<PAGE>
[Nuveen Logo]
Municipal
Bond Funds
May 31, 1998
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[Photo Appears Here]
Arizona
Colorado
New Mexico
<PAGE>
Highlights
As of May 31, 1998
For Class A shares on net asset value
Credit Quality Performance Highlights
Nuveen Flagship Arizona Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/pre-refunded 77%
AA 8%
A 7%
BBB/NR 8%
. Outperformed Lehman Brothers Municipal Bond Index and
Lipper peer group average for the one-year period
. One-year total return of 9.56%
. Taxable equivalent yield of 6.79%*
Nuveen Flagship Colorado Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/pre-refunded 62%
AA 16%
A 6%
BBB/NR 16%
. Steady dividend for 16 consecutive months
. Outperformed Lehman Brothers Municipal Bond Index and
Lipper peer group average for the one-year period
. Ranked the sixth best-performing tax-free fund
in the country for 1997 in Business Week**
Nuveen Flagship New Mexico Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/pre-refunded 60%
AA 10%
A 16%
BBB/NR 14%
. Steady dividend for 16 consecutive months
. Ranked in top 10% of funds in Lipper peer group
for one-year period
. One-year total return of 10.17%
* For investors in the 34.3% combined federal and state income tax bracket.
** An article in the December 29, 1997, issue of Business Week ranked the Nuveen
Flagship Colorado Municipal Bond Fund sixth out of 1,391 tax-free mutual
funds based on total returns for the period from January 1, 1997-December 12,
1997. The total return data was provided by Morningstar, Inc., an independent
investment information service, and reflects appreciation plus reinvestment
of dividends and capital gains before taxes.
Is it Time for a Financial Check-Up?
Now is a great time to sit down with your financial adviser and review your
financial plan. How can you make sure that your investment strategy is strong
enough to provide the income you need today and versatile enough to change as
your goals do? Here are some guidelines:
. Make sure you and your adviser understand your current situation. How have
your goals, objectives and risk profile changed? What are your current tax
concerns, interests, lifestyle?
. Revisit your current investment choices. If the value of one portion of your
portfolio has grown substantially, it may be time to rebalance asset classes.
. Determine how your asset mix will be implemented. Changing your asset
allocation is generally a gradual process. Make sure you and your adviser
have a clear understanding of each other's responsibilities. Define and
discuss what you want in terms of support from your adviser.
. Keep revisiting your plan. Don't assume that once you've revised your plan
and reallocated your portfolio the process is finished.
It's recommended that you meet at least once a year with your financial adviser
and usually more if there have been significant changes in interest rates, tax
laws, retirement plan distributions, lifestyle or health.
Even if things haven't changed, it makes good financial sense to keep in touch
with your adviser.
Contents
1 Dear Shareholder
4 Arizona Commentary
and Overview
6 Colorado Commentary
and Overview
8 New Mexico Commentary
and Overview
10 Report of Independent
Public Accountants
11 Portfolio of Investments
23 Statement of Net Assets
24 Statement of Operations
25 Statement of Changes in Net Assets
26 Notes to Financial Statements
33 Financial Highlights
36 Building Better Portfolios
37 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes
a lifetime
to build.
Once achieved,
it should be
preserved.
I'm pleased to share with you this performance report for the Nuveen Arizona,
Colorado and New Mexico municipal bond funds. Over the past 12 months, each of
the funds continued to perform well and meet their objectives of providing you
with attractive tax-free income and strong after-tax total returns.
For many of our shareholders, this annual report represents the first time you
have received a consolidated report covering performance data for other Nuveen
funds in addition to your own. These consolidated reports are part of our
continuing efforts to control fund expenses; we achieve greater economies of
scale for our shareholders through reducing paper, printing and mailing costs.
By consolidating reports by region and incorporating several funds into one
booklet, we have lowered these administrative expenses and made owning shares in
a Nuveen fund more cost-efficient for you.
The Economy in Review
Fixed-income investments enjoyed bullish performance over the past year, as
declining interest rates and low inflation spurred a bond market rally. The
equity markets also exhibited continued strength despite recent volatility
sparked by Asia's financial problems and their possible effects on U.S.
corporate earnings. Although interest rates have trended slightly upward in
recent months, a year-to-date comparison shows that today's rates are
significantly lower than they were one year ago. As shown in the accompanying
chart, between the end of May 1997 and May 1998, the yield on the Bond Buyer 40,
an unmanaged index of long-term municipal bonds, fell from 5.74% to 5.22%.
Much of the decline in interest rates resulted from expectations that the
financial problems of Asia would restrain the prices of imported goods and
reduce foreign demand for U.S. products and services, thereby keeping inflation
at moderate levels. These inflation expectations were largely fulfilled, as the
Consumer Price Index rose only 1.5% for the 12 months ended May 1998, remaining
at one of its lowest levels in years. The Asian
1
<PAGE>
"Another major factor in bond performance over the last 12 months was the
continued strength of the U.S. economy, which helped boost the credit quality
of many municipal bonds."
situation also provided additional strength to the bond market rally, as many
investors made a "flight to quality" by moving assets into high-quality U.S.
bonds in the face of the uncertainty in that region.
In coming months, we will continue to watch closely several key factors that are
likely to affect the future of the economy, including the demand for goods and
services, the availability of qualified employees, the strength of the dollar,
and indications from the Federal Reserve. With many investors still waiting for
the full impact of Asia's difficulties to show up in U.S. economic statistics,
the potential long-term effect of this crisis on American markets
continues to cause concern. We expect that the development of these factors will
continue to influence the tone of the fixed-income markets during the remainder
of the year.
Municipal Market Review
As interest rates continued to decline over the past year, bond prices rose.
This price appreciation for the bonds in our portfolios contributed to strong
total returns for the year.
Another major factor in bond performance over the last 12 months was the
continued strength of the U.S. economy, which helped boost the credit quality of
many municipal bonds. With the improvements in the fundamental financial health
of many municipalities and revenue projects financed by bonds, major credit
rating agencies upgraded the credit quality of thousands of issuers over the
past year, while downgrading relatively few. These boosts in credit quality also
contributed to the funds' performance as upgraded bonds increased in value.
The combination of low interest rates and a strong economy set new issuance on a
record pace and stimulated a dramatic increase in the refinancing of existing
bonds as issuers sought to lower their interest costs. The first quarter of 1998
saw $68 billion of new municipal issuance, up 70% from the same period in 1997.
The flood of new issues continued with May's long-awaited sale of the first
segment of Long Island (New York) Power Authority's $7 billion offering, the
largest issuance in municipal bond history. Although the nationwide supply of
municipal bonds remained heavy, the supply of bonds in each state varied
according to local economic conditions. This level of issuance highlights the
value of Nuveen's expertise in the municipal market, as our portfolio management
teams worked diligently to sift through the available issues to select those
undervalued securities that would help the funds achieve their investment
objectives.
2
<PAGE>
"Today, more than ever, you can count on Nuveen for a wide range of investments
that can help you build a well-balanced portfolio designed to achieve your
financial goals."
Diversification: The Key to a Better Portfolio
In view of current market conditions, we believe that investors will find
diversification to be an increasingly important investment strategy in the
months ahead. An appropriately diversified portfolio -- one that balances
different types of investments, levels of risk and tax management -- can help
cushion your portfolio against volatility and enhance your return potential.
Many investors select Nuveen's municipal bond funds because their emphasis on
dependable tax-free income and attractive after-tax returns makes them ideal for
building and sustaining long-term financial security. These funds also work well
with other Nuveen investments to create the foundation of a diversified, well-
balanced portfolio. In fact, recent studies by Nuveen Research have found that
portfolios combining municipal bonds and stocks generated higher after-tax
returns with lower levels of risk than similar portfolios combining stocks and
Treasury or corporate bonds.
We encourage you to talk to your financial adviser about Nuveen's range of
equity and balanced funds, including the Nuveen European Value Fund. This new
equity mutual fund offers a portfolio of quality European company stocks for
investors seeking long-term growth potential and international diversification.
The fund is just one of an ever-expanding range of Nuveen products and services
designed to help investors achieve diversification while building a tax-
efficient, risk-sensitive investment portfolio. If you'd like to learn more
about the Nuveen European Value Fund or any of our other investments, contact
your financial adviser or call Nuveen Investor Services at (800) 257-8787 for a
prospectus. Please read the information carefully before you invest.
When seeking quality investment solutions that withstand the test of time, we
hope that you continue to think of Nuveen. Today, more than ever, you can count
on Nuveen for a wide range of investments that can help you build a well-
balanced portfolio designed to achieve your financial goals. We thank you for
your continued confidence in us and our family of investments.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1998
3
<PAGE>
Nuveen Flagship Arizona Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Jan Terbrueggen discusses fund performance, the municipal
market, and key investment strategies for the Arizona fund.
Comments cover the one-year period ended May 31, 1998 and all performance
statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
After being a national leader in job growth for several years, Arizona seems to
have hit a plateau. Arizona's economy has been adversely affected by downturns
in several high-tech industries that export to Asia. The slowdown is seen by
some economists as a return to more normal growth rates for the state.
Arizona's state government is fiscally sound and is expecting another budget
surplus this year. In reaction, lawmakers enacted tax cuts for the sixth
consecutive year. Additionally, the state's "rainy day fund" reserves will be
increased by $75 million, to a total of more than $378 million.
In response to high population growth and low interest rates, municipal bond
issuance in the state for the first four months of 1998 increased by 80 percent
over the same period in 1997. Recently, though, issuance has slowed and high
demand has driven the prices of municipal bonds higher. However, narrow spreads
between the yields on higher- and lower-quality bonds increased the challenge of
identifying value in the markets.
Fund Performance
Once again, the fund generated sound performance, turning in a total return of
9.56% for the year, which is equivalent to a taxable return of 12.24% for
investors in the 34.3% combined federal and state income tax bracket. The total
return outpaces both the Lehman Brothers Municipal Bond Index return of 9.38%
and the average return of 8.73% for the peer group of Arizona municipal bond
funds followed by Lipper Analytical Service, a nationally recognized
performance measurement service. The Arizona Municipal Bond Fund also ranked
eighth among the 39 Arizona municipal bond funds in its Lipper peer group. In
addition, the fund provided a competitive yield of 4.46%, which is equivalent to
a taxable yield of 6.79% for investors in the 34.3% combined federal and state
income tax bracket.
The fund's strong performance was due in part to its long portfolio duration,
which is a measure of the fund's price volatility in relation to changes in
interest rates. With a duration of 7.68 years, the fund was somewhat longer than
the Lehman Index average duration of 7.11 years. The longer duration allowed
the fund to better participate in this year's market rally, although it would
have been more adversely affected had there been a market downturn. Another
important factor in the fund's performance was the purchase of a number of high-
quality, well-known holdings that are easy to sell and command competitive
prices in the marketplace.
Key Strategies
One strategy was to "barbell" the structure of the fund. At one end of the
barbell are zero-coupon bonds, which are purchased at a deep discount and are
highly volatile, but have significant price appreciation potential. At the other
end are high-coupon bonds, which provide significant income for the portfolio
and are less volatile. That strategy paid off in last year's market rally,
allowing the fund to earn a competitive income rate from the high-coupon bonds
while benefiting from the strong price appreciation of the zero-coupon bonds.
Other strategies included increasing the fund's holdings in the health care
sector, which has been out of favor and offered some good values. We also had
some success with housing bonds early in the year before their prices increased.
We moved to improve the portfolio's protection against bond calls, which can
negatively impact long-term performance if interest rates remain low and higher-
paying bonds are called away.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
Outlook for the Future
On July 1, 1998, Nuveen made several changes in the management of its mutual
funds to make more efficient use of staff resources and portfolio manager
expertise. As a result, Mike Davern assumed management responsibilities for this
fund. Mike is a seven-year veteran of Nuveen with 16 years of experience as an
investment professional. He has managed a range of other state municipal bond
funds. Mike and his team will continue to work on protecting the portfolio from
the risk of bond calls. At the same time, they will seek out individual values
among the state's general obligation issues, which offer the greatest supply and
also some of the most attractive opportunities. Another major focus for the
coming year will be a greater emphasis on supporting the fund's dividend during
this low interest rate environment by seeking quality bonds that offer
competitive coupon rates.
4
<PAGE>
Nuveen Flagship Arizona Municipal Bond Fund
Performance Overview
As of May 31, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
[CHART APPEARS HERE]
0.046 6/97
0.046 7/97
0.046 8/97
0.046 9/97
0.046 10/97
0.046 11/97
0.046 12/97
0.0455 1/98
0.0455 2/98
0.0455 3/98
0.0455 4/98
0.0455 5/98
Top 5 Sectors
Tax Obligation (General) 28%
U.S. Guaranteed 23%
Health Care 13%
Tax Obligation (Limited) 11%
Water and Sewer 8%
- -------------------------------
1 The fund also paid shareholders taxable distributions in December of $0.0180
per share.
2 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
3 Based on SEC yield and a combined federal and state income tax rate of 34.3%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
4 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses.
The Nuveen fund return depicted in the chart reflects the initial maximum
sales charge applicable to A shares (4.20%) and all ongoing fund expenses.
Portfolio Statistics
<TABLE>
<CAPTION>
Share Class A B C R
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 10/86 2/97 2/94 2/97
Net Asset Value $11.40 $11.39 $11.39 $ 11.40
Fund Net Assets ($000) $114,374
Average Weighted Maturity (Years) 14.69
Average Weighted Duration (Years) 7.68
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/2/
Share Class A(NAV) A(Offer) B C R
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 9.56% 4.96% 8.67% 8.89% 9.79%
5-Year 6.67% 5.76% 6.02% 6.07% 6.73%
10-Year 8.53% 8.07% 8.06% 7.93% 8.56%
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Distribution Rate 4.79% 4.59% 4.06% 4.27% 5.00%
SEC 30-Day Yield 4.46% 4.27% 3.72% 3.92% 4.66%
Taxable Equivalent Yield/3/ 6.79% 6.50% 5.66% 5.97% 7.09%
- -------------------------------------------------------------------------------------------
</TABLE>
Index Comparison/4/
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Lehman Brothers
Arizona Municipal Arizona Municipal Municipal
Bond Fund (NAV) Bond Fund (Offer) Bond Index
<S> <C> <C> <C>
5/88 10,000 9,580 10,000
5/89 11,404 10,925 11,149
5/90 12,033 11,528 11,965
5/91 13,141 12,589 13,171
5/92 14,487 13,879 14,466
5/93 16,422 15,732 16,195
5/94 16,737 16,034 16,595
5/95 18,417 17,644 18,107
5/96 19,193 18,387 18,934
5/97 20,699 19,830 20,505
5/98 22,682 21,729 22,430
</TABLE>
Lehman Brothers Municipal Bond Index $22,430
Nuveen Flagship Arizona Municipal Bond Fund (NAV) $22,682
Nuveen Flagship Arizona Municipal Bond Fund (Offer) $21,729
Past performance is not predictive of future results.
5
<PAGE>
Nuveen Flagship Colorado Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Jan Terbrueggen discusses fund performance, the municipal
market, and key investment strategies for the Colorado fund.
Comments cover the one-year period ended May 31, 1998 and all
performance statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Colorado has enjoyed significant economic and employment growth over the past
several years. The magnitude and duration of that growth has strained the
infrastructure, which in turn has resulted in increased bond financing. The
volume of new bond issues for the state was up over 50 percent in the first half
of 1998.
The state is also adjusting to the constraints of the Taxpayer's Bill of Rights
(TABOR), which was enacted in 1992 and imposed new constitutional limitations on
taxes, revenue and debt. In January 1998, the governor's office predicted $360
million of TABOR excess reserves for this fiscal year and $295 million for the
1999 fiscal year. The voters will now decide whether the excess revenues will be
rebated to the taxpayers or spent on governmental services within the state.
State municipal bond supplies were strong last year, although narrow spreads
between the yields on higher- and lower-quality bonds increased the challenge of
identifying value in the markets. However, we took advantage of Nuveen's top
research team to identify undervalued bonds in attractive areas such as housing
issues and non-rated bonds.
Fund Performance
Once again the fund posted outstanding results and superior performance compared
with its peers. For the year ended May 31, 1998, the total return on net asset
value for the Colorado Municipal Bond Fund was 11.85%, outpacing the 9.38%
return of the Lehman Brothers Municipal Bond Index by almost 250 basis points.
The fund surpassed the average return of 9.47% for its Lipper peer group of
Colorado municipal bond funds by almost the same margin and was ranked second
among the 26 Colorado municipal bond funds followed by Lipper. The fund also
generated a competitive taxable equivalent yield of 6.47% for investors in the
combined 34.5% federal and state income tax bracket, and provided steady
dividends throughout the year. This excellent performance record was recognized
by Business Week magazine, which ranked the fund the sixth best-performing tax-
free fund in the country for 1997.*
Key Strategies
The fund's strong performance was due in part to its long portfolio duration,
which is a measure of the fund's price volatility in relation to changes in
interest rates. With a duration of 8.60 years, the fund was longer than the
Lehman Index's average duration of 7.11 years. The longer duration allowed the
fund to better participate in this year's market rally, although it would have
been more adversely affected had there been a market downturn. Pre-refunded
bonds also played an important role in this outstanding performance. In a pre-
refunding, bonds are essentially paid off by their issuer and backed by U.S.
Treasury securities until they can be called from the portfolio. As a result
these bonds increase in value, with lower-rated and non-rated bonds tending to
increase more in value than higher-rated bonds. During the past year, a number
of the lower-rated bonds in the portfolio were pre-refunded, including several
non-rated bonds such as Denver Toll Road issues that Nuveen Research helped us
uncover in our search for value. Throughout the year, we focused on finding
these high-quality, non-rated bonds and other undervalued areas such as housing
issues that provided competitive yields and the potential for strong price
appreciation.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
Outlook for the Future
On July 1, 1998, Nuveen made several changes in the management of its mutual
funds to make more efficient use of staff resources and portfolio manager
expertise. As a result, Mike Davern assumed management responsibilities for this
fund. Mike is a seven-year veteran of Nuveen with 16 years of experience as an
investment professional. He has managed a range of other state municipal bond
funds. Given the uncertainty about the continued strength of the bond market in
the coming year, Mike and his team plan to shorten the portfolio's duration to
decrease volatility going forward. Until the yield spreads between lower- and
higher-quality bonds widen, they will continue to seek out value from smaller,
non-rated bond issues and other areas of the municipal bond market that offer
strong yields, such as housing and lease-backed issues.
6
<PAGE>
Nuveen Flagship Colorado Municipal Bond Fund
Performance Overview
As of May 31, 1998
- --------------------------------------------------
Monthly Tax-Free Dividends (Class A Shares)/1/
- --------------------------------------------------
[BAR GRAPH APPEARS HERE]
0.0435 6/97
0.0435 7/97
0.0435 8/97
0.0435 9/97
0.0435 10/97
0.0435 11/97
0.0435 12/97
0.0435 1/98
0.0435 2/98
0.0435 3/98
0.0435 4/98
0.0435 5/98
<TABLE>
<CAPTION>
- --------------------------------------------------
Top 5 Sectors
- --------------------------------------------------
<S> <C>
U.S. Guaranteed 39%
- --------------------------------------------------
Housing (Multifamily) 19%
- --------------------------------------------------
Transportation 10%
- --------------------------------------------------
Tax Obligation (General) 8%
- --------------------------------------------------
Education and Civic Organizations 8%
- --------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Portfolio Statistics
- ------------------------------------------------------------------------------
Share Class A B C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 5/87 2/97 2/97 2/97
- ------------------------------------------------------------------------------
Net Asset Value $10.81 $10.82 $10.80 $ 10.81
- ------------------------------------------------------------------------------
Fund Net Assets ($000) $40,572
- ------------------------------------------------------------------------------
Average Weighted Maturity (Years) 20.18
- ------------------------------------------------------------------------------
Average Weighted Duration (Years) 8.60
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Annualized Total Return/2/
- ------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1-Year 11.85% 7.21% 11.03% 11.17% 11.98%
- ------------------------------------------------------------------------------
5-Year 7.29% 6.38% 6.67% 6.85% 7.35%
- ------------------------------------------------------------------------------
10-Year 8.56% 8.10% 8.08% 8.15% 8.59%
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Tax-Free Yields
- ------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Distribution Rate 4.83% 4.63% 4.10% 4.28% 5.05%
- ------------------------------------------------------------------------------
SEC 30-Day Yield 4.24% 4.06% 3.49% 3.69% 4.44%
- ------------------------------------------------------------------------------
Taxable Equivalent Yield/3/ 6.47% 6.20% 5.33% 5.63% 6.78%
- ------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
Index Comparison/4/
- ------------------------------------------------------------------------------
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Lehman Brothers
Colorado Municipal Colorado Municipal Municipal
Bond Fund (NAV) Bond Fund (Offer) Bond Index
<S> <C> <C> <C>
5/88 10,000 9,580 10,000
5/89 11,282 10,808 11,149
5/90 11,913 11,412 11,965
5/91 12,954 12,410 13,171
5/92 14,222 13,625 14,466
5/93 15,985 15,314 16,195
5/94 16,310 15,625 16,595
5/95 17,865 17,115 18,107
5/96 18,603 17,822 18,934
5/97 20,322 19,468 20,505
5/98 22,730 21,775 22,430
</TABLE>
- -- Lehman Brothers Municipal Index $22,430
- -- Nuveen Flagship Colorado Municipal Bond Fund (NAV) $22,730
- -- Nuveen Flagship Colorado Municipal Bond Fund (Offer) $21,775
Past performance is not predictive of future results.
1 The fund also paid shareholders taxable distributions in December of $0.0025
per share.
2 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
3 Based on SEC yield and a combined federal and state income tax rate of 34.5%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
4 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses.
The Nuveen fund return depicted in the chart reflects the initial maximum
sales charge applicable to A shares (4.20%) and all ongoing fund expenses.
7
<PAGE>
Nuveen Flagship New Mexico Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Jan Terbrueggen discusses fund performance, the municipal
market, and key investment strategies for the New Mexico fund.
Comments cover the one-year period ended May 31, 1998 and all performance
statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
New Mexico's economy appears to be stabilizing after going through a growth
spurt in the early 1990s. Growth in the Albuquerque metro area, the focal point
of the state's economy, has slowed due to some recent corporate downsizing, but
the area's economy remains diverse and healthy. Economic development in the rest
of the state should be enhanced by more than $1.5 billion in federal highway
funds to be received over the next six years, as well as the state's plan to
issue $1.2 billion in state highway revenue bonds to finance several long-
overdue highway projects.
The state government is in solid financial shape, with growing revenues and
reserve fund balances. Municipal bond issuance in the state dropped 39% for the
first four months of the year compared with the same period in 1997. However,
the state highway revenue bonds as well as $79 million of state general
obligation bonds are on the horizon.
Fund Performance
The New Mexico Municipal Bond Fund performed exceptionally well during the year,
generating a total return on net asset value of 10.17%, which is equivalent to a
taxable return of 13.13% for investors in the 36.9% combined federal and state
income tax bracket. The total return outpaced the return of 9.38% posted by the
unmanaged Lehman Brothers Municipal Bond Index and surpassed the average return
of 8.46% for its peer group of funds followed by Lipper Analytical Service, a
nationally recognized performance measurement service. The fund also ranked
among the top 10 percent of small-state municipal bond funds in the "other
states" Lipper peer group. In addition to strong total returns, the fund
provided a competitive yield of 4.56%, which is equivalent to a taxable yield of
7.23% for investors in the 36.9% combined federal and state income tax bracket.
The fund's strong performance was due in part to its long portfolio duration,
which is a measure of the fund's price volatility in relation to changes in
interest rates. With a duration of 8.04 years, the fund was somewhat longer than
the Lehman Index's average duration of 7.11 years. The longer duration allowed
the fund to better participate in this year's market rally, although it would
have been more adversely affected had there been a market downturn.
Key Strategies
One strategy was to "barbell" the structure of the fund. At one end of the
barbell are zero-coupon bonds, which are purchased at a deep discount and are
highly volatile, but have significant price appreciation potential. At the other
end are high-coupon bonds, which provide significant income for the portfolio
and are less volatile. That strategy paid off in last year's market rally,
allowing the fund to earn a competitive income rate from the high-coupon bonds
while benefiting from the strong price appreciation of the zero-coupon bonds.
Other strategies included increasing the fund's holdings in non-callable bonds,
specifically a University of New Mexico issue and bonds issued by the Santa Fe
Correctional Facility. These non-callable bonds help protect the fund's dividend
by ensuring a dependable income stream because we know that these bonds will not
be called away from the portfolio until their maturity dates.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
As of May 31, 1998, the fund's sector holdings were weighted toward limited tax
obligation bonds, which are the most heavily issued bonds in the state and
accounted for 28% of the portfolio. Other key sectors in the fund included
education and civic organization bonds at 17%, single-family housing debt at 16%
and utility bonds at 13%.
Outlook for the Future
On July 1, 1998, Nuveen made several changes in the management of its mutual
funds to make more efficient use of staff resources and portfolio manager
expertise. As a result, Mike Davern assumed management responsibilities for this
fund. Mike is a seven-year veteran of Nuveen with 16 years of experience as an
investment professional. He has managed a range of other state municipal bond
funds. Issuance should remain strong in the coming year, which will help Mike
and his team maintain and execute their strategies for the fund. Their efforts
in the coming year will include further protecting the portfolio from the risk
of bond calls. At the same time, they will seek out individual values among the
state's general obligation issues, which offer the greatest supply and also some
of the most attractive opportunities.
8
<PAGE>
Nuveen Flagship New Mexico Municipal Bond Fund
Performance Overview
As of May 31, 1998
- --------------------------------------------------
Monthly Tax-Free Dividends (Class A Shares)
- --------------------------------------------------
[BAR GRAPH APPEARS HERE]
0.042 6/97
0.042 7/97
0.042 8/97
0.042 9/97
0.042 10/97
0.042 11/97
0.042 12/97
0.042 1/98
0.042 2/98
0.042 3/98
0.042 4/98
0.042 5/98
<TABLE>
<CAPTION>
- --------------------------------------------------
Top 5 Sectors
- --------------------------------------------------
<S> <C>
Tax Obligation (Limited) 28%
- --------------------------------------------------
Education and Civic Organizations 17%
- --------------------------------------------------
Housing (Single-family) 16%
- --------------------------------------------------
Utilities 13%
- --------------------------------------------------
Long-Term Care 6%
- --------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Portfolio Statistics
- ------------------------------------------------------------------------------
Share Class A B C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 9/92 2/97 2/97 2/97
- ------------------------------------------------------------------------------
Net Asset Value $10.67 $10.67 $10.67 $ 10.70
- ------------------------------------------------------------------------------
Fund Net Assets ($000) $58,320
- ------------------------------------------------------------------------------
Average Weighted Maturity (Years) 20.76
- ------------------------------------------------------------------------------
Average Weighted Duration (Years) 8.04
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Annualized Total Return/1/
- ------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 10.17% 5.49% 9.46% 9.60% 10.59%
- ------------------------------------------------------------------------------
5-Year 6.63% 5.72% 5.99% 6.21% 6.74%
- ------------------------------------------------------------------------------
Since inception 7.28% 6.47% 6.64% 6.86% 7.38%
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Tax-Free Yields
- ------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Distribution Rate 4.72% 4.52% 3.99% 4.22% 4.93%
- ------------------------------------------------------------------------------
SEC 30-Day Yield 4.56% 4.37% 3.81% 4.01% 4.76%
- ------------------------------------------------------------------------------
Taxable Equivalent Yield/2/ 7.23% 6.93% 6.04% 6.35% 7.54%
- ------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
Index Comparison/3/
- ------------------------------------------------------------------------------
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Lehman Brothers
New Mexico Municipal New Mexico Municipal Municipal
Bond Fund (NAV) Bond Fund (Offer) Bond Index
<S> <C> <C> <C>
9/92 10,000 9,580 10,000
5/93 10,878 10,421 10,726
5/94 11,085 10,619 10,991
5/95 12,111 11,603 11,992
5/96 12,496 11,971 12,540
5/97 13,609 13,037 13,580
5/98 14,991 14,361 14,855
</TABLE>
- -- Lehman Brothers Municipal Bond Index $14,855
- -- Nuveen Flagship New Mexico Municipal Bond Fund (NAV) $14,991
- -- Nuveen Flagship New Mexico Municipal Bond Fund (Offer) $14,361
Past performance is not predictive of future results.
1 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
2 Based on SEC yield and a combined federal and state income tax rate of 36.9%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
3 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses.
The Nuveen fund return depicted in the chart reflects the initial maximum
sales charge applicable to A shares (4.20%) and all ongoing fund expenses.
