<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1998.
1933 ACT REGISTRATION NO. 333-16617
1940 ACT REGISTRATION NO. 811-07747
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM N-1A
<TABLE>
<CAPTION>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [_]
<S> <C>
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 3 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 3 [X]
</TABLE>
(Check appropriate box or boxes)
--------------
NUVEEN FLAGSHIP MULTISTATE TRUST I
(Exact name of Registrant as Specified in Charter)
333 West Wacker Drive, Chicago, 60606
Illinois (Zip Code)
(Address of Principal Executive
Office)
Registrant's Telephone Number, including Area Code: (312) 917-7700
With a copy to:
Gifford R. Zimmerman, Esq.--Vice Thomas S. Harman
President and Secretary
333 West Wacker Drive Morgan Lewis & Bockius LLP
Chicago, Illinois 60606 1800 M Street, N.W.
(Name and Address of Agent for Washington, D.C. 20036
Service)
It is proposed that this filing will become effective (check appropriate box):
[X]
Immediately upon filing pursu-
ant to paragraph (b) [_]on (date) pursuant to paragraph
[_](a)(1)
75 days after filing pursuant to
paragraph (a)(2)
[_]
[_]
on September 30, 1998 pursuant on (date) pursuant to paragraph
to paragraph (b) (a)(2) of Rule 485.
If appropriate, check the following box:
[_]
60 days after filing pursuant
to paragraph (a)(1)
[_]
This post-effective amendment designates a new effective date for a previ-
ously filed post-effective amendment.
<PAGE>
PART A--PROSPECTUS
NUVEEN FLAGSHIP MULTISTATE TRUST I
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE>
NUVEEN
Municipal
Bond Funds
September 30, 1998
Prospectus
Dependable, tax-free income to help you keep more of what you earn.
[PHOTO APPEARS HERE]
Arizona
Colorado
New Mexico
NOT FDIC- May lose value
INSURED No bank guarantee
Like all mutual fund shares these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
Section 1 The Funds
This section provides you with an overview of the funds including investment
objectives, portfolio holdings and historical performance information.
<TABLE>
<CAPTION>
<S> <C>
Introduction 1
...............................................................................
Nuveen Flagship Arizona Municipal Bond Fund 2
...............................................................................
Nuveen Flagship Colorado Municipal Bond Fund 4
...............................................................................
Nuveen Flagship New Mexico Municipal Bond Fund 6
...............................................................................
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
Who Manages the Funds 8
...............................................................................
Management Fees 8
...............................................................................
What Securities We Invest In 9
...............................................................................
How We Select Investments 10
...............................................................................
What the Risks Are 10
...............................................................................
How We Manage Risk 11
...............................................................................
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into or out of your
account.
How to Choose a Share Class 13
...............................................................................
How to Reduce Your Sales Charge 15
...............................................................................
How to Buy Shares 15
...............................................................................
Systematic Investing 16
...............................................................................
Systematic Withdrawal 17
...............................................................................
Special Services 17
...............................................................................
How to Sell Shares 18
...............................................................................
Section 4 General Information
This section summarizes the fund's distribution policies and other general fund
information .
Distributions and Taxes 20
...............................................................................
Distribution and Service Plans 21
...............................................................................
Net Asset Value 22
...............................................................................
Fund Service Providers 22
...............................................................................
Section 5 Financial Highlights
This section provides the fund's financial performance 23
for the past 5 years.
...............................................................................
Appendix Additional State Information 26
...............................................................................
</TABLE>
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment Strategy
Risks
Fees, Charges
and Expenses
Shareholder
Instructions
Performance and
Current Portfolio
Information
<PAGE>
September 30, 1998
Section 1 The Funds
Nuveen Flagship Arizona Municipal Bond Fun
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
Prospectus
This prospectus is intended to provide important information to help you
evaluate whether one of the Nuveen Mutual Funds listed above may be right for
you. Please read it carefully before investing and keep it for future reference.
To learn more about how Nuveen Mutual Funds can help you achieve your financial
goals, talk with your financial adviser. Or call us at (800) 257-8787 for more
information
A Century of Investment Experience
Since our founding in 1898, John Nuveen & Co. Incorporated has been synonymous
with investments that withstand the test of time. Today we offer a broad range
of quality investments designed for individuals seeking to build and maintain
wealth.
Section 1 The Funds 1
<PAGE>
Nuveen Flagship Arizona Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings agencies.
The fund may buy non-rated municipal bonds if the fund's investment adviser
judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate and credit risk.
Interest rate risk is the risk that interest rates will rise, causing bond
prices to fall. Credit risk is the risk that an issuer of a municipal bond will
be unable to make interest and principal payments. In general, lower rated bonds
carry greater credit risk. The fund may bear additional risk because it invests
primarily in Arizona bonds. As with any mutual fund investment, loss of money is
a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or college
funding.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser/SM/ for municipal bond investing. The chart and table below illustrate
annual fund returns for each of the past ten years as well as annualized fund,
peer group and market benchmark returns for the one-, five- and ten-year periods
ending December 31, 1997. This information is intended to help you assess the
variability of fund returns over the past ten years (and consequently, the
potential rewards and risks of a fund investment).
Total Returns/1/
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Class A Annual Returns
<S> <C>
1988 12.5%
1989 9.9%
1990 5.5%
1991 12.3%
1992 10.2%
1993 13.0%
1994 -5.6%
1995 19.6%
1996 3.3%
1997 9.6%
</TABLE>
During the ten years ending December 31, 1997, the highest and lowest quarterly
returns were 7.58% and -5.84%, respectively for the quarters ending 3/31/95 and
3/31/94. The bar chart and highest/lowest quarterly returns do not reflect sales
charges, which would reduce returns, while the 1-, 5- and 10-year average annual
return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
....................................
Class 1 Year 5 Year 10 Year
- ---------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 5.03% 6.56% 8.28%
Class A (NAV) 9.63% 7.48% 8.75%
Class B 4.74% 6.68% 8.27%
Class C 9.04% 6.89% 8.16%
Class R 9.84% 7.52% 8.77%
- ---------------------------------------------------------------
LB Market Benchmark/2/ 9.19% 7.36% 8.58%
Lipper Peer Group/3/ 8.59% 6.67% 8.22%
</TABLE>
2 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A B C R/5/
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
........................................................................................
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
........................................................................................
Exchange Fees None None None None
........................................................................................
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
........................................................................................
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
- -----------------------------------------------------------------------------------------
Management Fees .55% .55% 55% .55%
........................................................................................
12b-1 Distribution and Service Fees .20% .95% .75% --%
........................................................................................
Other Expenses .18% .18% .18% .18%
- -----------------------------------------------------------------------------------------
Total Annual Fund Operating
Expenses--Gross+ .93% 1.68% 1.48% .73%
+ After Expense Reimbursements
........................................................................................
Reimbursements (.10%) (.17%) (.13%) (.10%)
........................................................................................
Total Annual Fund Operating Expenses--Net .83% 1.51% 1.35% .63%
........................................................................................
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 511 $ 566 $ 151 $ 75 $ 511 $ 171 $ 151 $ 75
...........................................................................
3 Years $ 704 $ 848 $ 468 $233 $ 704 $ 530 $ 468 $233
...........................................................................
5 Years $ 913 $1,027 $ 808 $406 $ 913 $ 913 $ 808 $406
...........................................................................
10 Years $1,515 $1,788 $1,768 $906 $1,515 $1,788 $1,768 $906
...........................................................................
</TABLE>
How the Fund Is Invested (as of 5/31/98)
<TABLE>
<CAPTION>
Portfolio Statistics
<S> <C>
Weighted Average Maturity 14.7 years
.........................................................
Weighted Average Duration 7.7 years
.........................................................
Weighted Average Credit Quality AA+
.........................................................
Number of Issues 129
.........................................................
Credit Quality
.........................................................
AAA 77%
.........................................................
AA 8%
.........................................................
A 7%
.........................................................
BBB/NR 8%
.........................................................
</TABLE>
Industry Diversification (Top 5)
[PIE CHART APEARS HERE]
Tax Obligation General (28%)
U.S. Guaranteed (23%)
Other (17%)
Health Care (13%)
Tax Obligation - Limited (11%)
Water/Sewer (8%)
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was 2.33%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Arizona Municipal Debt Category. Returns assume reinvestment of
dividends and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3% during
the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 3
<PAGE>
Nuveen Flagship Colorado Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings agencies.
The fund may buy non-rated municipal bonds if the fund's investment adviser
judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate and credit risk.
Interest rate risk is the risk that interest rates will rise, causing bond
prices to fall. Credit risk is the risk that an issuer of a municipal bond will
be unable to make interest and principal payments. In general, lower rated bonds
carry greater credit risk. The fund may bear additional risk because it invests
primarily in Colorado bonds. The fund is non-diversified, and may invest more of
its assets in a single issuer than a diversified fund. Greater concentration my
increase risk. As with any mutual fund investment, loss of money is a risk of
investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or
college funding.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser/SM/ for municipal bond investing. The chart and table below illustrate
annual fund returns for each of the past ten years as well as annualized fund,
peer group and market benchmark returns for the one-, five- and ten-year periods
ending December 31, 1997. This information is intended to help you assess the
variability of fund returns over the past ten years (and consequently, the
potential rewards and risks of a fund investment).
Total Returns/1/
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Class A Annual Returns
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12.1% 9.4% 5.3% 11.6% 9.2% 12.9% -5.8% 18.4% 4.3% 11.9%
</TABLE>
During the ten years ending December 31, 1997, the highest and lowest quarterly
returns were 6.45% and -5.94%, respectively for the quarters ending 3/31/95 and
3/31/94. The bar chart and highest/lowest quarterly returns do not reflect sales
charges, which would reduce returns, while the 1-, 5- and 10-year average annual
return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
......................................
Class 1 Year 5 Year 10 Year
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 7.26% 7.08% 8.28%
Class A (NAV) 11.92% 8.01% 8.75%
Class B 7.33% 7.27% 8.27%
Class C 11.25% 7.58% 8.34%
Class R 12.21% 8.06% 8.77%
- --------------------------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 8.58%
Lipper
Peer Group/3/ 9.16% 7.19% 8.12%
</TABLE>
4 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A B C R/5/
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
.......................................................................................
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
.......................................................................................
Exchange Fees None None None None
.......................................................................................
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
.......................................................................................
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
- ---------------------------------------------------------------------------------------
Management Fees .55% .55% .55% .55%
.......................................................................................
12b-1 Distribution and Service Fees .20% .95% .75% --%
.......................................................................................
Other Expenses .26% .26% .26% .26%
- ---------------------------------------------------------------------------------------
Total Annual Fund Operating
Expenses--Gross+ 1.01% 1.76% 1.56% .81%
+After Expense Reimbursements
.......................................................................................
Reimbursements (.01%) (.01%) (.01%) (.01%)
.......................................................................................
Total Annual Fund Operating Expenses--Net 1.00% 1.75% 1.55% .80%
.......................................................................................
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you invest
$10,000 in the fund for the time period indicated and then either redeem or do
not redeem your shares at the end of a period. The example assumes that your
investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 519 $ 574 $ 159 $ 83 $ 519 $ 179 $ 159 $ 83
3 Years $ 728 $ 871 $ 493 $ 259 $ 728 $ 554 $ 493 $ 259
5 Years $ 954 $1,068 $ 850 $ 450 $ 954 $ 954 $ 850 $ 450
10 Years $1,604 $1,875 $1,856 $1,002 $1,604 $1,875 $1,856 $1,002
</TABLE>
How the Fund Is Invested (as of 5/31/98)
Portfolio Statistics
Weighted Average Maturity 20.2 years
..............................................
Weighted Average Duration 8.6 years
..............................................
Weighted Average Credit Quality AA
..............................................
Number of Issues 56
..............................................
Credit Quality
AAA 62%
..............................................
AA 16%
..............................................
A 6%
..............................................
BBB/NR 16%
..............................................
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C> <C> <C> <C> <C>
Education and Civic Tax Obligation Transportation Other (16%) U.S. Guaranteed Housing-
Organization (8%) General (8%) (10%) (39%) Multifamily (19%)
</TABLE>
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was 2.44%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Colorado Municipal Debt Category. Returns assume reinvestment of
dividends and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers and
other firms may charge additional fees for shareholder transactions or for
advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC of
5% during the first year, 4% during the second and third years, 3% during the
fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 5
<PAGE>
Nuveen Flagship New Mexico Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings agencies.
The fund may buy non-rated municipal bonds if the fund's investment adviser
judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate and credit risk.
Interest rate risk is the risk that interest rates will rise, causing bond
prices to fall. Credit risk is the risk that an issuer of a municipal bond will
be unable to make interest and principal payments. In general, lower rated bonds
carry greater credit risk. The fund may bear additional risk because it invests
primarily in New Mexico bonds. The fund is non-diversified, and may invest more
of its assets in a single issuer than a diversified fund. Greater concentration
may increase risk. As with any mutual fund investment, loss of money is a risk
of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for
retirement, estate planning or college funding.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth
investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser/SM/ for municipal bond investing. The chart and table below illustrate
annual fund returns for each of the past five years as well as annualized fund,
peer group and market benchmark returns for the one-, five-year and inception
periods ending December 31, 1997. This information is intended to help you
assess the variability of fund returns over the past five years (and
consequently, the potential rewards and risks of a fund investment).
Total Returns/1/
[BAR CHART APPEARS HERE]
1993 13.9%
1994 -7.0%
1995 17.8%
1996 4.0%
1997 10.2%
From inception in September, 1992 to December 31, 1997, the highest and lowest
quarterly returns were 7.65% and -6.58%, respectively for the quarters ending
3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly returns do not
reflect sales charges, which would reduce returns, while the average annual
return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
....................................
Class 1 Year 5 Year Inception
<S> <C> <C> <C>
- -------------------------------------------------------
Class A (Offer) 5.62% 6.54% 6.67%
Class A (NAV) 10.20% 7.45% 7.55%
Class B 5.42% 6.67% 6.79%
Class C 9.75% 7.06% 7.16%
Class R 10.69% 7.54% 7.64%
- -------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 7.36%
Lipper
Peer Group/3/ 8.45% 6.63% 6.64%
</TABLE>
6 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
<TABLE>
<CAPTION>
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
Share Class A B C R/5/
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
..........................................................................
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
..........................................................................
Exchange Fees None None None None
..........................................................................
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
..........................................................................
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
- --------------------------------------------------------------------------
Management Fees .55% .55% .55% .55%
..........................................................................
12b-1 Distribution and Service Fees .20% .95% .75% --%
..........................................................................
Other Expenses .18% .18% .18% .18%
- --------------------------------------------------------------------------
Total Annual Fund Operating
Expenses-Gross .93% 1.68% 1.48% .73%
After Expense Reimbursements
..........................................................................
Reimbursements (.14%) (.15%) (.17%) (.15%)
..........................................................................
Total Annual Fund Operating Expenses-Net .79% 1.53% 1.31% .58%
..........................................................................
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 511 $ 566 $ 151 $ 75 $ 511 $ 171 $ 151 $ 75
.........................................................................
3 Years $ 704 $ 848 $ 468 $233 $ 704 $ 530 $ 468 $233
.........................................................................
5 Years $ 913 $1,027 $ 808 $406 $ 913 $ 913 $ 808 $406
.........................................................................
10 Years $1,515 $1,788 $1,768 $906 $1,515 $1,788 $1,768 $906
.........................................................................
</TABLE>
How the Fund Is Invested (as of 5/31/98)
Portfolio Statistics
Weighted Average Maturity 20.8 years
..............................................
Weighted Average Duration 8.0 years
..............................................
Weighted Average Credit Quality AA
..............................................
Number of Issues 64
..............................................
Credit Quality
AAA 60%
..............................................
AA 10%
..............................................
A 16%
..............................................
BBB/NR 14%
..............................................
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Tax Obligation-Limited (28%)
Other (20%)
Education and Civic Organizations (17%)
Housing-Single-Family (16%)
Utilities (13%)
Long-Term Care (6%)
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was 2.58%
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Other States Municipal Debt Category. Returns assume reinvestment
of dividends and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3% during
the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 7
<PAGE>
Section 2 How We Manage Your Money
To help you understand the funds better, this section includes a detailed
discussion of our investment and risk management strategies. For a more complete
discussion of these matters, please consult the Statement of Additional
Information.
Who Manages the Funds
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, IL 60606, ("Nuveen
Advisory"), serves as the investment adviser to the funds and in this capacity
is responsible for the selection and on-going monitoring of the municipal bonds
in each fund's investment portfolio, managing the fund's business affairs and
providing certain clerical, bookkeeping and other administrative services.
Nuveen Advisory serves as investment adviser to investment portfolios with more
than $35 billion in municipal assets under management.
Overall investment management strategy and operating policies for the funds are
set by the Investment Policy Committee of Nuveen Advisory. The Investment Policy
Committee is comprised of the principal executive officers and portfolio
managers of Nuveen Advisory and meets regularly to review economic conditions,
the outlook for the financial markets in general and the status of the municipal
markets in particular. Day-to-day operation of each fund and the execution of
its specific investment strategies is the responsibility of the designated
portfolio manager described below.
Michael S. Davern is the portfolio manager for the Arizona, Colorado, and New
Mexico Funds. Mr. Davern became a Vice President of Flagship Financial Inc. in
1991, and subsequently became a Vice President of Nuveen Advisory upon the
acquisition of Flagship Resources Inc. by The John Nuveen Company in January
1997. Mr. Davern currently manages investments for seventeen Nuveen-sponsored
investment companies, including the Kansas, Louisiana, Michigan, Missouri and
Wisconsin Funds.
Management Fees
For providing these services, Nuveen Advisory is paid an annual management fee.
The following schedule applies to each fund described in this prospectus:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
...............................................................................
<S> <C>
For the first $125 million 0.5500%
...............................................................................
For the next $125 million 0.5375%
...............................................................................
For the next $250 million 0.5250%
...............................................................................
For the next $500 million 0.5125%
...............................................................................
For the next $1 billion 0.5000%
...............................................................................
For assets over $2 billion 0.4750%
...............................................................................
</TABLE>
8 Section 2 How We Manage Your Money
<PAGE>
For the most recent fiscal year, the funds paid after expense reimbursements the
following management fees to Nuveen Advisory, as a percentage of average net
assets:
Nuveen Flagship Arizona Municipal Bond Fund .45%
...............................................................................
Nuveen Flagship Colorado Municipal Bond Fund .54%
...............................................................................
Nuveen Flagship New Mexico Municipal Bond Fund .40%
...............................................................................
What Securities We Invest In
Each fund's investment objective may not be changed without shareholder
approval. The following investment policies may be changed by the Board of
Trustees without shareholder approval unless otherwise noted in this prospectus
or the Statement of Additional Information.
Municipal Obligations
The funds invest primarily in municipal bonds that pay interest that is exempt
from regular federal, state and, in some cases, local income tax. Income from
these bonds may be subject to the federal alternative minimum tax.
States, local governments and municipalities issue municipal bonds to raise
money for various public purposes such as building public facilities,
refinancing outstanding obligations and financing general operating
expenses.
The funds may purchase municipal bonds that represent lease obligations. These
carry special risks because the issuer of the bonds may not be obligated to
appropriate money annually to make payments under the lease. In order to reduce
this risk, the funds will only purchase these bonds where the issuer has a
strong incentive to continue making appropriations until maturity.
Quality Municipal Bonds
The funds purchase only quality municipal bonds that are either rated investment
grade (AAA/Aaa to BBB/Baa) by independent rating agencies at the time of
purchase or are non-rated but judged to be investment grade by the fund's
investment adviser. Each fund will invest at least 80% of its net assets in
investment-grade quality municipal bonds. If suitable municipal bonds from a
specific state are not available at attractive prices and yields, a fund may
invest in municipal bonds of U.S. territories (such as Puerto Rico and Guam)
which are exempt from regular federal, state, and local income taxes. The
Arizona Fund may not invest more than 20% of its net assets in these territorial
municipal bonds.
Portfolio Maturity
Each fund buys municipal bonds with different maturities in pursuit of its
investment objective, but maintains under normal market conditions an investment
portfolio with an overall weighted average portfolio maturity of 15 to 30 years.
Short-term Investments
Under normal market conditions, each fund may invest up to 20% of net assets in
short-term, high quality municipal bonds. The funds may invest in short-term,
high quality taxable securities if suitable short-term municipal
Section 2 How We Manage Your Money 9
<PAGE>
bonds are not available at reasonable prices and yields. For more information on
eligible short-term investments, see the Statement of Additional Information.
Delayed Delivery Transactions
The funds may buy or sell securities on a when-issued or delayed-delivery basis,
paying for or taking delivery of the securities at a later date, normally within
15 to 45 days of the trade. Such transactions involve an element of risk because
the value of the security to be purchased may decline before the settlement
date.
How We Select Investments
Nuveen Advisory selects municipal obligations for the funds based upon its
assessment of a bond's relative value in terms of current yield, price, credit
quality and future prospects. Nuveen Advisory is supported by Nuveen's award-
winning team of specialized research analysts who review municipal securities
available for purchase, monitor the continued creditworthiness of each fund's
municipal investments, and analyze economic, political and demographic trends
affecting the municipal markets. We utilize these resources to identify
municipal obligations with favorable characteristics we believe are not yet
recognized by the market. We then select those higher-yielding and undervalued
municipal obligations that we believe represent the most attractive values.
Portfolio Turnover
A fund buys and sells portfolio securities in the normal course of its
investment activities. The proportion of the fund's investment portfolio that is
sold and replaced with new securities during a year is known as the fund's
portfolio turnover rate. The funds intend to keep portfolio turnover relatively
low in order to reduce trading costs and the realization of taxable capital
gains. Each fund, however, may make limited short-term trades to take advantage
of market opportunities or reduce market risk.
What the Risks Are
Risk is inherent in all investing. Investing in a mutual fund -- even the most
conservative -- involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part or all of your
investment. Therefore, before investing you should consider carefully the
following risks that you assume when you invest in these funds. Because of these
and other risks, you should consider an investment in any of these funds to be a
long-term investment.
Interest rate risk: the risk that the value of the fund's portfolio will decline
because of rising market interest rates (bond prices move in the opposite
direction of interest rates). The longer the average maturity (duration) of a
fund's portfolio, the greater its interest rate risk. See "What Securities We
Invest In--Portfolio Maturity."
Income risk: the risk that the income from the fund's portfolio will decline
because of falling market interest rates. This can result when the fund
10 Section 2 How We Manage Your Money
<PAGE>
invests the proceeds from new share sales, or from matured or called bonds, at
market interest rates that are below the portfolio's current earnings rate.
Credit risk: the risk that an issuer of a bond is unable to meet its obligation
to make interest and principal payments due to changing market conditions.
Generally, lower rated bonds provide higher current income but are considered to
carry greater credit risk than higher rated bonds. Year 2000 issues may affect
the ability of municipal issuers to meet their payment obligations to their bond
holders, and may adversely affect their credit ratings.
State Concentration risk: because the funds primarily purchase municipal bonds
from a specific state, each fund also bears investment risk from the economic,
political or regulatory changes that could adversely affect municipal bond
issuers in that state and therefore the value of the fund's investment
portfolio. See "Appendix--Additional State Information." These risks may be
greater for the Colorado and New Mexico Funds, which as "non-diversified" funds
may concentrate their investments in municipal bonds of certain issuers to a
greater extent than the Arizona Fund, which is a diversified fund.
Inflation risk: the risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the value of the funds' assets can decline as can the value
of the funds' distributions.
How We Manage Risk
In pursuit of its investment objective, each fund assumes investment risk,
chiefly in the form of interest rate and credit risk. The funds limit this
investment risk generally by restricting the type and maturities of municipal
bonds they purchase, and by diversifying their investment portfolios
geographically as well as across different industry sectors.
Investment Limitations
The funds have adopted certain investment limitations (based on total assets)
that cannot be changed without shareholder approval and are designed to limit
your investment risk and maintain portfolio diversification. Each fund may not
have more than:
. 25% in any one industry such as electric utilities or health
care.
. 10% in borrowings (33% if used to meet redemptions).
As a diversified fund, the Arizona Fund also may not have more than:
. 5% in securities of any one issuer (except for U.S. government
securities or for 25% of the fund's assets).
Hedging and Other Defensive Investment Strategies
Each fund may invest up to 100% in cash equivalents and short-term investments
as a temporary defensive measure in response to adverse market conditions, or to
keep cash on hand fully invested. During these periods, the weighted average
maturity of a fund's investment portfolio may fall below the defined range
described under "Portfolio Maturity."
Section 2 How We Manage Your Money 11
<PAGE>
Each fund may also use various investment strategies designed to limit the risk
of bond price fluctuations and to preserve capital. These hedging strategies
include using financial futures contracts, options on financial futures, or
options based on either an index of long-term tax-free securities or on debt
securities whose prices, in the opinion of the funds' investment adviser,
correlate with the prices of the funds' investments. The funds, however, have no
present intent to use these strategies.
12 Section 2 How We Manage Your Money
<PAGE>
Section 3 How You Can Buy and Sell Shares
You can choose from four classes of fund shares, each with a different
combination of sales charges, fees, eligibility requirements and other features.
Your financial adviser can help you determine which class is best for you. We
offer a number of features for your convenience. Please see the Statement of
Additional Information for further details.
How to Choose a Share Class
In deciding whether to purchase Class A, Class B, Class C or Class R shares, you
should consider:
. the amount of your purchase;
. any current holdings of fund shares;
. how long you expect to hold the shares;
. the amount of any up-front sales charge;
. whether a contingent deferred sales charge
(CDSC) would apply upon redemption;
. the amount of any distribution or service
fees that you may incur while you own the shares;
. whether you will be reinvesting income or
capital gain distributions in additional shares;
. whether you qualify for a sales charge
waiver or reduction.
For a summary of the charges and expenses for each class, please see "What are
the Costs of Investing?"
Class A Shares
You can buy Class A shares at the offering price, which is the net asset value
per share plus an up-front sales charge. You may qualify for a reduced sales
charge, or the sales charge may be waived, as described in "How to Reduce Your
Sales Charge." Class A shares are also subject to an annual service fee of .20%
which compensates your financial adviser for providing ongoing service to you.
The up-front Class A sales charge for all funds described in the prospectus is
as follows:
<TABLE>
<CAPTION>
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
<S> <C> <C> <C>
Less than $50,000 4.20% 4.38% 3.70%
....................................................................................................................
$50,000 but less than $100,000 4.00% 4.18% 3.50%
....................................................................................................................
$100,000 but less than $250,000 3.50% 3.63% 3.00%
....................................................................................................................
$250,000 but less than $500,000 2.50% 2.56% 2.00%
....................................................................................................................
$500,000 but less than $1,000,000 2.00% 2.04% 1.50%
....................................................................................................................
$1,000,000 and over --(1) -- 1.00%(1)
....................................................................................................................
</TABLE>
(1) You can buy $1 million or more of Class A shares at net asset value without
an up-front sales charge. Nuveen pays authorized dealers of record on these
share purchases a sales commission of 1.00% of the first $2.5 million, plus .50%
of the next $2.5 million, plus .25% of the amount over $5.0 million. If you
redeem your shares within 18 months of purchase, you may have to pay a CDSC of
1% of either your purchase price or your redemption proceeds, whichever is
lower. You do not have to pay this CDSC if your financial adviser has made
arrangements with Nuveen and agrees to waive the commission.
Section 3 How You Can Buy and Sell Shares 13
<PAGE>
Class B Shares
You can buy Class B shares at the offering price, which is the net asset value
per share without any up-front sales charge so that the full amount of your
purchase is invested in the fund. However, you will pay annual distribution and
service fees of .95% of average daily assets. The annual .20% service fee
compensates your financial adviser for providing ongoing service to you. The
annual .75% distribution fee compensates Nuveen for paying your financial
adviser a 4% up-front sales commission, which includes an advance of the first
year's service fee. If you sell your shares within six years of purchase, you
will have to pay a CDSC based on either your purchase price or what you sell
your shares for, whichever amount is lower, according to the following schedule.
You do not pay a CDSC on any Class B shares you purchase by reinvesting
dividends.
Class B shares automatically convert to Class A shares eight years after you buy
them so that the distribution fees you pay over the life of your investment are
limited. You will continue to pay an annual service fee on any converted Class B
shares.
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6
CDSC 5% 4% 4% 3% 2% 1%
..............................................................................
Class C Shares
You can buy Class C shares at the offering price, which is the net asset value
per share without any up-front sales charge so that the full amount of your
purchase is invested in the fund. However, you will pay annual distribution and
service fees of 1%. The annual .20% service fee compensates your financial
adviser for providing ongoing service to you. The annual .55% distribution fee
reimburses Nuveen for paying your financial adviser an ongoing sales commission.
Nuveen advances the first year's service and distribution fees. If you sell your
shares within 12 months of purchase, you may have to pay a 1% CDSC based on
either your purchase price or what you sell your shares for, whichever amount is
lower.
Class R Shares
Under limited circumstances, you may purchase Class R Shares at the offering
price, which is the net asset value on the day of purchase. In order to qualify,
you must be eligible under one of the programs described in "How to Reduce Your
Sales Charge" (below) or meet certain other purchase size criteria. Class R
Shares are not subject to sales charges or ongoing service or distribution fees.
Class R shares have lower ongoing expenses than the other classes.
14 Section 3 How You Can Buy and Sell Shares
<PAGE>
How to Reduce Your Sales Charge
We offer a number of ways to reduce or eliminate the up-front sales charge on
Class A shares or to qualify to purchase Class R shares.
<TABLE>
<CAPTION>
Class A Sales Charge Class A Sales Charge Class R Eligibility
Reductions Waivers
<S> <C> <C>
. Rights of accumulation . Nuveen Defined Portfolio . Certain employees and
. Letter of intent reinvestment Directors of Nuveen
. Group purchase . Purchases using or employees of
redemptions from authorized dealers
unrelated funds . Retirement plans
. Certain employees and . Bank trust departments
Directors of Nuveen or
employees of authorize
dealers
. Bank trust departments
</TABLE>
In addition, Class A shares at net asset value and Class R shares may be
purchased through registered investment advisers, certified financial planners
and registered broker-dealers who charge asset-based or comprehensive "wrap"
fees for their services. Please refer to the Statement of Additional Information
for detailed program descriptions and eligibility requirements. Additional
information is available from your financial adviser or by calling (800) 257-
8787. Your financial adviser can also help you prepare any necessary application
forms. You or your financial adviser must notify Nuveen at the time of each
purchase if you are eligible for any of these programs. The funds may modify or
discontinue these programs at any time.
How to Buy Shares
You may open an account with $3,000 per fund share class and make additional
investments at any time with as little as $50. There is no minimum if you are
reinvesting Nuveen Defined Portfolio distributions. The share price you pay will
depend on when Nuveen receives your order. Orders received before the close of
trading on a business day will receive that day's closing share price, otherwise
you will receive the next business day's price. A business day is any day the
New York Stock Exchange is open for business and usually ends at 4 p.m. New York
time when the Exchange closes.
Through a Financial Adviser
You may buy shares through your financial adviser, who can handle all the
details for you, including opening a new account. Financial advisers can also
help you review your financial needs and formulate long-term investment goals
and objectives. In addition, financial advisers generally can help you develop a
customized financial plan, select investments and monitor and review your
portfolio on an ongoing basis to help assure your investments continue to meet
your needs as circumstances change. Financial advisers are paid either from fund
sales charges and fees or by charging you a separate fee in lieu of a sales
charge for ongoing investment advice and services. If you do not have a
financial adviser, call (800) 257-8787 and Nuveen can refer you to one in your
area.
Section 3 How You Can Buy and Sell Shares 15
<PAGE>
By Mail
You may open an account and buy shares by mail by completing the enclosed
application and mailing it along with your check to: Nuveen Investor Services,
P.O. Box 5186, Bowling Green Station, New York, NY 10274-5186.
Systematic Investing
Once you have established a fund account, systematic investing allows you to
make regular investments through automatic deductions from your bank account
(simply complete the appropriate section of the account application form) or
directly from your paycheck. To invest directly from your paycheck, contact your
financial adviser or call Nuveen at (800) 257-8787. Systematic investing may
also make you eligible for reduced sales charges.
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 4%, 5% or 6% annually on your
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
[LINE CHART APPEARS HERE]
One of the benefits of systematic investing is dollar cost averaging. Because
you regularly invest a fixed amount of money over a period of years regardless
of the share price, you buy more shares when the price is low and fewer shares
when the price is high. As a result, the average share price you pay should be
less than the average share price of fund shares over the same period. To be
effective, dollar cost averaging requires that you invest over a long period of
time, and does not assure that you will profit.
Systematic Investment Plan
You can make regular investments of $50 or more per month by authorizing us to
draw preauthorized checks on your bank account. You can stop the withdrawals at
any time. There is no charge for this plan.
16 Section 3 How You Can Buy and Sell Shares
<PAGE>
Payroll Direct Deposit Plan
You can, with your employer's consent, make regular investments of $25 or more
per pay period (meeting the monthly minimum of $50) by authorizing your employer
to deduct this amount automatically from your paycheck. You can stop the
deductions at any time. There is no charge for this plan.
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to receive
payments monthly, quarterly, semi-annually or annually, and may choose to
receive a check, have the monies transferred directly into your bank account
(see "Fund Direct--Electronic Funds Transfer" below), paid to a third party or
sent payable to you at an address other than your address of record. You must
complete the appropriate section of the account application or Account Update
Form to participate in the fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent
purchases of Class A, B or C shares because you may unnecessarily pay a sales
charge or CDSC on these purchases.
Special Services
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered account at any time
for the same class of another Nuveen mutual fund available in your state. Your
exchange must meet the minimum purchase requirements of the fund into which you
are exchanging. Because an exchange is treated for tax purposes as a concurrent
sale and purchase, and any gain may be subject to tax, you should consult your
tax adviser about the tax consequences of any contemplated exchange.
The exchange privilege is not intended to allow you to use a fund for short-term
trading. Because excessive exchanges may interfere with portfolio management,
raise fund operating expenses or otherwise have an adverse effect on other
shareholders, each fund reserves the right to revise or suspend the exchange
privilege, limit the amount or number of exchanges, or reject any exchange.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your redemption
proceeds up to one year later without incurring any additional charges. You may
only reinvest into the same share class you redeemed. If you paid a CDSC, we
will refund your CDSC and reinstate your holding period. You may use this
reinstatement privilege only once for any redemption.
Section 3 How You Can Buy and Sell Shares 17
<PAGE>
Fund Direct
You may link your fund account to your bank account and transfer money
electronically between these accounts and perform a variety of account
transactions, including buying shares by telephone and systematic investment.
You may also have dividends, distributions, redemption payments or systematic
withdrawals sent directly to your bank account.
Your financial adviser can help you complete the forms for these services, or
you can call Nuveen at (800) 257-8787 for copies of the necessary forms.
How to Sell Shares
You may use one of the following ways to sell (redeem) your shares on any day
the New York Stock Exchange is open. You will receive the share price next
determined after Nuveen has received your properly completed redemption request.
Your redemption request must be received before the close of trading for you to
receive that day's price. While the funds do not charge a redemption fee, you
may be assessed a CDSC, if applicable. When you redeem Class A, Class B, or
Class C shares subject to a CDSC, the fund will first redeem any shares that are
not subject to a CDSC or that represent an increase in the value of your fund
account due to capital appreciation, and then redeem the shares you have owned
for the longest period of time, unless you ask the fund to redeem your shares in
a different order. No CDSC is imposed on shares you buy through the reinvestment
of dividends and capital gains. The holding period is calculated on a monthly
basis and begins on the first day of the month in which you buy shares. When you
redeem shares subject to a CDSC, the CDSC is calculated on the lower of your
purchase price or redemption proceeds, deducted from your redemption proceeds,
and paid to Nuveen. The CDSC may be waived under certain special circumstances
as described in the Statement of Additional Information.
Through Your Financial Adviser
You may sell your shares through your financial adviser who can prepare the
necessary documentation. Your financial adviser may charge for this.
By Telephone
If you have authorized telephone redemption privileges, you can redeem your
shares by telephone up to $50,000. You may not redeem by telephone shares held
in certificate form. Checks will be issued only to the shareholder of record and
mailed to the address of record. If you have established electronic funds
transfer privileges, you may have redemption proceeds transferred electronically
to your bank account. We will normally mail your check the next business day.
Nuveen and Chase Global Funds Services will be liable for losses resulting from
unauthorized telephone redemptions only if they do not follow reasonable
procedures designed to verify the identity of the caller. You should immediately
verify your trade confirmations when you receive them.
By Mail
You can sell your shares at any time by sending a written request to the
appropriate fund, Nuveen Investor Services, P.O. Box 5186, Bowling Green
Station, New York, NY 10274-5186. Your request must include the following
information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
18 Section 3 How You Can Buy and Sell Shares
<PAGE>
. The signature of each owner exactly as it appears on the account;
. The name of the person to whom you want your redemption proceeds paid (if
other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if other than the
address of record);
. Any certificates you have for the shares; and
. Any required signature guarantees.
We will normally mail your check the next business day, but in no event more
than seven days after we receive your request. If you purchased your shares by
check, your redemption proceeds will not be mailed until your check has cleared.
Guaranteed signatures are required if you are redeeming more than $50,000, you
want the check payable to someone other than the shareholder of record or you
want the check sent to another address (or the address of record has been
changed within the last 60 days). Signature guarantees must be obtained from a
bank, brokerage firm or other financial intermediary that is a member of an
approved Medallion Guarantee Program or that is otherwise approved by a fund. A
notary public cannot provide a signature guarantee.
An Important Note About Involuntary Redemption
From time to time, the funds may establish minimum account size requirements.
The funds reserve the right to liquidate your account upon 30 days' written
notice if the value of your account falls below an established minimum. The
funds presently have set a minimum balance of $100 unless you have an active
Nuveen Defined Portfolio reinvestment account. You will not be assessed a CDSC
on an involuntary redemption.
Section 3 How You Can Buy and Sell Shares 19
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the funds, this
section includes important details about how the funds make distributions to
shareholders. We discuss some other fund policies, as well.
Distributions and Taxes
The funds pay tax-free dividends monthly and any taxable capital gains or other
taxable distributions once a year in December. The funds declare dividends
monthly to shareholders of record as of the ninth of each month, payable the
first business day of the following month.
Payment and Reinvestment Options
The funds automatically reinvest your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than your address of record or reinvested in shares of another
Nuveen mutual fund. For further information, contact your financial adviser or
call Nuveen at (800) 257-8787.
Taxes and Tax Reporting
Because the funds invest in municipal bonds, the regular monthly dividends you
receive will be exempt from regular federal income tax. All or a portion of
these dividends, however, may be subject to state and local taxes or to the
federal alternative minimum tax (AMT).
Although the funds do not seek to realize taxable income or capital gains, the
funds may realize and distribute taxable income or capital gains from time to
time as a result of each fund's normal investment activities. Each fund will
distribute in December any taxable income or capital gains realized over the
preceding year. Net short-term gains are taxable as ordinary income. Net long-
term capital gains are taxable as long-term capital gains regardless of how long
you have owned your investment. Taxable dividends do not qualify for a dividends
received deduction if you are a corporate shareholder.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains, including any percentage of your fund
dividends attributable to municipal obligations, that you were paid during the
prior year. You will receive this statement from the firm where you purchased
your fund shares if you hold your investment in street name. Nuveen will send
you this statement if you hold your shares in registered form. The tax status of
your dividends is not affected by whether you reinvest your dividends or receive
them in cash. If you receive social security benefits, you should be aware that
any tax-free income is taken into account in calculating the amount of these
benefits that may be subject to federal income tax.
20 Section 4 General Information
<PAGE>
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
Please note that if you do not furnish us with your correct Social Security
number or employer identification number, federal law requires us to withhold
federal income tax from your distributions and redemption proceeds at a rate of
31%.
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable dividend
is commonly known as "buying the dividend." The entire dividend may be taxable
to you even though a portion of the dividend effectively represents
a return of your purchase price. Similarly, if you sell or exchange fund shares
shortly before the record date for a tax-exempt dividend, a portion of the price
you receive may be treated as a taxable capital gain even though it reflects
tax-free income earned but not yet distributed by the fund.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to earn on a
taxable investment in order to equal a stated tax-free yield on a municipal
investment. To assist you to more easily compare municipal investments like the
funds with taxable alternative investments, the table below presents the taxable
equivalent yields for a range of hypothetical tax-free yields and tax rates:
Taxable Equivalent Of Tax-Free Yields
<TABLE>
<CAPTION>
Tax-Free Yield
Tax Rate 4.00% 4.50% 5.00% 5.50% 6.00%
..................................................................
<S> <C> <C> <C> <C> <C>
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
..................................................................
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
..................................................................
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
..................................................................
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
..................................................................
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
statement of additional information or consult your tax adviser.
Distribution and Services Plans
John Nuveen & Co. Incorporated serves as the selling agent and distributor of
the fund's shares. In this capacity, Nuveen manages the offering of the fund's
shares and is responsible for all sales and promotional activities. In order to
reimburse Nuveen for its costs in connection with these activities, including
compensation paid to authorized dealers, each fund has adopted a distribution
and service plan under Rule 12b-1 under the Investment Company Act of 1940. (See
"How to Choose a Share Class" for a description of the distribution and service
fees paid under this plan.)
Nuveen receives the distribution fee for Class B and Class C shares primarily
for providing compensation to Authorized Dealers, including Nuveen, in
connection with the distribution of shares. Nuveen uses the service fee for
Class A, Class B, and Class C shares to compensate Authorized Dealers, including
Nuveen, for providing account services to
Section 4 General Information 21
<PAGE>
shareholders. These services may include establishing and maintaining
shareholder accounts, answering shareholder inquiries, and providing other
personal services to shareholders. These fees also compensate Nuveen for other
expenses, including printing and distributing prospectuses to persons other than
shareholders, and preparing, printing, and distributing advertising and sales
literature and reports to shareholders used in connection with the sale of
shares. Because these fees are paid out of the fund's assets on an on-going
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges.
Net Asset Value
The price you pay for your shares is based on the fund's net asset value per
share which is determined as of the close of trading (normally 4:00 p.m. eastern
time) on each day the New York Stock Exchange is open for business. Net asset
value is calculated for each class by taking the fair value of the class' total
assets, including interest or dividends accrued but not yet collected, less all
liabilities, and dividing by the total number of shares outstanding. The result,
rounded to the nearest cent, is the net asset value per share. All valuations
are subject to review by the fund's Board of Trustees or its delegate.
In determining net asset value, expenses are accrued and applied daily and
securities and other assets for which market quotations are available are valued
at market value. The prices of municipal bonds are provided by a pricing service
and based on the mean between the bid and asked price. When price quotes are not
readily available (which is usually the case for municipal securities), the
pricing service establishes fair market value based on prices of comparable
municipal bonds.
Fund Service Providers
The custodian of the assets of the funds is The Chase Manhattan Bank,
4 New York Plaza, New York, NY 10004-2413. Chase also provides
certain accounting services to the funds. The fund's transfer, shareholder
services and dividend paying agent, Chase Global Funds Services Company, P.O.
Box 5186, New York, NY 10274-5186, performs bookkeeping, data processing and
administrative services for the maintenance of shareholder accounts.
Nuveen Advisory and Chase Global Funds Services each rely on computer systems to
manage the fund's investments, process shareholder transactions and provide
shareholder account maintenance. Because of the way computers historically have
stored dates, some of these systems currently may not be able to correctly
process activity occurring in the year 2000. Nuveen Advisory is working with the
fund's service providers to adapt their systems to address this "Year 2000"
issue. Nuveen Advisory and the funds expect, but there can be no absolute
assurance, that the necessary work will be completed on a timely basis.
22 Section 4 General Information
<PAGE>
Section 5 Financial Highlights
The following tables are intended to help you better understand each fund's
recent past performance. The tables are excerpted from each fund's latest
financial statements audited by Arthur Andersen LLP. You may obtain the complete
statements along with the auditor's report by requesting from Nuveen a free copy
of the fund's latest annual shareholder report.
Arizona Municipal Bond Fund**
<TABLE>
<CAPTION>
Investment Operations Less Distributions
---------------------------------- --------------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ending Net Asset Investment Investment Investment Capital Asset Total
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/86)
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) 11.04 9.79
1997(c) 10.92 .19 .02 .21 (.19) -- (.19) 10.94 1.96
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
----------------------------------------
Class
(Inception
Date) Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ending Assets Net Net Turnover
May 31, (000) Assets(a) Assets(a) Rate
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (10/86)
1998 $85,922 .83% 4.87% 16%
1997 82,567 .83 5.13 25
1996 80,094 .69 5.20 38
1995 80,406 .82 5.59 27
1994 82,676 .64 5.48 21
Class B (2/97)
1998 1,620 1.51 4.15 16
1997(c) 347 1.62* 4.43* 25
Class C (2/94)
1998 6,328 1.35 4.33 16
1997 3,189 1.38 4.58 25
1996 1,970 1.23 4.64 38
1995 1,621 1.36 5.01 27
1994(c) 1,122 1.20* 4.36* 21
Class R (2/97)
1998 20,504 .63 5.07 16
1997(c) 19,031 .67* 5.38* 25
- ---------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Arizona.
(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.
Section 5 Financial Highlights 23
<PAGE>
Colorado Municipal Bond Fund**
<TABLE>
<CAPTION>
Investment Operations Less Distributions
---------------------------------- --------------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ending Net Asset Investment Investment Investment Capital Asset Total
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
- -------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
----------------------------------------
Class
(Inception
Date) Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ending Assets Net Net Turnover
May 31, (000) Assets(a) Assets(a) Rate
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (5/87)
1998 $37,285 1.00% 4.84% 19%
1997 31,229 .74 5.31 27
1996 33,637 .55 5.41 70
1995 34,982 .50 5.99 38
1994 35,796 .37 5.71 42
Class B (2/97)
1998 1,661 1.75 4.06 19
1997(c) 444 1.53* 4.60* 27
Class C (2/97)
1998 875 1.55 4.25 19
1997(c) 103 1.31* 4.94* 27
Class R (2/97)
1998 750 .80 5.03 19
1997(c) 413 .58* 5.60* 27
- ---------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Colorado.
(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.
24 Section 5 Financial Highlights
<PAGE>
New Mexico Municipal Bond Fund**
<TABLE>
<CAPTION>
Investment Operations Less Distributions
---------------------------------------- -----------------------------
Class
(Inception
Date)
Net
Realized Ratio of
and Ending Ending Expenses
Year Beginning Net Unrealized Net Net Net to Average
Ending Net Asset Investment Investment Investment Capital Asset Total Assets Net
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000) Assets(a)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/92)
1998 $10.16 $.50 $.51 $1.01 $(.50) $-- $(.50) $10.67 10.17% $54,959 .79%
1997 9.81 .51 .35 .86 (.51) -- (.51) 10.16 8.90 50,807 .77
1996 10.01 .51 (.19) .32 (.52) -- (.52) 9.81 3.18 51,173 .68
1995 9.68 .52 .33 .85 (.52) -- (.52) 10.01 9.25 52,150 .67
1994 10.04 .53 (.33) .20 (.53) (.03) (.56) 9.68 1.92 51,167 .40
Class B (2/97)
1998 10.15 .43 .52 .95 (.43) -- (.43) 10.67 9.46 1,408 1.53
1997(c) 10.24 .12 (.10) .02 (.11) -- (.11) 10.15 .18 657 1.54*
Class C (2/97)
1998 10.16 .45 .51 .96 (.45) -- (.45) 10.67 9.60 1,487 1.31
1997(c) 10.23 .12 (.08) .04 (.11) -- (.11) 10.16 .43 155 1.34*
Class R (2/97)
1998 10.17 .53 .53 1.06 (.53) -- (.53) 10.70 10.59 466 .58
1997(c) 10.23 .14 (.07) (.07) (.13) -- (.13) 10.17 .71 362 .59*
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
------------------------------------
Ratio of Net
Investment
Income
Year to Average Portfolio
Ending Net Turnover
May 31, Assets(a) Rate
- --------------------------------------------------------
<S> <C> <C>
Class A (9/92)
1998 4.79% 13%
1997 5.07 43
1996 5.10 57
1995 5.48 38
1994 5.24 39
Class B (2/97)
1998 4.03 13
1997(c) 4.19* 43
Class C (2/97)
1998 4.23 13
1997(c)** 4.40* 43
Class R (2/97)
1998 5.01 13
1997(c)** 5.18* 43
- --------------------------------------------------------
</TABLE>
* Annualized.
