<PAGE>
NUVEEN
MUNICIPAL
BOND FUNDS
NOVEMBER 30, 1997
SEMIANNUAL REPORT
[PHOTO APPEARS HERE]
DEPENDABLE, TAX-FREE INCOME
TO HELP YOU KEEP MORE OF
WHAT YOU EARN.
PENNSYLVANIA
<PAGE>
CONTENTS
1 DEAR SHAREHOLDER
3 ANSWERING YOUR QUESTIONS
6 PERFORMANCE OVERVIEW
8 PORTFOLIO OF INVESTMENTS
15 STATEMENT OF NET ASSETS
16 STATEMENT OF OPERATIONS
17 STATEMENT OF CHANGES IN NET ASSETS
18 NOTES TO FINANCIAL STATEMENTS
24 FINANCIAL HIGHLIGHTS
26 ADDITIONAL INVESTMENT OPPORTUNITIES
27 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.
It's a pleasure to share with you the Nuveen Flagship Pennsylvania Municipal
Bond Fund's outstanding performance record for the 12 months ended November 30,
1997. Over the past year, investors continued to enjoy attractive, tax-free
dividends generated by the fund's portfolio of municipal bonds. As of November
30, 1997, Class A shareholders were receiving a current yield on net asset value
of 4.65%. To match this yield, investors in the 33% combined federal and state
income tax bracket would have had to earn at least 6.94% on taxable
alternatives.
During this same period, the fund provided Class A shareholders with a highly
competitive total return on net asset value of 7.92% with income reinvested,
outpacing the average return of 6.73% for its peer group, the Pennsylvania
municipal bond fund category. You will find additional details on the fund's
performance on pages 6-7.
THE YEAR IN REVIEW
Over the past year, U.S. investors have benefited from robust economic growth
with little evidence of inflationary pressures. With unemployment rates at 20-
year lows and the current economic expansion entering its seventh year, the
presence of benign inflation has sparked debate over whether the traditional
link between growth and inflation has been broken. During 1997, expectations
that excess growth would generate inflation disrupted the markets on several
occasions, most notably following the Federal Reserve's interest rate tightening
in March and speeches by Fed Chairman Alan Greenspan. Still, falling commodity
prices kept producer prices in
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"The events of 1997 have focused renewed attention on the need for
diversi?cation and appropriate asset allocation."
check, while low import prices--due in part to the weakness in Asian markets--
limited U.S. companies' ability to raise consumer prices. This combination has
kept inflation subdued and the Federal Reserve "on hold" since March. The
reduction in the federal deficit and passage of the Taxpayer Relief Act of 1997
offer additional encouragement to long-term fixed-income investors.
HELPING YOU BUILD A BETTER PORTFOLIO
The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation. Stock market volatility,
especially late in the year, provided a vivid illustration of the steadying
effect that fixed-income investments can provide in a well-constructed
investment portfolio. Nuveen mutual funds provide an excellent balance to other
stock and bond investments. Your financial adviser can introduce you to a
variety of other Nuveen products and services to round out your investment
portfolio, including the Nuveen Growth and Income Stock Fund and two balanced
stock and bond funds.
In addition, we recently expanded our private asset management capabilities
through the acquisition of Rittenhouse Financial Services, a well-respected
growth investment manager. We encourage you to talk with your financial adviser
about ways to complement your current Nuveen investments by taking advantage of
these additional products and services.
We at Nuveen remain committed to providing you with quality investment solutions
that withstand the test of time. We thank you for your confidence in us and our
family of investments, and we look forward to our next report to you.
Sincerely,
/s/ Timothy R. Schwertfeger
TIMOTHY R. SCHWERTFEGER
Chairman of the Board
January 15, 1998
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2
<PAGE>
ANSWERING YOUR QUESTIONS
[PHOTO OF TED NEILD APPEARS HERE]
Ted Neild, managing director of Nuveen's portfolio management team, talks about
the municipal bond market and offers insights into factors that affected the
performance of the fund over the past year.
WHAT ECONOMIC AND MARKET FACTORS INFLUENCED THE PERFORMANCE OF MUNICIPAL BONDS
OVER THE PAST YEAR?
Over the past 12 months, the performance of the municipal bond market was
influenced by three major factors: the continued strength of the U.S. economy,
minimal inflation, and volatility in the equity markets. During 1997, these
factors contributed to a positive environment for fixed-income investments, as
reflected in the steady-to-declining interest rates evident
during the year.
Between December 1996 and November 1997, the yield on the 30-year Treasury bond
dropped from 6.36% to 6.05%, and the municipal market followed suit, as the
yield on the Bond Buyer 40 declined from 5.63% to 5.36%. The spread between tax-
free municipal bonds and taxable Treasury bonds remained tight, making municipal
bonds very attractive. The strong total returns produced in this environment
were somewhat muted by a heavy supply of newly issued bonds that temporarily
reduced bond prices. The increased supply worked to our advantage, however, as
it expanded opportunities to find value in the marketplace.
HOW HAS THE FUND PERFORMED DURING THIS PERIOD?
As Tim mentioned in his letter to shareholders, the fund performed well during
the one-year period ended November 30, 1997. The total return on net asset value
for Class A shares of the fund was 7.92%, which compares favorably with the one-
year average return of 6.73% for the peer group of Pennsylvania municipal bond
funds tracked by Lipper Analytical Services--a 119 basis point difference. Once
again, this fund was one of the top
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"Shareholders were rewarded with income rates that were higher than those
available in the current market, along with increased value in the underlying
securities."
performers in its category, ranking sixth among the 63 municipal bond funds in
the grouping.
GIVEN THE CURRENT MUNICIPAL MARKET, WHERE WERE YOU ABLE TO FIND VALUE?
One of the ways that we achieved such outstanding performance and created value
for shareholders was by purchasing bonds priced at a discount to their par
value. During the declining interest rate environment we experienced over the
past year, these discount bonds appreciated in value. Shareholders were rewarded
with income rates that were higher than those available in the current market,
along with increased value in the underlying securities. In addition, we used
our strong network of institutional investors to purchase bonds at competitive
prices in the secondary market. We also found good value in new issuance within
the transportation and health care sectors.
WHAT ARE YOUR KEY STRATEGIES FOR THE COMING YEAR?
To sustain this level of performance, we take a holistic approach to portfolio
management--assessing all of the factors that determine a fund's performance and
taking advantage of all of them to contribute to total return and dividend
stability. In the coming year, one focus will be boosting the credit quality of
the fund. As long as credit spreads remain tight, we will continue to take
advantage of opportunities to purchase bonds with high credit quality at yields
that are similar to bonds with lower ratings. We believe that if credit spreads
widen, these high-quality issues will increase in value relative to lower-rated
bonds.
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4
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"Looking at the year ahead, we believe the overall market will continue to
strike a good balance between supply and demand."
As part of our value investing approach, we will also continue to look for
individual bonds that offer good long-term value with the potential for
appreciating returns. Our thorough research helps us find investment quality
bonds that offer the best values--such as bonds from specific regions and
sectors that have the best potential for performance and appreciation. We plan
to continue to search for bonds with pre-refunding potential, as well as those
that we feel are undervalued by the market as a whole.
WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
Looking at the year ahead, we believe the overall market will continue to strike
a good balance between supply and demand. We expect supply to increase as new
issuers continue to enter the market. A continued decline in yields could also
cause new supply to come to market through refunding of current debt. On the
demand side, volatility in the equity markets, plus the potential for a
weakening of the economy, could spark increased interest in bonds of all types.
The financial crises in Asia, coupled with the continued strength of the dollar
and low commodity prices, are all contributing to the excellent inflation
picture. This backdrop should help offset stronger labor markets and limit the
effects of any bond market corrections. In the meantime, positive underlying
fundamentals provide good support for the municipal market.
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5
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Nuveen Flagship Pennsylvania
Municipal Bond Fund
PERFORMANCE OVERVIEW
As of November 30, 1997
<TABLE>
<CAPTION>
FUND HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------
SHARE CLASS A B C R
<S> <C> <C> <C> <C>
Inception Date 10/86 2/97 2/94 2/97
Net Asset Value (NAV) $ 10.56 $ 10.58 $ 10.56 $ 10.56
CUSIP 67065L740 67065L732 67065L724 67065L716
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Total Net Assets ($000) $128,887
Average Weighted Maturity (Years) 22.24
Average Weighted Duration (Years) 7.49
- ------------------------------------------------------------------------------------------------------
<CAPTION>
ANNUALIZED TOTAL RETURN/1/
- ------------------------------------------------------------------------------------------------------
SHARE CLASS A(NAV) A(OFFER) B C R
<S> <C> <C> <C> <C> <C>
1-Year 7.92% 3.42% 7.35% 7.35% 8.12%
5-Year 6.87% 5.97% 6.29% 6.29% 6.91%
10-Year 8.40% 7.94% 7.92% 7.81% 8.42%
- ------------------------------------------------------------------------------------------------------
<CAPTION>
TAX-FREE YIELDS
- ------------------------------------------------------------------------------------------------------
SHARE CLASS A(NAV) A(OFFER) B C R
<S> <C> <C> <C> <C> <C>
Dist Rate 5.28% 5.06% 4.54% 4.77% 5.51%
SEC 30-Day Yld 4.65% 4.46% 3.90% 4.10% 4.85%
Taxable Equiv Yld/2/ 6.94% 6.66% 5.82% 6.12% 7.24%
- ------------------------------------------------------------------------------------------------------
</TABLE>
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 up-front sales charge. Class B shares
have a contingent deferred sales charge (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 B shares automatically convert to Class A shares eight years
after purchase. Class C shares have a 1% CDSC for redemptions within one
year which is not reflected in the one-year total return.
2 Based on SEC Yield and a combined federal and state income tax rate of 33%.
Represents the yield on a taxable investment necessary to equal the yield
of the Nuveen fund on an after-tax basis.