9
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust I:
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Flagship Arizona Municipal Bond Fund,
Nuveen Flagship Colorado Municipal Bond Fund, and Nuveen Flagship New Mexico
Municipal Bond Fund (collectively, the "Funds") (three of the portfolios
constituting the Nuveen Flagship Multistate Trust I (a Massachusetts business
trust)), as of May 31, 1998, the related statements of operations, statements of
changes in net assets and the financial highlights for the year then ended.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
statements and financial highlights for the Funds for the years ended May 31,
1997 and prior were audited by other auditors whose report dated July 11, 1997,
expressed an unqualified opinion on those financial statements and financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1998, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Flagship Arizona Municipal Bond Fund, Nuveen Flagship Colorado Municipal Bond
Fund, and Nuveen Flagship New Mexico Municipal Bond Fund of the Nuveen Flagship
Multistate Trust I as of May 31, 1998, and the results of their operations, the
changes in their net assets, and the financial highlights for the year then
ended, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 17, 1998
10
<PAGE>
Portfolio of Investments
Nuveen Flagship Arizona Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer Cyclical - 0.9%
$ 1,000,000 Mesa, Arizona, Industrial Development Authority, Industrial Revenue, TRW No Opt. Call N/R $1,084,880
Vehicle Safety System Inc. Project, 7.250%, 10/15/04 (Alternative
Minimum Tax)
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples - 0.2%
250,000 Casa Grande, Arizona, Industrial Development Authority, Pollution 12/02 at 103 A1 275,673
Control Revenue Bonds (Frito-Lay Inc/PepsiCo), Series 1984, 6.650%,
12/01/14
- ----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 3.1%
570,000 Arizona Educational Loan Marketing Corporation, 1992 Educational Loan 3/02 at 101 Aa2 616,113
Revenue Bonds, Series B, 7.000%, 3/01/05 (Alternative Minimum Tax)
100,000 Arizona Educational Loan Marketing Corporation, Educational Loan Revenue 9/02 at 101 Aa 107,436
Bonds, 6.375%, 9/01/05 (Alternative Minimum Tax)
1,500,000 Student Loan Acquisition Authority of Arizona (a nonprofit corporation 5/04 at 102 Aa 1,631,925
organized pursuant to the laws of the State of Arizona), Student Loan
Revenue Bonds, Series 1994, 6.600%, 5/01/10 (Alternative Minimum Tax)
500,000 The Industrial Development Authority of the City of Glendale, Arizona, 5/06 at 102 AAA 538,435
Revenue Bonds, Midwestern University, Series 1996A, 6.000%, 5/15/16
300,000 Arizona Board of Regents, University of Arizona, System Revenue Refunding 6/02 at 102 AA 325,218
Bonds, Series 1992, 6.250%, 6/01/11
335,000 Yavapai County Community College, District of Yavapai County, Arizona, 7/03 at 101 A- 354,333
Revenue Bonds, Series 1993, 6.000%, 7/01/12
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care - 13.2%
1,250,000 Arizona Health Facilities Authority, Revenue Bonds (Arizona Voluntary 10/99 at 101 AAA 1,312,950
Hospital Federation, Pooled Loan Program), 1985 Series B, 7.250%,
10/01/13
2,775,000 The Industrial Development Authority of the County of Maricopa (Arizona), No Opt. Call AAA 3,486,566
Samaritan Health Services, Hospital System Revenue Refunding Bonds,
Series 1990A, 7.000%, 12/01/16
375,000 The Industrial Development Authority of the County of Maricopa (Arizona), 12/00 at 102 AAA 410,426
Hospital Refunding Revenue Bonds (John C. Lincoln Hospital and Health
Center), Series 1990, 7.500%, 12/01/13
600,000 The Industrial Development Authority of the County of Maricopa (Arizona), 9/05 at 101 AAA 619,716
Baptist Hospital System Revenue Refunding Bonds, Series 1995, 5.500%,
9/01/16
The Industrial Development Authority of the City of Phoenix, Arizona,
Hospital Revenue Bonds (John C. Lincoln Hospital and Health Center),
Series 1994:
500,000 6.000%, 12/01/10 12/03 at 102 BBB+ 525,985
500,000 6.000%, 12/01/14 12/03 at 102 BBB+ 526,105
The Industrial Development Authority of the County of Pima, Arizona,
Health Care System Revenue Bonds, Carondelet Health Care Corporation of
Arizona Issue, Series 1993:
500,000 5.250%, 7/01/12 No Opt. Call AAA 528,080
640,000 5.250%, 7/01/13 No Opt. Call AAA 674,163
1,500,000 Industrial Development Authority of the City of Scottsdale, Arizona No Opt. Call AAA 1,623,540
(Scottsdale Memorial Hospitals),
5.500%, 9/01/12
Industrial Development Authority of the City of Scottsdale, Arizona,
Hospital Revenue Refunding Bonds (Scottsdale Memorial Hospitals),
Series 1997A:
2,000,000 6.000%, 9/01/12 9/07 at 102 AAA 2,179,380
3,000,000 6.125%, 9/01/17 9/07 at 102 AAA 3,265,950
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Arizona Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily--1.8%
$ 295,000 Phoenix Housing Finance Corporation (Arizona), Mortgage Revenue 7/02 at 101 AAA $ 309,228
Refunding Bonds, Series 1992A (FHA Insured Mortgage Loans--Section 8
Assisted Projects), 6.500%, 7/01/24
Phoenix Industrial Development Authority (FHA Insured, Chris Ridge
Village Project):
200,000 6.750%, 11/01/12 11/02 at 101 AAA 212,388
425,000 6.800%, 11/01/25 11/02 at 101 AAA 448,039
500,000 The Industrial Development Authority of the City of Phoenix, Arizona, 2/03 at 102 Aaa 512,520
Multifamily Housing Revenue Refunding Bonds, Series 1993 (GNMA
Collateralized--Meadow Glen Apartments Project), 5.800%, 8/20/28
500,000 The Industrial Development Authority of the City of Tempe, Arizona, 6/03 at 102 AAA 522,150
Multi-Family Mortgage Refunding Bonds, Series 1993A (FHA Insured
Mortgage Loan--Quadrangles Village Apartments), 6.250%, 6/01/26
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family--1.7%
485,000 The Industrial Development Authority of the City of Phoenix, Arizona, 6/05 at 102 AAA 504,221
Statewide Single Family Mortgage Revenue Bonds, Series 1995, 6.150%,
12/01/08 (Alternative Minimum Tax)
390,000 The Industrial Development Authority of the County of Pima (Arizona), 8/05 at 102 A 415,448
Single Family Mortgage Revenue Refunding Bonds, Series 1995A, 6.500%,
2/01/17
1,000,000 The Industrial Development Authority of the County of Pima (Arizona), 5/07 at 102 AAA 1,062,600
Single Family Mortgage Revenue Bonds, Series 1997A, 6.250%, 11/01/30
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term Care--1.6%
1,670,000 The Industrial Development Authority of the County of Cochise, Arizona, 5/04 at 102 AAA 1,873,773
Tax Exempt Mortgage Revenue Refunding Bonds, Series 1994A (GNMA
Collateralized--Sierra Vista Care Center), 6.750%, 11/20/19
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General--27.7%
800,000 City of Chandler, Arizona, General Obligation Refunding Bonds, Series 7/01 at 101 AAA 868,832
1991, 7.000%, 7/01/12
Sierra Vista Unified School District No. 68 of Cochise County, Arizona,
General Obligation Refunding Bonds, Series 1992:
250,000 7.500%, 7/01/09 No Opt. Call AAA 314,275
300,000 7.500%, 7/01/10 No Opt. Call AAA 380,772
250,000 Government of Guam, General Obligation Bonds, Series 1993A, 5.400%, 11/03 at 102 BBB 251,518
11/15/18
375,000 Maricopa Rural Road Improvement District of Pinal County, Arizona, 7/99 at 101 N/R 386,798
Refunding Bonds, Series 1994, 6.900%, 7/01/05
1,000,000 Maricopa County School District No. 3, General Obligation Improvement 7/04 at 102 AAA 1,093,200
and Refunding Bonds, Series 1994, 6.000%, 7/01/13
750,000 Peoria Unified School District No. 11 of Maricopa County, Arizona, 7/01 at 101 AAA 805,478
School Improvement and Refunding Bonds, Series 1992, 6.400%, 7/01/10
675,000 Maricopa County, Arizona, School District No. 11, Peoria Unit Refunding, No Opt. Call AAA 467,978
Second Series, 0.000%, 7/01/06
1,440,000 Crieghton Elementary School District No. 14 of Maricopa County, Arizona, No Opt. Call AAA 949,925
Capital Appreciation Refunding Bond, Series 1994, 0.000%, 7/01/07
Kyrene Elementary School District No. 28 of Maricopa County, Arizona,
Refunding Bonds, Series 1993C:
4,000,000 0.000%, 7/01/07 No Opt. Call AAA 2,638,680
1,870,000 0.000%, 1/01/09 No Opt. Call AAA 1,141,055
3,805,000 0.000%, 1/01/10 No Opt. Call AAA 2,190,995
2,500,000 0.000%, 7/01/10 No Opt. Call AAA 1,405,675
6,000,000 0.000%, 1/01/11 No Opt. Call AAA 3,253,980
50,000 Kyrene Elementary School District No. 28 of Maricopa County, Arizona, 7/02 at 100 AAA 53,058
School Improvement Bonds, Project of 1990, Series E (1993), 6.000%,
7/01/12
Maricopa County, Arizona, Glendale School District No. 40, Improvement
Bonds:
500,000 6.200%, 7/01/09 7/05 at 101 AAA 559,245
2,500,000 6.250%, 7/01/10 7/05 at 101 AAA 2,795,675
1,750,000 6.300%, 7/01/11 7/05 at 101 AAA 1,946,438
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/General (continued)
$ 2,000,000 Gilbert Unified School District No. 41 of Maricopa County, Arizona, No Opt. Call AAA $1,418,360
Refunding Bonds, Series 1994, 0.000%, 1/01/06
500,000 Maricopa County, Arizona, Gilbert Unit School District No. 41, 7/08 at 100 AAA 555,305
6.250%, 7/01/15
515,000 Maricopa County, Arizona, Alhambra Elementary School District No. 68, 7/04 at 102 AAA 583,948
Refunding, Series A, 6.750%, 7/01/14
500,000 Maricopa County, Arizona, Unified School District No. 80 (Chandler), No Opt. Call AAA 580,425
6.250%, 7/01/11
1,275,000 Maricopa County, Arizona, School District No. 98, Fountain Hills Unit, No Opt. Call AAA 883,958
Refunding, 0.000%, 7/01/06
635,000 Navajo County, Arizona, Unit School District No. 32, Blue Ridge, 7/06 at 101 AAA 686,327
Formerly Navajo County, Arizona, Unit School Projects of 1994,
School Improvement, 5.800%, 7/01/14
1,000,000 Pima County, Arizona, Tucson Unit School District No. 1, No Opt. Call AAA 1,272,470
Refunding, 7.500%, 7/01/10
300,000 Tucson Unified School District No.1 of Pima County, Arizona, School 7/02 at 102 AAA 327,744
Improvement Bonds, Project of 1989, Series D (1992), 6.100%, 7/01/12
500,000 Pima County, Arizona, Tanque Verde Unit School District No. 13, 7/04 at 102 AAA 570,220
Refunding and Improvement, 6.700%, 7/01/10
315,000 Scottsdale Mountain Community Facilities District, Arizona, Series A, 7/03 at 102 A 338,893
6.200%, 7/01/17
225,000 City of Tempe, General Obligation Bonds, Series 1992B, 6.000%, 7/01/08 7/02 at 101 AA+ 242,795
600,000 Tempe Union High School District No. 213 of Maricopa County, Arizona, 7/04 at 101 AAA 654,696
School Improvement and Refunding Bonds, Series 1994, 6.000%, 7/01/12
1,130,000 Tucson, Arizona, Refunding, 5.000%, 7/01/19 7/07 at 100 AA 1,127,028
675,000 Yuma Union High School District No. 70 of Yuma County, Arizona, School 7/02 at 101 AAA 721,629
Improvement Bonds, Series 1994, 5.700%, 7/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 11.1%
700,000 Apache County (Arizona), Public Finance Corporation, Certificates of 5/00 at 102 A 722,953
Participation, Series 1994, Arizona Department of Corrections,
5.500%, 5/01/10
250,000 State of Arizona, Refunding Certificates of Participation, Series 9/02 at 102 AAA 271,600
1992B, 6.250%, 9/01/10
225,000 Arizona Municipal Financing Program, Certificates of Participation, No Opt. Call AAA 310,012
Series 11, 8.000%, 8/01/17
965,000 City of Bullhead City, Bullhead Parkway Improvement District, 1/03 at 103 Baa 1,032,936
Improvement Bonds, 6.100%, 1/01/13
350,000 City of Bullhead City, Arizona, Municipal Property Corporation, 7/08 at 101 Aaa 346,168
Excise Tax Revenue Bonds (Wastewater Treatment Plant Improvements),
Series 1998, 5.000%, 7/01/17
550,000 City of Douglas (Arizona), Municipal Property Corporation, Municipal 7/05 at 101 AAA 585,041
Facilities Excise Tax Revenue Bonds, Series 1995, 5.750%, 7/01/15
280,000 Eloy Municipal Property Corporation, Municipal Facilities Revenue Bonds, 7/02 at 101 BBB 304,156
Series 1992, 7.000%, 7/01/11
385,000 City of Flagstaff, Arizona, Junior Lien, Street and Highway User No Opt. Call AAA 433,857
Revenue Bonds, Series 1992, 5.900%, 7/01/10
300,000 Hospital District No. 1, Maricopa County, Arizona, Hospital Facilities 6/04 at 101 AAA 328,827
Refunding Bonds, Series B (1992), 6.250%, 6/01/10
1,000,000 Hospital District No. 1, Maricopa County, Arizona, General Obligation 6/06 at 101 A 1,087,450
Bonds, Series 1996, 6.500%, 6/01/17
City of Peoria, Arizona, Improvement District No. 8801 (North Valley
Power Center), Improvement Bonds:
425,000 7.300%, 1/01/12 1/03 at 101 BBB 466,174
460,000 7.300%, 1/01/13 1/03 at 101 BBB 504,367
300,000 City of Phoenix, Arizona, Junior Lien, Street and Highway User Revenue 7/02 at 102 A+ 326,394
Refunding Bonds, Series 1992, 6.250%, 7/01/11
Pinal County, Arizona, Certificates of Participation, Series 1994:
300,000 6.375%, 6/01/06 6/02 at 100 AA 323,259
200,000 6.500%, 6/01/09 6/02 at 100 AA 215,956
2,050,000 Puerto Rico Highway and Transportation Authority, Highway Revenue 7/16 at 100 A 2,148,503
Bonds, Series Y of 1996, 5.500%, 7/01/36
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship Arizona Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 2,100,000 Puerto Rico Public Buildings Authority, Revenue Guaranteed, 7/07 at 101 1/2 A $ 2,097,102
Government Facilities, Series B, 5.250%, 7/01/21
850,000 City of Tucson, Arizona, Certificates of Participation, Series 7/04 at 100 AA 934,023
1994, 6.375%, 7/01/09
250,000 Business Development Finance Corporation, Tucson (Arizona), Local 7/02 at 102 AAA 271,308
Development Lease Revenue Refunding Bonds, Series 1992, 6.250%,
7/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation--1.5%
500,000 Phoenix Airport System, Alternative Minimum Tax, 6.400%, 7/01/12 7/04 at 102 AAA 550,665
(Alternative Minimum Tax)
500,000 Tucson, Arizona, Airport Authority Inc., Series B, 7.125%, 6/01/15 6/00 at 102 AAA 535,245
(Alternative Minimum Tax)
575,000 Tucson, Arizona, Airport Authority, Inc., Airport Revenue 6/03 at 102 AAA 615,624
Refunding Bonds, Series 1993, 5.700%, 6/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed--23.2%
300,000 Arizona Health Facilities Authority, Hospital System Revenue 9/03 at 100 AAA 328,011
Refunding Bonds (Phoenix Baptist Hospital and Medical Center,
Inc. and Medical Environments, Inc.), Series 1992, 6.250%, 9/01/11
200,000 Arizona Municipal Financing Program, Certificates of No Opt. Call AAA 250,948
Participation, Series 20, 7.700%, 8/01/10
500,000 State of Arizona, Arizona Transportation Board, Highway Revenue 7/00 at 101 AAA 535,340
Bonds, Series 1990, 7.000%, 7/01/09 (Pre-refunded to 7/01/00)
300,000 Arizona Board of Regents, Arizona State University, System Revenue 7/02 at 101 Aaa 335,034
Bonds, Series 1989, 7.000%, 7/01/15 (Pre-refunded to 7/01/02)
Sedona-Oak Creek Joint Unified School District No. 9 of Coconino
and Yavapai Counties, Arizona, School Improvement Bonds, Project
of 1992, Series A:
250,000 6.700%, 7/01/06 (Pre-refunded to 7/01/01) 7/01 at 101 A-*** 271,518
250,000 6.750%, 7/01/07 (Pre-refunded to 7/01/01) 7/01 at 101 A-*** 271,878
365,000 Maricopa County, Arizona, Hospital Revenue Bonds, Series 1980 No Opt. Call AAA 455,830
(St. Luke's Hospital Medical Center), 8.750%, 2/01/10
375,000 The Industrial Development Authority of the County of Maricopa 12/00 at 102 AAA 413,243
(Arizona), Hospital Refunding Revenue Bonds (John C. Lincoln
Hospital and Health Center), Series 1990, 7.500%, 12/01/13
(Pre-refunded to 12/01/00)
17,300,000 The Industrial Development Authority of the County of Maricopa No Opt. Call AAA 7,037,467
(Arizona), Single Family Mortgage Revenue Bonds, Series 1984,
0.000%, 2/01/16
1,250,000 The Industrial Development Authority of the County of Maricopa, 7/99 at 102 AAA 1,319,013
Arizona, Mercy Health System Insured Revenue Bonds, 1985 Series B,
7.150%, 7/01/12 (Pre-refunded to 7/03/99)
265,000 Kyrene Elementary School District No. 28 of Maricopa County, 7/02 at 100 AAA 284,024
Arizona, School Improvement Bonds, Project of 1990, Series E, 6.000%,
7/01/12 (Pre-refunded to 7/01/02)
Maricopa County, Arizona, School District No. 214, Tolleson Unit
High, Series B:
575,000 6.500%, 7/01/09 7/00 at 100 AAA 610,650
300,000 6.500%, 7/01/10 7/00 at 100 AAA 318,600
1,250,000 Arizona Board of Regents, Northern Arizona University, System 6/99 at 100 Aaa 1,296,188
Revenue Bonds, Series 1989, 7.500%, 6/01/08 (Pre-refunded to 6/01/99)
700,000 Peoria Municipal Development Authority, Inc., Municipal Facilities 7/99 at 102 AAA 737,660
Revenue Bonds, Arizona, Series 1991, 7.000%, 7/01/10 (Pre-refunded
to 7/01/99)
400,000 City of Phoenix (Arizona), Civic Improvement Corporation, 7/03 at 102 AAA 442,868
Wastewater System Lease Revenue Bonds, Series 1993, 6.125%,
7/01/23 (Pre-refunded to 7/01/03)
500,000 City of Phoenix, Arizona, Senior Lien, Street and Highway User 7/02 at 102 AA 548,400
Revenue Bonds, Series 1992, 6.250%, 7/01/11
650,000 Tucson Unified School District No. 1 of Pima County, Arizona, 7/00 at 101 A*** 698,120
School Improvement Bonds, Project of 1989, Series B (1990),
7.200%, 7/01/09 (Pre-refunded to 7/01/00)
460,000 Pima County, Arizona, Sewer Revenue Refunding, 6.750%, 7/01/15 7/01 at 101 AAA 500,673
(Pre-refunded to 7/01/01)
1,500,000 Price-Elliot Research Park, Inc., Arizona State University, 7/01 at 102 AAA 1,655,775
Research Park Development Refunding Bonds, Series 1991,
7.000%, 7/01/21 (Pre-refunded to 7/01/01)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,925,000 Tatum Ranch, Arizona, Community Facilities District, Series A, 7/02 at 102 A*** $ 2,155,577
District General Obligation Bonds, Series 1991A , 6.875%, 7/01/16
(Pre-refunded to 7/01/02)
11,570,000 Tucson and Pima County Industrial Development Authorities, Single No Opt. Call AAA 5,083,742
Family Mortgage, 0.000%, 12/01/14
500,000 City of Tucson, Arizona, General Obligation Bonds, Series 1984-G, 7/04 at 101 AAA 559,140
6.250%, 7/01/18 (Pre-refunded to 7/01/04)
390,000 City of Tucson, Arizona, Water System Revenue Bonds, Series 7/06 at 101 AAA 438,352
1994-A, 6.000%, 7/01/21 (Pre-refunded to 7/01/06)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 5.0%
500,000 Central Arizona Water Conservation District (Central Arizona No Opt. Call AA- 544,430
Project), Contract Revenue Refunding Bonds, Series A 1993,
5.500%, 11/01/10
5,000 Central Arizona Water Conservation District (Central Arizona 5/01 at 102 AA- 5,379
Project), Contract Revenue Bonds, Series B 1991,
6.500%, 11/01/11
2,000,000 Coconino County, Arizona, Pollution Control Corporation, Pollution 10/06 at 102 BBB- 2,164,300
Control Revenue Bonds (Nevada Power Company Project), Series 1996,
6.375%, 10/01/36 (Alternative Minimum Tax)
1,000,000 City of Mesa, Arizona, Utility Systems Revenue Bonds, Series 1998, 7/08 at 100 AAA 962,290
4.750%, 7/01/17
500,000 Mohave County, Arizona, Industrial Development Authority, 2/00 at 101 AA- 523,235
Industrial Development Revenue, Citizens Utilities Company Project,
Series B, 7.150%, 2/01/26 (Alternative Minimum Tax)
500,000 The Industrial Development Authority of the County of Mohave 11/03 at 101 AA- 537,690
(Arizona), Industrial Development Revenue Bonds, 1994 Series
(Citizens Utilities Company Projects), 6.600%, 5/01/29
(Alternative Minimum Tax)
225,000 The Industrial Development Authority of the County of Pima 1/02 at 103 AAA 251,186
(Arizona), Industrial Development, Lease Obligation Refunding Revenue
Bonds, 1988 Series A (Irvington Project), 7.250%, 7/15/10
200,000 Puerto Rico Electric Power Authority, Power Revenue, Formerly 7/07 at 101 1/2 AAA 205,458
Puerto Rico Commonwealth Water Resource Authority Power, Series Aa,
5.375%, 7/01/27
500,000 Salt River Project Agricultural Improvement and Power District, No Opt. Call AA 554,745
5.750%, 1/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 7.8%
175,000 Wastewater Management Authority of Arizona, Wastewater Treatment, 7/02 at 102 AAA 187,945
Financial Assistance Revenue Bonds, Series 1992A, 5.950%, 7/01/12
250,000 Wastewater Management Authority of Arizona, Wastewater Treatment, 7/05 at 102 AAA 267,124
Financial Assistance Revenue Bonds, Series 1995, 5.750%, 7/01/15
1,750,000 City of Chandler, Arizona, Water and Sewer Revenue Refunding 7/01 at 101 AAA 1,899,677
Bonds, Series 1991, 6.750%, 7/01/06
City of Cottonwood, Arizona, Sewer Revenue Refunding Bonds, Series 1992:
500,000 6.900%, 7/01/03 7/02 at 101 BBB- 544,399
100,000 7.000%, 7/01/06 7/02 at 101 BBB- 109,325
100,000 7.000%, 7/01/07 7/02 at 101 BBB- 108,858
The Industrial Development Authority of the County of Maricopa, Water
System Improvement Revenue Bonds (Chaparral City Water Company Project),
Series 1997A:
1,000,000 5.200%, 12/01/11 (Alternative Minimum Tax) 12/07 at 102 AAA 1,021,989
610,000 5.400%, 12/01/22 (Alternative Minimum Tax) 12/07 at 102 AAA 616,252
1,000,000 Phoenix, Arizona, Civic Improvement Corporation, Water System 7/06 at 100 AA- 1,040,819
Revenue, Junior Lien, 5.600%, 7/01/18
540,000 Pima County, Arizona, Sewer Revenue Refunding, 6.750%, 7/01/15 7/01 at 101 AAA 582,594
800,000 Sedona, Arizona, Sewer Revenue Refunding, 7.000%, 7/01/12 7/04 at 101 BBB 883,655
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship Arizona Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer (continued)
$ 1,100,000 City of Tucson, Arizona, Water System Revenue Refunding Bonds, 7/07 at 100 AAA $ 1,091,452
Series 1997, 5.000%, 7/01/19
500,000 Tucson Water System, 6.700%, 7/01/12 7/01 at 102 A+ 543,109
- -----------------------------------------------------------------------------------------------------------------------------------
$132,090,000 Total Investments - (cost $102,515,950) - 98.8% 113,020,198
============-----------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities - 0.4%
$ 500,000 Maricopa County, Pollution Control and Recovery (Arizona Public A-1 500,000
Service), Variable Rate Demand Bonds, 4.000%, 5/01/29
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.8% 853,485
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $114,373,683
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
+ 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.
16
<PAGE>
Portfolio of Investments
Nuveen Flagship Colorado Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Consumer Staples - 2.6%
$ 1,000,000 City of Fort Collins, Colorado, Pollution Control Refunding Revenue 9/06 at 101 A+ $1,070,990
Bonds (Anheuser-Busch Project), Series 1996, 6.000%, 9/01/31
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 7.9%
400,000 Colorado Student Obligation Bond Authority, Student Loan Revenue 9/00 at 100 A 416,504
Bonds, 1991 Series A3, 7.250%, 9/01/05 (Alternative Minimum Tax)
245,000 Colorado Student Obligation Bond Authority, Student Loan Revenue 9/02 at 102 A 263,336
Bonds, 1992 Series C, 7.150%, 9/01/06 (Alternative Minimum Tax)
1,500,000 Hyland Hills Park and Recreation District, Adams County, Colorado, 12/06 at 101 N/R 1,632,210
Special Revenue Refunding and Improvement Bonds, Series
1996A, 6.750%, 12/15/15
900,000 Board of Trustees of the University of Northern Colorado, Auxiliary 6/08 at 100 AAA 884,565
Facilities System Revenue Refunding Bonds, Series 1998A,
5.000%, 6/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 3.2%
500,000 Colorado Health Facilities Authority, Revenue Bonds (Catholic Health 12/07 at 101 AA 496,890
Initiatives), Series 1997A, 5.125%, 12/01/22
500,000 City of Colorado Springs, Colorado, Hospital Revenue and Refunding 12/05 at 102 AAA 541,270
Bonds, Series 1995, 6.000%, 12/15/24
250,000 County of Pueblo, Colorado, Insured Hospital Refunding Revenue Bonds 9/01 at 101 AAA 274,295
(Parkview Episcopal Medical Center, Inc. Project), Series 1991A,
7.000%, 9/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 18.8%
100,000 City of Aurora, Colorado, Multifamily Housing Revenue Bonds (GNMA 7/98 at 103 AAA 103,295
Mortgage-Backed Security Program, Dayton Place Project), 1988
Series A, 8.250%, 1/20/29
1,500,000 Colorado Housing and Finance Authority, Multi-Family Housing Insured 10/06 at 102 AA 1,586,475
Mortgage Revenue Bonds, 1996 Series C3 (non-AMT), 6.250%, 10/01/38
460,000 Colorado Housing and Finance Authority, Multi-Family Housing Insured 4/05 at 102 AA 494,210
Mortgage Revenue Bonds, 1995 Series A, 6.650%, 10/01/28
(Alternative Minimum Tax)
1,265,000 Colorado Housing and Finance Authority, Multi-Family Housing Insured 10/07 at 102 AA 1,285,974
Mortgage Revenue Bonds, 1997 Series C2, 5.750%, 10/01/39
(Alternative Minimum Tax)
2,000,000 Denver City and County (FHA Insured), Boston Lofts Projects, Series 10/07 at 102 AAA 2,053,200
1997A, 5.850%, 10/01/38
(Alternative Minimum Tax)
1,000,000 City and County of Denver, Colorado, Multifamily Housing Revenue Bonds 5/07 at 102 AAA 1,017,030
(FHA Insured Mortgage Loan-The Buerger Brothers and Denver Fire Clay
Lofts Project), Series 1997A, 5.700%, 11/01/28
(Alternative Minimum Tax)
1,000,000 Lakewood, Colorado, Multi-Family Housing Revenue Mortgage, FHA Insured 10/05 at 102 AAA 1,076,210
Mortgage Loan, 6.650%,10/01/25 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 3.9%
105,000 Colorado Housing and Finance Authority, Single-Family Residential 9/01 at 100 Aa1 107,321
Housing Revenue Bonds, 1987 Series A, 8.125%, 9/01/17
250,000 Colorado Housing and Finance Authority, Single-Family Program, Senior 8/01 at 102 AA+ 265,253
Bonds, 1991 Issue C-2 (Federally Insured or Guaranteed Mortgage
Loans), 7.375%, 8/01/23 (Alternative Minimum Tax)
850,000 Colorado Housing and Finance Authority, Single-Family Housing Revenue No Opt. Call Aa1 505,980
Refunding Bonds, 1991 Series A, 0.000%, 11/01/06
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Flagship Colorado Municipal Bond Fund (continued)
May 31, 1998
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family (continued)
<C> <S> <C> <C> <C>
$ 130,000 City of Commerce City, Colorado, Single Family Mortgage Revenue 3/02 at 101 Aa1 $ 136,271
Refunding Bonds, 1992 Series A, 6.875%, 3/01/12
125,000 Pueblo County, Colorado, Single Family Mortgage Revenue, Series A, 6/02 at 102 AA- 133,844
6.850%, 12/01/25
415,000 Pueblo County, Colorado, Single Family Mortgage Revenue Refunding, 11/04 at 102 AAA 447,511
BKD Series A, 7.050%, 11/01/27
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 2.7%
1,000,000 Colorado Health Facilities Authority, First Mortgage Revenue Bonds 1/07 at 101 N/R 1,075,620
(Christian Living Campus - Johnson Center Nursing Facility Refunding
Project), Series 1997A, 7.050%, 1/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 8.3%
450,000 Cherry Creek Vista Park and Recreation District, Colorado, General 10/02 at 100 N/R 483,233
Obligation Refunding and Improvement Bonds, Series 1992B,
6.875%, 10/01/11
500,000 El Paso School District No. RJ-1, El Paso and Elbert Counties, 12/05 at 100 AA- 561,240
Colorado, General Obligation Bonds, Series 1995, 6.800%, 12/01/14
School District No. 3, El Paso County, Colorado, General Obligation
Bonds, Series 1995A:
1,025,000 0.000%, 12/15/07 12/05 at 92 1/16 AAA 662,212
1,020,000 0.000%, 12/15/08 12/05 at 86 3/4 AAA 625,648
500,000 School District No. 38, County of El Paso, State of Colorado, 12/01 at 101 AAA 545,340
General Obligation Bond, Collateralized Project, Fixed Rate
Certificates of Participation (Colorado Association of School
Boards, Lease Purchase Finance Program), Series 1992A, 6.900%,
12/01/13
250,000 Pitkin County, Colorado, Refunding and Improvement, 6.875%, 12/01/24 12/04 at 102 A 284,475
190,000 Valley Metropolitan District, Colorado, Jefferson County, 12/00 at 101 Baa 200,876
Refunding, 7.000%, 12/15/06
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 3.2%
175,000 Jefferson County, Colorado, Refunding Certificates of 12/02 at 102 AAA 195,260
Participation, 6.650%, 12/01/08
300,000 Puerto Rico Public Buildings Authority, Revenue Guaranteed, 7/07 at 101 1/2 A 299,586
Government Facilities, Series B, 5.250%, 7/01/21
750,000 Woodland Park, Colorado, Limited Sales Tax Revenue Refunding, 12/03 at 101 AA 815,123
Series B, 6.400%, 12/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 9.6%
750,000 City and County of Denver, Colorado, Airport System Revenue Bonds, 11/07 at 101 AAA 758,355
Series 1997E, 5.250%, 11/15/17
500,000 City and County of Denver, Colorado, Special Facilities Airport 10/02 at 102 Baa3 543,475
Revenue Bonds (United Air Lines Project), Series 1992A, 6.875%,
10/01/32 (Alternative Minimum Tax)
1,000,000 Eagle County Air Terminal Corporation, Airport Terminal Project 5/06 at 101 N/R 1,093,730
Revenue Bonds, Series 1996, 7.500%, 5/01/21 (Alternative Minimum Tax)
1,375,000 Guam Airport Authority, General Revenue Bonds, 1993 Series B, 6.700%, 10/03 at 102 BBB 1,508,430
10/01/23 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 39.2%
4,300,000 Public Highway Authority, Capital Improvement Trust Fund, Highway 8/05 at 95 29/32 Aaa 2,996,369
Revenue Bonds (E-470 Project), Senior Bonds, 0.000%, 8/31/06
(Pre-refunded to 8/31/05)
6,500,000 Arapahoe County, Colorado, Single Family Mortgage Revenue Bonds, No Opt. Call AAA 3,649,815
Series 1984A, 0.000%, 9/01/10
175,000 City of Aspen, Colorado, Public Facilities Authority, Certificates 9/98 at 100 1/2 AAA 177,315
of Participation, 7.000%, 9/01/09 (Pre-refunded to 9/01/98)
100,000 Pueblo School District No. 60 Project, Fixed Rate Certificates of 12/99 at 101 AAA 105,985
Participation (Colorado Association of School Boards, Lease Purchase
Finance Program), Series 1989A, 7.250%, 12/01/09 (Pre-refunded to
12/01/99)
300,000 Colorado Health Facilities Authority, Revenue Bonds (Rose Medical 8/01 at 102 AAA 331,791
Center), Series 1991, 7.000%, 8/15/21 (Pre-refunded to 8/15/01)
475,000 Colorado Housing Finance Authority, Single Family Revenue Bonds, No Opt. Call Aaa 211,323
1985 Series A, 0.000%, 9/01/14
7,500,000 Colorado Health Facilities Authority, Retirement Facilities No Opt. Call AAA 1,868,700
(Liberty Heights), 0.000%, 7/15/24
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 900,000 City of Colorado Springs, Colorado, Utilities System Revenue Bonds, No Opt. Call AAA $ 1,058,022
Series 1978B, 6.600%, 11/15/18
300,000 Colorado Water Resources and Power Development Authority, Water and 11/99 at 100 N/R*** 317,034
Power Revenue Bonds, 1986 Series (Stagecoach Project) (General
Obligation Bonds), 8.000%, 11/01/17 (Pre-refunded to 11/01/99)
250,000 City and County of Denver, Colorado, Industrial Development Revenue 3/01 at 102 AAA 277,090
Bonds (University of Denver Project), Series 1991, 7.500%, 3/01/16
(Pre-refunded to 3/01/01)
3,000,000 El Paso County, Colorado, Single Family Mortgage Revenue Bonds, 1984 No Opt. Call AAA 1,259,160
Series A, 0.000%, 9/01/15
250,000 Fountain Valley Authority (Colorado), Water Treatment Refunding 6/01 at 100 AA*** 269,498
Revenue Bonds, Series 1991, 6.800%, 12/01/19
(Pre-refunded to 6/01/01)
250,000 County of Logan, Colorado, Health Care Facilities Revenue Bonds 1/99 at 102 AAA 260,523
(Western Health Network, Inc.), Series 1988A-7, 7.625%, 1/01/19
(Pre-refunded to 1/01/99)
200,000 Mesa County, Colorado, Sales Tax Revenue Refunding Bonds, Series 12/98 at 100 AAA 204,046
1988, 7.750%, 12/01/13 (Pre-refunded to 12/01/98)
4,000,000 Mesa County, Colorado, Residual Revenue Refunding, 0.000%, 12/01/11 No Opt. Call Aaa 2,089,880
300,000 Parker, Colorado, Sales and Use Tax Revenue Improvement, Series B, 11/00 at 100 N/R*** 325,493
7.600%, 11/01/10 (Pre-refunded to 11/01/00)
100,000 Regional Transportation District (Colorado), Sales Tax Revenue Bonds, 11/00 at 101 AAA 108,190
Series 1990, 7.100%, 11/01/10 (Pre-refunded to 11/01/00)
100,000 University of Colorado, Certificates of Participation, Series D, 12/98 at 102 A2*** 103,797
Colorado Association of School Boards, Lease Purchase Finance Program,
7.400%, 12/01/05 (Pre-refunded to 12/01/98)
250,000 The Regents of the University of Colorado, Auxiliary Facilities 6/00 at 101 A1*** 267,039
System Revenue Bonds (Boulder Campus Projects), Series 1990, 7.050%,
6/01/15 (Pre-refunded to 6/01/00)
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 0.3%
120,000 Colorado Water Resources and Power Development Authority, Small Water 11/02 at 100 AAA 131,227
Resources Revenue Bonds, 1992 Series A, 6.700%, 11/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
$53,650,000 Total Investments - (cost $36,480,092) - 99.7% 40,457,534
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.3% 114,278
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $40,571,812
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Flagship New Mexico Municipal Bond Fund
May 31, 1998
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Basic Materials - 1.9%
$ 1,000,000 Lordsburg, New Mexico, Pollution Control Revenue Refunding, Phelps 4/03 at 102 A $ 1,095,270
Dodge Corporation Project, 6.500%, 4/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 16.7%
1,600,000 New Mexico Educational Assistance Foundation, Student Loan Revenue, 4/02 at 102 AAA 1,743,232
Series A, 6.850%, 4/01/05 (Alternative Minimum Tax)
400,000 New Mexico Educational Assistance Foundation, Student Loan Revenue, 12/02 at 101 Aaa 422,144
Senior Series One-A, 6.550%, 12/01/05 (Alternative Minimum Tax)
225,000 New Mexico Educational Assistance Foundation, Student Loan Revenue 12/02 at 101 A 240,500
Bonds, Subordinate 1992 Series One-B, 6.850%, 12/01/05 (Alternative
Minimum Tax)
870,000 New Mexico Educational Assistance Foundation, Student Loan Revenue, 6/04 at 102 Aaa 901,894
Senior Series II-A, 5.500%, 12/01/07 (Alternative Minimum Tax)
950,000 New Mexico Educational Assistance Foundation, Student Loan Revenue, No Opt. Call Aaa 1,012,596
Senior Series IV-A1, 6.500%, 3/01/04 (Alternative Minimum Tax)
435,000 Puerto Rico Industrial, Medical, and Environmental Pollution Control No Opt. Call BBB- 459,952
Facilities Authority, Formerly Puerto Rico Refunding Higher Education,
Catholic University, Series A, 5.600%, 12/01/07
City of Santa Fe, New Mexico, Educational Facilities, Improvement and
Refunding Revenue Bonds (College of Santa Fe Project), Series 1997:
500,000 6.000%, 10/01/13 10/07 at 100 BBB- 535,250
500,000 5.875%, 10/01/21 10/07 at 100 BBB- 517,200
500,000 City of Santa Fe, New Mexico, Educational Facilities, Improvement 10/07 at 100 BBB- 500,320
Revenue Bonds (College of Santa Fe Project), Series 1998A, 5.500%,
10/01/28
3,000,000 University of New Mexico, University Revenue Refunding, Series A, No Opt. Call AA 3,398,460
6.000%, 6/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 0.8%
450,000 City of Albuquerque, New Mexico, Hospital System Revenue Bonds, 1992 8/02 at 102 AAA 493,547
Series B (Presbyterian Healthcare Services), 6.375%, 8/01/07
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 4.5%
1,000,000 Las Cruces, New Mexico, Housing Development Corporation, Multifamily 4/03 at 102 A 1,053,320
Revenue Refunding Mortgage, Series A, 6.400%, 10/01/19
500,000 New Mexico Mortgage Finance Authority, Multifamily Housing Revenue, 7/07 at 102 AAA 511,140
Rio Volcan II Apartments Project, 5.650%, 7/01/18 (Alternative Minimum
Tax)
1,000,000 Villa Hermosa Affordable Housing Corporation (New Mexico), 5/07 at 102 AAA 1,043,350
Multifamily Revenue Bonds (Villa Hermosa Apartments Project), Series
1997, 5.900%, 5/20/27 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 16.2%
1,990,000 New Mexico Mortgage Finance Authority, Single Family Mortgage, Series 7/06 at 102 AAA 2,115,350
D-1, 6.250%, 7/01/22
1,435,000 New Mexico Mortgage Finance Authority, Single Family, Series G-2, 7/07 at 102 AAA 1,517,484
6.200%, 7/01/28 (Alternative Minimum Tax)
1,245,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/05 at 102 AAA 1,329,735
Program, Series A, Class D, 6.650%, 7/01/26 (Alternative Minimum Tax)
140,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/02 at 102 Aa1 149,496
Refunding, Senior Bonds Series A-1, 6.850%, 7/01/10
740,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/02 at 102 Aa1 786,206
Refunding, Senior Bonds 1992 Series A, 6.900%, 7/01/24
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family (continued)
$1,500,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/07 at 102 AAA $1,532,070
Program Bonds, 1997 Series F-2, 5.700%, 7/01/29 (Alternative
Minimum Tax)
1,000,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/07 at 102 AAA 1,004,090
Program Bonds, 1997 Series G-2, 5.400%, 7/01/29 (Alternative
Minimum Tax)
1,000,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 1/08 at 102 AAA 1,003,360
Program Bonds, 1998 Series A-2, 5.450%, 7/01/28 (Alternative
Minimum Tax)
- ----------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 6.1%
1,500,000 City of Albuquerque, New Mexico, Revenue Refunding Bonds (The 6/03 at 102 AAA 1,619,010
Evangelical Lutheran Good Samaritan Society), Series 1993,
5.900%, 6/01/13
1,000,000 City of Hobbs, New Mexico, Health Facilities Revenue Bonds (The 5/06 at 102 AAA 1,030,800
Evangelical Lutheran Good Samaritan Society Project), Series
1996, 5.500%, 5/01/26
500,000 Las Cruces, New Mexico, Health Facilities Revenue Refunding, 12/02 at 102 AAA 548,620
Evangelical Lutheran Project, 6.450%, 12/01/17
350,000 Socorro, New Mexico, Health Facility Revenue Refunding, Evangelical 5/04 at 102 AAA 384,699
Lutheran Good Samaritan, 6.000%, 5/01/08
- ----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 4.5%
25,000 Albuquerque Municipal School District No. 12, Bernalillo and Sandoval No Opt. Call AA 25,873
Counties, New Mexico, General Obligation Bonds, Series 1996,
5.000%, 8/01/02
80,000 Bernalillo County, New Mexico, General Obligation Bonds, Series May 1, 10/04 at 100 Aa1 86,463
1994, 5.750%, 10/01/05
Grants/Cibola County School District 1, Cibola County, New Mexico, General
Obligation School Building Bonds, Series 1994:
480,000 6.250%, 5/01/08 5/04 at 100 Baa2 513,955
510,000 6.250%, 5/01/09 5/04 at 100 Baa2 543,380
1,250,000 Government of Guam, General Obligation Bonds, Series 1993A, 5.375%, 11/03 at 102 BBB 1,264,900
11/15/13
200,000 Torrance County, New Mexico, 5.500%, 7/01/04 7/00 at 100 N/R 204,276
- ----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 28.0%
4,250,000 City of Albuquerque, New Mexico, Gross Receipts/Lodgers, Tax Refunding No Opt. Call AAA 2,263,975
and Improvement Revenue Bonds, Series 1991B, 0.000%, 7/01/11
335,000 Bernalillo County, New Mexico, Gross Receipts Tax, Refunding Revenue No Opt. Call AA 344,775
Bonds, Series 1998, 5.000%, 4/01/12
1,050,000 Dona Ana County, New Mexico, Gross Receipts Tax, Refunding and 6/03 at 102 AA 1,153,331
Improvement Revenue Bonds, Series 1993, 6.000%, 6/01/19
1,000,000 Dona Ana County, New Mexico, Gross Receipts Tax, Refunding and No Opt. Call Aaa 1,065,040
Improvement Revenue Bonds, Subordinate Series 1998, 5.500%, 6/01/16
250,000 Las Cruces, New Mexico, Gross Receipts Tax, Revenue Refunding, 6.250%, 12/02 at 101 A 272,268
12/01/05
1,000,000 Las Cruces, New Mexico, Revenue, 5.450%, 12/01/08 (Alternative No Opt. Call AAA 1,066,320
Minimum Tax)
35,000 New Mexico Finance Authority, Special Cigarette Tax, University of New No Opt. Call AAA 36,300
Mexico, 5.000%, 6/01/03
Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds,
Series Y of 1996:
3,550,000 5.500%, 7/01/36 7/16 at 100 A 3,720,578
750,000 5.000%, 7/01/36 7/16 at 100 A 737,423
500,000 Puerto Rico Public Buildings Authority, Guaranteed, Government 7/07 at 101 1/2 A 499,310
Facilities, Series B, 5.250%, 7/01/21
375,000 Sandoval County, New Mexico, Gross Receipts Tax, Revenue Refunding, 11/02 at 102 Baa1 409,279
6.900%, 11/01/12
130,000 Sandoval County, New Mexico, Gross Receipts Tax, Revenue Refunding, 12/02 at 102 Baa1 141,014
Series A, 6.500%, 12/01/06
4,000,000 Santa Fe County, New Mexico, Correctional System Revenue, 6.000%, No Opt. Call AAA 4,619,000
2/01/27
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen Flagship New Mexico Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Transportation - 1.9%
$ 1,000,000 City of Albuquerque, New Mexico, Airport Revenue Bonds, Series 1995A, 7/00 at 105 AAA $ 1,089,050
6.600%, 7/01/16 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 3.2%
250,000 City of Albuquerque, New Mexico, Joint Water and Sewer System Revenue 7/00 at 100 AAA 260,398
Bonds, Series 1990A, 6.000%, 7/01/15 (Pre-refunded to 7/01/00)
90,000 Las Cruces, New Mexico, Joint Utility Refunding and Improvement Revenue, 7/02 at 102 A1 98,294
6.250%, 7/01/12
30,000 New Mexico Finance Authority, Public Project Revolving Fund, Series A, 6/05 at 100 AAA 32,280
5.500%, 6/01/07 (Pre-refunded to 6/01/05)
Sandoval County, New Mexico, Gross Receipts Tax/Fire District Revenue:
225,000 6.600%, 12/01/04 (Pre-refunded to 12/01/99) 12/99 at 100 N/R*** 234,875
200,000 6.900%, 12/01/07 (Pre-refunded to 12/01/99) 12/99 at 100 N/R*** 209,536
500,000 Sandoval County, New Mexico, Gross Receipts Tax, 7.150%, 11/01/10 11/05 at 101 N/R*** 595,285
(Pre-refunded to 11/01/05)
327,000 Santa Fe County, New Mexico, Office and Training Facilities Project, No Opt. Call Aaa 439,105
9.000%, 7/01/07
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 13.3%
985,000 City of Farmington, New Mexico, Pollution Control, Revenue Refunding 12/02 at 102 AAA 1,078,339
Bonds, 1992 Series A (Public Service Company of New Mexico, San Juan,
and Four Corners Projects), 6.375%, 12/15/22
1,800,000 Guam Power Authority, Revenue Bonds, 1993 Series A, 5.250%, 10/01/23 10/03 at 102 BBB 1,792,368
1,500,000 Las Cruces, New Mexico, South Central Solid Waste Authority, 6/05 at 100 A 1,582,305
Environmental Services Gross Receipts Tax, 6.000%, 6/01/16
Los Alamos County, New Mexico, Inc., Utility System Revenue Refunding,
Series A:
1,000,000 5.700%, 7/01/05 7/04 at 102 AAA 1,081,550
1,000,000 6.000%, 7/01/15 7/04 at 102 AAA 1,077,640
Rio Grande, New Mexico, National Gas Association, National Gas System
Revenue Refunding and Improvement:
100,000 6.000%, 7/01/07 7/03 at 100 BBB+ 104,804
1,000,000 6.125%, 7/01/23 7/03 at 100 BBB+ 1,032,719
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 1.4%
1,000,000 City of Albuquerque, New Mexico, Joint Water and Sewer System, Revenue No Opt. Call AAA 662,599
Bonds, Series 1990A, 0.000%, 7/01/07
100,000 City of Grants, New Mexico, Joint Water and Sewer Utility, Refunding and 1/02 at 100 Baa 106,040
Improvement Revenue Bonds, Series 1993, 5.600%, 1/01/08
70,000 New Mexico Finance Authority, Public Project, Series A, 5.500%, 6/01/07 No Opt. Call AAA 74,467
- -----------------------------------------------------------------------------------------------------------------------------------
$56,277,000 Total Investments - (cost $52,986,712) - 98.5% 57,468,209
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.5% 851,705
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $58,319,914
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
22
<PAGE>
Statement of Net Assets
May 31, 1998
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $113,020,198 $40,457,534 $57,468,209
Temporary investments in short-term municipal securities, at
amoritized cost, which approximates market value (note 1) 500,000 -- --
Cash 35,091 208,332 396,395
Receivables:
Interest 1,820,417 414,388 1,060,778
Shares sold 156,564 145,455 99,463
Other assets 76,924 85,279 92,968
- -----------------------------------------------------------------------------------------------------------------------
Total assets 115,609,194 41,310,988 59,117,813
- -----------------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 614,475 307,238 512,063
Shares redeemed 121,284 205,117 725
Accrued expenses:
Management fees (note 6) 11,024 18,768 11,473
12b-1 distribution and service fees (notes 1 and 6) 19,386 7,752 11,206
Other 12,761 39,142 35,273
Dividends payable 456,581 161,159 227,159
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 1,235,511 739,176 797,899
- -----------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $114,373,683 $40,571,812 $58,319,914
=======================================================================================================================
Class A Shares (note 1)
Net assets $ 85,922,012 $37,285,438 $54,959,048
Shares outstanding 7,540,099 3,450,010 5,150,339
Net asset value and redemption price per share $ 11.40 $ 10.81 $ 10.67
Offering price per share (net asset value per share plus maximum
sales charge of 4.20% of offering price) $ 11.90 $ 11.28 $ 11.14
=======================================================================================================================
Class B Shares (note 1)
Net assets $ 1,619,526 $ 1,660,631 $ 1,407,709
Shares outstanding 142,235 153,419 131,962
Net asset value, offering and redemption price per share $ 11.39 $ 10.82 $ 10.67
=======================================================================================================================
Class C Shares (note 1)
Net assets $ 6,328,476 $ 875,494 $ 1,487,137
Shares outstanding 555,435 81,045 139,333
Net asset value, offering and redemption price per share $ 11.39 $ 10.80 $ 10.67
=======================================================================================================================
Class R Shares (note 1)
Net assets $ 20,503,669 $ 750,249 $ 466,020
Shares outstanding 1,799,352 69,375 43,574
Net asset value, offering and redemption price per share $ 11.40 $ 10.81 $ 10.70
=======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
Statement of Operations
Year Ended May 31, 1998
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $6,238,395 $2,113,180 $3,014,442
- ------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 601,838 199,251 297,332
12b-1 service fees -- Class A (notes 1 and 6) 169,618 68,378 104,393
12b-1 distribution and service fees -- Class B (notes 1 and 6) 5,457 9,698 8,761
12b-1 distribution and service fees -- Class C (notes 1 and 6) 30,045 2,678 4,586
Shareholders' servicing agent fees and expenses 77,603 15,663 18,060
Custodian's fees and expenses 56,763 31,981 36,044
Trustees' fees and expenses (note 6) 2,025 613 971
Professional fees 13,373 14,950 14,950
Shareholders' reports -- printing and mailing expenses 36,874 7,559 8,727
Federal and state registration fees 3,722 2,964 6,858
Organizational expenses (note 1) -- 16,717 10,330
Other expenses 2,696 1,984 2,763
- ------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 1,000,014 372,436 513,775
Expense reimbursement (note 6) (108,424) (3,777) (79,556)
- ------------------------------------------------------------------------------------------------------------
Net expenses 891,590 368,659 434,219
- ------------------------------------------------------------------------------------------------------------
Net investment income 5,346,805 1,744,521 2,580,223
- ------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 546,400 231,489 184,412
Net change in unrealized appreciation or depreciation of investments 4,023,073 1,920,494 2,447,338
- ------------------------------------------------------------------------------------------------------------
Net gain from investments 4,569,473 2,151,983 2,631,750
- ------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $9,916,278 $3,896,504 $5,211,973
============================================================================================================
</TABLE>
24
See accompanying notes to financial statements.