** 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.
Section 5 Financial Highlights 25
<PAGE>
Appendix Additional State Information
Because the funds primarily purchase municipal bonds from a specific state, each
fund also bears investment risk from economic, political or regulatory changes
that could adversely affect municipal bond issuers in that state and therefore
the value of the fund's investment portfolio. The following discussion of
special state considerations was obtained from official offering statements of
these issuers and has not been independently verified by the funds. The
discussion includes general state tax information related to an investment in
fund shares. Because tax laws are complex and often change, you should consult
your tax adviser about the state tax consequences of a specific fund investment.
See the Statement of Additional Information for further information.
Arizona
Arizona's economy is primarily based on services, tourism and high-tech
manufacturing. However, the military, agriculture, and mining of primary metals
still play a role. The State has experienced phenomenal economic and population
growth in the recent past due to an influx of businesses attracted by the
State's high quality of life, educated workforce, and friendly business
environment. Over the last five years, the State has ranked second in the nation
in job growth with more than a 30 percent increase and some 380,000 jobs
created. The State's leading economic indicators hit an all-time high in April,
suggesting that the State's economic growth may continue in the near term.
However, signs of slowing job growth have surfaced.
The statewide unemployment rate was 4.6 percent, slightly below the U.S. rate of
4.9 percent. Per capita income in 1997 was $22,364.
Arizona maintained a healthy general fund balance for fiscal 1996 of 11.2
percent of general fund revenues despite the previous income tax cuts. In fact,
in 1996 income tax revenues rose 1.5 percent from fiscal 1995. The State does
not issue general obligation bonds but relies on capital outlays, revenue bonds
and other methods to finance projects. Each project is individually rated for
its independent creditworthiness.
Tax Treatment
The Arizona Fund's regular monthly dividends will not be subject to the Arizona
individual income tax to the extent they are paid out of income earned on
Arizona municipal bonds or U.S. government securities. You will be subject to
Arizona personal income tax, however, to the extent the Arizona Fund distributes
any taxable income or realized capital gains, or if you sell or exchange Arizona
Fund shares and realize a capital gain on the transaction.
26 Appendix
<PAGE>
The treatment of corporate shareholders of the Arizona Fund is similar to that
described above.
Colorado
Colorado's trade and service sectors represent over half of non-agricultural
employment in the State's economy and have expanded in the past years.
Manufacturing employment is comparatively small and continues to shrink due to
the concentration in defense production. The State's economic activity tends to
mimic that of the nation as a whole.
Colorado's unemployment rate was a very low 3.3% in 1997, below the national
average of 4.9%. Monthly job growth averaged 2.67% from January to June of 1997.
Per capita income was $27,051 in 1997.
1996 general fund revenues were $4.3 billion against expenditures of $4.4
billion. 1997 projected revenues are $4.6 billion. There is no outstanding
general obligation debt, but outstanding lease obligations are rated A1 by
Moody's and A+ by Standard & Poor's.
Tax Treatment
The Colorado Fund's regular monthly dividends will not be subject to Colorado
personal income taxes to the extent they are paid out of income earned on
Colorado municipal bonds or U.S. government securities. You will be subject to
Colorado personal income taxes, however, to the extent the Colorado fund
distributes any taxable income, or if you sell or exchange Colorado Fund shares
and realize a capital gain on the transaction.
The treatment of corporate shareholders of the Colorado Fund is similar to that
described above.
New Mexico
New Mexico's major industries include energy resources, tourism, services,
crafts, agribusiness, manufacturing and mining. The economy also benefits from
the employment and technology base supplied by federal government scientific
research facilities at Los Alamos, Albuquerque and White Sands. Tourism should
continue given the large number of state and federal park lands in the State.
Finally, crop and livestock production remains diverse and will also remain a
major part of the economy.
New Mexico's unemployment rate was 6.2% in 1997, higher than the national
average of 4.9%. At the same time, per capita income was $19,587.
1996 audited general fund revenues were $4.3 billion against expenditures of
$4.2 billion. As of February 3, 1997, Moody's gives the State's general
obligation debt an Aa1 rating while Standard & Poor's gives it an AA+.
Tax Treatment
The New Mexico Fund's regular monthly dividends will not be subject to the New
Mexico personal income tax to the extent they are paid out of income earned on
New Mexico municipal obligations or U.S. government securities. You will be
subject to New Mexico personal income tax, however, to the extent the New Mexico
Fund distributes any taxable income or realized capital gains, or if you sell or
exchange New Mexico Fund shares and realize a capital gain on the transaction.
The treatment of corporate shareholders of the New Mexico Fund is similar to
that described above.
Appendix 27
<PAGE>
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
National Municipal Bond Funds
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
Arizona
California/1/
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky/2/
Louisiana
Maryland
Massachusetts/1/
Michigan
Missouri
New Jersey
New Mexico
New York/1/
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Several additional sources of information are available to you. The Statement of
Additional Information (SAI), incorporated by reference into this prospectus,
contains detailed information on fund policies and operation. Shareholder
reports contain management's discussion of market conditions, investment
strategies and performance results as of the fund's latest semi-annual or annual
fiscal year end. Call Nuveen at (800) 257-8787 to request a free copy of any of
these materials or other fund information.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission (SEC). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at (800) SEC-0330
for room hours and operation. You may also request fund information by writing
to the SEC's Public Reference Section, Washington, D.C. 20549. The fund's
Investment Company file number is 811-07747.
1. Long-term and insured long-term portfolios.
2. Long-term and limited-term portfolios.
VPR-MS2-NA 9-98
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
<PAGE>
NUVEEN
MUNICIPAL
BOND FUNDS
September 30, 1998
Prospectus
Dependable, tax-free income to help you keep more of what you earn.
[PHOTO APPEARS HERE]
FLORIDA
--------------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
--------------------------------
Like all mutual fund shares these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
<PAGE>
September 30, 1998
SECTION 1 The Fund
Nuveen Flagship Florida Municipal Bond Fund
PROSPECTUS
This prospectus is intended to provide important information to
help you evaluate whether one of the Nuveen Mutual Funds listed
above may be right for you. Please read it carefully before
investing and keep it for future reference.
To learn more about how Nuveen Mutual Funds can help you achieve
your financial goals, talk with your financial adviser. Or call
us at (800) 257-8787 for more information.
A CENTURY OF INVESTMENT EXPERIENCE
Since our founding in 1898, John Nuveen & Co. Incorporated has
been synonymous with investments that withstand the test of time.
Today we offer a broad range of quality investments designed for
individuals seeking to build and maintain wealth.
SECTION 1 The Fund 1
<PAGE>
NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level
of current interest income exempt from regular federal, state and, in some
cases, local income taxes as is consistent with preservation of capital.
How The Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment
grade (AAA/Aaa to BBB/Baa) at the time of purchase by independent rating
agencies. The fund may buy non-rated municipal bonds if the fund's
investment adviser judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential
for above-average total return.
What Are The Risks Of Investing In The Fund?
The principal risks of investing in the fund are interest rate risk and
credit risk. Interest rate risk is the risk that interest rates will rise,
causing bond prices to fall. Credit risk is the risk that an issuer of a
municipal bond will be unable to make interest and principal payments. In
general, lower rated bonds carry greater credit risk. The fund may bear
additional risk because it invests primarily in Florida bonds. As with any
mutual fund investment, loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or
college funding.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser(SM) for municipal bond investing. The chart and table below
illustrate annual fund returns for each of the past seven years as well as
annualized fund, peer group and market benchmark returns for the one-,
five-year and inception periods ending December 31, 1997. This information
is intended to help you assess the variability of fund returns over the
past seven years (and consequently, the potential rewards and risks of a
fund investment).
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1991 13.3%
1992 8.7%
1993 13.3%
1994 -5.6%
1995 16.4%
1996 2.6%
1997 8.5%
From inception in June 1990 to December 31, 1997, the highest and lowest
quarterly returns were 6.10% and -5.82%, respectively for the quarters
ending 3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly
returns do not reflect sales charges, which would reduce returns, while the
average annual return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
......................................
Class 1 Year 5 Year Inception
------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 3.89% 5.80% 7.34%
Class A (NAV) 8.48% 6.72% 7.96%
Class B 3.81% 5.96% 7.36%
Class C 7.81% 6.14% 7.37%
Class R 8.60% 6.74% 7.97%
------------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 8.28%
Lipper
Peer Group/3/ 8.58% 6.88% 7.94%
</TABLE>
2 Section 1 The Fund
<PAGE>
What are the Costs of Investing?
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A B C R/5/
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
</TABLE>
ANNUAL FUND OPERATING EXPENSES/11/
Paid From Fund Assets
<TABLE>
<CAPTION>
Share Class A B C R
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .54% .54% .54% .54%
12b-1 Distribution and Service Fees .20% .95% .75% --%
Other Expenses .10% .10% .10% .10%
Total Operating Expenses .84% 1.59% 1.39% .64%
</TABLE>
The following example is intended to help you compare the cost of investing
in the fund with the cost of investing in other mutual funds. It assumes
you invest $10,000 in the fund for the time period indicated and then
either redeem or do not redeem your shares at the end of a period. The
example assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Your actual returns and costs
may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 502 $ 557 $ 142 $ 65 $ 502 $ 162 $ 142 $ 65
3 Years $ 677 $ 821 $ 440 $205 $ 677 $ 502 $ 440 $205
5 Years $ 866 $ 980 $ 761 $357 $ 866 $ 866 $ 761 $357
10 Years $1,414 $1,688 $1,669 $798 $1,414 $1,688 $1,669 $798
</TABLE>
How the Fund Is Invested (as of 5/31/98)
Portfolio Statistics
Weighted Average Maturity 20.4 years
Weighted Average Duration 6.5 years
Weighted Average Credit Quality AA+
Number of Issues 185
Credit Quality
AAA 66%
AA 9%
A 11%
BBB/NR 14%
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
Tax Obligation Limited (14%)
Other (39%)
Utilities (11%)
Health Care (13%)
U.S. Guaranteed (13%)
Housing-Multifamily (10%)
1. Class A total returns reflect actual performance for all periods; Class B,
C and R total returns reflect actual performance for periods since class
inception (see "Financial Highlights" for dates) and Class A performance
for periods prior to class inception, adjusted for the differences in fees
between the classes (see "What are the Costs of Investing?"). The year-to-
date return as of 5/30/98 was 2.46%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Florida Municipal Debt Category. Returns assume reinvestment of
dividends and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced Class A sales charges apply to purchases of $50,000 or more. See
"How You Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Fund 3
<PAGE>
SECTION 2 HOW WE MANAGE YOUR MONEY
To help you understand the fund better, this section includes a
detailed discussion of our investment and risk management strategies.
For a more complete discussion of these matters, please consult the
Statement of Additional Information.
Who Manages the Fund
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, IL 60606,
("Nuveen Advisory"), serves as the investment adviser to the fund. In
this capacity, Nuveen Advisory is responsible for the selection and
on-going monitoring of the municipal bonds in the fund's investment
portfolio, managing the fund's business affairs and providing certain
clerical, bookkeeping and other administrative services. Nuveen
Advisory serves as investment adviser to investment portfolios with
more than $35 billion in municipal assets under management.
Overall investment management strategy and operating policies for the
fund is set by the Investment Policy Committee of Nuveen Advisory. The
Investment Policy Committee is comprised of the principal executive
officers and portfolio managers of Nuveen Advisory and meets regularly
to review economic conditions, the outlook for the financial markets
in general and the status of the municipal markets in particular. Day-
to-day operation of the fund and the execution of its specific
investment strategies is the responsibility of the designated
portfolio manager described below.
Thomas J. O'Shaughnessy has been the portfolio manager for the Florida
Fund since July 1998. Mr. O'Shaughnessy has been a portfolio manager
for Nuveen Advisory since 1983. He currently manages investments for
fourteen Nuveen-sponsored investment companies, including the Georgia,
Kentucky, North Carolina, and Tennessee Funds.
Management Fees
For providing these services, Nuveen Advisory is paid an annual
management fee. The following schedule applies to the fund:
Average Daily Net Asset Value Management Fee
For the first $125 million 0.5500%
For the next $125 million 0.5375%
For the next $250 million 0.5250%
For the next $500 million 0.5125%
For the next $1 billion 0.5000%
For assets over $2 billion 0.4750%
4 Section 2 How to Manage Your Money
<PAGE>
For the most recent fiscal year, the fund paid .54% of average net
assets to Nuveen Advisory.
What Securities We Invest In
The fund's investment objective may not be changed without shareholder
approval. The following investment policies may be changed by the
Board of Trustees without shareholder approval unless otherwise noted
in this prospectus or the Statement of Additional Information.
Municipal Obligations
The fund invests primarily in municipal bonds that pay interest that
is exempt from regular federal income tax. Income from these bonds may
be subject to the federal alternative minimum tax.
States, local governments and municipalities issue municipal bonds to
raise money for various public purposes such as building public
facilities, refinancing outstanding obligations and financing general
operating expenses.
The fund may purchase municipal bonds that represent lease
obligations. These carry special risks because the issuer of the bonds
may not be obligated to appropriate money annually to make payments
under the lease. In order to reduce this risk, the fund will only
purchase these bonds where the issuer has a strong incentive to
continue making appropriations until maturity.
Quality Municipal Bonds
The fund purchases only quality municipal bonds that are either rated
investment grade (AAA/Aaa to BBB/Baa) by independent rating agencies
at the time of purchase or are non-rated but judged to be investment
grade by the fund's investment adviser. The fund will invest at least
80% of its net assets in investment-grade quality municipal
bonds.
Portfolio Maturity
The fund buys municipal bonds with different maturities in pursuit of
its investment objective, but maintains under normal market conditions
an investment portfolio with an overall weighted average maturity
within a defined range. The fund normally maintains a weighted average
portfolio maturity of 15 to 30 years.
Short-term Investments
Under normal market conditions, the fund may invest up to 20% of net
assets in short-term, high quality municipal bonds. See: "How We
Manage Risk--Hedging and Other Defensive Investment Strategies." The
fund may invest in short-term, high quality taxable securities if
suitable short-term municipal bonds are not available at reasonable
prices and yields. For more information on eligible short-term
investments, see the Statement of Additional Information.
Delivery Transactions
The fund may buy or sell securities on a when-issued or delayed-
delivery basis, paying for or taking delivery of the securities at a
later date, normally within 15 to 45 days of the trade. Such
transactions involve an element of risk because the value of the
security to be purchased may decline before the settlement date.
Section 2 How We Manage Your Money 5
<PAGE>
How We Select Investments
Nuveen Advisory selects municipal obligations for the fund based upon
its assessment of a bond's relative value in terms of current yield,
price, credit quality and future prospects. Nuveen Advisory is
supported by Nuveen's award-winning team of specialized research
analysts who review municipal securities available for purchase,
monitor the continued creditworthiness of the fund's municipal
investments, and analyze economic, political and demographic trends
affecting the municipal markets. We utilize these resources to
identify municipal obligations with favorable characteristics we
believe are not yet recognized by the market. We then select those
higher-yielding and undervalued municipal obligations that we believe
represent the most attractive values.
Portfolio Turnover
A fund buys and sells portfolio securities in the normal course of its
investment activities. The proportion of the fund's investment
portfolio that is sold and replaced with new securities during a year
is known as the fund's portfolio turnover rate. The fund intends to
keep portfolio turnover relatively low in order to reduce trading
costs and the realization of taxable capital gains. The fund, however,
may make limited short-term trades to take advantage of market
opportunities or reduce market risk.
What the Risks Are
Risk is inherent in all investing. Investing in a mutual fund -- even
the most conservative -- involves risk, including the risk that you
may receive little or no return on your investment or even that you
may lose part or all of your investment. Therefore, before investing
you should consider carefully the following risks that you assume when
you invest in the fund. Because of these and other risks, you should
consider an investment in the fund to be a long-term investment.
Interest rate risk: the risk that the value of the fund's portfolio
will decline because of rising market interest rates (bond prices move
in the opposite direction of interest rates). The longer the average
maturity (duration) of a fund's portfolio, the greater its interest
rate risk. See "What Securities We Invest In--Portfolio
Maturity."
Income risk: the risk that the income from the fund's portfolio will
decline because of falling market interest rates. This can result when
the fund invests the proceeds from new share sales, or from matured or
called bonds, at market interest rates that are below the portfolio's
current earnings rate.
Credit risk: the risk that an issuer of a bond is unable to meet its
obligation to make interest and principal payments due to changing
market conditions. Generally, lower rated bonds provide higher current
income but are considered to carry greater credit risk than higher
rated bonds. Year 2000 issues may affect the ability of municipal
issuers to meet their payment obligations to their bond holders, and
may adversely affect their credit ratings.
State concentration risk: because the fund primarily purchases
municipal bonds from Florida, the fund also bears investment risk
from the
6 Section 2 How We Manage Your Money
<PAGE>
economic, political or regulatory changes that could adversely affect
municipal bond issuers in the state and therefore the value of the
fund's investment portfolio. See "Appendix--Additional State
Information."
Inflation risk: the risk that the value of assets or income from
investments will be less in the future as inflation decreases the
value of money. As inflation increases, the value of the funds' assets
can decline as can the value of the funds' distributions.
How We Manage Risk
In pursuit of its investment objective, the fund assumes investment
risk, chiefly in the form of interest rate and credit risk. The fund
limits this investment risk generally by restricting the type and
maturities of municipal bonds it purchases, and by diversifying its
investment portfolios geographically as well as across different
industry sectors.
Investment Limitations
The fund has adopted certain investment limitations (based on total
assets) that cannot be changed without shareholder approval and are
designed to limit your investment risk and maintain portfolio
diversification. As a diversified fund, the fund may not have more
than:
. 5% in securities in any one issuer (except for U.S. Government
securities or for 25% of the fund's total assets).
. 25% in any one industry such as electric utilities or health
care.
. 10% in borrowings (33% if used to meet redemptions).
Hedging and Other Defensive Investment Strategies
The fund may invest up to 100% in cash equivalents and short-term
investments as a temporary defensive measure in response to adverse
market conditions, or to keep cash on hand fully invested. During
these periods, the weighted average maturity of the fund's investment
portfolio may fall below the defined range described under "Portfolio
Maturity."
The fund may also use various investment strategies designed to limit
the risk of bond price fluctuations and to preserve capital. These
hedging strategies include using financial futures contracts, options
on financial futures, or options based on either an index of long-term
tax-free securities or on debt securities whose prices, in the opinion
of the fund's investment adviser, correlate with the prices of the
fund's investments. The fund, however, has no present intent to use
these strategies.
Section 2 How We Manage Your Money 7
<PAGE>
SECTION 3 HOW YOU CAN BUY AND SELL SHARES
You can choose from four classes of fund shares, each with a
different combination of sales charges, fees, eligibility
requirements and other features. Your financial adviser can help
you determine which class is best for you. We offer a number of
features for your convenience. Please see the Statement of
Additional Information for further details.
How to Choose a Share Class
In deciding whether to purchase Class A, Class B, Class C or
Class R shares, you should consider:
. the amount of your purchase;
. any current holdings of fund shares;
. how long you expect to hold the shares;
. the amount of any up-front sales charge;
. whether a contingent deferred sales charge (CDSC) would
apply upon redemption;
. the amount of any distribution or service fees that you
may incur while you own the shares;
. whether you will be reinvesting income or capital gain
distributions in additional shares;
. whether you qualify for a sales charge waiver or
reduction.
For a summary of the charges and expenses for each class, please
see "What are the Costs of Investing?"
CLASS A SHARES
You can buy Class A shares at the offering price, which is the
net asset value per share plus an up-front sales charge. You may
qualify for a reduced sales charge, or the sales charge may be
waived, as described in "How to Reduce Your Sales Charge." Class
A shares are also subject to an annual service fee of .20% which
compensates your financial adviser for providing ongoing service
to you. The up-front Class A sales charge for the fund is as
follows:
<TABLE>
<CAPTION>
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
<S> <C> <C> <C>
Less than $50,000 4.20% 4.38% 3.70%
$50,000 but less than $100,000 4.00% 4.18% 3.50%
$100,000 but less than $250,000 3.50% 3.63% 3.00%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.50%
$1,000,000 and over -(1) - 1.00%(1)
</TABLE>
8 Section 3 How You Can Buy and Sell Shares
<PAGE>
(1) You can buy $1 million or more of Class A shares at net asset
value without an up-front sales charge. Nuveen pays authorized
dealers of record on these share purchases a sales commission of
1.00% of the first $2.5 million, plus .50% of the next $2.5
million, plus .25% of the amount over $5.0 million. If you redeem
your shares within 18 months of purchase, you may have to pay a
CDSC of 1% of either your purchase price or your redemption
proceeds, whichever is lower. You do not have to pay this CDSC if
your financial adviser has made arrangements with Nuveen and
agrees to waive the commission.
CLASS B SHARES
You can buy Class B shares at the offering price, which is the
net asset value per share without any up-front sales charge so
that the full amount of your purchase is invested in the fund.
However, you will pay annual distribution and service fees of
.95% of average daily assets. The annual .20% service fee
compensates your financial adviser for providing ongoing service
to you. The annual .75% distribution fee compensates Nuveen for
paying your financial adviser a 4% up-front sales commission,
which includes an advance of the first year's service fee. If you
sell your shares within six years of purchase, you will have to
pay a CDSC based on either your purchase price or what you sell
your shares for, whichever amount is lower, according to the
following schedule. You do not pay a CDSC on any Class B shares
you purchase by reinvesting dividends.
Class B shares automatically convert to Class A shares eight
years after you buy them so that the distribution fees you pay
over the life of your investment are limited. You will continue
to pay an annual service fee on any converted Class B shares.
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6
CDSC 5% 4% 4% 3% 2% 1%
CLASS C SHARES
You can buy Class C shares at the offering price, which is the
net asset value per share without any up-front sales charge so
that the full amount of your purchase is invested in the fund.
However, you will pay annual distribution and service fees of 1%.
The annual .20% service fee compensates your financial adviser
for providing ongoing service to you. The annual .55%
distribution fee reimburses Nuveen for paying your financial
adviser an ongoing sales commission. Nuveen advances the first
year's service and distribution fees. If you sell your shares
within 12 months of purchase, you may have to pay a 1% CDSC based
on either your purchase price or what you sell your shares for,
whichever amount is lower.
CLASS R SHARES
Under limited circumstances, you may purchase Class R shares at
the offering price, which is the net asset value on the day of
purchase. In order to qualify, you must be eligible under one of
the programs described in "How to Reduce Your Sales Charge"
(below) or meet certain other purchase size criteria. Class R
shares are not subject to sales charges or ongoing service or
distribution fees. Class R shares have lower ongoing expenses
than the other classes.
Section 3 How You Can Buy and Sell Shares 9
<PAGE>
How to Reduce Your Sales Charge
We offer a number of ways to reduce or eliminate the up-front
sales charge on Class A shares or to qualify to purchase Class R
shares.
<TABLE>
<CAPTION>
Class A Sales Charge Class A Sales Charge Class R Eligibility
Reductions Waivers
<S> <C> <C>
. Rights of accumulation . Nuveen Defined Portfolio . Certain employees and
reinvestment directors of Nuveen or
. Letter of intent employees of authorized
. Purchases using dealers
. Group purchase redemptions from
unrelated funds . Bank trust departments
. Retirement plans
. Certain employees and
directors of Nuveen or
employees of authorized
dealers
. Bank trust departments
</TABLE>
In addition, Class A shares at net asset value and Class R shares
may be purchased through registered investment advisers,
certified financial planners and registered broker-dealers who
charge asset-based or comprehensive "wrap" fees for their
services. Please refer to the Statement of Additional Information
for detailed program descriptions and eligibility requirements.
Additional information is available from your financial adviser
or by calling (800) 257-8787. Your financial adviser can also
help you prepare any necessary application forms. You or your
financial adviser must notify Nuveen at the time of each purchase
if you are eligible for any of these programs. The funds may
modify or discontinue these programs at any time.
How to Buy Shares
You may open an account with $3,000 per fund share class and make
additional investments at any time with as little as $50. There
is no minimum if you are reinvesting Nuveen Defined Portfolio
distributions. The share price you pay will depend on when Nuveen
receives your order. Orders received before the close of trading
on a business day will receive that day's closing share price,
otherwise you will receive the next business day's price. A
business day is any day the New York Stock Exchange is open for
business and normally ends at 4 P.M. New York time.
THROUGH A FINANCIAL ADVISER
You may buy shares through your financial adviser, who can handle
all the details for you, including opening a new account.
Financial advisers can also help you review your financial needs
and formulate long-term investment goals and objectives. In
addition, financial advisers generally can help you develop a
customized financial plan, select investments and monitor and
review your portfolio on an ongoing basis to help assure your
investments continue to meet your needs as circumstances change.
Financial advisers are paid either from fund sales charges and
fees or by charging you a separate fee in lieu of a sales charge
for ongoing
10 Section 3 How You Can Buy and Sell Shares
<PAGE>
investment advice and services. If you do not have a financial
adviser, call (800) 257-8787 and Nuveen can refer you to one in
your area.
BY MAIL
You may open an account and buy shares by mail by completing the
enclosed application and mailing it along with your check to:
Nuveen Investor Services, P.O. Box 5186, Bowling Green Station,
New York, NY 10274-5186.
Systematic Investing
Once you have established a fund account, systematic investing
allows you to make regular investments through automatic
deductions from your bank account (simply complete the
appropriate section of the account application form) or directly
from your paycheck. To invest directly from your paycheck,
contact your financial adviser or call Nuveen at (800) 257-8787.
Systematic investing may also make you eligible for reduced sales
charges.
The chart below illustrates the benefits of systematic investing
based on a $3,000 initial investment and subsequent monthly
investments of $100 over 20 years. The example assumes you earn a
return of 4%, 5% or 6% annually on your investment and that you
reinvest all dividends. These annual returns do not reflect past
or projected fund performance.
[GRAPH APPEARS HERE]
One of the benefits of systematic investing is dollar cost
averaging. Because you regularly invest a fixed amount of money
over a period of years regardless of the share price, you buy
more shares when the price is low and fewer shares when the price
is high. As a result, the average share price you pay should be
less than the average share price of fund shares over the same
period. To be effective, dollar cost averaging requires that you
invest over a long period of time, and does not assure that you
will profit.
Section 3 How You Can Buy and Sell Shares 11
<PAGE>
SYSTEMATIC INVESTMENT PLAN
You can make regular investments of $50 or more per month by
authorizing us to draw preauthorized checks on your bank account.
You can stop the withdrawals at any time. There is no charge for
this plan.
PAYROLL DIRECT DEPOSIT PLAN
You can, with your employer's consent, make regular investments
of $25 or more per pay period (meeting the monthly minimum of
$50) by authorizing your employer to deduct this amount
automatically from your paycheck. You can stop the deductions at
any time. There is no charge for this plan.
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may
request to have $50 or more withdrawn automatically from your
account. You may elect to receive payments monthly, quarterly,
semi-annually or annually, and may choose to receive a check,
have the monies transferred directly into your bank account (see
"Special Services-Fund Direct" below), paid to a third party or
sent payable to you at an address other than your address of
record. You must complete the appropriate section of the account
application or Account Update Form to participate in the fund's
systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to
make concurrent purchases of Class A, B or C shares because you
may unnecessarily pay a sales charge or CDSC on these purchases.
Special Services
To help make your investing with us easy and efficient, we offer
you the following services at no extra cost.
EXCHANGING SHARES
You may exchange fund shares into an identically registered
account at any time for the same class of another Nuveen mutual
fund available in your state. Your exchange must meet the minimum
purchase requirements of the fund into which you are exchanging.
Because an exchange is treated for tax purposes as a concurrent
sale and purchase, and any gain may be subject to tax, you should
consult your tax adviser about the tax consequences of any
contemplated exchange.
The exchange privilege is not intended to allow you to use a fund
for short-term trading. Because excessive exchanges may interfere
with portfolio management, raise fund operating expenses or
otherwise have an adverse effect on other shareholders, each fund
reserves the right to revise or suspend the exchange privilege,
limit the amount or number of exchanges, or reject any exchange.
REINSTATEMENT PRIVILEGE
If you redeem fund shares, you may reinvest all or part of your
redemption proceeds up to one year later without incurring any
additional charges. You may only reinvest into the same share
class you redeemed.
12 Section 3 How You Can Buy and Sell Shares
<PAGE>
If you paid a CDSC, we will refund your CDSC and reinstate your
holding period. You may use this reinstatement privilege only
once for any redemption.
FUND DIRECT
You may link your fund account to your bank account and transfer
money electronically between these accounts and perform a variety
of account transactions, including buying shares by telephone and
systematic investment. You may also have dividends,
distributions, redemption payments or systematic withdrawals sent
directly to your bank account.
Your financial adviser can help you complete the forms for these
services, or you can call Nuveen at (800) 257-8787 for copies of
the necessary forms.
How to Sell Shares
You may use one of the following ways to sell (redeem) your
shares on any day the New York Stock Exchange is open. You will
receive the share price next determined after Nuveen has received
your properly completed redemption request. Your redemption
request must be received before the close of trading for you to
receive that day's price. While the funds do not charge a
redemption fee, you may be assessed a CDSC, if applicable. When
you redeem Class A, Class B, or Class C shares subject to a CDSC,
the fund will first redeem any shares that are not subject to a
CDSC or that represent an increase in the value of your fund
account due to capital appreciation, and then redeem the shares
you have owned for the longest period of time, unless you ask the
fund to redeem your shares in a different order. No CDSC is
imposed on shares you buy through the reinvestment of dividends
and capital gains. The holding period is calculated on a monthly
basis and begins on the first day of the month in which you buy
shares. When you redeem shares subject to a CDSC, the CDSC is
calculated on the lower of your purchase price or redemption
proceeds, deducted from your redemption proceeds, and paid to
Nuveen. The CDSC may be waived under certain special
circumstances as described in the Statement of Additional
Information.
THROUGH YOUR FINANCIAL ADVISER
You may sell your shares through your financial adviser who can
prepare the necessary documentation. Your financial adviser may
charge for this.
BY TELEPHONE
If you have authorized telephone redemption privileges, you can
redeem your shares by telephone up to $50,000. You may not redeem
by telephone shares held in certificate form. Checks will be
issued only to the shareholder of record and mailed to the
address of record. If you have established electronic funds
transfer privileges, you may have redemption proceeds transferred
electronically to your bank account. We will normally mail your
check the next business day. Nuveen and Chase Global Funds
Services will be liable for losses resulting from unauthorized
telephone redemptions only if they do not follow reasonable
procedures designed to verify the identity of the caller. You
should immediately verify your trade confirmations when you
receive them.
Section 3 How You Can Buy and Sell Shares 13
<PAGE>
By Mail
You can sell your shares at any time by sending a
An Important Note About written request to the appropriate fund, Nuveen
Involuntary Redemption Investor Services, P.O. Box 5186, Bowling Green
Station, New York, NY 10274-5186. Your request
From time to time, the must include the following information:
fund may establish minimum
account size requirements. . The fund's name;
The fund reserves the right
to liquidate your account . Your name and account number;
upon 30 days' written notice
if the value of your account . The dollar or share amount you wish to redeem;
falls below an established
minimum. The fund presently . The signature of each owner exactly as it
has set a minimum balance of appears on the account;
$100 unless you have an
active Nuveen Defined . The name of the person to whom you want your
Portfolio reinvestment redemption proceeds paid (if other than to the
account. You will not be shareholder of record);
assessed a CDSC on an
involuntary redemption. . The address where you want your redemption
proceeds sent (if other than the address of
record);
. Any certificates you have for the shares; and
. Any required signature guarantees.
We will normally mail your check the next
business day, but in no event more than seven
days after we receive your request. If you
purchased your shares by check, your redemption
proceeds will not be mailed until your check has
cleared. Guaranteed signatures are required if
you are redeeming more than $50,000, you want the
check payable to someone other than the
shareholder of record or you want the check sent
to another address (or the address of record has
been changed within the last 60 days). Signature
guarantees must be obtained from a bank,
brokerage firm or other financial intermediary
that is a member of an approved Medallion
Guarantee Program or that is otherwise approved
by a fund. A notary public cannot provide a
signature guarantee.
14 Section 3 How You Can Buy and Sell Shares
<PAGE>
SECTION 4 GENERAL INFORMATION
To help you understand the tax implications of investing in the fund,
this section includes important details about how the fund makes
distributions to shareholders. We discuss some other fund policies, as
well.
Distributions and Taxes
The fund pays tax-free dividends monthly and any taxable capital gains
or other taxable distributions once a year in December. The fund
declares dividends monthly to shareholders of record as of the ninth
of each month, payable the first business day of the following month.
Payment and Reinvestment Options
The fund automatically reinvests your dividends in additional fund
shares unless you request otherwise. You may request to have your
dividends paid to you by check, deposited directly into your bank
account, paid to a third party, sent to an address other than your
address of record or reinvested in shares of another Nuveen mutual
fund. For further information, contact your financial adviser or call
Nuveen at (800) 257-8787.
Taxes and Tax Reporting
Because the fund invests in municipal bonds, the regular monthly
dividends you receive will be exempt from regular federal, state and,
in some cases, local income tax. All or a portion of these dividends,
however, may be subject to the federal alternative minimum tax (AMT).
Although the fund does not seek to realize taxable income or capital
gains, the fund may realize and distribute taxable income or capital
gains from time to time as a result of its normal investment
activities. The fund will distribute in December any taxable income or
capital gains realized over the preceding year. Net short-term gains
are taxable as ordinary income. Net long-term capital gains are
taxable as long-term capital gains regardless of how long you have
owned your investment. Taxable dividends do not qualify for a
dividends received deduction if you are a corporate shareholder.
Early in each year, you will receive a statement detailing the amount
and nature of all dividends and capital gains, including any
percentage of your fund dividends attributable to municipal
obligations, that you were paid during the prior year. You will
receive this statement from the firm where you purchased your fund
shares if you hold your investment in street name. Nuveen will send
you this statement if you hold your shares in registered form. The tax
status of your dividends is not affected by whether you reinvest your
dividends or receive them in cash. If you receive social security
benefits, you should be aware that any tax-free income is taken into
account in calculating the amount of these benefits that may be
subject to federal income tax.
Section 4 General Information 15
<PAGE>
Tax laws are subject to change, so we urge you to consult your tax
adviser about your particular tax situation and how it might be
affected by current tax law.
Please note that if you do not furnish us with your correct Social
Security number or employer identification number, federal law
requires us to withhold federal income tax from your distributions and
redemption proceeds at a rate of 31%.
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable
dividend is commonly known as "buying the dividend." The entire
dividend may be taxable to you even though a portion of the dividend
effectively represents a return of your purchase price. Similarly, if
you sell or exchange fund shares shortly before the record date for a
tax-exempt dividend, a portion of the price you receive may be treated
as a taxable capital gain even though it reflects tax-free income
earned but not yet distributed by the fund.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to
earn on a taxable investment in order to equal a stated tax-free yield
on a municipal investment. To assist you to more easily compare
municipal investments like the funds with taxable alternative
investments, the table below presents the taxable equivalent yields
for a range of hypothetical tax-free yields and tax rates:
Taxable Equivalent Of Tax-Free Yields
<TABLE>
<CAPTION>
Tax-Free Yield
--------------------------------------------------------
Tax Rate 4.00% 4.50% 5.00% 5.50% 6.00%
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
</TABLE>
The yields and tax rates shown above are hypothetical and do not
predict your actual returns or effective tax rate. For more detailed
information, see the statement of additional information or consult
your tax adviser.
John Nuveen & Co. Incorporated serves as the selling agent and
distributor of the fund's shares. In this capacity, Nuveen manages the
offering of the funds' shares and is responsible for all sales and
promotional activities. In order to reimburse Nuveen for its costs in
connection with these activities, including compensation paid to
authorized dealers, each fund has adopted a distribution and service
plan under Rule 12b-1 under the Investment Company Act of 1940. (See
"How to Choose a Share Class" for a description of the distribution
and service fees paid under this plan.)
Nuveen receives the distribution fee for Class B and Class C shares
primarily for providing compensation to authorized dealers, including
Nuveen, in connection with the distribution of shares. Nuveen uses the
service fee for Class A, Class B, and Class C shares to compensate
authorized dealers, including Nuveen, for providing account services
to
16 Section 4 General Information
<PAGE>
shareholders. These services may include establishing and maintaining
shareholder accounts, answering shareholder inquiries, and providing
other personal services to shareholders. These fees also compensate
Nuveen for other expenses, including printing and distributing
prospectuses to persons other than shareholders, and preparing,
printing, and distributing advertising and sales literature and
reports to shareholders used in connection with the sale of shares.
Because these fees are paid out of the funds' assets on an on-going
basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.
Net Asset Value
The price you pay for your shares is based on the fund's net asset
value per share which is determined as of the close of trading
(normally 4:00 p.m. eastern time) on each day the New York Stock
Exchange is open for business. Net asset value is calculated for each
class by taking the fair value of the class' total assets, including
interest or dividends accrued but not yet collected, less all
liabilities, and dividing by the total number of shares outstanding.
The result, rounded to the nearest cent, is the net asset value per
share. All valuations are subject to review by the funds' Board of
Trustees or its delegate.
In determining net asset value, expenses are accrued and applied daily
and securities and other assets for which market quotations are
available are valued at market value. The prices of municipal bonds
are provided by a pricing service and based on the mean between the
bid and asked price. When price quotes are not readily available
(which is usually the case for municipal securities), the pricing
service establishes fair market value based on prices of comparable
municipal bonds.
Fund Service Providers
The custodian of the assets of the fund is The Chase Manhattan Bank, 4
New York Plaza, New York, NY 10004-2413. Chase also provides certain
accounting services to the fund. The fund's transfer, shareholder
services and dividend paying agent, Chase Global Funds Services
Company, P.O. Box 5186, New York, NY 10274-5186, performs bookkeeping,
data processing and administrative services for the maintenance of
shareholder accounts.
Nuveen Advisory and Chase Global Funds Services each rely on computer
systems to manage the fund's investments, process shareholder
transactions and provide shareholder account maintenance. Because of
the way computers historically have stored dates, some of these
systems currently may not be able to correctly process activity
occurring in the year 2000. Nuveen Advisory is working with the fund's
service providers to adapt their systems to address this "Year 2000"
issue. Nuveen Advisory and the fund expect, but there can be no
absolute assurance, that the necessary work will be completed on a
timely basis.
Section 4 General Information 17
<PAGE>
SECTION 5 FINANCIAL HIGHLIGHTS
The following tables are intended to help you better understand the
fund's recent past performance. The tables are excerpted from the
fund's latest financial statements audited by Arthur Andersen LLP. You
may obtain the complete statements along with the auditor's report by
requesting from Nuveen a free copy of the fund's latest annual
shareholder report.
<TABLE>
<CAPTION>
Florida Municipal Bond Fund**
Investment Operations Less Distributions Ratios/Supplemental Data
--------------------- ------------------ ------------------------
Class
(Inception
Date)
Net
Realized
and Ending Ending
Year Beginning Net Unrealized Net Net Net
Ending Net Asset Investment Investment Investment Capital Asset Total Assets
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A (6/90)
1998 $10.60 $.56 $.34 $.90 $(.55) $(.01) $(.56) $10.94 8.67% $292,399
1997 10.39 .56 .21 .77 (.56) -- (.56) 10.60 7.59 296,970
1996 10.63 .57 (.24) .33 (.57) -- (.57) 10.39 3.14 318,456
1995 10.38 .58 .26 .84 (.59) -- (.59) 10.63 8.43 341,374
1994 10.76 .60 (.38) .22 (.60) -- (.60) 10.38 2.00 372,082
CLASS B (2/97)
1998 10.61 .48 .35 .83 (.48) (.01) (.49) 10.95 7.89 5,266
1997(c) 10.59 .16 .02 .18 (.16) -- (.16) 10.61 1.70 785
CLASS C (9/95)
1998 10.60 .50 .36 .86 (.50) (.01) (.51) 10.95 8.20 7,646
1997 10.39 .50 .21 .71 (.50) -- (.50) 10.60 7.00 5,130
1996(c) 10.65 .35 (.26) .09 (.35) -- (.35) 10.39 1.30* 1,175
CLASS R (2/97)
1998 10.60 .58 .35 .93 (.58) (.01) (.59) 10.94 8.91 56,428
1997(c) 10.59 .19 .01 .20 (.19) -- (.19) 10.60 1.93 54,247
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Florida Municipal Bond Fund**
Ratios/Supplemental Data
------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Expenses Income
Year to Average to Average Portfolio
Ending Net Net Turnover
May 31, Assets(a) Assets(a) Rate
- --------------------------------------------------------------
<S> <C> <C> <C>
CLASS A (6/90)
1998 .84% 5.13% 14%
1997 .82 5.34 54
1996 .83 5.36 94
1995 .73 5.71 53
1994 .58 5.51 32
CLASS B (2/97)
1998 1.59 4.35 14
1997(c) 1.58* 4.52* 54
CLASS C (9/95)
1998 1.39 4.58 14
1997 1.35 4.75 54
1996(c) 1.38* 4.59* 94
CLASS R (2/97)
1998 .64 5.33 14
1997(c) .64* 5.55* 54
- --------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997,
reflects the financial highlights of Flagship Florida.
(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.
18 Section 5 Financial Highlights
<PAGE>
APPENDIX Additional State Information
Because the fund primarily purchases Florida municipal
bonds, the fund also bears investment risk from economic,
political or regulatory changes that could adversely affect
municipal bond issuers in that state and therefore the value
of the fund's investment portfolio. The following discussion
of special state considerations was obtained from official
offering statements of these issuers and has not been
independently verified by the fund. The discussion includes
general state tax information related to an investment in
fund shares. Because tax laws are complex and often change,
you should consult your tax adviser about the state tax
consequences of a specific fund investment. See the
Statement of Additional Information for further
information.
FLORIDA
Florida is one of the nation's fastest growing states.
Employment and personal income growth have outpaced the
nation since 1991 and recent economic reports indicate that
the State continues to experience job growth, although at a
more moderate pace. Population growth has slowed but remains
relatively high. Florida has a diverse economy with
substantial insurance, banking, healthcare, construction and
trade sectors, yet it remains heavily dependent on the
agriculture and tourism industries.
Florida's unemployment rate of 4.5% in June 1998 was
comparable to the national average of 4.5% in June 1998 and
lower than the State's 4.8% rate in June 1997. Florida's
1997 per capita income of $25,255 is on a par with national
averages and slightly above regional levels. Because the
State's significant senior population relies more on fixed
income than on wages, income levels in the State are
generally more stable over different phases of economic
cycles.
A voter-approved amendment to Florida's Constitution that
became effective in 1996 limits the rate of growth of state
revenues to the growth rate of personal income. Revenues
that are pledged to bonds, including new issuance, are
exempt from the limitation. Another recent constitutional
amendment requires the State to maintain a budget
stabilization fund. The fund, which is expected to reach the
required 5% level by 1999, provides a counterbalance to the
State's reliance on economically-sensitive sales tax
revenues. As of July 31, 1998, Florida's general obligation
debt carries ratings of AA+ by Standard & Poor's, Aa2 by
Moody's, and AA by Fitch.
APPENDIX 19
<PAGE>
Tax Treatment
Shares of the Florida fund will not be subject to the
Florida intangible personal property tax. The Florida fund
holds only Florida municipal bonds and U.S. Government
securities. If the Florida fund holds other taxable
securities, then your shares in the Florida fund will be
subject to the Florida intangible personal property tax,
except that the portion of your shares attributable to the
Florida fund's investments in U.S. securities will not be
subject to the tax. Corporate shareholders of the Florida
fund also may be subject to the Florida corporate income
tax. Corporate shareholders should refer to the Statement of
Additional Information for more detailed information.
20 APPENDIX
<PAGE>
NUVEEN MUTUAL FUNDS
Nuveen offers a variety of mutual funds designed to help you
reach your financial goals. The funds below are grouped by
investment objectives.
GROWTH
Nuveen Rittenhouse Growth Fund
GROWTH AND INCOME
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
TAX-FREE INCOME
NATIONAL MUNICIPAL BOND FUNDS
Long-term
Insured Long-term
Intermediate-term
Limited-term
STATE MUNICIPAL BOND FUNDS
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky/2/ New York/1/
Several additional sources of information are available to
you. The Statement of Additional Information (SAI),
incorporated by reference into this prospectus, contains
detailed information on fund policies and operation.
Shareholder reports contain management's discussion of
market conditions, investment strategies and performance
results as of the fund's latest semi-annual or annual fiscal
year end. Call Nuveen at (800) 257-8787 to request a free
copy of any of these materials or other fund information.
You may also obtain this and other fund information directly
from the Securities and Exchange Commission (SEC). The SEC
may charge a copying fee for this information. Visit the SEC
on-line at http://www.sec.gov or in person at the SEC's
Public Reference Room in Washington, D.C. Call the SEC at
(800) SEC-0330 for room hours and operation. You may also
request fund information by writing to the SEC's Public
Reference Section, Washington, D.C. 20549. The fund's
Investment Company file number is 811-07751.
1. Long-term and insured long-term portfolios.
2. Long-term and limited-term portfolios.
VPR-FL-NA 9-98
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
<PAGE>
NUVEEN
Municipal
Bond Funds
September 30, 1998
Prospectus
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Maryland
Pennsylvania
Virginia
NOT FDIC- May lose value
INSURED No bank guarantee
Like all mutual fund shares these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Section 1 The Funds
This section provides you with an overview of the funds including
investment objectives, portfolio holdings and historical performance
information.
Introduction 1
- --------------------------------------------------------------------------------
Nuveen Maryland Municipal Bond Fund 2
- --------------------------------------------------------------------------------
Nuveen Flagship Pennsylvania Municipal Bond Fund 4
- --------------------------------------------------------------------------------
Nuveen Flagship Virginia Municipal Bond Fund 6
- --------------------------------------------------------------------------------
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
Who Manages the Funds 8
- --------------------------------------------------------------------------------
Management Fees 9
- --------------------------------------------------------------------------------
What Securities We Invest In 9
- --------------------------------------------------------------------------------
How We Select Investments 10
- --------------------------------------------------------------------------------
What the Risks Are 11
- --------------------------------------------------------------------------------
How We Manage Risk 11
- --------------------------------------------------------------------------------
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into or
out of your account.
How to Choose a Share Class 13
- --------------------------------------------------------------------------------
How to Reduce Your Sales Charge 15
- --------------------------------------------------------------------------------
How to Buy Shares 15
- --------------------------------------------------------------------------------
Systematic Investing 16
- --------------------------------------------------------------------------------
Systematic Withdrawal 17
- --------------------------------------------------------------------------------
Special Services 17
- --------------------------------------------------------------------------------
How to Sell Shares 18
- --------------------------------------------------------------------------------
Section 4 General Information
This section summarizes the funds' distribution policies and other
general fund information.
Distributions and Taxes 20
- --------------------------------------------------------------------------------
Distribution and Service Plans 21
- --------------------------------------------------------------------------------
Net Asset Value 22
- --------------------------------------------------------------------------------
Fund Service Providers 22
- --------------------------------------------------------------------------------
Section 5 Financial Highlights
This section provides the funds' financial performance for the past
5 years. 23
- --------------------------------------------------------------------------------
Appendix Additional State Information 26
- --------------------------------------------------------------------------------
</TABLE>
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment Strategy
Risks
Fees, Charges
and Expenses
Shareholder
Instructions
Performance and
Current Portfolio
Information
<PAGE>
September 30, 1998
Section 1 The Funds
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
Prospectus
This prospectus is intended to provide important information to help you
evaluate whether one of the Nuveen Mutual Funds listed above may be right for
you. Please read it carefully before investing and keep it for future reference.