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6
<PAGE>
[PIE CHART APPEARS HERE]
Credit Quality
A 25%
BBB/NR 22%
AA 8%
AAA/Pre-refunded 45%
[BAR CHART APPEARS HERE]
Diversification
House (Single-family) 12%
Utilities 12%
Tax Obligation (Limited) 11%
Tax Obligation (G.O.) 10%
Long-Term Care 7%
U.S. Guaranteed 7%
Transportation 6%
Other 6%
Education/Civic Org. 4%
Energy 3%
Water & Sewer 3%
Health Care 19%
Dividend History (A Shares)
0.04735
0.04904
0.0466
0.0466
0.0466
0.0466
0.0465
0.0465
0.0465
0.0465
0.0465
0.0465
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7
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP PENNSYLVANIA
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CAPITAL GOODS -- 2.5%
$ 3,000,000 Delaware County, Pennsylvania, Industrial 1/08 at 102 A $ 3,197,160
Development Authority, Revenue Refunding,
Resource Recovery Facility, Series A,
6.200%, 7/01/19
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EDUCATION AND CIVIC ORGANIZATIONS -- 4.2%
3,000,000 Allegheny County, Pennsylvania, Higher Education 2/06 at 102 Baa2 3,070,110
Building Authority, Robert Morris College,
Series A, 6.250%, 2/15/26
750,000 Northeastern Pennsylvania Hospital and Education 2/05 at 100 AAA 845,955
Authority, College Revenue, Guaranteed, Luzerne
County Community College, 6.625%, 8/15/15
865,000 Union County Pennsylvania Higher Educational 4/06 at 101 AAA 886,884
Facilities Financing Authority, University Revenue,
Bucknell University, 5.500%, 4/01/16
600,000 Wilkes-Barre, Pennsylvania, General Municipal 12/00 at 100 N/R 657,864
Authority, College Revenue, Misericordia College,
Series A, 7.750%, 12/01/12
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ENERGY -- 3.1%
3,500,000 Pennsylvania Economic Development Financing No Opt. Call BBB 4,055,555
Authority, Wastewater Treatment Revenue,
Sun Company Inc., R and M Project, Series A,
7.600%, 12/01/24
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FOREST AND PAPER PRODUCTS -- 1.8%
2,000,000 Pennsylvania Economic Development Financing 12/05 at 102 Baa2 2,328,340
Authority, Exempt Facilities Revenue, Macmillan
Limited Partnership Project, 7.600%, 12/01/20
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HEALTH CARE -- 18.9%
1,525,000 Allegheny County, Pennsylvania, Hospital No Opt. Call A- 1,800,506
Development Authority, Allegheny Valley Hospital,
Series Q, 7.000%, 8/01/15
500,000 Clarion County, Pennsylvania, Hospital Authority, 7/99 at 102 N/R 539,875
Hospital Revenue Refunding, Clarion Hospital
Project, 8.100%, 7/01/12
1,320,000 Delaware County, Pennsylvania, Health Facilities, 12/06 at 102 BBB+ 1,355,350
Mercy Health Corporation Project,
6.000%, 12/15/26
1,300,000 Doylestown, Pennsylvania, Hospital Authority, Hospital 7/04 at 102 AAA 1,236,911
Revenue Refunding, Series A, 5.000%, 7/01/23
</TABLE>
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<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH CARE -- CONTINUED
$ 1,585,000 Jeannette, Pennsylvania, Health Service Authority, 11/06 at 102 BBB+ $ 1,635,688
Hospital Revenue Refunding, Jeannette District
Memorial Hospital, Series A, 6.000%, 11/01/18
2,000,000 Monroeville, Pennsylvania, Hospital Authority, 10/05 at 102 A- 2,102,560
Hospital Revenue Refunding, Forbes Health
System, 6.250%, 10/01/15
500,000 Montgomery County, Pennsylvania, Higher Education 2/00 at 100 AAA 536,655
and Health Authority, Hospital Revenue, Series A,
Holy Redeemer Hospital, 7.625%, 2/01/20
1,000,000 Philadelphia, Pennsylvania, Authority for Industrial 7/03 at 102 AA 985,510
Development, Revenue Refunding, PGH
Development Corporation, 5.250%, 7/01/17
1,985,000 Philadelphia, Pennsylvania, Hospitals and Higher 11/02 at 102 A- 2,111,186
Education Facilities Authority, Hospital Revenue
Refunding, Chestnut Hill Hospital, 6.500%, 11/15/22
4,000,000 Philadelphia, Pennsylvania, Hospitals and Higher 11/03 at 102 A- 4,328,560
Education Facilities Authority, Hospital Revenue
Refunding, Temple University Hospital,
Series A, 6.625%, 11/15/23
2,000,000 Philadelphia, Pennsylvania Hospitals & Higher No Opt. Call BBB+ 2,136,060
Education Facilities Authority, Hospital Revenue
Refunding, Pennsylvania Hospital, 6.250%, 7/01/06
2,500,000 Philadelphia, Pennsylvania Hospitals and Higher 7/07 at 102 BBB 2,539,350
Education Facilities Authority, Hospital Revenue
Refunding, Jeanes Hospital Project, 5.875%, 7/01/17
500,000 Saint Mary Hospital Authority, Bucks County, 7/02 at 102 AAA 545,270
Pennsylvania, Franciscan Health, St. Mary,
Series A, 6.500%, 7/01/12
230,000 Sayre, Pennsylvania, Health Care Facilities Authority, 3/01 at 102 AAA 250,939
Guthrie Healthcare System, Series A,
7.100%, 3/01/17
350,000 Washington County, Pennsylvania, Hospital Authority, 4/02 at 102 A3 379,708
Monongahela Valley Hospital Project,
6.750%, 12/01/08
1,750,000 Westmoreland County, Pennsylvania, Industrial 7/99 at 100 Baa2 1,788,692
Development Authority, Revenue Refunding,
Citizens General Hospital Project, Series A,
8.250%, 7/01/13
</TABLE>
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<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP PENNSYLVANIA - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING/MULTIFAMILY -- 0.4%
$ 500,000 Bucks County, Pennsylvania, Redevelopment Authority, 2/02 at 100 AAA $ 522,255
Mortgage Revenue Refunding, Warminster Heights,
Series A, 6.875%, 8/01/23
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HOUSING/SINGLE FAMILY -- 11.2%
1,670,000 Allegheny County, Pennsylvania, Residential Finance No Opt. Call Aaa 239,845
Authority, Mortgage Revenue, Single Family,
Series Z, 0.000%, 5/01/27
300,000 Pennsylvania Housing Finance Agency, Single Family 10/99 at 102 AA+ 317,700
Mortgage, Series S, 7.600%, 4/01/16
140,000 Pennsylvania Housing Finance Agency, Single Family 4//01 at 102 AA+ 148,858
Mortgage, Series 30, 7.300%, 10/01/17
520,000 Pennsylvania Housing Finance Agency, Refunding, 10/01 at 102 AA+ 553,270
Series 1991, 7.150%, 4/01/15
2,500,000 Pennsylvania Housing Finance Agency, Refunding, 10/06 at 102 AA+ 2,619,475
Single Family Mortgage, Series 50A,
6.000%, 10/01/13
2,000,000 Pennsylvania Housing Finance Agency, Single Family 4/06 at 102 AA+ 2,109,000
Mortgage, Series 51, 6.375%, 4/01/28
1,000,000 Pennsylvania Housing Finance Agency, Single Family 10/06 at 102 AA+ 1,034,470
Mortgage, Series 53A, 6.050%, 4/01/18
2,980,000 Pittsburgh Pennsylvania Urban Redevelopment 8/05 at 102 A 3,107,455
Authority, Home Improvement Loan, Series A,
6.375%, 8/01/18
Pittsburgh, Pennsylvania, Urban Redevelopment
Authority, Mortgage Revenue, Series A:
1,000,000 6.000%, 4/01/19 4/06 at 102 AAA 1,033,370
1,000,000 6.200%, 10/01/21 10/07 at 102 AAA 1,048,070
1,060,000 6.625%, 4/01/22 4/04 at 102 AAA 1,123,547
1,000,000 Pittsburgh, Pennsylvania, Urban Redevelopment 4/06 at 102 AAA 1,048,010
Authority, Mortgage Revenue, Series D,
6.250%, 10/01/17
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INDUSTRIAL/OTHER -- 1.5%
1,650,000 Cambria County, Pennsylvania, Industrial Development 9/98 at 100 A1 1,684,336
Authority, Resource Recovery Revenue, Cambria
Cogen Project, Series F, 7.750%, 9/01/19
250,000 Philadelphia, Pennsylvania, Authority for Industrial 5/02 at 102 A+ 274,353
Development Revenues, National Board of
Medical Examiners Project, 6.750%, 5/01/12
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LONG TERM CARE -- 6.5%
$ 2,990,000 Allegheny County, Pennsylvania, Residential Finance 10/05 at 100 AAA $ 3,179,207
Authority, Mortgage Revenue, Ladies Grand Army
Republic Health Facility Project, Series G,
6.350%, 10/01/36
2,000,000 Armstrong County, Pennsylvania, Hospital Authority, 12/01 at 100 AAA 2,135,380
Health Center Revenue Refunding, Canterbury Place
Project, 6.500%, 12/01/21
1,000,000 Butler County, Pennsylvania, Industrial Development 6/03 at 102 A 1,018,890
Authority, Health Center Revenue, Crossover
Refunding, Sherwood Oaks Project, 5.750%, 6/01/16
2,000,000 Montgomery County, Pennsylvania, Higher Education 1/06 at 101 BBB 2,096,460
and Health Authority, Mortgage, Waverly Heights
Project, 6.375%, 1/01/26
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TAX OBLIGATION/GENERAL -- 9.3%
2,850,000 Deer Lakes School District, Pennsylvania, 1/04 at 100 AAA 3,139,987
6.350%, 1/15/14
2,000,000 McKeesport, Pennsylvania, Area School District, 10/06 at 100 AAA 2,211,340
Series A, 6.000%, 10/01/25
2,195,000 Montour, Pennsylvania, School District, Series B, No Opt. Call AAA 953,398
New School, 0.000%, 1/01/14
1,000,000 Pennsylvania State, First Series, 5.375%, 5/15/16 5/06 at 101 1/2 AAA 1,015,300
1,250,000 Puerto Rico Commonwealth, 5.400%, 7/01/25 7/06 at 101 1/2 A 1,244,600
1,500,000 Puerto Rico Commonwealth, Refunding, Public 7/07 at 101 1/2 A 1,494,570
Improvement, 5.375%, 7/01/25
2,000,000 Radnor Township, Pennsylvania, 5.250%, 11/01/26 5/06 at 100 Aa2 1,976,440
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TAX OBLIGATION/LIMITED -- 10.9%
1,500,000 Allegheny County, Pennsylvania, Hospital Development 6/02 at 102 BBB 1,618,485
Authority,Health and Education, Rehabilitation
Institute of Pittsburgh, 7.000%, 6/01/22
1,500,000 Harrisburg, Pennsylvania, Authority, Pooled Bond 4/06 at 102 AAA 1,539,510
Program, Series I, 5.625%, 4/01/19
1,390,000 Pennsylvania Intergovernmental Coop Authority, No Opt. Call AAA 1,611,691
Special Tax Revenue, Philadelphia Funding Program,
7.000%, 6/15/05
</TABLE>
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11
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP PENNSYLVANIA - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/LIMITED -- CONTINUED
Puerto Rico Commonwealth, Highway and
Transportation Authority, Highway Revenue,Series Y:
$ 1,700,000 5.500%, 7/01/26 7/06 at 101 1/2 A $ 1,710,761
4,500,000 5.500%, 7/01/36 7/16 at 100 A 4,568,040
3,000,000 Southeastern Pennsylvania Transportation Authority, 3/07 at 102 AAA 3,003,510
Pennsylvania, Special Revenue, 5.375%, 3/01/22
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TRANSPORTATION -- 5.7%
2,300,000 Allegheny County, Pennsylvania, Airport Revenue 1/08 at 101 AAA 2,286,614
Refunding, Pittsburgh International Airport, Series A,
5.250%, 1/01/16
1,550,000 Pennsylvania State Turnpike Commission, Turnpike 12/02 at 102 AAA 1,571,561
Revenue, Series O, Refunding, 5.500%, 12/01/17
3,500,000 Philadelphia, Pennsylvania, Airport Revenue, 6/07 at 102 AAA 3,459,155
Philadelphia Airport System, Series B,
5.400%, 6/15/27
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U.S.GUARANTEED -- 6.5%
200,000 Allegheny County, Pennsylvania, Hospital Development 10/01 at 100 BBB+ 219,758
Authority, St. Margaret Memorial Hospital,
7.125%, 10/01/21 (Pre-refunded to 10/01/01)
1,000,000 Bucks County, Pennsylvania, Community College 6/02 at 100 AA*** 1,078,670
Authority, College Building Revenue Refunding,
6.250%, 6/15/14 (Pre-refunded to 6/15/02)