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
--------------------------- ------------------------- -------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
5/31/98 5/31/97* 5/31/98 5/31/97** 5/31/98 5/31/97***
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 5,346,805 $ 4,626,500 $ 1,744,521 $ 1,715,756 $ 2,580,223 $ 2,606,587
Net realized gain from investment
transactions (notes 1 and 4) 546,400 344,913 231,489 64,238 184,412 92,293
Net change in unrealized appreciation or
depreciation of investments 4,023,073 1,724,243 1,920,494 1,095,182 2,447,338 1,740,188
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 9,916,278 6,695,656 3,896,504 2,875,176 5,211,973 4,439,068
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (4,135,375) (4,163,497) (1,680,403) (1,687,245) (2,506,960) (2,592,045)
Class B (22,463) (2,842) (41,768) (1,292) (37,062) (2,872)
Class C (172,117) (117,169) (14,892) (1,256) (25,798) (1,113)
Class R (1,018,591) (335,301) (33,606) (2,521) (16,170) (309)
From accumulated net realized gains from
investment transactions:
Class A (132,275) (414,050) -- -- -- --
Class B (677) -- -- -- -- --
Class C (5,284) (12,740) -- -- -- --
Class R (31,231) -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions
to shareholders (5,518,013) (5,045,599) (1,770,669) (1,692,314) (2,585,990) (2,596,339)
- ---------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the
reorganization of Nuveen Arizona (note 1) -- 25,221,663 -- -- -- --
Net proceeds from shares issued as a
capital contribution -- 33,360 -- -- -- --
Net proceeds from sale of shares 17,232,021 9,311,968 9,498,060 5,390,547 9,586,060 7,206,729
Net proceeds from shares issued to
shareholders due to reinvestment of
distributions 2,750,177 2,094,732 881,170 767,704 1,454,066 1,155,487
- ---------------------------------------------------------------------------------------------------------------------------------
19,982,198 36,661,723 10,379,230 6,158,251 11,040,126 8,362,216
- ---------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (15,141,453) (15,241,517) (4,121,233) (8,789,634) (7,327,443) (9,396,878)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
Fund share transactions 4,840,745 21,420,206 6,257,997 (2,631,383) 3,712,683 (1,034,662)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 9,239,010 23,070,263 8,383,832 (1,448,521) 6,338,666 808,067
Net assets at the beginning of year 105,134,673 82,064,410 32,187,980 33,636,501 51,981,248 51,173,181
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $114,373,683 $105,134,673 $40,571,812 $32,187,980 $58,319,914 $51,981,248
=================================================================================================================================
Balance of undistributed/(overdistributed)
net investment income at end of year $ 5,950 $ 7,691 $ (2,706) $ 23,442 $ 4,481 $ 10,248
=================================================================================================================================
</TABLE>
* Information represents eight months of Flagship Arizona and four months of
Arizona (note 1).
** Information represents eight months of Flagship Colorado and four months of
Colorado (note 1).
*** Information represents eight months of Flagship New Mexico and four months
of New Mexico (note 1).
See accompanying notes to financial statements.
25
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Arizona Municipal Bond Fund, the Nuveen
Flagship Colorado Municipal Bond Fund and the Nuveen Flagship New Mexico
Municipal Bond Fund (the "Funds"), among others. The Trust was organized as a
Massachusetts business trust on July 1, 1996.
The John Nuveen Company ("Nuveen"), parent of John Nuveen & Co. Incorporated and
Nuveen Advisory Corp., respectively, the distributor ("Distributor") and
investment advisor ("Adviser") of the Funds, entered into an agreement under
which Nuveen acquired Flagship Resources Inc. and after the close of business on
January 31, 1997, consolidated their respective mutual fund businesses. This
agreement was approved at a meeting by the shareholders of the Flagship Funds in
December 1996.
After the close of business on January 31, 1997, Flagship Arizona Double Tax
Exempt Fund ("Flagship Arizona") and Nuveen Arizona Tax-Free Value Fund ("Nuveen
Arizona") reorganized into Nuveen Flagship Arizona Municipal Bond Fund
("Arizona"). Flagship Colorado Double Tax Exempt Fund ("Flagship Colorado") and
Flagship New Mexico Double Tax Exempt Fund ("Flagship New Mexico") were
reorganized into the Trust and renamed Nuveen Flagship Colorado Municipal Bond
Fund ("Colorado") and Nuveen Flagship New Mexico Municipal Bond Fund ("New
Mexico"). Prior to these reorganizations, Flagship Arizona, Flagship Colorado
and Flagship New Mexico were each a sub-trust of the Flagship Tax Exempt Funds
Trust while Nuveen Arizona was a series of the Nuveen Multistate Tax-Free Trust.
Nuveen Arizona had a fiscal year end of January 31 prior to being reorganized
into Arizona which has retained the fiscal year end of Flagship Arizona.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1998, there were no such outstanding purchase commitments in any of the
Funds.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences
26
<PAGE>
may occur and will be classified as either distributions in excess of net
investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, the Funds intend to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain such
tax-exempt status when distributed to the shareholders of the Funds. All monthly
tax-exempt income dividends paid during the fiscal year ended May 31, 1998, have
been designated Exempt Interest Dividends. Net realized capital gain and market
discount distributions are subject to federal taxation.
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Funds are authorized to invest in such
financial instruments, and may do so in the future, they did not make any such
investments during the fiscal year ended May 31, 1998.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
Organizational Expenses
The organizational expenses incurred on behalf of Colorado and New Mexico
(approximately $83,600 and $51,700, respectively) are being reimbursed to the
Adviser on a straight-line basis over a period of five years. As of May 31,
1998, all organizational expenses have been reimbursed.
- ------
27
<PAGE>
Notes to Financial Statements (continued)
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Arizona
----------------------------------------------------------
Year Ended Year Ended
5/31/98 5/31/97*
----------------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization of Nuveen Arizona:
Class A -- $ -- 491,617 $ 5,367,690
Class B -- -- -- --
Class C -- -- 48,608 530,721
Class R -- -- 1,769,783 19,323,252
Shares issued as a capital contribution:
Class A -- -- 764 8,340
Class B -- -- 764 8,340
Class C -- -- 764 8,340
Class R -- -- 764 8,340
Shares sold:
Class A 939,381 10,594,838 712,114 7,768,419
Class B 119,506 1,355,584 30,949 339,939
Class C 316,012 3,587,493 86,515 940,835
Class R 150,054 1,694,106 23,885 262,775
Shares issued to shareholders due to reinvestment of distributions:
Class A 175,183 1,969,412 172,561 1,878,199
Class B 1,093 12,309 51 556
Class C 10,523 118,375 6,676 72,706
Class R 57,709 650,081 13,166 143,271
- ---------------------------------------------------------------------------------------------------------------------------------
1,769,461 19,982,198 3,358,981 36,661,723
- ---------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,120,408) (12,656,620) (1,294,344) (14,116,042)
Class B (10,128) (112,911) -- --
Class C (62,551) (705,918) (34,699) (378,684)
Class R (147,567) (1,666,004) (68,442) (746,791)
- ---------------------------------------------------------------------------------------------------------------------------------
(1,340,654) (15,141,453) (1,397,485) (15,241,517)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase 428,807 $ 4,840,745 1,961,496 $ 21,420,206
=================================================================================================================================
*Information represents eight months of Flagship Arizona and four months of Arizona (note 1).
</TABLE>
- ------
28
<PAGE>
<TABLE>
<CAPTION>
Colorado
------------------------------------------------
Year Ended Year Ended
5/31/98 5/31/97*
------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 681,355 $ 7,321,628 442,011 $ 4,440,932
Class B 107,622 1,152,203 43,588 440,150
Class C 70,146 756,209 10,094 102,708
Class R 25,721 268,020 40,559 406,757
Shares issued to shareholders due to reinvestment of distributions:
Class A 76,970 817,880 76,620 765,931
Class B 2,159 22,985 55 553
Class C 752 8,060 53 536
Class R 3,027 32,245 68 684
- ------------------------------------------------------------------------------------------------------------------------------------
967,752 10,379,230 613,048 6,158,251
- ------------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (385,803) (4,121,180) (877,171) (8,789,634)
Class B (5) (53) -- --
Class C -- -- -- --
Class R -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
(385,808) (4,121,233) (877,171) (8,789,634)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 581,944 $ 6,257,997 (264,123) $(2,631,383)
====================================================================================================================================
</TABLE>
*Information represents eight months of Flagship Colorado and four months of
Colorado (note 1).
29
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
New Mexico
------------------------------------------------
Year Ended Year Ended
5/31/98 5/31/97*
------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 698,030 $ 7,365,655 604,874 $ 6,044,381
Class B 79,732 842,865 64,688 647,809
Class C 123,525 1,304,991 15,271 153,600
Class R 6,637 72,549 35,553 360,939
Shares issued to shareholders due to reinvestment of distributions:
Class A 136,279 1,420,855 115,338 1,154,792
Class B 1,262 13,257 42 418
Class C 525 5,545 12 123
Class R 1,369 14,409 15 154
- -----------------------------------------------------------------------------------------------------------------------
1,047,359 11,040,126 835,793 8,362,216
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (686,757) (7,182,281) (936,465) (9,396,878)
Class B (13,762) (145,162) -- --
Class C -- -- -- --
Class R -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
(700,519) (7,327,443) (936,465) (9,396,878)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 346,840 $ 3,712,683 (100,672) $(1,034,662)
=======================================================================================================================
</TABLE>
*Information represents eight months of Flagship New Mexico and four months of
New Mexico (note 1).
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on July 1, 1998, to shareholders of record on June 9,
1998, as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- -----------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $.0455 $.0435 $.0420
Class B .0385 .0370 .0355
Class C .0405 .0385 .0375
Class R .0475 .0455 .0440
=====================================================
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended May 31,
1998, were as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Investments in municipal securities $21,173,594 $12,776,246 $12,254,896
Temporary municipal investments 7,600,000 5,500,000 5,000,000
Sales:
Investments in municipal securities 17,585,954 6,682,769 7,131,949
Temporary municipal investments 7,100,000 5,500,000 5,900,000
==============================================================================
</TABLE>
At May 31, 1998, the identified cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes for each
Fund.
30
<PAGE>
At May 31, 1998, 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 carryforwards will expire as follows:
<TABLE>
<CAPTION>
Colorado New Mexico
- -------------------------------------------------
<S> <C> <C>
Expiration Year:
2003 $ 270,604 $ 812,701
2004 -- 290,586
- -------------------------------------------------
Total $ 270,604 $1,103,287
=================================================
</TABLE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 1998, were as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $10,532,665 $3,988,129 $4,484,343
depreciation (28,417) (10,687) (2,846)
- ---------------------------------------------------------------------
Net unrealized appreciation $10,504,248 $3,977,442 $4,481,497
=====================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- ----------------------------------------------------
<S> <C>
For the first $125 million .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 net assets over $2 billion .4750 of 1
====================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 1998, the Distributor collected sales
charges on purchases of Class A Shares, the majority of which were paid out as
concessions to authorized dealers as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ------------------------------------------------------------
<S> <C> <C> <C>
Sales charges collected $265,752 $119,938 $145,070
Paid to authorized dealers 227,330 101,364 125,132
============================================================
</TABLE>
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
31
<PAGE>
Notes to Financial Statements (continued)
During the fiscal year ended May 31, 1998, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commission advances $ 94,217 $ 85,081 $ 63,142
=====================================================================================================================
</TABLE>
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees on Class B Shares, and all 12b-1 service and
distribution fees on Class C Shares during the first year following a purchase
are retained by the Distributor. During the fiscal year ended May 31, 1998, the
Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 fees retained $ 19,491 $ 11,937 $ 12,966
=====================================================================================================================
</TABLE>
The remaining 12b-1 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
fiscal year ended May 31, 1998, as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CDSC retained $ 7,226 $ 6,000 $ 5,000
=====================================================================================================================
</TABLE>
7. Composition of Net Assets
At May 31, 1998, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $103,522,771 $36,867,681 $54,940,507
Balance of undistributed/(overdistributed) net investment income 5,950 (2,706) 4,481
Accumulated net realized gain (loss) from investment transactions 340,714 (270,605) (1,106,571)
Net unrealized appreciation of investments 10,504,248 3,977,442 4,481,497
- ---------------------------------------------------------------------------------------------------------------------
Net assets $114,373,683 $40,571,812 $58,319,914
=====================================================================================================================
</TABLE>
32
<PAGE>
Financial Highlights
33
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
-------------------------------- ------------------------------
Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
May 31, Value Income (a) Gain (Loss) Total Income Gain Total Value Return (b)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ARIZONA**
Class A (10/86)
1998 $10.94 $.55 $ .48 $1.03 $(.55) $(.02) $(.57) $11.40 9.56%
1997 10.73 .56 .27 .83 (.56) (.06) (.62) 10.94 7.85
1996 10.85 .57 (.12) .45 (.57) -- (.57) 10.73 4.21
1995 10.43 .58 .42 1.00 (.58) -- (.58) 10.85 10.03
1994 10.81 .60 (.38) .22 (.60) -- (.60) 10.43 1.92
Class B (2/97)
1998 10.94 .47 .47 .94 (.47) (.02) (.49) 11.39 8.67
1997 (c) 10.92 .16 .02 .18 (.16) -- (.16) 10.94 1.64
Class C (2/94)
1998 10.94 .49 .47 .96 (.49) (.02) (.51) 11.39 8.89
1997 10.73 .50 .27 .77 (.50) (.06) (.56) 10.94 7.28
1996 10.84 .51 (.11) .40 (.51) -- (.51) 10.73 3.75
1995 10.43 .52 .41 .93 (.52) -- (.52) 10.84 9.32
1994 (c) 11.22 .14 (.79) (.65) (.14) -- (.14) 10.43 (16.61)*
Class R (2/97)
1998 10.94 .57 .48 1.05 (.57) (.02) (.59) 11.40 9.79
1997 (c) 10.92 .19 .02 .21 (.19) -- (.19) 10.94 1.96
=================================================================================================================================
COLORADO***
Class A (5/87)
1998 $10.15 $.52 $ .66 $1.18 $(.52) $ -- $(.52) $10.81 11.85%
1997 9.79 .53 .35 .88 (.52) -- (.52) 10.15 9.22
1996 9.93 .54 (.13) .41 (.55) -- (.55) 9.79 4.14
1995 9.62 .57 .30 .87 (.56) -- (.56) 9.93 9.54
1994 10.04 .58 (.37) .21 (.58) (.05) (.63) 9.62 2.03
Class B (2/97)
1998 10.16 .43 .68 1.11 (.45) -- (.45) 10.82 11.03
1997 (c) 10.21 .12 (.06) .06 (.11) -- (.11) 10.16 .61
Class C (2/97)
1998 10.15 .46 .66 1.12 (.47) -- (.47) 10.80 11.17
1997 (c) 10.13 .16 .02 .18 (.16) -- (.16) 10.15 1.75
Class R (2/97)
1998 10.16 .54 .66 1.20 (.55) -- (.55) 10.81 11.98
1997 (c) 10.21 .15 (.06) .09 (.14) -- (.14) 10.16 .85
=================================================================================================================================
NEW MEXICO****
Class A (9/92)
1998 $10.16 $.50 $ .51 $1.01 $(.50) $ -- $(.50) $10.67 10.17%
1997 9.81 .51 .35 .86 (.51) -- (.51) 10.16 8.90
1996 10.01 .51 (.19) .32 (.52) -- (.52) 9.81 3.18
1995 9.68 .52 .33 .85 (.52) -- (.52) 10.01 9.25
1994 10.04 .53 (.33) .20 (.53) (.03) (.56) 9.68 1.92
Class B (2/97)
1998 10.15 .43 .52 .95 (.43) -- (.43) 10.67 9.46
1997 (c) 10.24 .12 (.10) .02 (.11) -- (.11) 10.15 .18
Class C (2/97)
1998 10.16 .45 .51 .96 (.45) -- (.45) 10.67 9.60
1997 (c) 10.23 .12 (.08) .04 (.11) -- (.11) 10.16 .43
Class R (2/97)
1998 10.17 .53 .53 1.06 (.53) -- (.53) 10.70 10.59
1997 (c) 10.23 .14 (.07) .07 (.13) -- (.13) 10.17 .71
=================================================================================================================================
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets (000) ment ment ment (a) ment (a) Rate
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$85,922 .93% 4.77% .83% 4.87% 16%
82,567 1.05 4.91 .83 5.13 25
80,094 1.07 4.82 .69 5.20 38
80,406 1.20 5.21 .82 5.59 27
82,676 1.09 5.03 .64 5.48 21
1,620 1.68 3.98 1.51 4.15 16
347 1.67* 4.38* 1.62* 4.43* 25
6,328 1.48 4.20 1.35 4.33 16
3,189 1.59 4.37 1.38 4.58 25
1,970 1.63 4.24 1.23 4.64 38
1,621 1.75 4.62 1.36 5.01 27
1,122 1.62* 3.94* 1.20* 4.36* 21
20,504 .73 4.97 .63 5.07 16
19,031 .73* 5.32* .67* 5.38* 25
- ---------------------------------------------------------------------------------
$37,285 1.01% 4.83% 1.00% 4.84% 19%
31,229 1.18 4.87 .74 5.31 27
33,637 1.27 4.69 .55 5.41 70
34,982 1.27 5.22 .50 5.99 38
35,796 1.27 4.81 .37 5.71 42
1,661 1.76 4.05 1.75 4.06 19
444 1.78* 4.35* 1.53* 4.60* 27
875 1.56 4.24 1.55 4.25 19
103 1.58* 4.67* 1.31* 4.94* 27
750 .81 5.02 .80 5.03 19
413 .83* 5.35* .58* 5.60* 27
- ---------------------------------------------------------------------------------
$54,959 .93% 4.65% .79% 4.79% 13%
50,807 1.08 4.76 .77 5.07 43
51,173 1.09 4.69 .68 5.10 57
52,150 1.17 4.98 .67 5.48 38
51,167 1.14 4.50 .40 5.24 39
1,408 1.68 3.88 1.53 4.03 13
657 1.68* 4.05* 1.54* 4.19* 43
1,487 1.48 4.06 1.31 4.23 13
155 1.48* 4.26* 1.34* 4.40* 43
466 .73 4.86 .58 5.01 13
362 .73* 5.04* .59* 5.18* 43
- ---------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Arizona.
*** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Colorado.
****Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship New Mexico.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total Returns are calculated on net asset value without any sales charge and
are not annualized except where noted.
(c) From commencement of class operations as noted.
35
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio--one that balances
different types of investments, levels of risk and tax management--can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers/SM/ including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, experienced, professional
security selection and surveillance and daily liquidity at that day's net asset
value for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
36
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
As of August 8, 1998
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
37
<PAGE>
Serving Investors for Generations
[Photo of John Nuveen, Sr. appears here]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time -- with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
1898
Nuveen 1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime.(TM)
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
<PAGE>
NUVEEN
Municipal
Bond Funds
May 31, 1998
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Florida
Florida
Intermediate
<PAGE>
Highlights
As of May 31, 1998
For Class A shares on net asset value
Credit Quality Performance Highlights
Nuveen Flagship Florida Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 66%
AA 9%
A 11%
BBB/NR 14%
. Steady dividend for 12 consecutive months
. One-year total return of 8.67%
. Taxable equivalent yield of 6.28%*
Nuveen Flagship Florida Intermediate Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 72%
AA 8%
A 9%
BBB/NR 11%
. Steady dividend for 12 consecutive months
. One-year total return of 9.06%
. Taxable equivalent yield of 5.99%*
* For investors in the 31% federal income tax bracket.
Is it Time for a Financial Check-Up?
Now is a great time to sit down with your financial adviser and review your
financial plan. How can you make sure that your investment strategy is strong
enough to provide the income you need today and versatile enough to change as
your goals do? Here are some guidelines:
. Make sure you and your adviser understand your current situation. How have
your goals, objectives and risk profile changed? What are your current tax
concerns, interests, lifestyle?
. Revisit your current investment choices. If the value of one portion of your
portfolio has grown substantially, it may be time to rebalance asset classes.
. Determine how your asset mix will be implemented. Changing your asset
allocation is generally a gradual process. Make sure you and your adviser have
a clear understanding of each other's responsibilities. Define and discuss
what you want in terms of support from your adviser.
. Keep revisiting your plan. Don't assume that once you've revised your plan
and reallocated your portfolio the process is finished.
It's recommended that you meet at least once a year with your financial adviser
and usually more if there have been significant changes in interest rates, tax
laws, retirement plan distributions, lifestyle or health.
Even if things haven't changed, it makes good financial sense to keep in touch
with your adviser.
Contents
1 Dear Shareholder
4 Florida Commentary
and Overview
6 Florida Intermediate Commentary
and Overview
8 Report of Independent
Public Accountants
9 Portfolio of Investments
20 Statement of Net Assets
21 Statement of Operations
22 Statement of Changes in Net Assets
23 Notes to Financial Statements
29 Financial Highlights
32 Building Better Portfolios
33 Fund Information
<PAGE>
Wealth takes a lifetime to build. Once achieved, it should be preserved.
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Dear Shareholder
I'm pleased to share with you this performance report for the Nuveen Florida and
Florida Intermediate municipal bond funds. Over the past 12 months, both funds
continued to perform well and meet their objectives of providing you with
attractive tax-free income and strong after-tax total returns.
Fund Update
Earlier this year, the Board of Trustees approved a reorganization of the
Florida Intermediate fund, subject to shareholder approval at a special meeting
on August 13. If approved, the Nuveen Flagship Florida Intermediate Municipal
Bond Fund will be merged into the Nuveen Flagship Intermediate Municipal Bond
Fund effective August 21, 1998. The merger of these two funds -- with their
similar philosophies and focus on intermediate-term investments -- offers
shareholders several potential benefits, including lower costs, greater
portfolio flexibility and higher after-tax performance potential. Mergers reduce
administrative expenses by consolidating fund reporting, record-keeping and
other operational functions. The combined fund will have a larger asset base,
enabling us to buy and sell larger blocks of bonds, thereby lowering trading
costs and enhancing portfolio liquidity. Despite the loss of exemption from the
Florida state intangibles tax, we anticipate that the proposed merger will
result in enhanced after-tax performance potential for shareholders.
The Economy in Review
Fixed-income investments enjoyed bullish performance over the past year, as
declining interest rates and low inflation spurred a bond market rally. The
equity markets also exhibited continued strength despite recent volatility
sparked by Asia's financial problems and their possible effects on U.S.
corporate earnings. Although interest rates have trended slightly upward in
recent months, a year-to-date comparison shows that today's rates are
significantly lower than they were one year ago. As shown in the accompanying
chart, between the end of May 1997 and May 1998, the yield on the Bond Buyer 40,
an unmanaged index of long-term municipal bonds, fell from 5.74% to 5.22%.
1
<PAGE>
"Another major factor in bond performance over the last 12 months was the
continued strength of the U.S. economy, which helped boost the credit quality
of many municipal bonds."
Much of the decline in interest rates resulted from expectations that the
financial problems of Asia would restrain the prices of imported goods and
reduce foreign demand for U.S. products and services, thereby keeping inflation
at moderate levels. These inflation expectations were largely fulfilled, as the
Consumer Price Index rose only 1.5% for the 12 months ended May 1998, remaining
at one of its lowest levels in years. The Asian situation also provided
additional strength to the bond market rally, as many investors made a "flight
to quality" by moving assets into high-quality U.S. bonds in the face of the
uncertainty in that region.
In coming months, we will continue to watch closely several key factors that are
likely to affect the future of the economy, including the demand for goods and
services, the availability of qualified employees, the strength of the dollar,
and indications from the Federal Reserve. With many investors still waiting for
the full impact of Asia's difficulties to show up in U.S. economic statistics,
the potential long-term effect of this crisis on American markets continues to
cause concern. We expect that the development of these factors will continue to
influence the tone of the fixed-income markets during the remainder of the year.
Municipal Market Review
As interest rates continued to decline over the past year, bond prices rose.
This price appreciation for the bonds in our portfolios contributed to strong
total returns for the year.
Another major factor in bond performance over the last 12 months was the
continued strength of the U.S. economy, which helped boost the credit quality of
many municipal bonds. With the improvements in the fundamental financial health
of many municipalities and revenue projects financed by bonds, major credit
rating agencies upgraded the credit quality of thousands of issuers over the
past year, while downgrading relatively few. These boosts in credit quality also
contributed to the funds' performance as upgraded bonds increased in value.
The combination of low interest rates and a strong economy set new issuance on a
record pace and stimulated a dramatic increase in the refinancing of existing
bonds as issuers sought to lower their interest costs. The first quarter of 1998
saw $68 billion of new municipal issuance, up 70% from the same period in 1997.
The flood of new issues continued with May's long-awaited sale of the first
segment of Long Island (New York) Power Authority's $7 billion offering, the
largest issuance in municipal bond history. Although the nationwide supply of
municipal bonds remained heavy, the supply of bonds in each state varied
according to local economic conditions. This level
2
<PAGE>
"Today, more than ever, you can count on Nuveen for a wide range of investments
that can help you build a well-balanced portfolio designed to achieve your
financial goals."
of issuance highlights the value of Nuveen's expertise in the municipal market,
as our portfolio management teams worked diligently to sift
through the available issues to select those undervalued securities that would
help the funds achieve their investment objectives.
Diversification: The Key
to a Better Portfolio
In view of current market conditions, we believe that investors will find
diversification to be an increasingly important investment strategy in the
months ahead. An appropriately diversified portfolio one that balances
different types of investments, levels of risk and tax management can help
cushion your portfolio against volatility and enhance your return potential.
Many investors select Nuveen's municipal bond funds because their emphasis on
dependable tax-free income and attractive after-tax returns makes them ideal for
building and sustaining long-term financial security. These funds also work well
with other Nuveen investments to create the foundation of a diversified, well-
balanced portfolio. In fact, recent studies by Nuveen Research have found that
portfolios combining municipal bonds and stocks generated higher after-tax
returns with lower levels of risk than similar portfolios combining stocks and
Treasury or corporate bonds.
We encourage you to talk to your financial adviser about Nuveen's range of
equity and balanced funds, including the Nuveen European Value Fund. This new
equity mutual fund offers a portfolio of quality European company stocks for
investors seeking long-term growth potential and international diversification.
The fund is just one of an ever-expanding range of Nuveen products and services
designed to help investors achieve diversification while building a tax-
efficient, risk-sensitive investment portfolio. If you'd like to learn more
about the Nuveen European Value Fund or any of our other investments, contact
your financial adviser or call Nuveen Investor Services at (800) 257-8787 for a
prospectus. Please read the information carefully before you invest.
When seeking quality investment solutions that withstand the test of time, we
hope that you continue to think of Nuveen. Today, more than ever, you can count
on Nuveen for a wide range of investments that can help you build a well-
balanced portfolio designed to achieve your financial goals. We thank you for
your continued confidence in us and our family of investments.
Sincerely,
/s/ Timothy R. Schwertfeger
- ---------------------------
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1998
3
<PAGE>
Nuveen Flagship Florida Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Mike Davern discusses fund performance, the municipal market,
and key investment strategies for the Florida fund.
Comments cover the one-year period ended May 31, 1998 and all
performance statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
The high credit ratings assigned by Moody's and Standard & Poor's to Florida's
long-term general obligation debt (Aa2 and AA+) reflect the state's diverse
economy, with its strength in the agriculture and tourism industries and its
generally solid financial position.
Growth in services, construction and trade sectors have enabled the labor force
to expand steadily since 1992. Tourism is expected to continue to play a
dominant economic role as Orlando attractions expand through 1999. Tourist
arrivals are expected to increase 2.1% in fiscal year 1998 and 4.0% in fiscal
year 1999. Unemployment continues its descent from recessionary levels, reaching
4.8% in fiscal year 1997 compared with 5.0% nationwide.
New issue volume has been diverse across the sectors and is up 30% over last
year for the first five months of 1998. Florida's fast-growing population, a
large proportion of which is at or over retirement age, will continue to exert
pressure on state services, mainly education and health care.
Fund Performance
For the year ended May 31, 1998, the total return on net asset value for the
Florida Municipal Bond Fund was 8.67%, which is equivalent to a taxable return
of 11.07% for investors in the 31% federal income tax bracket. The total return
compares to the annual return of 9.38% posted by the unmanaged Lehman Brothers
Municipal Bond Index, as well as to the average return of 9.03% for the peer
group of Florida municipal bond funds tracked by Lipper Analytical Service, a
nationally recognized performance measurement service.
The fund slightly underperformed these two benchmarks, in part, because of its
shorter portfolio duration and more defensive structure. Duration is a measure
of the fund's price volatility in relation to changes in interest rates. With a
duration of 6.45 years, the fund was somewhat shorter than the Lehman Index's
average duration of 7.11 years. Although the shorter duration hindered the
fund's ability to participate in this year's market rally, it helped protect the
fund from volatility and would help it outperform in a market downturn.
Key Strategies
In addition to focusing on maintaining a shorter duration, we worked to keep the
credit quality of the fund's holdings high. Given Florida's strong economy,
generous supply, and the narrow yield spreads between lower- and higher-rated
issues, we were able to purchase high-quality bonds without sacrificing much
yield. Although supply was strong, many of the bonds coming to market lacked the
protection from bond calls that we normally seek, increasing the likelihood that
they might be called away from the portfolio at an inopportune time. However, we
did find good opportunities in the health care sector and the housing sector
during the year. While housing bonds with good call protection were scarce, the
fund was able to purchase several single-family issues with better-than-normal
call protection.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
As of May 31, 1998, the fund's sector holdings were well-diversified, with 14%
of the portfolio invested in tax obligation bond issues, 13% in health care
bonds, 11% in utility issues and 13% in U.S. guaranteed debt.
Outlook for the Future
On July 1, 1998, Nuveen made several changes in the management of its mutual
funds to make more efficient use of staff resources and portfolio manager
expertise. As a result, Tom O'Shaughnessy assumed management responsibilities
for this fund. Tom is a 15-year veteran of Nuveen and an experienced investment
professional who has managed a range of other municipal bond funds, including
other funds from the state of Florida. Going forward, Tom and his team expect
market conditions that will allow them to extend the duration of the portfolio
and add some higher-yielding bonds. In terms of specific sectors, they will seek
out well-structured large issues in the year ahead, especially attractive health
care and water and sewer issues. Overall, they will continue to maintain the
fund's current healthy diversification, which should be aided by continuing
strong supply.
4
<PAGE>
Nuveen Flagship Florida Municipal Bond Fund
Performance Overview
As of May 31, 1998
MONTHLY TAX-FREE DIVIDENDS (CLASS A SHARES)/1/
[BAR CHART APPEARS HERE]
0.046 6/97
0.046 7/97
0.046 8/97
0.046 9/97
0.046 10/97
0.046 11/97
0.046 12/97
0.046 1/98
0.046 2/98
0.046 3/98
0.046 4/98
0.046 5/98
Top 5 Sectors
Tax Obligation (Limited) 14%
Health Care 13%
U.S. Guaranteed 13%
Utilities 11%
Housing (Multifamily) 10%
1 The fund also paid shareholders taxable distributions in December of $0.0101
per share.
2 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are Class
A share returns adjusted for differences in sales charges and expenses, which
are primarily differences in distribution and service fees. Class A shares have
a 4.2% maximum sales charge. Class B shares have a CDSC that begins at 5% for
redemptions during the first year after purchase and declines periodically to 0%
over the following five years, which is not reflected in the return figures.
Class C shares have a 1% CDSC for redemptions within one year which is not
reflected in the one-year total return.
3 Based on SEC yield and a federal income tax rate of 31%. Represents the yield
on a taxable investment necessary to equal the yield of the Nuveen fund on an
after-tax basis.
4 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Index is comprised of a broad range of investment-grade
municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to A shares (4.20%) and all ongoing fund expenses.