To learn more about how Nuveen Mutual Funds can help you achieve your financial
goals, talk with your financial adviser. Or call us at (800) 257-8787 for more
information.
A Century of Investment Experience
Since our founding in 1898, John Nuveen & Co. Incorporated has been synonymous
with investments that withstand the test of time. Today we offer a broad range
of quality investments designed for individuals seeking to build and maintain
wealth.
Section 1 The Funds 1
<PAGE>
Nuveen Maryland Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings agencies.
The fund may buy non-rated municipal bonds if the fund's investment adviser
judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate and credit risk.
Interest rate risk is the risk that interest rates will rise, causing bond
prices to fall. Credit risk is the risk that an issuer of a municipal bond will
be unable to make interest and principal payments. In general, lower rated bonds
carry greater credit risk. The fund may bear additional risk because it invests
primarily in Maryland bonds. The fund is non-diversified, and may invest more of
its assets in a single issuer than a diversified fund. Greater concentration may
increase risk. As with any mutual fund investment, loss of money is a risk of
investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. taxes on investment income;
. Set aside money systematically for retirement, estate planning or college
funding.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser/SM/ for municipal bond investing. The chart and table below illustrate
annual fund returns for each of the past five years as well as annualized fund,
peer group and market benchmark returns for the one-, five-year and inception
periods ending December 31, 1997. This information is intended to help you
assess the variability of fund returns over the past five years (and
consequently, the potential rewards and risks of a fund investment).
Total Returns/1/
Class R Annual Returns
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
1993 12.4%
1994 -6.1%
1995 17.2%
1996 3.8%
1997 7.7%
</TABLE>
From inception in December 1991 to December 31, 1997, the highest and lowest
quarterly returns were 7.40% and -5.70%, respectively for the quarters ending
3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly returns do not
reflect sales charges, which would reduce returns, while the average annual
return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
------------------------------------
Class 1 Year 5 Year Inception
- --------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 3.05% 5.52% 6.02%
Class A (NAV) 7.55% 6.43% 6.81%
Class B 2.75% 5.53% 5.93%
Class C 6.92% 5.70% 6.07%
Class R 7.74% 6.69% 7.07%
- --------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 7.78%
Lipper
Peer Group/3/ 8.47% 6.49% 6.92%
</TABLE>
2 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
Shareholder Transaction Expenses/4/
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Paid Directly From Your Investment
Share Class A B C R/5/
- -----------------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
...................................................................................
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
...................................................................................
Exchange Fees None None None None
...................................................................................
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
...................................................................................
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
- -----------------------------------------------------------------------------------
Management Fees .55% .55% .55% .55%
...................................................................................
12b-1 Distribution and Service Fees .20% .95% .75% --%
...................................................................................
Other Expenses .25% .25% .25% .25%
- -----------------------------------------------------------------------------------
Total Annual Fund Operating
Expenses--Gross+ 1.00% 1.75% 1.55% .80%
- -----------------------------------------------------------------------------------
+After Expense Reimbursements
...................................................................................
Reimbursements (.06%) (.06%) (.06%) (.06%)
...................................................................................
Total Annual Fund Operating Expenses--Net .94% 1.69% 1.49% .74%
...................................................................................
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you invest
$10,000 in the fund for the time period indicated and then either redeem or do
not redeem your shares at the end of a period. The example assumes that your
investment has a 5% return each year and that the fundOs operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 518 $ 573 $ 158 $ 82 $ 518 $ 178 $ 158 $ 82
.........................................................................
3 Years $ 725 $ 868 $ 490 $255 $ 725 $ 551 $ 490 $255
.........................................................................
5 Years $ 949 $1,063 $ 845 $444 $ 949 $ 949 $ 845 $444
.........................................................................
10 Years $1,593 $1,864 $1,845 $990 $1,593 $1,864 $1,845 $990
.........................................................................
</TABLE>
How the Funds Is Invested (as of 5/31/98)
Portfolio Statistics
Weighted Average Maturity 15.3 years
...................................................
Weighted Average Duration 5.4 years
...................................................
Weighted Average Credit Quality AA+
...................................................
Number of Issues 50
...................................................
Credit Quality
AAA 66%
...................................................
AA 22%
...................................................
A 4%
...................................................
BBB/NR 8%
...................................................
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C> <C> <C> <C> <C>
Tax Obligation- Housing- U.S. Guaranteed Health Care (12%) Other (32%) Housing-
Limited (11%) Multifamily (14%) (19%) Single-Family
(12%)
</TABLE>
1. Class R total returns reflect actual performance for all periods; Class A, B
and C total returns reflect actual performance for periods since class
inception, and Class R performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was 2.48%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Maryland Municipal Debt Category. Returns assume reinvestment of
dividends and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers and
other firms may charge additional fees for shareholder transactions or for
advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You Can
Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC of
5% during the first year, 4% during the second and third years, 3% during the
fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 3
<PAGE>
Nuveen Flagship Pennsylvania Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings agencies.
The fund may buy non-rated municipal bonds if the fund's investment adviser
judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate and credit risk.
Interest rate risk is the risk that interest rates will rise, causing bond
prices to fall. Credit risk is the risk that an issuer of a municipal bond will
be unable to make interest and principal payments. In general, lower rated bonds
carry greater credit risk. The fund may bear additional risk because it invests
primarily in Pennsylvania bonds. The fund is non-diversified, and may invest
more of its assets in a single issuer than a diversified fund. Greater
concentration may increase risk. As with any mutual fund investment, loss of
money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or college
funding.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser/SM/ for municipal bond investing. The chart and table below illustrate
annual fund returns for each of the past ten years as well as annualized fund,
peer group and market benchmark returns for the one-, five- and ten-year periods
ending December 31, 1997. This information is intended to help you assess the
variability of fund returns over the past ten years (and consequently, the
potential rewards and risks of a fund investment).
Total Returns/1/
Class A Annual Returns
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
1998 13.2%
1989 9.5%
1990 5.1%
1991 11.8%
1992 9.8%
1993 11.1%
1994 -4.2%
1995 15.3%
1996 3.8%
1997 10.0%
</TABLE>
During the ten years ending December 31, 1997, the highest and lowest quarterly
returns were 5.63% and -4.45%, respectively for the quarters ending 3/31/95 and
3/31/94. The bar chart and highest/lowest quarterly returns do not reflect sales
charges, which would reduce returns, while the 1-, 5- and 10-year average annual
return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
------------------------------------
Class 1 Year 5 Year 10 Year
<S> <C> <C> <C>
- -----------------------------------------------------------
Class A (Offer) 5.36% 6.06% 7.94%
Class A (NAV) 9.99% 6.98% 8.40%
Class B 5.39% 6.24% 7.93%
Class C 9.41% 6.38% 7.80%
Class R 10.21% 7.02% 8.42%
- -----------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 8.58%
Lipper
Peer Group/3/ 8.67% 7.00% 8.53%
</TABLE>
4 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
<TABLE>
<CAPTION>
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
Share Class A B C R/5/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
............................................................................
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
............................................................................
Exchange Fees None None None None
............................................................................
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
............................................................................
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
- ----------------------------------------------------------------------------
Management Fees .55% .55% .55% .55%
............................................................................
12b-1 Distribution and Service Fees .20% .95% .75% --%
............................................................................
Other Expenses .20% .20% .20% .20%
- ----------------------------------------------------------------------------
Total Annual Fund Operating
Expenses--Gross+ .95% 1.70% 1.50% .75%
+After Expense Reimbursements
............................................................................
Reimbursements (.34%) (.36%) (.34%) (.34%)
............................................................................
Total Annual Fund Operating Expenses--Net .61% 1.34% 1.16% .41%
............................................................................
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you
invest $10,000 in the fund for the time period indicated and then either redeem
or do not redeem your shares at the end of a period. The example assumes that
your investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 513 $ 568 $ 153 $ 77 $ 513 $ 173 $ 153 $ 77
............................................................................
3 Years $ 710 $ 854 $ 474 $240 $ 710 $ 536 $ 474 $240
............................................................................
5 Years $ 923 $1,037 $ 818 $417 $ 923 $ 923 $ 818 $417
............................................................................
10 Years $1,537 $1,810 $1,791 $930 $1,537 $1,810 $1,791 $930
............................................................................
</TABLE>
How the Fund is Invested (as of 5/31/98)
Portfolio Statistics
Weighted Average Maturity 22.1 years
...........................................
Weighted Average Duration 7.6 years
...........................................
Weighted Average Credit Quality A+
...........................................
Number of Issues 85
...........................................
Credit Quality
AAA 40%
...........................................
AA 8%
...........................................
A 19%
...........................................
BBB/NR 33%
...........................................
Industry Diversification (Top 5)
[pie chart appears here]
Other (37%)
Utilities (12%)
Health Care (15%)
U.S. Guaranteed (8%)
Housing-Single-Family (12%)
Education and Civic Organizations (16%)
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was 2.93%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns reflect the performance of the Lipper Pennsylvania
Municipal Debt Index, a managed index that represents the average annualized
returns of the 30 largest funds in the Lipper Pennsylvania Municipal Debt
Category. Returns assume reinvestment of dividends and do not reflect any
applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized Dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3% during
the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 5
<PAGE>
Nuveen Flagship Virginia Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent ratings agencies.
The fund may buy non-rated municipal bonds if the fund's investment adviser
judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate and credit risk.
Interest rate risk is the risk that interest rates will rise, causing bond
prices to fall. Credit risk is the risk that an issuer of a municipal bond will
be unable to make interest and principal payments. In general, lower rated
municipal bonds carry greater credit risk. The fund may bear additional risk
because it invests primarily in Virginia bonds. The fund is non-diversified, and
may invest more of its assets in a single issuer than a diversified fund.
Greater concentration may increase risk. As with any mutual fund investment,
loss of money is a risk of investing.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income;
. Set aside money systematically for retirement, estate planning or
college funding.
You should not invest in this fund if you seek to:
. Pursue an aggressive, high-growth investment strategy;
. Invest through an IRA or 401(k) plan;
. Avoid fluctuations in share price.
How the Fund Has Performed
The fund's investment adviser is Nuveen Advisory Corp., Nuveen's Premier
Adviser/SM/ for municipal bond investing. The chart and table below illustrate
annual fund returns for each of the past ten years as well as annualized fund,
peer group and market benchmark returns for the one-, five- and ten-year periods
ending December 31, 1997. This information is intended to help you assess the
variability of fund returns over the past ten years (and consequently, the
potential rewards and risks of a fund investment).
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1988 12.7%
1989 9.3%
1990 6.5%
1991 11.8%
1992 9.3%
1993 12.4%
1994 -5.5%
1995 16.3%
1996 4.0%
1997 9.4%
During the ten years ending December 31, 1997, the highest and lowest quarterly
returns were 6.58% and -5.14%, respectively for the quarters ending 3/31/95 and
3/31/94. The bar chart and highest/lowest quarterly returns do not reflect sales
charges, which would reduce returns, while the 1-, 5- and 10-year average annual
return table does.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1997
Class 1 Year 5 Year 10 Year
- ----------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) 4.79% 6.12% 7.99%
Class A (NAV) 9.41% 7.04% 8.45%
Class B 4.63% 6.26% 7.98%
Class C 8.91% 6.45% 7.86%
Class R 9.62% 7.08% 8.47%
- ----------------------------------------------------------------
LB Market
Benchmark/2/ 9.19% 7.36% 8.58%
Lipper
Peer Group/3/ 8.98% 6.70% 7.74%
</TABLE>
6 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A B C R/5/
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
.......................................................................................
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
.......................................................................................
Exchange Fees None None None None
.......................................................................................
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
.......................................................................................
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
- ---------------------------------------------------------------------------------------
Management Fees .55% .55% .55% .55%
.......................................................................................
12b-1 Distribution and Service Fees .20% .95% .75% --%
.......................................................................................
Other Expenses .15% .14% .14% .15%
- ---------------------------------------------------------------------------------------
Total Annual Fund Operating
Expenses--Gross+ .90% 1.64% 1.44% .70%
+After Expense Reimbursements
.......................................................................................
Reimbursements (.16%) (.13%) (.15%) (.16%)
.......................................................................................
.......................................................................................
Total Annual Fund Operating Expenses--Net .74% 1.51% 1.29% .54%
.......................................................................................
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you invest
$10,000 in the fund for the time period indicated and then either redeem or do
not redeem your shares at the end of a period. The example assumes that your
investment has a 5% return each year and that the fund's operating expenses
remain the same. Your actual returns and costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 508 $ 562 $ 147 $ 72 $ 508 $ 167 $ 147 $ 72
.........................................................................................................
3 Years $ 695 $ 836 $ 456 $224 $ 695 $ 517 $ 456 $224
.........................................................................................................
5 Years $ 898 $1,006 $ 787 $390 $ 898 $ 892 $ 787 $390
.........................................................................................................
10 Years $1,481 $1,746 $1,724 $871 $1,481 $1,746 $1,724 $871
</TABLE>
How the Fund Is Invested (as of 5/31/98)
Portfolio Statistics
Weighted Average Maturity 20.3 years
................................................
Weighted Average Duration 6.1 years
................................................
Weighted Average Credit Quality AA-
................................................
Number of Issues 127
................................................
Credit Quality
AAA 34%
................................................
AA 30%
................................................
A 24%
................................................
BBB/NR 12%
................................................
Industry Diversification (Top 5)
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C> <C> <C> <C> <C>
Tax Obligation- Water/ U.S. Guaranteed Health Care (14%) Other (38%) Education
Limited (15%) Sewer (14%) (8%) and Civic
Organizations
(11%)
</TABLE>
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception, and Class A performance for periods prior to class inception,
adjusted for the differences in fees between the classes (see "What are the
Costs of Investing?"). The year-to-date return as of 6/30/98 was 2.80%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Virginia Municipal Debt Category.
4. As a percent of offering price unless otherwise noted. Authorized Dealers and
other firms may charge additional fees for shareholder transactions or for
advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced sales charges apply to purchases of $50,000 or more. See "How You
Can Buy and Sell Shares."
7. As a percentage of lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC of
5% during the first year, 4% during the second and third years, 3% during the
fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 7
<PAGE>
Section 2 How We Manage Your Money
To help you understand the funds better, this section includes a detailed
discussion of our investment and risk management strategies. For a more complete
discussion of these matters, please consult the Statement of Additional
Information.
Who Manages the Funds
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, IL 60606, ("Nuveen
Advisory"), serves as the investment adviser to the funds and in this capacity
is responsible for the selection and on-going monitoring of the municipal bonds
in each fund's investment portfolio, managing the fund's business affairs and
providing certain clerical, bookkeeping and other administrative services.
Nuveen Advisory serves as investment adviser to investment portfolios with more
than $35 billion in municipal assets under management.
Overall investment management strategy and operating policies for the funds are
set by the Investment Policy Committee of Nuveen Advisory. The Investment Policy
Committee is comprised of the principal executive officers and portfolio
managers of Nuveen Advisory and meets regularly to review economic conditions,
the outlook for the financial markets in general and the status of the municipal
markets in particular. Day-to-day operation of each fund and the execution of
its specific investment strategies is the responsibility of the designated
portfolio manager described below.
Daniel S. Solender has been the portfolio manager for the Maryland and Virginia
Funds since July 1998. Mr. Solender has been a portfolio manager for Nuveen
Advisory since 1992. Mr. Solender is currently an Assistant Vice President of
Nuveen Advisory, and he manages investments for nineteen Nuveen-sponsored
investment companies, including the Connecticut, New York, and New York Insured
Funds.
Thomas J. O'Shaughnessy has been the portfolio manager for the Pennsylvania Fund
since July 1998. Mr. O'Shaughnessy has been a portfolio manager for Nuveen
Advisory since 1983. He currently manages investments for fourteen Nuveen-
sponsored investment companies, including the Georgia, Kentucky, North Carolina,
and Tennessee Funds.
8 Section 2 How We Manage Your Money
<PAGE>
Management Fee
<TABLE>
<CAPTION>
For providing these services, Nuveen Advisory is paid an annual management fee.
The following schedule applies to each fund described in this prospectus:
Average Daily Net Asset Value Management Fee
<S> <C>
For the first $125 million 0.5500%
................................................................................
For the next $125 million 0.5375%
................................................................................
For the next $250 million 0.5250%
................................................................................
For the next $500 million 0.5125%
................................................................................
For the next $1 billion 0.5000%
................................................................................
For assets over $2 billion 0.4750%
................................................................................
</TABLE>
<TABLE>
<CAPTION>
For the most recent fiscal year, the funds paid after expense reimbursements the
following management fees to Nuveen Advisory, as a percentage of average net
assets:
<S> <C>
Nuveen Maryland Municipal Bond Fund .49%
................................................................................
Nuveen Flagship Pennsylvania Municipal Bond Fund .21%
................................................................................
Nuveen Flagship Virginia Municipal Bond Fund .39%
................................................................................
</TABLE>
What Securities We Invest In
Each fund's investment objective may not be changed without shareholder
approval. The following investment policies may be changed by the Board of
Trustees without shareholder approval unless otherwise noted in this prospectus
or the Statement of Additional Information.
Municipal Obligations
The funds invest primarily in municipal bonds that pay interest that is exempt
from regular federal, state and, in some cases, local income tax. Income from
these bonds may be subject to the federal alternative minimum tax.
States, local governments and municipalities issue municipal bonds to raise
money for various public purposes such as building public facilities,
refinancing outstanding obligations and financing general operating
expenses.
The funds may purchase municipal bonds that represent lease obligations. These
carry special risks because the issuer of the bonds may not be obligated to
appropriate money annually to make payments under the lease. In order to reduce
this risk, the funds will only purchase these bonds where the issuer has a
strong incentive to continue making appropriations until maturity.
Quality Municipal Bonds
The funds purchase only quality municipal bonds that are either rated investment
grade (AAA/Aaa to BBB/Baa) by independent rating agencies at the time of
purchase or are non-rated but judged to be investment grade
Section 2 How We Manage Your Money 9
<PAGE>
by the fund's investment adviser. Each fund will invest at least 80% of its net
assets in investment-grade quality municipal bonds. If suitable municipal bonds
from a specific state are not available at attractive prices and yields, a fund
may invest in municipal bonds of U.S. territories (such as Puerto Rico and Guam)
which are exempt from regular federal, state, and local income taxes. The funds
may not invest more than 20% of their net assets in these territorial municipal
bonds.
Portfolio Maturity
Each fund buys municipal bonds with different maturities in pursuit of its
investment objective, but maintains under normal market conditions an investment
portfolio with an overall weighted average portfolio maturity of 15 to 30 years.
Short-term Investments
Under normal market conditions, each fund may invest up to 20% of net assets in
short-term, high quality municipal bonds. See "How We Manage Risk -- Hedging and
Other Defensive Investment Strategies." The funds may invest in short-term, high
quality taxable securities if suitable short-term municipal bonds are not
available at reasonable prices and yields. For more information on eligible
short-term investments, see the Statement of Additional Information.
Delayed Delivery Transactions
The funds may buy or sell securities on a when-issued or delayed-delivery basis,
paying for or taking delivery of the securities at a later date, normally within
15 to 45 days of the trade. Such transactions involve an element of risk because
the value of the security to be purchased may decline before the settlement
date.
How We Select Investments
Nuveen Advisory selects municipal obligations for the funds based upon its
assessment of a bond's relative value in terms of current yield, price, credit
quality and future prospects. Nuveen Advisory is supported by Nuveen's award-
winning team of specialized research analysts who review municipal securities
available for purchase, monitor the continued creditworthiness of each fund's
municipal investments, and analyze economic, political and demographic trends
affecting the municipal markets. We utilize these resources to identify
municipal obligations with favorable characteristics we believe are not yet
recognized by the market. We then select those higher-yielding and undervalued
municipal obligations that we believe represent the most attractive values.
Portfolio Turnover
A fund buys and sells portfolio securities in the normal course of its
investment activities. The proportion of the fund's investment portfolio that is
sold and replaced with new securities during a year is known as the fund's
portfolio turnover rate. The funds intend to keep portfolio turnover relatively
low in order to reduce trading costs and the realization of taxable capital
gains. Each fund, however, may make limited short-term trades to take advantage
of market opportunities or reduce market risk.
10 Section 2 How We Manage Your Money
<PAGE>
What the Risks Are
Risk is inherent in all investing. Investing in a mutual fund -- even the most
conservative -- involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part or all of your
investment. Therefore, before investing you should consider carefully the
following risks that you assume when you invest in these funds. Because of these
and other risks, you should consider an investment in any of these funds to be a
long-term investment.
Interest rate risk: the risk that the value of the fund's portfolio will decline
because of rising market interest rates (bond prices move in the opposite
direction of interest rates). The longer the average maturity (duration) of a
fund's portfolio, the greater its interest rate risk. See "What Securities We
Invest In--Portfolio Maturity."
Income risk: the risk that the income from the fund's portfolio will decline
because of falling market interest rates. This can result when the fund invests
the proceeds from new share sales, or from matured or called bonds, at market
interest rates that are below the portfolio's current earnings rate.
Credit risk: the risk that an issuer of a bond is unable to meet its obligation
to make interest and principal payments due to changing market conditions.
Generally, lower rated bonds provide higher current income but are considered to
carry greater credit risk than higher rated bonds. Year 2000 issues may affect
the ability of municipal issuers to meet their payment obligations to their bond
holders, and may adversely affect their credit ratings.
State concentration risk: because the funds primarily purchase municipal bonds
from a specific state, each fund also bears investment risk from the economic,
political or regulatory changes that could adversely affect municipal bond
issuers in that state and therefore the value of the fund's investment
portfolio. See "Appendix -- Additional State Information." These risks may be
greater for the funds, because they are "non-diversified" which authorizes them
to concentrate their investments in municipal bonds of certain issuers to a
greater extent than diversified funds.
Inflation risk: the risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the value of the funds' assets can decline as can the value
of the funds' distributions.
How We Manage Risk
In pursuit of its investment objective, each fund assumes investment risk,
chiefly in the form of interest rate and credit risk. The funds limit this
investment risk generally by restricting the type and maturities of municipal
bonds they purchase, and by diversifying their investment portfolios
geographically as well as across different industry sectors.
Section 2 How We Manage Your Money 11
<PAGE>
Investment Limitations
The funds have adopted certain investment limitations (based on total assets)
that cannot be changed without shareholder approval and are designed to limit
your investment risk and maintain portfolio diversification. Each fund may not
have more than:
. 25% in any one industry such as electric utilities or health care.
. 10% in borrowings (33% if used to meet redemptions).
Hedging and Other Defensive Investment Strategies
Each fund may invest up to 100% in cash equivalents and short-term investments
as a temporary defensive measure in response to adverse market conditions, or to
keep cash on hand fully invested. During these periods, the weighted average
maturity of a fund's investment portfolio may fall below the defined range
described under "Portfolio Maturity."
Each fund may also use various investment strategies designed to limit the risk
of bond price fluctuations and to preserve capital. These hedging strategies
include using financial futures contracts, options on financial futures, or
options based on either an index of long-term tax-free securities or on debt
securities whose prices, in the opinion of the funds' investment adviser,
correlate with the prices of the funds' investments. The funds, however, have no
present intent to use these strategies.
12 Section 2 How We Manage Your Money
<PAGE>
Section 3 How You Can Buy and Sell Shares
You can choose from four classes of fund shares, each with a different
combination of sales charges, fees, eligibility requirements and other features.
Your financial adviser can help you determine which class is best for you. We
offer a number of features for your convenience. Please see the Statement of
Additional Information for further details.
How to Choose a Share Class
In deciding whether to purchase Class A, Class B, Class C or Class R shares, you
should consider:
. the amount of your purchase;
. any current holdings of fund shares;
. how long you expect to hold the shares;
. the amount of any up-front sales charge;
. whether a contingent deferred sales charge (CDSC) would apply upon redemption;
. the amount of any distribution or service fees that you may incur while you
own the shares;
. whether you will be reinvesting income or capital gain distributions in
additional shares;
. whether you qualify for a sales charge waiver or reduction.
For a summary of the charges and expenses for each class, please see "What are
the Costs of Investing?"
Class A Shares
You can buy Class A shares at the offering price, which is the net asset value
per share plus an up-front sales charge. You may qualify for a reduced sales
charge, or the sales charge may be waived, as described in "How to Reduce Your
Sales Charge." Class A shares are also subject to an annual service fee of .20%
which compensates your financial adviser for providing ongoing service to you.
The up-front Class A sales charge for all funds described in the prospectus is
as follows:
<TABLE>
<CAPTION>
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
.........................................................................................................................
<S> <C> <C> <C>
Less than $50,000 4.20% 4.38% 3.70%
.........................................................................................................................
$50,000 but less than $100,000 4.00% 4.18% 3.50%
.........................................................................................................................
$100,000 but less than $250,000 3.50% 3.63% 3.00%
.........................................................................................................................
$250,000 but less than $500,000 2.50% 2.56% 2.00%
.........................................................................................................................
$500,000 but less than $1,000,000 2.00% 2.04% 1.50%
.........................................................................................................................
$1,000,000 and over --(1) -- 1.00%(1)
.........................................................................................................................
</TABLE>
(1) You can buy $1 million or more of Class A shares at net asset value without
an up-front sales charge. Nuveen pays authorized dealers of record on these
share purchases a sales commission of 1.00% of the first $2.5 million, plus .50%
of the next $2.5 million, plus .25% of the amount over $5.0 million. If you
redeem your shares within 18 months of purchase, you may have to pay a CDSC of
1%
Section 3 How You Can Buy and Sell Shares 13
<PAGE>
of either your purchase price or your redemption proceeds, whichever is lower.
You do not have to pay this CDSC if your financial adviser has made arrangements
with Nuveen and agrees to waive the commission.
Class B Shares
You can buy Class B shares at the offering price, which is the net asset value
per share without any up-front sales charge so that the full amount of your
purchase is invested in the fund. However, you will pay annual distribution and
service fees of .95% of average daily assets. The annual .20% service fee
compensates your financial adviser for providing ongoing service to you. The
annual .75% distribution fee compensates Nuveen for paying your financial
adviser a 4% up-front sales commission, which includes an advance of the first
year's service fee. If you sell your shares within six years of purchase, you
will have to pay a CDSC based on either your purchase price or what you sell
your shares for, whichever amount is lower, according to the following schedule.
You do not pay a CDSC on any Class B shares you purchase by reinvesting
dividends.
Class B shares automatically convert to Class A shares eight years after
you buy them so that the distribution fees you pay over the life of your
investment are limited. You will continue to pay an annual service fee on any
converted Class B shares.
<TABLE>
<CAPTION>
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6
...........................................................................
<S> <C> <C> <C> <C> <C> <C>
CDSC 5% 4% 4% 3% 2% 1%
...........................................................................
</TABLE>
Class C Shares
You can buy Class C shares at the offering price, which is the net asset value
per share without any up-front sales charge so that the full amount of your
purchase is invested in the fund. However, you will pay annual distribution and
service fees of 1%. The annual .20% service fee compensates your financial
adviser for providing ongoing service to you. The annual .55% distribution fee
reimburses Nuveen for paying your financial adviser an ongoing sales commission.
Nuveen advances the first year's service and distribution fees. If you sell your
shares within 12 months of purchase, you may have to pay a 1% CDSC based on
either your purchase price or what you sell your shares for, whichever amount is
lower.
Class R Shares
Under limited circumstances, you may purchase Class R Shares at the offering
price, which is the net asset value on the day of purchase. In order to qualify,
you must be eligible under one of the programs described in "How to Reduce Your
Sales Charge" (below) or meet certain other purchase size criteria. Class R
Shares are not subject to sales charges or ongoing service or distribution fees.
Class R shares have lower ongoing expenses than the other classes.
14 Section 3 How You Can Buy and Sell Shares
<PAGE>
How to Reduce Your Sales Charge
We offer a number of ways to reduce or eliminate the up-front sales charge on
Class A shares or to qualify to purchase Class R shares.
<TABLE>
<CAPTION>
Class A Sales Charge Class A Sales Charge Class R Eligibility
Reductions Waivers
<S> <C> <C>
. Rights of accumulation . Nuveen Defined Portfolio . Certain employees and
. Letter of intent reinvestment Directors of Nuveen or
. Group purchase . Purchases using employees of authorized
redemptions from dealers
unrelated funds . Bank trust departments
. Retirement plans
. Certain employees and
Directors of Nuveen or
employees of authorized
dealers
. Bank trust departments
</TABLE>
In addition, Class A shares at net asset value and Class R shares may be
purchased through registered investment advisers, certified financial planners
and registered broker-dealers who charge asset-based or comprehensive "wrap"
fees for their services. Please refer to the Statement of Additional Information
for detailed program descriptions and eligibility requirements. Additional
information is available from your financial adviser or by calling (800) 257-
8787. Your financial adviser can also help you prepare any necessary application
forms. You or your financial adviser must notify Nuveen at the time of each
purchase if you are eligible for any of these programs. The funds may modify or
discontinue these programs at any time.
How to Buy Shares
You may open an account with $3,000 per fund share class and make additional
investments at any time with as little as $50. There is no minimum if you are
reinvesting Nuveen Defined Portfolio distributions. The share price you pay will
depend on when Nuveen receives your order. Orders received before the close of
trading on a business day will receive that day's closing share price, otherwise
you will receive the next business day's price. A business day is any day the
New York Stock Exchange is open for business and usually ends at 4 p.m. New York
time when the Exchange closes.
Through a Financial Adviser
You may buy shares through your financial adviser, who can handle all
the details for you, including opening a new account. Financial advisers can
also help you review your financial needs and formulate long-term investment
goals and objectives. In addition, financial advisers generally can help you
develop a customized financial plan, select investments and monitor and review
your portfolio on an ongoing basis to help assure your investments continue to
meet your needs as circumstances change. Financial advisers are paid either from
fund sales charges and fees or by charging you a separate fee in lieu of a sales
charge for ongoing investment advice and services. If you do not have a
financial adviser, call (800) 257-8787 and Nuveen can refer you to one in your
area.
Section 3 How You Can Buy and Sell Shares 15
<PAGE>
By Mail
You may open an account and buy shares by mail by completing the enclosed
application and mailing it along with your check to: Nuveen Investor Services,
P.O. Box 5186, Bowling Green Station, New York, NY 10274-5186.
Systematic Investing
Once you have established a fund account, systematic investing allows
you to make regular investments through automatic deductions from your bank
account (simply complete the appropriate section of the account application
form) or directly from your paycheck. To invest directly from your paycheck,
contact your financial adviser or call Nuveen at (800) 257-8787. Systematic
investing may also make you eligible for reduced sales charges.
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 4%, 5% or 6% annually on your
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
[GRAPH APPEARS HERE]
One of the benefits of systematic investing is dollar cost averaging. Because
you regularly invest a fixed amount of money over a period of years regardless
of the share price, you buy more shares when the price is low and fewer shares
when the price is high. As a result, the average share price you pay should be
less than the average share price of fund shares over the same period. To be
effective, dollar cost averaging requires that you invest over a long period of
time, and does not assure that you will profit.
Systematic Investment Plan
You can make regular investments of $50 or more per month by authorizing us to
draw preauthorized checks on your bank account. You can stop the withdrawals at
any time. There is no charge for this plan.
16 Section 3 How You Can Buy and Sell Shares
<PAGE>
Payroll Direct Deposit Plan
You can, with your employer's consent, make regular investments of $25 or more
per pay period (meeting the monthly minimum of $50) by authorizing your employer
to deduct this amount automatically from your paycheck. You can stop the
deductions at any time. There is no charge for this plan.
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to receive
payments monthly, quarterly, semi-annually or annually, and may choose to
receive a check, have the monies transferred directly into your bank account
(see "Fund Direct--Electronic Funds Transfer" below), paid to a third party or
sent payable to you at an address other than your address of record. You must
complete the appropriate section of the account application or Account Update
Form to participate in the fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent
purchases of Class A, B or C shares because you may unnecessarily pay a sales
charge or CDSC on these purchases.
Special Services
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered account at any time
for the same class of another Nuveen mutual fund available in your state. Your
exchange must meet the minimum purchase requirements of the fund into which you
are exchanging. Because an exchange is treated for tax purposes as a concurrent
sale and purchase, and any gain may be subject to tax, you should consult your
tax adviser about the tax consequences of any contemplated exchange.
The exchange privilege is not intended to allow you to use a fund for short-term
trading. Because excessive exchanges may interfere with portfolio management,
raise fund operating expenses or otherwise have an adverse effect on other
shareholders, each fund reserves the right to revise or suspend the exchange
privilege, limit the amount or number of exchanges, or reject any exchange.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your redemption
proceeds up to one year later without incurring any additional charges. You may
only reinvest into the same share class you redeemed. If you paid a CDSC, we
will refund your CDSC and reinstate your holding period. You may use this
reinstatement privilege only once for any redemption.
Section 3 How You Can Buy and Sell Shares 17
<PAGE>
Fund Direct
You may link your fund account to your bank account and transfer money
electronically between these accounts and perform a variety of account
transactions, including buying shares by telephone and systematic investment.
You may also have dividends, distributions, redemption payments or systematic
withdrawals sent directly to your bank account.
Your financial adviser can help you complete the forms for these services, or
you can call Nuveen at (800) 257-8787 for copies of the necessary forms.
How to Sell Shares
You may use one of the following ways to sell (redeem) your shares on any day
the New York Stock Exchange is open. You will receive the share price next
determined after Nuveen has received your properly completed redemption request.
Your redemption request must be received before the close of trading for you to
receive that day's price. While the funds do not charge a redemption fee, you
may be assessed a CDSC, if applicable. When you redeem Class A, Class B, or
Class C shares subject to a CDSC, the fund will first redeem any shares that are
not subject to a CDSC or that represent an increase in the value of your fund
account due to capital appreciation, and then redeem the shares you have owned
for the longest period of time, unless you ask the fund to redeem your shares in
a different order. No CDSC is imposed on shares you buy through the reinvestment
of dividends and capital gains. The holding period is calculated on a monthly
basis and begins on the first day of the month in which you buy shares. When you
redeem shares subject to a CDSC, the CDSC is calculated on the lower of your
purchase price or redemption proceeds, deducted from your redemption proceeds,
and paid to Nuveen. The CDSC may be waived under certain special circumstances
as described in the Statement of Additional Information.
Through Your Financial Adviser
You may sell your shares through your financial adviser who can prepare the
necessary documentation. Your financial adviser may charge for this.
By Telephone
If you have authorized telephone redemption privileges, you can redeem your
shares by telephone up to $50,000. You may not redeem by telephone shares held
in certificate form. Checks will be issued only to the shareholder of record and
mailed to the address of record. If you have established electronic funds
transfer privileges, you may have redemption proceeds transferred electronically
to your bank account. We will normally mail your check the next business day.
Nuveen and Chase Global Funds Services will be liable for losses resulting from
unauthorized telephone redemptions only if they do not follow reasonable
procedures designed to verify the identity of the caller. You should immediately
verify your trade confirmations when you receive them.
By Mail
You can sell your shares at any time by sending a written request to the
appropriate fund, Nuveen Investor Services, P.O. Box 5186, Bowling Green
Station, New York, NY 10274-5186. Your request must include the following
information:
. The fund's name;
. Your name and account number;
18 Section 3 How You Can Buy and Sell Shares
<PAGE>
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person to whom you want your redemption proceeds paid (if
other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if other than the
address of record);
. Any certificates you have for the shares; and
. Any required signature guarantees.
We will normally mail your check the next business day, but in no event more
than seven days after we receive your request. If you purchased your shares by
check, your redemption proceeds will not be mailed until your check has cleared.
Guaranteed signatures are required if you are redeeming more than $50,000, you
want the check payable to someone other than the shareholder of record or you
want the check sent to another address (or the address of record has been
changed within the last 60 days). Signature guarantees must be obtained from a
bank, brokerage firm or other financial intermediary that is a member of an
approved Medallion Guarantee Program or that is otherwise approved by a fund. A
notary public cannot provide a signature guarantee.
An Important Note About Involuntary Redemption
From time to time, the funds may establish minimum account size requirements.
The funds reserve the right to liquidate your account upon 30 days' written
notice if the value of your account falls below an established minimum. The
funds presently have set a minimum balance of $100 unless you have an active
Nuveen Defined Portfolio reinvestment account. You will not be assessed a CDSC
on an involuntary redemption.
Section 3 How You Can Buy and Sell Shares 19
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the funds, this
section includes important details about how the funds make distributions to
shareholders. We discuss some other fund policies, as well.
Distributions and Taxes
The funds pay tax-free dividends monthly and any taxable capital gains or other
taxable distributions once a year in December. The funds declare dividends
monthly to shareholders of record as of the ninth of each month, payable the
first business day of the following month.
Payment and Reinvestment Options
The funds automatically reinvest your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than your address of record or reinvested in shares of another
Nuveen mutual fund. For further information, contact your financial adviser or
call Nuveen at (800) 257-8787.
Taxes and Tax Reporting
Because the funds invest in municipal bonds, the regular monthly dividends you
receive will be exempt from regular federal income tax. All or a portion of
these dividends, however, may be subject to state and local taxes or to the
federal alternative minimum tax (AMT).
Although the funds do not seek to realize taxable income or capital gains, the
funds may realize and distribute taxable income or capital gains from time to
time as a result of each fund's normal investment activities. Each fund will
distribute in December any taxable income or capital gains realized over the
preceding year. Net short-term gains are taxable as ordinary income. Net long-
term capital gains are taxable as long-term capital gains regardless of how long
you have owned your investment. Taxable dividends do not qualify for a dividends
received deduction if you are a corporate shareholder.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains, including any percentage of your fund
dividends attributable to municipal obligations, that you were paid during the
prior year. You will receive this statement from the firm where you purchased
your fund shares if you hold your investment in street name. Nuveen will send
you this statement if you hold your shares in registered form. The tax status of
your dividends is not affected by whether you reinvest your dividends or receive
them in cash. If you receive social security benefits, you should be aware that
any tax-free income is taken into account in calculating the amount of these
benefits that may be subject to federal income tax.
20 Section 4 General Information
<PAGE>
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
Please note that if you do not furnish us with your correct Social Security
number or employer identification number, federal law requires us to withhold
federal income tax from your distributions and redemption proceeds at a rate of
31%.
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable dividend is
commonly known as "buying the dividend." The entire dividend may be taxable to
you even though a portion of the dividend effectively represents a return of
your purchase price. Similarly, if you sell or exchange fund shares shortly
before the record date for a tax-exempt dividend, a portion of the price you
receive may be treated as a taxable capital gain even though it reflects tax-
free income earned but not yet distributed by the fund.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to earn on a
taxable investment in order to equal a stated tax-free yield on a municipal
investment. To assist you to more easily compare municipal investments like the
funds with taxable alternative investments, the table below presents the taxable
equivalent yields for a range of hypothetical tax-free yields and tax rates:
Taxable Equivalent Of Tax-Free Yields
Tax-Free Yield
<TABLE>
<CAPTION>
Tax Rate 4.00% 4.50% 5.00% 5.50% 6.00%
<S> <C> <C> <C> <C> <C>
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
...............................................................
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
...............................................................
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
...............................................................
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
...............................................................
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
statement of additional information or consult your tax adviser.
Distribution and Service Plans
John Nuveen & Co. Incorporated serves as the selling agent and distributor of
the funds' shares. In this capacity, Nuveen manages the offering of the funds'
shares and is responsible for all sales and promotional activities. In order to
reimburse Nuveen for its costs in connection with these activities, including
compensation paid to authorized dealers, each fund has adopted a distribution
and service plan under Rule 12b-1 under the Investment Company Act of 1940. (See
"How to Choose a Share Class" for a description of the distribution and service
fees paid under this plan.)
Nuveen receives the distribution fee for Class B and Class C shares primarily
for providing compensation to authorized dealers, including Nuveen, in
connection with the distribution of shares. Nuveen uses the service fee for
Class A, Class B, and Class C shares to compensate authorized dealers, including
Nuveen, for providing account services to shareholders. These services may
include establishing and maintaining
Section 4 General Information 21
<PAGE>
shareholder accounts, answering shareholder inquiries, and providing other
personal services to shareholders. These fees also compensate Nuveen for other
expenses, including printing and distributing prospectuses to persons other than
shareholders, the expenses of preparing, printing, and distributing advertising
and sales literature and reports to shareholders used in connection with the
sale of shares. Because these fees are paid out of the fund' assets on an on-
going basis, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
Net Asset Value
The price you pay for your shares is based on the fund's net asset value per
share which is determined as of the close of trading (normally 4:00 p.m. eastern
time) on each day the New York Stock Exchange is open for business. Net asset
value is calculated for each class by taking the fair value of the class' total
assets, including interest or dividends accrued but not yet collected, less all
liabilities, and dividing by the total number of shares outstanding. The result,
rounded to the nearest cent, is the net asset value per share. All valuations
are subject to review by the funds' Board of Trustees or its delegate.
In determining net asset value, expenses are accrued and applied daily and
securities and other assets for which market quotations are available are valued
at market value. The prices of municipal bonds are provided by a pricing service
and based on the mean between the bid and asked price. When price quotes are not
readily available (which is usually the case for municipal securities), the
pricing service establishes fair market value based on prices of comparable
municipal bonds.
Fund Service Providers
The custodian of the assets of the funds is The Chase Manhattan Bank, 4 New York
Plaza, New York, NY 10004-2413. Chase also provides certain accounting services
to the funds. The funds' transfer, shareholder services and dividend paying
agent, Chase Global Funds Services Company, P.O. Box 5186, New York, NY 10274-
5186, performs bookkeeping, data processing and administrative services for the
maintenance of shareholder accounts.
Nuveen Advisory and Chase Global Funds Services each rely on computer systems to
manage the funds' investments, process shareholder transactions and provide
shareholder account maintenance. Because of the way computers historically have
stored dates, some of these systems currently may not be able to correctly
process activity occurring in the year 2000. Nuveen Advisory is working with the
funds' service providers to adapt their systems to address this "Year 2000"
issue. Nuveen Advisory and the funds expect, but there can be no absolute
assurance, that the necessary work will be completed on a timely basis.
22 Section 4 General Information
<PAGE>
Section 5 Financial Highlights
The following tables are intended to help you better understand each fund's
recent past performance. The tables are excerpted from each fund's latest
financial statements audited by Arthur Andersen LLP. You may obtain the complete
statements along with the auditor's report by requesting from Nuveen a free copy
of the fund's latest annual shareholder report.
Maryland Municipal Bond Fund
<TABLE>
<CAPTION>
Investment Operations Less Distributions
---------------------------------------- -----------------------------
Class
(Inception
Date)
Net
- --- Realized Ratio of
and Ending Ending Expenses
Year Beginning Net Unrealized Net Net Net to Average
Ending Net Asset Investment Investment Investment Capital Asset Total Assets Net
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000) Assets(a)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1998 $10.25 $.48 $ .32 $ .80 $(.49) $-- $(.49) $10.56 7.95% $17,427 .94%
1997(c) 10.25 .16 .01 .17 (.17) -- (.17) 10.25 1.63 12,977 .95*
1997(d) 10.43 .46 (.15) .31 (.49) -- (.49) 10.25 3.06 11,788 1.00
1996(d) 9.60 .48 .85 1.33 (.50) -- (.50) 10.43 14.07 6,860 1.00
1995(e) 9.84 .20 (.23) (.03) (.21) -- (.21) 9.60 (.26) 1,605 1.00*
Class B (3/97)
1998 10.25 .41 .31 .72 (.41) -- (.41) 10.56 7.16 2,332 1.69
1997(f) 10.29 .10 (.04) .06 (.10) -- (.10) 10.25 .83 150 1.70*
Class C (9/94)
1998 10.24 .43 .32 .75 (.43) -- (.43) 10.56 7.44 2,606 1.49
1997(c) 10.24 .15 -- .15 (.15) -- (.15) 10.24 1.43 2,103 1.50*
1997(d) 10.42 .39 (.16) .23 (.41) -- (.41) 10.24 2.28 1,985 1.75
1996(d) 9.59 .41 .84 1.25 (.42) -- (.42) 10.42 13.24 1,438 1.75
1995(e) 9.75 .16 (.15) .01 (.17) -- (.17) 9.59 .12 860 1.75*
Class R (12/91)
1998 10.26 .51 .32 .83 (.51) -- (.51) 10.58 8.23 44,599 .74
1997(c) 10.26 .17 -- .17 (.17) -- (.17) 10.26 1.68 43,306 .75*
1997(d) 10.44 .47 (.14) .33 (.51) -- (.51) 10.26 3.29 43,738 .75
1996(d) 9.61 .51 .84 1.35 (.52) -- (.52) 10.44 14.33 47,389 .75
1995(d) 10.62 .51 (1.01) (.50) (.51) -- (.51) 9.61 (4.58) 42,741 .75
1994(d) 9.91 .51 .72 1.23 (.50) (.02) (.52) 10.62 12.71 47,822 .75
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
------------------------------------
Ratio of Net
Investment
Income
Year to Average Portfolio
Ending Net Turnover
May 31 Assets(a) Rate
- --------------------------------------------------------
<S> <C> <C>
Class A (9/94)
1998 4.62% 7%
1997(c) 4.90* 3
1997(d) 4.79 4
1996(d) 4.74 17
1995(e) 5.26* 35
Class B (3/97)
1998 3.85 7
1997(f) 4.00* 3
Class C (9/94)
1998 4.07 7
1997(c) 4.35* 3
1997(d) 4.05 4
1996(d) 4.04 17
1995(e) 4.55* 35
Class R (12/91).
1998 4.82 7
1997(c) 5.10* 3
1997(d) 5.06 4
1996(d) 5.07 17
1995(d) 5.28 35
1994(d) 4.85 4
- ------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized 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.
Section 5 Financial Highlights 23
<PAGE>
Pennsylvania Municipal Bond Fund **
<TABLE>
<CAPTION>
Investment Operations Less Distributions
------------------------------------ ---------------------------
Class
(Inception
Date)
Net
Realized
and Ending Ending
Year Beginning Net Unrealized Net Net Net
Ending Net Asset Investment Investment Investment Capital Asset Total Assets
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/86)
1998 $10.25 $.56 $ .45 $1.01 $(.56) $(.02) $(.58) $10.68 10.05% $65,826
1997 10.00 .57 .25 .82 (.57) -- (.57) 10.25 8.37 55,667
1996 10.21 .59 (.20) .39 (.60) -- (.60) 10.00 3.83 44,392
1995 10.06 .60 .16 .76 (.61) -- (.61) 10.21 7.90 42,600
1994 10.38 .61 (.32) .29 (.61) -- (.61) 10.06 2.70 42,226
Class B (2/97)
1998 10.27 .48 .45 .93 (.48) (.02) (.50) 10.70 9.23 2,640
1997(c) 10.21 .16 .06 .22 (.16) -- (.16) 10.27 2.18 229
Class C (2/94)
1998 10.25 .50 .45 .95 (.50) (.02) (.52) 10.68 9.50 8,912
1997 9.99 .51 .26 .77 (.51) -- (.51) 10.25 7.88 6,320
1996 10.21 .53 (.21) .32 (.54) -- (.54) 9.99 3.16 4,442
1995 10.06 .54 .16 .70 (.55) -- (.55) 10.21 7.31 3,118
1994(c) 10.71 .16 (.64) (.48) (.17) -- (.17) 10.06 (13.46)* 1,697
Class R (2/97)
1998 10.25 .58 .45 1.03 (.58) (.02) (.60) 10.68 10.30 61,180
1997(c) 10.21 .20 .03 .23 (.19) -- (.19) 10.25 2.31 57,383
Ratios/Supplemental Data
-------------------------------------
Class
(Inception
Date)
Ratio of Net
Ratio of Investment
Expenses Income
Year to Average to Average Portfolio
Ending Net Net Turnover
May 31, Assets(a) Assets(a) Rate
- ----------------------------------------------
<S> <C> <C> <C>
Class A (10/86)
1998 .61% 5.28% 20%
1997 .70 5.61 46
1996 .79 5.76 65
1995 .89 6.08 50
1994 .91 5.80 21
Class B (2/97)
1998 1.34 4.50 20
1997(c) 1.35* 4.84* 46
Class C (2/94)
1998 1.16 4.73 20
1997 1.25 5.06 46
1996 1.68 4.85 65
1995 1.84 5.05 50
1994(c) 1.68* 4.64* 21
Class R (2/97)
1998 .41 5.48 20
1997(c) .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) From commencement of class operations as noted.