200,000 Butler County, Pennsylvania, Hospital Authority, 6/01 at 102 AAA 221,168
Hospital Revenue, North Hills, Passavant Hospital,
Series A, 7.000%, 6/01/22 (Pre-refunded to 6/01/01)
1,500,000 Pennsylvania Intergovernmental Coop Authority, 6/05 at 100 AAA 1,739,235
Special Tax Revenue, Philadelphia Funding Program,
7.000%, 6/15/14 (Pre-refunded to 6/15/05)
500,000 Pennsylvania State Higher Educational Facilities 10/98 at 102 N/R*** 527,905
Authority, College and University Revenues,
Lycoming College, 8.375%, 10/01/18
(Pre-refunded to 10/01/98)
700,000 Pennsylvania State Higher Educational Facilities 1/98 at 102 AAA 716,583
Authority, Hospital Revenue, Thomas Jefferson
University, 8.000%, 1/01/18
(Pre-refunded to 1/01/98)
650,000 Philadelphia, Pennsylvania, Gas Works Revenue, No Opt. Call AAA 782,373
Twelfth Series, B, 7.000%, 5/15/20
</TABLE>
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12
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S.GUARANTEED -- CONTINUED
Philadelphia, Pennsylvania, Municipal Authority,
Revenue Refunding:
$ 150,000 7.800%, 4/01/18 (Pre-refunded to 4/01/98) 4/98 at 102 AAA $ 154,991
1,450,000 7.800%, 4/01/18 (Pre-refunded to 4/01/00) 4/00 at 100 AAA 1,569,698
935,000 West View, Pennsylvania, Municipal Authority, Special No Opt. Call AAA 1,345,400
Obligation, Refunding, Series A, 9.500%, 11/15/14
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UTILITIES -- 11.4%
153,000 Allegheny County, Pennsylvania, Industrial No Opt. Call N/R 154,685
Development Authority, Solid Waste Disposal
Revenue, Conversion System Inc. Project,
8.000%, 3/01/98
2,000,000 Cambria County, Pennsylvania, Industrial Development 11/05 at 102 AAA 2,087,300
Authority, Pollution Control Revenue Refunding,
Pennsylvania Electric Company Project, Series A,
5.800%, 11/01/20
800,000 Greater Lebanon Refuse Authority, Pennsylvania, 11/02 at 100 A- 859,560
Solid Waste Revenue Refunding, 7.000%, 11/15/04
1,500,000 Lawrence County, Pennsylvania, Industrial Development 9/01 at 102 Baa2 1,613,820
Authority, Pollution Control Revenue Refunding,
Pennsylvania Power Company, New Castle Project,
Series A, 7.150%, 3/01/17
Lehigh County, Pennsylvania, Industrial Development
Authority, Pollution Control Revenue Refunding,
Pennsylvania Power and Light Company Project,
Series A:
1,610,000 6.400%, 11/01/21 11/02 at 102 AAA 1,765,075
550,000 6.150%, 8/01/29 8/05 at 102 AAA 592,317
950,000 Luzerne County, Pennsylvania, Industrial Development 12/02 at 102 A- 1,042,654
Authority, Exempt Facilities Revenue, Pennsylvania
Gas and Water Company Project, Series B,
7.125%, 12/01/22
1,500,000 Luzerne County, Pennsylvania, Industrial Development 12/04 at 102 AAA 1,693,890
Authority, Exempt Facilities Revenue Refunding,
Pennsylvania Gas and Water Company Project,
Series A, 7.000%, 12/01/17
1,000,000 Northampton County, Pennsylvania, Industrial 7/05 at 102 AAA 1,076,070
Development Authority, Revenue Refunding,
Pollution Control, Metropolitan Edison, Series A,
6.100%, 7/15/21
</TABLE>
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13
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP PENNSYLVANIA - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITIES -- CONTINUED
Philadelphia,Pennsylvania, Gas Works,Revenue
Refunding, Fourteenth, Series A:
$ 2,000,000 6.375%, 7/01/14 7/03 at 102 AAA $ 2,187,580
1,400,000 6.375%, 7/01/26 7/03 at 102 Baa1 1,484,014
- ------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER -- 3.2%
2,000,000 Allegheny County, Pennsylvania, Sanitation Authority 12/07 at 102 AAA 2,002,620
Sewer Revenue, 5.375%, 12/01/24
1,185,000 Pittsburgh, Pennsylvania, Water and Sewer Authority, 9/05 at 100 AAA 1,224,543
Water and Sewer System Revenue, Series B,
5.750%, 9/01/25
890,000 South Wayne County Water and Sewer Authority, 4/02 at 102 N/R 952,629
Pennsylvania, Revenue Refunding, Sewer,
8.200%, 4/15/13
- ------------------------------------------------------------------------------------------------------------------------------------
$ 120,878,000 Total Investments -- (cost $116,508,135) -- 97.1% 125,106,139
- ------------------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES -- 0.8%
$ 1,000,000 Philadelphia, Pennsylvania, Hospitals and Higher A-1+ 1,000,000
- ---------------------
Education Facilities Authority, Hospital Revenue
(Children's Hospital of Philadelphia Project),
1992 Series B, Variable Rate Demand Bonds,
4.100%, 3/01/27+
-----------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 2.1% 2,780,752
-----------------------------------------------------------------------------------------------------------
Net Assets -- 100% $ 128,886,891
-----------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions: 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: 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.
_____
14
<PAGE>
STATEMENT OF NET ASSETS (UNAUDITED)
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
PENNSYLVANIA
- -------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $125,106,139
Temporary investments in short-term municipal securities, at
amortized cost, which approximates market value (note 1) 1,000,000
Cash 558,833
Receivables:
Interest 2,315,735
Investments sold 412,000
Shares sold 171,214
Other assets 2,752
- -------------------------------------------------------------------------------------------------------
Total assets 129,566,673
=======================================================================================================
LIABILITIES
Payable for shares redeemed 56,147
Accrued expenses:
Management fees (note 6) 22,282
12b-1 distribution and service fees (notes 1 and 6) 14,572
Other 13,646
Dividends payable 573,135
- -------------------------------------------------------------------------------------------------------
Total liabilities 679,782
=======================================================================================================
Net assets (note 7) $128,886,891
=======================================================================================================
CLASS A SHARES (NOTE 1)
Net assets $ 60,725,275
Shares outstanding 5,748,270
Net asset value and redemption price per share $ 10.56
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 11.02
=======================================================================================================
CLASS B SHARES (NOTE 1)
Net assets $ 925,817
Shares outstanding 87,468
Net asset value, offering and redemption price per share $ 10.58
=======================================================================================================
CLASS C SHARES (NOTE 1)
Net assets $ 6,943,274
Shares outstanding 657,613
Net asset value, offering and redemption price per share $ 10.56
=======================================================================================================
CLASS R SHARES (NOTE 1)
Net assets $ 60,292,525
Shares outstanding 5,708,174
Net asset value, offering and redemption price per share $ 10.56
=======================================================================================================
</TABLE>
_____ See accompanying notes to financial statements.
15
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Pennsylvania
- -------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $3,726,412
- -------------------------------------------------------------------------------------------------------
EXPENSES
Management fees (note 6) 343,340
12b-1 service fees -- Class A (notes 1 and 6) 58,590
12b-1 distribution and service fees -- Class B (notes 1 and 6) 2,413
12b-1 distribution and service fees -- Class C (notes 1 and 6) 24,932
Shareholders' servicing agent fees and expenses 71,169
Custodian's fees and expenses 26,744
Trustees' fees and expenses (note 6) 1,230
Professional fees 7,693
Shareholders' reports -- printing and mailing expenses 22,546
Federal and state registration fees 2,200
Other expenses 1,255
- -------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 562,112
Expense reimbursement (note 6) (206,789)
- -------------------------------------------------------------------------------------------------------
Net expenses 355,323
- -------------------------------------------------------------------------------------------------------
Net investment income 3,371,089
- -------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 4) 379,024
Net change in unrealized appreciation or depreciation of investments 3,303,069
- -------------------------------------------------------------------------------------------------------
Net gain from investments 3,682,093
- -------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $7,053,182
- -------------------------------------------------------------------------------------------------------
</TABLE>
_____ See accompanying notes to financial statements.
16
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
Nuveen Flagship Pennsylvania
----------------------------------
Six months ended Year ended
11/30/97 5/31/97*
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 3,371,089 $ 4,041,330
Net realized gain from investment transactions
(notes 1 and 4) 379,024 46,769
Net change in unrealized appreciation or depreciation
of investments 3,303,069 1,490,845
- ------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 7,053,182 5,578,944
- ------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (1,557,594) (2,665,076)
Class B (11,187) (1,816)
Class C (159,634) (264,780)
Class R (1,640,446) (1,082,438)
- ------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (3,368,861) (4,014,110)
- ------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from shares issued in the reorganization
of Nuveen Pennsylvania (note 1) -- 68,634,295
Net proceeds from shares issued as a capital contribution -- 33,360
Net proceeds from sale of shares 8,598,982 7,311,629
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 2,105,054 1,622,041
- ------------------------------------------------------------------------------------------------------
10,704,036 77,601,325
- ------------------------------------------------------------------------------------------------------
Cost of shares redeemed (5,100,016) (8,401,239)
- ------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 5,604,020 69,200,086
- ------------------------------------------------------------------------------------------------------
Net increase in net assets 9,288,341 70,764,920
Net assets at the beginning of period 119,598,550 48,833,630
- ------------------------------------------------------------------------------------------------------
Net assets at the end of period $128,886,891 $119,598,550
- ------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end of period $ 29,448 $ 27,220
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Pennsylvania and Four
months of Nuveen Flagship Pennsylvania (see note 1).