Portfolio Statistics
Share Class A B C R
Inception Date 6/90 2/97 9/95 2/97
Net Asset Value $10.94 $10.95 $10.95 $ 10.94
Fund Net Assets ($000) $361,739
Average Weighted Maturity (Years) 20.40
Average Weighted Duration (Years) 6.45
Annualized Total Return/2/
Share Class A(NAV) A(Offer) B C R
1-Year 8.67% 4.15% 7.89% 8.20% 8.91%
5-Year 5.93% 5.03% 5.32% 5.37% 5.99%
Since Inception 7.76% 7.18% 7.15% 7.18% 7.80%
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
Distribution Rate 5.05% 4.83% 4.33% 4.49% 5.27%
SEC 30-Day Yield 4.33% 4.15% 3.58% 3.78% 4.53%
Taxable Equivalent Yield/3/ 6.28% 6.01% 5.19% 5.48% 6.57%
Index Comparison/4/
[LINE GRAPH APPEARS HERE]
Nuveen Flagship Nuveen Flagship
Florida Municipal Florida Municipal Lehman Brothers
Bond Fund (Nav) Bond Fund (Offer) Municipal Bond Index
6/90 10,000 9,580 10,000
5/91 10,941 10,481 10,912
5/92 12,082 11,575 11,985
5/93 13,592 13,021 13,418
5/94 13,866 13,284 13,749
5/95 15,039 14,407 15,001
5/96 15,512 14,861 15,687
5/97 16,689 15,988 16,988
5/98 18,138 17,377 18,583
- -- Lehmon Brothers Municipal Bond Index $18,583
- -- Nuveen Flagship Florida Municipal Bond Fund (NAV) $18,138
- -- Nuveen Flagship Florida Municipal Bond Fund (Offer) $17,377
Past performance is not predictive of future results.
5
<PAGE>
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Paul Brennan discusses fund performance, the municipal market,
and key investment strategies for the Florida Intermediate fund.
Comments cover the one-year period ended May 31, 1998 and all performance
statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
The high credit ratings assigned by Moody's and Standard & Poor's to Florida's
long-term general obligation debt (Aa2 and AA+) reflect the state's diverse
economy, with its strength in the agriculture and tourism industries and its
generally solid financial position.
Growth in services, construction and trade sectors have enabled the labor force
to expand steadily since 1992. Tourism is expected to continue to play a
dominant economic role as Orlando attractions expand through 1999. Tourist
arrivals are expected to increase 2.1% in fiscal year 1998 and 4.0% in fiscal
year 1999. Unemployment continues its descent from recessionary levels, reaching
4.8% in fiscal year 1997 compared with 5.0% nationwide.
New issue volume has been diverse across the sectors and is up 30% over last
year for the first five months of 1998. Florida's fast-growing population, a
large proportion of which is at or over retirement age, will continue to exert
pressure on state services, mainly education and health care.
Fund Performance
The fund performed well for the year ended May 31, 1998, generating a total
return on net asset value of 9.06%, which is equivalent to a taxable return of
11.19% for investors in the 31% federal income tax bracket. The total return
outperformed the annual return of 8.06% posted by the benchmark Lehman Brothers
7-Year Municipal Bond Index and surpassed its Lipper peer group average of 7.31%
by 175 basis points. The Florida Intermediate Municipal Bond Fund also ranked
second among the 19 Florida intermediate-term funds tracked by Lipper Analytical
Service, a nationally recognized performance measurement service.
The fund's strong performance was due in part to its longer portfolio duration,
which is a measure of the fund's price volatility in relation to changes in
interest rates. The fund's duration of 6.84 years was longer than the Lehman 7-
Year Index's average duration of 5.39 years. The longer duration allowed the
fund to better participate in this year's market rally, although it would have
been more adversely affected had there been a market downturn.
Key Strategies
In addition to maintaining a longer duration, we have worked to keep the credit
quality of the fund's holdings high. Given Florida's strong economy, generous
supply and the narrow yield spreads between lower- and higher-rated issues, we
were able to avoid credit risks last year without sacrificing performance.
Although many longer-term issues lacked the protection from bond calls that we
normally seek, the intermediate-term bonds purchased for this fund have
excellent call protection. As a result, the likelihood of bond calls adversely
affecting the fund's income levels remains remote. We also found good
opportunities and attractive returns in the transportation sector, as well as in
bonds subject to the alternative minimum tax (AMT).
In addition, we felt that high demand for bonds with maturities of less than 10
years limited the number of good values among those issues. So we sought
attractive opportunities to increase the fund's income among bonds with
maturities of 10-12 years, being careful to keep the fund's average maturity
under 10 years.
As of May 31, 1998, limited tax obligation issues represented the primary sector
of the fund, accounting for 26% of the portfolio. Other key sectors included
transportation bonds at 16%, general tax obligation bond issues at 16%, and
health care bonds at 11%.
Outlook for the Future
Going forward, we will continue to work against narrow spreads between higher-
and lower-rated bonds, seeking out good values across a range of sectors. We
will also continue to maintain and even improve the portfolio's call protection,
helping to ensure that portfolio performance won't be hindered because high-
paying bonds are prematurely called away by their issuers.
6
<PAGE>
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Performance Overview
As of May 31, 1998
Monthly Tax-Free Dividends (Class a Shares)/1/
[BAR CHART APPEARS HERE]
0.039 6/97
0.039 7/97
0.039 8/97
0.039 9/97
0.039 10/97
0.039 11/97
0.039 12/97
0.039 1/98
0.039 2/98
0.039 3/98
0.039 4/98
0.039 5/98
Top 5 Sectors
Tax Obligation (Limited) 26%
Transportation 16%
Tax Obligation (General) 16%
Health Care 11%
Water and Sewer 8%
1 The fund also paid shareholders taxable distributions in December of $0.0405
per share.
2 Class A share returns are actual. Class C and R share returns are actual for
the period since class inception; returns prior to class inception are Class A
share returns adjusted for differences in sales charges and expenses, which are
primarily differences in distribution and service fees. Class A shares have a
3.0% maximum sales charge. Class C shares have a 1% CDSC for redemptions within
one year which is not reflected in the one-year total return.
3 Based on SEC yield and a federal income tax rate of 31%. Represents the yield
on a taxable investment necessary to equal the yield of the Nuveen fund on an
after-tax basis.
4 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers 7-Year and
10-Year Municipal Bond Indexes. In the past, the fund's performance was compared
with the Lehman 10-Year Index. Beginning this year, we will compare the fund's
performance with the Lehman 7-Year Municipal Bond Index because that index
better corresponds to the fund's investment policies, which require that the
fund maintains a weighted average portfolio maturity of 5-10 years. The Lehman
Indexes are comprised of a broad range of investment-grade municipal bonds, and
do not reflect any initial or ongoing expenses. The Nuveen fund return depicted
in the chart reflects the initial maximum sales charge applicable to A shares
(3.0%) and all ongoing fund expenses.
Portfolio Statistics
Share Class A C R
Inception Date 2/94 2/94 2/97
Net Asset Value $10.48 $10.48 $ 10.50
Fund Net Assets ($000) $12,896
Average Weighted Maturity (Years) 9.80
Average Weighted Duration (Years) 6.84
Annualized Total Return/2/
Share Class A(NAV) A(Offer) C R
1-Year 9.06% 5.81% 8.61% 9.29%
3-Year 6.53% 5.45% 5.96% 6.69%
Since Inception 6.59% 5.84% 6.01% 6.70%
Tax-Free Yields
Share Class A(NAV) A(Offer) C R
Distribution Rate 4.47% 4.33% 3.95% 4.69%
SEC 30-Day Yield 4.13% 4.01% 3.58% 4.33%
Taxable Equivalent Yield/3/ 5.99% 5.81% 5.19% 6.28%
Index Comparison/4/
[LINE GRAPH APPEARS HERE]
NUVEEN FLAGSHIP NUVEEN FLAGSHIP
FLORIDA INTERMEDIATE FLORIDA INTERMEDIATE LEHMAN BROTHERS LEHMAN BROTHERS
MUNICIPAL BOND MUNICIPAL BOND 7-YEAR MUNICIPAL 10-YEAR MUNICIPAL
FUND (NAV) FUND (OFFER) BOND INDEX BOND INDEX
2/94 10,000 9,700 10,000 10,000
5/94 9,962 9,663 9,592 9,458
5/95 10,572 10,255 10,153 10,071
5/96 11,299 10,960 10,922 10.912
5/97 11,893 11,537 11,508 11,605
5/98 13,177 12,782 12,594 12,861
- -- Lehman Brothers 10-Year Municipal Bond Index $12,861
- -- Lehman Brothers 7-Year Municipal Bond Index $12,594
- -- Nuveen Flagship Florida Intermediate Municipal Bond Fund (NAV) $13,177
- -- Nuveen Flagship Florida Intermediate Municipal Bond Fund (Offer) $12,782
Past performance is not predictive of future results.
7
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust I:
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Flagship Florida Municipal Bond Fund and
Nuveen Flagship Florida Intermediate Municipal Bond Fund (collectively, the
"Funds") (two of the portfolios constituting the Nuveen Flagship Multistate
Trust I (a Massachusetts business trust)), as of May 31, 1998, the related
statements of operations, statements of changes in net assets and the financial
highlights for the year then ended. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial statements and financial highlights for the
Funds for the years ended May 31, 1997 and prior were audited by other auditors
whose report dated July 11, 1997, expressed an unqualified opinion on those
financial statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1998, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Flagship Florida Municipal Bond Fund and Nuveen Flagship Florida Intermediate
Municipal Bond Fund of the Nuveen Flagship Multistate Trust I as of May 31,
1998, and the results of their operations, the changes in their net assets, and
the financial highlights for the year then ended, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 17, 1998
8
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 0.4%
$ 750,000 Clay County Development Authority, Industrial Development Revenue 7/02 at 102 AA- $ 807,840
Refunding Bonds (Cargill Incorporated Project), Series 1992,
6.400%, 3/01/11
600,000 City of Jacksonville, Florida, Industrial Development Revenue 3/02 at 102 AA- 645,804
Refunding Bonds (Cargill Incorporated Project), Series 1992,
6.400%, 3/01/11
- --------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 0.1%
300,000 Brevard County Educational Facilities Authority, Florida, 11/02 at 102 BBB 323,031
Educational Facilities Refunding and Improvement Revenue Bonds,
Series 1992, 6.875%, 11/01/22
- --------------------------------------------------------------------------------------------------------------------------
Energy - 0.3%
1,000,000 Gulf Coast Industrial Development Authority, Waste Disposal Revenue 6/08 at 102 BBB- 999,850
Bonds (Valero Refining and Marketing Company Project), Series 1997,
5.600%, 12/01/31 (Alternative Minimum Tax)
- --------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 4.6%
5,500,000 Escambia County, Florida, Pollution Control Revenue Bonds (Champion 8/04 at 102 Baa1 6,061,715
International Project), Series 1994, 6.900%, 8/01/22 (Alternative
Minimum Tax)
8,350,000 Escambia County, Florida, Pollution Control Revenue Bonds (Champion 9/06 at 102 Baa1 9,129,974
International Project), Series 1996, 6.400%, 9/01/30 (Alternative
Minimum Tax)
1,500,000 Nassau County, Florida, Pollution Control Revenue Refunding, ITT 7/03 at 102 BBB+ 1,587,720
Rayonier Inc. Project, 6.200%, 7/01/15
- --------------------------------------------------------------------------------------------------------------------------
Health Care - 13.1%
3,000,000 Jacksonville Health Facilities Authority, Florida, Hospital 11/01 at 102 AA+ 3,300,150
Facilities Refunding Revenue Bonds, Series 1991 (St. Lukes
Hospital Association Project), 7.125%, 11/15/20
2,000,000 Jacksonville Health Facilities Authority, Florida, Hospital Revenue 8/07 at 101 AAA 1,980,400
Bonds (Charity Obligated Group-Baptist/St. Vincents Health System,
Inc.), Series 1997A, 5.125%, 8/15/27
6,000,000 City of Lakeland, Florida, Hospital Revenue Refunding Bonds, Lakeland 11/06 at 102 AAA 6,009,420
Regional Medical Center Project, Series 1996, 5.250%, 11/15/25
2,100,000 Hospital Board of Directors of Lee County, Florida, Hospital Revenue 4/07 at 102 AAA 2,224,887
Bonds (Lee Memorial Health System), Fixed Rate Hospital Revenue Bonds,
1997 Series A, 5.625%, 4/01/16
2,320,000 Martin County Health Facilities Authority, Florida, Hospital Revenue 11/00 at 102 AAA 2,527,222
Refunding Bonds, Series 1990A (Martin Memorial Hospital), 7.125%,
11/15/04
North Broward Hospital District, Florida, Refunding and Improvement
Revenue Bonds, Series 1997:
1,000,000 5.250%, 1/15/17 1/07 at 101 AAA 1,008,860
3,000,000 5.375%, 1/15/24 1/07 at 101 AAA 3,039,810
1,260,000 North Miami, Florida, Health Facilities Authority, Health Facility 9/00 at 102 A+ 1,368,385
Revenue, Villa Maria Housing, Series B (Bon Secours), 7.500%,
9/01/12
2,500,000 Orange County Health Facilities Authority, Florida, Hospital Revenue 11/01 at 102 AAA 2,743,825
Bonds (Adventist Health System/Sunbelt, Inc.), Series 1991 A, 6.875%,
11/15/15
2,500,000 Orange County Health Facilities Authority, Florida, Hospital Revenue 11/01 at 102 AAA 2,733,900
Bonds (Adventist Health System/Sunbelt, Inc.), Series 1991 B,
6.750%, 11/15/21
10,645,000 Orange County Health Facilities Authority, Florida, Hospital Revenue 11/05 at 102 AAA 10,660,435
Bonds (Adventist Health System/Sunbelt Obligated Group), Series
1995, 5.250%, 11/15/20
2,070,000 Orange County Health Facilities Authority, Florida, Hospital Revenue No Opt. Call AAA 2,408,859
Bonds (Orlando Regional Healthcare System), Series 1996A, 6.250%,
10/01/18
</TABLE>
9
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$5,455,000 Orange County Health Facilities Authority, Florida, Hospital Revenue No Opt. Call AAA $6,402,643
Refunding Bonds (Orlando Regional Healthcare System), Series C,
6.250%, 10/01/21
1,000,000 St. Johns County, Industrial Development Authority, Hospital Revenue 8/02 at 102 A2 1,039,020
Bonds, Flagler Hospital Project, Series 1992, 6.000%, 8/01/22
- --------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 9.7%
600,000 Housing Finance Authority of Broward County, Florida, Multifamily 2/05 at 102 AAA 652,716
Housing Revenue Refunding Bonds, (Lakeside Apartments Projects),
Series 1995, 7.000%, 2/01/25
250,000 Housing Finance Authority of Broward County, Florida, Multifamily 8/06 at 102 AAA 268,308
Housing Revenue Bonds (Boardwalk Apartments Project), Series 1996,
6.200%, 8/01/16
940,000 Housing Finance Authority of Broward County, Florida, Multifamily 10/08 at 102 N/R 950,913
Housing Revenue Bonds (Stirling Apartments Project), Series 1998,
5.400%, 10/01/11 (Alternative Minimum Tax)
2,700,000 Duval County Housing Finance Authority, Florida, Multi-Family Housing 4/05 at 102 BBB+ 2,877,795
Revenue Refunding Bonds, Series 1995 (Greentree Place Project),
6.750%, 4/01/25
750,000 Florida Housing Finance Agency, General Mortgage Revenue Refunding 6/02 at 103 AAA 793,710
Bonds, 1992 Series A, 6.400%, 6/01/24
Florida Housing Finance Agency, Housing Revenue Bonds (Antigua Club
Apartments Project), 1995 Series A1:
1,000,000 6.750%, 8/01/14 (Alternative Minimum Tax) 2/05 at 102 AAA 1,092,840
5,000,000 6.875%, 8/01/26 (Alternative Minimum Tax) 2/05 at 102 AAA 5,451,700
1,115,000 Florida Housing Finance Agency, Housing Revenue Bonds (Brittany of 2/05 at 102 AAA 1,215,071
Rosemont Apartments Project), 1995 Series C1, 6.875%, 8/01/26
(Alternative Minimum Tax)
2,250,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1997 Series C 12/07 at 102 AAA 2,359,553
(Windchase Apartments Project), 5.900%, 12/01/27
Florida Housing Finance Agency, Housing Revenue Bonds, 1995 Series H
(The Vineyards Project):
1,260,000 6.400%, 11/01/15 11/05 at 102 BBB+ 1,322,609
1,660,000 6.500%, 11/01/25 11/05 at 102 BBB+ 1,748,262
2,000,000 Florida Housing Finance Agency, Multi-Family Housing Revenue Refunding 8/06 at 102 AAA 2,146,460
Bonds, 1991 Series C, 6.200%, 8/01/16
3,500,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series H 10/06 at 102 AAA 3,708,950
(Villas of Capri Project), 6.100%, 4/01/17 (Alternative Minimum Tax)
1,000,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series N 9/06 at 102 AAA 1,066,000
(Leigh Meadows Apartments Project), 6.300%, 9/01/36 (Alternative
Minimum Tax)
1,000,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series O 9/06 at 102 AAA 1,066,000
(Stoddert Arms Apartments Project), 6.300%, 9/01/36 (Alternative
Minimum Tax)
700,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series T 12/06 at 102 AAA 734,972
(The Landings at Sea Front Apartments Project), 6.050%, 12/01/36
(Alternative Minimum Tax)
1,440,000 Florida Housing Finance Agency, Multi-Family Housing Revenue Bonds, 6/99 at 103 AAA 1,508,832
1989 Series I (GNMA Collateralized Driftwood Terrace Apartments
Project), 7.650%, 12/20/31 (Alternative Minimum Tax)
2,500,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1997 Series L 5/08 at 102 AAA 2,496,000
(Sarahs Place Apartments Project), 5.400%, 11/01/32 (Alternative
Minimum Tax)
1,000,000 Orange County Housing Finance Authority, Multifamily Housing Revenue 10/01 at 101 BBB+ 1,039,050
Bonds (Ashley Point Apartments Project), 1994 Series A, 7.100%,
10/01/24 (Alternative Minimum Tax)
1,925,000 Osceola County, Florida, Housing Finance Authority, Multifamily 6/07 at 100 AAA 1,977,957
Housing Revenue, Tierra Vista Apartments Project, Series A,
5.800%, 12/01/29 (Alternative Minimum Tax)
750,000 Housing Finance Authority of Palm Beach County, Florida, Multifamily 6/08 at 102 N/R 757,710
Housing Revenue Bonds (Windsor Park Apartments Project), 1998
Series A, 5.900%, 6/01/38 (Alternative Minimum Tax)
- --------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 9.1%
4,345,000 Housing Finance Authority of Broward County, Florida, Home Mortgage No Opt. Call AAA 734,783
Revenue Bonds, 1985 Series A, 0.000%, 4/01/16
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$1,525,000 Housing Finance Authority of Broward County, Florida, GNMA 3/00 at 102 AA+ $1,593,137
Collateralized Home Mortgage Revenue Bonds, 1990 Series A,
7.900%, 3/01/23 (Alternative Minimum Tax)
1,825,000 Housing Finance Authority of Clay County, Florida, Single Family 3/05 at 102 Aaa 1,946,107
Mortgage Revenue Bonds, Series 1995 (Multi-County Program),
6.550%, 3/01/28 (Alternative Minimum Tax)
2,000,000 Housing Finance Authority of Clay County, Florida, Single Family 4/07 at 102 Aaa 2,006,340
Mortgage Revenue Bonds, Series 1998 (Multi-County Program),
5.450%, 4/01/31 (Alternative Minimum Tax)
235,000 Housing Finance Authority of Dade County, Florida, Single Family 9/00 at 102 Aaa 247,688
Mortgage Revenue Bonds, 1990 Series B, 7.750%, 3/01/17
(Alternative Minimum Tax)
725,000 Housing Finance Authority of Dade County, Florida, Single Family 3/01 at 102 Aaa 764,281
Mortgage Revenue Bonds, Series B, 7.250%,
9/01/23 (Alternative Minimum Tax)
731,000 Housing Finance Authority of Dade County, Florida, Single Family 12/01 at 102 AAA 777,477
Mortgage Revenue Refunding Bonds, 1991 Series D, 6.950%, 12/15/12
40,000 Housing Finance Authority of Dade County, Florida, Single Family 3/01 at 102 Aaa 42,126
Mortgage Revenue Bonds, 1991 Series E, 7.000%, 3/01/24
1,000,000 Housing Finance Authority of Dade County, Florida, Single Family 4/05 at 102 AAA 1,066,940
Mortgage Revenue Bonds, Series 1995, 6.700%,
4/01/28 (Alternative Minimum Tax)
365,000 Duval County Housing Finance Authority, Single Family Mortgage Revenue 6/00 at 102 Aaa 383,487
Bonds (GNMA Mortgage Backed Securities Program),
Series 1990B, 7.500%, 6/01/15
Duval County Housing Finance Authority, Single Family Mortgage Revenue
Bonds (GNMA Mortgage Backed Securities Program), Series 1990A:
395,000 7.650%, 9/01/10 9/00 at 103 AAA 419,048
180,000 7.850%, 12/01/22 (Alternative Minimum Tax) 6/00 at 102 Aaa 189,115
720,000 Duval County Housing Finance Authority, Single Family Mortgage Revenue 10/04 at 102 Aaa 765,994
Bonds (GNMA Mortgage Backed Securities Program), Series 1994, 6.550%,
10/01/15 (Alternative Minimum Tax)
1,690,000 Escambia County Housing Finance Authority, Florida, Single Family 4/01 at 102 Aaa 1,782,933
Mortgage Revenue Bonds, Series 1991 A (Multi-County Program),
7.400%, 10/01/23 (Alternative Minimum Tax)
325,000 Escambia County Housing Finance Authority, Florida, Single Family 10/02 at 102 Aaa 343,714
Mortgage Revenue Bonds, Series 1992 A (Multi-County Program),
6.900%, 4/01/20 (Alternative Minimum Tax)
565,000 Escambia County Housing Finance Authority, Florida, Single Family 4/05 at 102 AAA 610,505
Mortgage Revenue Bonds, Series 1995 (Multi-County Program),
6.950%, 10/01/27 (Alternative Minimum Tax)
2,000,000 Escambia County Housing Finance Authority, Florida, Single Family 4/07 at 102 Aaa 2,009,660
Mortgage Revenue Bonds, Series 1998 A (Multi County Program),
5.350%, 4/01/31 (Alternative Minimum Tax)
1,250,000 Florida Housing Finance Agency, 6.250%, 7/01/11 7/04 at 102 AAA 1,331,450
Florida Housing Finance Agency, Single Family:
705,000 6.550%, 7/01/14 (Alternative Minimum Tax) 1/05 at 102 AAA 755,090
705,000 6.650%, 1/01/24 (Alternative Minimum Tax) 1/05 at 102 AAA 754,886
1,000,000 Housing Finance Authority of Lee County, Florida, Single Family 3/08 at 105 Aaa 1,106,040
Mortgage Revenue Bonds, Series 1998A, Subseries 1,2,3,4, 6.300%,
3/01/29 (Alternative Minimum Tax)
350,000 Leon County, Florida, Housing Finance Authority, Single Family Mortgage 4/01 at 102 Aaa 368,438
Revenue Bonds, 1991 Series A (Multi-County Program), 7.300%,
4/01/21 (Alternative Minimum Tax)
2,125,000 Leon County, Florida, Housing Finance Authority, Single Family Mortgage No Opt. Call AAA 2,420,885
Revenue Bonds, Series B (Multi-County Program), 7.300%, 1/01/28
(Alternative Minimum Tax)
790,000 Housing Finance Authority of Manatee County, Florida, Single Family 11/05 at 105 Aaa 885,519
Mortgage Revenue Bonds, Series 1994, Sub Series 3, 7.600%, 11/01/26
(Alternative Minimum Tax)
1,035,000 Orange County Housing Finance Authority, Mortgage Revenue, Series B, 5/99 at 103 Aaa 1,084,535
8.100%, 11/01/21 (Alternative Minimum Tax)
280,000 Orange County Housing Finance Authority, GNMA Collateralized Mortgage 7/00 at 103 AAA 298,698
Revenue Refunding Bonds, 1990 Series A, 7.600%, 1/01/24
1,005,000 Housing Finance Authority of Palm Beach County, Florida, Single Family 9/00 at 103 Aaa 1,065,159
Mortgage Revenue Bonds, 1990 Series B, 7.600%, 3/01/23
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$1,595,000 Pinellas County, Florida, Housing Finance Authority, Single Family 2/05 at 102 AAA $1,716,300
Mortgage Revenue Bonds (Multi-County Program), Series A, 6.650%,
8/01/21 (Alternative Minimum Tax)
3,000,000 Pinellas County, Florida, Housing Finance Authority, Single Family 3/07 at 102 Aaa 3,228,180
Mortgage Revenue Bonds (Multi-County Program), Series 1998A,
6.850%, 3/01/29 (Alternative Minimum Tax)
1,050,000 Pinellas County, Florida, Housing Finance Authority, Single Family 3/07 at 102 Aaa 1,076,072
Mortgage Revenue (Multi-County Program), Series C, 5.800%,
3/01/29 (Alternative Minimum Tax)
1,160,000 Polk County, Florida, Housing Finance Authority, Series A, 7.150%, 3/01 at 102 Aaa 1,221,758
9/01/23
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term Care -- 7.1%
2,735,000 Dade County Health Facilities Authority, Revenue Refunding Bonds, 8/00 at 102 A1 2,928,912
Series 1990 (Catholic Health and Rehabilitation Services, Inc.
Project), 7.125%, 8/15/09
Escambia County Health Facilities Authority, Florida, Health
Facilities Revenue Bonds (Azalea Trace, Inc.), Series 1997:
1,000,000 6.000%, 1/01/15 1/07 at 102 N/R 1,031,160
1,595,000 6.100%, 1/01/19 1/07 at 102 N/R 1,657,317
Jacksonville Health Facilities Authority, Florida, Tax
Exempt Industrial Development Revenue Bonds (National Benevolent
Association - Cypress Village Florida Project), Series 1996A:
690,000 6.125%, 12/01/16 12/06 at 102 Baa1 731,414
1,000,000 6.250%, 12/01/26 12/06 at 102 Baa1 1,066,640
1,550,000 Osceola County, Florida, Industrial Development Authority, 5/01 at 102 AAA 1,678,325
Evangelical Lutheran Social Project, 6.750%, 5/01/16
8,000,000 Palm Beach County, Florida, Health Facilities Authority, 11/06 at 102 A 8,310,720
Retirement Community, Adult Communities Total Services
Inc., 5.625%, 11/15/20
4,000,000 Palm Beach County, Florida, Industrial Development Revenue, 12/06 at 102 A+ 4,392,160
Lourdes, Noreen McKeen Residence, Geriatric Care Inc.,
6.625%, 12/01/26
Sarasota County, Florida, Health Facility Authority, Health
Revenue Refunding Facilities, Sunnyside Properties:
855,000 5.500%, 5/15/01 No Opt. Call N/R 876,768
540,000 5.500%, 5/15/02 No Opt. Call N/R 556,027
570,000 5.500%, 5/15/03 No Opt. Call N/R 588,941
600,000 5.500%, 5/15/04 No Opt. Call N/R 621,852
170,000 5.500%, 5/15/05 No Opt. Call N/R 178,094
1,000,000 6.000%, 5/15/10 5/06 at 102 N/R 1,036,380
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 4.6%
4,000,000 State of Florida, Full Faith and Credit, Broward County Expressway No Opt. Call AA+ 5,712,280
Authority, Series of 1984, 9.875%, 7/01/09
1,000,000 State of Florida, Full Faith and Credit, Broward County Expressway No Opt. Call AA+ 1,533,380
Authority, Series of 1984(General Obligation Bonds), 10.000%, 7/01/14
2,165,000 State of Florida, Full Faith and Credit, State Board of Education, No Opt. Call AA+ 3,119,570
Public Education Capital Outlay Bonds, Series 1985, 9.125%, 6/01/14
2,990,000 Hillsborough County, Florida, Environmentally Sensitive Land 7/02 at 102 Aa3 3,258,951
Acquisition and Protection Program Bonds, Series 1992, 6.250%, 7/01/08
2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997 No Opt. Call AAA 2,380,300
(General Obligation Bonds), 6.500%, 7/01/15
700,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 7/07 at 101 1/2 A 708,246
5.375%, 7/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 14.4%
The School Board of Brevard County, Florida, Certificates of
Participation, Series 1996A:
500,000 5.400%, 7/01/11 No Opt. Call AAA 539,240
500,000 5.400%, 7/01/12 No Opt. Call AAA 536,815
3,100,000 5.500%, 7/01/21 7/06 at 102 AAA 3,204,098
4,425,000 The School Board of Dade County, Florida, Certificates of 5/06 at 101 AAA 4,571,733
Participation, Series 1996A, 5.500%, 5/01/25
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 255,000 Dade County, Florida, Special Obligation Bonds (Courthouse Center 4/04 at 102 AAA $ 280,179
Project), Series 1994, 6.300%, 4/01/14
Dade County, Florida, Special Obligation and Refunding Bonds,
Series 1996B:
4,835,000 0.000%, 10/01/07 No Opt. Call AAA 3,196,709
4,585,000 5.000%, 10/01/35 10/06 at 102 AAA 4,471,154
190,000 Certificates of Participation, Series 1992, The School Board of 2/02 at 100 AAA 202,251
Escambia County, Florida, 6.375%, 2/01/12
1,500,000 Certificates of Participation, The Department of Corrections
(State of Florida), Series 1994, 6.000%, 3/01/14 3/04 at 102 A+ 1,607,580
3,105,000 City of Gulf Breeze, Florida, Local Government Loan Program, Floating 12/99 at 102 AAA 3,329,988
Rate Demand Revenue Bonds, Boca Raton Projects, Series 1985 E, 7.750%,
12/01/15
1,000,000 City of Gulf Breeze, Florida, Local Government Loan Program, Floating
Rate Demand Revenue Bonds, Series 1985 B, Remarketed, 5.900%, 12/01/15 12/11 at 100 AAA 1,098,980
5,000,000 The County of Hernando, Florida, Criminal Justice Complex Financing No Opt. Call AAA 6,602,950
Program 1986 Series, 7.650%, 7/01/16
250,000 City of Jacksonville, Florida, Excise Taxes Revenue Refunding Bonds, 10/02 at 102 AAA 274,653
Series 1992, 6.500%, 10/01/13
1,010,000 Martin County, Florida, Special Assignment Revenue, Tropical Farms Water,
5.900%, 11/01/11 11/05 at 100 A2 1,071,519
1,000,000 Miami Beach, Florida, Redevelopment Agency, City Center Tax Increment 12/04 at 102 BBB 1,021,790
Revenue, Historic Convention Village, 5.875%, 12/01/22 (Alternative
Minimum Tax)
4,115,000 School Board of Orange County, Florida, Master Lease Program,
Certificates of Participation, Series 1997A, 5.375%, 8/01/22 8/07 at 101 Aaa 4,184,009
1,000,000 Palm Beach County, Florida, Criminal Justice Facilities Revenue Refunding No Opt. Call AAA 1,079,030
Bonds, Series 1993, 5.375%, 6/01/10
1,000,000 Palm Beach County, Florida, School Board, Certificates of Participation, 8/04 at 101 AAA 1,126,880
Series A, 6.375%, 8/01/15
1,000,000 City of Palm Beach Gardens, Florida, Special Obligation Revenue Bonds, 7/99 at 102 AAA 1,053,400
Series 1990, 7.250%, 7/01/15
2,000,000 Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds, 7/16 at 100 A 2,096,100
1996 Series Y, 5.500%, 7/01/36
1,950,000 Puerto Rico Highway and Transportation Authority, Transportation Revenue 7/08 at 101 A 1,884,480
Bonds, Series A, 5.000%, 7/01/38
5,000,000 Sunrise Lakes, Florida, Phase 4 Recreation District, Series A, 6.750%, 8/05 at 102 BBB 5,817,400
8/01/24
3,300,000 Tampa, Florida, Utility Tax, 0.000%, 4/01/17 No Opt. Call AAA 1,287,297
3,170,000 Tampa, Florida, Utilities Tax Improvement Bonds, Series 1997, 0.000%, No Opt. Call AAA 1,145,004
10/01/18
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation 4.4%
3,000,000 Broward County, Florida, Port Facilities Revenue Bonds (Port Everglades), No Opt. Call AAA 2,901,330
Series 1998C, 5.000%, 9/01/27 (Alternative Minimum Tax) (DD)
1,000,000 Dade County, Florida, Aviation Facilities Revenue Bonds, 1992 Series B, 10/02 at 102 AAA 1,092,670
6.55%, 10/01/13 (Alternative Minimum Tax)
Greater Orlando Aviation Authority, Airport Facilities Revenue Bonds,
City of Orlando, Florida, Series 1997:
500,000 5.750%, 10/01/10 (Alternative Minimum Tax) No Opt. Call AAA 547,470
1,250,000 5.250%, 10/01/23 (Alternative Minimum Tax) 10/07 at 101 AAA 1,246,438
1,000,000 Hillsborough County Aviation Authority, Florida, Tampa International 10/06 at 102 AAA 1,071,570
Airport Revenue Bonds, (Alternative Minimum Tax) Series 1996B, 5.875%,
10/01/23
2,185,000 Palm Beach County, Florida, Airport System Revenue Refunding Bonds, No Opt. Call AAA 2,338,780
Series 1991, 7.500%, 10/01/00
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation (continued)
Sanford, Florida, Airport Authority, Industrial Development
Revenue, Central Florida Terminals Inc. Project, Series A:
$ 3,000,000 7.500%, 5/01/15 5/06 at 102 N/R $3,221,190
3,270,000 7.750%, 5/01/21 5/06 at 102 N/R 3,572,540
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 13.0%
1,925,000 City of Boynton Beach, Florida, Water and Sewer Utility, Revenue 11/00 at 102 AAA 2,113,419
Bonds, Series 1990, 7.400%, 11/01/15 (Pre-refunded to 11/01/00)
1,500,000 The School Board of Broward County, Florida, Certificates of 7/00 at 102 AAA 1,623,585
Participation, Series 1990A, 7.125%, 7/01/10 (Pre-refunded
to 7/01/00)
250,000 Dade County Health Facilities Authority, Florida, Hospital Revenue 10/99 at 102 AAA 265,135
Refunding Bonds, Series 1989 (South Miami Hospital Project), 7.000%,
10/01/18 (Pre-refunded to 10/01/99)
1,500,000 Dade County Health Facilities Authority, Florida, Hospital Revenue No Opt. Call AAA 1,624,425
Bonds, Series 1991A (Baptist Hospital of Miami Project), 5.750%,
5/01/21
300,000 Dade County Health Facilities Authority, Florida, Hospital Revenue 8/02 at 102 AAA 332,685
Refunding Bonds, Series 1992 (North Shore Medical
Center Project), 6.500%, 8/15/15 (Pre-refunded to 8/15/02)
310,000 The School Board of Escambia County, Florida, Certificates of 2/02 at 100 AAA 334,320
Participation, Series 1992, 6.375%, 2/01/12 (Pre-refunded to 2/01/02)
300,000 State of Florida, Full Faith and Credit, Pollution Control Bonds, 7/02 at 101 AA+*** 330,558
Series Y, Division of Bond Finance of the Department of
General Services, 6.600%, 7/01/17 (Pre-refunded to 7/01/02)
1,160,000 State of Florida, Faith and Credit, State Board of Education, Public No Opt. Call AAA 1,182,608
Education Capital Outlay Bonds, Series 1986 C, 7.100%, 6/01/07
335,000 State of Florida, Full Faith and Credit, State Board of Education, No Opt. Call AAA 476,655
Public Education Capital Outlay Bonds, Series 1985, 9.125%, 6/01/14
5,000,000 State of Florida, Full Faith and Credit, State Board of Education, 6/01 at 101 AAA 5,425,350
Public Education Capital Outlay Bonds, Series 1991 B, 6.700%, 6/01/22
(Pre-refunded to 6/01/01)
2,000,000 State of Florida, State Board of Education,Public Education Capital 6/02 at 101 Aaa 2,204,520
Outlay Bonds, Series 1991 C, 6.625%, 6/01/17 (Pre-refunded to 6/01/02)
1,000,000 Hillsborough County Port District, Florida, Tampa Port Authority, 12/00 at 102 Baa1*** 1,118,170
Revenue Bonds, Series 1990, 8.250%, 6/01/09 (Pre-refunded to 12/01/00)
250,000 Hillsborough County, Florida, Capital Improvement, Non-Ad Valorem 1/00 at 102 A*** 264,090
Revenue Bonds (Museum of Science and Industry Project), Series 1992,
6.400%, 1/01/12 (Pre-refunded to 1/01/00)
1,635,000 Hillsborough County, Florida, Refunding Utility Revenue Bonds, Series 8/01 at 102 BBB+*** 1,803,585
1991A, 7.000%, 8/01/14 (Pre-refunded to 8/01/01)
250,000 City of Hollywood, Florida, Water and Sewer Revenue Bonds, Series 1991, 10/01 at 102 AAA 276,660
6.875%, 10/01/21 (Pre-refunded to 10/01/01)
1,810,000 Jacksonville Electric Authority (Jacksonville, Florida), Bulk Power 10/00 at 101 1/2 Aaa 1,958,311
Supply System Revenue Bonds (Scherer 4 Project, Issue One), Series
1991A, 7.000%, 10/01/12 (Pre-refunded to 10/01/00)
1,500,000 Town of Lady Lake, Florida, Industrial Development Revenue Bonds 7/00 at 102 N/R*** 1,694,550
(Sunbelt Utilities, Inc. Project), Series 1990, 9.625%,
7/01/15 (Pre-refunded to 7/01/00) (Alternative Minimum Tax)
1,000,000 Martin County Health Facilities Authority, Florida, Hospital Revenue 11/00 at 102 AAA 1,091,330
Bonds, Series 1990B (Martin Memorial Hospital South Project), 7.100%,
11/15/20 (Pre-refunded to 11/15/00)
1,050,000 City of Naples, Florida, Hospital Revenue Bonds (Naples Community 10/00 at 102 AAA 1,144,731
Hospital, Inc. Project), Series 1990, 7.200%, 10/01/19 (Pre-refunded
to 10/01/00)
3,400,000 North Springs Improvement District, Florida, Water and Sewer Revenue, 10/01 at 102 N/R*** 3,883,310
8.000%, 10/01/16 (Pre-refunded to 10/01/01)
145,000 Orange County, Florida, Sales Tax Revenue Bonds, Series 1989, 1/00 at 102 AAA 152,702
6.125%, 1/01/19 (Pre-refunded to 1/01/00)
1,750,000 Orange County, Florida, Tourist Development Tax Revenue Bonds, 10/00 at 102 AAA 1,911,070
Series 1990, 7.250%, 10/01/10 (Pre-refunded to 10/01/00)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$1,750,000 Palm Beach County, Florida, Criminal Justice Facilities Revenue 6/00 at 102 AAA $1,894,253
Bonds, Series 1990 (General Obligation Bonds), 7.250%, 6/01/11
(Pre-refunded to 6/01/00)
1,425,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series P, 7/01 at 102 Aaa 1,573,870
7.000%, 7/01/21 (Pre-refunded to 7/01/01)
500,000 City of St. Petersburg Health Facilities Authority, Florida, Series 12/01 at 102 AAA 556,705
1985 A (Allegany Health System Loan Program), 7.000%, 12/01/15
(Pre-refunded to 12/01/01)
2,000,000 City of St. Petersburg, Florida, Health Facilities Authority, 12/03 at 100 AAA 2,254,120
Allegany Health System Revenue Bonds, Series 1991 (St. Anthony's
Health Care Center, Inc.), 6.750%, 12/01/21 (Pre-refunded to
12/01/03)
1,610,000 City of St. Petersburg Health Facilities Authority, Florida, 12/01 at 102 AAA 1,792,590
Allegany Health System Revenue Bonds, Series 1991 (St. Marys
Hospital, Inc.), 7.000%, 12/01/21 (Pre-refunded to 12/01/01)
2,500,000 The School Board of Seminole County, Florida, Certificates of 7/04 at 101 AAA 2,863,750
Participation, Series 1994B, 6.750%, 7/01/14 (Pre-refunded to
7/01/04)
1,000,000 City of Tampa, Florida, Allegany Health System Revenue Bonds, Series 12/01 at 102 AAA 1,106,000
1991 (St. Josephs Hospital, Inc.), 6.750%, 12/01/17 (Pre-refunded
to 12/01/01)
2,000,000 City of Tampa, Florida, Allegany Health System Revenue Bonds, Series 12/04 at 102 AAA 2,294,320
1994 (St. Josephs Hospital, Inc.) 6.500%, 12/01/23 (Pre-refunded to
12/01/04)
335,000 City of Tampa, Florida, Water and Sewer Systems, Series 1992, 10/02 at 101 AAA 363,341
6.000%, 10/01/17 (Pre-refunded to 10/01/02)
1,000,000 Turtle Run Community Development District, Coral Springs, Florida, 5/03 at 100 A3*** 1,098,040
Water Management Benefit Tax Refunding Bonds, Series 1993, 6.400%,
5/01/11 (Pre-refunded to 5/01/03)
- --------------------------------------------------------------------------------------------------------------------------
Utilities--11.0%
4,210,000 Broward County, Florida, Resource Recovery Revenue Bonds, Series 12/99 at 103 A- 4,534,044
1984 (SES Broward Company, L.P. South Project), 7.950%, 12/01/08
6,000,000 Citrus County, Florida, Pollution Control Refunding Revenue Bonds, 1/02 at 102 A+ 6,528,540
Series 1992 A (Florida Power Corporation Crystal River Power Plant
Project), 6.625%, 1/01/27
1,500,000 City of Gainesville, Florida, Utilities System Revenue Bonds, 1996 10/06 at 102 AA 1,501,080
Series A, 5.200%, 10/01/22
2,500,000 Hillsborough County Industrial Development Authority Florida, 8/01 at 103 AA 2,830,900
Pollution Control Revenue Bonds, (Tampa Electric Company
Project), Series 1991, 7.875%, 8/01/21
1,000,000 City of Lakeland, Florida, Electric and Water Revenue Refunding and No Opt. Call AAA 1,136,680
Improvement Bonds (Junior Subordinate Lien), Series 1996B, 6.000%,
10/01/12
2,125,000 Lee County, Florida, Solid Waste System, Series 1991A, 7.000%, 10/01 at 102 AAA 2,317,525
10/01/11 (Alternative Minimum Tax)
2,000,000 Martin County, Florida, Pollution Control Revenue Refunding Bonds 7/00 at 102 AAA 2,159,320
(Florida Power and Light Company Project), Series 1990, 7.300%,
7/01/20
1,000,000 Orlando, Florida, Utilities Commission, Water and Electric No Opt. Call Aa2 1,225,140
Subordinated Revenue Bonds, Series 1989D, 6.750%, 10/01/17
1,250,000 Orlando, Florida, Utilities Commission, Water and Electric 10/02 at 102 Aa2 1,329,400
Subordinated Revenue Bonds, Series 1992A, 6.000%, 10/01/20
4,000,000 Pinellas County, Florida, Pollution Control Refunding Revenue Bonds 6/01 at 102 A+ 4,400,160
(Florida Power Corporation Anclote and Bartow Power Plants
Project), Series 1991, 7.200%, 12/01/14
6,000,000 Polk County Industrial Development Authority, Florida, Solid Waste 12/06 at 102 A-1+ 6,332,520
Disposal Facility Revenue Bonds (Tampa Electric Company Project),
Series 1996, 5.850%, 12/01/30 (Alternative Minimum Tax)
3,000,000 St. Lucie County, Florida, Solid Waste Disposal Revenue Bonds 2/01 at 102 AA- 3,259,020
(Florida Power and Light Company Project), Series 1991, 7.150%,
2/01/23 (Alternative Minimum Tax)
2,000,000 St. Lucie County, Florida, Solid Waste Disposal Revenue Bonds 5/02 at 102 AA- 2,177,640
(Florida Power and Light Company Project), 6.700%, 5/01/27
(Alternative Minimum Tax)
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer - 7.1%
$ 1,000,000 The Governmental Utility Services Corporation of the City of Bessemer, 6/08 at 102 AAA $ 993,720
Alabama, Water Supply Revenue Bonds, Series 1998, 5.250%,
6/01/32 (DD)
1,000,000 City of Callaway/Bay County, Florida, Wastewater System Revenue Bonds, 9/06 at 102 AAA 1,087,990
Series 1996A, 6.000%, 9/01/26
Dade County, Florida, Water and Sewer System Revenue Bonds, Series 1997:
3,000,000 5.250%, 10/01/21 10/07 at 101 AAA 3,017,610
7,500,000 5.250%, 10/01/26 10/07 at 101 AAA 7,537,650
1,000,000 Town of Davie, Florida, Water and Sewer Improvement and Refunding, 10/02 at 102 AAA 1,088,840
Revenue Bonds, Series 1992, 6.250%, 10/01/17
600,000 The City of Daytona Beach, Florida, Water and Sewer Revenue Bonds, 11/02 at 102 AAA 645,840
Series 1992, 6.000%, 11/15/14
2,000,000 Escambia County Utilities Authority, Florida, Utility System Revenue No Opt. Call AAA 881,520
Bonds, Series 1992B, 0.000%, 1/01/15
2,250,000 Hillsborough County, Florida, Refunding Utility Revenue Bonds, Series 8/01 at 102 AAA 2,434,478
1991A, 6.500%, 8/01/16
3,500,000 Hillsborough County, Florida, Refunding Utility Revenue Bonds, Series 8/01 at 102 AAA 3,786,965
1991B, 6.500%, 8/01/16
375,000 City of Jacksonville, Florida, Water and Sewer Development Revenue Bonds, 6/02 at 102 A 407,190
Series 1992 (Jacksonville Suburban Utilities Corporation Project),
6.750%, 6/01/22 (Alternative Minimum Tax)
250,000 Town of Jupiter, Florida, Water Revenue Bonds, Series 1992B, 6.250%, 10/01 at 102 AAA 271,905
10/01/18
Manatee County, Florida, Public Utilities Revenue Refunding and
Improvement Bonds, Series 1991 C:
1,850,000 0.000%, 10/01/08 No Opt. Call AAA 1,167,756
2,800,000 0.000%, 10/01/09 No Opt. Call AAA 1,677,423
500,000 Orange County, Florida, Water Utilities System Revenue Bonds, Series 4/02 at 102 AAA 540,769
1992, 6.250%, 10/01/17
165,000 City of Tampa, Florida, Water and Sewer Systems Revenue Bonds, Series 10/02 at 101 AAA 176,341
1992, 6.000%, 10/01/17
- --------------------------------------------------------------------------------------------------------------------------
$343,926,000 Total Investments - (cost $327,968,234) - 98.9% 357,734,891
============--------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.1% 4,004,015
------------------------------------------------------------------------------------------------------------
Net Assets - 100% $361,738,906
============================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
(DD) Security purchased on a delayed delivery basis (note 1).