24 Section 5 Financial Highlights
<PAGE>
Virginia Municipal Bond Fund **
<TABLE>
<CAPTION>
Investment Operations Less Distributions Ratios/Supplemental Data
---------------------------- ------------------------- ---------------------------------
Class
(Inception
Date)
Net Ratio of Net
Realized Ratio of Investment
and Ending Ending Expenses Income
Year Beginning Net Unrealized Net Net Net to Average to Average Portfolio
Ending Net Asset Investment Investment Investment Capital Asset Total Assets Net Net Turnover
May 31, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b) (000) Assets(a) Assets(a) Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (3/86)
1998 $10.66 $.56 $ .41 $ .97 $(.56) $(.01) $(.57) $11.06 9.30% $133,966 .74% 5.15% 3%
1997 10.40 .58 .25 .83 (.57) -- (.57) 10.66 8.20 122,252 .74 5.45 23
1996 10.56 .57 (.15) .42 (.58) -- (.58) 10.40 4.03 117,677 .83 5.41 17
1995 10.36 .59 .20 .79 (.59) -- (.59) 10.56 7.99 112,643 .79 5.81 50
1994 10.82 .60 (.31) .29 (.60) (.15) (.75) 10.36 2.62 107,502 .64 5.53 17
Class B (2/97)
1998 10.66 .48 .41 .89 (.48) (.01) (.49) 11.06 8.53 3,894 1.51 4.33 3
1997(c) 10.62 .16 .04 .20 (.16) -- (.16) 10.66 1.94 381 1.47* 4.68* 23
Class C (10/93)
1998 10.65 .50 .42 .92 (.50) (.01) (.51) 11.06 8.81 15,660 1.29 4.59 3
1997 10.39 .52 .26 .78 (.52) -- (.52) 10.65 7.61 11,700 1.29 4.89 23
1996 10.56 .51 (.16) .35 (.52) -- (.52) 10.39 3.37 10,978 1.38 4.84 17
1995 10.36 .53 .20 .73 (.53) -- (.53) 10.56 7.40 6,537 1.34 5.24 50
1994(c) 11.24 .34 (.78) (.44) (.34) (.10) (.44) 10.36 (7.13)* 4,759 1.14* 4.85* 17
Class R (2/97)
1998 10.66 .59 .41 1.00 (.59) (.01) (.60) 11.06 9.54 58,734 .54 5.35 3
1997(c) 10.62 .20 (.04) .24 (.20) -- (.20) 10.66 2.26 57,002 .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.
Section 5 Financial Highlights 25
<PAGE>
Appendix Additional State Information
Because the funds primarily purchase municipal bonds from a specific state, each
fund also bears investment risk from economic, political or regulatory changes
that could adversely affect municipal bond issuers in that state and therefore
the value of the fund's investment portfolio. The following discussion of
special state considerations was obtained from official offering statements of
these issuers and has not been independently verified by the funds. The
discussion includes general state tax information related to an investment in
fund shares. Because tax laws are complex and often change, you should consult
your tax adviser about the state tax consequences of a specific fund investment.
See the Statement of Additional Information for further information.
Maryland
Maryland has benefited from the expansion in the national economy. The state's
once sluggish economy has shown improvement, although employment and income
growth rates remain at or below national averages and below neighboring states.
Services, wholesale and retail trade, and government account for most of the
State's employment. Unlike in most states, government employment surpasses
manufacturing employment in Maryland.
The State's unemployment rate, which fell to 4.4% in June 1998 from 5.2% in
1997, remains below the national average. Per capita income, which was $28,969
in 1997, is 113% of the national average.
The State's constitution mandates a balanced budget. During its spring 1998
term, the Maryland legislature voted to accelerate the income tax reduction it
passed in 1997; as a result, income taxes will be reduced by 5% in 1998, more
than the 2% reduction originally planned for 1998. The 1998 reduction is part of
the total 10% reduction to the State's income tax, which is being phased in
through 2002. Maryland's general obligation debt, which is constitutionally
limited to a maximum term of 15 years, remains moderate. Maryland's general
obligation debt carries triple-A ratings from Moody's Standard and Poors, and
Fitch.
Tax Treatment
The Maryland Fund's regular monthly dividends will not be subject to Maryland
personal income taxes to the extent they are paid out of income earned on
Maryland municipal bonds or U.S. government securities. You will be subject to
Maryland personal income tax, however, to the extent the Maryland Fund
distributes any taxable income, or if you sell or exchange Maryland Fund shares
and realize a capital gain on the transaction.
26 Appendix
<PAGE>
The treatment of corporate shareholders of the Maryland Fund is similar to that
described above.
Pennsylvania
Pennsylvania's economy, which is one of the weaker economies in the Northeast,
is expected to continue to lag national economic trends in the near future. The
sluggish economy is due in part to continued mergers and acquisitions,
expenditure reductions, and layoffs in the healthcare, defense, and
telecommunications industries, which are the most important to the
Commonwealth's economy.
As of January 1998, Pennsylvania's unemployment rate was 4.6% compared to 4.7%
for the United States. Personal income in the Commonwealth for 1996 is $299.0
billion, an increase of 4.9 percent over the previous year. During the same
period, national personal income increased at a rate of 5.6 percent. Based on
the 1996 personal income estimates, per capita income for 1996 is at $24,803 in
the Commonwealth compared to per capita income in the United States of $24,426.
General Fund collections for fiscal year 1997-98 were $676.1 million or 3.9%
above estimate, and the General Fund budget for 1998-99 included approximately
$218 million of tax cuts. As of April 30, 1998, Pennsylvania's general
obligation debt carries ratings of AA- by Standard & Poor's, Aa3 by Moody's, and
AA by Fitch.
Tax Treatment
The Pennsylvania Fund's regular monthly dividends will not be subject to the
Pennsylvania personal income tax (and, for Philadelphia residents, the
Philadelphia School District income tax) to the extent they are paid out of
income earned on Pennsylvania municipal bonds or U.S. government securities. You
will be subject to Pennsylvania personal income tax (and, for Philadelphia
residents, the Philadelphia School District income tax), however, to the extent
the Pennsylvania Fund distributes any taxable income or realized capital gains,
or if you sell or exchange Pennsylvania Fund shares and realize a capital gain
on the transaction.
The treatment of corporate shareholders of the Pennsylvania Fund is similar to
that described above.
Virginia
Like the U.S. economy, the Virginia economy is broad-based and composed of
several distinct regions. The Commonwealth's economy nearly mirrors the U.S.
economy with the services, trade, government, and manufacturing sectors
supplying a significant portion of employment. Recent employment losses in the
federal government, manufacturing, and mining sectors have been offset by
employment growth in other sectors, including high technology. The federal
government remains an important employer and has a greater impact on the
Commonwealth than it has on most other states.
Virginia's unemployment rate was a low 3.1% in June 1998, below the national
average of 4.5% in June 1998 and down slightly from the Commomwealth's June 1997
rate of 4.1%. At $26,438 in 1997, per capita income remains above the U.S.
average.
The Commonwealth has historically operated on a fiscally conservative basis but
had a deficit in fiscal year 1995, largely because of a court decision that
required the Commonwealth to refund certain taxes. Large operating surpluses in
fiscal years 1996 and 1997 allowed the
Appendix 27
<PAGE>
Commonwealth to eliminate this deficit by fiscal 1997. In 1998, the Virginia
legislature voted to phase out over 5 years the personal property automobile tax
collected by local governments. The Commonwealth is expected to reimburse local
governments for the revenue losses. As of July 1998, Moody's, S&P, and Fitch
each rated the Commonwealth AAA.
Tax Treatment
The Virginia Fund's regular monthly dividends will not be subject to Virginia
personal income taxes to the extent they are paid out of income earned on
Virginia municipal bonds or U.S. government securities. You will be subject to
Virginia personal income tax, however, to the extent the Virginia Fund
distributes any taxable income, or if you sell or exchange Virginia Fund shares
and realize a capital gain on the transaction.
The treatment of corporate shareholders of the Virginia Fund is similar to that
described above.
28 Appendix
<PAGE>
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
National Municipal Bond Funds
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky/2/ New York/1/
Several additional sources of information are available to you. The Statement of
Additional Information (SAI), incorporated by reference into this prospectus,
contains detailed information on fund policies and operation. Shareholder
reports contain management's discussion of market conditions, investment
strategies and performance results as of the fund's latest semi-annual or annual
fiscal year end. Call Nuveen at (800) 257-8787 to request a free copy of any of
these materials or other fund information.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission (SEC). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at (800) SEC-0330
for room hours and operation. You may also request fund information by writing
to the SEC's Public Reference Section, Washington, D.C. 20549. The fund's
Investment Company file number is 811-07751.
1. Long-term and insured long-term portfolios.
2. Long-term and limited-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com VPR-MS1-NA 9-98
<PAGE>
SEPTEMBER 30, 1998
NUVEEN FLAGSHIP MULTISTATE TRUST I
NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND
NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND
NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND
NUVEEN MARYLAND MUNICIPAL BOND FUND
NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL BOND FUND
NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND
NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus. This Statement
of Additional Information should be read in conjunction with the Prospectus of
the Nuveen Flagship Multistate Trust I dated September 30, 1998. The Prospectus
may be obtained without charge from certain securities representatives, banks,
and other financial institutions that have entered into sales agreements with
John Nuveen & Co. Incorporated, or from the Funds, by mailing a written request
to the Funds, c/o John Nuveen & Co. Incorporated, 333 West Wacker Drive,
Chicago, Illinois 60606 or by calling (800) 257-8787.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies and Investment Portfolio............................... S-2
Management................................................................. S-13
Investment Adviser and Investment Management Agreement..................... S-24
Portfolio Transactions..................................................... S-25
Net Asset Value............................................................ S-26
Tax Matters................................................................ S-27
Performance Information.................................................... S-36
Additional Information on the Purchase and Redemption of Fund Shares....... S-45
Distribution and Service Plan.............................................. S-52
Independent Public Accountants and Custodian............................... S-54
Financial Statements....................................................... S-54
Appendix A--Ratings of Investments......................................... A-1
Appendix B--Description of Hedging Techniques.............................. B-1
</TABLE>
The audited financial statements for each Fund's most recent fiscal year
appear in the Funds' Annual Reports; each is included herein by reference. The
Annual Reports accompany this Statement of Additional Information.
<PAGE>
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
INVESTMENT POLICIES
The investment objective and certain fundamental investment policies of each
Fund are described in the Prospectus. Each of the Funds, as a fundamental
policy, may not, without the approval of the holders of a majority of the
shares of that Fund:
(1) Invest in securities other than Municipal Obligations and short-term
securities, as described in the Prospectus. Municipal Obligations are
municipal bonds that pay interest that is exempt from regular federal,
state and, in some cases, local income taxes.
(2) Invest more than 5% of its total assets in securities of any one
issuer, except this limitation shall not apply to securities of the United
States Government, and to the investment of 25% of such Fund's assets. This
limitation shall apply only to the Arizona Municipal Bond Fund and the
Florida Municipal Bond Fund.
(3) Borrow money, except from banks for temporary or emergency purposes
and not for investment purposes and then only in an amount not exceeding
(a) 10% of the value of its total assets at the time of borrowing or (b)
one-third of the value of the Fund's total assets including the amount
borrowed, in order to meet redemption requests which might otherwise
require the untimely disposition of securities. While any such borrowings
exceed 5% of such Fund's total assets, no additional purchases of
investment securities will be made by such Fund. If due to market
fluctuations or other reasons, the value of the Fund's assets falls below
300% of its borrowings, the Fund will reduce its borrowings within 3
business days. To do this, the Fund may have to sell a portion of its
investments at a time when it may be disadvantageous to do so.
(4) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (2) above, it may pledge securities
having a market value at the time of pledge not exceeding 10% of the value
of the Fund's total assets.
(5) Issue senior securities as defined in the Investment Company Act of
1940, except to the extent such issuance might be involved with respect to
borrowings described under item (3) above or with respect to transactions
involving futures contracts or the writing of options within the limits
described in the Prospectus and this Statement of Additional Information.
(6) Underwrite any issue of securities, except to the extent that the
purchase or sale of Municipal Obligations in accordance with its investment
objective, policies and limitations, may be deemed to be an underwriting.
(7) Purchase or sell real estate, but this shall not prevent any Fund
from investing in Municipal Obligations secured by real estate or interests
therein or foreclosing upon and selling such security.
(8) Purchase or sell commodities or commodities contracts or oil, gas or
other mineral exploration or development programs, except for transactions
involving futures contracts within the limits described in the Prospectus
and this Statement of Additional Information.
(9) Make loans, other than by entering into repurchase agreements and
through the purchase of Municipal Obligations or temporary investments in
accordance with its investment objective, policies and limitations.
S-2
<PAGE>
(10) Make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance of
transactions.
(11) Write or purchase put or call options, except to the extent that the
purchase of a stand-by commitment may be considered the purchase of a put,
and except for transactions involving options within the limits described
in the Prospectus and this Statement of Additional Information.
(12) Invest more than 25% of its total assets in securities of issuers in
any one industry; provided, however, that such limitations shall not be
applicable to Municipal Obligations issued by governments or political
subdivisions of governments, and obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
(13) Purchase or retain the securities of any issuer other than the
securities of the Fund if, to the Fund's knowledge, those trustees of the
Trust, or those officers and directors of Nuveen Advisory Corp. ("Nuveen
Advisory"), who individually own beneficially more than 1/2 of 1% of the
outstanding securities of such issuer, together own beneficially more than
5% of such outstanding securities.
In addition, each Fund, as a non-fundamental policy, may not invest more than
15% of its net assets in "illiquid" securities, including repurchase agreements
maturing in more than seven days.
For the purpose of applying the limitations set forth in paragraph (2) above,
an issuer shall be deemed the sole issuer of a security when its assets and
revenues are separate from other governmental entities and its securities are
backed only by its assets and revenues. Similarly, in the case of a non-
governmental user, such as an industrial corporation or a privately owned or
operated hospital, if the security is backed only by the assets and revenues of
the non-governmental user, then such non-governmental user would be deemed to
be the sole issuer. Where a security is also backed by the enforceable
obligation of a superior or unrelated governmental entity or other entity
(other than a bond insurer), it shall also be included in the computation of
securities owned that are issued by such governmental or other entity.
Where a security is guaranteed by a governmental entity or some other
facility, such as a bank guarantee or letter of credit, such a guarantee or
letter of credit would be considered a separate security and would be treated
as an issue of such government, other entity or bank. Where a security is
insured by bond insurance, it shall not be considered a security issued or
guaranteed by the insurer; instead the issuer of such security will be
determined in accordance with the principles set forth above. The foregoing
restrictions do not limit the percentage of the Fund's assets that may be
invested in securities insured by any single insurer.
The foregoing restrictions and limitations, as well as a Fund's policies as
to ratings of portfolio investments, will apply only at the time of purchase of
securities, and the percentage limitations will not be considered violated
unless an excess or deficiency occurs or exists immediately after and as a
result of an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment
objective of each Fund, cannot be changed without approval by holders of a
"majority of the Fund's outstanding voting shares." As defined in the
Investment Company Act of 1940, this means the vote of (i) 67% or more of the
Fund's shares present at a meeting, if the holders of more than 50% of the
Fund's shares are present or represented by proxy, or (ii) more than 50% of the
Fund's shares, whichever is less.
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end
management series investment company organized as a Massachusetts business
trust on July 1, 1996. Each of the Funds is an open-end management investment
company organized as a series of the Nuveen Flagship Multistate Trust I. The
Trust is
S-3
<PAGE>
an open-end management series company under SEC Rule 18f-2. Each Fund is a
separate series issuing its own shares. The Trust currently has eight series:
the Nuveen Flagship Arizona Municipal Bond Fund (formerly the Flagship Arizona
Double Tax Exempt Fund, a series of the Flagship Tax Exempt Funds Trust); the
Nuveen Flagship Colorado Municipal Bond Fund (formerly the Flagship Colorado
Double Tax Exempt Fund, a series of the Flagship Tax Exempt Funds Trust); the
Nuveen Flagship Florida Municipal Bond Fund (formerly the Flagship Florida
Double Tax Exempt Fund, a series of the Flagship Tax Exempt Funds Trust); the
Nuveen Maryland Municipal Bond Fund (formerly the Nuveen Maryland Tax-Free
Value Fund, a series of the Nuveen Multistate Tax-Free Trust); the Nuveen
Flagship New Mexico Municipal Bond Fund (formerly the Flagship New Mexico
Double Tax Exempt Fund, a series of the Flagship Tax Exempt Funds Trust); the
Nuveen Oklahoma Municipal Bond Fund; the Nuveen Flagship Pennsylvania Municipal
Bond Fund (formerly the Flagship Pennsylvania Triple Tax Exempt Fund, a series
of the Flagship Tax Exempt Funds Trust); and the Nuveen Flagship Virginia
Municipal Bond Fund (formerly the Flagship Virginia Double Tax Exempt Fund, a
series of the Flagship Tax Exempt Funds Trust). The Nuveen Oklahoma Municipal
Bond Fund has also been organized as a series of the Trust, but has issued no
shares to date. Certain matters under the Investment Company Act of 1940 which
must be submitted to a vote of the holders of the outstanding voting securities
of a series company shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding voting
securities of each Fund affected by such matter.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of a trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Trust and requires that
notice of this disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the Trustees. The Declaration of Trust
further provides for indemnification out of the assets and property of the
Trust for all loss and expense of any shareholder personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself were unable to meet its
obligations. The Trust believes the likelihood of these circumstances is
remote.
PORTFOLIO SECURITIES
As described in the Prospectus, each of the Funds invests substantially all
of its assets (at least 80%) in a portfolio of Municipal Obligations free from
regular federal, state and, in some cases, local income tax in each Fund's
respective state, which generally will be Municipal Obligations issued within
the Fund's respective state. In general, Municipal Obligations include debt
obligations issued by states, cities and local authorities to obtain funds for
various public purposes, including construction of a wide range of public
facilities such as airports, bridges, highways, hospitals, housing, mass
transportation, schools, streets and water and sewer works. Industrial
development bonds and pollution control bonds that are issued by or on behalf
of public authorities to finance various privately-rated facilities are
included within the term Municipal Obligations if the interest paid thereon is
exempt from federal income tax.
The investment assets of each Fund will consist of (1) Municipal Obligations
which are rated at the time of purchase within the four highest grades (Baa or
BBB or better) by Moody's Investors Service, Inc. ("Moody's"), by Standard and
Poor's Corporation ("S&P") or by Fitch Investors Service, Inc. ("Fitch"), (2)
unrated Municipal Obligations which, in the opinion of Nuveen Advisory, have
credit characteristics equivalent to bonds rated within the four highest grades
by Moody's, S&P or Fitch, except that the Fund may not invest more than 20% of
its net assets in unrated bonds and (3) temporary investments as described
below, the income from
S-4
<PAGE>
which may be subject to state income tax or to both federal and state income
taxes. See Appendix A for more information about ratings by Moody's, S&P, and
Fitch.
As described in the Prospectus, each Fund may invest in Municipal Obligations
that constitute participations in a lease obligation or installment purchase
contract obligation (hereafter collectively called "lease obligations") of a
municipal authority or entity. Although lease obligations do not constitute
general obligations of the municipality for which the municipality's taxing
power is pledged, a lease obligation is ordinarily backed by the municipality's
covenant to budget for, appropriate and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Although nonappropriation lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. A Fund will seek to minimize the special
risks associated with such securities by only investing in those
nonappropriation leases where Nuveen Advisory has determined that the issuer
has a strong incentive to continue making appropriations and timely payment
until the security's maturity. Some lease obligations may be illiquid under
certain circumstances. Lease obligations normally provide a premium interest
rate which along with regular amortization of the principal may make them
attractive for a portion of the assets of the Funds.
Obligations of issuers of Municipal Obligations are subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
the laws enacted in the future by Congress, state legislatures or referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation or other
conditions, the power or ability of any issuer to pay, when due, the principal
of and interest on its Municipal Obligations may be materially affected.
YEAR 2000 ISSUES
The "Year 2000" problem refers to the fact that many computer programs use
only the last two digits of a year, and do not recognize a year that begins
with "20" instead of "19." If this problem is not corrected, computers could
function improperly or not at all, which could affect the global economy. The
SEC has urged securities issuers to disclose the steps they are taking to
correct any Year 2000 problems.
The Funds invest primarily in municipal securities. If municipal issuers do
not correct any Year 2000 problems in a timely manner, they could experience
problems in conducting their operations or in making payments on their
securities, which could cause the value of these securities to decline.
Municipal issuers could experience three types of Year 2000 problems. First, if
an issuer's internal computer systems experience Year 2000 problems, this could
disrupt an issuer's operations (such as its ability to collect local taxes or
fees). Second, an issuer may rely on other parties for the payments that
support its debt service, such as servicers that collect mortgage or student
loan payments, and those third parties may have Year 2000 problems that
interfere with their ability to forward payments to the issuer. Third, an
issuer may have mechanical problems in sending payments to its securities
holders.
Nuveen Advisory is obtaining information about the Year 2000 readiness of the
issuers of its portfolio securities as part of its ongoing surveillance of the
creditworthiness of those issuers.
PORTFOLIO TRADING AND TURNOVER
The Funds will make changes in their investment portfolio from time to time
in order to take advantage of opportunities in the municipal market and to
limit exposure to market risk. The Funds may also engage to a limited extent in
short-term trading consistent with their investment objective. Securities may
be sold in
S-5
<PAGE>
anticipation of market decline or purchased in anticipation of market rise and
later sold. In addition, a security may be sold and another of comparable
quality purchased at approximately the same time to take advantage of what
Nuveen Advisory believes to be a temporary disparity in the normal yield
relationship between the two securities. Each Fund may make changes in its
investment portfolio in order to limit its exposure to changing market
conditions. Changes in a Fund's investments are known as "portfolio turnover."
While it is impossible to predict future portfolio turnover rates, the annual
portfolio turnover rate for each of the Funds is generally not expected to
exceed 75%. However, each Fund reserves the right to make changes in its
investments whenever it deems such action advisable and, therefore, a Fund's
annual portfolio turnover rate may exceed 75% in particular years depending
upon market conditions.
The portfolio turnover rates for the 1997 and 1998 fiscal years were:
<TABLE>
<CAPTION>
FISCAL
YEAR
1997 1998
---- ----
<S> <C> <C>
Arizona Municipal Bond Fund ................................... 25% 16%
Colorado Municipal Bond Fund .................................. 27% 19%
Florida Municipal Bond Fund ................................... 54% 14%
Maryland Municipal Bond Fund .................................. 4%* 7%
New Mexico Municipal Bond Fund ................................ 43% 13%
Pennsylvania Municipal Bond Fund .............................. 46% 20%
Virginia Municipal Bond Fund .................................. 23% 3%
</TABLE>
- --------
*For the year ending January 31. For the four months ending May 31, 1997,
the portfolio turnover rate was 3%.
WHEN-ISSUED SECURITIES
Each Fund may purchase and sell Municipal Obligations on a when-issued or
delayed delivery basis. When-issued and delayed delivery transactions arise
when securities are purchased or sold with payment and delivery beyond the
regular settlement date. (When-issued transactions normally settle within 15-45
days.) On such transactions the payment obligation and the interest rate are
fixed at the time the buyer enters into the commitment. The commitment to
purchase securities on a when-issued or delayed delivery basis may involve an
element of risk because the value of the securities is subject to market
fluctuation, no interest accrues to the purchaser prior to settlement of the
transaction, and at the time of delivery the market value may be less than
cost. At the time a Fund makes the commitment to purchase a Municipal
Obligation on a when-issued or delayed delivery basis, it will record the
transaction and reflect the amount due and the value of the security in
determining its net asset value. Likewise, at the time a Fund makes the
commitment to sell a Municipal Obligation on a delayed delivery basis, it will
record the transaction and include the proceeds to be received in determining
its net asset value; accordingly, any fluctuations in the value of the
Municipal Obligation sold pursuant to a delayed delivery commitment are ignored
in calculating net asset value so long as the commitment remains in effect. The
Funds will maintain designated readily marketable assets at least equal in
value to commitments to purchase when-issued or delayed delivery securities,
such assets to be segregated by the Custodian specifically for the settlement
of such commitments. The Funds will only make commitments to purchase Municipal
Obligations on a when-issued or delayed delivery basis with the intention of
actually acquiring the securities, but the Funds reserve the right to sell
these securities before the settlement date if it is deemed advisable. If a
when-issued security is sold before delivery any gain or loss would not be tax-
exempt. The Funds commonly engage in when-issued transactions in order to
purchase or sell newly-issued Municipal Obligations, and may engage in delayed
delivery transactions in order to manage its operations more effectively.
S-6
<PAGE>
SPECIAL CONSIDERATIONS RELATING TO MUNICIPAL OBLIGATIONS OF DESIGNATED STATES
As described in the Prospectus, except for investments in temporary
investments, each of the Funds will invest substantially all of its assets (at
least 80%) in municipal bonds that are exempt from federal and state tax in
that state ("Municipal Obligations"), generally Municipal Obligations issued in
its respective state. Each Fund is therefore more susceptible to political,
economic or regulatory factors adversely affecting issuers of Municipal
Obligations in its state. Brief summaries of these factors are contained in the
Prospectus. Set forth below is additional information that bears upon the risk
of investing in Municipal Obligations issued by public authorities in the
states of currently offered Funds. This information was obtained from official
statements of issuers located in the respective states as well as from other
publicly available official documents and statements. The Funds have not
independently verified any of the information contained in such statements and
documents. The information below is intended only as a general summary, and is
not intended as a discussion of any specific factor that may affect any
particular obligation or issuer.
FACTORS PERTAINING TO ARIZONA
Arizona's economy is primarily based on services, tourism and high technology
manufacturing. However, the military, agriculture, and mining of primary metals
still play a role. The State has experienced phenomenal economic and population
growth recently due to an influx of businesses attracted by the State's high
quality of life, educated workforce, and friendly business environment. Major
employers include Intel Corp., Microchip Technology and Charles Schwab. Over
the last five years, the State has ranked second in the nation in job growth
with a 33 percent increase which created over 400,000 private sector jobs. The
State's leading economic indicators hit an all-time high in April, suggesting
that the State's economic growth may continue in the near term. However, the
magnitude and duration of the economic turmoil in East Asia may dampen economic
growth within the state. According to 1996 estimates, approximately 45% of the
State's $10 billion of exports were to Asian countries.
The statewide unemployment rate was 4.0 percent, at the end of June 1998,
slightly below the U.S. rate of 4.5 percent. Additionally, unemployment rates
in the State's two largest metropolitan areas, Phoenix-Mesa and Tucson, were a
very low 2.4 percent and 2.8 percent, respectively. Statewide personal income
grew at a rate of 5.5 percent in 1997 to approximately $22,438. Retail sales in
Arizona through May 1998 were up 7.7 percent from the preceeding year.
The Arizona Constitution restricts the legislature's power to raise revenues
by increasing property taxes. The State has also enacted limits on annual
spending. At the recent legislative session, the corporate income tax rate was
trimmed to 8% from 9% and personal income taxes were cut again.
The State does not issue general obligation bonds but relies on capital
outlays, revenue bonds and other methods to finance projects. Each project is
individually rated for its creditworthiness.
FACTORS PERTAINING TO COLORADO
Colorado's trade and service sectors represent over half of non-agricultural
employment in the State's economy and have expanded in the past years.
Manufacturing employment is comparatively small and continues to shrink due to
the concentration in defense production. The trade and services sectors, led by
a healthy tourist industry, helped pull the State out of a recession in the
late 1980's which had been caused by contraction in the energy, high technology
and construction industries. The State's economic activity tends to mimic that
of the nation as a whole albeit less severely, according to Colorado's Office
of State Planning and Budgeting.
Colorado's unemployment rate was a very low 3.4% in June 1998, below the
national average of 4.5%. Per capita income grew 5.1% to $27,051 in 1997.
Colorado has no outstanding general obligation debt, but outstanding lease
obligations are rated A1 by Moody's and A+ by Standard and Poor's.
S-7
<PAGE>
FACTORS PERTAINING TO FLORIDA
Florida is one of the nation's fastest growing states. Employment and
personal income growth have outpaced the nation since 1991 and recent economic
reports indicate that the State continues to experience job growth, albeit at a
more moderate pace. Population growth, which reached 30% from 1980 to 1990, has
slowed but remains relatively high. Florida has a diverse economy with
substantial insurance, banking, healthcare, construction and trade sectors, yet
it remains heavily dependent on the agriculture and tourism industries.
Florida's unemployment rate of 4.5% in June 1998 was comparable to the
national average of 4.5% in June 1998 and lower than the State's 4.8% rate in
June 1997. Florida's 1997 per capita income of $25,255 is on a par with
national averages and slightly above regional levels. Because the State's
significant senior population relies more on fixed incomes than on wages,
income levels in the State are generally more stable over different phases of
economic cycles.
A voter-approved amendment to Florida's Constitution that be came effective
in 1996 limits the rate of growth of state revenues to the growth rate of
personal income. Revenues that are pledged to bonds, including new issuance,
are exempt from the limitation. Another recent constitutional amendment
requires the State to maintain a budget stabilization fund. The fund, which is
expected to reach the required 5% level by 1999, provides a counterbalance to
the State's reliance on economically-sensitive sales tax revenues. As of July
31, 1998, Florida's general obligation debt carries ratings of AA+ by S&P, Aa2
by Moody's, and AA by Fitch.
FACTORS PERTAINING TO MARYLAND
Maryland has benefited from the expansion in the national economy. The
State's once sluggish economy has shown improvement, although employment and
income growth rates remain at or below national averages and below neighboring
states. Services, wholesale and retail trade, and government account for most
of the State's employment. Unlike in most states, government employment
surpasses manufacturing employment in Maryland.
The State's unemployment rate, which fell to 4.4% in June 1998 from 5.2% in
June 1997, remains below the national average. Per capita income, which was
$28,969 in 1997, is 113% of the national average.
The State Constitution mandates a balanced budget. Conservative fiscal
policies and recent economic growth have benefited the State's financial
position. For example, the State's statutorily-mandated rainy day fund has
exceeded its required 5% level recently. The rainy day fund is, however,
scheduled to be drawn down to its 5% level in future years. During its spring
1998 term, the Maryland legislature voted to accelerate the income tax
reduction it passed in 1997; as a result, income taxes will be reduced by 5% in
1998, more than the 2% reduction originally planned for 1998. The 1988
reduction is part of the total 10% reduction to the State's income tax, which
is being phased in through 2002. Maryland's general obligation debt, which is
constitutionally limited to a maximum term of 15 years, remains moderate.
Maryland's general obligation debt carries triple-A ratings from Moody's,
Standard & Poor's, and Fitch.
FACTORS PERTAINING TO NEW MEXICO
New Mexico's major industries include energy, tourism, services, crafts,
agribusiness, manufacturing and mining. Energy resource production, including
gas and oil sales, was approximately $5.2 billion in 1997. The economy also
benefits from the employment and technology base supplied by federal government
scientific research facilities at Los Alamos, Albuquerque and White Sands.
Tourism generated about $2.3 billion for the state according to a 1991
estimate, a trend that should continue given the large number of state and
federal park lands in the State. Finally, crop and livestock production remains
diverse given the State's variety of climatic conditions and will also remain a
major part of the economy.
New Mexico's unemployment rate was 6.7% in June 1998, surpassing the national
average of 4.5%. At the same time, per capita income rose 4.1% in 1997 to reach
$19,587.
S-8
<PAGE>
As of June 1998, Moody's rates the state's general obligation debt Aa1, while
Standard and Poor's rates it AA+.
FACTORS PERTAINING TO OKLAHOMA
Oklahoma's principal industries include trade, manufacturing, mineral and
energy exploration and production and agriculture. Oklahoma is vulnerable to
cyclical fluctuations in oil and gas prices just like any other energy driven
economy. Nonfuel mineral represented $338 million in activity in 1994 while
tourists spent some $3 billion in the state during the same year.
Oklahoma's unemployment rate is low compared to the national average. It
stood at 4.0% in June 1997 compared to national averages of 4.5%. Per capita
income rose 5.0% in 1997 to reach $20,556.
As of June 1998, Moody's gives the state's general obligation debt an Aa3
rating while S&P gives it an AA rating.
FACTORS PERTAINING TO PENNSYLVANIA
After several years of trailing the national economy, Pennsylvania's economy
has performed fairly well during the past two years. The State's employment
growth has approached national levels and income growth has also been good.
Part of the growth can be explained by the State's efforts in recent years to
reduce its relatively high business taxes. Future growth is, however, expected
to moderate. The State's healthcare environment continues to be difficult,
particularly in the Philadelphia and Pittsburgh metro areas. A well-publicized
example of the pressures in these markets occurred in July 1998 with the
bankruptcy filing by AHERF (Allegheny Health, Research, and Education
Foundation) on behalf of its eight Philadelphia-area hospitals.
Pennsylvania's unemployment rate was 4.3% in June 1998, compared with the
June 1998 national rate of 4.5% and the State's 5.2% rate in June 1997.
Pennsylvania's 1997 per capita income was $26,058, approximately 102% of the
national average.
The Governor must submit a balanced operating budget by law and while the
General Assembly may change items, the Governor retains a line-item veto power.
Total appropriations cannot exceed estimated revenues, also taking into account
any deficit or surplus remaining from the previous year. The State's financial
position has improved modestly. The State made notable additions to its
reserves in fiscal 1997, including its rainy day fund and its
unreserved/undesignated fund balance. Improved reserves contributed to the
decisions by two rating agencies--Moody's and Fitch--to upgrade the State's
general obligation rating to Aa3 and AA, respectively, in October 1997.
Pennsylvania's general obligation debt also carries a rating of AA- by Standard
& Poor's.
FACTORS PERTAINING TO VIRGINIA
Like the U.S. economy, the Virginia economy is broad-based and composed of
several distinct regions. The Commonwealth's economy nearly mirrors the U.S.
economy with the services, trade, government, and manufacturing sectors
supplying a significant portion of employment. Recent employment losses in the
federal government, manufacturing, and mining sectors has been offset by
employment growth in other sectors, including high technology. The federal
government, however, remains an important employer and has a greater impact on
the Commonwealth than it has on most other states.
Virginia's unemployment rate was a low 3.1% in June 1998, below the national
average of 4.5% in June 1998 and down slightly from the June 1997 rate of 4.1%.
At $26,438 in 1997, per capita income remains above the U.S. average.
S-9
<PAGE>
Virginia's Constitution requires a balanced biennial budget. The Commonwealth
has historically operated on a fiscally conservative basis but realized a fund
balance deficit in fiscal year 1995, largely as the result of a court decision
that required the Commonwealth to refund certain taxes. Large operating
surpluses in fiscal years 1996 and 1997 allowed the Commonwealth to eliminate
the fund balance deficit by fiscal 1997. Also in fiscal 1997, the balance in
the Commonwealth's constitutionally-mandated revenue stabilization fund reached
$156.6 million. In 1998, the Virginia legislature voted to phase out over a 5-
year period the personal property automobile tax, collected by local
governments. The Commonwealth is expected to reimburse local governments for
the revenue losses. As of July 31, 1998 Moody's, S&P, and Fitch each rated the
Commonwealth AAA.
HEDGING AND OTHER DEFENSIVE ACTIONS
Each Fund may periodically engage in hedging transactions. Hedging is a term
used for various methods of seeking to preserve portfolio capital value of
offsetting price changes in one investment through making another investment
whose price should tend to move in the opposite direction. It may be desirable
and possible in various market environments to partially hedge the portfolio
against fluctuations in market value due to interest rate fluctuations by
investment in financial futures and index futures as well as related put and
call options on such instruments. Both parties entering into an index or
financial futures contract are required to post an initial deposit of 1% to 5%
of the total contract price. Typically, option holders enter into offsetting
closing transactions to enable settlement in cash rather than take delivery of
the position in the future of the underlying security. Each Fund will only sell
covered futures contracts, which means that the Fund segregates assets equal to
the amount of the obligations.
These transactions present certain risks. In particular, the imperfect
correlation between price movements in the futures contract and price movements
in the securities being hedged creates the possibility that losses on the hedge
by a Fund may be greater than gains in the value of the securities in such
series, portfolio. In addition, futures and options markets may not be liquid
in all circumstances. As a result, in volatile markets, a Fund may not be able
to close out the transaction without incurring losses substantially greater
than the initial deposit. Finally, the potential daily deposit requirements in
futures contracts create an ongoing greater potential financial risk than do
options transactions, where the exposure is limited to the cost of the initial
premium. Losses due to hedging transactions will reduce yield. Net gains, if
any, from hedging and other portfolio transactions will be distributed as
taxable distributions to shareholders.
No Fund will make any investment (whether an initial premium or deposit or a
subsequent deposit) other than as necessary to close a prior investment if,
immediately after such investment, the sum of the amount of its premiums and
deposits would exceed 5% of such series' net assets. Each series will invest in
these instruments only in markets believed by the investment adviser to be
active and sufficiently liquid. For further information regarding these
investment strategies and risks presented thereby, see Appendix B to this
Statement of Additional Information.
Each Fund reserves the right for liquidity or defensive purposes (such as
thinness in the market for municipal securities or an expected substantial
decline in value of long-term obligations), to temporarily invest up to 20% of
its assets in obligations issued or guaranteed by the U.S. Government and its
agencies or instrumentalities, including up to 5% in adequately collateralized
repurchase agreements relating thereto. Interest on each instrument is taxable
for Federal income tax purposes and would reduce the amount of tax-free
interest payable to shareholders.
SHORT-TERM SECURITIES
The Prospectus discusses briefly the ability of the Funds to invest a portion
of their assets in federally tax-exempt or taxable short-term securities
("temporary investments"). Temporary investments will not exceed 20% of a
Fund's assets except when made for defensive purposes. The Funds will invest
only in taxable temporary
S-10
<PAGE>
investments that are either U.S. Government securities or are rated within the
highest grade by Moody's, S&P, or Fitch and mature within one year from the
date of purchase or carry a variable or floating rate of interest. See Appendix
A for more information about ratings by Moody's, S&P, and Fitch.
The Funds may invest in the following federally tax-exempt temporary
investments:
Bond Anticipation Notes (BANs) are usually general obligations of state
and local governmental issuers which are sold to obtain interim financing
for projects that will eventually be funded through the sale of long-term
debt obligations or bonds. The ability of an issuer to meet its obligations
on its BANs is primarily dependent on the issuer's access to the long-term
municipal bond market and the likelihood that the proceeds of such bond
sales will be used to pay the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments
to finance the current operations of such governments. Repayment is
generally to be derived from specific future tax revenues. Tax anticipation
notes are usually general obligations of the issuer. A weakness in an
issuer's capacity to raise taxes due to, among other things, a decline in
its tax base or a rise in delinquencies, could adversely affect the
issuer's ability to meet its obligations on outstanding TANs.
Revenue Anticipation Notes (RANs) are issued by governments or
governmental bodies with the expectation that future revenues from a
designated source will be used to repay the notes. In general, they also
constitute general obligations of the issuer. A decline in the receipt of
projected revenues, such as anticipated revenues from another level of
government, could adversely affect an issuer's ability to meet its
obligations on outstanding RANs. In addition, the possibility that the
revenues would, when received, be used to meet other obligations could
affect the ability of the issuer to pay the principal and interest on RANs.
Construction Loan Notes are issued to provide construction financing for
specific projects. Frequently, these notes are redeemed with funds obtained
from the Federal Housing Administration.
Bank Notes are notes issued by local government bodies and agencies as
those described above to commercial banks as evidence of borrowings. The
purposes for which the notes are issued are varied but they are frequently
issued to meet short-term working capital or capital-project needs. These
notes may have risks similar to the risks associated with TANs and RANs.
Tax-Exempt Commercial Paper (Municipal Paper) represents very short-term
unsecured, negotiable promissory notes, issued by states, municipalities
and their agencies. Payment of principal and interest on issues of
municipal paper may be made from various sources, to the extent the funds
are available therefrom. Maturities of municipal paper generally will be
shorter than the maturities of TANs, BANs or RANs. There is a limited
secondary market for issues of municipal paper.
Certain Municipal Obligations may carry variable or floating rates of
interest whereby the rate of interest is not fixed, but varies with changes in
specified market rates or indices, such as a bank prime rate or a tax-exempt
money market index.
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace and the Fund may invest in such other types of notes to the
extent permitted under its investment objective, policies and limitations. Such
notes may be issued for different purposes and may be secured differently from
those mentioned above.
The Funds may also invest in the following taxable temporary investments:
U.S. Government Direct Obligations are issued by the United States
Treasury and include bills, notes and bonds.
S-11
<PAGE>
--Treasury bills are issued with maturities of up to one year. They are
issued in bearer form, are sold on a discount basis and are payable at
par value at maturity.
--Treasury notes are longer-term interest bearing obligations with
original maturities of one to seven years.
--Treasury bonds are longer-term interest-bearing obligations with
original maturities from five to thirty years.
U.S. Government Agencies Securities--Certain federal agencies have been
established as instrumentalities of the United States Government to supervise
and finance certain types of activities. These agencies include, but are not
limited to, the Bank for Cooperatives, Federal Land Banks, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States, and Tennessee Valley Authority. Issues of these agencies, while not
direct obligations of the United States Government, are either backed by the
full faith and credit of the United States or are guaranteed by the Treasury or
supported by the issuing agencies' right to borrow from the Treasury. There can
be no assurance that the United States Government itself will pay interest and
principal on securities as to which it is not legally so obligated.
Certificates of Deposit (CDs)--A certificate of deposit is a negotiable
interest bearing instrument with a specific maturity. CDs are issued by banks
in exchange for the deposit of funds and normally can be traded in the
secondary market, prior to maturity. The Fund will only invest in U.S. dollar
denominated CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few days to nine months. Commercial paper may be purchased from
U.S. corporations.
Other Corporate Obligations--The Funds may purchase notes, bonds and
debentures issued by corporations if at the time of purchase there is less than
one year remaining until maturity or if they carry a variable or floating rate
of interest.
Repurchase Agreements--A repurchase agreement is a contractual agreement
whereby the seller of securities (U.S. Government or Municipal Obligations)
agrees to repurchase the same security at a specified price on a future date
agreed upon by the parties. The agreed upon repurchase price determines the
yield during a Fund's holding period. Repurchase agreements are considered to
be loans collateralized by the underlying security that is the subject of the
repurchase contract. The Funds will only enter into repurchase agreements with
dealers, domestic banks or recognized financial institutions that in the
opinion of Nuveen Advisory present minimal credit risk. The risk to the Funds
is limited to the ability of the issuer to pay the agreed-upon repurchase price
on the delivery date; however, although the value of the underlying collateral
at the time the transaction is entered into always equals or exceeds the
agreed-upon repurchase price, if the value of the collateral declines there is
a risk of loss of both principal and interest. In the event of default, the
collateral may be sold but a Fund might incur a loss if the value of the
collateral declines, and might incur disposition costs or experience delays in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization upon the collateral by a Fund may be delayed or limited. Nuveen
Advisory will monitor the value of collateral at the time the transaction is
entered into and at all times subsequent during the term of the repurchase
agreement in an effort to determine that the value always equals or exceeds the
agreed upon price. In the event the value of the collateral declined below the
repurchase price, Nuveen Advisory will demand additional collateral from the
issuer to increase the value of the collateral to at least that of the
repurchase price. Each of the Funds will not invest more than 10% of its assets
in repurchase agreements maturing in more than seven days.
S-12
<PAGE>
MANAGEMENT
The management of the Trust, including general supervision of the duties
performed for the Funds under the Investment Management Agreement, is the
responsibility of its Board of Trustees. The Trust currently has eight
trustees, two of whom are "interested persons" (as the term "interested
persons" is defined in the Investment Company Act of 1940) and six of whom are
"disinterested persons." The names and business addresses of the trustees and
officers of the Trust and their principal occupations and other affiliations
during the past five years are set forth below, with those trustees who are
"interested persons" of the Trust indicated by an asterisk.
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
Timothy R. 49 Chairman and Chairman since July 1, 1996 of The John
Schwertfeger* Trustee Nuveen Company, John Nuveen & Co.
333 West Wacker Drive Incorporated, Nuveen Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional Advisory Corp.; prior
thereto Executive Vice President and
Director of The John Nuveen Company, John
Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.; Chairman and Director (since January
1997) of Nuveen Asset Management, Inc.;
Director (since 1996) of Institutional
Capital Corporation.
Anthony T. Dean* 53 President and President since July 1, 1996 of The John
333 West Wacker Drive Trustee Nuveen Company, John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.; prior
thereto, Executive Vice President and
Director of The John Nuveen Company, John
Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.; President and Director (since
January 1997) of Nuveen Asset Management,
Inc.; Chairman and Director (since 1997) of
Rittenhouse Financial Services, Inc.
Robert P. Bremner 58 Trustee Private Investor and Management Consultant.
3725 Huntington
Street, N.W.
Washington, D.C. 20015
Lawrence H. Brown 64 Trustee Retired (August 1989) as Senior Vice
201 Michigan Avenue President of The Northern Trust Company.
Highwood, IL 60040
Anne E. Impellizzeri 65 Trustee Executive Director of Manitoga (Center for
3 West 29th Street Russel Wright's Design with Nature);
New York, NY 10001 formerly President and Chief Executive
Officer of Blanton-Peale Institute of
Religion and Health.
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
Peter R. 65 Trustee Adjunct Professor of Business and Economics,
Sawers University of Dubuque, Iowa; Adjunct
22 The Professor, Lake Forest Graduate School of
Landmark Management, Lake Forest, Illinois;
Northfield, Chartered Financial Analyst; Certified
IL 60093 Management Consultant.
William J. 54 Trustee Senior Partner, Miller-Valentine Partners,
Schneider Vice President, Miller-Valentine Group.
4000
Miller-
Valentine
Ct.
P.O. Box
744
Dayton, OH
45401
Judith M. 50 Trustee Executive Director, Gaylord and Dorothy
Stockdale Donnelley Foundation (since 1994); prior
1913 North thereto, Executive Director, Great Lakes
Mohawk St. Protection Fund (from 1990 to 1994).
Chicago,
IL 60614
Alan G. 37 Vice President Vice President and General Counsel (since
Berkshire and Assistant September 1997) and Secretary (since May
333 West Secretary 1998) of The John Nuveen Company, John
Wacker Nuveen & Co. Incorporated, Nuveen Advisory
Drive Corp. and Nuveen Institutional Advisory
Chicago IL Corp., prior thereto, Partner in the law
60606 firm of Kirkland & Ellis.
Michael S. 41 Vice President Vice President of Nuveen Advisory Corp.
Davern (since January 1997); prior thereto, Vice
One South President and Portfolio Manager of Flagship
Main Financial.
Street
Dayton, OH
45402
Lorna C. 53 Vice President Vice President of John Nuveen & Co.
Ferguson Incorporated; Vice President (since January
333 West 1998) of Nuveen Advisory Corp. and Nuveen
Wacker Institutional Advisory Corp.
Drive
Chicago,
IL 60606
William M. 34 Vice President Vice President of Nuveen Advisory Corp.
Fitzgerald (since December 1995); Assistant Vice
333 West President of Nuveen Advisory Corp. (from
Wacker September 1992 to December 1995), prior
Drive thereto Assistant Portfolio Manager of
Chicago, Nuveen Advisory Corp. (from June 1988 to
IL 60606 September 1992).