_____ See accompanying notes to financial statements.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 Pennsylvania Municipal Bond Fund (the
"Fund"), 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 Fund, 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 Pennsylvania Triple
Tax Exempt Fund ("Flagship Pennsylvania") and Nuveen Pennsylvania Tax-Free Value
Fund ("Nuveen Pennsylvania") reorganized into Nuveen Flagship Pennsylvania
Municipal Bond Fund ("Nuveen Flagship Pennsylvania"). Prior to the
reorganization, Flagship Pennsylvania was a sub-trust of the Flagship Tax Exempt
Funds Trust, while Nuveen Pennsylvania was a series of the Nuveen Multistate
Tax-Free Trust. Nuveen Pennsylvania had a fiscal year end of January 31 prior to
being reorganized into Nuveen Flagship Pennsylvania which has retained the
fiscal year end of Flagship Pennsylvania.
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
SECURITIES VALUATION
The prices of municipal bonds in the 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 Fund has 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
November 30, 1997, the Fund had no such outstanding purchase commitments.
_____
18
<PAGE>
INTEREST INCOME
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
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 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
The Fund is a separate taxpayer for federal income tax purposes. The 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 Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Pennsylvania state income taxes, to
retain such tax-exempt status when distributed to the shareholders of the Fund.
Net realized capital gain and market discount distributions are subject to
federal taxation.
FLEXIBLE SALES CHARGE PROGRAM
The 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.
_____
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
DERIVATIVE FINANCIAL INSTRUMENTS
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the six months ended November 30, 1997.
EXPENSE ALLOCATION
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
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.
_____
20
<PAGE>
2. FUND SHARES
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED 11/30/97 YEAR ENDED 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 451,240 4,712,713 390,922 3,976,377
Class B 64,685 678,152 21,356 217,925
Class C 66,288 692,102 168,084 1,709,951
Class R 241,109 2,516,015 137,689 1,407,376
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 88,485 918,993 96,590 980,201
Class B 537 5,631 73 740
Class C 13,209 136,900 13,846 140,564
Class R 100,066 1,043,530 49,269 500,536
- ----------------------------------------------------------------------------------------------------------------------------
1,025,619 10,704,036 7,604,629 77,601,325
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (220,443) (2,302,377) (512,221) (5,199,195)
Class B -- -- -- --
Class C (38,527) (401,403) (111,867) (1,144,394)
Class R (229,369) (2,396,236) (202,089) (2,057,650)
- ----------------------------------------------------------------------------------------------------------------------------
(488,339) (5,100,016) (826,177) (8,401,239)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase 537,280 $ 5,604,020 6,778,452 $69,200,086
============================================================================================================================
</TABLE>
* Information represents eight months of Flagship Pennsylvania and four months
of Nuveen Flagship Pennsylvania (see note 1).
_____
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
3. DISTRIBUTIONS TO SHAREHOLDERS
On December 9, 1997, the Fund declared dividend distributions from its tax-
exempt net investment income which were paid on December 31, 1997, to
shareholders of record on December 9, 1997, as follows:
<TABLE>
- -------------------------------------------------------------
<S> <C>
Dividend per share:
Class A $.0465
Class B .0400
Class C .0420
Class R .0485
- -------------------------------------------------------------
</TABLE>
At the same time, the Fund also declared taxable distributions, which includes
capital gains and/or taxable market discount, of $.0217 per share.
4. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities for the six months ended November 30, 1997, aggregated $13,717,293
and $10,517,564, respectively. Purchases and sales (including maturities) of
temporary municipal investments for the six months ended November 30, 1997,
aggregated $6,150,000 and $5,150,000, respectively.
At November 30, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for the Fund.
At May 31, 1997, the Fund's last fiscal year end, the Fund had unused capital
loss carryforwards of $142,820 available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, $46,943 of the
carryforwards will expire in the year 2003 and $95,877 will expire in the year
2004.
5. UNREALIZED APPRECIATION (DEPRECIATION)
At November 30, 1997, net unrealized appreciation aggregated $8,598,004, all of
which related to appreciated securities.
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Trust's investment management agreement with the Adviser, the 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 the 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
_____
22
<PAGE>
directly to its Trustees who are affiliated with the Adviser or to its officers,
all of whom receive remuneration for their services to the Trust from the
Adviser.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $122,600 of which
approximately $105,100 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 six months ended November 30, 1997, the Distributor compensated
authorized dealers directly with approximately $30,200 in commission advances at
the time of purchase. 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 six months
ended November 30, 1997, the Distributor retained approximately $10,200 in such
12b-1 fees. 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 approximately $1,100 of
CDSC on share redemptions during the six months ended November 30, 1997.
7. COMPOSITION OF NET ASSETS
At November 30, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Capital paid-in $120,029,135
Balance of undistributed net investment income 29,448
Accumulated net realized gain from investment transactions 230,304
Net unrealized appreciation of investments 8,598,004
- --------------------------------------------------------------------------------
Net assets $128,886,891
================================================================================
</TABLE>
_____
23
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
Selected data for a share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
CLASS (INCEPTION DATE) OPERATING PERFORMANCE LESS DISTRIBUTIONS
--------------------- ------------------
NET
NUVEEN FLAGSHIP PENNSYLVANIA** NET REALIZED AND DIVIDENDS NET TOTAL
ASSET UNREALIZED FROM TAX- ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSETS
MAY 31, OF PERIOD INCOME (B) INVESTMENTS INCOME GAINS PERIOD VALUE (A)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (10/86)
1998 (d) $ 10.25 $ .28 $ .31 $ (.28) $ -- $ $10.56 5.80%
1997 10.00 .57 .25 (.57) -- 10.25 8.37
1996 10.21 .59 (.20) (.60) -- 10.00 3.83
1995 10.06 .60 .16 (.61) -- 10.21 7.90
1994 10.38 .61 (.32) (.61) -- 10.06 2.70
1993 9.90 .62 .47 (.61) -- 10.38 11.34
1992 9.60 .63 .30 (.63) -- 9.90 9.98
1991 9.39 .62 .22 (.63) -- 9.60 9.26
1990 9.49 .63 (.10) (.63) -- 9.39 5.70
1989 9.01 .64 .48 (.64) -- 9.49 12.79
1988 8.83 .65 .18 (.65) -- 9.01 9.70
CLASS B (2/97)
1998 (d) 10.27 .24 .31 (.24) -- 10.58 5.40
1997 (c) 10.21 .16 .06 (.16) -- 10.27 2.18
CLASS C (2/94)
1998 (d) 10.25 .25 .31 (.25) -- 10.56 5.53
1997 9.99 .51 .26 (.51) -- 10.25 7.88
1996 10.21 .53 (.21) (.54) -- 9.99 3.16
1995 10.06 .54 .16 (.55) -- 10.21 7.31
1994 (c) 10.71 .16 (.64) (.17) -- 10.06 (13.46)
CLASS R (2/97)
1998 (d) 10.25 .29 .31 (.29) -- 10.56 5.92
1997 (c) 10.21 .20 .03 (.19) -- 10.25 2.31
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ending May 31, 1997, reflects
the financial highlights of Flagship Pennsylvania.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted.
(d) For the six months ending November 30, 1997.
_____
24
<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
NET ASSETS BEFORE BEFORE AFTER AFTER PORTFOLIO
END OF PERIOD REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
(IN THOUSANDS) MENT MENT MENT MENT (B) RATE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$60,725 .96%* 5.01%* .63%* 5.34%* 9%
55,667 1.09 5.22 .70 5.61 46
44,392 1.13 5.42 .79 5.76 65
42,600 1.29 5.68 .89 6.08 50
42,226 1.17 5.55 .91 5.80 21
40,705 1.32 5.67 .92 6.07 23
36,917 1.31 5.99 .83 6.47 41
35,408 1.29 6.25 .91 6.63 23
35,632 1.29 6.28 .92 6.65 30
33,476 1.35 6.47 .98 6.84 23
33,838 1.22 6.78 .72 7.28 52
926 1.72* 4.26* 1.38* 4.60* 9
229 1.72* 4.47* 1.35* 4.84* 46
6,943 1.51* 4.46* 1.18* 4.79* 9
6,320 1.63 4.68 1.25 5.06 46
4,442 1.34 5.19 1.68 4.85 65
3,118 1.39 5.50 1.84 5.05 50
1,697 1.41* 4.91* 1.68* 4.64* 21
60,293 .76* 5.21* .43* 5.54* 9
57,383 .77* 5.45* .39* 5.83* 46
- ---------------------------------------------------------------------------------------------------------
</TABLE>
_____
25
<PAGE>
ADDITIONAL INVESTMENT OPPORTUNITIES
NUVEEN FAMILY OF MUTUAL FUNDS
Nuveen offers a variety of funds designed to help you reach your financial
goals.
GROWTH FUND
Nuveen Rittenhouse Growth Fund
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
MUNICIPAL BOND FUNDS
NATIONAL FUNDS
Long-Term
Insured
Intermediate
Limited Term
STATE FUNDS
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Fund, contact your financial
adviser. If you would like to add to your current investment on a regular basis,
you can sign up for Nuveen's systematic investing program, which allows you to
invest a fixed dollar amount every month automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you give your investment the added
growth potential of long-term compounding.
For more information on any of these service options, call your adviser, or
Nuveen at (800) 225-8530.
_____
26
<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
Boston Financial Data Service
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
LEGAL COUNSEL
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, Illinois
_____
27
<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
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
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 products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 225-8530 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 225-8530
WWW.nuveen.com
<PAGE>
NUVEEN
MUNICIPAL BONDS FUNDS
NOVEMBER 30, 1997
SEMIANNUAL REPORT
[PHOTO APPEARS HERE]
DEPENDABLE, TAX-FREE INCOME TO HELP
YOU KEEP MORE OF WHAT YOU EARN.