N/R Investment is not rated.
See accompanying notes to financial statements.
16
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Intermediate Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Forest and Paper Products - 1.7%
$ 200,000 Escambia County, Florida, Pollution Control Refunding Bonds, Champion 11/02 at 102 Baa1 $219,594
International Project, Series 1992, 6.950%, 11/01/07
- -------------------------------------------------------------------------------------------------------------------------
Health Care - 10.7%
200,000 Alachua County Health Facilities Authority, Florida, Health Facilities 12/06 at 102 AAA 215,430
Revenue Bonds, Shands Teaching Hospital and Clinics, Inc. Project,
Series 1996A, 5.300%, 12/01/08
200,000 Halifax Hospital Medical Center (Daytona Beach, Florida), Health Care No Opt. Call A 196,834
Facilities Bonds (Halifax Management System, Inc. Project), 1998
Series A, 4.600%, 4/01/08
200,000 Halifax Hospital Medical Center (Daytona Beach, Florida), Hospital 10/07 at 102 AAA 209,194
Revenue Refunding and Improvement Bonds, 1997 Series A, 5.000%,
10/01/08
250,000 Hospital Board of Directors of Lee County, Florida, Hospital Bonds (Lee 4/07 at 102 AAA 268,940
Memorial Health System), Fixed Rate Hospital Bonds, 1997 Series A,
5.400%, 4/01/09
200,000 Leesburg, Florida, Hospital Refunding, Leesburg Regional Medical Center 7/06 at 102 A- 214,072
Project A, 5.600%, 7/01/08
250,000 City of Tampa, Florida, Health System Revenue Bonds, Catholic Health No Opt. Call AAA 269,993
East Issue, Series 1998A-1, 5.500%, 11/15/12
- -------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 6.7%
300,000 Brevard County Housing Finance Authority, Multi-Family Housing 2/06 at 101 AAA 341,061
Refunding Bonds (Windover Oaks and Windover Health Club Apartments
Projects), Series 1996A, 6.900%, 2/01/27
500,000 Housing Finance Authority of Polk County, Multi-family Housing Bonds 7/05 at 101 AAA 521,380
(Winter Oaks Apartments Project), Series 1997A, 5.250%, 7/01/22
- -------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 5.8%
190,000 Escambia County Housing Finance Authority, Single Family Mortgage Bonds 4/07 at 102 Aaa 197,822
(Multi County Program), Series 1997A , 5.500%, 4/01/08 (Alternative
Minimum Tax)
180,000 Florida Housing Finance Agency, Single Family, 6.000%, 1/01/04 No Opt. Call AAA 187,205
(Alternative Minimum Tax)
345,000 Orange County Housing Finance Authority, Single Family Mortgage Bonds 9/07 at 102 AAA 356,951
(GNMA and Fannie Mae Mortgage Backed Securities Program), Series 1997B,
5.400%, 9/01/09 (Alternative Minimum Tax)
- -------------------------------------------------------------------------------------------------------------------------
Long Term Care - 3.0%
165,000 Jacksonville Health Facilities Authority, Tax Exempt Industrial No Opt. Call Baa1 178,839
Development Bonds (National Benevolent Association - Cypress Village
Florida Project), Series 1996A, 5.850%, 12/01/06
200,000 Sarasota County, Florida, Health Facility Authority, Refunding Health No Opt. Call N/R 209,522
Facilities, Sunnyside Properties, 5.500%, 5/15/05
- -------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 15.6%
200,000 The School District of Dade County, Florida, General Obligation 7/06 at 101 AAA 201,610
Refunding School Bonds, Series 1996, 4.500%, 7/15/08
500,000 Duval County School District, General Obligation Refunding Bonds, 8/02 at 102 AAA 537,005
Series 1992, 6.300%, 8/01/08
225,000 State of Florida, Full Faith and Credit, Broward County Expressway No Opt. Call AA+ 321,316
Authority, Series of 1984, 9.875%, 7/01/09
100,000 State of Florida, Full Faith and Credit, State Board of Education, 6/02 at 101 AA+ 107,305
Public Education Capital Outlay Bonds, Series 1992A, 6.000%, 6/01/07
325,000 Government of Guam, General Obligation Bonds, Series 1993A, 4.900%, 11/03 at 102 BBB 330,571
11/15/04
</TABLE>
17
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Intermediate Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 275,000 The City of New York, General Obligation Bonds, Fiscal 1997 8/06 at 101 1/2 A3 $307,445
Series A, Fixed Rate Tax-Exempt Bonds, 6.250%, 8/01/08
200,000 Commonwealth of Puerto Rico, Public Improvement Refunding Bonds, No Opt. Call A 211,320
General Obligation Bonds, Series 1993, 5.375%, 7/01/05
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 26.3%
200,000 Broward County, Florida, Professional Sports Facilities Tax and 9/06 at 101 AAA 213,140
Revenue Bonds (Broward County Civic Arena Project), Series
1996A, 5.200%, 9/01/07
100,000 Dade County, Florida, School Board, Certificates of Participation, No Opt. Call AAA 106,370
Series 1994A, 5.375%, 5/01/04
190,000 Dade County, Florida, Special Obligation and Refunding Bonds, 10/08 at 98 7/32 AAA 113,825
Series 1996B, 0.000%, 10/01/09
325,000 Florida Ports Financing Commission, Revenue Bonds (State No Opt. Call AAA 337,165
Transportation Trust Fund), Series 1996, 5.000%, 6/01/07
(Alternative Minimum Tax)
250,000 State of Florida, Department of Environmental Protection, 7/05 at 101 AAA 270,323
Preservation 2000 Revenue Bonds, Series 1995A, 5.500%, 7/01/06
405,000 Gulf Breeze Local Government Loan Program Bonds, Remarketed Series 12/06 at 101 AAA 440,166
1985-B, 5.600%, 12/01/15
100,000 Gulf County, Florida, Gas Tax Refunding and Improvement Bonds, 10/05 at 102 AAA 105,096
Series 1995, 5.000%, 10/01/07
145,000 School District of Gulf County, Florida Sales Tax Revenue Bonds, 6/07 at 101 AA 152,222
Series 1997, 5.200%, 6/01/08
200,000 Hillsborough County, Florida, Capital Improvement Program Refunding 8/06 at 102 AAA 206,228
Revenue Bonds, Series 1996, 4.800%, 8/01/08
150,000 Indian Trace Community Development District (Broward County, 5/05 at 102 AAA 162,180
Florida), Water Management Special Benefit Refunding Bonds,
Series 1995A, 5.500%, 5/01/06
400,000 Lee County, Florida, Capital Revenue Refunding, Series A, 5.750%, No Opt. Call AAA 445,664
10/01/11
290,000 Levy County, Florida, School Board Certificates of Participation, 7/05 at 102 AA 309,874
5.500%, 7/01/06
125,000 Lynn Haven, Florida, Special Project, 5.250%, 10/01/05 (Alternative No Opt. Call AAA 130,916
Minimum Tax)
250,000 Martin County, Florida, Special Assessment Tropical Farms Water, No Opt. Call A2 267,425
5.600%, 11/01/05
125,000 Pembroke Pines, Florida, Special Assessment, No. 94, 5.750%, 11/01/05 No Opt. Call Baa1 134,110
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation -- 16.2%
350,000 Dade County, Florida, Aviation Refunding Bonds, Miami International No Opt. Call AAA 379,033
Airport, Series 1994A, 6.250%, 10/01/02 (Alternative Minimum Tax)
500,000 Dade County, Florida, Seaport Refunding Bonds, Series 1995, 6.200%, No Opt. Call AAA 577,460
10/01/10
200,000 Greater Orlando Aviation Authority, Airport Facilities Bonds, City No Opt. Call AAA 218,988
of Orlando, Florida, Series 1997, 5.750%,10/01/10
(Alternative Minimum Tax)
200,000 Hillborough County Aviation Authority, Tampa International Airport 10/06 at 101 AAA 218,298
Refunding Bonds, Series 1997A, 5.750%, 10/01/07
(Alternative Minimum Tax)
200,000 Pensacola, Florida, Airport Revenue, Series B, 5.400%, 10/01/07 No Opt. Call AAA 213,118
(Alternative Minimum Tax)
250,000 Sanford Airport Authority, Industrial Development Bonds (Central No Opt. Call N/R 266,445
Florida Terminals Inc. Project), Series 1997C, 6.750%, 5/01/05
200,000 Sarasota-Manatee Airport Authority, Airport System Refunding Bonds, 8/06 at 102 AAA 214,146
Series 1996, 5.250%, 8/01/08
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 0.7%
145,000 Dade County Special Obligation and Refunding Bonds, 10/08 at 98 7/32 AAA 87,399
Series 1996B, 0.000%, 10/01/09
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities -- 4.8%
$ 120,000 Jacksonville Electric Authority (Jacksonville, Florida), St. John's 4/06 at 101 AA $ 123,574
River Power Park System Refunding Bonds, Issue Two, Series 15,
4.750%, 10/01/07
375,000 Pasco County Solid Waste Disposal and Resource Recovery System, 4/07 at 101 AAA 390,622
Series B, 5.250%, 4/01/09 (Alternative Minimum Tax)
100,000 City of St. Lucie, Florida, Utility System Bonds, Series 1994, No Opt. Call AAA 107,278
5.500%, 9/01/04
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer -- 8.2%
485,000 City of Auburndale, Water and Sewer Bonds, Series 1995, 5.375%, 12/05 at 102 AAA 522,582
12/01/08
250,000 Lee County Industrial Development Authority, Utilities Refunding, 11/06 at 101 AAA 269,847
Bonita Springs Utilities Project, 5.450%, 11/01/07
(Alternative Minimum Tax)
250,000 City of Plant City, Utility System Refunding and Improvement Bonds, 10/04 at 101 AAA 267,298
Series 1995, 5.400%, 10/01/06
- ------------------------------------------------------------------------------------------------------------------------------------
$12,085,000 Total Investments -- (cost $12,102,272) 99.7% 12,854,201
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.3% 41,675
--------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $12,895,876
====================================================================================================================
</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>
Statement of Net Assets
May 31, 1998
<TABLE>
<CAPTION>
Florida
Florida Intermediate
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $357,734,891 $12,854,201
Cash 1,317,792 --
Receivables:
Fund manager (note 6) -- 1,467
Interest 5,858,350 182,062
Investments sold 2,280,787 --
Shares sold 256,323 --
Other assets 209,770 23,390
- -------------------------------------------------------------------------------------------------------------------
Total assets 367,657,913 13,061,120
- -------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 57,965
Payables:
Investments purchased 3,866,173 --
Shares redeemed 300,200 22,732
Accrued expenses:
Management fees (note 6) 164,022 --
12b-1 distribution and service fees (notes 1 and 6) 57,316 4,408
Other 14,947 32,522
Dividends payable 1,516,349 47,617
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 5,919,007 165,244
- -------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $361,738,906 $12,895,876
===================================================================================================================
Class A Shares (note 1)
Net assets $292,398,509 $ 7,984,203
Shares outstanding 26,717,796 761,539
Net asset value and redemption price per share $ 10.94 $ 10.48
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% and 3.00%, respectively,
of offering price) $ 11.42 $ 10.80
===================================================================================================================
Class B Shares (note 1)
Net assets $ 5,266,234 N/A
Shares outstanding 480,837 N/A
Net asset value, offering and redemption price per share $ 10.95 N/A
===================================================================================================================
Class C Shares (note 1)
Net assets $ 7,645,837 $ 4,788,248
Shares outstanding 698,421 457,108
Net asset value, offering and redemption price per share $ 10.95 $ 10.48
===================================================================================================================
Class R Shares (note 1)
Net assets $ 56,428,326 $ 123,425
Shares outstanding 5,157,580 11,751
Net asset value, offering and redemption price per share $ 10.94 $ 10.50
===================================================================================================================
</TABLE>
N/A Florida Intermediate is not authorized to issue Class B Shares.
See accompanying notes to financial statements.
20
<PAGE>
Statement of Operations
Year Ended May 31, 1998
<TABLE>
<CAPTION>
Florida
Florida Intermediate
- --------------------------------------------------------------------------------------------------------------
Investment Income (note 1) $21,489,333 $ 653,564
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Expenses
Management fees (note 6) 1,936,305 69,185
12b-1 service fees Class A (notes 1 and 6) 589,283 17,499
12b-1 distribution and service fees Class B (notes 1 and 6) 25,088 N/A
12b-1 distribution and service fees Class C (notes 1 and 6) 49,426 27,906
Shareholders' servicing agent fees and expenses 172,328 13,049
Custodian's fees and expenses 82,430 41,694
Trustees' fees and expenses (note 6) 7,479 230
Professional fees 11,695 14,950
Shareholders' reports printing and mailing expenses 69,455 986
Federal and state registration fees 3,957 2,062
Organizational expenses (note 1) -- 9,125
Other expenses 6,080 833
- --------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 2,953,526 197,519
Expense reimbursement (note 6) -- (78,150)
- --------------------------------------------------------------------------------------------------------------
Net expenses 2,953,526 119,369
- --------------------------------------------------------------------------------------------------------------
Net investment income 18,535,807 534,195
- --------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 1,741,055 107,442
Net change in unrealized appreciation or depreciation of investments 9,935,425 436,659
- --------------------------------------------------------------------------------------------------------------
Net gain from investments 11,676,480 544,101
- --------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $30,212,287 $1,078,296
==============================================================================================================
N/A Florida Intermediate is not authorized to issue Class B Shares.
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Florida
----------------------------------
Year Ended Year Ended
5/31/98 5/31/97*
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 18,535,807 $ 17,560,647
Net realized gain (loss) from investment transactions (notes 1 and 4) 1,741,055 1,079,346
Net change in unrealized appreciation or depreciation of investments 9,935,425 5,172,708
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 30,212,287 23,812,701
- -------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (15,043,556) (16,417,162)
Class B (111,486) (6,544)
Class C (298,769) (136,909)
Class R (2,978,766) (978,903)
From accumulated net realized gains from investment transactions:
Class A (232,327) (27,453)
Class B (2,178) --
Class C (5,383) (288)
Class R (44,456) --
- -------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (18,716,921) (17,567,259)
- -------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the reorganization of Nuveen Florida
(note 1) -- 65,696,034
Net proceeds from shares issued as a capital contribution -- 33,360
Net proceeds from sale of shares 40,781,150 30,465,913
Net proceeds from shares issued to shareholders due to reinvestment of
distributions 8,503,896 5,587,408
- -------------------------------------------------------------------------------------------------------------------
49,285,046 101,782,715
- -------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (56,173,488) (70,527,219)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions (6,888,442) 31,255,496
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 4,606,924 37,500,938
Net assets at the beginning of year 357,131,982 319,631,044
- -------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 361,738,906 $ 357,131,982
- -------------------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end of year $ 124,359 $ 21,129
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Florida Intermediate
------------------------------------
Year Ended Year Ended
5/31/98 5/31/97**
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 534,195 $ 424,132
Net realized gain (loss) from investment transactions (notes 1 and 4) 107,442 (26,511)
Net change in unrealized appreciation or depreciation of investments 436,659 223,395
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 1,078,296 621,016
- ----------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (392,518) (312,115)
Class B N/A N/A
Class C (147,457) (123,497)
Class R (5,061) (406)
From accumulated net realized gains from investment transactions:
Class A (33,206) (11,177)
Class B N/A N/A
Class C (14,348) (5,494)
Class R (465) --
- ----------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (593,055) (452,689)
- ----------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the reorganization of Nuveen Florida
(note 1) -- --
Net proceeds from shares issued as a capital contribution -- --
Net proceeds from sale of shares 4,430,671 13,641,821
Net proceeds from shares issued to shareholders due to reinvestment of
distributions 333,039 160,751
- ----------------------------------------------------------------------------------------------------------------------
4,763,710 13,802,572
- ----------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (8,550,783) (5,846,919)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions (3,787,073) 7,955,653
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (3,301,832) 8,123,980
Net assets at the beginning of year 16,197,708 8,073,728
- ----------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 12,895,876 $ 16,197,708
- ----------------------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end of year $ 53 $ 10,894
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Florida and four months of
Florida (note 1).
** Information represents eight months of Flagship Florida Intermediate and four
months of Florida Intermediate (note 1).
N/A -- Florida Intermediate is not authorized to issue Class B Shares.
See accompanying notes to financial statements.
22
<PAGE>
Notes to Financial Statements
1. General information and significant accounting policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Florida Municipal Bond Fund and the Nuveen
Flagship Florida Intermediate Municipal Bond Fund (the "Funds"), among others.
The Trust was organized as a Massachusetts business trust on July 1, 1996.
The John Nuveen Company, parent of John Nuveen & Co. Incorporated and Nuveen
Advisory Corp., respectively, the distributor ("Distributor") and investment
advisor ("Adviser") of the Funds, entered into an agreement under which Nuveen
acquired Flagship Resources Inc. and after the close of business on January 31,
1997, consolidated their respective mutual fund businesses. This agreement was
approved at a meeting by the shareholders of the Flagship Funds in December,
1996.
After the close of business on January 31, 1997, Flagship Florida Double Tax
Exempt Fund ("Flagship Florida") and Nuveen Florida Tax-Free Value Fund ("Nuveen
Florida") reorganized into Nuveen Flagship Florida Municipal Bond Fund
("Florida"). Flagship Florida Intermediate Tax Exempt Fund ("Flagship Florida
Intermediate") was reorganized into the Trust and renamed Nuveen Flagship
Florida Intermediate Municipal Bond Fund ("Florida Intermediate"). Prior to
these reorganizations, Flagship Florida and Flagship Florida Intermediate were
each a sub-trust of Flagship Tax Exempt Funds Trust, while Nuveen Florida was a
series of the Nuveen Multistate Tax-Free Trust. Nuveen Florida had a fiscal year
end of January 31 prior to being reorganized into Florida which has a May 31
fiscal year end.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1998, Florida had outstanding delayed delivery purchase commitments of
$3,866,173. Florida Intermediate had no such outstanding purchase commitments.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions are distributed to shareholders not less frequently
than annually. Furthermore, capital gains are distributed only to the extent
they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differ-
23
<PAGE>
Notes to Financial Statements (continued)
ences may occur and will be classified as either distributions in excess of net
investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, the Funds intend to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal income taxes, to retain such tax-exempt status
when distributed to the shareholders of the Funds. All monthly tax-exempt income
dividends paid during the fiscal year ended May 31, 1998, have been designated
Exempt Interest Dividends. Net realized capital gain and market discount
distributions are subject to federal taxation.
Flexible Sales Charge Program
Each Fund offers Class A, C and R Shares. Florida also offers Class B shares.
Class A Shares are sold with a sales charge and incur an annual 12b-1 service
fee. Class A Share purchases of $1 million or more are sold at net asset value
without any up-front sales charge but may be subject to a 1% contingent deferred
sales charge ("CDSC") if redeemed within 18 months of purchase. Class B Shares
are sold without a sales charge but incur annual 12b-1 distribution and service
fees. An investor purchasing Class B Shares agrees to pay a CDSC of up to 5%
depending upon the length of time the shares are held by the investor (CDSC is
reduced to 0% at the end of six years). Class B Shares convert to Class A Shares
eight years after purchase. Class C Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class C
Shares agrees to pay a CDSC of 1% if Class C Shares are redeemed within one year
of purchase. Class R Shares are not subject to any sales charge or 12b-1
distribution or service fees. Class R Shares are available for purchases of over
$1 million and in other limited circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Funds are authorized to invest in such
financial instruments, and may do so in the future, they did not make any such
investments during the fiscal year ended May 31, 1998.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
Organizational Expenses
The organizational expenses incurred on behalf of Florida Intermediate
(approximately $27,400) are being reimbursed to the Adviser on a straight line
basis over a period of three years. As of May 31, 1998, $18,246 has been
reimbursed.
- ---
24
<PAGE>
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Florida
------------------------------------------------------------------------------
Year Ended Year Ended
5/31/98 5/31/97*
------------------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the
reorganization of Nuveen Florida:
Class A -- $ -- 1,049,952 $ 11,119,107
Class B -- -- -- --
Class C -- -- 33,855 358,702
Class R -- -- 5,119,701 54,218,225
Shares issued as a capital contribution:
Class A -- -- 788 8,340
Class B -- -- 788 8,340
Class C -- -- 787 8,340
Class R -- -- 788 8,340
Shares sold:
Class A 2,575,627 28,008,973 2,325,105 24,486,690
Class B 420,285 4,565,047 72,980 773,584
Class C 328,848 3,571,148 363,870 3,832,018
Class R 428,140 4,635,982 129,989 1,373,621
Shares issued to shareholders due to
reinvestment of distributions:
Class A 606,794 6,557,242 488,917 5,143,242
Class B 3,957 43,099 211 2,219
Class C 14,699 159,154 3,197 33,754
Class R 160,928 1,744,401 38,779 408,193
- ------------------------------------------------------------------------------------------------------------------------------------
4,539,278 49,285,046 9,629,707 101,782,715
- ------------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (4,482,418) (48,620,708) (6,499,240) (68,393,215)
Class B (17,384) (188,950) -- --
Class C (128,897) (1,402,431) (30,973) (324,954)
Class R (548,970) (5,961,399) (171,775) (1,809,050)
- ------------------------------------------------------------------------------------------------------------------------------------
(5,177,669) (56,173,488) (6,701,988) (70,527,219)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (638,391) $ (6,888,442) 2,927,719 $ 31,255,496
====================================================================================================================================
</TABLE>
* Information represents eight months of Flagship Florida and four months of
Florida (note 1).
25
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
Florida Intermediate
--------------------------------------------------------------------------------------
Year Ended Year Ended
5/31/98 5/31/97*
--------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 197,777 $ 2,070,816 1,278,167 $12,883,393
Class C 223,409 2,320,053 65,754 657,819
Class R 3,848 39,802 10,011 100,609
Shares issued to shareholders due to
reinvestment of distributions:
Class A 21,496 222,450 11,064 110,935
Class C 10,174 105,150 4,973 49,816
Class R 523 5,439 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
457,227 4,763,710 1,369,969 13,802,572
- ----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (755,341) (7,744,442) (496,941) (5,002,329)
Class C (74,731) (779,251) (83,942) (844,590)
Class R (2,631) (27,090) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
(832,703) (8,550,783) (580,883) (5,846,919)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (375,476) $(3,787,073) 789,086 $ 7,955,653
==================================================================================================================================
*Information represents eight months of Flagship Florida Intermediate and four months of Florida Intermediate (note 1).
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on July 1, 1998, to shareholders of record on June 9,
1998, as follows:
<TABLE>
<CAPTION>
Florida
Florida Intermediate
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Dividend per share:
Class A $.0460 $.0390
Class B .0395 N/A
Class C .0410 .0345
Class R .0480 .0410
=============================================================================================
N/A - Florida Intermediate is not authorized to issue Class B Shares.
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended May 31,
1998, were as follows:
<TABLE>
<CAPTION>
Florida
Florida Intermediate
- -----------------------------------------------------------------
<S> <C> <C>
Purchases:
Investments in municipal securities $48,546,507 $4,507,698
Temporary municipal investments 17,200,000 3,900,000
Sales:
Investments in municipal securities 55,569,699 5,033,441
Temporary municipal investments 17,200,000 3,900,000
=================================================================
</TABLE>
At May 31, 1998, the identified cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes for each
Fund.
26
<PAGE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 1998, were as follows:
<TABLE>
<CAPTION>
Florida
Florida Intermediate
- ---------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $29,856,079 $752,739
depreciation (89,422) (810)
- ---------------------------------------------------------
Net unrealized appreciation $29,766,657 $751,929
=========================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- ------------------------------------------------
<S> <C>
For the first $125 million .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 net assets over $2 billion .4750 of 1
================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 1998, the Distributor collected sales
charges on purchases of Class A Shares of approximately $487,800 and $22,400 for
Florida and Florida Intermediate, respectively, of which approximately $419,200
and $21,600 were paid out as concessions to authorized dealers. The Distributor
also received 12b-1 service fees on Class A Shares, substantially all of which
were paid to compensate authorized dealers for providing services to
shareholders relating to their investments.
During the fiscal year ended May 31, 1998, the Distributor compensated
authorized dealers directly with approximately $251,700 and $18,000 in
commission advances at the time of purchase for Florida and Florida
Intermediate, respectively. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares for Florida during
the first year following a purchase, all 12b-1 distribution fees on Class B
Shares for Florida, and all 12b-1 service and distribution fees on Class C
Shares
27
<PAGE>
Notes to Financial Statements (continued)
during the first year following a purchase are retained by the Distributor.
During the fiscal year ended May 31, 1998, the Distributor retained
approximately $46,300 and $10,300 in such 12b-1 fees for Florida and Florida
Intermediate, respectively. The remaining 12b-1 fees charged to the Funds were
paid to compensate authorized dealers for providing services to shareholders
relating to their investments. The Distributor also collected and retained
approximately $9,900 and $2,600 of CDSC on share redemptions for Florida and
Florida Intermediate, respectively, during the fiscal year ended May 31, 1998.
7. Composition of Net Assets
At May 31, 1998, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Florida
Florida Intermediate
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in $331,003,387 $12,110,982
Balance of undistributed net investment income 124,359 53
Accumulated net realized gain from investment transactions 844,503 32,912
Net unrealized appreciation of investments 29,766,657 751,929
- ----------------------------------------------------------------------------------------
Net assets $361,738,906 $12,895,876
========================================================================================
</TABLE>
28
<PAGE>
Financial Highlights
29
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------- ------------------------------
Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
May 31, Value Income(a) Gain (Loss) Total Income Gain Total Value Return(b)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FLORIDA**
Class A (6/90)
1998 $10.60 $.56 $ .34 $.90 $(.55) $(.01) $(.56) $10.94 8.67%
1997 10.39 .56 .21 .77 (.56) -- (.56) 10.60 7.59
1996 10.63 .57 (.24) .33 (.57) -- (.57) 10.39 3.14
1995 10.38 .58 .26 .84 (.59) -- (.59) 10.63 8.43
1994 10.76 .60 (.38) .22 (.60) -- (.60) 10.38 2.00
Class B (2/97)
1998 10.61 .48 .35 .83 (.48) (.01) (.49) 10.95 7.89
1997(c) 10.59 .16 .02 .18 (.16) -- (.16) 10.61 1.70
Class C (9/95)
1998 10.60 .50 .36 .86 (.50) (.01) (.51) 10.95 8.20
1997 10.39 .50 .21 .71 (.50) -- (.50) 10.60 7.00
1996(c) 10.65 .35 (.26) .09 (.35) -- (.35) 10.39 1.30*
Class R (2/97)
1998 10.60 .58 .35 .93 (.58) (.01) (.59) 10.94 8.91
1997(c) 10.59 .19 .01 .20 (.19) -- (.19) 10.60 1.93
==============================================================================================================================
FLORIDA INTERMEDIATE***
Class A (2/94)
1998 $10.09 $.46 $ .44 $.90 $(.47) $(.04) $(.51) $10.48 9.06%
1997 9.88 .45 .25 .70 (.47) (.02) (.49) 10.09 7.16
1996 10.05 .46 (.12) .34 (.46) (.05) (.51) 9.88 3.41
1995 9.66 .46 .33 .79 (.40) -- (.40) 10.05 8.42
1994(c) 9.70 .12 (.04) .08 (.12) -- (.12) 9.66 1.75*
Class C (2/94)
1998 10.08 .40 .45 .85 (.41) (.04) (.45) 10.48 8.61
1997 9.88 .40 .23 .63 (.41) (.02) (.43) 10.08 6.47
1996 10.05 .40 (.11) .29 (.41) (.05) (.46) 9.88 2.88
1995 9.66 .40 .33 .73 (.34) -- (.34) 10.05 7.80
1994(c) 9.70 .11 (.06) .05 (.09) -- (.09) 9.66 1.33*
Class R (2/97)
1998 10.11 .48 .44 .92 (.49) (.04) (.53) 10.50 9.29
1997(c) 10.20 .12 (.09) .03 (.12) -- (.12) 10.11 .32
==============================================================================================================================
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental
- --------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets (000) ment ment ment (a) ment (a) Rate
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$292,399 .84% 5.13% .84% 5.13% 14%
296,970 .96 5.20 .82 5.34 54
318,456 1.02 5.17 .83 5.36 94
341,374 1.04 5.40 .73 5.71 53
372,082 1.00 5.09 .58 5.51 32
5,266 1.59 4.35 1.59 4.35 14
785 1.58* 4.52* 1.58* 4.52* 54
7,646 1.39 4.58 1.39 4.58 14
5,130 1.46 4.64 1.35 4.75 54
1,175 1.55* 4.42* 1.38* 4.59* 94
56,428 .64 5.33 .64 5.33 14
54,247 .64* 5.55* .64* 5.55* 54
- --------------------------------------------------------------------------------------------
$ 7,984 1.41% 3.79% .79% 4.41% 36%
13,089 1.80 3.42 .73 4.49 35
4,995 1.67 3.57 .76 4.48 66
3,898 3.54 1.87 .67 4.74 105
964 6.70* (2.62)* .29* 3.79* 28
4,788 1.96 3.24 1.34 3.86 36
3,008 2.56 2.71 1.28 3.99 35
3,079 2.25 2.97 1.34 3.88 66
1,765 4.53 .85 1.19 4.19 105
1,058 7.38* (3.28)* .68* 3.42* 28
123 1.21 4.00 .59 4.62 36
101 1.21* 3.82* .56* 4.47* 35
- --------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Florida.
*** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Florida Intermediate.
(a) After the waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total Returns are calculated on net asset value without any sales charge and
are not annualized except where noted.
(c) From commencement of class operations as noted.
31
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
National Funds
Long-Term Insured
Intermediate-Term
Limited-Term
State Funds
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio--one that balances
different types of investments, levels of risk and tax management--can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers/SM/ including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, experienced, professional
security selection and surveillance and daily liquidity at that day's net asset
value for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
32
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
As of August 8, 1998
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
33
<PAGE>
Serving Investors for Generations
[Photo of John Nuveen, Sr. appears here]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
1898
Nuveen 1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime.(TM)
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Il. 60606-1286
www.nuveen.com
<PAGE>
NUVEEN
MUNICIPAL
BOND FUNDS
May 31, 1998
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PICTURE APPEARS HERE]
Maryland
Pennsylvania
Virginia
<PAGE>
Highlights
As of May 31, 1998
For Class A shares on net asset value
- --------------------------------------------------------------------------------
Credit Quality Performance Highlights
- --------------------------------------------------------------------------------
Nuveen Maryland Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 66% . High credit quality with 88% of the
AA 22% assets in AAA and AA rated securities
A 4%
BBB/NA 8% . One-year total return of 7.95%
. Taxable equivalent yield of 6.22%*
Nuveen Flagship Pennsylvania Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 40% ****Four-star rating by Morningstar**
AA 6%
A 19% Steady dividend for 12 consecutive
BBB/NA 33% months
Ranked in the top 10% of Pennsylvania
municipal bond funds for the one-year
period by Lipper
Nuveen Flagship Virginia Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 34% ****Four-star rating by Morningstar**
AA 30%
A 24% One-year total return of 9.30%
BBB/NA 12%
Taxable equivalent yield of 6.95%*
* For investors in the 31% federal and applicable state income tax bracket. See
your fund's performance overview in this report for more information.
**The Morningstar rating is an overall rating for the municipal bond category
and relates to Class A shares. Morningstar proprietary ratings reflect
historical risk-adjusted performance and are subject to change every month.
Ratings are calculated from a fund's three-, five- and 10-year average annual
returns in excess of 90-day Treasury bill returns, with appropriate fee
adjustments and a risk factor that reflects fund performance below 90-day
Treasury bill returns. Class A shares of the Pennsylvania fund earned four
stars for each of the three-, five- and 10-year periods ended 5/31/98. Class A
shares of the Virginia fund earned four, four and three stars for the three-,
five- and 10-year periods ended 5/31/98. In an investment category, 10% of the
funds receive five stars, 22.5% receive four stars, and 22.5% receive three
stars. 1,548 municipal bond funds were rated for the three-year period, 819
for the five-year period and 348 for the 10-year period, each ended 5/31/98.
Contents
1 Dear Shareholder
4 Maryland Commentary and Overview
6 Pennsylvania Commentary and Overview
8 Virginia Commentary and Overview
10 Report of Independent Public Accountants
11 Portfolio of Investments
24 Statement of Net Assets
25 Statement of Operations
26 Statement of Changes in Net Assets
28 Notes to Financial Statements
35 Financial Highlights
40 Building Better Portfolios
41 Fund Information
Is it Time for a Financial Check-Up?
Now is a great time to sit down with your financial adviser and review your
financial plan. How can you make sure that your investment strategy is strong
enough to provide the income you need today and versatile enough to change as
your goals do? Here are some guidelines:
[X] Make sure you and your adviser understand your current situation. How have
your goals, objectives and risk profile changed? What are your current tax
concerns, interests, lifestyle?
[X] Revisit your current investment choices. If the value of one portion of
your portfolio has grown substantially, it may be time to rebalance asset
classes.
[X] Determine how your asset mix will be implemented. Changing your asset
allocation is generally a gradual process. Make sure you and your adviser
have a clear understanding of each other's responsibilities. Define and
discuss what you want in terms of support from your adviser.
[X] Keep revisiting your plan. Don't assume that once you've revised your plan
and reallocated your portfolio the process is finished.
It's recommended that you meet at least once a year with your financial adviser
- - and usually more if there have been significant changes in interest rates, tax
laws, retirement plan distributions, lifestyle or health.
Even if things haven't changed, it makes good financial sense to keep in touch
with your adviser.
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R.
SHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
I'm pleased to share with you this performance report for the Nuveen Maryland,
Pennsylvania and Virginia municipal bond funds. Over the past 12 months, the
funds in this report continued to meet their objectives of providing you with
attractive tax-free income and after-tax total returns.
For many of our shareholders, this annual report represents the first time you
have received a consolidated report covering performance data for other Nuveen
funds in addition to your own. These consolidated reports are part of our
continuing efforts to control fund expenses; we achieve greater economies of
scale for our shareholders through reducing paper, printing and mailing costs.
By consolidating reports by region and incorporating several funds into one
booklet, we have lowered these administrative expenses and made owning shares in
a Nuveen fund more cost-efficient for you.
The Economy in Review
Fixed-income investments enjoyed bullish performance over the past year, as
declining interest rates and low inflation spurred a bond market rally. The
equity markets also exhibited continued strength despite recent volatility
sparked by Asia's financial problems and their possible effects on U.S.
corporate earnings. Although interest rates have trended slightly upward in
recent months, a year-to-date comparison shows that today's rates are
significantly lower than they were one year ago. As shown in the accompanying
chart, between the end of May 1997 and May 1998, the yield on the Bond Buyer 40,
an unmanaged index of long-term municipal bonds, fell from 5.74% to 5.22%.
Much of the decline in interest rates resulted from expectations that the
financial problems of Asia would restrain the prices of imported goods and
reduce foreign demand for U.S. products and services, thereby keeping inflation
at moderate levels. These inflation expectations were largely fulfilled, as the
Consumer Price Index rose only 1.5% for the 12 months ended May 1998, remaining
at one of
- ----
1
<PAGE>
"Another major factor in bond performance over the last 12 months was the
continued strength of the U.S. economy, which helped boost the credit quality of
many municipal bonds."
its lowest levels in years. The Asian situation also provided additional
strength to the bond market rally, as many investors made a "flight to quality"
by moving assets into high-quality U.S. bonds in the face of the uncertainty in
that region.
In coming months, we will continue to watch closely several key factors that are
likely to affect the future of the economy, including the demand for goods and
services, the availability of qualified employees, the strength of the dollar,
and indications from the Federal Reserve. With many investors still waiting for
the full impact of Asia's difficulties to show up in U.S. economic statistics,
the potential long-term effect of this crisis on American markets continues to
cause concern. We expect that the development of these factors will continue to
influence the tone of the fixed-income markets during the remainder of the year.
Municipal Market Review
As interest rates continued to decline over the past year, bond prices rose.
This price appreciation for the bonds in our portfolios contributed to strong
total returns for the year. Another major factor in bond performance over the
last 12 months was the continued strength of the U.S. economy, which helped
boost the credit quality of many municipal bonds. With the improvements in the
fundamental financial health of many municipalities and revenue projects
financed by bonds, major credit rating agencies upgraded the credit quality of
thousands of issuers over the past year, while downgrading relatively few. These
boosts in credit quality also contributed to the funds' performance as upgraded
bonds increased in value.
The combination of low interest rates and a strong economy set new issuance on a
record pace and stimulated a dramatic increase in the refinancing of existing
bonds as issuers sought to lower their interest costs. The first quarter of 1998
saw $68 billion of new municipal issuance, up 70% from the same period in 1997.
The flood of new issues continued with May's long-awaited sale of the first
segment of Long Island (New York) Power Authority's $7 billion offering, the
largest issuance in municipal bond history. Although the nationwide supply of
municipal bonds remained heavy, the supply of bonds in each state varied
according to local economic conditions. This level of issuance highlights the
value of Nuveen's expertise in the municipal market, as our portfolio management
teams worked diligently to sift through the available issues to select those
undervalued securities that
2
<PAGE>
"Today, more than ever, you can count on Nuveen for a wide range of investments
that can help you build a well-balanced portfolio designed to achieve your
financial goals."
would help the funds achieve their investment objectives.
Diversification: The Key to a Better Portfolio
In view of current market conditions, we believe that investors will find
diversification to be an increasingly important investment strategy in the
months ahead. An appropriately diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can help
cushion your portfolio against volatility and enhance your return potential.
Many investors select Nuveen's municipal bond funds because their emphasis on
dependable tax-free income and attractive after-tax returns makes them ideal for
building and sustaining long-term financial security. These funds also work well
with other Nuveen investments to create the foundation of a diversified,
well-balanced portfolio. In fact, recent studies by Nuveen Research have found
that portfolios combining municipal bonds and stocks generated higher after-tax
returns with lower levels of risk than similar portfolios combining stocks and
Treasury or corporate bonds.
We encourage you to talk to your financial adviser about Nuveen's range of
equity and balanced funds, including the Nuveen European Value Fund.
This new equity mutual fund offers a portfolio of quality European company
stocks for investors seeking long-term growth potential and international
diversification. The fund is just one of an ever-expanding range of Nuveen
products and services designed to help investors achieve diversification while
building a tax-efficient, risk-sensitive investment portfolio. If you'd like to
learn more about the Nuveen European Value Fund or any of our other investments,
contact your financial adviser or call Nuveen Investor Services at (800)
257-8787 for a prospectus. Please read the information carefully before you
invest.
When seeking quality investment solutions that withstand the test of time, we
hope that you continue to think of Nuveen. Today, more than ever, you can count
on Nuveen for a wide range of investments that can help you build a
well-balanced portfolio designed to achieve your financial goals. We thank you
for your continued confidence in us and our family of investments.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1998
3
<PAGE>
Nuveen Maryland Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager John Gambla discusses fund performance, the municipal market,
and key investment strategies for the Maryland fund.
Comments cover the one-year period ended May 31, 1998 and all performance
statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Like many other states, Maryland has benefited from the expansion in the
national economy. Higher income and sales tax receipts have flowed into state
and county coffers, bringing increased financial flexibility to many municipal
issuers. The state's once-sluggish economy has shown improvement, although
employment and income growth rates remain at or below national averages, and
below those of neighboring states as well.
This spring, the Maryland legislature voted to accelerate the income tax
reduction it passed last year. As a result, income taxes will be reduced 5% this
year, more than the 2% originally planned. Because it could present financial
challenges in future years, the tax reduction program remains a credit concern.
Fund Performance
For the year ended May 31, 1998, the total return on net asset value for the
Maryland Municipal Bond Fund was 7.95%, which is equivalent to a taxable return
of 10.52% for investors in the 34.4% combined federal and state income tax
bracket. The total return compares to the annual return of 9.38% posted by the
unmanaged Lehman Brothers Municipal Bond Index and the fund's Lipper peer group
average of 8.60%. The key reason for the fund's underperformance of these two
measures is the Maryland fund's shorter duration (5.36 years compared with 7.11
years for the index). Duration is a measure of price volatility in reaction to
changes in interest rates. Although the shorter duration hindered the fund's
ability to participate in this year's market rally, it helped protect the fund
from volatility and would help it outperform in a market downturn. With its
focus on income, the fund provided a competitive yield of 4.08%, which is
equivalent to a taxable yield of 6.22% for investors in the 34.4% combined
federal and state income tax bracket.
Key Strategies
During the year, the Maryland fund maintained a defensive structure focused on
high-quality bonds with dependable income - as evidenced by the fact that 88% of
the portfolio is invested in AAA and AA bonds. We also focused on reducing the
fund's exposure to bond calls when possible, which remained a challenge since
many of the new bonds issued during the year lacked good call protection. Given
this environment, the fund did face a significant number of bond calls during
the year, which affected its income level. However, we sought higher-yielding
bonds that would help support the dividend and found good value in both housing
securities and insured bonds in all sectors during the past year.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
As of May 31, 1998, the fund's sector holdings were well-diversified, with 19%
of the portfolio invested in U.S. guaranteed debt, 14% in multifamily housing
issues, 12% in single-family housing issues and 12% in health care bonds.
Outlook for the Future
On July 1, 1998, Nuveen made several changes in the management of its mutual
funds to make more efficient use of staff resources and portfolio manager
expertise. As a result, Dan Solender assumed management responsibilities for
this fund. Dan is a six-year veteran of Nuveen and an experienced investment
professional who has managed a range of other state and national municipal bond
funds.
Until the yield spreads between lower- and higher-quality bonds widen, Dan and
his team will continue to seek out value from higher-rated bond issues, which
provide competitive income without subjecting the fund to undue credit risk.
Particular areas they will be monitoring include the state's housing bonds,
which offer incrementally higher yields. They will also continue to maximize the
fund's after-tax income and take advantage of temporary increases in municipal
bond supply to purchase quality issues at attractive prices.
4
<PAGE>
Nuveen Maryland Municipal Bond Fund
Performance Overview
As of May 31, 1998
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
Month Monthly Dividends
- ----- -----------------
June 0.0415
July 0.0415
August 0.0415
September 0.0415
October 0.0415
November 0.0415
December 0.0415
January 0.04
February 0.04
March 0.04
April 0.04
May 0.04
- ----------------------------------------------------
Top 5 Sectors
- ----------------------------------------------------
U.S. Guaranteed 19%
....................................................
Housing (Multifamily) 14%
....................................................
Housing (Single-family) 12%
....................................................
Health Care 12%
....................................................
Tax Obligation (Limited) 11%
- ----------------------------------------------------
1 Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
2 Based on SEC yield and a combined federal and state income tax rate of
34.4%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
3 The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses. For periods prior to inception of Class A shares, performance
reflects Class R share performance adjusted for differences in expenses,
which are primarily differences in distribution and service fees.
- --------------------------------------------------------------------------------
Portfolio Statistics
- --------------------------------------------------------------------------------
Share Class A B C R
- --------------------------------------------------------------------------------
Inception Date 9/94 3/97 9/94 12/91
................................................................................
Net Asset Value $10.56 $10.56 $10.56 $10.58
................................................................................
Fund Net Assets ($000) $66,963
................................................................................
Average Weighted Maturity (Years) 15.30
................................................................................
Average Weighted Duration (Years) 5.36
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Annualized Total Return/1/
- --------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
1-Year 7.95% 3.41% 7.16% 7.44% 8.23%
................................................................................
5-Year 5.67% 4.76% 4.95% 4.98% 5.94%
................................................................................
Since Inception 6.68% 5.95% 5.95% 5.97% 6.95%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Tax-Free Yields
- --------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
Distribution Rate 4.55% 4.36% 3.81% 3.98% 4.71%
................................................................................
SEC 30-Day Yield 4.08% 3.91% 3.33% 3.53% 4.28%
................................................................................
Taxable Equivalent
Yield/2/ 6.22% 5.96% 5.08% 5.38% 6.52%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Index Comparison/3/
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Lehman Brothers Nuveen Maryland Nuveen Maryland
Municipal Municipal Municipal
Date Bond Index Bond Fund (Offer) Bond Fund (NAV)
- ---- --------------- ----------------- ---------------
2/92 $10,000 $ 9,580 $10,000
5/92 10,165 9,738 10,212
5/93 11,374 10,895 11,433
5/94 11,506 11,021 11,716
5/95 12,540 12,012 12,783
5/96 13,013 12,464 13,367
5/97 13,880 13,294 14,476
5/98 14,983 14,352 15,834
Past performance is not predictive of future results.
<PAGE>
Nuveen Flagship Pennsylvania Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Rick Huber discusses fund performance, the municipal market,
and key investment strategies for the Pennsylvania fund.
Comments cover the one-year period ended May 31, 1998 and all performance
statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Pennsylvania's highly cyclical economy is growing more diverse, moving from a
largely industrial make-up toward a more service-oriented one. In an attempt to
take advantage of the national economic upswing - and to help counteract its
reputation as an anti-business state - Pennsylvania cut certain business taxes
to encourage businesses to remain in or relocate to the state. While growth in
the service industries offset losses in manufacturing sectors, sluggish
performance is expected from the finance, transportation, and utility sectors
due to deregulation and the ongoing consolidation of those industries.
Reflecting the broader municipal bond marketplace, the supply of Pennsylvania
bonds generally improved over the last year. The benefits of this strong supply,
however, were partially offset by a narrow spread between the yields on
higher-and lower-quality bonds, which made it more difficult to identify value
in the market. Pennsylvania's education and health care sectors provided the
greatest number of issues, and therefore offered some of the year's most
attractive buying opportunities.
Fund Performance
For the year ended May 31, 1998, the fund performed exceptionally well,
generating a total return on net asset value of 10.05%, which is equivalent to a
taxable return of 12.79% for investors in the 32.9% combined federal and state
income tax bracket. The total return outperformed the benchmark Lehman Brothers
Municipal Bond Index's return of 9.38% and surpassed its Lipper peer group
average of 8.91% by more than 100 basis points. In addition, the Pennsylvania
Municipal Bond Fund ranked number six of the 66 Pennsylvania municipal bond
funds in its Lipper category.
The fund's outstanding performance and steady dividends in the last year were
due in part to a longer portfolio duration, which is a measure of price
volatility in reaction to changes in interest rates. With a duration of 7.56
years, the fund was somewhat longer than the Lehman Municipal Bond Index's
average duration of 7.11 years. The longer duration allowed the fund to better
participate in this year's market rally, although it would have been more
adversely affected had there been a market downturn.
In addition, the fund experienced gains by selling some of its appreciated
BBB-rated holdings and reinvesting the capital in other areas, including
higher-rated bonds.
Key Strategies
Over the past year, we worked to improve the fund's balance among different
sectors of the market and to locate value in smaller, perhaps overlooked bond
issues. To that end, we reduced the fund's holdings in the health care sector,
and at the same time found attractive opportunities in the bonds of several
small Pennsylvania colleges. We also moved to improve the portfolio's protection
against bond calls, which can negatively impact long-term performance by
allowing higher-paying bonds to be called away from the portfolio.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
As of May 31, 1998, the fund's sector holdings were well-diversified, with 16%
of the portfolio invested in education and civic organization bonds issues, 15%
in health care bonds, 12% in single-family housing issues and 12% in utility
debt.
Outlook for the Future
On July 1, 1998, Nuveen made several changes in the management of its mutual
funds to make more efficient use of staff resources and portfolio manager
expertise. As a result, Tom O'Shaughnessy assumed management responsibilities
for this fund. Tom is a 15-year veteran of Nuveen and an experienced investment
professional who has managed a range of other state and national municipal bond
funds.
Until lower-rated bonds offer more competitive yields, Tom and his team will
continue to seek value from small, higher-rated bond issues. Particular areas
they will be monitoring include education, industrial development and tax-backed
bonds. They also continue to reduce the portfolio's duration, which will reduce
price volatility in the event of a market downturn.
6
<PAGE>
Nuveen Flagship Pennsylvania Municipal Bond Fund
Performance Overview
As of May 31, 1998
- --------------------------------------------------------------------------------
Monthly Tax-Free Dividends (Class A Shares)/1/
- --------------------------------------------------------------------------------
[BAR GRAPH APPEARS HERE]
June ................................................................... $0.0466
July ................................................................... 0.0465
August ................................................................. 0.0465
September .............................................................. 0.0465
October ................................................................ 0.0465
November ............................................................... 0.0465
December ............................................................... 0.0465
January ................................................................ 0.0465
February ............................................................... 0.0465
March .................................................................. 0.0465
April .................................................................. 0.0465
May .................................................................... 0.0465
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 5 Sectors
- --------------------------------------------------------------------------------
Education and Civic Organizations 16%
................................................................................
Health Care 15%
................................................................................
Housing (Single-family) 12%
................................................................................
Utilities 12%
................................................................................
U.S. Guaranteed 8%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Portfolio Statistics
- --------------------------------------------------------------------------------
Share Class A B C R
- --------------------------------------------------------------------------------
Inception Date 10/86 2/97 2/94 2/97
................................................................................
Net Asset Value $10.68 $10.70 $10.68 $10.68
................................................................................
Fund Net Assets ($000) $138,558
................................................................................
Average Weighted Maturity (Years) 22.14
................................................................................
Average Weighted Duration (Years) 7.56
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Annualized Total Return/2/
- --------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
1-Year 10.05% 5.42% 9.23% 9.50% 10.30%
................................................................................
5-Year 6.53% 5.61% 5.93% 5.96% 6.59%
................................................................................
10-Year 8.15% 7.68% 7.68% 7.56% 8.18%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Tax-Free Yields
- --------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
Distribution Rate 5.22% 5.00% 4.49% 4.72% 5.45%
................................................................................
SEC 30-Day Yield 4.64% 4.44% 3.89% 4.09% 4.84%
................................................................................
Taxable Equivalent
Yield/3/ 6.92% 6.62% 5.80% 6.10% 7.21%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Index Comparison/4/
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Nuveen Flagship Nuveen Flagship Lehman Brothers
Pennsylvania Municipal Pennsylvania Municipal Municipal Bond
Date Bond Fund (NAV) Bond Fund (Offer) Index
- --------------------------------------------------------------------------------
5/88 $10,000 $ 9,580 $10,000
5/89 11,280 10,806 11,149
5/90 11,923 11,422 11,965
5/91 13,026 12,479 13,171
5/92 14,327 13,725 14,466
5/93 15,956 15,285 16,195
5/94 16,387 15,698 16,595
5/95 17,680 16,937 18,107
5/96 18,358 17,587 18,934
5/97 19,895 19,060 20,505
5/98 21,900 20,980 22,430
- --------------------------------------------------------------------------------
1 The fund also paid shareholders taxable distributions in December of $0.0217
per share.
2 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and declines
periodically to 0% over the following five years, which is not reflected in
the return figures. Class C shares have a 1% CDSC for redemptions within one
year which is not reflected in the one-year total return.
3 Based on SEC yield and a combined federal and state income tax rate of 32.9%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
4 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Index is comprised of a broad range of investment-grade
municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to A shares (4.20%) and all ongoing fund expenses.
Past performance is not predictive of future results.
7
<PAGE>
Nuveen Flagship Virginia Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Rick Huber discusses fund performance, the municipal market,
and key investment strategies for the Virginia fund.
Comments cover the one-year period ended May 31, 1998 and all performance
statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Virginia's economy continues to run smoothly, as unemployment reached its lowest
level in almost three decades, and per capita income growth remains impressive.
Both of these factors were fueled in part by the continued expansion of the
state's retail and high-tech industries. While the commonwealth's financial
position has benefited from recent economic growth, city and county coffers have
not profited to the same degree. Many local governments in Virginia rely heavily
on property taxes and collect very few alternate taxes. As a result, they have
not been able to capture the increases in sales and income tax revenues
generated by the vibrant state economy. Nevertheless, the financial position of
most Virginia municipalities remains solid.
A healthy economy, however, did not immediately translate into a healthy supply
of bond issues. Supply was tight, and that, combined with a narrow spread
between the yields on higher- and lower-quality bonds, increased the challenge
of identifying value in the markets. Virginia's education and health care
sectors provided the greatest number of issues, and therefore offered some of
the year's most attractive buying opportunities.
Fund Performance
For the year ended May 31, 1998, the total return on net asset value for the
Virginia Municipal Bond Fund was 9.30%, which is equivalent to a taxable return
of 12.21% for investors in the 35% combined federal and state income tax
bracket. The fund's total return was in line with the annual return of 9.38%
posted by the unmanaged Lehman Brothers Municipal Bond Index, as well as the
9.34% return generated by the Lipper peer group of Virginia municipal bond
funds.
Although the fund performed competitively against its peers, its total return
over the last year was moderated in part by the lack of supply in the market, as
well as the fund's modest portfolio duration. Duration is a measure of the
fund's price volatility in relation to changes in interest rates. With a
duration of 6.14 years, the fund was significantly shorter than the Lehman
Municipal Bond Index's average duration of 7.11 years. Although the shorter
duration hindered the fund's ability to participate in this year's market rally,
it helps protect the fund from volatility and will help it outperform in a
market downturn.
Key Strategies
We worked last year to reallocate the fund's balance among different sectors of
the market and to ensure diversification among the levels of investment-grade
credit quality. To that end, we reduced the fund's holdings in the health care
sector, and at the same time found attractive opportunities in smaller, perhaps
overlooked bond issues - particularly those of colleges. We also moved to
improve the portfolio's protection against bond calls, which decreases the
likelihood that higher-paying bonds will be called away if interest rate
conditions change.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
As of May 31, 1998, the fund's sector holdings were well-diversified, with 15%
of the portfolio invested in tax obligation bond issues, 14% in health care
bonds, 14% in water and sewer issues and 11% in education and civic organization
debt.
Outlook for the Future
On July 1, 1998, Nuveen made several changes in the management of its mutual
funds to make more efficient use of staff resources and portfolio manager
expertise. As a result, Dan Solender assumed management responsibilities for
this fund. Dan is a 6-year veteran of Nuveen and an experienced investment
professional who has managed a range of other state and national municipal bond
funds.
The continued healthy state economy might translate into strong bond supply in
late 1998 or 1999. Until lower-rated bonds offer more competitive yields, Dan
and his team will continue to seek value from small, higher-rated bond issues.
Particular areas they will be monitoring include education, industrial
development and tax-backed bonds. They will also maintain the portfolio's
shorter duration, which will help cushion the fund in the event of a market
downturn.
8
<PAGE>
Nuveen Flagship Virginia Municipal Bond Fund
Performance Overview
As of May 31, 1998
- --------------------------------------------------------------------------------
Monthly Tax-Free Dividends (Class A Shares)/1/
- --------------------------------------------------------------------------------
[BAR CHART APPEARS HERE]
Month $
----- _
June 0.0475
July 0.0475
August 0.0475
September 0.0475
October 0.0475
November 0.0475
December 0.0475
January 0.046
February 0.046
March 0.046
April 0.046
May 0.046
- -----------------------------------------------------
Top 5 Sectors
- -----------------------------------------------------
Tax Obligation (Limited) 15%
.....................................................
Health Care 14%
.....................................................
Water and Sewer 14%
.....................................................
Education and Civic Organizations 11%
.....................................................
U.S. Guaranteed 8%
- -----------------------------------------------------
- --------------------------------------------------------------------------------
Portfolio Statistics
- --------------------------------------------------------------------------------
Share Class A B C R
- --------------------------------------------------------------------------------
Inception Date 3/86 2/97 10/93 2/97
................................................................................
Net Asset Value $11.06 $11.06 $11.06 $11.06
................................................................................
Fund Net Assets ($000) $212,254
................................................................................
Average Weighted Maturity (Years) 20.28
................................................................................
Average Weighted Duration (Years) 6.14
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Annualized Total Return/2/
- --------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
1-Year 9.30% 4.69% 8.53% 8.81% 9.54%
................................................................................
5-Year 6.40% 5.50% 5.77% 5.81% 6.46%
................................................................................
10-Year 8.16% 7.69% 7.69% 7.57% 8.19%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Tax-Free Yields
- --------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
Distribution Rate 4.99% 4.78% 4.29% 4.45% 5.21%
................................................................................
SEC 30-Day Yield 4.52% 4.33% 3.77% 3.97% 4.72%
................................................................................
Taxable Equivalent 6.95% 6.66% 5.80% 6.11% 7.26%
Yield/3/
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Index Comparison/4/
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Lehman Brothers Nuveen Flagship Nuveen Flagship
Municipal Virginia Municipal Virginia Municipal
Date Bond Index Bond Fund (Offer) Bond Fund (NAV)
---- ---------- ----------------- ---------------
5/88 $10,000 $ 9,580 $10,000
5/89 11,149 10,753 11,224
5/90 11,965 11,413 11,913
5/91 13,171 12,519 13,068
5/92 14,466 13,692 14,292
5/92 16,195 15,386 16,060
5/94 16,595 15,788 16,480
5/95 18,107 17,050 17,797
5/96 18,934 17,737 18,515
5/97 20,303 18,938 19,768
5/98 22,430 20,980 21,900
1 The fund also paid shareholders taxable distributions in December of $0.01 per
share.
2 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and declines
periodically to 0% over the following five years, which is not reflected in
the return figures. Class C shares have a 1% CDSC for redemptions within one
year which is not reflected in the one-year total return.
3 Based on SEC yield and a combined federal and state sincome tax rate of 35%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
4 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Index is comprised of a broad range of investment-grade
municipal bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial maximum sales
charge applicable to A shares (4.20%) and all ongoing fund expenses.