Stephen D. 44 Vice President and Vice President of John Nuveen & Co.
Foy Controller Incorporated.
333 West
Wacker
Drive
Chicago,
IL 60606
J. Thomas 43 Vice President Vice President of Nuveen Advisory Corp.
Futrell
333 West
Wacker
Drive
Chicago,
IL 60606
Richard A. 35 Vice President Vice President of Nuveen Advisory Corp.
Huber (since January 1997); prior thereto, Vice
333 West President and Portfolio Manager of Flagship
Wacker Financial.
Drive
Chicago,
IL 60606
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
POSITIONS
AND OFFICES PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH TRUST DURING PAST FIVE YEARS
- ---------------- --- ----------- ----------------------
<S> <C> <C> <C>
Steven J. Krupa 41 Vice President Vice President of Nuveen Advisory Corp.
333 West
Wacker Drive
Chicago, IL
60606
Larry W. Martin 47 Vice President Vice President, Assistant Secretary and
333 West Assistant General Counsel of John Nuveen &
Wacker Drive Co. Incorporated; Vice President and
Chicago, IL Assistant Secretary of Nuveen Advisory
60606 Corp.; Vice President and Assistant
Secretary of Nuveen Institutional Advisory
Corp.; Assistant Secretary of The John
Nuveen Company.
Edward F. 33 Vice President Vice President (since September 1996),
Neild, IV previously Assistant Vice President (since
333 West December 1993) of Nuveen Advisory Corp.,
Wacker Drive portfolio manager prior thereto; Vice
Chicago, IL President (since September 1996),
60606 previously Assistant Vice President (since
May 1995) of Nuveen Institutional Advisory
Corp., portfolio manager prior thereto.
Stephen S. 40 Vice President Vice President (since September 1997),
Peterson previously Assistant Vice President (since
333 West September 1996) of Nuveen Advisory Corp.,
Wacker Drive Portfolio Manager prior thereto.
Chicago, IL
60606
Stuart W. 42 Vice President Vice President of John Nuveen & Co.
Rogers Incorporated.
333 West
Wacker Drive
Chicago, IL
60606
Thomas C. 47 Vice President Vice President of Nuveen Advisory Corp. and
Spalding, Jr. Nuveen Institutional Advisory Corp.;
333 West Chartered Financial Analyst.
Wacker Drive
Chicago, IL
60606
H. William 64 Vice President Vice President and Treasurer of The John
Stabenow and Treasurer Nuveen Company, John Nuveen & Co.
333 West Incorporated, Nuveen Advisory Corp. and
Wacker Drive Nuveen Institutional Advisory Corp.
Chicago, IL
60606
William S. 33 Vice President Vice President of John Nuveen & Co.
Swanson Incorporated (since October 1997), prior
333 West thereto, Assistant Vice President (since
Wacker Drive September 1996); formerly, Associate of
Chicago, IL John Nuveen & Co. Incorporated.
60606
Gifford R. 42 Vice President Vice President, Secretary and Assistant
Zimmerman and Secretary General Counsel of John Nuveen & Co.
333 West Incorporated; Vice President and Assistant
Wacker Drive Secretary of Nuveen Advisory Corp.; Vice
Chicago, IL President and Assistant Secretary of Nuveen
60606 Institutional Advisory Corp.
</TABLE>
S-15
<PAGE>
Anthony Dean, Peter Sawers and Timothy Schwertfeger serve as members of the
Executive Committee of the Board of Trustees. The Executive Committee, which
meets between regular meetings of the Board of Trustees, is authorized to
exercise all of the powers of the Board of Trustees.
The trustees of the Trust are also directors or trustees, as the case may be,
of 37 Nuveen open-end funds and 52 Nuveen closed-end funds advised by Nuveen
Advisory Corp.
The following table sets forth compensation paid by the Trust to each of the
trustees of the Trust and the total compensation paid to each trustee during
the fiscal year ended May 31, 1998. The Trust has no retirement or pension
plans. The officers and trustees affiliated with Nuveen serve without any
compensation from the Trust.
<TABLE>
<CAPTION>
TOTAL
AGGREGATE COMPENSATION
COMPENSATION FROM TRUST AND
FROM THE SERIES FUND COMPLEX
NAME OF TRUSTEE OF THIS TRUST PAID TO TRUSTEES
--------------- --------------- ----------------
<S> <C> <C>
Robert P. Bremner........................ $3,992 $66,446
Lawrence H. Brown........................ $4,238 $79,000
Anne E. Impellizzeri..................... $3,992 $73,000
Margaret K. Rosenheim*................... $1,368 $29,506(1)
Peter R. Sawers.......................... $3,992 $73,000
William J. Schneider..................... $3,992 $66,446
Judith M. Stockdale**.................... $2,849 $49,000
</TABLE>
- --------
*Former trustee; retired July 1997.
**Elected to the Board in July 1997.
(1) Includes $1,256 in interest accrued on deferred compensation from prior
years.
Each trustee who is not affiliated with Nuveen or Nuveen Advisory receives a
fee. The Trust requires no employees other than its officers, all of whom are
compensated by Nuveen.
The officers and directors of each Fund, in the aggregate, own less than 1%
of the shares of the Fund.
The following table sets forth the percentage ownership of each person, who,
as of September 1, 1998, owns of record, or is known by Registrant to own of
record or beneficially 5% or more of any class of a Fund's shares.
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Arizona
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 21.82%
Class A Shares............ for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
</TABLE>
S-16
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Arizona
Municipal Bond Fund MLPF&S 39.11%
Class B Shares............ For the sole benefit of its customers
Attn Fund Admin Sec 97ND2
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
NFSC FEBO OXS-294926 6.20
James L. Emmons
Esther Robinson
145 W. Glendale
Phoenix, AZ 85021-8722
Nuveen Flagship Arizona
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 37.95
Class C Shares............ for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Sigmund J. Grinko 6.58
PO Box 14886
Scottsdale, AZ 85267-4886
Nuveen Flagship Arizona 5.63
Municipal Bond Fund Horace M. Wade
Class R Shares............ and Christine M. Wade
Trst Wade Liv Trust U-A DTD 04-13-98
4980 N. Calle Bujia
Tucson, AZ 85718-6155
Nuveen Flagship Colorado
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 23.42
Class A Shares............ for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Colorado
Municipal Bond Fund Mary Ann Davis Evans 8.11
Class B Shares............ 505 Lyda Ln
Colorado Spgs, CO 80904-1008
U S Bancorp Investments 7.14
FBO 180124921
100 South Fifth Street Suite 1400
Minneapolis, MN 55402-1217
Marcella C. Kruse 6.89
1275 S. Birch St. Apt 509
Denver, CO 80246-7834
Helen May Ferrell 6.36
230 S. Monaco Pkwy #10
Denver, CO 80224-1116
</TABLE>
S-17
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith- 12.29%
for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Olde Discount FBO 02606256 5.38
751 Griswold St.
Detroit, MI 48226-3224
Nuveen Flagship Colorado
Municipal Bond Fund Class Merrill Lynch, Pierce, Fenner & Smith 31.63
C Shares................. for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
M-A-N-U-A-L S-C-R-U-B MANUAL-SCRUB 17.56%
Acct 80257082
FAO E. Mueller
Trst N. Mueller
5035 McIntyre St.
Golden, CO 80403-1739
John J. Ferrero 6.20
8774 Allison Dr. Apt. A
Arvada, CO 80005-4814
Olde Discount FBO 02604753 5.34
751 Griswold St.
Detroit, MI 48226-3224
Nuveen Flagship Colorado
Municipal Bond Fund Class Raymond & Lisa Ann Munyon & 38.66
R Shares................. Renee L. Miller TRS
UA AUG 28 92
Munyon Family Irrevocable Trust
7650 Kline Dr.
Arvada, CO 80005-3776
Homer U. Van Hooser 22.97
250 Bennington Dr.
Colorado Springs, CO 80906-3355
Joseph N. Emmons 14.58
2428 Virgo Dr.
Colorado Springs, CO 80906-1048
Harold M. Gott 13.18
Darlene A. Gott JT WROS
P.O. Box. 1929
Montrose, CO 81402-1929
</TABLE>
S-18
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Florida
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 47.04%
Class A Shares.......... for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Florida
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 36.14
Class B Shares.......... for the sole benefit of
its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Donaldson Lufkin Jenrette 8.56
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
BT Alex Brown Incorporated FBO 5.74
771-16904-17
P.O. Box 1346
Baltimore MD 21203-1346
Nuveen Flagship Florida
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 64.69
Class C Shares.......... for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Rolland Eaton TR 5.12
Rolland Eaton Trust
U/A DTD 04/06/93
15520 Gullane Court SE
Fort Myers, FL 33912-3908
Nuveen Maryland Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 8.88
Class A Shares.......... for the sole benefit of its customers
Attn: Fund Administration #97E83
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Maryland Municipal
Bond Fund MLPF&S for the benefit of its customers 24.64
Class B Shares.......... Attn Fund Admn/ 97NB4
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
</TABLE>
S-19
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nathan Schofer & Reuben 5.17%
Ambaruch & Phyllis Silvermann TRS
UA Jun 10 88
Nathan Schofer Revoc Trust
3330 W. Leisure World Blvd. #921
Silver Spring, Md 20906-5654
Nuveen Maryland Municipal
Bond Fund MLPF&S for the benefit of its customers 9.88
Class C Shares........... ATTN: Fund Admn/#97GX7
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Jessie L. & John L. Daniels & 6.39
Diane D. Cole & Lynne D. Mella TRS
UA Dec 21, 1992
Jessie L. Daniels Trust
9039 Rouen Ln.
Potomac, ND 20854-3135
Nuveen Maryland Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 7.22
Class R Shares........... for the sole benefit of its customers
Attn: Fund Admn/#979D5
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship New Mexico
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 32.28
Class A Shares........... for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship New Mexico
Municipal Bond Fund Class Merrill Lynch, Pierce, Fenner & Smith 18.97
B Shares................. for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. 3 FL 3
Jacksonville, FL 32246-6484
NFSC FEBO OC8-827983 10.13
Dorothy Tiramani
6100 Cortaderia NE Apt 4013
Albuquerque, NM 87111-8012
</TABLE>
S-20
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Raymond James & Assoc Inc for Elite 7.75%
Acct. 80274821
FAO Brenda M. St. James
Vista Del Rio 1620
Indian School Rd. NE Apt. 356
Albuquerque, NM 87102-1678
Pat Frieder and Brian Frieder 6.00
JT Ten
2200 Artesands NW
Albuquerque, NM 87107-0000
Smith Barney Inc. 5.43
00123229912
388 Greenwich Street
New York, NY 10013-2339
Nuveen Flagship New Mexico
Municipal Bond Fund Class C Raymond James & Assoc. Inc. 26.70
Shares...................... for Elite Acct. 50094911 FAO
Ann M. Gebhart TTEE
UA DTD 9-27-88 AM
1421 Pinnacle View Dr. NE
Albuquerque, NM 87112-6558
Anthony G. Hillerman 13.45
Marie E. Hillerman CO-TTEES
UA DTD 02-22-90
Anthony G. Marie E. Hillerman
Rev TR Hillerman, RV TR
1632 Francisca Rd.
Albuquerque, NM 87107-7118
BA Investment Services FBO 5.64
429597591
185 Berry St.
3rd Floor 12640
San Francisco, CA 94107-1729
Edward D. Jones & Co. FAO 5.57
Russell J. Hayman & EDJ
574-00584-1-6
P.O. Box 2500
Maryland Heights, MO 63043-8500
Nuveen Flagship New Mexico
Municipal Bond Fund Class R Mary Swickard 61.53
Shares...................... 84 Barcelona Ave.
Los Alamos, NM 87544-3428
</TABLE>
S-21
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Cecil E. McClelland 29.91%
5916 Inverness Dr.
Farmington, NM 87402-5071
Herschel W. Rogers & Rosemary E. Rogers Tr. 8.52
UA 12/05/96
H.W. & R.E. Rogers Rev. Trust
4509 Acapulco Dr. NE
Albuquerque, NM 87111-2813
Nuveen Flagship
Pennsylvania Municipal Merrill Lynch, Pierce, Fenner & Smith 40.90
Bond Fund Class A for the sole benefit of its customers
Shares................. Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship
Pennsylvania Municipal Merrill Lynch, Pierce, Fenner & Smith for 46.44
Bond Fund Class B the sole benefit of its customers
Shares................. Attn: Fund Administration
4800 Deer Lake Dr E FL 3
Jacksonville, FL 32246-6484
Nuveen Flagship
Pennsylvania Municipal Merrill Lynch, Pierce, Fenner & Smith 69.46
Bond Fund Class C for the sole benefit of its customers
Shares................. Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Virginia
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 28.76
Class A Shares......... for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Virginia
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 27.87
Class B Shares......... for the sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Dr E. Fl 3
Jacksonville, FL 32246-6484
NFSC FEBO DFL-722774 5.54
George J Nozicka Colette M Nozicka
4974 Sentinel Drive
Bethesda, MD 20816-3597
</TABLE>
S-22
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NAME OF FUND AND CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
- ---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Flagship Virginia
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 55.55%
Class C Shares............ for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Flagship Virginia
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 5.83
Class R Shares............ for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
</TABLE>
S-23
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory Corp. acts as investment adviser for and manages the
investment and reinvestment of the assets of each of the Funds. Nuveen Advisory
also administers the Trust's business affairs, provides office facilities and
equipment and certain clerical, bookkeeping and administrative services, and
permits any of its officers or employees to serve without compensation as
trustees or officers of the Trust if elected to such positions. See "Fund
Service Providers" in the Prospectus.
Pursuant to an investment management agreement between Nuveen Advisory and
the Trust, each of the Funds has agreed to pay an annual management fee at the
rates set forth below:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE FEE MANAGEMENT FEE
- --------------------------------- --------------
<S> <C>
For the first $125 million....................................... .5500 of 1%
For the next $125 million........................................ .5375 of 1%
For the next $250 million........................................ .5250 of 1%
For the next $500 million........................................ .5125 of 1%
For the next $1 billion.......................................... .5000 of 1%
For assets over $2 billion....................................... .4750 of 1%
</TABLE>
For all Funds, except the Maryland Fund, Nuveen Advisory has committed
through at least 1998 to continue Flagship's general dividend-setting
practices. For the Maryland Fund, Nuveen Advisory has voluntarily agreed
through July 31, 1998 to waive fees or reimburse expenses so that the total
operating expenses (not counting distribution and service fees) for the fund do
not exceed 0.75% of average daily net assets.
For the last three fiscal years, the Maryland Municipal Bond Fund paid net
management fees to Nuveen Advisory as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF
EXPENSE REIMBURSEMENT FEE WAIVERS AND EXPENSE
PAID TO NUVEEN ADVISORY REIMBURSEMENTS
FOR THE YEAR ENDED FOR THE YEAR ENDED
------------------------- ------------------------
1/31/96 5/31/97* 5/31/98 1/31/96 5/31/97* 5/31/98
-------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Maryland Municipal Bond
Fund....................... $131,476 332,471 313,921 148,537 81,437 36,658
</TABLE>
- --------
*For the sixteen month period ended May 31, 1997.
S-24
<PAGE>
For the last three fiscal years, the Arizona Municipal Bond Fund, the
Colorado Municipal Bond Fund, the Florida Municipal Bond Fund, the New Mexico
Municipal Bond Fund, the Pennsylvania Municipal Bond Fund, and the Virginia
Municipal Bond Fund paid net management fees to Flagship Financial, predecessor
to Nuveen Advisory, and beginning on 2/1/97, to Nuveen Advisory, as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES NET OF
EXPENSE REIMBURSEMENT PAID FEE WAIVERS AND EXPENSE
TO FLAGSHIP FINANCIAL FOR REIMBURSEMENTS
THE YEAR ENDED FOR THE YEAR ENDED
--------------------------- -----------------------
5/31/96 5/31/97 5/31/98 5/31/96 5/31/97 5/31/98
------- --------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Arizona Municipal Bond
Fund...................... 82,113 277,387 493,414 337,926 190,556 108,424
Colorado Municipal Bond
Fund...................... -- 24,740 195,474 257,637 142,072 3,777
Florida Municipal Bond
Fund...................... 980,751 1,238,874 1,936,305 685,218 448,690 --
New Mexico Municipal Bond
Fund...................... 32,291 109,772 217,776 226,537 155,889 79,556
Pennsylvania Municipal Bond
Fund...................... 65,517 101,030 268,015 167,757 277,221 440,918
Virginia Municipal Bond
Fund...................... 310,198 404,706 786,826 312,111 374,624 316,199
</TABLE>
In addition to the management fee of Nuveen Advisory, each Fund pays all
other costs and expenses of its operations and a portion of the Trust's general
administrative expenses allocated in proportion to the net assets of each Fund.
Nuveen Advisory is a wholly owned subsidiary of John Nuveen & Co.
Incorporated ("Nuveen"), the Funds' principal underwriter. Nuveen is sponsor of
the Nuveen Defined Portfolios, and is the principal underwriter for the Nuveen
Mutual Funds, and has served as a co-managing underwriter for the shares of the
Nuveen Exchange-Traded Funds. Over 1,300,000 individuals have invested to date
in Nuveen's funds and Defined Portfolios. Founded in 1898, Nuveen is a
subsidiary of The John Nuveen Company which, in turn, is approximately 78%
owned by The St. Paul Companies, Inc. ("St. Paul"). St. Paul is located in St.
Paul, Minnesota and is principally engaged in providing property-liability
insurance through subsidiaries. Effective January 1, 1997, The John Nuveen
Company acquired Flagship Resources Inc., and as part of that acquisition,
Flagship Financial, the adviser to the Flagship Funds, was merged with Nuveen
Advisory.
The Funds, the other Nuveen funds, Nuveen Advisory, and other related
entities have adopted a code of ethics which essentially prohibits all Nuveen
fund management personnel, including Nuveen fund portfolio managers, from
engaging in personal investments which compete or interfere with, or attempt to
take advantage of, a Fund's anticipated or actual portfolio transactions, and
is designed to assure that the interests of Fund shareholders are placed before
the interests of Nuveen personnel in connection with personal investment
transactions.
PORTFOLIO TRANSACTIONS
Nuveen Advisory, in effecting purchases and sales of portfolio securities for
the account of each Fund, will place orders in such manner as, in the opinion
of management, will offer the best price and market for the execution of each
transaction. Portfolio securities will normally be purchased directly from an
underwriter or in
S-25
<PAGE>
the over-the-counter market from the principal dealers in such securities,
unless it appears that a better price or execution may be obtained elsewhere.
Portfolio securities will not be purchased from Nuveen or its affiliates except
in compliance with the Investment Company Act of 1940.
The Funds expect that all portfolio transactions will be effected on a
principal (as opposed to an agency) basis and, accordingly, do not expect to
pay any brokerage commissions. Purchases from underwriters will include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers will include the spread between the bid and asked price. Given the
best price and execution obtainable, it will be the practice of the Funds to
select dealers which, in addition, furnish research information (primarily
credit analyses of issuers and general economic reports) and statistical and
other services to Nuveen Advisory. It is not possible to place a dollar value
on information and statistical and other services received from dealers. Since
it is only supplementary to Nuveen Advisory's own research efforts, the receipt
of research information is not expected to reduce significantly Nuveen
Advisory's expenses. While Nuveen Advisory will be primarily responsible for
the placement of the business of the Funds, the policies and practices of
Nuveen Advisory in this regard must be consistent with the foregoing and will,
at all times, be subject to review by the Board of Trustees.
Nuveen Advisory reserves the right to, and does, manage other investment
accounts and investment companies for other clients, which may have investment
objectives similar to the Funds. Subject to applicable laws and regulations,
Nuveen Advisory will attempt to allocate equitably portfolio transactions among
the Funds and the portfolios of its other clients purchasing or selling
securities whenever decisions are made to purchase or sell securities by a Fund
and one or more of such other clients simultaneously. In making such
allocations the main factors to be considered will be the respective investment
objectives of the Fund and such other clients, the relative size of portfolio
holdings of the same or comparable securities, the availability of cash for
investment by the Fund and such other clients, the size of investment
commitments generally held by the Fund and such other clients and opinions of
the persons responsible for recommending investments to the Fund and such other
clients. While this procedure could have a detrimental effect on the price or
amount of the securities available to a Fund from time to time, it is the
opinion of the Board of Trustees that the benefits available from Nuveen
Advisory's organization will outweigh any disadvantage that may arise from
exposure to simultaneous transactions.
Under the Investment Company Act of 1940, the Funds may not purchase
portfolio securities from any underwriting syndicate of which Nuveen is a
member except under certain limited conditions set forth in Rule 10f-3. The
Rule sets forth requirements relating to, among other things, the terms of an
issue of Municipal Obligations purchased by a Fund, the amount of Municipal
Obligations which may be purchased in any one issue and the assets of a Fund
which may be invested in a particular issue. In addition, purchases of
securities made pursuant to the terms of the Rule must be approved at least
quarterly by the Board of Trustees, including a majority of the trustees who
are not interested persons of the Trust.
NET ASSET VALUE
As stated in the Prospectus, the net asset value of the shares of the Funds
will be determined separately for each class of the Fund's shares by The Chase
Manhattan Bank, the Funds' custodian, as of the close of trading (normally 4:00
p.m. Eastern Time) on each day on which the New York Stock Exchange (the
"Exchange") is normally open for trading. The Exchange is not open for trading
on New Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of a class of shares of a Fund will be computed by dividing the
value of the Fund's assets attributable to the class, less the liabilities
attributable to the class, by the number of shares of the class outstanding.
S-26
<PAGE>
In determining net asset value for the Funds, the Funds' custodian utilizes
the valuations of portfolio securities furnished by a pricing service approved
by the trustees. Securities for which quotations are not readily available
(which constitute a majority of the securities held by the Funds) are valued at
fair value as determined by the pricing service using methods which include
consideration of the following: yields or prices of municipal bonds of
comparable quality, type of issue, coupon, maturity and rating; indications as
to value from dealers; and general market conditions. The pricing service may
employ electronic data processing techniques and/or a matrix system to
determine valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Trust under the general supervision of the
Board of Trustees.
TAX MATTERS
FEDERAL INCOME TAX MATTERS
The following discussion of federal income tax matters is based upon the
advice of Morgan, Lewis & Bockius LLP, counsel to the Trust.
Each Fund intends to qualify under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code") for tax treatment as a regulated investment
company. In order to qualify as a regulated investment company, a Fund must
satisfy certain requirements relating to the source of its income,
diversification of its assets, and distributions of its income to shareholders.
First, a Fund must derive at least 90% of its annual gross income (including
tax-exempt interest) from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities, foreign currencies or other income (including but not limited to
gains from options and futures) derived with respect to its business of
investing in such stock or securities (the "90% gross income test"). Second,
for taxable years beginning on or before August 5, 1997 a Fund must derive less
than 30% of its annual gross income from the sale or other disposition of any
of the following which was held for less than three months: (i) stock or
securities and (ii) certain options, futures, or forward contracts (the "short-
short test"). The short-short test will not be a requirement for qualification
as a regulated investment company for taxable years beginning after August 5,
1997. Third, a Fund must diversify its holdings so that, at the close of each
quarter of its taxable year, (i) at least 50% of the value of its total assets
is comprised of cash, cash items, United States Government securities,
securities of other regulated investment companies and other securities limited
in respect of any one issuer to an amount not greater in value than 5% of the
value of a Fund's total assets and to not more than 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of
the total assets is invested in the securities of any one issuer (other than
United States Government securities and securities of other regulated
investment companies) or two or more issuers controlled by a Fund and engaged
in the same, similar or related trades or businesses.
As a regulated investment company, a Fund will not be subject to federal
income tax in any taxable year for which it distributes at least 90% of the sum
of (i) its "investment company taxable income" (which includes dividends,
taxable interest, taxable original issue discount and market discount income,
income from securities lending, net short-term capital gain in excess of long-
term capital loss, and any other taxable income other than "net capital gain"
(as defined below) and is reduced by deductible expenses) and (ii) its net tax-
exempt interest (the excess of its gross tax-exempt interest income over
certain disallowed deductions). A Fund may retain for investment its net
capital gain (which consists of the excess of its net long-term capital gain
over its short-term capital loss). However, if a Fund retains any net capital
gain or any investment company taxable income, it will be subject to tax at
regular corporate rates on the amount retained. If a Fund retains any capital
gain, such Fund may designate the retained amount as undistributed capital
gains in a notice to its shareholders who, if subject to federal income tax on
long-term capital gains, (i) will be required to include in income for federal
income tax purposes, as long-term capital gain, their shares of such
undistributed amount, and (ii) will be entitled to credit
S-27
<PAGE>
their proportionate shares of the tax paid by such Fund against their federal
income tax liabilities if any, and to claim refunds to the extent the credit
exceeds such liabilities. For federal income tax purposes, the tax basis of
shares owned by a shareholder of the Fund will be increased by an amount equal
under current law to 65% of the amount of undistributed capital gains included
in the shareholder's gross income. Each Fund intends to distribute at least
annually to its shareholders all or substantially all of its net tax-exempt
interest and any investment company taxable income and net capital gain.
Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain, i.e., the excess of
net long-term capital gain over net short-term capital loss for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or part of any net capital loss, any
net long-term capital loss or any net foreign currency loss incurred after
October 31 as if they had been incurred in the succeeding year.
Each Fund also intends to satisfy conditions (including requirements as to
the proportion of its assets invested in Municipal Obligations) that will
enable it to designate distributions from the interest income generated by
investments in Municipal Obligations, which is exempt from regular federal
income tax when received by such Fund, as exempt-interest dividends.
Shareholders receiving exempt-interest dividends will not be subject to regular
federal income tax on the amount of such dividends. Insurance proceeds received
by a Fund under any insurance policies in respect of scheduled interest
payments on defaulted Municipal Obligations will be excludable from federal
gross income under Section 103(a) of the Code. In the case of non-appropriation
by a political subdivision, however, there can be no assurance that payments
made by the insurer representing interest on "non-appropriation" lease
obligations will be excludable from gross income for federal income tax
purposes. See "Investment Policies and Investment Portfolio; Portfolio
Securities."
Distributions by a Fund of net interest received from certain taxable
temporary investments (such as certificates of deposit, commercial paper and
obligations of the U.S. Government, its agencies and instrumentalities) and net
short-term capital gains realized by a Fund, if any, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
If a Fund purchases a Municipal Obligation at a market discount, any gain
realized by the Fund upon sale or redemption of the Municipal Obligation will
be treated as taxable interest income to the extent such gain does not exceed
the market discount, and any gain realized in excess of the market discount
will be treated as capital gains. Any net long-term capital gains realized by a
Fund and distributed to shareholders in cash or additional shares, will be
taxable to shareholders as long-term capital gains regardless of the length of
time investors have owned shares of a Fund. Distributions by a Fund that do not
constitute ordinary income dividends, exempt-interest dividends, or capital
gain dividends will be treated as a return of capital to the extent of (and in
reduction of) the shareholder's tax basis in his or her shares. Any excess will
be treated as gain from the sale of his or her shares, as discussed below.
If a Fund has both tax-exempt and taxable income, it will use the "average
annual" method for determining the designated percentage that is taxable income
and designate the use of such method within 60 days after the end of the Fund's
taxable year. Under this method, one designated percentage is applied uniformly
to all distributions made during the Fund's taxable year. The percentage of
income designated as tax-exempt for any particular distribution may be
substantially different from the percentage of the Fund's income that was tax-
exempt during the period covered by the distribution.
If a Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to a Fund, defer a Fund's losses, cause
adjustments in the holding periods of a Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
S-28
<PAGE>
Because the taxable portion of a Fund's investment income consists primarily
of interest, none of its dividends, whether or not treated as exempt-interest
dividends, is expected to qualify under the Internal Revenue Code for the
dividends received deductions for corporations.
Prior to purchasing shares in a Fund, the impact of dividends or
distributions which are expected to be or have been declared, but not paid,
should be carefully considered. Any dividend or distribution declared shortly
after a purchase of such shares prior to the record date will have the effect
of reducing the per share net asset value by the per share amount of the
dividend or distribution.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by a Fund (and received by
the shareholders) on December 31.
The redemption or exchange of the shares of a Fund normally will result in
capital gain or loss to the shareholders. Generally, a shareholder's gain or
loss will be long-term gain or loss if the shares have been held for more than
one year. Present law taxes both long- and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, net capital gains (i.e., the excess of net long-term
capital gain over net short-term capital loss) will be taxed at a maximum
marginal rate of 28%, while short-term capital gains and other ordinary income
will be taxed at a maximum marginal rate of 39.6%. Because of the limitations
on itemized deductions and the deduction for personal exemptions applicable to
higher income taxpayers, the effective tax rate may be higher in certain
circumstances.
All or a portion of a sales charge paid in purchasing shares of a Fund cannot
be taken into account for purposes of determining gain or loss on the
redemption or exchange of such shares within 90 days after their purchase to
the extent shares of a Fund or another fund are subsequently acquired without
payment of a sales charge pursuant to the reinvestment or exchange privilege.
Any disregarded portion of such charge will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. Moreover, losses
recognized by a shareholder on the redemption or exchange of shares of a Fund
held for six months or less are disallowed to the extent of any distribution of
exempt-interest dividends received with respect to such shares and, if not
disallowed, such losses are treated as long-term capital losses to the extent
of any distributions of long-term capital gains made with respect to such
shares. In addition, no loss will be allowed on the redemption or exchange of
shares of a Fund if the shareholder purchases other shares of such Fund
(whether through reinvestment of distributions or otherwise) or the shareholder
acquires or enters into a contract or option to acquire securities that are
substantially identical to shares of a Fund within a period of 61 days
beginning 30 days before and ending 30 days after such redemption or exchange.
If disallowed, the loss will be reflected in an adjustment to the basis of the
shares acquired.
It may not be advantageous from a tax perspective for shareholders to redeem
or exchange shares after tax-exempt income has accrued but before the record
date for the exempt-interest dividend representing the distribution of such
income. Because such accrued tax-exempt income is included in the net asset
value per share (which equals the redemption or exchange value), such a
redemption could result in treatment of the portion of the sales or redemption
proceeds equal to the accrued tax-exempt interest as taxable gain (to the
extent the redemption or exchange price exceeds the shareholder's tax basis in
the shares disposed of) rather than tax-exempt interest.
In order to avoid a 4% federal excise tax, a Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and the excess of realized
S-29
<PAGE>
capital gains over realized capital losses for the prior year that was not
distributed during such year and on which such Fund paid no federal income tax.
For purposes of the excise tax, a regulated investment company may reduce its
capital gain net income (but not below its net capital gain) by the amount of
any net ordinary loss for the calendar year. The Funds intend to make timely
distributions in compliance with these requirements and consequently it is
anticipated that they generally will not be required to pay the excise tax.
If in any year a Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year (other than interest
income from Municipal Obligations), and distributions to its shareholders would
be taxable to shareholders as ordinary dividend income for federal income tax
purposes to the extent of the Fund's available earnings and profits.
Because the Funds may invest in private activity bonds, the interest on which
is not federally tax-exempt to persons who are "substantial users" of the
facilities financed by such bonds or "related persons" of such "substantial
users," the Funds may not be an appropriate investment for shareholders who are
considered either a "substantial user" or a "related person" within the meaning
of the Code. For additional information, investors should consult their tax
advisers before investing in a Fund.
Federal tax law imposes an alternative minimum tax with respect to both
corporations and individuals. Interest on certain Municipal Obligations, such
as bonds issued to make loans for housing purposes or to private entities (but
not for certain tax-exempt organizations such as universities and non-profit
hospitals), is included as an item of tax preference in determining the amount
of a taxpayer's alternative minimum taxable income. To the extent that a Fund
receives income from Municipal Obligations subject to the alternative minimum
tax, a portion of the dividends paid by it, although otherwise exempt from
federal income tax, will be taxable to shareholders to the extent that their
tax liability is determined under the alternative minimum tax regime. The Funds
will annually supply shareholders with a report indicating the percentage of
Fund income attributable to Municipal Obligations subject to the federal
alternative minimum tax.
In addition, the alternative minimum taxable income for corporations is
increased by 75% of the difference between an alternative measure of income
("adjusted current earnings") and the amount otherwise determined to be the
alternative minimum taxable income. Interest on all Municipal Obligations, and
therefore all distributions by the Funds that would otherwise be tax-exempt, is
included in calculating a corporation's adjusted current earnings.
Tax-exempt income, including exempt-interest dividends paid by a Fund, will
be added to the taxable income of individuals receiving social security or
railroad retirement benefits in determining whether a portion of that benefit
will be subject to federal income tax.
The Code provides that interest on indebtedness incurred or continued to
purchase or carry shares of any Fund is not deductible. Under rules used by the
IRS for determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of shares of a Fund may
be considered to have been made with borrowed funds even though such funds are
not directly traceable to the purchase of shares.
The Funds are required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares
who have not furnished to the Funds their correct taxpayer identification
number (in the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its shareholders. For
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<PAGE>
complete provisions, reference should be made to the pertinent Code sections
and Treasury Regulations. The Code and Treasury Regulations are subject to
change by legislative or administrative action, and any such change may be
retroactive with respect to Fund transactions. Shareholders are advised to
consult their own tax advisers for more detailed information concerning the
federal taxation of the Funds and the income tax consequences to their
shareholders.
STATE TAX MATTERS
The discussion of tax treatment is based on the assumptions that the Funds
will qualify under Subchapter M of the Code as regulated investment companies
and as qualified investment funds under applicable state law, that they will
satisfy the conditions which will cause distributions to qualify as exempt-
interest dividends to shareholders when distributed as intended, and that each
Fund will distribute all interest and dividends it receives to its
shareholders. Unless otherwise noted, shareholders in each Fund will not be
subject to state income taxation on distributions that are attributable to
interest earned on the municipal obligations issued by that state or its
subdivisions, or on obligations of the United States. Shareholders generally
will be required to include capital gain distributions in their income for
state tax purposes. The tax discussion summarizes general state tax laws which
are currently in effect and are subject to change by legislative or
administrative action; any such changes may be retroactive with respect to the
applicable Fund's transactions. Investors should consult a tax adviser for more
detailed information about state taxes to which they may be subject.
MARYLAND
The following is a general, abbreviated summary of certain provisions of the
applicable Maryland tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Maryland
Fund. This summary does not address the taxation of other shareholders. These
provisions are subject to change by legislative or administrative action, and
any such change may be retroactive with respect to Maryland Fund transactions.
The following is based on the assumptions that the Maryland Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Maryland Fund distributions to qualify
as exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Maryland Fund's shareholders.
The Maryland Fund will be subject to the Maryland corporate income tax only
if it has a sufficient nexus with Maryland. If it is subject to the Maryland
corporate income tax, it does not expect to pay a material amount of such tax.
Distributions by the Maryland Fund that are attributable to interest on or
gain from the sale or exchange of any obligation of Maryland or its political
subdivisions ("Maryland Obligations") or to interest on obligations of the
United States, its territories, possessions, or instrumentalities that are
exempt from state taxation under federal law ("Federal Obligations") will not
be subject to the Maryland individual income tax or the Maryland corporate
income tax. All remaining distributions to shareholders will be subject to the
Maryland individual and corporate income taxes, and in the case of individuals,
will be subject to local taxes as well.
Gain on the sale, exchange, or other disposition of shares of the Maryland
Fund will be subject to the Maryland individual and corporate income taxes, and
in the case of individuals, will be subject to local taxes as well.
Shares of the Maryland Fund may be subject to the Maryland estate tax if
owned by a Maryland decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Maryland state and local tax matters.
S-31
<PAGE>
ARIZONA
The following is a general, abbreviated summary of certain provisions of the
applicable Arizona tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Arizona Fund.
This summary does not address the taxation of other shareholders nor does it
discuss any local taxes that may be applicable. These provisions are subject to
change by legislative or administrative action, and any such change may be
retroactive with respect to Arizona Fund transactions.
The following is based on the assumptions that the Arizona Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
be registered as a diversified management company under (S)5 of the Federal
Investment Company Act of 1940, that it will satisfy the conditions which will
cause Arizona Fund distributions to qualify as exempt-interest dividends to
shareholders, and that it will distribute all interest and dividends it
receives to the Arizona Fund's shareholders.
The Arizona Fund is not subject to the Arizona corporate income tax.
Distributions by the Arizona Fund that are attributable to interest on any
obligation of Arizona and its political subdivisions or to interest on
obligations of the United States, its territories, possessions or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the Arizona individual and corporate income taxes. All
remaining distributions, including distributions attributable to capital gains,
will be subject to the Arizona individual and corporate income taxes.
Gain on the sale, exchange, or other disposition of shares of the Arizona
Fund will be subject to the Arizona individual and corporate income taxes.
Shares of the Arizona Fund may be subject to the Arizona estate tax if owned
by an Arizona decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Arizona state and local tax matters.
COLORADO
The following is a general, abbreviated summary of certain provisions of the
applicable Colorado tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Colorado
Fund. This summary does not address the taxation of other shareholders nor does
it discuss any local taxes that may be applicable. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to Colorado Fund transactions.
The following is based on the assumptions that the Colorado Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Colorado Fund distributions to qualify
as exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Colorado Fund's shareholders.
The Colorado Fund will be subject to the Colorado corporate income tax only
if it has a sufficient nexus with Colorado. If it is subject to the Colorado
corporate income tax, it does not expect to pay a material amount of such tax.
Distributions by the Colorado Fund that are attributable to interest earned
on any obligation of Colorado and its political subdivisions issued on or after
May 1, 1980 and certain such obligations issued before May 1, 1980 or to
interest on obligations of the United States, its territories, possessions or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the Colorado corporate income tax. All other
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<PAGE>
distributions, including distributions attributable to capital gains, will be
subject to the Colorado individual and corporate income taxes.
Gain on the sale, exchange, or other disposition of shares of the Colorado
Fund will be subject to the Colorado individual and corporate income taxes.
Shares of the Colorado Fund may be subject to the Colorado estate tax if
owned by an Colorado decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Colorado state and local tax matters.
FLORIDA
The following is a general, abbreviated summary of certain provisions of the
applicable Florida tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Florida Fund.
This summary does not address the taxation of other shareholders nor does it
discuss any local taxes that may be applicable. These provisions are subject to
change by legislative or administrative action, and any such change may be
retroactive with respect to Florida Fund transactions.
The following is based on the assumptions that the Florida Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause distributions of the Florida Fund to
qualify as exempt-interest dividends to shareholders, and that it will
distribute all interest and dividends it receives to the Florida Fund's
shareholders.
The Florida Fund will be subject to the Florida corporate income tax only if
it has a sufficient nexus with Florida. If the Florida Fund is subject to the
Florida corporate income tax, it does not expect to pay a material amount of
such tax. The Florida Fund will not be subject to the Florida intangible
personal property tax.
Shares of the Florida Fund will not be subject to the Florida intangible
personal property tax if on January 1 of the taxable year, the Fund holds only
tax-exempt obligations of Florida and its political subdivisions ("Florida
Obligations") or of the United States, its territories, possessions or
instrumentalities that are exempt from state taxation under federal law
("Federal Obligations"). If the Florida Fund holds any other types of assets on
that date, then the entire value of the Fund's shares (except for the portion
of the value of the shares attributable to Federal Obligations) will be subject
to the Florida intangible personal property tax.
All distributions by the Florida Fund to corporate shareholders, regardless
of source, will be subject to the Florida corporate income tax. Gain on the
sale, exchange, or other dispositions of shares of the Florida Fund will be
subject to the Florida corporate income tax.
Shares of the Florida Fund may be subject to the Florida estate tax if owned
by a Florida decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Florida state and local tax matters.
NEW MEXICO
The following is a general, abbreviated summary of certain provisions of the
applicable New Mexico tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the New Mexico
Fund. This summary does not address the taxation of other shareholders nor does
it discuss any local taxes that may be applicable. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to New Mexico Fund transactions.
S-33
<PAGE>
The following is based on the assumptions that the New Mexico Fund will
qualify under Subchapter M of the Code as a regulated investment company, that
it will satisfy the conditions which will cause New Mexico Fund distributions
to qualify as exempt-interest dividends to shareholders, and that it will
distribute all interest and dividends it receives to the New Mexico Fund's
shareholders.
The New Mexico Fund will be subject to the New Mexico corporate franchise tax
and the New Mexico corporate income tax only if it has a sufficient nexus with
New Mexico. If the New Mexico Fund is subject to such taxes, it does not expect
to pay a material amount of either tax.
Distributions by the New Mexico Fund that are attributable to interest on any
obligation of New Mexico and its political subdivisions or to interest on
obligations of the United States, its territories, possessions or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the New Mexico personal income tax or the New Mexico
corporate income tax. All other distributions, including distributions
attributable to capital gains, will be subject to the New Mexico personal and
corporate income taxes.
Gain on the sale, exchange, or other disposition of shares of the New Mexico
Fund will be subject to the New Mexico personal and corporate income taxes.
Shares of the New Mexico Fund may be subject to the New Mexico estate tax if
owned by a New Mexico decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning New Mexico and local tax matters.
PENNSYLVANIA
The following is a general, abbreviated summary of certain provisions of the
applicable Pennsylvania tax law as presently in effect as it directly governs
the taxation of resident individual and corporate shareholders of the
Pennsylvania Fund. This summary does not address the taxation of other
shareholders. These provisions are subject to change by legislative or
administrative action, and any such change may be retroactive with respect to
Pennsylvania Fund transactions.
The following is based on the assumptions that the Pennsylvania Fund will
qualify under Subchapter M of the Code and under the Investment Company Act of
1940 as a regulated investment company, that it will satisfy the conditions
which will cause Pennsylvania Fund distributions to qualify as exempt-interest
dividends to shareholders, and that it will distribute all interest and
dividends it receives to the Pennsylvania Fund's shareholders.
The Pennsylvania Fund will not be subject to the Pennsylvania corporate net
income tax. The Pennsylvania Fund will be subject to the Pennsylvania franchise
tax only if it has a sufficient nexus with Pennsylvania. If it is subject to
the Pennsylvania franchise tax, it does not expect to pay a material amount of
such tax.
Distributions from the Pennsylvania Fund that are attributable to interest on
any obligation of Pennsylvania or its political subdivisions or to interest on
obligations of the United States, its territories, possessions, or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the Pennsylvania personal income tax, the Pennsylvania
corporate net income tax, or to the Philadelphia School District income tax
(for Philadelphia residents). Distributions by the Pennsylvania Fund that are
attributable to interest on the obligations of states other than Pennsylvania
will not be subject to the Pennsylvania corporate net income tax unless they
are subject to federal income tax. Most other distributions, including those
attributable to capital gains, will be subject to the Pennsylvania personal and
corporate income taxes. Similarly, such other distributions would be subject to
the Philadelphia School
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<PAGE>
District income tax (for Philadelphia residents) except for distributions
attributable to capital gains in respect to obligations held by the
Pennsylvania Fund in excess of six months.
Gain on the sale, exchange, or other disposition of shares of the
Pennsylvania Fund will be subject to the Pennsylvania personal and corporate
income taxes, but such gain will not be subject to the Philadelphia School
District income tax (for Philadelphia residents) if the shares are held in
excess of six months.
Shares of the Pennsylvania Fund may be subject to the Pennsylvania
inheritance tax and the Pennsylvania estate tax if held by a Pennsylvania
decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Pennsylvania and local tax matters.
VIRGINIA
The following is a general, abbreviated summary of certain provisions of the
applicable Virginia tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Virginia
Fund. This summary does not address the taxation of other shareholders. These
provisions are subject to change by legislative or administrative action, and
any such change may be retroactive with respect to Virginia Fund transactions.
The following is based on the assumptions that the Virginia Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Virginia Fund distributions to qualify
as exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Virginia Fund's shareholders.
The Virginia Fund will be subject to the Virginia corporate income tax only
if it has a sufficient nexus with Virginia. If it is subject to the Virginia
corporate income tax, it does not expect to pay a material amount of such tax.
Distributions by the Virginia Fund that are attributable to income derived
from or on the sale and exchange of, obligations of Virginia and its political
subdivisions and instrumentalities ("Virginia Obligations") or to income
derived from or on the sale and exchange of, obligations of the United States
and its territories, possessions or instrumentalities that are exempt from
state taxation under federal law ("Federal Obligations") will not be subject to
the Virginia personal income tax or the Virginia corporate income tax. All
remaining distributions will be subject to the Virginia personal and corporate
income taxes, and may be subject to local income taxes.
Gain on the sale, exchange, or other disposition of shares of the Virginia
Fund will be subject to the Virginia personal and corporate income taxes.
If a shareholder receives a distribution consisting in part of taxable
income, then the entire distribution will be taxed unless the shareholder
substantiates the portion which is exempt from taxation.
Shares of the Virginia Fund may be subject to the Virginia estate tax if
owned by a Virginia decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Virginia state and local tax matters.
S-35
<PAGE>
PERFORMANCE INFORMATION
The historical investment performance of the Funds may be shown in the form
of "yield," "taxable equivalent yield," "average annual total return,"
"cumulative total return" and "taxable equivalent total return" figures, each
of which will be calculated separately for each class of shares.
In accordance with a standardized method prescribed by rules of the
Securities and Exchange Commission ("SEC"), yield is computed by dividing the
net investment income per share earned during the specified one month or 30-day
period by the maximum offering price per share on the last day of the period,
according to the following formula:
Yield=2[(a-b +1)/6/ -1]
cd
In the above formula, a = dividends and interest earned during the period; b
= expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the maximum offering price per share on the last day
of the period. In the case of Class A shares, the maximum offering price
includes the current maximum front-end sales charge of 4.20% (3% for the
Florida Intermediate Fund).
In computing yield, the Funds follow certain standardized accounting
practices specified by SEC rules. These practices are not necessarily
consistent with those that the Funds use to prepare their annual and interim
financial statements in conformity with generally accepted accounting
principles. Thus, yield may not equal the income paid to shareholders or the
income reported in a Fund's financial statements.
Taxable equivalent yield is computed by dividing that portion of the yield
which is tax-exempt by the remainder of (1 minus the stated combined federal
and state income tax rate, taking into account the deductibility of state taxes
for federal income tax purposes) and adding the product to that portion, if
any, of the yield that is not tax exempt.
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<PAGE>
The taxable equivalent yields quoted below are based upon (1) the stated
combined federal and state income tax rates and (2) the yields for the 30-day
period quoted in the left-hand column.
<TABLE>
<CAPTION>
AS OF MAY 31, 1998
------------------------------------------
COMBINED FEDERAL TAXABLE
YIELD AND STATE TAX RATE* EQUIVALENT YIELD
----- ------------------- ----------------
<S> <C> <C> <C>
Arizona Municipal Bond Fund
Class A Shares............. 4.27% 42.70% 7.45%
Class B Shares ............ 3.71% 42.70% 6.47%
Class C Shares............. 3.91% 42.70% 6.82%
Class R Shares............. 4.65% 42.70% 8.12%
Colorado Municipal Bond Fund
Class A Shares............. 4.02% 42.60% 7.00%
Class B Shares ............ 3.45% 42.60% 6.01%
Class C Shares............. 3.65% 42.60% 6.36%
Class R Shares............. 4.40% 42.60% 7.67%
Florida Municipal Bond Fund
Class A Shares............. 4.09% 39.60% 6.77%
Class B Shares ............ 3.52% 39.60% 5.83%
Class C Shares............. 3.72% 39.60% 6.16%
Class R Shares............. 4.47% 39.60% 7.40%
Maryland Municipal Bond Fund
Class A Shares............. 3.87% 42.60% 6.74%
Class B Shares ............ 3.29% 42.60% 5.73%
Class C Shares............. 3.49% 42.60% 6.08%
Class R Shares............. 4.24% 42.60% 7.39%
New Mexico Municipal Bond
Fund
Class A Shares............. 4.34% 44.70% 7.85%
Class B Shares ............ 3.78% 44.70% 6.84%
Class C Shares............. 3.98% 44.70% 7.20%
Class R Shares............. 4.73% 44.70% 8.55%
Pennsylvania Municipal Bond
Fund
Class A Shares............. 4.45% 41.30% 7.58%
Class B Shares ............ 3.90% 41.30% 6.64%
Class C Shares............. 4.09% 41.30% 6.97%
Class R Shares............. 4.84% 41.30% 8.25%
Virginia Municipal Bond Fund
Class A Shares............. 4.28% 43.10% 7.52%
Class B Shares ............ 3.72% 43.10% 6.54%
Class C Shares............. 3.92% 43.10% 6.89%
Class R Shares............. 4.67% 43.10% 8.21%
</TABLE>
- --------
* The combined tax rates used in these tables represent the highest or one
of the highest combined tax rates applicable to state taxpayers, rounded
to the nearest .5%; these rates do not reflect the current federal tax
limitations on itemized deductions and personal exemptions, which may
raise the effective tax rate and taxable equivalent yield for taxpayers
above certain income levels.