VIRGINIA
<PAGE>
CONTENTS
1 DEAR SHAREHOLDER
3 ANSWERING YOUR QUESTIONS
6 PERFORMANCE OVERVIEW
8 PORTFOLIO OF INVESTMENTS
18 STATEMENT OF NET ASSETS
19 STATEMENT OF OPERATIONS
20 STATEMENT OF CHANGES IN NET ASSETS
21 NOTES TO FINANCIAL STATEMENTS
28 FINANCIAL HIGHLIGHTS
30 ADDITIONAL INVESTMENT OPPORTUNITIES
31 FUND INFORMATION
<PAGE>
DEAR SHAREHOLDER
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Wealth takes a lifetime to build. Once achieved, it should be preserved.
It's a pleasure to share with you the Nuveen Flagship Virginia Municipal Bond
Fund's outstanding performance record for the 12 months ended November 30, 1997.
Over the past year, investors continued to enjoy attractive, tax-free dividends
generated by the fund's portfolio of municipal bonds. As of November 30, 1997,
Class A shareholders were receiving a current yield on net asset value of 4.76%.
To match this yield, investors in the 35% combined federal and state income tax
bracket would have had to earn at least 7.32% on taxable alternatives.
During this same period, the fund provided Class A shareholders with a
competitive total return on net asset value of 7.64% with income reinvested,
outpacing the average return of 6.94% for its peer group, the Virginia municipal
bond fund category. You will find additional details on the fund's performance
on pages 6-7.
THE YEAR IN REVIEW
Over the past year, U.S. investors have benefited from robust economic growth
with little evidence of inflationary pressures. With unemployment rates at 20-
year lows and the current economic expansion entering its seventh year, the
presence of benign inflation has sparked debate over whether the traditional
link between growth and inflation has been broken. During 1997, expectations
that excess growth would generate inflation disrupted the markets on several
occasions, most notably following the Federal Reserve's interest rate tightening
in March and speeches by Fed Chairman Alan Greenspan. Still, falling commodity
prices kept producer prices in check, while
_____
1
<PAGE>
"The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation."
low import prices--due in part to the weakness in Asian markets--limited U.S.
companies' ability to raise consumer prices. This combination has kept inflation
subdued and the Federal Reserve "on hold" since March. The reduction in the
federal deficit and passage of the Taxpayer Relief Act of 1997 offer additional
encouragement to long-term fixed-income investors.
HELPING YOU BUILD A BETTER PORTFOLIO
The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation. Stock market volatility,
especially late in the year, provided a vivid illustration of the steadying
effect that fixed-income investments can provide in a well-constructed
investment portfolio. Nuveen mutual funds provide an excellent balance to other
stock and bond investments. Your financial adviser can introduce you to a
variety of other Nuveen products and services to round out your investment
portfolio, including the Nuveen Growth and Income Stock Fund and two balanced
stock and bond funds.
In addition, we recently expanded our private asset management capabilities
through the acquisition of Rittenhouse Financial Services, a well-respected
growth investment manager. We encourage you to talk with your financial adviser
about ways to complement your current Nuveen investments by taking advantage of
these additional products and services.
We at Nuveen remain committed to providing you with quality investment solutions
that withstand the test of time. We thank you for your confidence in us and our
family of investments, and we look forward to our next report to you.
Sincerely,
/s/ Timothy R. Schwertfeger
TIMOTHY R. SCHWERTFEGER
Chairman of the Board
January 15, 1998
_____
2
<PAGE>
ANSWERING YOUR QUESTIONS
[PHOTO OF TED NEILD APPEARS HERE]
Ted Neild, managing director of Nuveen's portfolio management team, talks about
the municipal bond market and offers insights into factors that affected the
performance of the fund over the past year.
WHAT ECONOMIC AND MARKET FACTORS INFLUENCED THE PERFORMANCE OF MUNICIPAL BONDS
OVER THE PAST YEAR?
Over the past 12 months, the performance of the municipal bond market was
influenced by three major factors: the continued strength of the U.S. economy,
minimal inflation, and volatility in the equity markets. During 1997, these
factors contributed to a positive environment for fixed-income investments, as
reflected in the steady-to-declining interest rates evident during the year.
Between December 1996 and November 1997, the yield on the 30-year Treasury bond
dropped from 6.36% to 6.05%, and the municipal market followed suit, as the
yield on the Bond Buyer 40 declined from 5.63% to 5.36%. The spread between tax-
free municipal bonds and taxable Treasury bonds remained tight, making municipal
bonds very attractive. The strong total returns produced in this environment
were somewhat muted by a heavy supply of newly issued bonds that temporarily
reduced bond prices. The increased supply worked to our advantage, however, as
it expanded opportunities to find value in the marketplace.
HOW HAS THE FUND PERFORMED DURING THIS PERIOD?
As Tim mentioned in his letter to shareholders, the fund performed well during
the one-year period ended November 30, 1997. The total return on net asset value
for Class A shares of the fund was 7.64%, which compares favorably with the one-
year average return of 6.94% for the peer group of Virginia municipal bond funds
tracked by Lipper Analytical Services--a 70 basis point difference. Once again,
this fund was one of the top performers in its category, ranking fourth among
the 32 municipal bond funds in the grouping.
_____
3
<PAGE>
"Shareholders were rewarded with income rates that were higher than those
available in the current market, along with increased value in the underlying
securities."
GIVEN THE CURRENT MUNICIPAL MARKET, WHERE WERE YOU ABLE TO FIND VALUE?
One of the ways that we achieved such outstanding performance and created value
for shareholders was by purchasing bonds priced at a discount to their par
value. During the declining interest rate environment we experienced over the
past year, these discount bonds appreciated in value. Shareholders were rewarded
with income rates that were higher than those available in the current market,
along with increased value in the underlying securities. This level of price
appreciation allowed us to maintain strong dividends as interest rates fell
during the year.
In addition, we used our strong network of institutional investors to purchase
bonds at competitive prices in the secondary market. The limited supply of new
issuance in the state can sometimes be problematic, so we found value in the
secondary market during this lean issuance period. However, we did uncover good
value in some new issuance within the transportation and health care sectors.
WHAT ARE YOUR KEY STRATEGIES FOR THE COMING YEAR?
To sustain this level of performance, we take a holistic approach to portfolio
management--assessing all of the factors that determine a fund's performance and
taking advantage of all of them to contribute to total return and dividend
stability. In the coming year, one focus will be boosting the credit quality of
the fund. As long as credit spreads remain tight, we will continue to take
advantage of opportunities to purchase bonds with high credit quality at yields
that are similar to bonds with lower ratings. We believe that if credit spreads
widen, these high-quality issues will increase in value relative to lower-rated
bonds.
_____
4
<PAGE>
"Looking at the year ahead, we believe the overall market will continue to
strike a good balance between supply and demand."
In addition to credit quality, we will also strive to improve the call
protection of the fund. By purchasing non-callable bonds and/or bonds with
longer call protection, we ensure that the fund's income stream will be more
stable and that it will be less susceptible to changes in interest rates.
As part of our value investing approach, we will also continue to look for
individual bonds that offer good long-term value with the potential for
appreciating returns. Our thorough research helps us find investment quality
bonds that offer the best values--such as bonds from specific regions and
sectors that have the best potential for performance and appreciation. We plan
to continue to search for bonds with pre-refunding potential, as well as those
that we feel are undervalued by the market as a whole.
WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
Looking at the year ahead, we believe the overall market will continue to strike
a good balance between supply and demand. We expect supply to increase as new
issuers continue to enter the market. A continued decline in yields could also
cause new supply to come to market through refunding of current debt. On the
demand side, volatility in the equity markets, plus the potential for a
weakening of the economy, could spark increased interest in bonds of all types.
The financial crises in Asia, coupled with the continued strength of the dollar
and low commodity prices, are all contributing to the excellent inflation
picture. This backdrop should help offset stronger labor markets and limit the
effects of any bond market corrections. In the meantime, positive underlying
fundamentals provide good support for the municipal market.
_____
5
<PAGE>
Nuveen Flagship Virginia
Municipal Bond Fund
PERFORMANCE OVERVIEW
As of November 30, 1997
<TABLE>
<CAPTION>
FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
SHARE CLASS A B C R
<S> <C> <C> <C> <C>
Inception Date 3/86 2/97 10/93 2/97
Net Asset Value (NAV) $10.95 $10.95 $10.95 $10.95
CUSIP 67065L690 67065L682 67065L674 67065L666
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Net Assets ($000) $200,352
................................................................................
Average Weighted Maturity (Years) 21.13
................................................................................
Average Weighted Duration (Years) 6.38
- --------------------------------------------------------------------------------
<CAPTION>
ANNUALIZED TOTAL RETURN/1/
- --------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
1-Year 7.64% 3.12% 6.89% 7.05% 7.83%
................................................................................
5-Year 7.03% 6.12% 6.42% 6.44% 7.07%
................................................................................
10-Year 8.54% 8.08% 8.06% 7.94% 8.56%
- --------------------------------------------------------------------------------
<CAPTION>
TAX-FREE YIELDS
- --------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
Dist Rate 5.21% 4.99% 4.49% 4.66% 5.42%
................................................................................
SEC 30-Day Yld 4.76% 4.56% 4.02% 4.21% 4.97%
................................................................................
Taxable Equiv Yld/2/ 7.32% 7.02% 6.18% 6.48% 7.65%
- --------------------------------------------------------------------------------
</TABLE>
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 up-front sales charge. Class B shares have a
contingent deferred sales charge (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 B
shares automatically convert to Class A shares eight years after purchase.
Class C shares have a 1% CDSC for redemptions within one year which is not
reflected in the one-year total return.