9
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust I:
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Maryland Municipal Bond Fund (Maryland),
Nuveen Flagship Pennsylvania Municipal Bond Fund (Pennsylvania), and Nuveen
Flagship Virginia Municipal Bond Fund (Virginia) (collectively, the "Funds")
(three of the portfolios constituting the Nuveen Flagship Multistate Trust I (a
Massachusetts business trust)), as of May 31, 1998, the related statements of
operations, statements of changes in net assets and the financial highlights for
the year then ended. We have also audited the financial statements and financial
highlights of Maryland for the years ended January 31, 1997 and prior. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
statements and financial highlights for the Funds for the year ended May 31,
1997 and for Pennsylvania and Virginia for the years ended May 31, 1996 and
prior were audited by other auditors whose report dated July 11, 1997, expressed
an unqualified opinion on those financial statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1998, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Maryland Municipal Bond Fund, Nuveen Flagship Pennsylvania Municipal Bond Fund,
and Nuveen Flagship Virginia Municipal Bond Fund of the Nuveen Flagship
Multistate Trust I as of May 31, 1998, and the results of their operations, the
changes in their net assets, and the financial highlights for the year then
ended, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 17, 1998
10
<PAGE>
Portfolio of Investments
Nuveen Maryland Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Basic Materials - 2.5%
$ 1,500,000 Mayor and City Council of Baltimore (Maryland), Port Facilities 4/02 at 103 AA- $ 1,642,515
Revenue Bonds (Consolidation Coal Sales Company Project), Series
1984B, 6.500%, 10/01/11
- ---------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 4.8%
1,000,000 Maryland Health and Higher Educational Facilities Authority, 7/08 at 102 Aa2 999,300
Refunding Bonds, The John Hopkins University Issue, Series 1998,
5.125%, 7/01/20
1,500,000 Morgan State University, Maryland, Academic Fees and Auxiliary No Opt. Call AAA 1,738,725
Facilities Fees, Refunding Bonds, 1993 Series, 6.100%, 7/01/20
500,000 University of Maryland System, Auxiliary Facility and Tuition 10/03 at 101 AA+ 508,880
Bonds, 1993 Refunding Series C, 5.000%, 10/01/11
- ---------------------------------------------------------------------------------------------------------------------------
Health Care - 11.3%
2,165,000 City of Gaithersburg, Maryland, Nursing Home Refunding Bonds No Opt. Call AAA 2,561,390
(Shady Grove Adventist Nursing and Rehabilitation Center
Project), Series 1992A, 6.500%, 9/01/12
1,820,000 Maryland Economic Development Corporation Bonds (Health and 4/11 at 102 N/R 1,864,317
Mental Hygiene Providers Facilities Acquisition Program), Series
1996A, 7.625%, 4/01/21
1,000,000 Maryland Health and Higher Educational Facilities Authority, 7/03 at 102 AAA 1,004,690
Refunding Bonds, Francis Scott Key Medical Center Issue, Series
1993, 5.000%, 7/01/13
1,000,000 Maryland Health and Higher Educational Facilities Authority, 7/03 at 102 Baa1 1,025,060
Project and Refunding Bonds, Doctors Community Hospital Issue,
Series 1993, 5.750%, 7/01/13
1,000,000 Puerto Rico Industrial, Tourist, Educational, Medical and 1/05 at 102 AAA 1,113,700
Environmental Control Facilities Financing Authority, Hospital
Bonds (Hospital Auxilio Mutuo Obligated Group Project), 1995
Series A, 6.250%, 7/01/16
- ---------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 13.7%
1,000,000 Baltimore City, Maryland, Mortgage Refunding Bonds (GNMA 12/02 at 102 AAA 1,073,440
Collateralized-Tindeco Wharf Apartments Project), Series 1992,
6.700%, 12/20/28
1,000,000 Howard County, Maryland, Mortgage Refunding Bonds (Howard Hills 7/02 at 102 AAA 1,059,090
Townhouses Project-FHA Insured Mortgage Loan), Series 1992,
6.400%, 7/01/24
2,000,000 Howard County, Maryland, Multifamily Housing Refunding Bonds 7/02 at 104 Baa2 2,217,580
(Chase Glen Project), Series 1994, 7.000%, 7/01/24
Community Development Administration, Department of Housing and
Community Development, State of Maryland, Multi-Family Housing
Bonds (Insured Mortgage Loans), 1992 Series D:
700,000 6.700%, 5/15/27 5/02 at 102 Aa 750,120
500,000 6.750%, 5/15/33 5/02 at 102 Aa 535,755
1,000,000 Housing Opportunities Commission of Montgomery County 7/05 at 102 Aa 1,044,050
(Maryland), Multifamily Housing Bonds, 1995 Series A, 6.000%,
7/01/20
1,550,000 Prince Georges County Housing Authority (New Keystone Apartments 1/02 at 102 AAA 1,648,580
- FHA Insured), 6.800%, 7/01/25
860,000 Housing Authority of Prince Georges County (Maryland), Mortgage 5/00 at 100 AAA 860,619
Refunding Bonds (Collateralized-Foxglenn Apartments Project),
Series 1998 A, 5.450%, 11/20/14 (Alternative Minimum Tax)
- ---------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 11.6%
1,385,000 Maryland Community Development Administration, Department of 4/01 at 102 Aa2 1,461,078
Housing and Community Development, Single Family Program Bonds,
1991 Fourth Series, 7.450%, 4/01/32 (Alternative Minimum Tax)
1,500,000 Community Development Administration, Maryland Department of 3/08 at 101 1/2 Aa2 1,489,545
Housing and Community Development, Residential Bonds, 1998
Series A, 5.300%, 9/01/23 (Alternative Minimum Tax)
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Maryland Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 1,615,000 Housing Opportunities Commission of Montgomery County 7/04 at 102 Aa2 $ 1,735,059
(Maryland), Single Family Mortgage Bonds, 1994 Series A, 6.600%,
7/01/14
3,000,000 Housing Authority of Prince Georges County (Maryland), 8/07 at 102 AAA 3,084,420
FHLMC/FNMA/GNMA Collateralized, Single Family Mortgage Bonds,
Series 1997, 5.750%, 8/01/26 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 7.0%
2,295,000 Mayor and City Council of Baltimore (Maryland), General No Opt. Call AAA 2,643,794
Obligation Consolidated Public Improvement Refunding Bonds of
1995, Series A, 7.375%, 10/15/03
2,000,000 State of Maryland, General Obligation Bonds, State and Local 7/03 at 101 AAA 2,038,860
Facilities Loan of 1993, Third Series, Capital Improvement and
Refunding Bonds, 4.600%, 7/15/06
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 11.0%
1,000,000 Mayor and City Council of Baltimore (Maryland), Certificates of 10/07 at 102 AAA 1,003,370
Participation (Emergency Telecommunications Facilities), Series
1997A, 5.000%, 10/01/17
1,760,000 Maryland Stadium Authority, Convention Center Expansion Lease 12/04 at 102 AAA 1,916,886
Bonds, Series 1994, 5.875%, 12/15/12
Maryland Stadium Authority, Sports Facilities Lease Bonds,
Series 1989 D:
500,000 7.375%, 12/15/04 (Alternative Minimum Tax) 12/99 at 102 Aa 533,215
500,000 7.500%, 12/15/10 (Alternative Minimum Tax) 12/99 at 102 Aa 532,815
1,170,000 Washington Suburban Sanitary District, Maryland (Montgomery and No Opt. Call Aa1 1,319,538
Prince Georges Counties), General Construction Bonds of 1991,
Second Series, 8.000%, 1/01/02
1,000,000 Washington Suburban Sanitary District, General Construction 6/02 at 102 Aa1 1,079,780
Refunding Bonds of Maryland, Series 1992, 5.900%, 6/01/04
1,000,000 Washington Suburban Sanitary District, Maryland (Montgomery and 6/07 at 100 Aa1 1,001,780
Prince Georges Counties), General Construction Bonds of 1997,
5.125%, 6/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 9.4%
2,525,000 Maryland Transportation Authority, Special Obligation Bonds, 7/04 at 102 AAA 2,685,514
Baltimore/Washington International Airport Projects (Qualified
Airport Bonds), Series 1994 A, 6.400%, 7/01/19 (Alternative
Minimum Tax)
1,000,000 Maryland Transportation Authority, Transportation Facilities 7/02 at 100 A+ 1,036,340
Projects, Series 1992, 5.750%, 7/01/15
2,500,000 Washington Metropolitan Area Transit Authority (District of 1/04 at 102 AAA 2,548,425
Columbia), Gross Transit Refunding Bonds, Series 1993, 5.250%,
7/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 18.1%
2,000,000 Baltimore County, Maryland, General Obligation Bonds, Baltimore 7/98 at 102 AAA 2,044,880
County Pension Funding Bonds, 1991 Refunding Series, 6.700%,
7/01/11 (Pre-refunded to 7/01/98)
600,000 Mayor and City Council of Baltimore, Maryland, General 10/02 at 100 AAA 657,768
Obligation Consolidated Public Improvement Bonds of 1992, Series
A, 6.500%, 10/15/12 (Pre-refunded to 10/15/02)
625,000 Mayor and City Council of Baltimore, Maryland, Project and 7/00 at 100 AAA 657,206
Refunding Bonds (Water Projects), Series 1990 A, 6.500%, 7/01/20
(Pre-refunded to 7/01/00)
700,000 The Maryland National Capital Park and Planning Commission, 7/02 at 102 AA*** 764,554
Maryland, General Obligation Bonds, Prince Georges County Park
Acquisition and Development Bonds, Series L-2, 6.125%, 7/01/10
(Pre-refunded to 7/01/02)
500,000 Maryland Health and Higher Educational Facilities Authority, 7/00 at 102 AAA 539,745
Sinai Hospital of Baltimore Bond Issue, Series 1990, 7.000%,
7/01/19 (Pre-refunded to 7/01/00)
500,000 Maryland Health and Higher Educational Facilities Authority, 7/00 at 102 AAA 537,470
Francis Scott Key Medical Center Bond Issue, Series 1990,
6.750%, 7/01/23 (Pre-refunded to 7/01/00)
1,005,000 Maryland Health and Higher Educational Facilities Authority, 7/00 at 102 AAA 1,119,821
Doctors Community Hospital Bond Issue, Series 1990, 8.750%,
7/01/22 (Pre-refunded to 7/01/00)
1,000,000 Morgan State University, Maryland, Academic Fees and Auxiliary 7/00 at 102 AAA 1,079,490
Facilities Fees, 1990 Series A, 7.000%, 7/01/20 (Pre-refunded
to 7/01/00)
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 2,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 7/07 at 101 1/2 AAA $ 2,843,325
6.000%, 7/01/26 (Pre-refunded to 7/01/07)
500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1992, 7/02 at 101 1/2 AAA 554,045
General Obligation Bonds, 6.600%, 7/01/13 (Pre-refunded to
7/01/02)
1,000,000 Puerto Rico Aqueduct and Sewer Authority, Series 1988 A, 7.875%, 7/98 at 102 AAA 1,023,460
7/01/17 (Pre-refunded to 7/01/98)
315,000 Puerto Rico Electric Power Authority, Power Refunding Bonds, 7/99 at 101 1/2 AAA 330,851
Series 1989-O, 7.125%, 7/01/14 (Pre-refunded to 7/01/99)
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities - 5.9%
1,000,000 Montgomery County, Maryland, Solid Waste System Bonds, 6/03 at 102 AAA 1,062,090
1993 Series A, 5.875%, 6/01/13 (Alternative Minimum Tax)
1,000,000 Northeast Maryland Waste Disposal Authority, Resource Recovery No Opt. Call AAA 1,044,140
Refunding Bonds (Southwest Resource Recovery Facility), Series
1993, 6.900%, 1/01/00
1,500,000 Prince Georges County, Maryland, Pollution Control Refunding 1/03 at 102 A1 1,617,735
Bonds (Potomac Electric Project), 1993 Series, 6.375%, 1/15/23
185,000 Puerto Rico Electric Power Authority, Power Refunding Bonds, 7/99 at 101 1/2 BBB+ 193,749
Series 1989-N, 7.125%, 7/01/14
- ----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 2.3%
1,500,000 Mayor and City Council of Baltimore, Maryland, Project and 7/06 at 101 AAA 1,553,971
Refunding Bonds (Water Projects), Series 1996-A, 5.500%, 7/01/26
- ----------------------------------------------------------------------------------------------------------------------------------
$ 61,275,000 Total Investments - (cost $61,334,300) - 97.6% 65,382,530
- ----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.4% 1,580,622
------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 66,963,152
------------------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
13
<PAGE>
Portfolio of Investments
Nuveen Flagship Pennsylvania Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Basic Materials - 1.2%
$ 1,650,000 Cambria County Industrial Development Authority, Pennsylvania, 9/98 at 100 A1 $ 1,662,408
Resource Recovery Bonds (Cambria
CoGen Company Project), 1989 Series F2, 7.750%, 9/01/19
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Goods - 2.4%
3,000,000 Delaware County Industrial Development Authority (Pennsylvania), 1/08 at 102 A 3,274,920
Refunding Bonds (Resource Recovery Facility), Series A 1997,
6.200%, 7/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 16.3%
Allegheny County Higher Education Building Authority (Commonwealth
of Pennsylvania), College Bonds (Robert Morris College):
1,190,000 Series A of 1998, 5.500%, 5/01/15 No Opt. Call Baa3 1,228,437
3,000,000 Series A of 1996, 6.250%, 2/15/26 2/06 at 102 Baa3 3,158,010
1,500,000 Series A of 1998, 6.000%, 5/01/28 No Opt. Call Baa3 1,661,460
Chester County Health and Education Facilities Authority
(Pennsylvania), College Revenue Bonds (Immaculata College),
Series of 1998:
1,300,000 5.600%, 10/15/18 10/08 at 102 BBB- 1,307,982
2,300,000 5.625%, 10/15/27 10/08 at 102 BBB- 2,298,183
2,315,000 Delaware County Authority (Pennsylvania), College Refunding Bonds 10/08 at 100 BBB- 2,273,515
(Neumann College), Series 1998A, 5.375%, 10/01/26
New Wilmington Municipal Authority (Lawrence County, Pennsylvania),
College Bond (Westminster College), 1998 Series:
1,275,000 5.300%, 3/01/18 3/08 at 100 Baa1 1,264,099
935,000 5.350%, 3/01/28 3/08 at 100 Baa1 930,774
750,000 Northeastern Pennsylvania Hospital and Education Authority, College 2/05 at 100 AAA 852,293
Revenue, Guaranteed, Luzerne County Community College, 6.625%,
8/15/15
Pennsylvania Higher Educational Facilities Authority (Commonwealth
of Pennsylvania), Geneva College Bonds, Series of 1998:
4,150,000 5.375%, 4/01/15 4/08 at 102 BBB- 4,151,494
1,800,000 5.375%, 4/01/23 4/08 at 102 BBB- 1,784,016
865,000 Union County Higher Educational Facilities Financing Authority, 4/06 at 101 AAA 897,541
Pennsylvania, University Bonds (Bucknell University), Series 1996,
5.500%, 4/01/16
600,000 The General Municipal Authority of the City of Wilkes-Barre, 12/00 at 100 N/R 660,102
College Misericordia Refunding Bonds, Series A of 1992, 7.750%,
12/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Energy - 3.0%
3,500,000 Pennsylvania Economic Development Financing Authority (Sun Company, No Opt. Call BBB 4,103,155
Inc. (R&M) Project), Series 1994A, 7.600%, 12/01/24 (Alternative
Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 1.6%
2,000,000 Pennsylvania Economic Development Financing Authority (MacMillan 12/05 at 102 Baa2 2,243,380
Bloedel Limited Partnership), 7.600%, 12/01/20 (Alternative
Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 15.1%
1,525,000 Allegheny County Hospital Development Authority (Pennsylvania), No Opt. Call A- 1,847,812
Hospital Bonds (Allegheny Valley Hospital, Sublessee), Series Q,
7.000%, 8/01/15
500,000 Clarion County Hospital Authority, Hospital Refunding Bonds 7/99 at 102 N/R 532,100
(Clarion Hospital Project), Series 1989, 8.100%, 7/01/12
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care (continued)
$ 1,585,000 The City of Jeannette Health Services Authority, Hospital Bonds 11/06 at 102 BBB+ $ 1,666,421
(Jeannette District Memorial Hospital), Series A of 1996,
6.000%, 11/01/18
2,000,000 Monroeville, Pennsylvania, Hospital Authority, Hospital Refunding 10/05 at 102 A 2,126,240
Bond, Forbes Health System, 6.250%, 10/01/15
500,000 Montgomery County, Pennsylvania, Higher Education and Health 2/00 at 100 AAA 529,680
Authority, Holy Redeemer Hospital, Series A, 7.625%, 2/01/20
1,985,000 Philadelphia, Pennsylvania, Hospitals and Higher Education
Facilities Authority, Hospital Refunding Bond, Chestnut 11/02 at 102 A 2,136,197
Hill Hospital, 6.500%, 11/15/22
2,000,000 The Hospitals and Higher Education Facilities Authority of
Philadelphia, Hospital Bonds (Temple University Hospital), 11/03 at 102 A 2,151,280
Series A of 1993, 6.625%, 11/15/23
2,000,000 Philadelphia, Pennsylvania, Hospitals and Higher Education No Opt. Call BBB+ 2,170,780
Facilities Authority, Hospital Refunding Bond,
Pennsylvania Hospital, 6.250%, 7/01/06
2,500,000 Philadelphia, Pennsylvania, Hospitals and Higher Education 7/07 at 102 BBB 2,582,150
Facilities Authority, Hospital Refunding Bond, Jeanes Hospital
Project, 5.875%, 7/01/17
2,250,000 City of Pottsville Hospital Authority, Hospital Bonds (The 7/08 at 100 BBB 2,242,238
Pottsville Hospital and Warne Clinic), Series of 1998, 5.625%,
7/01/24
500,000 Saint Mary Hospital Authority, Hospital Bonds (Franciscan Health 7/02 at 102 AAA 545,280
System/Saint Mary Hospital of Langhorne, Inc.), Series 1992A,
6.500%, 7/01/12
230,000 Health Care Facilities Authority of Sayre (Pennsylvania), Guthrie 3/01 at 102 AAA 249,695
Healthcare System, Series 1991A, 7.100%, 3/01/17
350,000 Washington County Hospital Authority, Hospital Bonds (Monongahela 4/02 at 102 A3 381,672
Valley Hospital, Inc. Project), Series 1992, 6.750%, 12/01/08
1,750,000 Westmoreland County Industrial Development Authority 7/99 at 100 Baa2 1,794,013
(Pennsylvania), Hospital Refunding Bonds (Citizens General
Hospital), Series A of 1987, 8.250%, 7/01/13
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 0.4%
500,000 Redevelopment Authority of the County of Bucks, Pennsylvania, 2/02 at 100 AAA 521,515
Mortgage Refunding Bonds (Warminster Heights Section 8 Assisted
FHA Insured Project), 1992 Series A, 6.875%, 8/01/23
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 11.9%
1,670,000 Allegheny County Residential Finance Authority, Single Family No Opt. Call Aaa 249,314
Mortgage Bonds, 1994 Series Y, 0.000%, 5/01/27 (Alternative
Minimum Tax)
300,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Bonds, 10/99 at 102 AA+ 315,006
Series S, 7.600%, 4/01/16
130,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Bonds, 4/01 at 102 AA+ 137,795
Series 30, 7.300%, 10/01/17
520,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Bonds, 10/01 at 102 AA+ 553,160
Series 1991-32, 7.150%, 4/01/15
2,500,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Bonds, 10/06 at 102 AA+ 2,650,325
Series 1996-50A, 6.000%, 10/01/13
2,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Bonds, 4/06 at 102 AA+ 2,126,740
Series 1996-51, 6.375%, 4/01/28 (Alternative Minimum Tax)
1,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Bonds, 10/06 at 102 AA+ 1,050,900
Series 53A, 6.050%, 4/01/18 (Alternative Minimum Tax)
2,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Bonds, No Opt. Call AA+ 2,023,400
Series 1997-61A, 5.500%, 4/01/29 (Alternative Minimum Tax)
2,980,000 Urban Redevelopment Authority of Pittsburgh, Home Improvement Loan 8/05 at 102 A 3,130,520
Bonds, 1995 Series A, 6.375%, 8/01/18 (Alternative Minimum Tax)
1,000,000 Pittsburgh, Pennsylvania, Urban Redevelopment Authority, Mortgage 4/06 at 102 AAA 1,042,150
Bonds, Series A, 6.000%, 4/01/19 (Alternative Minimum Tax)
1,000,000 Pittsburgh, Pennsylvania, Urban Redevelopment Authority, Mortgage 4/06 at 102 AAA 1,062,560
Bonds, Series D, 6.250%, 10/01/17
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship Pennsylvania Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Housing/Single Family (continued)
$ 1,060,000 Pittsburgh, Pennsylvania, Urban Redevelopment Authority, 4/04 at 102 AAA $ 1,135,864
Mortgage Bonds, 1994 Series A, 6.625%, 4/01/22 (Alternative
Minimum Tax)
1,000,000 Pittsburgh, Pennsylvania, Urban Redevelopment Authority, 10/07 at 102 AAA 1,057,330
Mortgage Bonds, 1997 Series A, 6.200%, 10/01/21 (Alternative
Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Other - 0.2%
250,000 Philadelphia Authority for Industrial Development Bonds 5/02 at 102 A+ 274,758
(National Board of Medical Examiners Project), Series of 1992,
6.750%, 5/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 6.2%
2,980,000 Allegheny County Residential Finance Authority, Mortgage Bonds 10/05 at 100 AAA 3,216,761
(FHA Insured Mortgage, Ladies Grand Army of the Republic
Health Facility Project), 1995 Series G, 6.350%, 10/01/36
2,000,000 Armstrong County Hospital Authority (Pennsylvania), Health 12/01 at 100 AAA 2,159,660
Center Refunding Bonds (Canterbury Place Project), Series 1991,
6.500%, 12/01/21
1,000,000 Butler County Industrial Development Authority (Pennsylvania), 6/03 at 102 A 1,033,130
Health Center Refunding Bonds, Pittsburgh Lifetime Care Community
(Sherwood Oaks Project), Series 1993, 5.750%, 6/01/16
2,000,000 Montgomery County Higher Education and Health Authority, Mortgage 1/06 at 101 BBB 2,123,700
Bonds (Waverly Heights Project), Series of 1996, 6.375%, 1/01/26
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 5.6%
2,000,000 Mckeesport Area School District (Allegheny County, 10/06 at 100 AAA 2,238,240
Pennsylvania), General Obligation Bonds,
Series of 1996A, 6.000%, 10/01/25
2,195,000 Montour School District (Allegheny County, Pennsylvania), No Opt. Call AAA 1,001,118
General Obligation Bonds,
Series B of 1993, 0.000%, 1/01/14
1,000,000 Pennsylvania State, First Series, 5.375%, 5/15/16 5/06 at 101 1/2 AAA 1,028,590
1,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 7/07 at 101 1/2 A 1,517,670
5.375%, 7/01/25
2,000,000 Radnor Township, General Obligation Bonds, Series 1996, 5.250%, 5/06 at 100 Aa2 2,002,480
11/01/26
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 7.9%
1,500,000 The Harrisburg Authority, Dauphin County (Pennsylvania), Series 4/06 at 102 AAA 1,568,490
I of 1996 (Pooled Bond Program), 5.625%, 4/01/19
1,390,000 Pennsylvania Intergovernmental Cooperative Authority (City of No Opt. Call AAA 1,620,115
Philadelphia Funding Program), Series of 1994, 7.000%, 6/15/05
4,500,000 Puerto Rico Highway and Transportation Authority, Highway 7/16 at 100 A 4,716,225
Bonds, Series Y of 1996, 5.500%, 7/01/36
3,000,000 Southeastern Pennsylvania Transportation Authority, Special 3/07 at 102 AAA 3,057,450
Bonds, Series of 1997, 5.375%, 3/01/22
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 5.4%
2,300,000 County of Allegheny, Pennsylvania, Airport Refunding Bonds 1/08 at 101 AAA 2,309,154
(Pittsburgh International Airport), Series 1997A, 5.250%,
1/01/16 (Alternative Minimum Tax)
1,550,000 Pennsylvania Turnpike Commission, Series O of 1992, 5.500%, 12/02 at 102 AAA 1,587,402
12/01/17
3,500,000 Philadelphia, Pennsylvania, Airport System, Series B, 5.400%, 6/07 at 102 AAA 3,540,565
6/15/27 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 7.9%
200,000 Allegheny County Hospital Development Authority, Hospital Bonds 10/01 at 100 BBB+*** 218,586
(St. Margaret Memorial Hospital), Series 1991 A, 7.125%,
10/01/21 (Pre-refunded to 10/01/01)
200,000 Butler County Hospital Authority (Butler County, Pennsylvania), 6/01 at 102 AAA 220,054
Hospital Bonds (North Hills Passavant Hospital), Series 1991 A,
7.000%, 6/01/22 (Pre-refunded to 6/01/01)
2,850,000 Deer Lakes School District (Allegheny County, Pennsylvania), 1/04 at 100 AAA 3,156,375
General Obligation Bonds, Series of 1995, 6.350%, 1/15/14
(Pre-refunded to 1/15/04)
1,320,000 Delaware County Authority, Health Facilities Bonds (Mercy 12/06 at 102 BBB+ 1,483,957
Health Corporation of Southeastern Pennsylvania Obligated
Group), Series of 1996, 6.000%, 12/15/26
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,500,000 Pennsylvania Intergovernmental Cooperation Authority, Special 6/05 at 100 AAA $ 1,748,325
Tax Bonds (City of Philadelphia Funding Program), Series of
1994, 7.000%, 6/15/14 (Pre-refunded to 6/15/05)
500,000 Pennsylvania Higher Educational Facilities Authority 10/98 at 102 N/R*** 517,670
(Commonwealth of Pennsylvania), Lycoming College Bonds, Series
of 1988, 8.375%, 10/01/18 (Pre-refunded to 10/01/98)
650,000 City of Philadelphia, Pennsylvania, Gas Works Bonds, No Opt. Call AAA 791,798
Twelfth Series B, 7.000%, 5/15/20
1,450,000 The Philadelphia Municipal Authority, Philadelphia, Pennsylvania, 4/00 at 100 AAA 1,548,629
Criminal Justice Center Refunding Bonds, Series of 1988, 7.800%,
4/01/18 (Pre-refunded to 4/01/00)
935,000 The Municipal Authority of the Borough of West View (Allegheny No Opt. Call AAA 1,329,402
County, Pennsylvania), Special Obligation Bonds, Series of
1985A, 9.500%, 11/15/14
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 11.9%
2 ,000,000 Beaver County Industrial Development Authority, Pennsylvania, 6/08 at 102 AAA 2,000,000
Exempt Facilities Bonds (Shippingport Project), Series A, 5.375%,
6/01/28 (Alternative Minimum Tax) (WI)
2,000,000 Cambria County Industrial Development Authority (Pennsylvania), 11/05 at 102 AAA 2,122,060
Pollution Control Refunding Bonds (Pennsylvania Electric Company
Project), 1995 Series A, 5.800%, 11/01/20
800,000 Greater Lebanon Refuse Authority, Lebanon County (Pennsylvania), 11/02 at 100 A- 855,016
Solid Waste Bonds, Series of 1992, 7.000%, 11/15/04
1,500,000 Lawrence County, Pennsylvania, Industrial Development Authority, 9/01 at 102 Baa2 1,618,965
Pollution Control Refunding Bond, Pennsylvania Power Company,
New Castle Project, Series A, 7.150%, 3/01/17
1,610,000 Lehigh County Industrial Development Authority, Pollution Control 11/02 at 102 AAA 1,764,608
Refunding Bonds (Pennsylvania Power and Light Company Project),
1002 Series A, 6.400%, 11/01/21
550,000 Lehigh County Industrial Development Authority, Pollution Control 8/05 at 102 AAA 604,153
Refunding Bonds (Pennsylvania Power and Light Company Project),
1995 Series A, 6.150%, 8/01/29
950,000 Luzerne County Industrial Development Authority, Exempt Facilities 12/02 at 102 A- 1,050,415
Bonds (Pennsylvania Gas and Water Company Project), 1992 Series B,
7.125%, 12/01/22 (Alternative Minimum Tax)
1,500,000 Luzerne County Industrial Development Authority, Exempt Facilities 12/04 at 102 AAA 1,709,085
Revenue Refunding Bonds (Pennsylvania Gas and Water Company
Project), 1994 Series A, 7.000%, 12/01/17 (Alternative
Minimum Tax)
1,000,000 Northampton County Industrial Development Authority (Pennsylvania), 7/05 at 102 AAA 1,096,540
Pollution Control Refunding Bonds (Metropolitan Edison Company
Project), 1995 Series A, 6.100%, 7/15/21
City of Philadelphia (Pennsylvania), Gas Works Bonds, Fourteenth
Series:
2,000,000 6.375%, 7/01/14 7/03 at 102 AAA 2,205,479
1,400,000 6.375%, 7/01/26 7/03 at 102 Baa1 1,505,938
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 2.1%
2,000,000 Allegheny County (Pennsylvania), Sanitary Authority, Sewer Bonds, 12/07 at 102 AAA 2,040,439
Series of 1997, 5.375%, 12/01/24
860,000 South Wayne County Water and Sewer Authority, Pennsylvania, 4/02 at 102 N/R 934,879
Sewer Refunding Bond, 8.200%, 4/15/13 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 131,905,000 Total Investments--(cost $127,723,049) 99.1% 137,281,787
=============-----------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities - 0.7%
$ 1 ,000,000 Philadelphia Hospital and Higher Educational Facilities Authority. A-1+ 1,000,000
============ (Childrens Hospital), Series A, Variable Rate Demand Bonds,
4.000%, 3/01/27+
----------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.2% 276,634
----------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $ 138,558,421
================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent
public accountants): Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at
varying prices at later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient
U.S. government or U.S. government agency securities which ensures the
timely payment of principal and interest. Securities are normally
considered to be equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
+ 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.
17
<PAGE>
Portfolio of Investments
Nuveen Flagship Virginia Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Capital Goods 1.0%
$ 2,000,000 Industrial Development Authority of the County of Henrico, Virginia, No Opt. Call A- $ 2,074,560
Solid Waste Disposal Revenue Bonds, Series 1996A (Browning-Ferris
Industries of South Atlantic, Inc. Project), 5.450%, 1/01/14
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Staples 0.8%
1,500,000 Industrial Development Authority of the County of James City, 4/07 at 101 A+ 1,592,565
Virginia, Sewage and Solid Waste Disposal Facilities
Revenue Bonds, Series 1997 (Anheuser Busch Project), 6.000%,
4/01/32 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations 11.0%
1,000,000 Industrial Development Authority of the Nature Conservancy, Series 7/07 at 102 Aa1 1,025,910
1997A, Facility Revenue Bonds, Series 1997A, 5.450%, 7/01/27
500,000 Medical College of Hampton Roads (Virginia), General Revenue Refunding 11/01 at 102 A- 540,865
Bonds, Series 1991A, 6.875%, 11/15/16
Industrial Development Authority of Loudoun County, Virginia,
University Facilities Revenue Refunding Bonds (The George Washington
University), Series of 1992:
500,000 6.250%, 5/15/12 5/02 at 102 A1 535,085
2,225,000 6.250%, 5/15/22 5/02 at 102 A1 2,369,469
1,250,000 Industrial Development Authority of Rockingham County, Virginia, 10/03 at 102 Baa3 1,291,788
Educational Facilities Revenue Bonds (Bridgewater College),
Series 1993, 6.000%, 10/01/23
Staunton Industrial Development Authority, Educational Facilities
Revenue Bonds (Mary Baldwin College):
350,000 5.900%, 11/01/03 No Opt. Call N/R 355,324
370,000 6.000%, 11/01/04 No Opt. Call N/R 376,475
2,000,000 University of Virginia, University General Revenues, Series B, 5.375%, 6/03 at 102 AA+ 2,025,000
6/1/20
750,000 Virginia College Building Authority, Educational Facilities Revenue 1/02 at 102 AAA 820,095
Refunding, Washington and Lee University Project, 6.400%, 1/01/12
800,000 Virginia College Building Authority, Educational Facilities Revenue 5/02 at 102 A 884,728
Bonds (Randolph-Macon College Project), Series of 1992, 6.625%,
5/01/13
Virginia College Building Authority, Educational Facilities Revenue,
Marymount University Project:
1,000,000 7.000%, 7/01/12 7/02 at 102 BBB- 1,091,750
1,400,000 7.000%, 7/01/22 7/02 at 102 BBB- 1,520,302
2,000,000 Virginia College Building Authority, Educational Facilities Revenue 10/02 at 102 BBB+ 2,159,260
Refunding, Roanoke College Project, 6.625%, 10/15/12
3,250,000 Virginia College Building Authority, Educational Facilities Revenue 4/03 at 102 A+ 3,402,880
Refunding Bonds, Hampton University Project, Series of 1993, 5.750%,
4/01/14
Virginia College Building Authority, Educational Facilities Revenue
Bonds, The Washington and Lee University Project, Series of 1994:
1,000,000 5.750%, 1/01/14 1/04 at 102 AA 1,069,530
1,000,000 5.800%, 1/01/24 1/04 at 102 AAA 1,093,990
Industrial Development Authority of the City of Winchester (Virginia),
Educational Facilities First Mortgage Revenue Bonds (Shenandoah
University Project), Series 1994:
1,800,000 6.700%, 10/01/14 10/04 at 102 AA 2,006,280
775,000 6.750%, 10/01/19 10/04 at 102 AA 865,908
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Forest and Paper Products - 4.4%
$ 2,000,000 Industrial Development Authority of Covington-Alleghany County, Virginia, 9/04 at 102 A1 $ 2,241,080
Pollution Control Facilities Refunding Revenue Bonds (Westvaco
Corporation Project), Series 1994, 6.650%, 9/01/18
3,545,000 Industrial Development Authority of the Isle of Wight County, Virginia, 4/04 at 102 A1 3,888,262
Solid Waste Disposal Facilities Revenue Bonds (Union Camp Corporation
Project), Series 1994, 6.550%, 4/01/24 (Alternative Minimum Tax)
3,000,000 Industrial Development Authority of the Isle of Wight County, Virginia, 5/07 at 102 A- 3,176,490
Solid Waste Disposal Facilities Revenue Bonds (Union Camp Corporation
Project), Series 1997, 6.100%, 5/01/27 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 13.7%
1,125,000 Industrial Development Authority of Albemarle County, Virginia, Health 10/02 at 102 A+ 1,209,983
Services Revenue Bonds (The University of Virginia Health Services
Foundation), Series 1992, 6.500%, 10/01/22
2,060,000 Industrial Development Authority of Albemarle County, Virginia, Hospital 10/03 at 102 A2 2,155,275
Refunding Revenue Bonds (Martha Jefferson Hospital), Series 1993,
5.875%, 10/01/13
1,135,000 Industrial Development Authority of the City of Buena Vista, Virginia, 11/98 at 101 1/2 N/R 1,160,242
Hospital Facility Crossover Refunding Revenue Bonds (Stonewall
Jackson Hospital, Incorporated), Series 1987, 8.375%, 11/01/14
2,000,000 Industrial Development Authority of Fairfax County, Virginia, Health 8/06 at 102 AA 2,151,620
Care Revenue Bonds (Inova Health System Project), Series 1996A,
6.000%, 8/15/26
2,000,000 Industrial Development Authority of the City of Fredericksburg, 6/07 at 102 AAA 1,999,940
Virginia, Hospital Facilities Revenue Refunding Bonds (MediCorp
Health System Obligated Group), Series 1996, 5.250%, 6/15/23
1,110,000 The Industrial Development Authority of the County of Giles, 12/05 at 102 A+ 1,173,947
Virginia, Exempt Facility Revenue Bonds, Hoechst Celanese Project,
Series 1995, 5.950%, 12/01/25 (Alternative Minimum Tax)
500,000 Industrial Development Authority of the City of Hampton, Virginia, 11/04 at 102 Aa2 558,565
Hospital Revenue and Refunding Bonds (Sentara Hampton General
Hospital), Series 1994A, 6.500%, 11/01/12
2,000,000 Industrial Development Authority of the County of Hanover (Virginia), No Opt. Call AAA 2,351,620
Hospital Revenue Bonds, Series 1995 (Memorial Regional Medical Center
Project at Hanover Medical Park) (Guaranteed by Bon Secours Health
System Obligated Group), 6.375%, 8/15/18
2,000,000 Industrial Development Authority of the County of Hanover (Virginia), 8/05 at 102 AAA 2,055,100
Hospital Revenue Bonds, Series 1995 (Bon Secours Health System
Projects), 5.500%, 8/15/25
1,250,000 Industrial Development Authority of Henry County, Virginia, Hospital 1/07 at 101 A+ 1,328,325
Revenue Bonds (Memorial Hospital of Martinsville and Henry County),
Series 1997, 6.000%, 1/01/27
1,700,000 Industrial Development Authority of Loudoun County, Virginia, 6/05 at 102 AAA 1,792,599
Hospital Revenue Bonds (Loudoun Hospital Center), Series 1995,
5.800%, 6/01/20
3,500,000 Industrial Development Authority of Norfolk (Virginia), Industrial 10/99 at 100 N/R 3,567,095
Development Revenue, James Barry, Robinson Institute Project,
7.700%, 10/01/06
1,000,000 Industrial Development Authority of the City of Norfolk (Virginia), 8/07 at 102 AAA 1,001,600
Health Care Revenue Bonds, Series 1997 (Bon Secours Health System),
5.250%, 8/15/26
2,080,000 Peninsula Ports Authority of Virginia, Health System Revenue and 7/02 at 102 Aa2 2,270,611
Refunding Bonds (Riverside Health System Project), Series 1992-A,
6.625%, 7/01/18
2,000,000 Industrial Development Authority of the City of Roanoke, Virginia, 7/03 at 102 AAA 1,937,580
Hospital Revenue Refunding Bonds (Roanoke Memorial Hospitals,
Community Hospital of Roanoke Valley, Franklin Memorial
Hospital Project), Series 1993A, 5.000%, 7/01/24
2,260,000 City of Virginia Beach Development Authority (Virginia), Hospital 11/01 at 102 AA 2,433,884
Revenue Bonds (Sentara Bayside Hospital), Series 1991, 6.300%,
11/01/21
</TABLE>
19
<PAGE>
Portfolio of Investments
Nuveen Flagship Virginia Municipal Bond Fund
(continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Housing/Multifamily - 3.9%
$ 1,200,000 Fairfax County (Virginia), Redevelopment and Housing Authority, FHA- 9/06 at 102 AAA $ 1,262,472
Insured Mortgage Housing for the Elderly Revenue Refunding Bonds,
Series 1996 (Little River Glen), 6.100%, 9/01/26
Harrisonburg (Virginia), Redevelopment and Housing Authority, Multi-
Family Housing Revenue Refunding Bonds (United Dominion Projects),
Series 1992:
1,415,000 7.000%, 12/01/08 12/02 at 102 BBB+ 1,505,093
2,040,000 7.100%, 12/01/15 12/02 at 102 BBB+ 2,166,174
2,000,000 Newport News, Virginia, Redevelopment and Housing Authority, Mortgage 1/02 at 102 AAA 2,085,660
Revenue Refunding, West Apartments, Series A, 6.550%, 7/01/24
480,000 Suffolk Redevelopment and Housing Authority, Multifamily Housing 7/02 at 104 Baa2 528,509
Revenue Refunding Bonds, Series 1994 (Chase Heritage at Dulles
Project), 7.000%, 7/01/24
700,000 Virginia State Housing Development Authority, Multi-Family, 5/01 at 102 AA+ 745,563
Series F, 7.000%, 5/01/04
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 5.9%
315,000 Puerto Rico Housing Finance Corporation, Single Family Mortgage 9/00 at 102 AAA 334,911
Revenue, Portfolio 1, Series B, 7.650%, 10/15/22
650,000 Virginia Housing Development Authority, Commonwealth Mortgage Bonds, 1/00 at 102 AA+ 672,211
1990 Series B, Subseries B-4, 6.850%, 7/01/17
Virginia Housing Development Authority, Commonwealth Mortgage Bonds,
1992 Series A:
3,000,000 7.100%, 1/01/17 1/02 at 102 AA+ 3,134,010
1,000,000 7.100%, 1/01/22 1/02 at 102 AA+ 1,050,520
4,000,000 7.150%, 1/01/33 1/02 at 102 AA+ 4,202,080
- ------------------------------------------------------------------------------------------------------------------------------------
1,000,000 Virginia Housing Development Authority, Commonwealth Mortgage Bonds, 7/05 at 102 AA+ 1,058,760
Series C-1, 6.300%, 7/01/25 (Alternative Minimum Tax)
2,000,000 Virginia State Housing Development Authority, Commonwealth Mortgage 7/05 at 102 AA+ 2,107,360
Bonds, Series C, Subseries C-3, 6.125%, 7/01/22 (Alternative
Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial/Other - 0.2%
400,000 Richmond Virginia Industrial Development Authority, Medical Facility, 2/00 at 100 AA- 408,912
Richmond Metropolitan Blood Service, 7.125%, 2/01/11
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 2.0%
715,000 Industrial Development Authority of Albemarle County, Virginia, 1/01 at 103 N/R 788,423
Mortgage Revenue Refunding Bonds, Series 1986A (FHA Insured Project),
8.900%, 7/15/26
1,000,000 Health Center Commission for the County of Chesterfield (Virginia), 12/06 at 102 AAA 1,067,460
Mortgage Revenue Bonds (GNMA Collateralized-Lucy Corr Nursing Home
Project), Series 1996, 5.875%, 12/01/21
500,000 Fairfax County Redevelopment and Housing Authority, Multifamily Housing 12/06 at 103 AAA 526,775
Revenue Refunding Bonds (FHA Insured Mortgage Loan-Paul Spring
Retirement Center), Series 1996 A, 6.000%, 12/15/28
500,000 Front Royal and Warren County, Virginia, Industrial Development 1/06 at 100 A 541,915
Authority, Revenue Bonds (Heritage Hall XIII), Series 1986, 9.450%,
7/15/24
1,190,000 Industrial Development Authority of the County of Henrico, Virginia, 7/03 at 102 AAA 1,263,625
Nursing Facility Insured-Mortgage Refunding Revenue Bonds (Cambridge
Manor Nursing Home), Series 1993, 5.875%, 7/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 6.7%
1,000,000 Town of Abingdon, Virginia, General Obligation Capital Improvement 8/02 at 102 A 1,078,460
Bonds, Series 1992, 6.250%, 8/01/12
730,000 City of Danville, Virginia, General Improvement Bonds of Fiscal Year 5/02 at 102 A3 804,883
1991-1992, 6.500%, 5/01/12
1,500,000 City of Portsmouth, Virginia, General Obligation Bonds, Public 8/03 at 102 AA- 1,530,135
Utility Refunding Bonds, Series 1993, 5.500%, 8/01/19
500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1996 7/06 at 101 1/2 A 507,355
(General Obligation Bonds), 5.400%, 7/01/25
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/General (continued)
$ 1,500,000 Commonwealth of Puerto Rico, Public Improvement 7/07 at 101 1/2 A $ 1,517,670
7/01/25 Bonds of 1997, 5.375%,
Commonwealth of Puerto Rico, Public Improvement
Bonds of 1994 (General Obligation Bonds):
2,575,000 6.450%, 7/01/17 7/04 at 102 AAA 2,921,492
2,500,000 6.500%, 7/01/23 7/04 at 101 1/2 AAA 2,843,050
3,005,000 City of Richmond, Virginia, General Obligation Public 7/03 at 102 AA 3,061,494
Improvement Bonds, Series 1993B, 5.500%, 7/15/23
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 14.4%
2,300,000 Big Stone Gap, Virginia, Redevelopment and Housing Authority, 9/05 at 102 AA 2,373,853
Commonwealth of Virginia Correctional Facility Lease Revenue Bonds
(Wallens Ridge Development Project), Series 1995, 5.500%, 9/01/15
3,000,000 Industrial Development Authority of Brunswick County, Virginia, 7/06 at 102 AAA 3,115,170
Correctional Facility Lease Revenue Bonds, Series 1996, 5.500%, 7/01/17
1,385,000 Fairfax County Redevelopment and Housing Authority (Virginia), Revenue 6/02 at 102 N/R 1,473,294
Bonds, 1992 Issue A (FCRHA Office Building), 7.500%, 6/15/18
5,000,000 Hampton Roads (Virginia), Regional Jail Authority, Regional Jail 7/06 at 102 AAA 5,163,950
Facility Revenue Bonds, Series 1996A, 5.500%, 7/01/24
2,000,000 Industrial Development Authority of the County of Henrico, Virginia, 8/05 at 102 AA 2,328,480
Public Facility Lease Revenue Bonds (Henrico County Regional Jail
Project), Series 1994, 7.000%, 8/01/13
750,000 Loudoun County, Virginia, Certificates of Participation, Series E, No Opt. Call AAA 936,420
7.200%, 10/01/10
1,500,000 Peninsula Airport Commission, Virginia, Airport Improvement Revenue, 7/01 at 102 Aa2 1,649,115
7.300%, 7/15/21 (Alternative Minimum Tax)
Prince William County, Virginia, Industrial Development Authority,
Lease Revenue:
2,000,000 6.000%, 2/01/14 2/06 at 102 A2 2,131,980
1,000,000 6.000%, 2/01/18 2/06 at 102 A2 1,076,110
2,500,000 Prince William County Park Authority (Virginia), Revenue Bonds, Series 10/04 at 102 A- 2,818,875
1994, 6.875%, 10/15/16
2,250,000 Puerto Rico Highway and Transportation Authority, Highway Revenue 7/16 at 100 A 2,358,113
Bonds, Series Y of 1996, 5.500%, 7/01/36
1,500,000 Richmond (Virginia), Redevelopment and Housing Authority, Project 3/05 at 102 AAA 1,619,700
Revenue Bonds (1994 Old Manchester Project), Series 1994, 6.800%,
3/01/15
1,000,000 Virginia Public School Authority, School Financing Bonds, Series 8/04 at 102 AA 1,108,710
1994 A, 6.200%, 8/01/13
Virginia State Public School Authority, Series B:
1,000,000 5.750%, 8/01/15 8/05 at 102 AA 1,067,450
1,210,000 5.625%, 8/01/16 8/05 at 102 AA 1,271,359
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 7.2%
2,250,000 Capital Region Airport Commission, Richmond (Virginia), International 7/05 at 102 AAA 2,343,263
Airport Projects, Airport Revenue Bonds, Series 1995A, 5.625%,
7/01/25
750,000 Charlottesville-Albemarle Airport Authority (Virginia), Airport Revenue 12/05 at 102 BBB 784,568
Refunding Bonds, Series 1995, 6.125%, 12/01/13 (Alternative Minimum Tax)
Loudoun County, Virginia, Industrial Development Authority, Air
Cargo Facility Revenue, Washington Dulles Air Cargo:
210,000 6.625%, 1/01/00 (Alternative Minimum Tax) No Opt. Call N/R 215,019
3,000,000 7.000%, 1/01/09 (Alternative Minimum Tax) 1/01 at 102 N/R 3,144,150
600,000 6.500%, 1/01/09 (Alternative Minimum Tax) 1/06 at 102 N/R 634,500
Metropolitan Washington Airports Authority, Airport System Revenue Bonds,
Series 1992A:
1,500,000 6.625%, 10/01/19 (Alternative Minimum Tax) 10/02 at 102 AAA 1,640,265
1,500,000 6.250%, 10/01/21 (Alternative Minimum Tax) 10/02 at 102 AAA 1,620,240
1,000,000 Metropolitan Washington Airports Authority, Airport System Revenue Bonds, 10/04 at 102 AAA 1,041,560
Series 1994A, 5.750%, 10/01/20 (Alternative Minimum Tax)
770,000 Metropolitan Washington D C. Apartments Authority, Virginia General 10/07 at 101 AA- 790,205
Airport Revenue, Series B, 5.500%, 10/01/23 (Alternative Minimum Tax)
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen Flagship Virginia Municipal Bond Fund
(continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Transportation (continued)
$ 1,900,000 Puerto Rico Ports Authority, Special Facilities, American Airlines, 6/06 at 102 BBB- $ 2,057,738
Series A, 6.250%, 6/01/26 (Alternative Minimum Tax)
1,000,000 Virginia Port Authority, Port Facilities Revenue Bonds, Series 1997, 7/07 at 101 AAA 1,024,140
5.500%, 7/01/24 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 7.3%
750,000 Chesapeake Bay Bridge and Tunnel District, General Resolution Revenue 7/01 at 102 AAA 814,403
Bonds Refunding, Series 1991, 6.375%, 7/01/22 (Pre-refunded to 7/01/01)
1,000,000 Industrial Development Authority of Covington-Alleghany County, Virginia, 4/02 at 102 A-*** 1,103,070
Hospital Facility Revenue Bonds (Alleghany Regional Hospital), Series
1992, 6.625%, 4/01/12 (Pre-refunded to 4/01/02)
500,000 Fairfax County Redevelopment and Housing Authority (Virginia), Revenue 11/99 at 102 N/R*** 534,005
Bonds (Vinson Pavilion Project), 1989 Series A, 7.500%, 11/01/19
(Pre-refunded to 11/01/99)
150,000 Fairfax County (Virginia), Water Authority, Water Refunding Revenue 4/07 at 102 AAA 170,220
Bonds, Series 1992, 6.000%, 4/01/22 (Pre-refunded to 4/01/07)
250,000 Martinsville, Virginia, Industrial Development Authority, Hospital 1/01 at 100 A2*** 267,655
Facility Revenue, Memorial Hospital Martinsville and Henry, 7.000%,
1/01/11 (Pre-refunded to 1/01/01)
2,000,000 Peninsula Ports Authority, Virginia, Health Care Facilities Revenue 8/06 at 100 BBB+*** 2,332,400
Refunding, Mary Immaculate Project, 7.000%, 8/01/17 (Pre-refunded
to 8/01/06)
5,250,000 Industrial Development Authority of the County of Prince William 10/05 at 102 A2*** 6,131,318
(Virginia), Hospital Facility Revenue Bonds (Potomac Hospital
Corporation of Prince William), Series 1995, 6.850%, 10/01/25
(Pre-refunded to 10/01/05)
1,000,000 Prince William County Service Authority (Virginia), Water and Sewer 7/01 at 100 AAA 1,057,380
System Revenue Bonds, Series 1991, 6.000%, 7/01/29 (Pre-refunded
to 7/01/01)
1,000,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series R, 7/02 at 101 1/2 BBB+*** 1,091,460
6.250%, 7/01/17 (Pre-refunded to 7/01/02)
1,000,000 Virginia College Building Authority, Educational Facilities Revenue 4/99 at 102 N/R*** 1,052,000
Bonds (Hampton University Project), Series of 1989A, 7.750%, 4/01/14
(Pre-refunded to 4/01/99)
580,000 Virginia State Resource Authority, Water and Sewer System Revenue 11/98 at 102 AA*** 604,212
Bonds (Pooled Loan Program), 1986 Series A (Mandatory Redemption
November 1, 2013), 7.600%, 11/01/16 (Pre-refunded to 11/01/98)
410,000 Virginia State Resource Authority, Water and Sewer System Revenue, 11/99 at 102 AA*** 437,376
Pool A, 7.650%, 11/01/16 (Pre-refunded to 11/01/99)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 6.0%
2,110,000 Halifax County Industrial Development Authority (Old Dominion 12/02 at 102 A+ 2,287,683
Electric Cooperative), 6.500%, 12/01/12 (Alternative Minimum Tax)
2,500,000 Mecklenburg County, Virginia, Industrial Development Authority, Exempt 5/01 at 102 A1 2,698,900
Facility, Mecklenburg Cogen, Series A, 7.350%, 5/01/08 (Alternative
Minimum Tax)
2,000,000 City of Richmond, Virginia, Public Utility Revenue and Refunding Bonds, 1/08 at 101 A+ 1,971,380
Series 1998A, 5.125%, 1/15/28
1,000,000 Industrial Development Authority of Russell County, Virginia, Pollution 11/00 at 102 Baa1 1,087,020
Control Revenue Bonds (Appalachian Power Company Project), Series G,
7.700%, 11/01/07
1,500,000 Southeastern Public Service Authority of Virginia, Senior Revenue Bonds, 7/03 at 102 A- 1,561,290
Series 1993 (Regional Solid Waste System), 6.000%, 7/01/13 (Alternative
Minimum Tax)
1,000,000 Virginia State Resource Authority, Solid Waste Disposal System Revenue, 11/02 at 102 AA 1,105,700
Series B, 6.750%, 11/01/12
1,960,000 Virginia Resources Authority, Solid Waste Disposal System Revenue Bonds, 4/05 at 102 AA 2,015,076
(County of Prince William, Virginia, Refunding), 1995 Series A, 5.500%,
4/01/15
</TABLE>
- ----
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Water and Sewer - 13.3%
$ 1,000,000 Blacksburg-Virginia Polytechnic Institute Sanitation Authority 11/02 at 102 A $ 1,067,950
(Virginia), Sewer System Revenue Bonds, Series of 1992,
6.250%, 11/01/12
6,000,000 Fairfax County Water Authority (Virginia), Water Refunding Revenue 4/07 at 102 AA 5,879,400
Bonds, Series 1997, 5.000%, 4/01/29
Fairfax County Water Authority (Virginia), Water Refunding Revenue
Bonds, Series 1992:
850,000 6.000%, 4/01/22 4/07 at 102 AA 931,949
1,625,000 5.750%, 4/01/29 4/02 at 100 AA 1,672,109
1,000,000 Frederick-Winchester Service Authority (Virginia), Regional Sewer 10/03 at 102 AAA 1,054,310
System Refunding Revenue Bonds, Series 1993, 5.750%, 10/01/15
2,500,000 Henrico County, Virginia, Water and Sewer System Refunding Revenue 5/02 at 100 Aa2 2,650,350
Bonds, Series 1992, 6.250%, 5/01/13
2,500,000 Leesburg, Virginia, Utility System Revenue Refunding, 5.125%, 7/01/22 7/07 at 102 AAA 2,477,675
1,000,000 Loudoun County Sanitation Authority (Virginia), Water and Sewer 1/03 at 102 AAA 1,090,270
System Revenue Refunding Bonds, Series 1992, 6.250%, 1/01/16
1,000,000 Loudoun County Sanitation Authority, Series 1996, Refunding, 1/07 at 102 AAA 990,470
5.125%, 1/01/26
4,000,000 Upper Occoquan Sewage Authority (Virginia), Regional Sewerage System 1/04 at 102 AAA 3,908,760
Revenue Refunding Bonds, Series of 1993, 5.000%, 7/01/21
2,215,000 Upper Occoquan Sewage Authority (Virginia), Regional Sewerage System 7/16 at 100 AAA 2,268,005
Revenue Bonds, Series of 1995A, 5.150%, 7/01/20
1,000,000 Virginia Resources Authority, Sewer System Revenue Bonds, 1995 10/05 at 102 AA 1,064,599
Series A (Hopewell Regional Wastewater Treatment Facility Project),
6.000%, 10/01/25 (Alternative Minimum Tax)
1,000,000 Virginia Resources Authority, Water and Sewer System Revenue Bonds, 10/05 at 102 AA 1,031,459
1995 Series A (Sussex County Project), 5.600%, 10/01/25
500,000 Virginia State Resource Authority, Water and Sewer System Revenue, 10/98 at 103 AA 520,564
Lot 7, Rapidan Service Authority, 7.125%, 10/01/16
1,500,000 Virginia Resources Authority, Water System Refunding Revenue Bonds, 4/02 at 100 AA 1,583,114
1992 Series A, 6.125%, 4/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
$195,675,000 Total Investments - (cost $191,320,993) - 97.8% 207,572,313
=============----------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities - 0.5%
$ 1,000,000 Roanoke Industrial Development Authority (Carilion), Variable Rate A-1+ 1,000,000
============= Demand Bonds, 4.000%, 7/01/27+
-------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.7% 3,681,273
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 212,253,586
===================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent
public accountants): Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at
varying prices at later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the
timely payment of principal and interest. Securities are normally
considered to be equivalent to AAA rated securities.