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<PAGE>
For additional information concerning taxable equivalent yields, see the
Taxable Equivalent Yields tables in the Prospectus.
The Funds may from time to time in their advertising and sales materials
report a quotation of their current distribution rate. The distribution rate
represents a measure of dividends distributed for a specified period.
Distribution rate is computed by taking the most recent monthly tax-free income
dividend per share, multiplying it by 12 to annualize it, and dividing by the
appropriate price per share (e.g., net asset value for purchases to be made
without a load such as reinvestments from Nuveen UITs, or the maximum public
offering price). The distribution rate differs from yield and total return and
therefore is not intended to be a complete measure of performance. Distribution
rate may sometimes differ from yield because a Fund may be paying out more than
it is earning and because it may not include the effect of amortization of bond
premiums to the extent such premiums arise after the bonds were purchased.
The distribution rates as of the period quoted, based on the maximum public
offering price then in effect for the Funds, and assuming the imposition of the
maximum sales charge for Class A Shares of 4.20%, were as follows:
<TABLE>
<CAPTION>
MAY 31, 1998
-----------------------------
DISTRIBUTION RATES
-----------------------------
CLASS
CLASS A B CLASS C CLASS R
------- ----- ------- -------
<S> <C> <C> <C> <C>
Arizona Municipal Bond Fund................. 4.59% 4.06% 4.27% 5.00%
Colorado Municipal Bond Fund................ 4.63% 4.10% 4.28% 5.05%
Florida Municipal Bond Fund ................ 4.83% 4.33% 4.49% 5.27%
Maryland Municipal Bond Fund................ 4.36% 3.81% 3.98% 4.71%
New Mexico Municipal Bond Fund.............. 4.52% 3.99% 4.22% 4.93%
Pennsylvania Municipal Bond Fund............ 5.00% 4.49% 4.72% 5.45%
Virginia Municipal Bond Fund................ 4.78% 4.29% 4.45% 5.21%
</TABLE>
Average annual total return quotation is computed in accordance with a
standardized method prescribed by SEC rules. The average annual total return
for a specific period is found by taking a hypothetical, $1,000 investment
("initial investment") in Fund shares on the first day of the period, reducing
the amount to reflect the maximum sales charge, and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted
from the result, which is then expressed as a percentage. The calculation
assumes that all income and capital gains distributions have been reinvested in
Fund shares at net asset value on the reinvestment dates during the period.
Total returns for the oldest class of each fund reflect actual performance
for all periods. For other classes, total returns reflect actual performance
for periods since class inception, and the oldest class's performance for
periods prior to inception, adjusted for the differences in sales charges and
fees between the classes.
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<PAGE>
The inception dates for each class of the Funds' shares are as follows:
<TABLE>
<CAPTION>
INCEPTION DATES
------------------
<S> <C>
Arizona Municipal Bond fund
Class A Shares............................................. October 29, 1986
Class B Shares............................................. February 1, 1997
Class C Shares............................................. February 7, 1994
Class R Shares............................................. February 1, 1997
Colorado Municipal Bond fund
Class A Shares............................................. May 4, 1987
Class B Shares............................................. February 1, 1997
Class C Shares............................................. February 1, 1997
Class R Shares............................................. February 1, 1997
Florida Municipal Bond fund
Class A Shares............................................. June 15, 1990
Class B Shares............................................. February 1, 1997
Class C Shares............................................. September 14, 1995
Class R Shares............................................. February 1, 1997
Maryland Municipal Bond fund
Class A Shares............................................. September 6, 1994
Class B Shares............................................. February 1, 1997
Class C Shares............................................. September 6, 1994
Class R Shares............................................. July 26, 1991
New Mexico Municipal Bond fund
Class A Shares............................................. September 16, 1992
Class B Shares............................................. February 1, 1997
Class C Shares............................................. February 1, 1997
Class R Shares............................................. February 1, 1997
Pennsylvania Municipal Bond fund
Class A Shares............................................. October 29, 1986
Class B Shares............................................. February 1, 1997
Class C Shares............................................. February 2, 1994
Class R Shares............................................. February 1, 1997
Virginia Municipal Bond fund
Class A Shares............................................. March 27, 1986
Class B Shares............................................. February 1, 1997
Class C Shares............................................. October 4, 1993
Class R Shares............................................. February 1, 1997
</TABLE>
S-39
<PAGE>
The annual total return figures for the Funds, including the effect of the
maximum sales charge for Class A shares, and applicable CDSC for Class B
Shares, for the one-year, five-year, and ten-year periods (as applicable) ended
May 31, 1998 and for the period from inception through May 31, 1998,
respectively, using the performance of the oldest class for periods prior to
the inception of the newer classes, as described above, were:
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
---------------------------------------
FROM
ONE YEAR FIVE YEARS TEN YEARS INCEPTION
ENDED ENDED ENDED THROUGH
MAY 31, MAY 31, MAY 31, MAY 31,
1998 1998 1998 1998
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Arizona Municipal Bond Fund
Class A Shares................. 4.96% 5.76% 8.07% 7.45%
Class B Shares................. 4.67% 5.86% 8.06% 7.44%
Class C Shares................. 8.89% 6.07% 7.93% 7.24%
Class R Shares................. 9.79% 6.73% 8.56% 7.87%
Colorado Municipal Bond Fund
Class A Shares................. 7.21% 6.38% 8.10% 7.22%
Class B Shares................. 7.03% 6.52% 8.08% 7.20%
Class C Shares................. 11.17% 6.85% 8.15% 7.23%
Class R Shares................. 11.98% 7.35% 8.59% 7.66%
Florida Municipal Bond Fund
Class A Shares................. 4.15% 5.03% N/A 7.18%
Class B Shares................. 3.89% 5.15% N/A 7.15%
Class C Shares................. 8.20% 5.37% N/A 7.18%
Class R Shares................. 8.91% 5.99% N/A 7.80%
Maryland Municipal Bond Fund
Class A Shares................. 3.41% 4.76% N/A 5.95%
Class B Shares................. 3.16% 4.78% N/A 5.95%
Class C Shares................. 7.44% 4.98% N/A 5.97%
Class R Shares................. 8.23% 5.94% N/A 6.95%
New Mexico Municipal Bond Fund
Class A Shares................. 5.49% 5.72% N/A 6.47%
Class B Shares................. 5.46% 5.83% N/A 6.64%
Class C Shares................. 9.60% 6.21% N/A 6.86%
Class R Shares................. 10.59% 6.74% N/A 7.38%
Pennsylvania Municipal Bond Fund
Class A Shares................. 5.42% 5.61% 7.68% 7.03%
Class B Shares................. 5.23% 5.77% 7.68% 7.02%
Class C Shares................. 9.50% 5.96% 7.56% 6.84%
Class R Shares................. 10.30% 6.59% 8.18% 7.45%
</TABLE>
S-40
<PAGE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
---------------------------------------
FROM
ONE YEAR FIVE YEARS TEN YEARS INCEPTION
ENDED ENDED ENDED THROUGH
MAY 31, MAY 31, MAY 31, MAY 31,
1998 1998 1998 1998
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Virginia Municipal Bond Fund
Class A Shares................ 4.69% 5.50% 7.69% 7.29%
Class B Shares................ 4.53% 5.61% 7.69% 7.28%
Class C Shares................ 8.81% 5.81% 7.57% 7.07%
Class R Shares................ 9.54% 6.46% 8.19% 7.69%
</TABLE>
Calculation of cumulative total return is not subject to a prescribed
formula. Cumulative total return for a specific period is calculated by first
taking a hypothetical initial investment in Fund shares on the first day of the
period, deducting (in some cases) the maximum sales charge, and computing the
"redeemable value" of that investment at the end of the period. The cumulative
total return percentage is then determined by subtracting the initial
investment from the redeemable value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains distributions by the Fund have been
reinvested at net asset value on the reinvestment dates during the period.
Cumulative total return may also be shown as the increased dollar value of the
hypothetical investment over the period. Cumulative total return calculations
that do not include the effect of the sales charge would be reduced if such
charge were included.
S-41
<PAGE>
The cumulative total return figures for the Funds, including the effect of
the maximum sales charge for the Class A Shares, and applicable CDSC for Class
B Shares, for the one-year, five-year and ten-year periods (as applicable)
ended May 31, 1998, and for the period since inception through May 31, 1998,
respectively, using the performance of the oldest class for periods prior to
the inception of the newer classes, as described above, were:
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------
FROM
ONE YEAR TEN YEARS INCEPTION
ENDED FIVE YEARS ENDED THROUGH
MAY 31, ENDED MAY MAY 31, MAY 31,
1998 31, 1998 1998 1998
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Arizona Municipal Bond Fund
Class A Shares................. 4.96% 32.35% 117.26% 129.80%
Class B Shares................. 4.67% 32.93% 117.12% 129.62%
Class C Shares................. 8.89% 34.27% 114.57% 124.88%
Class R Shares................. 9.79% 38.48% 127.42% 140.53%
Colorado Municipal Bond Fund
Class A Shares................. 7.21% 36.21% 117.86% 115.20%
Class B Shares................. 7.03% 37.14% 117.51% 114.94%
Class C Shares................. 11.17% 39.28% 118.82% 115.43%
Class R Shares................. 11.98% 42.56% 127.88% 125.20%
Florida Municipal Bond Fund
Class A Shares................. 4.15% 27.79% N/A 73.64%
Class B Shares................. 3.89% 28.57% N/A 73.22%
Class C Shares................. 8.20% 29.91% N/A 73.69%
Class R Shares................. 8.91% 33.76% N/A 81.79%
Maryland Municipal Bond Fund
Class A Shares................. 3.41% 26.18% N/A 43.51%
Class B Shares................. 3.16% 26.32% N/A 43.55%
Class C Shares................. 7.44% 27.52% N/A 43.67%
Class R Shares................. 8.23% 33.43% N/A 52.23%
New Mexico Municipal Bond Fund
Class A Shares................. 5.49% 32.04% N/A 42.98%
Class B Shares................. 5.46% 32.76% N/A 43.29%
Class C Shares................. 9.60% 35.14% N/A 45.98%
Class R Shares................. 10.59% 38.56% N/A 50.09%
Pennsylvania Municipal Bond Fund
Class A Shares ................ 5.42% 31.39% 109.57% 119.61%
Class B Shares................. 5.23% 32.38% 109.53% 119.46%
Class C Shares................. 9.50% 33.55% 107.33% 115.16%
Class R Shares................. 10.30% 37.61% 119.52% 129.91%
</TABLE>
S-42
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------
FROM
ONE YEAR TEN YEARS INCEPTION
ENDED FIVE YEARS ENDED THROUGH
MAY 31, ENDED MAY MAY 31, MAY 31,
1998 31, 1998 1998 1998
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Virginia Municipal Bond Fund
Class A Shares ............... 4.69% 30.68% 109.84% 135.50%
Class B Shares................ 4.53% 31.36% 109.72% 135.31%
Class C Shares................ 8.81% 32.64% 107.40% 129.86%
Class R Shares................ 9.54% 36.74% 119.73% 146.54%
</TABLE>
Calculation of taxable equivalent total return is also not subject to a
prescribed formula. Taxable equivalent total return for a specific period is
calculated by first taking a hypothetical initial investment in Fund shares on
the first day of the period, computing the total return for each calendar year
in the period in the manner described above, and increasing the total return
for each such calendar year by the amount of additional income that a taxable
fund would need to have generated to equal the income on an after-tax basis, at
a specified income tax rate (usually the highest marginal federal tax rate),
calculated as described above under the discussion of "taxable equivalent
yield." The resulting amount for the calendar year is then divided by the
initial investment amount to arrive at a "taxable equivalent total return
factor" for the calendar year. The taxable equivalent total return factors for
all the calendar years are then multiplied together and the result is then
annualized by taking its Nth root (N representing the number of years in the
period) and subtracting 1, which provides a taxable equivalent total return
expressed as a percentage.
Using the 42.6% maximum combined marginal federal and state tax rate for
1998, the annual taxable equivalent total return for the Maryland Municipal
Bond Fund's shares for the five-year period ended May 31, 1998 with respect to
the Class R Shares was 9.78%.
Class A Shares of the Funds are sold at net asset value plus a current
maximum sales charge of 4.20% of the offering price. This current maximum sales
charge will typically be used for purposes of calculating performance figures.
Yield, returns and net asset value of each class of shares of the Funds will
fluctuate. Factors affecting the performance of the Funds include general
market conditions, operating expenses and investment management. Any additional
fees charged by a securities representative or other financial services firm
would reduce returns described in this section. Shares of the Funds are
redeemable at net asset value, which may be more or less than original cost.
In reports or other communications to shareholders or in advertising and
sales literature, the Funds may also compare their performance with that of:
(1) the Consumer Price Index or various unmanaged bond indexes such as the
Lehman Brothers Municipal Bond Index and the Salomon Brothers High Grade
Corporate Bond Index and (2) other fixed income or municipal bond mutual funds
or mutual fund indexes as reported by Lipper Analytical Services, Inc.
("Lipper"), Morningstar, Inc. ("Morningstar"), Wiesenberger Investment
Companies Service ("Wiesenberger") and CDA Investment Technologies, Inc.
("CDA") or similar independent services which monitor the performance of mutual
funds, or other industry or financial publications such as Barron's, Changing
Times, Forbes and Money Magazine. Performance comparisons by these indexes,
services or publications may rank mutual funds over different periods of time
by means of aggregate, average, year-by-year, or other types of total return
and performance figures. Any given performance quotation or performance
comparison should not be considered as representative of the performance of the
Funds for any future period.
Each Fund may from time to time in its advertising and sales materials
compare its current yield or total return with the yield or total return on
taxable investments such as corporate or U.S. Government bonds, bank
certificates of deposit (CDs) or money market funds. These taxable investments
have investment characteristics
S-43
<PAGE>
that differ from those of the Funds. U.S. Government bonds, for example, are
long-term investments backed by the full faith and credit of the U.S.
Government, and bank CDs are generally short-term, FDIC-insured investments,
which pay fixed principal and interest but are subject to fluctuating rollover
rates. Money market funds are short-term investments with stable net asset
values, fluctuating yields and special features enhancing liquidity.
There are differences and similarities between the investments which the
Funds may purchase and the investments measured by the indexes and reporting
services which are described herein. The Consumer Price Index is generally
considered to be a measure of inflation. The CDA Mutual Fund-Municipal Bond
Index is a weighted performance average of other mutual funds with a federally
tax-exempt income objective. The Salomon Brothers High Grade Corporate Bond
Index is an unmanaged index that generally represents the performance of high
grade long-term taxable bonds during various market conditions. The Lehman
Brothers Municipal Bond Index is an unmanaged index that generally represents
the performance of high grade intermediate and long-term municipal bonds during
various market conditions. Lipper calculates municipal bond fund averages based
on average maturity and credit quality. Morningstar rates mutual funds by
overall risk-adjusted performance, investment objectives, and assets. Lipper,
Morningstar, Wiesenberger and CDA are widely recognized mutual fund reporting
services whose performance calculations are based upon changes in net asset
value with all dividends reinvested and which do not include the effect of any
sales charges. The market prices and yields of taxable and tax-exempt bonds
will fluctuate. The Funds primarily invest in investment grade Municipal
Obligations in pursuing their objective of as high a level of current interest
income which is exempt from federal and state income tax as is consistent, in
the view of the Funds' management, with preservation of capital.
The Funds may also compare their taxable equivalent total return performance
to the total return performance of taxable income funds such as treasury
securities funds, corporate bond funds (either investment grade or high yield),
or Ginnie Mae funds. These types of funds, because of the character of their
underlying securities, differ from municipal bond funds in several respects.
The susceptibility of the price of treasury bonds to credit risk is far less
than that of municipal bonds, but the price of treasury bonds tends to be
slightly more susceptible to change resulting from changes in market interest
rates. The susceptibility of the price of investment grade corporate bonds and
municipal bonds to market interest rate changes and general credit changes is
similar. High yield bonds are subject to a greater degree of price volatility
than municipal bonds resulting from changes in market interest rates and are
particularly susceptible to volatility from credit changes. Ginnie Mae bonds
are generally subject to less price volatility than municipal bonds from credit
concerns, due primarily to the fact that the timely payment of monthly
installments of principal and interest are backed by the full faith and credit
of the U.S. Government, but Ginnie Mae bonds of equivalent coupon and maturity
are generally more susceptible to price volatility resulting from market
interest rate changes. In addition, the volatility of Ginnie Mae bonds due to
changes in market interest rates may differ from municipal bonds of comparable
coupon and maturity because bonds of the sensitivity of Ginnie Mae prepayment
experience to change in interest rates.
S-44
<PAGE>
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION OF FUND SHARES
As described in the Prospectus, the Funds provide you with alternative ways
of purchasing Fund shares based upon your individual investment needs and
preferences.
Each class of shares of a Fund represents an interest in the same portfolio
of investments. Each class of shares is identical in all respects except that
each class bears its own class expenses, including distribution and
administration expenses, and each class has exclusive voting rights with
respect to any distribution or service plan applicable to its shares. As a
result of the differences in the expenses borne by each class of shares, net
income per share, dividends per share and net asset value per share will vary
among a Fund's classes of shares.
Shareholders of each class will share expenses proportionately for services
that are received equally by all shareholders. A particular class of shares
will bear only those expenses that are directly attributable to that class,
where the type or amount of services received by a class varies from one class
to another. For example, class-specific expenses generally will include
distribution and service fees.
The minimum initial investment is $3,000 per fund share class, and may be
lower for accounts opened through fee-based programs for which the program
sponsor has established a single master account with the fund's transfer agent
and performs all sub-accounting services related to that account.
Class A Shares may be purchased at a public offering price equal to the
applicable net asset value per share plus an up-front sales charge imposed at
the time of purchase as set forth in the Prospectus. Shareholders may qualify
for a reduced sales charge, or the sales charge may be waived in its entirety,
as described below. Class A Shares are also subject to an annual service fee
of .20%. See "Distribution and Service Plans." Set forth below is an example
of the method of computing the offering price of the Class A shares of a Fund.
The example assumes a purchase on April 30, 1998 of Class A shares from the
Nuveen Municipal Bond Fund aggregating less than $50,000 subject to the
schedule of sales charges set forth in the Prospectus at a price based upon
the net asset value of the Class A shares.
<TABLE>
<S> <C>
Net Asset Value per share.......................................... $9.46
Per Share Sales Charge--4.20% of public offering price (4.38% of
net asset value per share)........................................ .41
-----
Per Share Offering Price to the Public............................. $9.87
</TABLE>
The Funds receive the entire net asset value of all Class A Shares that are
sold. Nuveen retains the full applicable sales charge from which it pays the
uniform reallowances shown in the Prospectus to Authorized Dealers.
<TABLE>
<CAPTION>
AUTHORIZED DEALER
SALES CHARGE AS % OF SALES CHARGE AS % OF COMMISSION AS % OF
AMOUNT OF PURCHASE PUBLIC OFFERING PRICE NET AMOUNT INVESTED PUBLIC OFFERING PRICE
- ------------------ --------------------- -------------------- ---------------------
<S> <C> <C> <C>
Less than $50,000....... 4.20% 4.38% 3.70%
$50,000 but less than
$100,000............... 4.00% 4.18% 3.50%
$100,000 but less than
$250,000............... 3.50% 3.63% 3.00%
$250,000 but less than
$500,000............... 2.50% 2.56% 2.00%
$500,000 but less than
$1,000,000............. 2.00% 2.04% 1.50%
$1,000,000 and over..... --(1) -- 1.00%
</TABLE>
- --------
(1) You can buy $1 million or more of Class A shares or net asset value
without an up-front sales charge. Nuveen pays authorized dealers of record
on these share purchases a sales commission of 1.00% (0.50% for the
Limited Term fund) of the first $2.5 million, plus .50% of the next $2.5
million, plus .25% of the amount over $5.0 million. If you redeem your
shares within 18 months of purchase, you may have to pay a CDSC of 1%
(0.50% for the Limited-Term fund) of either your purchase price or your
redemption proceeds, whichever is lower. You do not have to pay this CDSC
if your financial adviser has made arrangements with Nuveen and agrees to
waive the commission.
S-45
<PAGE>
REDUCTION OR ELIMINATION OF UP-FRONT SALES CHARGE ON CLASS A SHARES AND CLASS R
SHARES PURCHASE ELIGIBILITY
Rights of Accumulation. You may qualify for a reduced sales charge on a
purchase of Class A Shares of any Fund if the amount of your purchase, when
added to the value that day of all of your prior purchases of shares of any
Fund or of another Nuveen Mutual Fund, or Nuveen exchange-traded fund, or units
of a Nuveen Defined Portfolio, on which an up-front sales charge or ongoing
distribution fee is imposed, or is normally imposed, falls within the amounts
stated in the Class A Sales Charges and Commissions table in "How You Can Buy
and Sell Shares" in the Prospectus. You or your financial adviser must notify
Nuveen or the Fund's transfer agent of any cumulative discount whenever you
plan to purchase Class A Shares of a Fund that you wish to qualify for a
reduced sales charge.
Letter of Intent. You may qualify for a reduced sales charge on a purchase of
Class A Shares of any Fund if you plan to purchase Class A Shares of Nuveen
Mutual Funds over the next 13 months and the total amount of your purchases
would, if purchased at one time, qualify you for one of the reduced sales
charges shown in the Class A Sales Charges and Commissions table in "How You
Can Buy and Sell Shares" in the Prospectus. In order to take advantage of this
option, you must complete the applicable section of the Application Form or
sign and deliver either to an Authorized Dealer or to the Fund's transfer agent
a written Letter of Intent in a form acceptable to Nuveen. A Letter of Intent
states that you intend, but are not obligated, to purchase over the next 13
months a stated total amount of Class A Shares that would qualify you for a
reduced sales charge shown above. You may count shares of a Nuveen Mutual Fund
that you already own on which you paid an up-front sales charge or an ongoing
distribution fee and any Class B or C Shares of a Nuveen Mutual Fund that you
purchase over the next 13 months towards completion of your investment program,
but you will receive a reduced sales charge only on new Class A Shares you
purchase with a sales charge over the 13 months. You cannot count towards
completion of your investment program Class A Shares that you purchase without
a sales charge through investment of distributions from a Nuveen Mutual Fund or
a Nuveen Defined Portfolio, or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of
Class A Shares of a Fund following execution of the Letter of Intent will be at
least 5% of the total amount of your intended purchases. You further agree that
shares representing 5% of the total amount of your intended purchases will be
held in escrow pending completion of these purchases. All dividends and capital
gains distributions on Class A Shares held in escrow will be credited to your
account. If total purchases, less redemptions, prior to the expiration of the
13 month period equal or exceed the amount specified in your Letter of Intent,
the Class A Shares held in escrow will be transferred to your account. If the
total purchases, less redemptions, exceed the amount specified in your Letter
of Intent and thereby qualify for a lower sales charge than the sales charge
specified in your Letter of Intent, you will receive this lower sales charge
retroactively, and the difference between it and the higher sales charge paid
will be used to purchase additional Class A Shares on your behalf. If the total
purchases, less redemptions, are less than the amount specified, you must pay
Nuveen an amount equal to the difference between the amounts paid for these
purchases and the amounts which would have been paid if the higher sales charge
had been applied. If you do not pay the additional amount within 20 days after
written request by Nuveen or your financial adviser, Nuveen will redeem an
appropriate number of your escrowed Class A Shares to meet the required
payment. By establishing a Letter of Intent, you irrevocably appoint Nuveen as
attorney to give instructions to redeem any or all of your escrowed shares,
with full power of substitution in the premises.
You or your financial adviser must notify Nuveen or the Fund's transfer agent
whenever you make a purchase of Fund shares that you wish to be covered under
the Letter of Intent option.
S-46
<PAGE>
Reinvestment of Nuveen Defined Portfolio Distributions. You may purchase
Class A Shares without an up-front sales charge by reinvestment of
distributions from any of the various Defined Portfolios sponsored by Nuveen.
There is no initial or subsequent minimum investment requirement for such
reinvestment purchases.
Group Purchase Programs. If you are a member of a qualified group, you may
purchase Class A Shares of any Fund or of another Nuveen Mutual Fund at the
reduced sales charge applicable to the group's purchases taken as a whole. A
"qualified group" is one which has previously been in existence, has a purpose
other than investment, has ten or more participating members, has agreed to
include Fund sales publications in mailings to members and has agreed to comply
with certain administrative requirements relating to its group purchases.
Under any group purchase program, the minimum initial investment in Class A
shares of any particular Fund or portfolio for each participant in the program
is $3,000 and the minimum monthly investment in Class A shares of any
particular Fund or portfolio by each participant is $50. No certificates will
be issued for any participant's account. All dividends and other distributions
by a Fund will be reinvested in additional Class A Shares of the same Fund. No
participant may utilize a systematic withdrawal program.
To establish a group purchase program, both the group itself and each
participant must fill out special application materials, which the group
administrator may obtain from the group's financial adviser, by calling Nuveen
toll-free (800) 257-8787.
Reinvestment of Redemption Proceeds from Unaffiliated Funds. You may also
purchase Class A Shares at net asset value without a sales charge if the
purchase takes place through a broker-dealer and represents the reinvestment of
the proceeds of the redemption of shares of one or more registered investment
companies not affiliated with Nuveen. You must provide appropriate
documentation that the redemption occurred not more than one year prior to the
reinvestment of the proceeds in Class A Shares, and that you either paid an up-
front sales charge or were subject to a contingent deferred sales charge in
respect of the redemption of such shares of such other investment company.
Special Sales Charge Waivers. Class A Shares of a Fund may be purchased at
net asset value without a sales charge, and Class R Shares may be purchased, by
the following categories of investors:
. investors purchasing $1,000,000 or more ($2,500,000 for R Shares);
. officers, trustees and former trustees of the Nuveen and Flagship Funds;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services.
S-47
<PAGE>
. any eligible employer-sponsored qualified defined contribution retirement
plan. Eligible plans are those with at least 25 employees and which
either (a) make an initial purchase of one or more Nuveen Mutual Funds
aggregating $500,000 or more or (b) execute a Letter of Intent to
purchase in the aggregate $500,000 or more of fund shares. Nuveen will
pay Authorized Dealers a sales commission on such purchases equal to 1%
of the first $2.5 million, plus 2.5% of any amount purchased over $5.0
million. For this category of investors a contingent deferred sales
charge of 1% will be assessed on redemptions within 18 months of
purchase, unless waived. Municipal bond funds are not a suitable
investment for individuals investing in retirement plans.
Holders of Class C Shares acquired on or before January 31, 1997 can convert
those shares to Class A Shares of the same fund at the shareholder's
affirmative request six years after the date of purchase. Holders of Class C
Shares must submit their request to the transfer agent no later than the last
business day of the 71st month following the month in which they purchased
their shares. Holders of Class C Shares purchased after that date will not have
the option to convert those shares to Class A Shares.
Class B Shares will automatically convert to Class A Shares eight years after
purchase. The purpose of the conversion is to limit the distribution fees you
pay over the life of your investment. All conversions will be done at net asset
value without the imposition of any sales load, fee, or other charge, so that
the value of each shareholder's account immediately before conversion will be
the same as the value of the account immediately after conversion. Class B
Shares acquired through reinvestment of distributions will convert into Class A
Shares based on the date of the initial purchase to which such shares relate.
For this purpose, Class B Shares acquired through reinvestment of distributions
will be attributed to particular purchases of Class B Shares in accordance with
such procedures as the Board of Trustees may determine from time to time. Class
B Shares that are converted to Class A Shares will remain subject to an annual
service fee that is identical in amount for both Class B Shares and Class A
Shares. Since net asset value per share of the Class B Shares and the Class A
Shares may differ at the time of conversion, a shareholder may receive more or
fewer Class A Shares than the number of Class B Shares converted. Any
conversion of Class B Shares into Class A Shares will be subject to the
continuing availability of an opinion of counsel or a private letter ruling
from the Internal Revenue Service to the effect that the conversion of shares
would not constitute a taxable event under federal income tax law. Conversion
of Class B Shares into Class A Shares might be suspended if such an opinion or
ruling were no longer available.
Any Class A Shares purchased pursuant to a special sales charge waiver must
be acquired for investment purposes and on the condition that they will not be
transferred or resold except through redemption by the Funds. You or your
financial adviser must notify Nuveen or the Fund's transfer agent whenever you
make a purchase of Class A Shares of any Fund that you wish to be covered under
these special sales charge waivers.
Class A Shares of any Fund may be issued at net asset value without a sales
charge in connection with the acquisition by a Fund of another investment
company. All purchases under the special sales charge waivers will be subject
to minimum purchase requirements as established by the Funds.
In determining the amount of your purchases of Class A Shares of any Fund
that may qualify for a reduced sales charge, the following purchases may be
combined: (1) all purchases by a trustee or other fiduciary for a single trust,
estate or fiduciary account; (2) all purchases by individuals and their
immediate family members (i.e., their spouses, parents, children, grandparents,
grandchildren, parents-in-law, sons- and daughters-in-law, siblings, a
sibling's spouse, and a spouse's siblings); or (3) all purchases made through a
group purchase program as described above.
S-48
<PAGE>
Class R Share Purchase Eligibility. Class R Shares are available for
purchases of $2.5 million or more and for purchases using dividends and capital
gains distributions on Class R Shares. Class R Shares also are available for
the following categories of investors:
. officers, trustees and former trustees of the Nuveen and Flagship Funds
and their immediate family members or trustees/directors of any fund,
sponsored by Nuveen, any parent company of Nuveen and subsidiaries
thereof and their immediate family members;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates, or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services.
. Any shares purchased by investors falling within any of the first four
categories listed above must be acquired for investment purposes and on
the condition that they will not be transferred or resold except through
redemption by the fund.
In addition, purchasers of Nuveen Defined Portfolios may reinvest their
distributions from such Defined Portfolios in Class R Shares, if, before
September 6, 1994, such purchasers had elected to reinvest distributions in
Nuveen Fund shares (before June 13, 1995 for Nuveen Municipal Bond Fund
shares). Shareholders may exchange their Class R Shares of any Nuveen Fund into
Class R Shares of any other Nuveen Fund.
The reduced sales charge programs may be modified or discontinued by the
Funds at any time upon prior written notice to shareholders of the Funds.
For more information about the purchase of Class A Shares or reduced sales
charge programs, or to obtain the required application forms, call Nuveen toll-
free at (800) 257-8787.
REDUCTION OR ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
Class A Shares are normally redeemed at net asset value, without any
Contingent Deferred Sales Charge ("CDSC"). However, in the case of Class A
Shares purchased at net asset value on or after July 1, 1996 because the
purchase amount exceeded $1 million, where the Authorized Dealer did not waive
the sales commission, a CDSC of 1% is imposed on any redemption within 18
months of purchase. In the case of Class B Shares redeemed within six years of
purchase, a CDSC is imposed, beginning at 5% for redemptions within the first
year, declining to 4% for redemptions within years two and three, and declining
by 1% each year thereafter until disappearing after the sixth year. Class C
Shares are redeemed at net asset value, without any CDSC, except that a CDSC of
1% is imposed upon redemption of Class C Shares that are redeemed within 12
months of purchase.
S-49
<PAGE>
In determining whether a CDSC is payable, a Fund will first redeem shares not
subject to any charge, or that represent an increase in the value of a Fund
account due to capital appreciation, and then will redeem shares held for the
longest period, unless the shareholder specifies another order. No CDSC is
charged on shares purchased as a result of automatic reinvestment of dividends
or capital gains paid. In addition, no CDSC will be charged on exchanges of
shares into another Nuveen Mutual Fund or Nuveen money market fund. The holding
period is calculated on a monthly basis and begins the first day of the month
in which the order for investment is received. The CDSC is calculated based on
the lower of the redeemed shares' cost or net asset value at the time of the
redemption and is deducted from the redemption proceeds. Nuveen receives the
amount of any CDSC shareholders pay. If shares subject to a CDSC are exchanged
for shares of a Nuveen money market fund, the CDSC would be imposed on the
subsequent redemption of those money market shares, and the period during which
the shareholder holds the money market fund shares would be counted in
determining the remaining duration of the CDSC. The Fund may elect not to so
count the period during which the shareholder held the money market fund
shares, in which event the amount of any applicable CDSC would be reduced in
accordance with applicable SEC rules by the amount of any 12b-1 plan payments
to which those money market funds shares may be subject.
The CDSC may be waived or reduced under the following six special
circumstances: 1) redemptions within one year following the death or
disability, as defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended, of a shareholder; 2) in whole or in part for redemptions of
shares by shareholders with accounts in excess of specified breakpoints that
correspond to the breakpoints under which the up-front sales charge on Class A
Shares is reduced pursuant to Rule 22d-1 under the Act; 3) redemptions of
shares purchased under circumstances or by a category of investors for which
Class A Shares could be purchased at net asset value without a sales charge; 4)
in connection with the exercise of a reinstatement privilege whereby the
proceeds of a redemption of a Fund's shares subject to a sales charge are
reinvested in shares of certain Funds within a specified number of days; 5) in
connection with the exercise of a Fund's right to redeem all shares in an
account that does not maintain a certain minimum balance or that the applicable
board has determined may have material adverse consequences to the shareholders
of such Fund; and 6) redemptions made pursuant to a Fund's automatic withdrawal
plan, up to 12% of the original investment amount. If a Fund waives or reduces
the CDSC, such waiver or reduction would be uniformly applied to all Fund
shares in the particular category. In waiving or reducing a CDSC, the Funds
will comply with the requirements of Rule 22d-1 of the Investment Company Act
of 1940, as amended.
GENERAL MATTERS
The Funds may encourage registered representatives and their firms to help
apportion their assets among bonds, stocks and cash, and may seek to
participate in programs that recommend a portion of their assets be invested in
tax-free, fixed income securities.
To help advisers and investors better understand and most efficiently use the
Funds to reach their investment goals, the Funds may advertise and create
specific investment programs and systems. For example, this may include
information on how to use the Funds to accumulate assets for future education
needs or periodic payments such as insurance premiums. The Funds may produce
software, electronic information sites, or additional sales literature to
promote the advantages of using the Funds to meet these and other specific
investor needs.
Exchanges of shares of a Fund for shares of a Nuveen money market fund may be
made on days when both funds calculate a net asset value and make shares
available for public purchase. Shares of the Nuveen money market funds may be
purchased on days on which the Federal Reserve Bank of Boston is normally open
for
S-50
<PAGE>
business. In addition to the holidays observed by the Fund, the Nuveen money
market funds observe and will not make fund shares available for purchase on
the following holidays: Martin Luther King's Birthday, Columbus Day and
Veterans Day.
In addition, you may exchange Class R Shares of any Fund for Class A Shares
of the same Fund without a sales charge if the current net asset value of those
Class R Shares is at least $3,000 or you already own Class A Shares of that
Fund.
Each Fund may suspend the right of redemption, or delay payment to redeeming
shareholders for more than seven days, when the New York Stock Exchange is
closed (not including customary weekend and holiday closings); when trading in
the markets a Fund normally uses is restricted, or the SEC determines that an
emergency exists so that trading of a Fund's portfolio securities or
determination of a Fund's net asset value is not reasonably practical; or the
SEC by order permits the suspension of the right of redemption or the delay in
payment to redeeming shareholders for more than seven days.
Shares will be registered in the name of the investor or the investor's
financial adviser. A change in registration or transfer of shares held in the
name of a financial adviser may only be made by an order in good form from the
financial adviser acting on the investor's behalf. Share certificates will only
be issued upon written request to the Funds' transfer agent. No share
certificates will be issued for fractional shares.
For more information on the procedure for purchasing shares of a Fund and on
the special purchase programs available thereunder, see "How to Buy Shares" in
the Prospectus.
Nuveen serves as the principal underwriter of the shares of the Funds
pursuant to a "best efforts" arrangement as provided by a distribution
agreement with the Nuveen Flagship Multistate Trust I, dated February 1, 1997
("Distribution Agreement"). Pursuant to the Distribution Agreement, the Trust
appointed Nuveen to be its agent for the distribution of the Funds' shares on a
continuous offering basis. Nuveen sells shares to or through brokers, dealers,
banks or other qualified financial intermediaries (collectively referred to as
"Dealers"), or others, in a manner consistent with the then effective
registration statement of the Trust. Pursuant to the Distribution Agreement,
Nuveen, at its own expense, finances certain activities incident to the sale
and distribution of the Funds' shares, including printing and distributing of
prospectuses and statements of additional information to other than existing
shareholders, the printing and distributing of sales literature, advertising
and payment of compensation and giving of concessions to Dealers. Nuveen
receives for its services the excess, if any, of the sales price of the Funds'
shares less the net asset value of those shares, and reallows a majority or all
of such amounts to the Dealers who sold the shares; Nuveen may act as such a
Dealer. Nuveen also receives compensation pursuant to a distribution plan
adopted by the Trust pursuant to Rule 12b-1 and described herein under
"Distribution and Service Plan." Nuveen receives any CDSCs imposed on
redemptions of shares.
S-51
<PAGE>
The following table sets forth the aggregate amount of underwriting
commissions with respect to the sale of Fund shares and the amount thereof
retained by Nuveen (or Flagship Financial, Inc., which Nuveen acquired on
January 1, 1997) for each of the Funds for the last three fiscal years. All
figures are to the nearest thousand.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1998 MAY 31, 1997* JANUARY 31, 1996
------------------------ ------------------------ ------------------------
AMOUNT OF AMOUNT AMOUNT OF AMOUNT AMOUNT OF AMOUNT
UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY
COMMISSIONS NUVEEN COMMISSIONS NUVEEN COMMISSIONS NUVEEN
FUND ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Maryland Fund........... 157,160 24,681 191 25 160 26
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996
------------------------ ------------------------ ------------------------
AMOUNT OF AMOUNT AMOUNT OF AMOUNT AMOUNT OF AMOUNT
UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY UNDERWRITING RETAINED BY
COMMISSIONS FLAGSHIP COMMISSIONS NUVEEN COMMISSIONS FLAGSHIP
FUND ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Arizona Fund............ 265,752 38,422 145 20 194 26
Colorado Fund........... 119,938 18,574 78 10 98 13
Florida Fund............ 487,800 68,600 443 61 609 83
New Mexico Fund......... 145,070 19,938 113 15 132 18
Pennsylvania Fund....... 241,907 33,886 110 14 107 14
Virginia Fund........... 473,783 66,875 279 38 311 26
</TABLE>
- --------
*For the sixteen month period ended May 31, 1997.
DISTRIBUTION AND SERVICE PLAN
The Funds have adopted a plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, which provides that Class B Shares and Class C
Shares will be subject to an annual distribution fee, and that Class A Shares,
Class B Shares and Class C Shares will be subject to an annual service fee.
Class R Shares will not be subject to either distribution or service fees.
The distribution fee applicable to Class B and Class C Shares under each
Fund's Plan will be payable to reimburse Nuveen for services and expenses
incurred in connection with the distribution of Class B and Class C Shares,
respectively. These expenses include payments to Authorized Dealers, including
Nuveen, who are brokers of record with respect to the Class B and Class C
Shares, as well as, without limitation, expenses of printing and distributing
prospectuses to persons other than shareholders of the Fund, expenses of
preparing, printing and distributing advertising and sales literature and
reports to shareholders used in connection with the sale of Class B and Class C
Shares, certain other expenses associated with the distribution of Class B and
Class C Shares, and any distribution-related expenses that may be authorized
from time to time by the Board of Trustees.
The service fee applicable to Class A Shares, Class B Shares and Class C
Shares under each Fund's Plan will be payable to Authorized Dealers in
connection with the provision of ongoing account services to shareholders.
These services may include establishing and maintaining shareholder accounts,
answering shareholder inquiries and providing other personal services to
shareholders.
Each Fund may spend up to .20 of 1% per year of the average daily net assets
of Class A Shares as a service fee under the Plan applicable to Class A Shares.
Each Fund may spend up to .75 of 1% per year of the average daily net assets of
Class B Shares as a distribution fee and up to .20 of 1% per year of the
average daily net assets of Class B Shares as a service fee under the Plan
applicable to Class B Shares. Each Fund may spend up to .55 of 1% per year of
the average daily net assets of Class C Shares as a distribution fee and up to
.20 of 1% per year of the average daily net assets of Class C Shares as a
service fee under the Plan applicable to Class C Shares.
S-52
<PAGE>
For the fiscal year ended May 31, 1998, 100% of service fees and distribution
fees were paid out as compensation to Authorized Dealers. Prior to February 1,
1997, the service fee for the Maryland Municipal Bond Fund was .25% for both
Class A and Class C Shares and the distribution fee was .75% for Class C
Shares. For such periods, the service fee for the other Funds was .20% and the
distribution fee was .40% for the Class A Shares and .75% for the Class C
Shares (.55% for the Florida Intermediate Fund). Thereafter, the service fee
for the Class A and Class C Shares was .20% and the distribution fee for the
Class C Shares was .55%.
<TABLE>
<CAPTION>
COMPENSATION PAID TO
AUTHORIZED DEALERS FOR
END OF FISCAL 1998
----------------------
<S> <C>
Arizona Municipal Bond Fund
Class A................................................ $ 169,618
Class B................................................ $ 5,457
Class C................................................ $ 30,045
Colorado Municipal Bond Fund
Class A................................................ $ 68,378
Class B................................................ $ 9,698
Class C................................................ $ 2,678
Florida Municipal Bond Fund
Class A................................................ $ 589,283
Class B................................................ $ 25,088
Class C................................................ $ 49,426
Maryland Municipal Bond Fund
Class A................................................ $ 31,906
Class B................................................ $ 11,344
Class C................................................ $ 16,799
New Mexico Municipal Bond Fund
Class A................................................ $ 104,393
Class B................................................ $ 8,761
Class C................................................ $ 4,586
Pennsylvania Municipal Bond Fund
Class A................................................ $ 121,297
Class B................................................ $ 10,643
Class C................................................ $ 54,660
Virginia Municipal Bond Fund
Class A................................................ $ 256,577
Class B................................................ $ 16,407
Class C................................................ $ 104,827
</TABLE>
- --------
Under each Fund's Plan, the Fund will report quarterly to the Board of
Trustees for its review all amounts expended per class of shares under the
Plan. The Plan may be terminated at any time with respect to any class of
shares, without the payment of any penalty, by a vote of a majority of the
trustees who are not "interested persons" and who have no direct or indirect
financial interest in the Plan or by vote of a majority of the outstanding
voting securities of such class. The Plan may be renewed from year to year if
approved by a vote of the Board of Trustees and a vote of the non-interested
trustees who have no direct or indirect financial interest
S-53
<PAGE>
in the Plan cast in person at a meeting called for the purpose of voting on the
Plan. The Plan may be continued only if the trustees who vote to approve such
continuance conclude, in the exercise of reasonable business judgment and in
light of their fiduciary duties under applicable law, that there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
The Plan may not be amended to increase materially the cost which a class of
shares may bear under the Plan without the approval of the shareholders of the
affected class, and any other material amendments of the Plan must be approved
by the non-interested trustees by a vote cast in person at a meeting called for
the purpose of considering such amendments. During the continuance of the Plan,
the selection and nomination of the non-interested trustees of the Trust will
be committed to the discretion of the non-interested trustees then in office.
INDEPENDENT PUBLIC ACCOUNTANTS AND CUSTODIAN
Arthur Andersen LLP, independent public accountants, 33 West Monroe Street,
Chicago, Illinois, 60603 has been selected as auditors for all of the Funds. In
addition to audit services, the auditors provide consultation and assistance on
accounting, internal control, tax and related matters. The financial statements
incorporated by reference elsewhere in this Statement of Additional Information
and the information for prior periods set forth under "Financial Highlights" in
the Prospectus have been audited by the auditors as indicated in their reports
with respect thereto, and are included in reliance upon the authority of those
firms in giving their reports.
The custodian of the assets of the Funds is The Chase Manhattan Bank, 4 New
York Plaza, New York, New York 10004. The custodian performs custodial, fund
accounting, and portfolio accounting services.
The Fund's transfer, shareholder services, and dividend paying agent is Chase
Global Funds Services Company, 73 Tremont Street, Boston, Massachusetts 02108.
FINANCIAL STATEMENTS
The audited financial statements for each Fund's most recent fiscal year
appear in the Fund's Annual Reports and are incorporated herein by reference.
The Annual Reports accompany this Statement of Additional Information.
S-54
<PAGE>
APPENDIX A
RATINGS OF INVESTMENTS
The four highest ratings of Moody's for Municipal Obligations are Aaa, Aa, A
and Baa. Municipal Obligations rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to Municipal Obligations which are of
"high quality by all standards," but as to which margins of protection or other
elements make long-term risks appear somewhat greater than in Aaa rated
Municipal Obligations. The Aaa and Aa rated Municipal Obligations comprise what
are generally known as "high grade bonds." Municipal Obligations that are rated
A by Moody's possess many favorable investment attributes and are considered
upper medium grade obligations. Factors giving security to principal and
interest of A rated Municipal Obligations are considered adequate, but elements
may be present, which suggest a susceptibility to impairment sometime in the
future. Municipal Obligations rated Baa by Moody's are considered medium grade
obligations (i.e., they are neither highly protected nor poorly secured). Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well. Moody's bond rating symbols may contain numerical
modifiers of a generic rating classification. The modifier 1 indicates that the
bond ranks at the high end of its category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its general rating category.
The four highest ratings of S&P for Municipal Obligations are AAA, AA, A and
BBB. Municipal Obligations rated AAA have a strong capacity to pay principal
and interest. The rating of AA indicates that capacity to pay principal and
interest is very strong and such bonds differ from AAA issues only in small
degree. The category of A describes bonds which have a strong capacity to pay
principal and interest, although such bonds are somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions. The
BBB rating is the lowest "investment grade" security rating by S&P. Municipal
Obligations rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas such bonds normally exhibit adequate protection
parameters, adverse economic conditions are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category than for
bonds in the A category.
The four highest ratings of Fitch for Municipal Obligations are AAA, AA, A
and BBB. Municipal Obligations rated AAA are considered to be investment grade
and of the highest credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events. Municipal Obligations rated AA are considered
to be investment grade and of very high quality. The obligor's ability to pay
interest and repay principal is very strong, although not quite as strong as
bonds rated "AAA." Because Municipal Obligations rated in the "AAA" and "AA"
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F-1+." Municipal
Obligations rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Municipal
Obligations rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
The "Other Corporate Obligations" category of temporary investments are
corporate (as opposed to municipal) debt obligations rated AAA by S&P or Aaa by
Moody's. Corporate debt obligations rated AAA by S&P have an extremely strong
capacity to pay principal and interest. The Moody's corporate debt rating of
Aaa is comparable to that set forth above for Municipal Obligations.
A-1
<PAGE>
Subsequent to its purchase by a Fund, an issue may cease to be rated or its
rating may be reduced below the minimum required for purchase by such Fund.
Neither event requires the elimination of such obligation from a Fund's
portfolio, but Nuveen Advisory will consider such an event in its determination
of whether the Fund should continue to hold such obligation.