2 Based on SEC Yield and a combined federal and state income 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.
_____
6
<PAGE>
Credit Quality
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
A 29%
AA 29%
BBB/NR 14%
AAA/Pre-refunded 28%
</TABLE>
Diversification
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Health Care 18%
Tax Obligation (Limited) 15%
Education/Civic Org. 12%
Water & Sewer 11%
Transportation 8%
Tax Obligation (G.O.) 7%
Housing (Single-Family) 6%
Other 5%
Forest/Paper Products 5%
Housing (Multi-Family) 4%
Utilities 5%
U.S. Guaranteed 4%
</TABLE>
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<S> <C>
0.04836 December 1996
0.05005 January 1997
0.0476 February 1997
0.0476 March 1997
0.0476 April 1997
0.0476 May 1997
0.0475 June 1997
0.0475 July 1997
0.0475 August 1997
0.0475 September 1997
0.0475 October 1997
0.0475 November 1997
</TABLE>
_____
7
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP VIRGINIA
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CAPITAL GOODS -- 1.0%
$2,000,000 Henrico County, Virginia, Industrial Development No Opt. Call A $2,043,420
Authority, Solid Waste, Browning Ferris, Series A,
5.450%, 1/01/14
- --------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES -- 0.8%
1,500,000 James County, Virginia, Industrial Development 4/07 at 101 A+ 1,572,900
Authority, Sewer and Solid Waste Disposal Facilities
Revenue, Anheuser Busch Project, 6.000%, 4/01/32
- --------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS -- 11.5%
1,000,000 Arlington County, Virginia, Industrial Development 7/07 at 102 Aa1 1,017,150
Authority, Headquarters Facility Revenue, The Nature
Conservancy, Series A, 5.450%, 7/01/27
500,000 Hampton Roads, Virginia, Medical College General 11/01 at 102 A- 540,040
Revenue, Series A, 6.875%, 11/15/16
Loudoun County, Virginia, Industrial Development
Authority, University Facilities Revenue, George
Washington University:
500,000 6.250%, 5/15/12 5/02 at 102 A1 528,780
2,225,000 6.250%, 5/15/22 5/02 at 102 A1 2,344,327
1,250,000 Rockingham County, Virginia, Industrial Development 10/03 at 102 Baa3 1,271,750
Authority, Bridgewater College, 6.000%, 10/01/23
Staunton, Virginia, Industrial Development Authority,
Educational Facilities Revenue, Mary Baldwin College:
350,000 5.900%, 11/01/03 No Opt. Call N/R 353,199
370,000 6.000%, 11/01/04 No Opt. Call N/R 373,837
2,000,000 University Virginia, University Revenues, Series B, 6/03 at 102 AA+ 2,012,880
5.375%, 6/01/20
800,000 Virginia College Building Authority, Educational 5/02 at 102 A- 864,184
Facilities Revenue, Randolph Macon College Project,
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- 1,079,890
1,400,000 7.000%, 7/01/22 7/02 at 102 BBB- 1,501,206
2,000,000 Virginia College Building Authority, Educational 10/02 at 102 BBB+ 2,134,580
Facilities Revenue, Roanoke College Project,
6.625%, 10/15/12
3,250,000 Virginia College Building Authority, Educational 4/03 at 102 A+ 3,367,715
Facilities Revenue, Hampton University Project,
5.750%, 4/01/14
</TABLE>
___
8
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION AND CIVIC ORGANIZATIONS -- CONTINUED
Virginia College Building Authority, Educational Facilities
Revenue, Washington and Lee University Project:
$ 750,000 6.400%, 1/01/12 1/02 at 102 AA $ 808,740
1,000,000 5.750%, 1/01/14 1/04 at 102 AA 1,034,560
1,000,000 5.800%, 1/01/24 1/04 at 102 AA 1,038,500
Winchester, Virginia, Industrial Development Authority,
Educational Facilities Revenue, 1st Mortgage,
Shenandoah University Project:
1,800,000 6.700%, 10/01/14 10/04 at 102 AA 1,987,956
775,000 6.750%, 10/01/19 10/04 at 102 AA 858,995
- --------------------------------------------------------------------------------------------------------------------------------
FOREST AND PAPER PRODUCTS -- 4.6%
2,000,000 Covington, Alleghany County, Virginia, Industrial 9/04 at 102 A1 2,223,420
Development Authority, Pollution Control Revenue,
Westvaco Corporation Project, 6.650%, 9/01/18
Isle Wight County, Virginia, Industrial Development
Authority, Solid Waste Disposal Facilities Revenue,
Union Camp Corporation Project:
3,545,000 6.550%, 4/01/24 4/04 at 102 A1 3,856,641
3,000,000 6.100%, 5/01/27 5/07 at 102 A- 3,148,440
- --------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE -- 17.3%
1,125,000 Albemarle County, Virginia, Industrial Development 10/02 at 102 A+ 1,199,351
Authority, Health Services Revenue, University of
Virginia, Health Services Foundation,
6.500%, 10/01/22
2,060,000 Albemarle County, Virginia, Industrial Development 10/03 at 102 A2 2,129,690
Authority, Hospital Revenue, Martha Jefferson
Hospital, 5.875%, 10/01/13
1,135,000 Buena Vista, Virginia, Industrial Development Authority, 11/01 at 100 N/R 1,160,072
Hospital Facility Revenue, Stonewall Jackson,
8.375%, 11/01/14
2,000,000 Fairfax County, Virginia, Industrial Development 8/06 at 102 AA 2,106,460
Authority, Health Care, Inova Health System Project,
6.000%, 8/15/26
2,000,000 Fredericksburg, Virginia, Industrial Development 6/07 at 102 AAA 1,977,760
Authority, Hospital Facilities Revenue, Medicorp
Health System Obligation, 5.250%, 6/15/23
1,110,000 Giles County, Virginia, Industrial Development 12/05 at 102 A+ 1,149,771
Authority, Exempt Facility, Hoechst Celanese
Project, 5.950%, 12/01/25
</TABLE>
___
9
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP VIRGINA - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH CARE -- CONTINUED
$ 500,000 Hampton, Virginia, Industrial Development Authority, 11/04 at 102 Aa2 $ 553,320
Hospital Revenue, Sentara General Hospital,
Series A, 6.500%, 11/01/12
2,000,000 Hanover County, Virginia, Industrial Development No Opt. Call AAA 2,305,680
Authority, Hospital Revenue, Memorial Regional
Medical Center Project, 6.375%, 8/15/18
2,000,000 Hanover County, Virginia, Industrial Development 8/05 at 102 AAA 2,007,280
Authority, Hospital Revenue, Bon Secours Health
System Projects, 5.500%, 8/15/25
1,250,000 Henry County, Virginia, Industrial Development 1/07 at 101 A+ 1,308,388
Authority, Hospital Revenue, Memorial Hospital,
Martinsville and Henry, 6.000%, 1/01/27
1,700,000 Loudoun County, Virginia, Industrial Development 6/05 at 102 AAA 1,762,832
Authority, Hospital Revenue, Loudoun Hospital
Center, 5.800%, 6/01/20
3,500,000 Norfolk Virginia, Industrial Development Authority, 10/99 at 100 N/R 3,599,575
Industrial Development Revenue, James Barry,
Robinson Institute Project, 7.700%, 10/01/06
1,000,000 Norfolk Virginia, Industrial Development Authority, 8/07 at 102 AAA 986,770
Health Care, Bon Secours Health, Series B,
5.250%, 8/15/26
2,080,000 Peninsula Ports Authority, Virginia Health System 7/02 at 102 Aa2 2,263,622
Revenue, Riverside Health System Project, Series A,
6.625%, 7/01/18
5,250,000 Prince William County, Virginia, Industrial Development 10/05 at 102 A2 5,835,795
Authority, Hospital Revenue, Potomac Hospital
Corporation, 6.850%, 10/01/25
2,000,000 Roanoke, Virginia, Industrial Development Authority, 7/03 at 102 AAA 1,903,920
Hospital Revenue, Roanoke Memorial Hospitals
Project, Series A, 5.000%, 7/01/24
2,260,000 Virginia Beach, Virginia, Development Authority, 11/01 at 102 AA 2,401,499
Hospital Facility Revenue, Sentara Bayside
Hospital, 6.300%, 11/01/21
</TABLE>
_____
10
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
SHARE DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING/MULTIFAMILY -- 4.1%
$1,200,000 Fairfax County, Virginia, Redevelopment and Housing 9/06 at 102 AAA $1,251,816
Authority, Mortgage Revenue, Housing for the Elderly,
Little River Glen, Series A, 6.100%, 9/01/26
Harrisonburg, Virginia, Redevelopment and Housing
Authority, Multifamily Housing Revenue, United
Dominion Projects:
1,415,000 7.000%, 12/01/08 12/02 at 102 BBB+ 1,505,319
2,040,000 7.100%, 12/01/15 12/02 at 102 BBB+ 2,156,117
2,000,000 Newport News, Virginia, Redevelopment and Housing 1/02 at 102 AAA 2,082,140
Authority, Mortgage Revenue, West Apartments,
Series A, 6.550%, 7/01/24
480,000 Suffolk, Virginia, Redevelopment and Housing 7/02 at 104 N/R 525,706
Authority, Multifamily Housing Revenue, Chase
Heritage Dulles, 7.000%, 7/01/24
700,000 Virginia Housing Development Authority, Multifamily, 5/01 at 102 AA+ 748,265
Series F, 7.000%, 5/01/04
- --------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY -- 6.3%
380,000 Puerto Rico Housing Finance Corporation, Single Family 9/00 at 102 AAA 405,042
Mortgage Revenue, Portfolio 1, Series B,
7.650%,10/15/22
Virginia Housing Development Authority,
Commonwealth Mortgage, Series A:
3,000,000 7.100%, 1/01/17 1/02 at 102 AA+ 3,177,390
1,000,000 7.100%, 1/01/22 1/02 at 102 AA+ 1,059,130
4,000,000 7.150%, 1/01/33 1/02 at 102 AA+ 4,218,280
650,000 Virginia Housing Development Authority, 1/00 at 102 AA+ 678,691
Commonwealth Mortgage, Series B, Subseries B-4,
6.850%, 7/01/17
1,000,000 Virginia Housing Development Authority, 7/05 at 102 AA+ 1,052,100
Commonwealth Mortgage, Series C, Subseries C-1,
6.300%, 7/01/25
2,000,000 Virginia, State Housing Development Authority, 7/05 at 102 AA+ 2,092,080
Commonwealth Mortgage, Series C, Subseries C-3,
6.125%, 7/01/22
</TABLE>
_____
11
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP VIRGINIA -- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL/OTHER -- 1.6%
$2,500,000 Mecklenburg County, Virginia, Industrial Development 5/01 at 102 A1 $ 2,705,175
Authority, Exempt Facility, Mecklenburg
Cogen, Series A, 7.350%, 5/01/08
400,000 Richmond, Virginia, Industrial Development Authority, 2/98 at 102 AA- 409,872
Medical Facility, Richmond Metropolitan Blood
Service, 7.125%, 2/01/11
- --------------------------------------------------------------------------------------------------------------------------------
LONG TERM CARE -- 2.1%
715,000 Albemarle County, Virginia, Industrial Development 1/01 at 103 N/A 793,707
Authority, First Mortgage Revenue,
8.900%, 7/15/26
1,000,000 Chesterfield County, Virginia, Health Center 12/06 at 102 AAA 1,045,790
Commission Mortgage Revenue, Lucy Corr Nursing
Home Project, 5.875%, 12/01/21