N/R Investment is not rated.
+ 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.
23
<PAGE>
Statement of Net Assets
May 31, 1998
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $ 65,382,530 $137,281,787 $207,572,313
Temporary investments in short-term municipal securities, at
amortized cost, which approximates market value (note 1) -- 1,000,000 1,000,000
Cash 285,953 367,969 1,079,235
Receivables:
Interest 1,368,966 2,236,414 3,615,367
Shares sold 65,263 276,398 207,666
Other assets 65,712 114,855 124,388
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 67,168,424 141,277,423 213,598,969
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased -- 2,000,000 --
Shares redeemed -- 39,546 298,011
Accrued expenses:
Management fees (note 6) 26,897 10,577 80,244
12b-1 distribution and service fees (notes 1 and 6) 5,803 18,504 35,182
Other 9,067 44,453 48,853
Dividends payable 163,505 605,922 883,093
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 205,272 2,719,002 1,345,383
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $ 66,963,152 $138,558,421 $212,253,586
=================================================================================================================================
Class A Shares (note 1)
Net assets $ 17,426,678 $ 65,826,333 $133,965,543
Shares outstanding 1,650,115 6,160,765 12,109,723
Net asset value and redemption price per share $ 10.56 $ 10.68 $ 11.06
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 11.02 $ 11.15 $ 11.54
=================================================================================================================================
Class B Shares (note 1)
Net assets $ 2,332,092 $ 2,639,660 $ 3,894,469
Shares outstanding 220,882 246,587 352,195
Net asset value, offering and redemption price per share $ 10.56 $ 10.70 $ 11.06
=================================================================================================================================
Class C Shares (note 1)
Net assets $ 2,605,799 $ 8,912,066 $ 15,659,587
Shares outstanding 246,839 834,762 1,416,364
Net asset value, offering and redemption price per share $ 10.56 $ 10.68 $ 11.06
=================================================================================================================================
Class R Shares (note 1)
Net assets $ 44,598,583 $ 61,180,362 $ 58,733,987
Shares outstanding 4,216,426 5,727,633 5,310,426
Net asset value, offering and redemption price per share $ 10.58 $ 10.68 $ 11.06
=================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
Statement of Operations
Year Ended May 31, 1998
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $ 3,547,176 $ 7,603,763 $ 11,915,238
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 350,579 708,933 1,103,025
12b-1 service fees - Class A (notes 1 and 6) 31,906 121,297 256,577
12b-1 distribution and service fees - Class B (notes 1 and 6) 11,344 10,643 16,407
12b-1 distribution and service fees - Class C (notes 1 and 6) 16,799 54,660 104,827
Shareholders' servicing agent fees and expenses 51,670 131,948 157,156
Custodian's fees and expenses 45,445 53,772 59,940
Trustees' fees and expenses (note 6) 1,204 2,452 4,009
Professional fees 14,215 14,687 14,895
Shareholders' reports - printing and mailing expenses 37,640 53,417 59,378
Federal and state registration fees 5,785 4,815 3,988
Other expenses 2,612 3,610 4,412
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 569,199 1,160,234 1,784,614
Expense reimbursement (note 6) (36,658) (440,918) (316,199)
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses 532,541 719,316 1,468,415
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 3,014,635 6,884,447 10,446,823
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 38,164 1,203,144 382,323
Net change in unrealized appreciation or depreciation of investments 1,872,963 4,263,803 7,151,615
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 1,911,127 5,466,947 7,533,938
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 4,925,762 $ 12,351,394 $ 17,980,761
===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Maryland
------------------------------------------------
Year Ended 4 Months Ended Year Ended
5/31/98 5/31/97 1/31/97
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income $ 3,014,635 $ 961,469 $ 2,797,118
Net realized gain (loss) from investment transactions
(notes 1 and 4) 38,164 (122,456) 68,885
Net change in unrealized appreciation or depreciation
of investments 1,872,963 116,827 (1,067,755)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 4,925,762 955,840 1,798,248
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (744,781) (202,348) (444,620)
Class B (45,159) (690) N/A
Class C (91,846) (28,646) (71,252)
Class R (2,152,261) (726,336) (2,248,162)
From accumulated net realized gains from investment
transactions:
Class A -- -- --
Class B -- -- N/A
Class C -- -- --
Class R -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (3,034,047) (958,020) (2,764,034)
- ---------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the reorganization of
Nuveen Pennsylvania/Virginia (note 1) -- -- --
Net proceeds from shares issued as a capital contribution -- --
Net proceeds from sale of shares 9,987,470 3,009,545 9,011,948
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 2,015,880 626,481 1,781,550
- ---------------------------------------------------------------------------------------------------------------------------------
12,003,350 3,636,026 10,793,498
- ---------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (5,468,111) (2,607,528) (8,005,106)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 6,535,239 1,028,498 2,788,392
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 8,426,954 1,026,318 1,822,606
Net assets at the beginning of year 58,536,198 57,509,880 55,687,274
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 66,963,152 $ 58,536,198 $ 57,509,880
=================================================================================================================================
Balance of undistributed net investment income at end of year $ 18,057 $ 37,469 $ 34,020
=================================================================================================================================
</TABLE>
N/A - The Fund was not authorized to issue Class B Shares prior to February 1,
1997.
See accompanying notes to financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania Virginia
---------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended
5/31/98 5/31/97* 5/31/98 5/31/97**
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 6,884,447 $ 4,041,330 $ 10,446,823 $ 8,156,974
Net realized gain (loss) from investment transactions
(notes 1 and 4) 1,203,144 46,769 382,323 772,114
Net change in unrealized appreciation or depreciation
of investments 4,263,803 1,490,845 7,151,615 2,690,836
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 12,351,394 5,578,944 17,980,761 11,619,924
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) From undistributed net
investment income:
Class A (3,203,991) (2,665,076) (6,589,893) (6,499,935)
Class B (49,039) (1,816) (72,610) (2,778)
Class C (346,415) (264,780) (637,996) (588,320)
Class R (3,306,035) (1,082,438) (3,128,186) (1,059,930)
From accumulated net realized gains from investment transactions:
Class A (123,729) -- (116,144) --
Class B (1,903) -- (1,295) --
Class C (14,187) -- (12,972) --
Class R (122,743) -- (53,068) --
- ---------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (7,168,042) (4,014,110) (10,612,164) (8,150,963)
- ---------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the reorganization of
Nuveen Pennsylvania/Virginia (note 1) -- 68,634,295 -- 67,765,255
Net proceeds from shares issued as a capital contribution -- 33,360 -- 33,360
Net proceeds from sale of shares 20,611,181 7,311,629 26,410,433 14,267,420
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 4,302,789 1,622,041 6,677,292 3,941,869
- ---------------------------------------------------------------------------------------------------------------------------------
24,913,970 77,601,325 33,087,725 86,007,904
- ---------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (11,137,451) (8,401,239) (19,538,617) (26,796,317)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 13,776,519 69,200,086 13,549,108 59,211,587
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 18,959,871 70,764,920 20,917,705 62,680,548
Net assets at the beginning of year 119,598,550 48,833,630 191,335,881 128,655,333
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 138,558,421 $ 119,598,550 $ 212,253,586 $ 191,335,881
=================================================================================================================================
Balance of undistributed net investment income at end of year $ 6,187 $ 27,220 $ 24,149 $ 6,011
=================================================================================================================================
</TABLE>
* Information represents eight months of Flagship Pennsylvania and four
months of Pennsylvania (note 1).
** Information represents eight months of Flagship Virginia and four months
of Virginia (note 1).
See accompanying notes to financial statements.
27
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Maryland Municipal Bond Fund, the Nuveen Flagship
Pennsylvania Municipal Bond Fund and the Nuveen Flagship Virginia Municipal Bond
Fund (the "Funds"), among others. The Trust was organized as a Massachusetts
business trust on July 1, 1996.
The John Nuveen Company ("Nuveen"), parent of John Nuveen & Co. Incorporated and
Nuveen Advisory Corp., respectively, the distributor ("Distributor") and
investment advisor ("Adviser") of the Funds, entered into an agreement under
which Nuveen acquired Flagship Resources Inc. and after the close of business on
January 31, 1997, consolidated their respective mutual fund businesses. This
agreement was approved at a meeting by the shareholders of the Flagship Funds in
December 1996.
After the close of business on January 31, 1997, Nuveen Maryland Tax-Free Value
Fund ("Nuveen Maryland") was reorganized into the Trust and renamed Nuveen
Maryland Municipal Bond Fund ("Maryland"). Nuveen Maryland Tax-Free Value Fund
had a January 31 fiscal year end prior to being reorganized into the Trust and
now has a May 31 fiscal year end. Flagship Pennsylvania Triple Tax Exempt Fund
("Flagship Pennsylvania") and Nuveen Pennsylvania Tax-Free Value Fund ("Nuveen
Pennsylvania") reorganized into Nuveen Flagship Pennsylvania Municipal Bond Fund
("Pennsylvania"). Flagship Virginia Double Tax Exempt Fund ("Flagship Virginia")
and Nuveen Virginia Tax-Free Value Fund ("Nuveen Virginia") reorganized into
Nuveen Flagship Virginia Municipal Bond Fund ("Virginia"). Prior to these
reorganizations, Flagship Pennsylvania and Flagship Virginia were each a
sub-trust of the Flagship Tax Exempt Funds Trust, while Nuveen Pennsylvania and
Nuveen Virginia were each a series of the Nuveen Multistate Tax-Free Trust.
Nuveen Pennsylvania and Nuveen Virginia each had a fiscal year end of January 31
prior to being reorganized into Pennsylvania and Virginia, respectively, which
have retained the fiscal year end of Flagship Pennsylvania and Flagship
Virginia.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1998, Pennsylvania had an outstanding when-issued purchase commitment of
$2,000,000. There were no such outstanding purchase commitments in Maryland or
Virginia.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
28
<PAGE>
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, the Funds intend to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Funds. All
monthly tax-exempt income dividends paid during the fiscal year ended May 31,
1998, have been designated Exempt Interest Dividends. Net realized capital gain
and market discount distributions are subject to federal taxation.
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Funds are authorized to invest in such
financial instruments, and may do so in the future, they did not make any such
investments during the fiscal year ended May 31, 1998.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
29
<PAGE>
Notes to Financial Statements (continued)
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Maryland
-----------------------------------------------------------------------------------
Year Ended 4 Months Ended Year Ended
5/31/98 5/31/97 1/31
-----------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 464,364 $ 4,845,395 173,922 $ 1,782,262 599,512 $ 6,107,242
Class B 213,521 2,237,985 14,619 149,109 N/A N/A
Class C 68,184 714,237 19,110 194,556 82,446 841,446
Class R 209,535 2,189,853 86,096 883,618 201,418 2,063,260
Shares issued to shareholders due
to reinvestment of distributions:
Class A 53,642 561,120 14,385 146,945 30,226 308,915
Class B 1,687 17,707 14 147 N/A N/A
Class C 6,886 71,952 2,157 22,020 5,415 55,286
Class R 130,430 1,365,101 44,709 457,369 138,494 1,417,349
- ---------------------------------------------------------------------------------------------------------------------------
1,148,249 12,003,350 355,012 3,636,026 1,057,511 10,793,498
- ---------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (134,447) (1,409,630) (72,253) (733,516) (137,185) (1,394,119)
Class B (8,959) (93,717) -- -- N/A N/A
Class C (33,614) (349,287) (9,738) (99,104) (32,039) (327,651)
Class R (345,224) (3,615,477) (173,454) (1,774,908) (615,881) (6,283,336)
- ---------------------------------------------------------------------------------------------------------------------------
(522,244) (5,468,111) (255,445) (2,607,528) (785,105) (8,005,106)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase 626,005 $ 6,535,239 99,567 $ 1,028,498 272,406 $ 2,788,392
===========================================================================================================================
</TABLE>
N/A - The Fund was not authorized to issue Class B Shares prior to February 1,
1997.
30
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania
-----------------------------------------------------------------------
Year Ended Year Ended
5/31/98 5/31/97*
-----------------------------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization of
Nuveen Pennsylvania:
Class A -- $ -- 1,011,604 $ 10,326,580
Class B -- -- -- --
Class C -- -- 101,246 1,033,183
Class R -- -- 5,610,682 57,274,532
Shares issued as a capital contribution:
Class A -- -- 817 8,340
Class B -- -- 817 8,340
Class C -- -- 817 8,340
Class R -- -- 817 8,340
Shares sold:
Class A 1,036,447 10,930,439 390,922 3,976,377
Class B 223,667 2,375,027 21,356 217,925
Class C 290,257 3,081,110 168,084 1,709,951
Class R 401,273 4,224,605 137,689 1,407,376
Shares issued to shareholders due to
reinvestment of distributions:
Class A 172,750 1,815,747 96,590 980,201
Class B 2,572 27,340 73 740
Class C 25,872 271,646 13,846 140,564
Class R 207,616 2,188,056 49,269 500,536
- ---------------------------------------------------------------------------------------------------------------------------
2,360,454 24,913,970 7,604,629 77,601,325
- ---------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (477,420) (5,039,815) (512,221) (5,199,195)
Class B (1,898) (20,305) -- --
Class C (98,010) (1,035,568) (111,867) (1,144,394)
Class R (477,624) (5,041,763) (202,089) (2,057,650)
- ---------------------------------------------------------------------------------------------------------------------------
(1,054,952) (11,137,451) (826,177) (8,401,239)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase 1,305,502 $ 13,776,519 6,778,452 $ 69,200,086
===========================================================================================================================
</TABLE>
* Information represents eight months of Flagship Pennsylvania and four months
of Pennsylvania (note 1).
31
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
Virginia
-------------------------------------------------------------------------
Year Ended Year Ended
5/31/98 5/31/97*
-------------------------------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization of
Nuveen Virginia:
Class A -- $ -- 873,399 $ 9,273,783
Class B -- -- -- --
Class C -- -- 109,201 1,158,978
Class R -- -- 5,399,536 57,332,494
Shares issued as a capital contribution:
Class A -- -- 785 8,340
Class B -- -- 785 8,340
Class C -- -- 786 8,340
Class R -- -- 785 8,340
Shares sold:
Class A 1,437,801 15,756,900 938,620 9,896,915
Class B 326,829 3,585,765 36,862 391,987
Class C 363,753 3,972,294 307,161 3,231,156
Class R 282,345 3,095,474 70,304 747,362
Shares issued to shareholders due to
reinvestment of distributions:
Class A 370,069 4,035,466 304,589 3,213,145
Class B 3,820 41,944 9 98
Class C 59,523 649,924 23,878 251,837
Class R 178,519 1,949,958 45,124 476,789
- ---------------------------------------------------------------------------------------------------------------------------
3,022,659 33,087,725 8,111,824 86,007,904
- ---------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,169,518) (12,775,202) (1,966,406) (20,767,054)
Class B (14,233) (156,135) (1,877) (19,915)
Class C (105,398) (1,154,489) (399,175) (4,241,028)
Class R (499,196) (5,452,791) (166,991) (1,768,320)
- ---------------------------------------------------------------------------------------------------------------------------
(1,788,345) (19,538,617) (2,534,449) (26,796,317)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase 1,234,314 $ 13,549,108 5,577,375 $ 59,211,587
===========================================================================================================================
</TABLE>
* Information represents eight months of Flagship Virginia and four months of
Virginia (note 1).
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on July 1, 1998, to shareholders of record on June 9,
1998, as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $ .0400 $ .0465 $ .0460
Class B .0335 .0400 .0395
Class C .0350 .0420 .0410
Class R .0415 .0485 .0480
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended May 31,
1998, were as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Investments in municipal securities $11,639,224 $39,490,527 $17,222,293
Temporary municipal investments 6,300,000 13,950,000 11,300,000
Sales:
Investments in municipal securities 4,605,736 25,937,929 6,320,490
Temporary municipal investments 7,000,000 12,950,000 10,300,000
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
At May 31, 1998, the identified cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes for each
Fund.
32
<PAGE>
At May 31, 1998, 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 carryforwards will expire as follows:
<TABLE>
<CAPTION>
Maryland Virginia
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Expiration Year:
2002 $ 96,343 $ 70,165
2003 377,963 --
2004 -- 152,699
2005 121,857 --
- --------------------------------------------------------------------------------------------------------------------------------
Total $ 596,163 $ 222,864
================================================================================================================================
</TABLE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 1998, were as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $ 4,058,685 $ 9,558,738 $ 16,288,087
depreciation (10,455) -- (36,767)
- --------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation $ 4,048,230 $ 9,558,738 $ 16,251,320
================================================================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the first $125 million .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 net assets over $2 billion .4750 of 1
================================================================================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 1998, the Distributor collected sales
charges on purchases of Class A Shares, the majority of which were paid out as
concessions to authorized dealers as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales charges collected $ 157,160 $ 241,907 $ 473,783
Paid to authorized dealers 132,479 208,021 406,908
================================================================================================================================
</TABLE>
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the fiscal year ended May 31, 1998, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commission advances $ 95,507 $ 144,528 $ 172,673
================================================================================================================================
</TABLE>
33
<PAGE>
Notes to Financial Statements (continued)
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees on Class B Shares, and all 12b-1 service and
distribution fees on Class C Shares during the first year following a purchase
are retained by the Distributor. During the fiscal year ended May 31, 1998, the
Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 fees retained $ 16,043 $ 28,993 $ 45,284
================================================================================================================================
</TABLE>
The remaining 12b-1 fees charged to the Funds were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
fiscal year ended May 31, 1998, as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CDSC retained $ 5,743 $ 3,584 $ 10,169
================================================================================================================================
</TABLE>
7. Composition of Net Assets
At May 31, 1998, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $ 63,493,028 $ 128,201,634 $ 196,211,498
Balance of undistributed net investment income 18,057 6,187 24,149
Accumulated net realized gain (loss) from investment transactions (596,163) 791,862 (233,381)
Net unrealized appreciation of investments 4,048,230 9,558,738 16,251,320
- --------------------------------------------------------------------------------------------------------------------------------
Net assets $ 66,963,152 $ 138,558,421 $ 212,253,586
================================================================================================================================
</TABLE>
34
<PAGE>
Financial Highlights
35
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout
each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
--------------------------------- ---------------------------------
Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
May 31, Value Income (a) Gain (Loss) Total Income Gain Total Value Return (b)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MARYLAND
Class A (9/94)
1998 $ 10.25 $ .48 $ .32 $ .80 $ (.49) $ -- $ (.49) $ 10.56 7.95%
1997(c) 10.25 .16 .01 .17 (.17) -- (.17) 10.25 1.63
1997(d) 10.43 .46 (.15) .31 (.49) -- (.49) 10.25 3.06
1996(d) 9.60 .48 .85 1.33 (.50) -- (.50) 10.43 14.07
1995(e) 9.84 .20 (.23) (.03) (.21) -- (.21) 9.60 (.26)
Class B (3/97)
1998 10.25 .41 .31 .72 (.41) -- (.41) 10.56 7.16
1997(f) 10.29 .10 (.04) .06 (.10) -- (.10) 10.25 .83
Class C (9/94)
1998 10.24 .43 .32 .75 (.43) -- (.43) 10.56 7.44
1997(c) 10.24 .15 -- .15 (.15) -- (.15) 10.24 1.43
1997(d) 10.42 .39 (.16) .23 (.41) -- (.41) 10.24 2.28
1996(d) 9.59 .41 .84 1.25 (.42) -- (.42) 10.42 13.24
1995(e) 9.75 .16 (.15) .01 (.17) -- (.17) 9.59 .12
Class R (12/91)
1998 10.26 .51 .32 .83 (.51) -- (.51) 10.58 8.23
1997(c) 10.26 .17 -- .17 (.17) -- (.17) 10.26 1.68
1997(d) 10.44 .47 (.14) .33 (.51) -- (.51) 10.26 3.29
1996(d) 9.61 .51 .84 1.35 (.52) -- (.52) 10.44 14.33
1995(d) 10.62 .51 (1.01) (.50) (.51) -- (.51) 9.61 (4.58)
1994(d) 9.91 .51 .72 1.23 (.50) (.02) (.52) 10.62 12.71
PENNSYLVANIA**
Class A (10/86)
1998 $ 10.25 $ .56 $ .45 $ 1.01 $ (.56) $ (.02) $ (.58) $ 10.68 10.05%
1997 10.00 .57 .25 .82 (.57) -- (.57) 10.25 8.37
1996 10.21 .59 (.20) .39 (.60) -- (.60) 10.00 3.83
1995 10.06 .60 .16 .76 (.61) -- (.61) 10.21 7.90
1994 10.38 .61 (.32) .29 (.61) -- (.61) 10.06 2.70
Class B (2/97)
1998 10.27 .48 .45 .93 (.48) (.02) (.50) 10.70 9.23
1997(f) 10.21 .16 .06 .22 (.16) -- (.16) 10.27 2.18
Class C (2/94)
1998 10.25 .50 .45 .95 (.50) (.02) (.52) 10.68 9.50
1997 9.99 .51 .26 .77 (.51) -- (.51) 10.25 7.88
1996 10.21 .53 (.21) .32 (.54) -- (.54) 9.99 3.16
1995 10.06 .54 .16 .70 (.55) -- (.55) 10.21 7.31
1994(f) 10.71 .16 (.64) (.48) (.17) -- (.17) 10.06 (13.46)/*/
Class R (2/97)
1998 10.25 .58 .45 1.03 (.58) (.02) (.60) 10.68 10.30
1997(f) 10.21 .20 .03 .23 (.19) -- (.19) 10.25 2.31
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Year Ended Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
May 31, Assets (000) ment ment ment (a) ment (a) Rate
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MARYLAND
Class A (9/94)
1998 $ 17,427 1.00% 4.56% .94% 4.62% 7%
1997(c) 12,977 1.02* 4.83* .95* 4.90* 3
1997(d) 11,788 1.12 4.67 1.00 4.79 4
1996(d) 6,860 1.33 4.41 1.00 4.74 17
1995(e) 1,605 1.59* 4.67* 1.00* 5.26* 35
Class B (3/97)
1998 2,332 1.75 3.79 1.69 3.85 7
1997(f) 150 1.76* 3.94* 1.70* 4.00* 3
Class C (9/94)
1998 2,606 1.55 4.01 1.49 4.07 7
1997(c) 2,103 1.57* 4.28* 1.50* 4.35* 3
1997(d) 1,985 1.87 3.93 1.75 4.05 4
1996(d) 1,438 2.06 3.73 1.75 4.04 17
1995(e) 860 1.86* 4.44* 1.75* 4.55* 35
Class R (12/91)
1998 44,599 .80 4.76 .74 4.82 7
1997(c) 43,306 .82* 5.03* .75* 5.10* 3
1997(d) 43,738 .87 4.94 .75 5.06 4
1996(d) 47,389 1.04 4.78 .75 5.07 17
1995(d) 42,741 .89 5.14 .75 5.28 35
1994(d) 47,822 .86 4.74 .75 4.85 4
- -----------------------------------------------------------------------------------------------------------
PENNSYLVANIA**
Class A (10/86)
1998 $ 65,826 .95% 4.94% .61% 5.28% 20%
1997 55,667 1.09 5.22 .70 5.61 46
1996 44,392 1.13 5.42 .79 5.76 65
1995 42,600 1.29 5.68 .89 6.08 50
1994 42,226 1.17 5.55 .91 5.80 21
Class B (2/97)
1998 2,640 1.70 4.14 1.34 4.50 20
1997(f) 229 1.72* 4.47* 1.35* 4.84* 46
Class C (2/94)
1998 8,912 1.50 4.39 1.16 4.73 20
1997 6,320 1.63 4.68 1.25 5.06 46
1996 4,442 1.34 5.19 1.68 4.85 65
1995 3,118 1.39 5.50 1.84 5.05 50
1994(f) 1,697 1.41* 4.91* 1.68* 4.64* 21
Class R (2/97)
1998 61,180 .75 5.14 .41 5.48 20
1997(f) 57,383 .77* 5.45* .39* 5.83* 46
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Pennsylvania.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized except where noted.
(c) For the four months ended May 31.
(d) For year ended January 31.
(e) From commencement of class operations as noted through January 31.
(f) From commencement of class operations as noted.
37
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period is as follows:
----------------------
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
-------------------------------- --------------------------------
Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
May 31, Value Income (a) Gain (Loss) Total Income Gain Total Value Return (b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VIRGINIA**
Class A (3/86)
1998 $ 10.66 $ .56 $ .41 $ .97 $ (.56) $ (.01) $ (.57) $ 11.06 9.30%
1997 10.40 .58 .25 .83 (.57) -- (.57) 10.66 8.20
1996 10.56 .57 (.15) .42 (.58) -- (.58) 10.40 4.03
1995 10.36 .59 .20 .79 (.59) -- (.59) 10.56 7.99
1994 10.82 .60 (.31) .29 (.60) (.15) (.75) 10.36 2.62
Class B (2/97)
1998 10.66 .48 .41 .89 (.48) (.01) (.49) 11.06 8.53
1997(c) 10.62 .16 .04 .20 (.16) -- (.16) 10.66 1.94
Class C (10/93)
1998 10.65 .50 .42 .92 (.50) (.01) (.51) 11.06 8.81
1997 10.39 .52 .26 .78 (.52) -- (.52) 10.65 7.61
1996 10.56 .51 (.16) .35 (.52) -- (.52) 10.39 3.37
1995 10.36 .53 .20 .73 (.53) -- (.53) 10.56 7.40
1994(c) 11.24 .34 (.78) (.44) (.34) (.10) (.44) 10.36 (7.13)*
Class R (2/97)
1998 10.66 .59 .41 1.00 (.59) (.01) (.60) 11.06 9.54
1997(c) 10.62 .20 .04 .24 (.20) -- (.20) 10.66 2.26
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Year Ended Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
May 31, Assets (000) ment ment ment (a) ment (a) Rate
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
VIRGINIA**
Class A (3/86)
1998 $ 133,966 .90% 4.99% .74% 5.15% 3%
1997 122,252 1.00 5.19 .74 5.45 23
1996 117,677 1.06 5.18 .83 5.41 17
1995 112,643 1.10 5.50 .79 5.81 50
1994 107,502 1.06 5.11 .64 5.53 17
Class B (2/97)
1998 3,894 1.64 4.20 1.51 4.33 3
1997(c) 381 1.66* 4.49* 1.47* 4.68* 23
Class C (10/93)
1998 15,660 1.44 4.44 1.29 4.59 3
1997 11,700 1.55 4.63 1.29 4.89 23
1996 10,978 1.60 4.62 1.38 4.84 17
1995 6,537 1.65 4.93 1.34 5.24 50
1994(c) 4,759 1.79* 4.20* 1.14* 4.85* 17
Class R (2/97)
1998 58,734 .70 5.19 .54 5.35 3
1997(c) 57,002 .71* 5.50* .52* 5.69* 23
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Virginia.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized except where noted.
(c) From commencement of class operations as noted.
- ----
39
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers(SM) including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, experienced, professional
security selection and surveillance and daily liquidity at that day's net asset
value for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
40
<PAGE>
Fund Information
Board of Trustees Transfer Agent and
Shareholder Services
Robert P. Bremner
Lawrence H. Brown As of August 8, 1998
Anthony T. Dean The Chase Manhattan Bank
Anne E. Impellizzeri 4 New York Plaza
Peter R. Sawers New York, NY 10004-2413
William J. Schneider (800) 257-8787
Timothy R. Schwertfeger
Judith M. Stockdale Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Fund Manager
Independent Public
Nuveen Advisory Corp. Accountants
333 West Wacker Drive
Chicago, IL 60606 Arthur Andersen LLP
Chicago, IL
41
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time -- with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
1898
Nuveen 1998
Our Second Century
Helping investors sustain wealth of a lifetime.(TM)
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