A-2
<PAGE>
APPENDIX B
DESCRIPTION OF HEDGING TECHNIQUES
Set forth below is additional information regarding the various Fund's
defensive hedging techniques and use of repurchase agreements.
FUTURES AND INDEX TRANSACTIONS
Financial Futures. A financial future is an agreement between two parties to
buy and sell a security for a set price on a future date. They have been
designed by boards of trade which have been designated "contracts markets" by
the Commodity Futures Trading Commission ("CFTC").
The purchase of financial futures is for the purpose of hedging a Fund's
existing or anticipated holdings of long-term debt securities. When a Fund
purchases a financial future, it deposits in cash or securities an "initial
margin" of between 1% and 5% of the contract amount. Thereafter, the Fund's
account is either credited or debited on a daily basis in correlation with the
fluctuation in price of the underlying future or other requirements imposed by
the exchange in order to maintain an orderly market. The Fund must make
additional payments to cover debits to its account and has the right to
withdraw credits in excess of the liquidity, the Fund may close out its
position at any time prior to expiration of the financial future by taking an
opposite position. At closing a final determination of debits and credits is
made, additional cash is paid by or to the Fund to settle the final
determination and the Fund realizes a loss or gain depending on whether on a
net basis it made or received such payments.
The sale of financial futures is for the purpose of hedging a Fund's existing
or anticipated holdings of long-term debt securities. For example, if a Fund
owns long-term bonds and interest rates were expected to increase, it might
sell financial futures. If interest rates did increase, the value of long-term
bonds in the Fund's portfolio would decline, but the value of the Fund's
financial futures would be expected to increase at approximately the same rate
thereby keeping the net asset value of the Fund from declining as much as it
otherwise would have.
Among the risks associated with the use of financial futures by the Funds as
a hedging device, perhaps the most significant is the imperfect correlation
between movements in the price of the financial futures and movements in the
price of the debt securities which are the subject of the hedge.
Thus, if the price of the financial future moves less or more than the price
of the securities which are the subject of the hedge, the hedge will not be
fully effective. To compensate for this imperfect correlation, the Fund may
enter into financial futures in a greater dollar amount than the dollar amount
of the securities being hedged if the historical volatility of the prices of
such securities has been greater than the historical volatility of the
financial futures. Conversely, the Fund may enter into fewer financial futures
if the historical volatility of the price of the securities being hedged is
less than the historical volatility of the financial futures.
The market prices of financial futures may also be affected by factors other
than interest rates. One of these factors is the possibility that rapid changes
in the volume of closing transactions, whether due to volatile markets or
movements by speculators, would temporarily distort the normal relationship
between the markets in the financial future and the chosen debt securities. In
these circumstances as well as in periods of rapid and large price movements.
The Fund might find it difficult or impossible to close out a particular
transaction.
Options on Financial Futures. The Funds may also purchase put or call options
on financial futures which are traded on a U.S. Exchange or board of trade and
enter into closing transactions with respect to such options to terminate an
existing position. Currently, options can be purchased with respect to
financial futures on U.S. Treasury Bonds on The Chicago Board of Trade. The
purchase of put options on financial futures is analogous to the purchase of
put options by a Fund on its portfolio securities to hedge against the risk of
rising interest rates. As with options on debt securities, the holder of an
option may terminate his position by selling an option of the same Fund. There
is no guarantee that such closing transactions can be effected.
B-1
<PAGE>
INDEX CONTRACTS
Index Futures. A tax-exempt bond index which assigns relative values to the
tax-exempt bonds included in the index is traded on the Chicago Board of Trade.
The index fluctuates with changes in the market values of all tax-exempt bonds
included rather than a single bond. An index future is a bilateral agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash--rather than any security--equal to specified dollar amount times the
difference between the index value at the close of the last trading day of the
contract and the price at which the index future was originally written. Thus,
an index future is similar to traditional financial futures except that
settlement is made in cash.
Index Options. The Funds may also purchase put or call options on U.S.
Government or tax-exempt bond index futures and enter into closing transactions
with respect to such options to terminate an existing position. Options on
index futures are similar to options on debt instruments except that an option
on an index future gives the purchaser the right, in return for the premium
paid, to assume a position in an index contract rather than an underlying
security at a specified exercise price at any time during the period of the
option. Upon exercise of the option, the delivery of the futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance of the writer's futures margin account
which represents the amount by which the market price of the index futures
contract, at exercise, is less than the exercise price of the option on the
index future.
Bond index futures and options transactions would be subject to risks similar
to transactions in financial futures and options thereon as described above. No
series will enter into transactions in index or financial futures or related
options unless and until, in the Adviser's opinion, the market for such
instruments has developed sufficiently.
REPURCHASE AGREEMENTS
A Fund may invest temporarily up to 5% of its assets in repurchase
agreements, which are agreements pursuant to which securities are acquired by
the Fund from a third party with the understanding that they will be
repurchased by the seller at a fixed price on an agreed date. These agreements
may be made with respect to any of the portfolio securities in which the Fund
is authorized to invest. Repurchase agreements may be characterized as loans
secured by the underlying securities. The Fund may enter into repurchase
agreements with (i) member banks of the Federal Reserve System having total
assets in excess of $500 million and (ii) securities dealers, provided that
such banks or dealers meet the creditworthiness standards established by the
Fund's board of trustees ("Qualified Institutions"). The Adviser will monitor
the continued creditworthiness of Qualified Institutions, subject to the
oversight of the Fund's board of trustees.
The use of repurchase agreements involves certain risks. For example, if the
seller of securities under a repurchase agreement defaults on its obligation to
repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, the
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the securities
underlying the repurchase agreement will be held by the custodian at all times
in an amount at least equal to the repurchase price, including accrued
interest. If the seller fails to repurchase the securities, the Fund may suffer
a loss to the extent proceeds from the sale of the underlying securities are
less than the repurchase price.
The resale price reflects the purchase price plus an agreed upon market rate
of interest which is unrelated to the coupon rate or date of maturity of the
purchased security. The collateral is marked to market daily. Such agreements
permit the Fund to keep all its assets earning interest while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature.
B-2
<PAGE>
VAI-MS1-9.97
<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
<PAGE>
PART C--OTHER INFORMATION
ITEM 23: EXHIBITS.
(b) Exhibits:
<TABLE>
<C> <S> <C>
a(1). Declaration of Trust of Registrant. Filed as Exhibit 1(a) to
Registrant's Registration Statement on Form N-1A (File No.
333-16617) and incorporated herein by reference thereto.
a(2). Amended and Restated Establishment and Designation of Series
of Shares of Beneficial Interest dated October 11, 1996. Filed
as Exhibit 1(b) to Registrant's Registration Statement on Form
N-1A (File No. 333-16617) and incorporated herein by reference
thereto.
a(3). Certificate for the Establishment and Designation of Classes
dated July 10, 1996. Filed as Exhibit 1(c) to Registrant's
Registration Statement on Form N-1A (File No. 333-16617) and
incorporated herein by reference thereto.
a(4). Incumbency Certificate. Filed as Exhibit 1(d) to Post-Effec-
tive Amendment No. 1 to Registrant's Registration Statement on
Form N-1A (File No. 333-16617) and incorporated herein by ref-
erence thereto.
b. By-Laws of Registrant. Filed as Exhibit 2 to Registrant's Reg-
istration Statement on Form N-1A (File No. 333-16617) and in-
corporated herein by reference thereto.
c. Specimen certificates of Shares of each Fund. Filed as Exhibit
4 to Registrant's Registration Statement on Form N-1A (File
No. 333-16617) and incorporated herein by reference thereto.
d(1). Investment Management Agreement between Registrant and Nuveen
Advisory Corp. Filed as Exhibit 5 to Post-Effective Amendment
No. 1 to Registrant's Registration Statement on Form N-1A
(File No. 333-16617) and incorporated herein by reference
thereto.
d(2). Renewal of Investment Management Agreement dated May 5, 1998.
e(1). Distribution Agreement between Registrant and John Nuveen &
Co. Incorporated. Filed as Exhibit 6 to Post-Effective Amend-
ment No. 1 to Registrant's Registration Statement on Form N-1A
(File No. 333-16617) and incorporated herein by reference
thereto.
e(2). Renewal of Distribution Agreement dated July 31, 1998.
f. Not applicable.
g. Custodian Agreement between Registrant and Chase Manhattan
Bank. Filed as Exhibit 8 to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No.
333-16617) and incorporated herein by reference thereto.
h. Transfer Agency Agreement between Registrant and Chase Global
Funds Services Company.
i. Opinion of Morgan, Lewis, and Bockius LLP.
j(1). Consent of Arthur Andersen LLP, Independent Public Accoun-
tants.
j(2). Consent of Deloitte & Touche, Independent Auditors.
k. Not applicable.
l. Not applicable.
m. Plan of Distribution and Service Pursuant to Rule 12b-1 for
the Class A Shares, Class B Shares and Class C Shares of each
Fund. Filed as Exhibit 15 to Registrant's Registration State-
ment on Form N-1A (File No. 333-16617) and incorporated herein
by reference thereto.
n. Financial Data Schedule.
o. Multi-Class Plan Adopted Pursuant to Rule 18f-3. Filed as Ex-
hibit 18 to Registrant's Registration Statement on Form N-1A
(File No. 333-16617) and incorporated herein by reference
thereto.
z(1). Original Powers of Attorney for each Director authorizing,
among others, Gifford R. Zimmerman and Larry W. Martin to exe-
cute the Registration Statement on his or her behalf. Filed as
Exhibit 99(a) to Post-Effective Amendment No. 1 to Regis-
trant's Registration Statement on Form N-1A (File No. 333-
16617) and incorporated herein by reference thereto.
z(2). Certified copy of Resolution of Board of Trustees authorizing
the signing of the names of trustees and officers on the Reg-
istrant's Registration Statement pursuant to power of attor-
ney.
z(3). Code of Ethics and Reporting Requirements. Filed as Exhibit
99(c) to Post-Effective Amendment No. 1 to Registrant's Regis-
tration Statement on Form N-1A (File No. 333-16617) and incor-
porated herein by reference thereto.
</TABLE>
C-1
<PAGE>
ITEM 24: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 25: INDEMNIFICATION
Section 4 of Article XII of Registrant's Amended and Restated Declaration of
Trust provides as follows:
Subject to the exceptions and limitations contained in this Section 4, every
person who is, or has been, a Trustee, officer, employee or agent of the Trust,
including persons who serve at the request of the Trust as directors, trustees,
officers, employees or agents of another organization in which the Trust has an
interest as a shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person"), shall be indemnified by the Trust to the fullest extent
permitted by law against liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his being or
having been such a Trustee, director, officer, employee or agent and against
amounts paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the proceeding
was brought that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination
that such Covered Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the settlement
or other disposition or a reasonable determination, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that he
did not engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in
office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Covered Person may now or hereafter be entitled,
shall continue as to a person who has ceased to be such a Covered Person and
shall inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it
is ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any
such advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee,
anyone who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the word
"liability" and "expenses" shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
----------------
The trustees and officers of the Registrant are covered by an Investment Trust
Errors and Omission policy in the aggregate amount of $20,000,000 (with a
maximum deductible of $500,000) against liability and expenses of claims of
C-2
<PAGE>
wrongful acts arising out of their position with the Registrant, except for
matters which involved willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she reasonably believed to be in the best interest of Registrant
or where he or she shall have had reasonable cause to believe this conduct was
unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, trustees or controlling persons of the
Registrant pursuant to the Declaration of Trust of the Registrant or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer or trustee or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, trustee or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
ITEM 26: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Nuveen Advisory Corp. serves as investment adviser to the following open-end
management type investment companies: Nuveen Flagship Multistate Trust I,
Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III,
Nuveen Flagship Multistate Trust IV, Nuveen Flagship Municipal Trust, Flagship
Admiral Funds Inc., Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free
Money Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., and Nuveen
Tax-Free Reserves, Inc. It also serves as investment adviser to the following
closed-end management type investment companies: Nuveen Municipal Value Fund,
Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal
Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen
California Performance Plus Municipal Fund, Inc., Nuveen New York Performance
Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen
Municipal Market Opportunity Fund, Inc., Nuveen California Municipal Market
Opportunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen
California Investment Quality Municipal Fund, Inc., Nuveen New York Investment
Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc.,
Nuveen Florida Investment Quality Municipal Fund, Nuveen New Jersey Investment
Quality Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal
Fund, Nuveen Select Quality Municipal Fund, Inc., Nuveen California Select
Quality Municipal Fund, Inc., Nuveen New York Select Quality Municipal Fund,
Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured Municipal
Opportunity Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen
Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income
Municipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen
California Quality Income Municipal Fund, Inc., Nuveen New York Quality Income
Municipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen
Premier Insured Municipal Income Fund, Inc. Nuveen Premium Income Municipal
Fund 2, Inc., Nuveen Insured California Premium Income Municipal Fund, Inc.,
Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen Select
Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc.,
Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium
Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund,
Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California
Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income
Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen
Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income
Municipal Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen
Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income
Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen California Premium Income
Municipal Fund, and Nuveen Insured Premium Income Municipal Fund 2. Nuveen
Advisory Corp. has no other clients or business at the present time. The
principal business address for all of these investment companies is 333 West
Wacker Drive, Chicago, Illinois 60606.
For a description of other business, profession, vocation or employment of a
substantial nature in which any director or officer, other than Timothy R.
Schwertfeger and Anthony T. Dean, of the investment adviser has engaged during
the last two years for his account or in the capacity of director, officer,
employee, partner or trustee, see the descriptions under "Management" in the
Statement of Additional Information.
Timothy R. Schwertfeger is Chairman and Director of Nuveen Advisory Corp., the
investment adviser. Mr. Schwertfeger has, during the last two years, been
Chairman and formerly Executive Vice President and Director of the John Nuveen
Company, John Nuveen & Co. Incorporated, and Nuveen Institutional Advisory
Corp. Anthony T. Dean is President and Director of Nuveen Advisory Corp., the
investment adviser. Mr. Dean has, during the last two years, been Executive
Vice President and Director of The John Nuveen Company and John Nuveen & Co.
Incorporated; and Director of Nuveen Institutional Advisory Corp.
C-3
<PAGE>
ITEM 27: PRINCIPAL UNDERWRITERS
(a) John Nuveen & Co., Incorporated ("Nuveen") acts as principal underwriter to
the following open-end management type investment companies: Nuveen Flagship
Multistate Trust I, Nuveen Flagship Multistate Trust II, Nuveen Flagship
Multistate Trust III, Nuveen Flagship Multistate Trust IV, Nuveen Flagship
Municipal Trust, Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Money
Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., Nuveen Tax-Free
Reserves, Inc., Flagship Admiral Funds Inc., and Nuveen Investment Trust.
Nuveen also acts as depositor and principal underwriter of the Nuveen Tax-Free
Unit Trust and the Nuveen Unit Trust, registered unit investment trusts. Nuveen
has also served or is serving as co-managing underwriter to the following
closed-end management type investment companies: Nuveen Municipal Value Fund,
Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal
Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen
California Performance Plus Municipal Fund, Inc., Nuveen New York Performance
Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen
Municipal Market Opportunity Fund, Inc., Nuveen California Municipal Market
Opportunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen
California Investment Quality Municipal Fund, Inc., Nuveen New York Investment
Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc.,
Nuveen Florida Investment Quality Municipal Fund, Nuveen New Jersey Investment
Quality Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal
Fund, Nuveen Select Quality Municipal Fund, Inc., Nuveen California Select
Quality Municipal Fund, Inc., Nuveen New York Select Quality Municipal Fund,
Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured Municipal
Opportunity Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen
Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income
Municipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen
California Quality Income Municipal Fund, Inc., Nuveen New York Quality Income
Municipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen
Premier Insured Municipal Income Fund, Inc., Nuveen Premium Income Municipal
Fund 2, Inc., Nuveen Insured California Premium Income Municipal Fund, Inc.,
Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen Select
Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc.,
Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium
Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund,
Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California
Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income
Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen
Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income
Municipal Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen
Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income
Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen California Premium Income
Municipal Fund, Nuveen Insured Premium Income Municipal Fund 2, Nuveen Select
Tax-Free Income Portfolio, Nuveen Select Tax-Free Income Portfolio 2, Nuveen
Insured California Select Tax-Free Income Portfolio, Nuveen Insured New York
Select Tax-Free Income Portfolio and Nuveen Select Tax-Free Income Portfolio 3.
(b)
<TABLE>
<CAPTION>
NAME AND
PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- -----------------------------------------------------------------------------
<S> <C> <C>
Timothy R. Chairman of the Board, Chairman of the Board
Schwertfeger Chief Executive Officer and Director and Director
333 West Wacker
Drive
Chicago, IL 60606
Anthony T. Dean President and Director President and Trustee
333 West Wacker
Drive
Chicago, IL 60606
Bruce P. Bedford Executive Vice President None
333 West Wacker
Drive
Chicago, IL 60606
John P. Amboian Executive Vice President None
333 West Wacker and Chief Financial Officer
Drive
Chicago, IL 60606
William Adams IV Vice President None
333 West Wacker
Drive
Chicago, IL 60606
Alan G. Berkshire Vice President and Secretary Vice President and
333 West Wacker Assistant Secretary
Drive
Chicago, IL 60606
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
NAME AND PRINCIPAL OFFICES OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------------------------------------------------
<S> <C> <C>
Clifton L. Fenton Vice President None
333 West Wacker Drive
Chicago, IL 60606
Kathleen M. Flanagan Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Stephen D. Foy Vice President None
333 West Wacker Drive
Chicago, IL 60606
Michael G. Gaffney Vice President None
333 West Wacker Drive
Chicago, IL 60606
Anna R. Kucinskis Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Robert B. Kuppenheimer Vice President None
19900 MacArthur Blvd.
Irvine, CA 92612
Larry W. Martin Vice President and Vice President and
333 West Wacker Drive Assistant Secretary Assistant Secretary
Chicago, IL 60606
Thomas C. Muntz Vice President None
333 West Wacker Drive
Chicago, IL 60606
Stuart W. Rogers Vice President None
333 West Wacker Drive
Chicago, IL 60606
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive
Chicago, IL 60606
H. William Stabenow Vice President Vice President and
333 West Wacker Drive and Treasurer Treasurer
Chicago, IL 60606
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
Margaret E. Wilson Vice President and None
333 West Wacker Drive Corporate Controller
Chicago, IL 60606
Gifford R. Zimmerman Vice President Vice President and
333 West Wacker Drive and Secretary Secretary
Chicago, IL 60606
</TABLE>
(c) Not applicable.
ITEM 28: LOCATION OF ACCOUNTS AND RECORDS
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606,
maintains the Declaration of Trust, By-Laws, minutes of trustees and
shareholder meetings and contracts of the Registrant and all advisory material
of the investment adviser.
C-5
<PAGE>
The Chase Manhattan Bank, 4 New York Plaza, 770 Broadway, New York, New York
10004 maintains all general and subsidiary ledgers, journals, trial balances,
records of all portfolio purchases and sales, and all other required records
not maintained by Nuveen Advisory Corp.
Chase Global Funds Services Company, 73 Tremont Street, Boston, Massachusetts,
maintains all the required records in its capacity as transfer, dividend
paying, and shareholder service agent for the Funds.
ITEM 29: MANAGEMENT SERVICES
Not applicable.
ITEM 30: UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest Annual Report to Sharehold-
ers upon request and without charge.
(d) The Registrant agrees to call a meeting of shareholders for the purpose of
voting upon the question of the removal of any trustee or trustees when re-
quested to do so in writing by the record holders of at least 10% of the Reg-
istrant's outstanding shares and to assist the shareholders in communications
with other shareholders as required by section 16(c) of the Act.
C-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT THIS REGISTRATION STATEMENT
MEETS ALL THE REQUIREMENTS FOR EFFECTIVENESS UNDER PARAGRAPH (A) OF RULE 485
UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, AND STATE OF ILLINOIS, ON THE 30TH DAY OF
SEPTEMBER, 1998.
NUVEEN FLAGSHIP MULTISTATE TRUST I
/s/ Gifford R. Zimmerman
-----------------------------------------
Gifford R. Zimmerman, Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ Stephen D. Foy
-------------------------------
Stephen D. Foy Vice President and September 30, 1998
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board
and Trustee (Principal
Executive Officer)
Anthony T. Dean President and Trustee
Robert P. Bremner Trustee
Lawrence H. Brown Trustee /s/ Gifford R.
Anne E. Impellizzeri Trustee Zimmerman
Peter R. Sawers Trustee
</TABLE>
By____________________________
Gifford R. Zimmerman
William J. Schneider Trustee Attorney-in-Fact
Judith M. Stockdale Trustee
September 30, 1998
AN ORIGINAL POWER OF ATTORNEY AUTHORIZING, AMONG OTHERS, GIFFORD R. ZIMMERMAN
AND LARRY W. MARTIN TO EXECUTE THIS REGISTRATION STATEMENT, AND AMENDMENTS
THERETO, FOR EACH OF THE OFFICERS AND TRUSTEES OF REGISTRANT ON WHOSE BEHALF
THIS REGISTRATION STATEMENT IS FILED, HAS BEEN EXECUTED AND IS INCORPORATED BY
REFERENCE TO THIS REGISTRATION STATEMENT.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
d(2). Renewal of Investment Management Agreement dated May
5, 1998.
e(2). Renewal of Distribution Agreement dated July 31,
1998.
(h). Transfer Agency Services Agreement.
(i). Opinion of Morgan Lewis & Bockius LLP.
j(1). Consent of Arthur Andersen LLP, Independent Public
Accountants.
j(2). Consent of Deloitte & Touche LLP, Independent Audi-
tors.
n. Financial Data Schedule.
z(2). Certified copy of Resolution of Board of Trustees au-
thorizing the signing of the names of trustees and
officers on the Registrant's Registration Statement
pursuant to power of attorney.
</TABLE>
<PAGE>
NUVEEN FLAGSHIP MULTISTATE TRUST I
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
This Agreement made this 5th day of May, 1998 by and between Nuveen Flagship
Multistate Trust I, a Massachusetts business trust (the "Fund"), and Nuveen
Advisory Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates August 1, 1998 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Trustees, at a meeting called for the purpose of reviewing
the Agreement, have approved the Agreement and its continuance until August 1,
1999 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreements the parties hereto do hereby continue the Agreement in effect until
August 1, 1999 and ratify and confirm the Agreement in all respects.
NUVEEN FLAGSHIP MULTISTATE TRUST I
By: /s/ Gifford R. Zimmerman
---------------------------
Vice President
ATTEST:
/s/ Karen L. Healy
- ---------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By: /s/ Edward F. Neild
---------------------------
Vice President
ATTEST:
/s/ Larry Martin
- --------------------------
Assistant Secretary
<PAGE>
Renewal of Distribution Agreement
---------------------------------
This Agreement made this 31st day of July, 1998 by and between Nuveen Flagship
Multistate Trust I, a Massachusetts business trust (the "Fund"), and John Nuveen
& Co. Incorporated, a Delaware corporation (the "Underwriter"):
WHEREAS, the parties hereto are the contracting parties under that certain
Distribution Agreement (the "Agreement") pursuant to which the Underwriter acts
as agent for the distribution of shares of the Fund; and
WHEREAS, the Agreement terminates August 1, 1998 unless continued in the manner
required by the Investment Company Act of 1940;
WHEREAS, the Board of Trustees of the Fund, at a meeting called for the purpose
of reviewing the Agreement has approved the Agreement and its continuance until
August 1, 1999 in the manner required by the Investment Company Act of 1940;
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1999 and ratify and confirm the Agreement in all respects.
NUVEEN FLAGSHIP MULTISTATE TRUST I
By: /s/ Gifford R. Zimmerman
----------------------------------
Vice President
ATTEST:
/s/ Karen L. Healy
- -------------------------------
Assistant Secretary
JOHN NUVEEN & CO. INCORPORATED
By: /s/ Alan G. Berkshire
----------------------------------
Vice President
ATTEST:
/s/ Larry Martin
- -------------------------------
Assistant Secretary
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
. Transfer Agency Services
NUVEEN FUNDS
August 24, 1998
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
Table of Contents
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. Appointment................................................... 1
2. Representations and Warranties................................ 1
3. Delivery of Documents......................................... 3
4. Services Provided............................................. 3
5. Fees and Expenses............................................. 4
6. Limitation of Liability and Indemnification................... 6
7. Term.......................................................... 8
8. Notices....................................................... 9
9. Waiver........................................................ 9
10. Force Majeure................................................. 9
11. Additional Funds.............................................. 10
12. Amendments.................................................... 10
13. Assignment.................................................... 10
14. Severability.................................................. 10
15. Governing Law................................................. 10
Signatures......................................................... 10
</TABLE>
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
Table of Contents (continued)
-----------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Schedule A -- Fees and Expenses................................... A-1
Schedule B -- List of Nuveen Funds and Jurisdictions under
which Funds are Organized........................... B-1
Schedule C -- Transfer Agency Services Description................ C-1
</TABLE>
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
AGREEMENT made as of August 24, 1998 by and between the Nuveen Funds
(each, a "Fund" and collectively the "Funds"), for the Funds listed on Schedule
B, and organized under the jurisdictions set forth on Schedule B, and Chase
Global Funds Services Company ("Chase"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, each Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, each Fund wishes to contract with Chase to provide certain
services with respect to the Fund;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Funds hereby appoint Chase to provide services for
the Funds, as described hereinafter, subject to the supervision of the Board of
Directors or Trustees of the Funds (the "Board"), for the period and on the
terms set forth in this Agreement. Chase accepts such appointment and agrees to
furnish the services herein set forth in return for the compensation as provided
in Section 5 of and Schedule A to this Agreement.
2. Representations and Warranties.
(a) Chase represents and warrants to the Funds that:
(i) Chase is a corporation, duly organized and existing under the
laws of the State of Delaware;
(ii) Chase is duly qualified to carry on its business in the
Commonwealth of Massachusetts;
(iii) Chase is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and perform this Agreement;
(iv) all requisite corporate proceedings have been taken to
authorize Chase to enter into and perform this Agreement;
1
<PAGE>
(v) Chase has, and will continue to have, access to the
facilities, personnel and equipment required to fully perform its duties and
obligations hereunder;
(vi) no legal or administrative proceedings have been instituted
or threatened which would impair Chase's ability to perform its duties and
obligations under this Agreement; and
(vii) Chase's entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligation of Chase or any law or regulation applicable to Chase;
(b) Each Fund represents and warrants to Chase that:
(i) the Fund is a duly organized and existing and in good
standing under the laws of the jurisdictions set forth above its name on
Schedule B;
(ii) the Fund is empowered under applicable laws and by its
Charter Document and By-Laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the
Fund to enter into and perform this Agreement;
(iv) the Fund is an investment company properly registered under
the 1940 Act;
(v) a registration statement under the Securities Act of 1933, as
amended ("1933 Act") and the 1940 Act on Form N-1A has been filed and will be
effective and will remain effective during the term of this Agreement, and all
necessary filings under the laws of the states will have been made and will be
current during the term of this Agreement;
(vi) no legal or administrative proceedings have been instituted
or threatened which would impair the Fund's ability to perform its duties and
obligations under this Agreement;
(vii) the Fund's registration statement complies in all material
respects with the 1933 Act and the 1940 Act (including the rules and regulations
thereunder) and none of the Fund's prospectuses and/or statements of additional
information contain any untrue statement of material fact or omit to state a
material fact necessary to make the statements therein not misleading; and
2
<PAGE>
(viii) the Fund's entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligation of the Fund or any law or regulation applicable to it.
3. Delivery of Documents. Each Fund will promptly furnish to Chase such
copies, properly certified or authenticated, of contracts, documents and other
related information that Chase may request or requires to properly discharge its
duties. Such documents may include but are not limited to the following:
(a) Resolutions of the Board authorizing the appointment of Chase to
provide certain services to the Fund and approving this Agreement;
(b) The Fund's Charter Document;
(c) The Fund's By-Laws;
(d) The Fund's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission ("SEC");
(e) The Fund's registration statement including exhibits, as amended,
on Form N-1A (the "Registration Statement") under the 1933 Act and the 1940 Act,
as filed with the SEC;
(f) Copies of the Investment Advisory Agreement between the Fund and
its investment adviser (the "Advisory Agreement");
(g) Opinions of counsel and auditors' reports;
(h) The Fund's prospectus(es) and statement(s) of additional
information relating to all funds, series, portfolios and classes, as
applicable, and all amendments and supplements thereto (such Prospectus(es) and
Statement(s) of Additional Information and supplements thereto, as presently in
effect and as from time to time hereafter amended and supplemented, herein
called the "Prospectuses"); and
(i) Such other agreements as the Fund may enter into from time to time
including securities lending agreements, futures and commodities account
agreements, brokerage agreements and options agreements.
4. Services Provided.
(a) Chase will provide the following services subject to the control,
direction and supervision of the Board and its designated agents and in
compliance with the objectives, policies and limitations set forth in the Funds'
Registration Statement, Charter Document and By-Laws; applicable laws and
regulations; and all resolutions and policies implemented by the Board:
3
<PAGE>
(i) Transfer Agency.
A description of the above service is contained in Schedule C to this Agreement.
(b) Chase will also:
(i) provide office facilities with respect to the provision of
the services contemplated herein (which may be in the offices of Chase or a
corporate affiliate of Chase);
(ii) provide or otherwise obtain personnel sufficient for
provision of the services contemplated herein;
(iii) furnish equipment and other materials, which are necessary
or desirable for provision of the services contemplated herein; and
(iv) keep records relating to the services provided hereunder in
such form and manner as Chase may deem appropriate or advisable. To the extent
required by Section 31 of the 1940 Act and the rules thereunder, Chase agrees
that all such records prepared or maintained by Chase relating to the services
provided hereunder are the property of the Funds and will be preserved for the
periods prescribed under Rule 31a-2 under the 1940 Act, maintained at the Funds'
expense, and made available in accordance with such Section and rules.
5. Fees and Expenses.
(a) As compensation for the services rendered to the Funds pursuant to
this Agreement the Funds shall pay Chase monthly fees determined as set forth in
Schedule A to this Agreement. Such fees are to be billed monthly and shall be
due and payable upon receipt of the invoice. Upon any termination of the
provision of services under this Agreement before the end of any month, the fee
for the part of the month before such termination shall be prorated according to
the proportion which such part bears to the full monthly period and shall be
payable upon the date of such termination.
(b) For the purpose of determining fees calculated as a function of
each Fund's assets, the value of the Fund's assets and net assets shall be
computed as required by its currently effective Prospectus, generally accepted
accounting principles, and resolutions of the Board.
(c) The Funds may request additional services, additional processing,
or special reports, with such specifications, requirements and documentation as
may be reasonably required by Chase. If Chase elects to provide such services
or arrange for their provision, it shall be entitled to additional fees and
expenses at its customary rates and charges.
4
<PAGE>
(d) Chase will bear its own expenses in connection with the
performance of the services under this Agreement except as provided herein or as
agreed to by the parties. Each Fund agrees to promptly reimburse Chase for any
services, equipment or supplies ordered by or for the Fund through Chase and for
any other expenses that Chase may incur on the Fund's behalf at the Fund's
request or as consented to by the Fund. Such other expenses to be incurred in
the operation of the Fund and to be borne by the Funds, include, but are not
limited to: taxes; interest; brokerage fees and commissions; salaries and fees
of officers, directors, or trustees who are not officers, directors,
shareholders or employees of Chase, or the Fund's distributor; SEC and state
Blue Sky registration and qualification fees, levies, fines and other charges;
postage and mailing costs; costs of share certificates; advisory fees;
independent public accountants and custodians; insurance premiums including
fidelity bond premiums; legal expenses; consulting fees; customary bank charges
and fees; expenses of typesetting and printing of Prospectuses for regulatory
purposes and for distribution to current shareholders of the Fund (the Fund's
distributor to bear the expense of all other printing, production, and
distribution of Prospectuses, and marketing materials); expenses of printing and
production costs of shareholders' reports and proxy statements and materials;
expenses of proxy solicitation and annual meetings; costs and expenses of Fund
stationery and forms; customer service telephone expenses, costs and expenses of
telephone and data lines and devices which are specially requested by the Fund;
costs associated with corporate or trust, shareholder, and Board meetings; trade
association dues and expenses; reprocessing costs to Chase caused by third party
errors; and any extraordinary expenses and other customary Fund expenses.
(e) All fees, out-of-pocket expenses, or additional charges of Chase
shall be billed on a monthly basis and shall be due and payable upon receipt of
the invoice.
(f) Chase will render, after the close of each month in which services
have been furnished, a statement reflecting all of the charges for such month.
Charges remaining unpaid after thirty (30) days shall bear interest in finance
charges equivalent to, in the aggregate, the Prime Rate (as reasonably
determined by Chase) plus two percent per year and all costs and expenses of
effecting collection of any such sums, including reasonable attorney's fees,
shall be paid by the Funds to Chase.
(g) In the event that the Funds are more than sixty (60) days
delinquent in payments of monthly billings in connection with this Agreement
(with the exception of specific
5
<PAGE>
amounts which may be contested in good faith by the Funds), this Agreement may
be terminated upon thirty (30) days' written notice to the Funds by Chase. The
Funds must notify Chase in writing of any contested amounts within thirty (30)
days of receipt of a billing for such amounts. Disputed amounts are not due and
payable while they are being investigated.
6. Limitation of Liability and Indemnification.
(a) Chase shall not be liable for any error of judgment or mistake of
law or for any loss or expense suffered by the Funds, in connection with the
matters to which this Agreement relates, except for a loss or expense solely
caused by or resulting from willful misfeasance, bad faith or negligence on
Chase's part in the performance of its duties or from reckless disregard by
Chase of its obligations and duties under this Agreement. In no event shall
Chase be liable for any indirect, incidental, special or consequential losses or
damages of any kind whatsoever, even if Chase has been advised of the likelihood
of such loss or damage and regardless of the form of action.
(b) Subject to Section 6(a) above, Chase shall not be responsible for,
and the Funds shall indemnify and hold Chase harmless from and against, any and
all losses, damages, costs, reasonable attorneys' fees and expenses, payments,
expenses and liabilities incurred by Chase, any of its agents, or the Funds'
agents in the performance of its/their duties hereunder, including but not
limited to those arising out of or attributable to:
(i) any and all actions of Chase or its officers or agents
required to be taken pursuant to this Agreement;
(ii) the reasonable reliance on or use by Chase or its officers
or agents of information, records, or documents which are received by Chase or
its officers or agents and furnished to it or them by or on behalf of the Funds,
and which have been prepared or maintained by the Funds or any third party on
behalf of the Funds;
(iii) the Funds' refusal or failure to comply with the terms of
this Agreement or the Funds' lack of good faith, or actions, or lack thereof,
involving negligence or willful misfeasance;
(iv) the breach of any representation or warranty of the Funds
hereunder;
(v) the taping or other form of recording of telephone
conversations or other forms of electronic communications with investors and
shareholders, or reasonable reliance by Chase on telephone or other electronic
instructions of any person acting on behalf of a
6
<PAGE>
shareholder or shareholder account for which telephone or other electronic
services have been authorized;
(vi) the reliance on or the carrying out by Chase or its officers
or agents of any proper instructions reasonably believed to be duly authorized,
or requests of the Funds or recognition by Chase of any share certificates which
are reasonably believed to bear the proper signatures of the officers of the
Funds and the proper countersignature of any transfer agent or registrar of the
Funds;
(vii) any delays, inaccuracies, errors in or omissions from
information or data provided to Chase by data, corporate action, pricing
services or securities brokers and dealers;
(viii) the offer or sale of shares by any Fund in violation of
any requirement under the Federal securities laws or regulations or the
securities laws or regulations of any state, or in violation of any stop order
or other determination or ruling by any Federal agency or any state agency with
respect to the offer or sale of such shares in such state (1) resulting from
activities, actions, or omissions by the Funds or their other service providers
and agents, or (2) existing or arising out of activities, actions or omissions
by or on behalf of the Fund prior to the effective date of this Agreement;
(ix) any failure of a Fund's registration statement to comply
with the 1933 Act and the 1940 Act (including the rules and regulations
thereunder) and any other applicable laws, or any untrue statement of a material
fact or omission of a material fact necessary to make any statement therein not
misleading in a Fund's prospectus;
(x) the actions taken by the Funds, their investment adviser, and
their distributor in compliance with applicable securities, tax, commodities and
other laws, rules and regulations, or the failure to so comply; and
(xi) all actions, inactions, omissions, or errors caused by third
parties to whom Chase or the Funds has assigned any rights and/or delegated any
duties under this Agreement at the request of or as required by the Funds, their
investment advisers, distributor, administrator or sponsor.
(c) In performing its services hereunder, Chase shall be entitled to
reasonably rely on any oral or written instructions, notices or other
communications, including electronic transmissions, from the Funds and their
custodians, officers and directors, investors, agents and
7
<PAGE>
other service providers and shareholders which Chase reasonably believes to be
genuine, valid and authorized, and shall be indemnified by the Funds for any
loss or expense caused by such reliance. Chase shall also be entitled to consult
with and rely on the advice and opinions of outside legal counsel retained by
the Funds, as necessary or appropriate.
(d) Chase shall indemnify and hold the Funds harmless from and against
any and all losses, damages, costs, charges, payments, expenses and liability,
excluding attorneys' fees and costs, arising out of or attributable to Chase's
refusal or failure to comply with the material terms of this Agreement, or
Chase's lack of good faith, negligence or willful misconduct.
(e) Subject to the above Sections 6 (a) through 6 (d), any costs or
losses incurred by a Fund for the processing of any purchase, redemption,
exchange or other share transactions at a price per share other than the price
per share applicable to the effective date of the transaction (the foregoing
being generally referred to herein as "as of" transactions) will be handled in
the following manner:
(i) For each calendar year, if all "as of" transactions for the
year, taken in the aggregate, result in a net loss to a Fund ("net loss"), Chase
will reimburse the Fund for such net loss, except to the extent that such net
loss may be offset by application of a "net benefit" to the Fund carried over
from prior calendar years pursuant to sub-paragraph (ii) immediately below.
(ii) For each calendar year, if all "as of" transactions for the
year, taken in the aggregate, result in a net benefit to a Fund ("net benefit"),
the Fund shall not reimburse Chase for the amount of such net benefit; however,
any "net benefit" for any calendar year may be used to offset, in whole or in
part, any "net loss" suffered by the Fund in any future calendar year so as to
reduce the amount by which Chase shall be required to reimburse the Fund for
such "net loss" in such year pursuant to sub-paragraph (i) immediately above.
(iii) Any "net loss" for which Chase reimburses a Fund in any
calendar year shall not be carried over into future years so as to offset any
"net benefit" in such future years.
7. Term. This Agreement shall become effective on the date first
hereinabove written for an initial term of four years. The Agreement may be
modified or amended from time to time by mutual agreement between the parties
hereto. After the initial term, the Agreement shall continue in effect unless
terminated by either party on 6 months' prior written notice. Upon termination
of this Agreement, each Fund shall pay to Chase such compensation and any
8
<PAGE>
reasonable out-of-pocket or other reimbursable expenses which may become due or
payable under the terms hereof as of the date of termination or after the date
that the provision of services ceases, whichever is later. If the Funds
terminate the Agreement for any reason during the first year of the initial
term, they will reimburse Chase in accordance with Schedule A.
8. Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed effective on the date of personal delivery (by
private messenger, courier service or otherwise) or upon confirmed receipt of
telex or facsimile, whichever occurs first, or upon receipt if by mail to the
parties at the following address (or such other address as a party may specify
by notice to the other):
If to the Funds:
John Nuveen & Co., Incorporated
333 West Wacker Drive
Chicago, IL 60606
Attention: Fund Controller
Fax: (312) 917-8049
If to Chase:
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
Attention: Karl O. Hartmann, Esq., General Counsel
Fax: (617) 557-8616
9. Waiver. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver nor
shall it deprive such party of the right thereafter to insist upon strict
adherence to that term or any term of this Agreement. Any waiver must be in
writing signed by the waiving party.
10. Force Majeure. Chase shall not be responsible or liable for any harm,
loss or damage suffered by the Funds, their investors, or other third parties or
for any failure or delay in performance of Chase's obligations under this
Agreement arising out of or caused, directly or indirectly, by circumstances
beyond Chase's control. In the event of a force majeure, any resulting harm,
loss, damage, failure or delay by Chase will not give the Funds the right to
terminate this Agreement.
11. Additional Funds. In the event that John Nuveen & Company
Incorporated sponsors additional open-end management companies with respect to
which it desires Chase to
9
<PAGE>
provide services under the terms of this Agreement, it shall so notify Chase in
writing, and if Chase agrees in writing to provide such services, such Fund or
Funds shall be subject to the terms of this Agreement and Schedule C shall be
modified accordingly.
12. Amendments. This Agreement may be modified or amended from time to
time by mutual written agreement between the parties. No provision of this
Agreement may be changed, discharged, or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, discharge or termination is sought.
13. Assignment. Chase may assign and delegate this Agreement and its
rights and obligations hereunder without the consent of the other party.
14. Severability. If any provision of this Agreement is invalid or
unenforceable, the balance of the Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance it shall nevertheless
remain applicable to all other persons and circumstances.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE SUBSTANTIVE
LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
NUVEEN FUNDS
By: /s/ Stuart Rogers
-----------------------------
Name: Stuart Rogers
---------------------------
Title: Vice President
--------------------------
CHASE GLOBAL FUNDS
SERVICES COMPANY
By: /s/ Donald P. Hearn
-----------------------------
Name: Donald P. Hearn
---------------------------
Title: Chairman and CEO
--------------------------
10
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE A
FEES AND EXPENSES
Transfer Agency Fees
A. $18.50 per municipal fund account per annum
$18.25 per equity fund account per annum
$29.00 per money market fund account per annum
B. Out-of-pocket expenses, including but not limited to those in Section
5(d), will be computed, billed and payable monthly Customized systems
and technology charges (excluding those projects covered under the
conversion agreement) will be negotiated individually and billed along
with out-of-pocket expenses.
C. If the Funds terminate this Agreement for any reason whatsoever between
the date of this Agreement and July 1, 1999, there will be immediately
due and owing to Chase by Nuveen a $6 million charge; if between the date
of July 1, 1999 and June 30, 2000, a $4 million charge; and if between
July 1, 2000 and June 30, 2001, a $2 million charge. In addition, the
Funds will reimburse Chase for all costs it incurs in connection with any
conversion to another transfer agent.
A-1
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE B
Flagship Admiral Funds Inc. (Maryland Corporation)
Flagship Utility Income Fund
Nuveen Investment Trust (Massachusetts Business Trust)
Nuveen Growth and Income Stock Fund
Nuveen Balanced Stock and Bond Fund
Nuveen Balanced Municipal and Stock Fund
Nuveen European Value Fund
Nuveen Investment Trust II (Massachusetts Business Trust)
Nuveen Rittenhouse Growth Fund
Nuveen Flagship Municipal Trust (Massachusetts Business Trust)
Nuveen Municipal Bond Fund
Nuveen Insured Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Flagship Limited Term Municipal Bond Fund
Nuveen Flagship Intermediate Municipal Bond Fund
Nuveen Flagship Multistate Trust I (Massachusetts Business Trust)
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
B-1
<PAGE>
Nuveen Flagship Multistate Trust II (Massachusetts Business Trust)
Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
Nuveen Flagship Connecticut Municipal Bond Fund
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
Nuveen Flagship New Jersey Municipal Bond Fund
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
Nuveen Flagship New York Municipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
Nuveen Flagship Multistate Trust III (Massachusetts Business Trust)
Nuveen Flagship Alabama Municipal Bond Fund
Nuveen Flagship Georgia Municipal Bond Fund
Nuveen Flagship Louisiana Municipal Bond Fund
Nuveen Flagship North Carolina Municipal Bond Fund
Nuveen Flagship South Carolina Municipal Bond Fund
Nuveen Flagship Tennessee Municipal Bond Fund
Nuveen Flagship Multistate Trust IV (Massachusetts Business Trust)
Nuveen Flagship Kansas Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
Nuveen Tax-Exempt Money Market Fund, Inc. (Maryland Corporation)
Nuveen Tax-Free Reserves, Inc. (Maryland Corporation)
Nuveen Tax-Free Money Market Fund, Inc. (Minnesota Corporation)
Nuveen Massachusetts Tax-Free Money Market Fund
Nuveen New York Tax-Free Money Market Fund
B-2
<PAGE>
Nuveen California Tax-Free Fund, Inc. (Maryland Corporation)
Nuveen California Tax-Free Money Market Fund
B-3
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE C
DESCRIPTION OF TRANSFER AGENCY SERVICES
The following is a general description of the transfer agency services Chase
shall provide to each Fund.
A. Shareholder Recordkeeping. Maintain records showing for each Fund
shareholder the following: (i) name, address, appropriate tax
certification and tax identifying number; (ii) number of shares of each
Fund, portfolio or class; (iii) historical information including, but not
limited to, dividends paid, date and price of all transactions including
individual purchases and redemptions, based upon appropriate supporting
documents; and (iv) any dividend reinvestment order, application,
specific address, payment and processing instructions and correspondence
relating to the current maintenance of the account.
B. Share Issuance. Record the issuance of shares of each Fund, portfolio or
class. Except as specifically agreed in writing between Chase and the
Fund, Chase shall have no obligation when countersigning and issuing
and/or crediting shares to take cognizance of any other laws relating to
the issue and sale of such shares except insofar as policies and
procedures of the Stock Transfer Association recognize such laws.
C. Transfer, Purchase, Exchange and Redemption Orders. Process all orders
for the transfer, purchase, exchange and redemption of shares of the Fund
in accordance with the Fund's current prospectus and customary transfer
agency policies and procedures, including electronic transmissions which
the Fund acknowledges it has authorized, or in accordance with any
instructions of the Fund or its agents which Chase reasonably believes to
be authorized.
D. Shareholder Communications. Transmit all communications by the Fund to
its shareholders promptly following the delivery by the Fund of the
material to be transmitted by mail, telephone, courier service or
electronically.
E. Proxy Materials. Assist with the mailing or transmission of proxy
materials, tabulating votes, and compiling and certifying voting results.
Services may include the provision of inspectors of election at any
meeting of shareholders.
F. Share Certificates. If permitted by Fund policies, and if a shareholder
of the Fund requests a certificate representing shares, Chase as Transfer
Agent, will countersign and mail a share certificate to the investor at
his/her address as it appears on the Fund's shareholder records.
C-1
<PAGE>
G. Returned Checks. In the event that any check or other negotiable
instrument for the payment of shares is returned unpaid for any reason,
Chase will take such steps, as Chase may, in its discretion, deem
appropriate and notify the Fund of such action. However, the Fund
remains ultimately liable for any returned checks or negotiable
instruments of its shareholders.
H. Shareholder & Broker-Dealer Correspondence. Acknowledge all
correspondence from shareholders and broker-dealers relating to share
accounts and undertake such other shareholder and broker-dealer
correspondence as may from time to time be mutually agreed upon.
I. Tax Reporting. Chase shall issue appropriate shareholder tax forms as
required.
J. Dividend Disbursing. Chase will prepare and mail checks, place wire
transfers or credit income and capital gain payments to shareholders.
The Fund will advise Chase of the declaration of any dividend or
distribution and the record and payable date thereof at least five (5)
days prior to the record date. Chase will, on or before the payment date
of any such dividend or distribution, notify the Fund's Custodian of the
estimated amount required to pay any portion of such dividend or
distribution payable in cash, and on or before the payment date of such
distribution, the Fund will instruct its Custodian to make available to
Chase sufficient funds for the cash amount to be paid out. If a
shareholder is entitled to receive additional shares by virtue of any
such distribution or dividend, appropriate credits will be made to each
shareholder's account.
K. Escheatment. Chase shall provide escheatment services only with respect
to the escheatment laws of the Commonwealth of Massachusetts, including
those which relate to reciprocal agreements with other states.
L. Telephone Services. Chase will provide staff coverage, training and
supervision in connection with the Fund's telephone line for shareholder
inquiries, and will respond to inquiries concerning shareholder records,
transactions processed by Chase, procedures to effect the shareholder
records and inquiries of a general nature relative to shareholder
services.