500,000 Fairfax County, Virginia, Redevelopment and Housing 12/06 at 103 AAA 518,195
Authority, Multifamily Housing Revenue, Paul
Spring Center, Series A, 6.000%, 12/15/28
500,000 Front Royal and Warren County, Virginia, Industrial 1/06 at 100 A 546,870
Development Authority, Heritage Hall XIII,
9.450%, 7/15/24
1,190,000 Henrico County, Virginia, Industrial Development 7/03 at 102 AAA 1,246,394
Authority, Nursing Facility, Insured Mortgage,
Cambridge Manor, 5.875%, 7/01/19
- --------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL -- 7.0%
1,000,000 Abingdon, Virginia, Capital Improvement, 8/02 at 102 A 1,072,100
6.250%, 8/01/12
730,000 Danville, Virginia, 6.500%, 5/01/12 5/02 at 102 A3 782,275
1,500,000 Portsmouth, Virginia, Public 8/03 at 102 AA- 1,520,475
Utility, 5.500%, 8/01/19
Puerto Rico Commonwealth:
2,575,000 6.450%, 7/01/17 7/04 at 102 A 2,853,100
2,500,000 6.500%, 7/01/23 7/04 at 101 1/2 A 2,762,025
500,000 5.400%, 7/01/25 7/06 at 101 1/2 A 497,840
1,500,000 Puerto Rico Commonwealth, 7/07 at 101 1/2 A 1,494,570
Public Improvement, 5.375%, 7/01/25
3,005,000 Richmond, Virginia, Public Improvement, 7/03 at 102 AA 3,028,980
Series B, 5.500%, 7/15/23
</TABLE>
_____
12
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTION CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/LIMITED -- 15.0%
$ 2,300,000 Big Stone Gap, Virginia, Redevelopment and Housing 9/05 at 102 AA $ 2,346,782
Authority, Correctional Facility Lease Revenue,
Wallens Ridge Development Project, 5.500%, 9/01/15
3,000,000 Brunswick County, Virginia, Industrial Development 7/06 at 102 AAA 3,067,530
Authority, Correctional Facility Lease Revenue,
5.500%, 7/01/17
1,385,000 Fairfax County, Virginia, Redevelopment and Housing 6/02 at 102 N/R 1,468,515
Series A, 7.500%, 6/15/18
5,000,000 Hampton Roads, Virginia, Regional Jail Authority, 7/06 at 102 AAA 5,063,800
Series A, 5.500%, 7/01/24
2,000,000 Henrico, County, Virginia, Industrial Development 8/05 at 102 AA 2,303,140
Authority, Public Facility Lease Revenue, Henrico
County, Regional Jail Project, 7.000%, 8/01/13
750,000 Loudoun County, Virginia, Certificates of No. Opt. Call AAA 920,183
Participation, Series E, 7.200%, 10/01/10
1,500,000 Peninsula Airport Commission, Virginia, 7/01 at 102 Aa 1,651,365
Airport Improvement, 7.300%, 7/15/21
Prince William County, Virginia, Industrial Development
Authority, Lease Revenue, Atcc Project:
2,000,000 6.000%, 2/01/14 2/06 at 102 A2 2,108,840
1,000,000 6.000%, 2/01/18 2/06 at 102 A2 1,054,260
2,500,000 Prince William County, Virginia, Park Authority, 10/04 at 102 A- 2,797,700
6.875%, 10/15/16
2,250,000 Puerto Rico Commonwealth Highway and Transportation 7/16 at 100 A 2,284,020
Authority, Highway Revenue,
Series Y, 5.500%, 7/01/36
1,500,000 Richmond, Virginia, Redevelopment and Housing 3/05 at 102 AAA 1,615,815
Authority, Project Revenue, Old Manchester Project,
6.800%, 3/01/15
1,000,000 Virginia Public School Authority, 8/04 at 102 AA 1,085,260
Series A, 6.200%, 8/01/13
Virginia Public School Authority, Series B:
1,000,000 5.750%, 8/01/15 8/05 at 102 AA 1,049,070
1,210,000 5.625%, 8/01/16 8/05 at 102 AA 1,253,270
</TABLE>
_____
13
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP VIRGINIA - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTION CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSPORTATION -- 7.6%
$ 2,250,000 Capital Region Airport Commission, Virginia Airport 7/05 at 102 AAA $ 2,306,003
Revenue, Richmond International Airport Projects,
Series A, 5.625%, 7/01/25
750,000 Charlottesville and Albemarle,Virginia Airport 12/05 at 102 BBB 776,483
Authority, Airport Revenue, 6.125%, 12/01/13
Loudoun County, Virginia, Industrial Development
Authority, Air Cargo Facility Revenue, Washington
Dulles Air Cargo:
210,000 6.625%, 1/01/00 No Opt. Call N/R 215,775
3,000,000 7.000%, 1/01/09 1/01 at 102 N/R 3,138,810
600,000 6.500%, 1/01/09 1/06 at 102 N/R 625,098
Metropolitan Washington D.C. Apartments Authority,
Virginia, General Airport Revenue, Series A:
1,500,000 6.625%, 10/01/19 10/02 at 102 AAA 1,634,610
1,000,000 5.750%, 10/01/20 10/04 at 102 AAA 1,027,100
1,500,000 6.250%, 10/01/21 10/02 at 102 AAA 1,587,810
770,000 Metropolitan Washington D.C. Apartments Authority, 10/07 at 101 AA- 775,405
Virginia, General Airport Revenue, Series B,
5.500%, 10/01/23
1,900,000 Puerto Rico Ports Authority, Special Facilities, 6/06 at 102 BBB- 2,051,164
Amem Airlines, Series A, 6.250%, 6/01/26
1,000,000 Virginia Port Authority, Port Facility 7/07 at 101 AAA 1,004,200
Revenue, 5.500% 7/01/24
- ------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED -- 3.7%
750,000 Chesapeake Bay Bridge and Tunnel Commission, 7/01 at 102 AAA 816,878
Virginia District Revenue, General Resolution,
6.375%, 7/01/22 (Pre-refunded to 7/01/01)
1,000,000 Covington and Alleghany County, Virginia, Industrial 4/02 at 102 A-*** 1,105,430
Development Authority, Hospital Facility Revenue,
Alleghany Regional Hospital, 6.625%, 4/01/12
(Pre-refunded to 4/01/02)
500,000 Fairfax County, Virginia, Redevelopment and Housing 11/99 at 102 N/R*** 539,950
Authority, Vinson Pavilion, Series A,
7.500%, 11/01/19 (Pre-refunded to 11/01/99)
150,000 Fairfax County, Virginia, Water Development Authority, 4/07 at 102 AA*** 167,691
6.000%, 4/01/22 (Pre-refunded to 4/01/07)
</TABLE>
_____
14
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTION CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GUARANTEED -- CONTINUED
$ 250,000 Martinsville, Virginia, Industrial Development Authority, 1/01 at 100 A2*** $ 269,670
Hospital 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 8/06 at 100 BBB+*** 2,309,340
Facilities Revenue, Mary Immaculate Project,
7.000%, 8/01/17 (Pre-refunded to 8/01/06)
1,000,000 Virginia College Building Authority, Educational 4/99 at 102 N/R*** 1,066,780
Facilities Revenue, Hampton University Project,
Series A, 7.750%, 4/01/14 (Pre-refunded to 4/01/99)
Virginia Resource Authority, Water and Sewer System
Revenue, Pooled Loan Program, Series A:
410,000 7.650%, 11/01/16 (Pre-refunded to 11/01/99) 11/99 at 102 AA*** 442,784
580,000 7.600%, 11/01/16 (Pre-refunded to 11/01/98) 11/98 at 102 AA*** 600,584
- ------------------------------------------------------------------------------------------------------------------------
UTILITIES -- 4.5%
2,110,000 Halifax County, Virginia, industrial Development 12/02 at 102 A+ 2,276,078
Authority, Exempt Facility Revenue, Old Dominion
Electric Coop Project, 6.500%, 12/01/12
1,000,000 Puerto Rico Electric Power Authority, Power Revenue 7/02 at 101 1/2 BBB+ 1,066,870
Formerly Puerto Rico Commonwealth Water
Resource Authority, Series R, 6.250%, 7/01/17
1,000,000 Russell County, Virginia, Industrial Development 11/00 at 102 Baa1 1,093,410
Authority, Pollution Control Revenue, Appalachian
Power Company Project, Series G, 7.700%, 11/01/07
1,500,000 Southeastern Public Service Authority, Regional Solid 7/03 at 102 A- 1,545,945
Waste System, 6.000%, 7/01/13
1,000,000 Virginia Resource Authority, Solid Waste Disposal 11/02 at 102 AA 1,100,880
System Revenue, Series B, 6.750%, 11/01/12
1,960,000 Virginia Resource Authority, Solid Waste Disposal 4/05 at 102 AA 1,992,771
System Revenue, Series A, 5.500%, 4/01/15
- ------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER -- 11.0%
1,000,000 Blacksburg, Virginia, Polytechnic Institute Sanitation 11/02 at 102 A 1,053,240
Authority, Sewer System Revenue, 6.250%, 11/01/12
Fairfax County, Virginia, Water Authority:
850,000 6.000%, 4/01/22 4/07 at 102 AA 914,439
1,625,000 5.750%, 4/01/29 4/02 at 100 AA 1,661,108
</TABLE>
_____
15
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP VIRGINIA - CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTION CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WATER AND SEWER - CONTINUED
$ 1,000,000 Frederick and Winchester Service Authority, Virginia 10/03 at 102 AAA 1,038,230
Regional Sewer System Revenue, 5.750%, 10/01/15
2,500,000 Henrico County, Virginia, Water and Sewer 5/02 at 100 AA- 2,640,125
Revenue, 6.250%, 5/01/13
2,500,000 Leesburg, Virginia, Utility System Revenue, 7/07 at 102 AAA 2,450,225
5.125%, 7/01/22
1,000,000 Loudoun County, Virginia, Sanitation Authority, Water 1/03 at 102 AAA 1,082,360
and Sewer Revenue, 6.250%, 1/01/16
1,000,000 Prince William County, Virginia, Service Authority, 7/01 at 100 AAA 1,035,770
Water and Sewer System Revenue, 6.000%, 7/01/29
4,000,000 Upper Occoquan Sewer Authority, Virginia Regional 1/04 at 102 AAA 3,844,520
Sewer Revenue, 5.000%, 7/01/21
2,215,000 Upper Occoquan Sewer Authority, Virginia Regional 7/16 at 100 AAA 2,206,096
Sewer Revenue, Series A, 5.150%, 7/01/20
1,000,000 Virginia Resource Authority, Sewer System Revenue, 10/05 at 102 AA 1,048,370
Hopewell Regional Wastewater Facility,
Series A, 6.000%, 10/01/25
Virginia Resource Authority, Water and Sewer System
Revenue, Series A,
1,500,000 6.125%, 4/01/19 4/02 at 100 AA 1,569,762
1,000,000 5.600%, 10/01/25 10/05 at 102 AA 1,015,030
500,000 Virginia Resource Authority, Water and Sewer System 10/98 at 103 AA 527,900
Revenue, Lot 7, Rapidan Service Authority,
7.125%, 10/01/16
- ------------------------------------------------------------------------------------------------------------------------
$ 186,740,000 Total Investments - (cost $182,515,076) - 98.1% 196,538,583
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
_____
16
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTION CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES -- 0.5%
$ 1,000,000 Roanoke, Virginia, Industrial Development Authority, AA3 $ 1,000,000
- --------------
Carillion Health System Series B, Variable Rate
Demand Bonds, 3.900%, 7/01/27+
--------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.4% 2,813,179
--------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 200,351,762
--------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions: 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: Using the higher of Standard and 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.