M. 12b-1. Chase will calculate and process all 12b-1 payments in accordance
with each Fund's current prospectus.
N. Commission Payments. Chase will calculate and process all commission
payments in accordance with each Fund's current prospectus.
O. Requests for Information. Chase will provide all required information in
a timely fashion in support of regulatory filings.
P. SAS 70. Chase will make available to the Funds' sponsor independent
auditor reports in compliance with SAS 70.
C-2
<PAGE>
Q. Regulatory Changes. Chase will provide assistance with the analysis and
implementation of any changes required by regulatory bodies.
C-3
<PAGE>
September 28, 1998
Nuveen Flagship Multistate Trust I
333 West Wacker Drive
Chicago, Illinois 60606
Re: Opinion of Counsel regarding Post-Effective Amendment No. 3 to the
Registration Statement filed on Form N-1A under the Securities Act of 1933
(File No. 333-16617).
Ladies and Gentlemen:
We have acted as counsel for Nuveen Flagship Multistate I, a Massachusetts
voluntary association (commonly known as a business trust) (the "Trust"), in
connection with the above-referenced Registration Statement on Form N-1A (as
amended, the "Registration Statement") which relates to the Class A Shares,
Class B Shares, Class C Shares and Class R Shares, (collectively, the "Shares")
par value $.01 per share, of each of the following series of the Trust: Nuveen
Flagship Arizona Municipal Bond Fund, Nuveen Flagship Colorado Municipal Bond
Fund, Nuveen Flagship Florida Municipal Bond Fund, Nuveen Maryland Municipal
Bond Fund, Nuveen Flagship New Mexico Municipal Bond Fund, Nuveen Flagship
Pennsylvania Municipal Bond Fund, and Nuveen Flagship Virginia Municipal Bond
Fund (collectively, the "Series"). This opinion is being delivered to you in
connection with the Trust's filing of Post-Effective Amendment No. 3 to the
Registration Statement (the "Amendment") to be filed with the Securities and
Exchange Commission on or about September 28, 1998 pursuant to Rule 485(b) of
the Securities Act of 1933 (the "1933 Act"). With your permission, all
assumptions and statements of reliance herein have been made without any
independent investigation or verification on our part except to the extent
otherwise expressly stated, and we express no opinion with respect to the
subject matter or accuracy of such assumptions or items relied upon.
In connection with this opinion, we have reviewed, among other things,
executed copies of the following documents:
(a) a certificate of the Secretary of State of the Commonwealth of
Massachusetts as to the existence of the Trust;
<PAGE>
Nuveen Flagship Multistate Trust I
September 28, 1998
Page 2
(b) copies, certified by the Secretary of State of the Commonwealth of
Massachusetts, of the Trust's Declaration of Trust and of all
amendments thereto on file with in the office of the Secretary of
State (the "Charter");
(c) a certificate executed by Karen L. Healy, an Assistant Secretary of
the Trust, certifying as to, and attaching copies of, the Charter and
the By-Laws (the "By-Laws"), and certain resolutions adopted by the
Board of Trustees of the Trust authorizing the issuance of the Shares;
and
(d) a printer's proof, dated September 28, 1998, of the Amendment.
In our capacity as counsel to the Trust, we have examined the originals, or
certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinions hereinafter expressed. In all such examinations, we have
assumed the legal capacity of all natural persons executing documents, the
genuineness of all signatures, the authenticity of all original or certified
copies, and the conformity to original or certified copies of all copies
submitted to us as conformed or reproduced copies. As to various questions of
fact relevant to such opinion, we have relied upon, and assume the accuracy of,
certificates and oral or written statements of public officials and officers or
representatives of the Trust. We have assumed that the Registration Statement,
as filed with the Securities and Exchange Commission, will be in substantially
the form of the printer's proof referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of the
opinion that the Shares, when issued and sold in accordance with the Trust's
Charter and By-Laws, and for the consideration described in the Registration
Statement, will be legally issued, fully paid and nonassessable, except that, as
set forth in the Registration Statement, shareholders of the Trust may, under
certain circumstances, be held personally liable for its obligations.
The opinion expressed herein is limited to the laws of the Commonwealth of
Massachusetts.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
/s/ Morgan, Lewis & Bockius LLP
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
dated July 17, 1998, and to all references to our Firm included in or made a
part of this registration statement of Nuveen Flagship Multistate Trust I
(comprising the Nuveen Flagship Arizona Municipal Bond Fund, Nuveen Flagship
Colorado Municipal Bond Fund, Nuveen Flagship New Mexico Municipal Bond Fund,
Nuveen Flagship Florida Municipal Bond Fund, Nuveen Flagship Florida
Intermediate Municipal Bond Fund, Nuveen Maryland Municipal Bond Fund, Nuveen
Flagship Pennsylvania Municipal Bond Fund and the Nuveen Flagship Virginia
Municipal Bond Fund).
ARTHUR ANDERSEN LLP
Chicago, Illinois
September 21, 1998
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 3 to Registration
Statement on Form N-1A under the Securities Act of 1933, filed under
Registration Statement No. 333-16617, of our reports dated July 11, 1997,
relating to Nuveen Flagship Arizona Municipal Bond Fund, Nuveen Flagship
Colorado Municipal Bond Fund, Nuveen Flagship Florida Municipal Bond Fund,
Nuveen Maryland Municipal Bond Fund, Nuveen Flagship New Mexico Municipal Bond
Fund, Nuveen Flagship Pennsylvania Municipal Bond Fund and Nuveen Flagship
Virginia Municipal Bond Fund, incorporated by reference in the Statement of
Additional Information, which is part of such Registration Statement.
/s/ Deloitte & Touche LLP
Dayton, Ohio
September 21, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 011
<NAME> NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 103016
<INVESTMENTS-AT-VALUE> 113520
<RECEIVABLES> 1977
<ASSETS-OTHER> 112
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 115609
<PAYABLE-FOR-SECURITIES> 614
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 621
<TOTAL-LIABILITIES> 1235
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103523
<SHARES-COMMON-STOCK> 7540
<SHARES-COMMON-PRIOR> 7546
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 341
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10504
<NET-ASSETS> 114374
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6238
<OTHER-INCOME> 0
<EXPENSES-NET> 891
<NET-INVESTMENT-INCOME> 5347
<REALIZED-GAINS-CURRENT> 546
<APPREC-INCREASE-CURRENT> 4023
<NET-CHANGE-FROM-OPS> 9916
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4135
<DISTRIBUTIONS-OF-GAINS> 132
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 939
<NUMBER-OF-SHARES-REDEEMED> 1120
<SHARES-REINVESTED> 175
<NET-CHANGE-IN-ASSETS> 9239
<ACCUMULATED-NII-PRIOR> 8
<ACCUMULATED-GAINS-PRIOR> (36)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 602
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 999
<AVERAGE-NET-ASSETS> 84827
<PER-SHARE-NAV-BEGIN> 10.94
<PER-SHARE-NII> .55
<PER-SHARE-GAIN-APPREC> .48
<PER-SHARE-DIVIDEND> (.55)
<PER-SHARE-DISTRIBUTIONS> (.02)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.40
<EXPENSE-RATIO> .83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 012
<NAME> NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 103016
<INVESTMENTS-AT-VALUE> 113520
<RECEIVABLES> 1977
<ASSETS-OTHER> 112
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 115609
<PAYABLE-FOR-SECURITIES> 614
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 621
<TOTAL-LIABILITIES> 1235
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103523
<SHARES-COMMON-STOCK> 142
<SHARES-COMMON-PRIOR> 32
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 341
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10504
<NET-ASSETS> 114374
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6238
<OTHER-INCOME> 0
<EXPENSES-NET> 891
<NET-INVESTMENT-INCOME> 5347
<REALIZED-GAINS-CURRENT> 546
<APPREC-INCREASE-CURRENT> 4023
<NET-CHANGE-FROM-OPS> 9916
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 22
<DISTRIBUTIONS-OF-GAINS> 1
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 120
<NUMBER-OF-SHARES-REDEEMED> 10
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 9239
<ACCUMULATED-NII-PRIOR> 8
<ACCUMULATED-GAINS-PRIOR> (36)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 602
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 999
<AVERAGE-NET-ASSETS> 574
<PER-SHARE-NAV-BEGIN> 10.94
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> .47
<PER-SHARE-DIVIDEND> (.47)
<PER-SHARE-DISTRIBUTIONS> (.02)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.39
<EXPENSE-RATIO> 1.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 013
<NAME> NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 103016
<INVESTMENTS-AT-VALUE> 113520
<RECEIVABLES> 1977
<ASSETS-OTHER> 112
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 115609
<PAYABLE-FOR-SECURITIES> 614
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 621
<TOTAL-LIABILITIES> 1235
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103523
<SHARES-COMMON-STOCK> 555
<SHARES-COMMON-PRIOR> 291
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 341
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10504
<NET-ASSETS> 114374
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6238
<OTHER-INCOME> 0
<EXPENSES-NET> 891
<NET-INVESTMENT-INCOME> 5347
<REALIZED-GAINS-CURRENT> 546
<APPREC-INCREASE-CURRENT> 4023
<NET-CHANGE-FROM-OPS> 9916
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 172
<DISTRIBUTIONS-OF-GAINS> 5
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 316
<NUMBER-OF-SHARES-REDEEMED> 63
<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> 9239
<ACCUMULATED-NII-PRIOR> 8
<ACCUMULATED-GAINS-PRIOR> (36)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 602
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 999
<AVERAGE-NET-ASSETS> 4006
<PER-SHARE-NAV-BEGIN> 10.94
<PER-SHARE-NII> .49
<PER-SHARE-GAIN-APPREC> .47
<PER-SHARE-DIVIDEND> (.49)
<PER-SHARE-DISTRIBUTIONS> (.02)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.39
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 014
<NAME> NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 103016
<INVESTMENTS-AT-VALUE> 113520
<RECEIVABLES> 1977
<ASSETS-OTHER> 112
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 115609
<PAYABLE-FOR-SECURITIES> 614
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 621
<TOTAL-LIABILITIES> 1235
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103523
<SHARES-COMMON-STOCK> 1799
<SHARES-COMMON-PRIOR> 1739
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 341
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10504
<NET-ASSETS> 114374
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6238
<OTHER-INCOME> 0
<EXPENSES-NET> 891
<NET-INVESTMENT-INCOME> 5347
<REALIZED-GAINS-CURRENT> 546
<APPREC-INCREASE-CURRENT> 4023
<NET-CHANGE-FROM-OPS> 9916
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1019
<DISTRIBUTIONS-OF-GAINS> 31
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 150
<NUMBER-OF-SHARES-REDEEMED> 148
<SHARES-REINVESTED> 58
<NET-CHANGE-IN-ASSETS> 9239
<ACCUMULATED-NII-PRIOR> 8
<ACCUMULATED-GAINS-PRIOR> (36)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 602
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 999
<AVERAGE-NET-ASSETS> 20040
<PER-SHARE-NAV-BEGIN> 10.94
<PER-SHARE-NII> .57
<PER-SHARE-GAIN-APPREC> .48
<PER-SHARE-DIVIDEND> (.57)
<PER-SHARE-DISTRIBUTIONS> (.02)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.40
<EXPENSE-RATIO> .63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 021
<NAME> NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 36480
<INVESTMENTS-AT-VALUE> 40457
<RECEIVABLES> 560
<ASSETS-OTHER> 294
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 41311
<PAYABLE-FOR-SECURITIES> 307
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 432
<TOTAL-LIABILITIES> 739
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36868
<SHARES-COMMON-STOCK> 3450
<SHARES-COMMON-PRIOR> 3077
<ACCUMULATED-NII-CURRENT> (3)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (271)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3978
<NET-ASSETS> 40572
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2113
<OTHER-INCOME> 0
<EXPENSES-NET> 368
<NET-INVESTMENT-INCOME> 1745
<REALIZED-GAINS-CURRENT> 231
<APPREC-INCREASE-CURRENT> 1921
<NET-CHANGE-FROM-OPS> 3897
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1680
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 681
<NUMBER-OF-SHARES-REDEEMED> 386
<SHARES-REINVESTED> 77
<NET-CHANGE-IN-ASSETS> 8384
<ACCUMULATED-NII-PRIOR> 23
<ACCUMULATED-GAINS-PRIOR> (502)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 199
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 372
<AVERAGE-NET-ASSETS> 34160
<PER-SHARE-NAV-BEGIN> 10.15
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.66
<PER-SHARE-DIVIDEND> (0.52)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.81
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 022
<NAME> NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 36480
<INVESTMENTS-AT-VALUE> 40457
<RECEIVABLES> 560
<ASSETS-OTHER> 294
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 41311
<PAYABLE-FOR-SECURITIES> 307
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 432
<TOTAL-LIABILITIES> 739
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36868
<SHARES-COMMON-STOCK> 153
<SHARES-COMMON-PRIOR> 44
<ACCUMULATED-NII-CURRENT> (3)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (271)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3978
<NET-ASSETS> 40572
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2113
<OTHER-INCOME> 0
<EXPENSES-NET> 368
<NET-INVESTMENT-INCOME> 1745
<REALIZED-GAINS-CURRENT> 231
<APPREC-INCREASE-CURRENT> 1921
<NET-CHANGE-FROM-OPS> 3897
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 42
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 108
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 8384
<ACCUMULATED-NII-PRIOR> 23
<ACCUMULATED-GAINS-PRIOR> (502)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 199
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 372
<AVERAGE-NET-ASSETS> 1018
<PER-SHARE-NAV-BEGIN> 10.16
<PER-SHARE-NII> 0.43
<PER-SHARE-GAIN-APPREC> 0.68
<PER-SHARE-DIVIDEND> (0.45)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.82
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 023
<NAME> NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 36480
<INVESTMENTS-AT-VALUE> 40457
<RECEIVABLES> 560
<ASSETS-OTHER> 294
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 41311
<PAYABLE-FOR-SECURITIES> 307
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 432
<TOTAL-LIABILITIES> 739
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36868
<SHARES-COMMON-STOCK> 81
<SHARES-COMMON-PRIOR> 10
<ACCUMULATED-NII-CURRENT> (3)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (271)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3978
<NET-ASSETS> 40572
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2113
<OTHER-INCOME> 0
<EXPENSES-NET> 368
<NET-INVESTMENT-INCOME> 1745
<REALIZED-GAINS-CURRENT> 231
<APPREC-INCREASE-CURRENT> 1921
<NET-CHANGE-FROM-OPS> 3897
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 70
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 8384
<ACCUMULATED-NII-PRIOR> 23
<ACCUMULATED-GAINS-PRIOR> (502)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 199
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 372
<AVERAGE-NET-ASSETS> 355
<PER-SHARE-NAV-BEGIN> 10.15
<PER-SHARE-NII> 0.46
<PER-SHARE-GAIN-APPREC> 0.66
<PER-SHARE-DIVIDEND> (0.47)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.80
<EXPENSE-RATIO> 1.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 024
<NAME> NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 36480
<INVESTMENTS-AT-VALUE> 40457
<RECEIVABLES> 560
<ASSETS-OTHER> 294
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 41311
<PAYABLE-FOR-SECURITIES> 307
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 432
<TOTAL-LIABILITIES> 739
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36868
<SHARES-COMMON-STOCK> 69
<SHARES-COMMON-PRIOR> 41
<ACCUMULATED-NII-CURRENT> (3)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (271)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3978
<NET-ASSETS> 40572
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2113
<OTHER-INCOME> 0
<EXPENSES-NET> 368
<NET-INVESTMENT-INCOME> 1745
<REALIZED-GAINS-CURRENT> 231
<APPREC-INCREASE-CURRENT> 1921
<NET-CHANGE-FROM-OPS> 3897
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 34
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 8384
<ACCUMULATED-NII-PRIOR> 23
<ACCUMULATED-GAINS-PRIOR> (502)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 199
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 372
<AVERAGE-NET-ASSETS> 660
<PER-SHARE-NAV-BEGIN> 10.16
<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> 0.66
<PER-SHARE-DIVIDEND> (0.55)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.81
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information Extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 061
<NAME> NUVEEN FLAGSHIP NEW MEXICO MUNI BOND FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 52987
<INVESTMENTS-AT-VALUE> 57468
<RECEIVABLES> 1160
<ASSETS-OTHER> 490
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 59118
<PAYABLE-FOR-SECURITIES> 512
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 286
<TOTAL-LIABILITIES> 798
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 54941
<SHARES-COMMON-STOCK> 5150
<SHARES-COMMON-PRIOR> 5003
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1107)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4482
<NET-ASSETS> 58320
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3014
<OTHER-INCOME> 0
<EXPENSES-NET> 434
<NET-INVESTMENT-INCOME> 2580
<REALIZED-GAINS-CURRENT> 185
<APPREC-INCREASE-CURRENT> 2447
<NET-CHANGE-FROM-OPS> 5212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2507
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 698
<NUMBER-OF-SHARES-REDEEMED> 687
<SHARES-REINVESTED> 136
<NET-CHANGE-IN-ASSETS> 6339
<ACCUMULATED-NII-PRIOR> 10
<ACCUMULATED-GAINS-PRIOR> (1291)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 297
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 514
<AVERAGE-NET-ASSETS> 52209
<PER-SHARE-NAV-BEGIN> 10.16
<PER-SHARE-NII> .50
<PER-SHARE-GAIN-APPREC> .51
<PER-SHARE-DIVIDEND> (.50)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.67
<EXPENSE-RATIO> .79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information Extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 062
<NAME> NUVEEN FLAGSHIP NEW MEXICO MUNI BOND FUND CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 52987
<INVESTMENTS-AT-VALUE> 57468
<RECEIVABLES> 1160
<ASSETS-OTHER> 490
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 59118
<PAYABLE-FOR-SECURITIES> 512
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 286
<TOTAL-LIABILITIES> 798
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 54941
<SHARES-COMMON-STOCK> 132
<SHARES-COMMON-PRIOR> 65
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1107)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4482
<NET-ASSETS> 58320
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3014
<OTHER-INCOME> 0
<EXPENSES-NET> 434
<NET-INVESTMENT-INCOME> 2580
<REALIZED-GAINS-CURRENT> 185
<APPREC-INCREASE-CURRENT> 2447
<NET-CHANGE-FROM-OPS> 5212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 37
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 80
<NUMBER-OF-SHARES-REDEEMED> 14
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 6339
<ACCUMULATED-NII-PRIOR> 10
<ACCUMULATED-GAINS-PRIOR> (1291)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 297
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 514
<AVERAGE-NET-ASSETS> 922
<PER-SHARE-NAV-BEGIN> 10.15
<PER-SHARE-NII> .43
<PER-SHARE-GAIN-APPREC> .52
<PER-SHARE-DIVIDEND> (.43)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.67
<EXPENSE-RATIO> 1.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information Extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 063
<NAME> NUVEEN FLAGSHIP NEW MEXICO MUNI BOND FUND CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 52987
<INVESTMENTS-AT-VALUE> 57468
<RECEIVABLES> 1160
<ASSETS-OTHER> 490
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 59118
<PAYABLE-FOR-SECURITIES> 512
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 286
<TOTAL-LIABILITIES> 798
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 54941
<SHARES-COMMON-STOCK> 139
<SHARES-COMMON-PRIOR> 15
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1107)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4482
<NET-ASSETS> 58320
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3014
<OTHER-INCOME> 0
<EXPENSES-NET> 434
<NET-INVESTMENT-INCOME> 2580
<REALIZED-GAINS-CURRENT> 185
<APPREC-INCREASE-CURRENT> 2447
<NET-CHANGE-FROM-OPS> 5212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 26
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 124
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 6339
<ACCUMULATED-NII-PRIOR> 10
<ACCUMULATED-GAINS-PRIOR> (1291)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 297
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 514
<AVERAGE-NET-ASSETS> 612
<PER-SHARE-NAV-BEGIN> 10.16
<PER-SHARE-NII> .45
<PER-SHARE-GAIN-APPREC> .51
<PER-SHARE-DIVIDEND> (.45)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.67
<EXPENSE-RATIO> 1.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information Extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 064
<NAME> NUVEEN FLAGSHIP NEW MEXICO MUNI BOND FUND CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 52987
<INVESTMENTS-AT-VALUE> 57468
<RECEIVABLES> 1160
<ASSETS-OTHER> 490
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 59118
<PAYABLE-FOR-SECURITIES> 512
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 286
<TOTAL-LIABILITIES> 798
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 54941
<SHARES-COMMON-STOCK> 44
<SHARES-COMMON-PRIOR> 36
<ACCUMULATED-NII-CURRENT> 4
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1107)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4482
<NET-ASSETS> 58320
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3014
<OTHER-INCOME> 0
<EXPENSES-NET> 434
<NET-INVESTMENT-INCOME> 2580
<REALIZED-GAINS-CURRENT> 185
<APPREC-INCREASE-CURRENT> 2447
<NET-CHANGE-FROM-OPS> 5212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 16
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 6339
<ACCUMULATED-NII-PRIOR> 10
<ACCUMULATED-GAINS-PRIOR> (1291)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 297
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 514
<AVERAGE-NET-ASSETS> 329
<PER-SHARE-NAV-BEGIN> 10.17
<PER-SHARE-NII> .53
<PER-SHARE-GAIN-APPREC> .53
<PER-SHARE-DIVIDEND> (.53)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.70
<EXPENSE-RATIO> .58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the Financial Statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 031
<NAME> NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND- CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 327968
<INVESTMENTS-AT-VALUE> 357735
<RECEIVABLES> 8395
<ASSETS-OTHER> 1528
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 367658
<PAYABLE-FOR-SECURITIES> 3866
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2053
<TOTAL-LIABILITIES> 5919
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 331003
<SHARES-COMMON-STOCK> 26718
<SHARES-COMMON-PRIOR> 28018
<ACCUMULATED-NII-CURRENT> 124
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 845
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29767
<NET-ASSETS> 361739
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 21489
<OTHER-INCOME> 0
<EXPENSES-NET> 2953
<NET-INVESTMENT-INCOME> 18536
<REALIZED-GAINS-CURRENT> 1741
<APPREC-INCREASE-CURRENT> 9935
<NET-CHANGE-FROM-OPS> 30212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15044
<DISTRIBUTIONS-OF-GAINS> 232
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2576
<NUMBER-OF-SHARES-REDEEMED> 4482
<SHARES-REINVESTED> 607
<NET-CHANGE-IN-ASSETS> 4607
<ACCUMULATED-NII-PRIOR> 21
<ACCUMULATED-GAINS-PRIOR> (612)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1936
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2953
<AVERAGE-NET-ASSETS> 294694
<PER-SHARE-NAV-BEGIN> 10.60
<PER-SHARE-NII> .56
<PER-SHARE-GAIN-APPREC> .34
<PER-SHARE-DIVIDEND> (.55)
<PER-SHARE-DISTRIBUTIONS> (.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.94
<EXPENSE-RATIO> .84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the Financial Statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 032
<NAME> NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND- CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 327968
<INVESTMENTS-AT-VALUE> 357735
<RECEIVABLES> 8395
<ASSETS-OTHER> 1528
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 367658
<PAYABLE-FOR-SECURITIES> 3866
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2053
<TOTAL-LIABILITIES> 5919
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 331003
<SHARES-COMMON-STOCK> 481
<SHARES-COMMON-PRIOR> 74
<ACCUMULATED-NII-CURRENT> 124
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 845
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29767
<NET-ASSETS> 361739
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 21489
<OTHER-INCOME> 0
<EXPENSES-NET> 2953
<NET-INVESTMENT-INCOME> 18536
<REALIZED-GAINS-CURRENT> 1741
<APPREC-INCREASE-CURRENT> 9935
<NET-CHANGE-FROM-OPS> 30212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 111
<DISTRIBUTIONS-OF-GAINS> 2
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 420
<NUMBER-OF-SHARES-REDEEMED> 17
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> 4607
<ACCUMULATED-NII-PRIOR> 21
<ACCUMULATED-GAINS-PRIOR> (612)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1936
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2953
<AVERAGE-NET-ASSETS> 2641
<PER-SHARE-NAV-BEGIN> 10.61
<PER-SHARE-NII> .48
<PER-SHARE-GAIN-APPREC> .35
<PER-SHARE-DIVIDEND> (.48)
<PER-SHARE-DISTRIBUTIONS> (.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.95
<EXPENSE-RATIO> 1.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the Financial Statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 033
<NAME> NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND- CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 327968
<INVESTMENTS-AT-VALUE> 357735
<RECEIVABLES> 8395
<ASSETS-OTHER> 1528
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 367658
<PAYABLE-FOR-SECURITIES> 3866
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2053
<TOTAL-LIABILITIES> 5919
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 331003
<SHARES-COMMON-STOCK> 698
<SHARES-COMMON-PRIOR> 484
<ACCUMULATED-NII-CURRENT> 124
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 845
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29767
<NET-ASSETS> 361739
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 21489
<OTHER-INCOME> 0
<EXPENSES-NET> 2953
<NET-INVESTMENT-INCOME> 18536
<REALIZED-GAINS-CURRENT> 1741
<APPREC-INCREASE-CURRENT> 9935
<NET-CHANGE-FROM-OPS> 30212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 299
<DISTRIBUTIONS-OF-GAINS> 5
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 329
<NUMBER-OF-SHARES-REDEEMED> 129
<SHARES-REINVESTED> 15
<NET-CHANGE-IN-ASSETS> 4607
<ACCUMULATED-NII-PRIOR> 21
<ACCUMULATED-GAINS-PRIOR> (612)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1936
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2953
<AVERAGE-NET-ASSETS> 6591
<PER-SHARE-NAV-BEGIN> 10.60
<PER-SHARE-NII> .50
<PER-SHARE-GAIN-APPREC> .36
<PER-SHARE-DIVIDEND> (.50)
<PER-SHARE-DISTRIBUTIONS> (.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.95
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the Financial Statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 034
<NAME> NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND- CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 327968
<INVESTMENTS-AT-VALUE> 357735
<RECEIVABLES> 8395
<ASSETS-OTHER> 1528
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 367658
<PAYABLE-FOR-SECURITIES> 3866
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2053
<TOTAL-LIABILITIES> 5919
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 331003
<SHARES-COMMON-STOCK> 5158
<SHARES-COMMON-PRIOR> 5117
<ACCUMULATED-NII-CURRENT> 124
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 845
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29767
<NET-ASSETS> 361739
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 21489
<OTHER-INCOME> 0
<EXPENSES-NET> 2953
<NET-INVESTMENT-INCOME> 18536
<REALIZED-GAINS-CURRENT> 1741
<APPREC-INCREASE-CURRENT> 9935
<NET-CHANGE-FROM-OPS> 30212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2979
<DISTRIBUTIONS-OF-GAINS> 44
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 428
<NUMBER-OF-SHARES-REDEEMED> 549
<SHARES-REINVESTED> 161
<NET-CHANGE-IN-ASSETS> 4607
<ACCUMULATED-NII-PRIOR> 21
<ACCUMULATED-GAINS-PRIOR> (612)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1936
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2953
<AVERAGE-NET-ASSETS> 56032
<PER-SHARE-NAV-BEGIN> 10.60
<PER-SHARE-NII> .58
<PER-SHARE-GAIN-APPREC> .35
<PER-SHARE-DIVIDEND> (.58)
<PER-SHARE-DISTRIBUTIONS> (.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.94
<EXPENSE-RATIO> .64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 041
<NAME> NUVEEN FLAGSHIP FLORIDA INTERMEDIATE MUNI BOND FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 12102
<INVESTMENTS-AT-VALUE> 12854
<RECEIVABLES> 184
<ASSETS-OTHER> 23
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13061
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 165
<TOTAL-LIABILITIES> 165
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12111
<SHARES-COMMON-STOCK> 762
<SHARES-COMMON-PRIOR> 1298
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 752
<NET-ASSETS> 12896
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 654
<OTHER-INCOME> 0
<EXPENSES-NET> 120
<NET-INVESTMENT-INCOME> 534
<REALIZED-GAINS-CURRENT> 107
<APPREC-INCREASE-CURRENT> 437
<NET-CHANGE-FROM-OPS> 1078
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 393
<DISTRIBUTIONS-OF-GAINS> 33
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 198
<NUMBER-OF-SHARES-REDEEMED> 755
<SHARES-REINVESTED> 21
<NET-CHANGE-IN-ASSETS> (3302)
<ACCUMULATED-NII-PRIOR> 11
<ACCUMULATED-GAINS-PRIOR> (27)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 69
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 198
<AVERAGE-NET-ASSETS> 8753
<PER-SHARE-NAV-BEGIN> 10.09
<PER-SHARE-NII> .46
<PER-SHARE-GAIN-APPREC> .44
<PER-SHARE-DIVIDEND> (.47)
<PER-SHARE-DISTRIBUTIONS> (.04)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.48
<EXPENSE-RATIO> .79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 043
<NAME> NUVEEN FLAGSHIP FLORIDA INTERMEDIATE MUNI BOND FUND CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 12102
<INVESTMENTS-AT-VALUE> 12854
<RECEIVABLES> 184
<ASSETS-OTHER> 23
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13061
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 165
<TOTAL-LIABILITIES> 165
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12111
<SHARES-COMMON-STOCK> 457
<SHARES-COMMON-PRIOR> 298
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 752
<NET-ASSETS> 12896
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 654
<OTHER-INCOME> 0
<EXPENSES-NET> 120
<NET-INVESTMENT-INCOME> 534
<REALIZED-GAINS-CURRENT> 107
<APPREC-INCREASE-CURRENT> 437
<NET-CHANGE-FROM-OPS> 1078
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 147
<DISTRIBUTIONS-OF-GAINS> 14
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 223
<NUMBER-OF-SHARES-REDEEMED> 74
<SHARES-REINVESTED> 10
<NET-CHANGE-IN-ASSETS> (3302)
<ACCUMULATED-NII-PRIOR> 11
<ACCUMULATED-GAINS-PRIOR> (27)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 69
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 198
<AVERAGE-NET-ASSETS> 3719
<PER-SHARE-NAV-BEGIN> 10.08
<PER-SHARE-NII> .40
<PER-SHARE-GAIN-APPREC> .45
<PER-SHARE-DIVIDEND> (.41)
<PER-SHARE-DISTRIBUTIONS> (.04)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.48
<EXPENSE-RATIO> 1.34
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 044
<NAME> NUVEEN FLAGSHIP FLORIDA INTERMEDIATE MUNI BOND FUND CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 12102
<INVESTMENTS-AT-VALUE> 12854
<RECEIVABLES> 184
<ASSETS-OTHER> 23
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13061
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 165
<TOTAL-LIABILITIES> 165
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12111
<SHARES-COMMON-STOCK> 12
<SHARES-COMMON-PRIOR> 10
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 752
<NET-ASSETS> 12896
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 654
<OTHER-INCOME> 0
<EXPENSES-NET> 120
<NET-INVESTMENT-INCOME> 534
<REALIZED-GAINS-CURRENT> 107
<APPREC-INCREASE-CURRENT> 437
<NET-CHANGE-FROM-OPS> 1078
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4
<NUMBER-OF-SHARES-REDEEMED> 3
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (3302)
<ACCUMULATED-NII-PRIOR> 11
<ACCUMULATED-GAINS-PRIOR> (27)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 69
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 198
<AVERAGE-NET-ASSETS> 108
<PER-SHARE-NAV-BEGIN> 10.11
<PER-SHARE-NII> .48
<PER-SHARE-GAIN-APPREC> .44
<PER-SHARE-DIVIDEND> (.49)
<PER-SHARE-DISTRIBUTIONS> (.04)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.50
<EXPENSE-RATIO> .59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the Financial Statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 051
<NAME> NUVEEN MARYLAND TAX FREE VALUE FUND - CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 61334
<INVESTMENTS-AT-VALUE> 65383
<RECEIVABLES> 1434
<ASSETS-OTHER> 351
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 67168
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 205
<TOTAL-LIABILITIES> 205
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 63493
<SHARES-COMMON-STOCK> 1650
<SHARES-COMMON-PRIOR> 1267
<ACCUMULATED-NII-CURRENT> 18
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (596)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4048
<NET-ASSETS> 66963
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3547
<OTHER-INCOME> 0
<EXPENSES-NET> 532
<NET-INVESTMENT-INCOME> 3015
<REALIZED-GAINS-CURRENT> 38
<APPREC-INCREASE-CURRENT> 1873
<NET-CHANGE-FROM-OPS> 4926
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 744
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 464
<NUMBER-OF-SHARES-REDEEMED> 134
<SHARES-REINVESTED> 54
<NET-CHANGE-IN-ASSETS> 8427
<ACCUMULATED-NII-PRIOR> 37
<ACCUMULATED-GAINS-PRIOR> (635)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 351
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 569
<AVERAGE-NET-ASSETS> 15956
<PER-SHARE-NAV-BEGIN> 10.25
<PER-SHARE-NII> .48
<PER-SHARE-GAIN-APPREC> .32
<PER-SHARE-DIVIDEND> (.49)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.56
<EXPENSE-RATIO> .94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the Financial Statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 052
<NAME> NUVEEN MARYLAND TAX FREE VALUE FUND - CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 61334
<INVESTMENTS-AT-VALUE> 65383
<RECEIVABLES> 1434
<ASSETS-OTHER> 351
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 67168
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 205
<TOTAL-LIABILITIES> 205
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 63493
<SHARES-COMMON-STOCK> 221
<SHARES-COMMON-PRIOR> 15
<ACCUMULATED-NII-CURRENT> 18
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (596)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4048
<NET-ASSETS> 66963
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3547
<OTHER-INCOME> 0
<EXPENSES-NET> 532
<NET-INVESTMENT-INCOME> 3015
<REALIZED-GAINS-CURRENT> 38
<APPREC-INCREASE-CURRENT> 1873
<NET-CHANGE-FROM-OPS> 4926
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 45
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 213
<NUMBER-OF-SHARES-REDEEMED> 9
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 8427
<ACCUMULATED-NII-PRIOR> 37
<ACCUMULATED-GAINS-PRIOR> (635)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 351
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 569
<AVERAGE-NET-ASSETS> 1194
<PER-SHARE-NAV-BEGIN> 10.25
<PER-SHARE-NII> .41
<PER-SHARE-GAIN-APPREC> .31
<PER-SHARE-DIVIDEND> (.41)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.56
<EXPENSE-RATIO> 1.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the Financial Statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 053
<NAME> NUVEEN MARYLAND TAX FREE VALUE FUND - CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 61334
<INVESTMENTS-AT-VALUE> 65383
<RECEIVABLES> 1434
<ASSETS-OTHER> 351
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 67168
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 205
<TOTAL-LIABILITIES> 205
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 63493
<SHARES-COMMON-STOCK> 247
<SHARES-COMMON-PRIOR> 205
<ACCUMULATED-NII-CURRENT> 18
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (596)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4048
<NET-ASSETS> 66963
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3547
<OTHER-INCOME> 0
<EXPENSES-NET> 532
<NET-INVESTMENT-INCOME> 3015
<REALIZED-GAINS-CURRENT> 38
<APPREC-INCREASE-CURRENT> 1873
<NET-CHANGE-FROM-OPS> 4926
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 92
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 68
<NUMBER-OF-SHARES-REDEEMED> 34
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 8427
<ACCUMULATED-NII-PRIOR> 37
<ACCUMULATED-GAINS-PRIOR> (635)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 351
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 569
<AVERAGE-NET-ASSETS> 2240
<PER-SHARE-NAV-BEGIN> 10.24
<PER-SHARE-NII> .43
<PER-SHARE-GAIN-APPREC> .32
<PER-SHARE-DIVIDEND> (.43)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.56
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the Financial Statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 054
<NAME> NUVEEN MARYLAND TAX FREE VALUE FUND - Class R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 61334
<INVESTMENTS-AT-VALUE> 65383
<RECEIVABLES> 1434
<ASSETS-OTHER> 351
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 67168
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 205
<TOTAL-LIABILITIES> 205
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 63493
<SHARES-COMMON-STOCK> 4216
<SHARES-COMMON-PRIOR> 4222
<ACCUMULATED-NII-CURRENT> 18
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (596)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4048
<NET-ASSETS> 66963
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3547
<OTHER-INCOME> 0
<EXPENSES-NET> 532
<NET-INVESTMENT-INCOME> 3015
<REALIZED-GAINS-CURRENT> 38
<APPREC-INCREASE-CURRENT> 1873
<NET-CHANGE-FROM-OPS> 4926
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2152
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 209
<NUMBER-OF-SHARES-REDEEMED> 345
<SHARES-REINVESTED> 130
<NET-CHANGE-IN-ASSETS> 8427
<ACCUMULATED-NII-PRIOR> 37
<ACCUMULATED-GAINS-PRIOR> (635)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 351
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 569
<AVERAGE-NET-ASSETS> 44364
<PER-SHARE-NAV-BEGIN> 10.26
<PER-SHARE-NII> .51
<PER-SHARE-GAIN-APPREC> .32
<PER-SHARE-DIVIDEND> (.51)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.58
<EXPENSE-RATIO> .74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 071
<NAME> NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 128723
<INVESTMENTS-AT-VALUE> 138282
<RECEIVABLES> 2513
<ASSETS-OTHER> 482
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 141277
<PAYABLE-FOR-SECURITIES> 2000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 719
<TOTAL-LIABILITIES> 2719
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 128201
<SHARES-COMMON-STOCK> 6161
<SHARES-COMMON-PRIOR> 5429
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 792
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9559
<NET-ASSETS> 138558
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7604
<OTHER-INCOME> 0
<EXPENSES-NET> 720
<NET-INVESTMENT-INCOME> 6884
<REALIZED-GAINS-CURRENT> 1203
<APPREC-INCREASE-CURRENT> 4264
<NET-CHANGE-FROM-OPS> 12351
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3204
<DISTRIBUTIONS-OF-GAINS> 124
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1036
<NUMBER-OF-SHARES-REDEEMED> 477
<SHARES-REINVESTED> 173
<NET-CHANGE-IN-ASSETS> 18960
<ACCUMULATED-NII-PRIOR> 27
<ACCUMULATED-GAINS-PRIOR> (149)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 709
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1160
<AVERAGE-NET-ASSETS> 60662
<PER-SHARE-NAV-BEGIN> 10.25
<PER-SHARE-NII> .56
<PER-SHARE-GAIN-APPREC> .45
<PER-SHARE-DIVIDEND> (.56)
<PER-SHARE-DISTRIBUTIONS> (.02)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.68
<EXPENSE-RATIO> .61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 072
<NAME> NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 128723
<INVESTMENTS-AT-VALUE> 138282
<RECEIVABLES> 2513
<ASSETS-OTHER> 482
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 141277
<PAYABLE-FOR-SECURITIES> 2000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 719
<TOTAL-LIABILITIES> 2719
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 128201
<SHARES-COMMON-STOCK> 247
<SHARES-COMMON-PRIOR> 22
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 792
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9559
<NET-ASSETS> 138558
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7604
<OTHER-INCOME> 0
<EXPENSES-NET> 720
<NET-INVESTMENT-INCOME> 6884
<REALIZED-GAINS-CURRENT> 1203
<APPREC-INCREASE-CURRENT> 4264
<NET-CHANGE-FROM-OPS> 12351
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 49
<DISTRIBUTIONS-OF-GAINS> 2
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 224
<NUMBER-OF-SHARES-REDEEMED> 2
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 18960
<ACCUMULATED-NII-PRIOR> 27
<ACCUMULATED-GAINS-PRIOR> (149)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 709
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1160
<AVERAGE-NET-ASSETS> 1120
<PER-SHARE-NAV-BEGIN> 10.27
<PER-SHARE-NII> .48
<PER-SHARE-GAIN-APPREC> .45
<PER-SHARE-DIVIDEND> (.48)
<PER-SHARE-DISTRIBUTIONS> (.02)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.70
<EXPENSE-RATIO> 1.34
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 073
<NAME> NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 128723
<INVESTMENTS-AT-VALUE> 138282
<RECEIVABLES> 2513
<ASSETS-OTHER> 482
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 141277
<PAYABLE-FOR-SECURITIES> 2000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 719
<TOTAL-LIABILITIES> 2719
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 128201
<SHARES-COMMON-STOCK> 835
<SHARES-COMMON-PRIOR> 617
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 792
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9559
<NET-ASSETS> 138558
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7604
<OTHER-INCOME> 0
<EXPENSES-NET> 720
<NET-INVESTMENT-INCOME> 6884
<REALIZED-GAINS-CURRENT> 1203
<APPREC-INCREASE-CURRENT> 4264
<NET-CHANGE-FROM-OPS> 12351
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 346
<DISTRIBUTIONS-OF-GAINS> 14
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 290
<NUMBER-OF-SHARES-REDEEMED> 98
<SHARES-REINVESTED> 26
<NET-CHANGE-IN-ASSETS> 18960
<ACCUMULATED-NII-PRIOR> 27
<ACCUMULATED-GAINS-PRIOR> (149)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 709
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1160
<AVERAGE-NET-ASSETS> 7290
<PER-SHARE-NAV-BEGIN> 10.25
<PER-SHARE-NII> .50
<PER-SHARE-GAIN-APPREC> .45
<PER-SHARE-DIVIDEND> (.50)
<PER-SHARE-DISTRIBUTIONS> (.02)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.68
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 074
<NAME> NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND CLASS R
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 128723
<INVESTMENTS-AT-VALUE> 138282
<RECEIVABLES> 2513
<ASSETS-OTHER> 482
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 141277
<PAYABLE-FOR-SECURITIES> 2000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 719
<TOTAL-LIABILITIES> 2719
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 128201
<SHARES-COMMON-STOCK> 5728
<SHARES-COMMON-PRIOR> 5596
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 792
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9559
<NET-ASSETS> 138558
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7604
<OTHER-INCOME> 0
<EXPENSES-NET> 720
<NET-INVESTMENT-INCOME> 6884
<REALIZED-GAINS-CURRENT> 1203
<APPREC-INCREASE-CURRENT> 4264
<NET-CHANGE-FROM-OPS> 12351
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3306
<DISTRIBUTIONS-OF-GAINS> 123
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 401
<NUMBER-OF-SHARES-REDEEMED> 478
<SHARES-REINVESTED> 208
<NET-CHANGE-IN-ASSETS> 18960
<ACCUMULATED-NII-PRIOR> 27
<ACCUMULATED-GAINS-PRIOR> (149)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 709
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1160
<AVERAGE-NET-ASSETS> 59960
<PER-SHARE-NAV-BEGIN> 10.25
<PER-SHARE-NII> .58
<PER-SHARE-GAIN-APPREC> .45
<PER-SHARE-DIVIDEND> (.58)
<PER-SHARE-DISTRIBUTIONS> (.02)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.68
<EXPENSE-RATIO> .41
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 081
<NAME> NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 192321
<INVESTMENTS-AT-VALUE> 208572
<RECEIVABLES> 3823
<ASSETS-OTHER> 1204
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 213599
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1345
<TOTAL-LIABILITIES> 1345
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 196212
<SHARES-COMMON-STOCK> 12110
<SHARES-COMMON-PRIOR> 11471
<ACCUMULATED-NII-CURRENT> 24
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (233)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16251
<NET-ASSETS> 212254
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11915
<OTHER-INCOME> 0
<EXPENSES-NET> 1468
<NET-INVESTMENT-INCOME> 10447
<REALIZED-GAINS-CURRENT> 382
<APPREC-INCREASE-CURRENT> 7152
<NET-CHANGE-FROM-OPS> 17981
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6590
<DISTRIBUTIONS-OF-GAINS> 116
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1438
<NUMBER-OF-SHARES-REDEEMED> 1170
<SHARES-REINVESTED> 370
<NET-CHANGE-IN-ASSETS> 20918
<ACCUMULATED-NII-PRIOR> 6
<ACCUMULATED-GAINS-PRIOR> (432)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1103
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1784
<AVERAGE-NET-ASSETS> 128314
<PER-SHARE-NAV-BEGIN> 10.66
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 0.41
<PER-SHARE-DIVIDEND> (0.56)
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.06
<EXPENSE-RATIO> 0.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 082
<NAME> NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 192321
<INVESTMENTS-AT-VALUE> 208572
<RECEIVABLES> 3823
<ASSETS-OTHER> 1204
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 213599
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1345
<TOTAL-LIABILITIES> 1345
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 196212
<SHARES-COMMON-STOCK> 352
<SHARES-COMMON-PRIOR> 36
<ACCUMULATED-NII-CURRENT> 24
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (233)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16251
<NET-ASSETS> 212254
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11915
<OTHER-INCOME> 0
<EXPENSES-NET> 1468
<NET-INVESTMENT-INCOME> 10447
<REALIZED-GAINS-CURRENT> 382
<APPREC-INCREASE-CURRENT> 7152
<NET-CHANGE-FROM-OPS> 17981
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 73
<DISTRIBUTIONS-OF-GAINS> 1
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 327
<NUMBER-OF-SHARES-REDEEMED> 14
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> 20918
<ACCUMULATED-NII-PRIOR> 6
<ACCUMULATED-GAINS-PRIOR> (432)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1103
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1784
<AVERAGE-NET-ASSETS> 1727
<PER-SHARE-NAV-BEGIN> 10.66
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> 0.41
<PER-SHARE-DIVIDEND> (0.48)
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.06
<EXPENSE-RATIO> 1.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 083
<NAME> NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 192321
<INVESTMENTS-AT-VALUE> 208572
<RECEIVABLES> 3823
<ASSETS-OTHER> 1204
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 213599
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1345
<TOTAL-LIABILITIES> 1345
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 196212
<SHARES-COMMON-STOCK> 1416
<SHARES-COMMON-PRIOR> 1098
<ACCUMULATED-NII-CURRENT> 24
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (233)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16251
<NET-ASSETS> 212254
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11915
<OTHER-INCOME> 0
<EXPENSES-NET> 1468
<NET-INVESTMENT-INCOME> 10447
<REALIZED-GAINS-CURRENT> 382
<APPREC-INCREASE-CURRENT> 7152
<NET-CHANGE-FROM-OPS> 17981
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 638
<DISTRIBUTIONS-OF-GAINS> 13
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 364
<NUMBER-OF-SHARES-REDEEMED> 105
<SHARES-REINVESTED> 60
<NET-CHANGE-IN-ASSETS> 20918
<ACCUMULATED-NII-PRIOR> 6
<ACCUMULATED-GAINS-PRIOR> (432)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1103
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1784
<AVERAGE-NET-ASSETS> 13979
<PER-SHARE-NAV-BEGIN> 10.65
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 0.42
<PER-SHARE-DIVIDEND> (0.50)
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.06
<EXPENSE-RATIO> 1.29
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Form
N-SAR and the financial statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<SERIES>
<NUMBER> 084
<NAME> NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1998
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<INVESTMENTS-AT-VALUE> 208572
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<OTHER-ITEMS-LIABILITIES> 1345
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<OVERDISTRIBUTION-GAINS> 0
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</TABLE>
<PAGE>
Certified Resolution
The undersigned, Gifford R. Zimmerman, hereby certifies, on behalf of Nuveen
Flagship Multistate Trust I (the "Fund"), (1) that he is the duly elected,
qualified and acting Secretary of the Fund, and that as such Secretary he has
custody of its corporate books and records, (2) that attached to this
Certificate is a true and correct copy of a resolution duly adopted by the Board
of Trustees of the Fund at a meeting held on January 22, 1998, and (3) that said
resolution has not been amended or rescinded and remains in full force and
effect.
September 24, 1998
/s/ Gifford R. Zimmerman
-----------------------------------------
Gifford R. Zimmerman, Secretary
<PAGE>
FURTHER RESOLVED, that each member of the Board and officer of the Fund who may
be required to execute the registration statement on Form N-1A, or any amendment
or amendments thereto, be, and each of them hereby is, authorized to execute a
power of attorney appointing Timothy R. Schwertfeger, Anthony T. Dean, Bruce P.
Bedford, Larry W. Martin, Gifford R. Zimmerman, and Thomas S. Harman, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign the registration statement, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done, as fully to all intents and purposes as he might or could
do in person, and ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