_____
17 See accompanying notes to financial statements.
<PAGE>
STATEMENT OF NET ASSETS (UNAUDITED)
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
VIRGINIA
- --------------------------------------------------------------------------------
ASSETS
<S> <C>
Investments in municipal securities, at market value (note 1) $196,538,583
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) 1,000,000
Cash 145,997
Receivables:
Interest 3,479,283
Investments sold 90,000
Shares sold 151,120
Other assets 5,245
- --------------------------------------------------------------------------------
Total assets 201,410,228
================================================================================
LIABILITIES
Payable for shares redeemed 64,961
Accrued expenses:
Management fees (note 6) 54,664
12b-1 distribution and service fees (notes 1 and 6) 30,031
Other 39,210
Dividends payable 869,600
- --------------------------------------------------------------------------------
Total liabilities 1,058,466
================================================================================
Net assets (note 7) $200,351,762
================================================================================
CLASS A SHARES (NOTE 1)
Net assets $126,958,088
Shares outstanding 11,592,489
Net asset value and redemption price per share $ 10.95
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 11.43
- --------------------------------------------------------------------------------
CLASS B SHARES (NOTE 1)
Net assets $ 1,328,876
Shares outstanding 121,354
Net asset value, offering and redemption price per share $ 10.95
- --------------------------------------------------------------------------------
CLASS C SHARES (NOTE 1)
Net assets $ 14,104,915
Shares outstanding 1,288,596
Net asset value, offering and redemption price per share $ 10.95
- --------------------------------------------------------------------------------
CLASS R SHARES (NOTE 1)
Net assets $ 57,959,883
Shares outstanding 5,293,001
Net asset value, offering and redemption price per share $ 10.95
- --------------------------------------------------------------------------------
</TABLE>
_____ See accompanying notes to financial statements
18
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
VIRGINIA
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $ 5,888,156
- --------------------------------------------------------------------------------
EXPENSES
Management fees (note 6) 538,300
12b-1 service fees -- Class A (notes 1 and 6) 125,445
12b-1 distribution and service fees -- Class B (notes 1 and 6) 4,471
12b-1 distribution and service fees -- Class C (notes 1 and 6) 48,781
Shareholders' servicing agent fees and expenses 84,471
Custodian's fees and expenses 29,844
Trustees' fees and expenses (note 6) 2,039
Professional fees 7,798
Shareholders' reports -- printing and mailing expenses 26,714
Federal and state registration fees 2,037
Other expenses 1,619
- --------------------------------------------------------------------------------
Total expenses before expense reimbursement 871,519
Expense reimbursement (note 6) (200,180)
- --------------------------------------------------------------------------------
Net expenses 671,339
- --------------------------------------------------------------------------------
Net investment income 5,216,817
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 4) 384,015
Net change in unrealized appreciation or depreciation of investments 4,923,801
- --------------------------------------------------------------------------------
Net gain from investments 5,307,816
- --------------------------------------------------------------------------------
Net increase in net assets from operations $10,524,633
================================================================================
</TABLE>
See accompanying notes to financial statements
_____
19
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP VIRGINIA
-------------------------------------
SIX MONTHS ENDED YEAR ENDED
11/30/97 5/31/97*
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 5,216,817 $ 8,156,974
Net realized gain from investment transactions
(notes 1 and 4) 384,015 772,114
Net change in unrealized appreciation or depreciation
of investments 4,923,801 2,690,836
- ----------------------------------------------------------------------------------------------
Net increase in net assets from operations 10,524,633 11,619,924
- ----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (3,289,461) (6,499,935)
Class B (19,905) (2,778)
Class C (302,544) (588,320)
Class R (1,585,486) (1,059,930)
- ----------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (5,197,396) (8,150,963)
- ----------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from shares issued in the reorganization of
Nuveen Virginia (note 1) -- 67,765,255
Net proceeds from shares issued as a capital contribution -- 33,360
Net proceeds from sale of shares 11,015,649 14,267,420
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 3,332,291 3,941,869
- ----------------------------------------------------------------------------------------------
14,347,940 86,007,904
- ----------------------------------------------------------------------------------------------
Cost of shares redeemed (10,659,296) (26,796,317)
- ----------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 3,688,644 59,211,587
- ----------------------------------------------------------------------------------------------
Net increase in net assets 9,015,881 62,680,548
Net assets at the beginning of period 191,335,881 128,655,333
- ----------------------------------------------------------------------------------------------
Net assets at the end of period $200,351,762 $191,335,881
- ----------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end
of period $ 25,432 $ 6,011
- ----------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Virginia and four months of
Nuveen Flagship Virginia (note 1).
See accompanying notes in financial statements
_____
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 Virginia Municipal Bond Fund (the "Fund"),
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 Fund, 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 Virginia Double Tax
Exempt Fund ("Flagship Virginia") and Nuveen Virginia Tax-Free Value Fund
("Nuveen Virginia") reorganized into Nuveen Flagship Virginia Municipal Bond
Fund. Prior to the reorganization, Flagship Virginia was a sub-trust of the
Flagship Tax Exempt Funds Trust while Nuveen Virginia was a series of the Nuveen
Multistate Tax-Free Trust. Nuveen Virginia had a fiscal year end of January 31
prior to being reorganized into Nuveen Flagship Virginia which has retained the
fiscal year end of Flagship Virginia.
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
SECURITIES VALUATION
The prices of municipal bonds in the 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 Fund has 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
November 30, 1997, the Fund had no such outstanding purchase commitments.
___
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
INTEREST INCOME
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
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 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
The Fund is a separate taxpayer for federal income tax purposes. The 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 Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Virginia state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Fund. Net
realized capital gain and market discount distributions are subject to federal
taxation.
FLEXIBLE SALES CHARGE PROGRAM
The 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.
___
22
<PAGE>
DERIVATIVE FINANCIAL INSTRUMENTS
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the six months ended November 30, 1997.
EXPENSE ALLOCATION
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
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.
___
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
2. FUND SHARES
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED 11/30/97 YEAR ENDED 5/31/97*
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization
of Nuveen Virginia:
Class A -- $ -- 938,620 $ 9,896,915
Class B -- -- 36,862 391,987
Class C -- -- 307,161 3,231,156
Class R -- -- 70,304 747,362
Shares issued as a capital
contribution:
Class A -- -- 304,589 3,213,145
Class B -- -- 9 98
Class C -- -- 23,878 251,837
Class R -- -- 45,124 476,789
Shares sold:
Class A 601,969 6,536,142 873,399 9,273,783
Class B 93,976 1,017,028 -- --
Class C 203,455 2,205,106 109,201 1,158,978
Class R 116,114 1,257,373 5,399,536 57,332,494
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 194,889 2,103,856 785 8,340
Class B 1,051 11,419 785 8,340
Class C 22,554 242,764 786 8,340
Class R 89,994 974,252 785 8,340
- ---------------------------------------------------------------------------------------------------------------------------
1,324,002 14,347,940 8,111,824 86,007,904
- ---------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (675,740) (7,329,630) (1,966,406) (20,767,054)
Class B (9,452) (102,933) (1,877) (19,915)
Class C (35,899) (388,511) (399,175) (4,241,028)
Class R (261,865) (2,838,222) (166,991) (1,768,320)
- ---------------------------------------------------------------------------------------------------------------------------
(982,956) (10,659,296) (2,534,449) (26,796,317)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase 341,046 $ 3,688,644 5,577,375 $ 59,211,587
===========================================================================================================================
</TABLE>
* Information represents eight months of Flagship Virginia and four months of
Nuveen Flagship Virginia (see note 1).
_____
24
<PAGE>
3. DISTRIBUTIONS TO SHAREHOLDERS
On December 9, 1997, the Fund declared dividend distributions from its tax-
exempt net investment income which were paid on December 31, 1997, to
shareholders of record on December 9, 1997, as follows:
<TABLE>
- -----------------------------------------------------------------------------
<S> <C>
Dividend per share:
Class A $.0475
Class B .0410
Class C .0425
Class R .0495
- -----------------------------------------------------------------------------
</TABLE>
At the same time, the Fund also declared taxable distributions, which includes
capital gains and/or taxable market discount, of $.0100 per share.
4. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities for the six months ended November 30, 1997, aggregated $8,357,123 and
$6,255,490, respectively. Purchases and sales (including maturities) of
temporary municipal investments for the six months ended November 30, 1997,
aggregated $6,300,000 and $5,300,000, respectively.
At November 30, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for the Fund.
At May 31, 1997, the Fund's last fiscal year end, the Fund had unused capital
loss carryforwards of $409,795 available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, $257,096 of the
carryforward will expire in the year 2002 and $152,699 will expire in the year
2004.
5. UNREALIZED APPRECIATION (DEPRECIATION)
At November 30, 1997, net unrealized appreciation aggregated $14,023,507, all of
which related to appreciated securities.
_____
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Trust's investment management agreement with the Adviser, the 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 the 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 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.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $195,400 of which
approximately $168,900 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 six months ended November 30, 1997, the Distributor compensated
authorized dealers directly with approximately $62,000 in commission advances at
the time of purchase. 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 six months
ended November 30, 1997, the Distributor retained approximately $16,700 in such
12b-1 fees. 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 approximately $6,000 of
CDSC on share redemptions during the six months ended November 30, 1997.
_____
26
<PAGE>
7. COMPOSITION OF NET ASSETS
At November 30, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
- -----------------------------------------------------------------------------------------
<S> <C>
Capital paid-in $186,351,033
Balance of undistributed net investment income 25,432
Accumulated net realized gain (loss) from investment transactions (48,210)
Net unrealized appreciation of investments 14,023,507
- ------------------------------------------------------------------------------------------
Net assets $200,351,762
==========================================================================================
</TABLE>
_____
27
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
CLASS (INCEPTION DATE) OPERATING PERFORMANCE LESS DISTRIBUTIONS
--------------------- ------------------
NUVEEN FLAGSHIP NET
VIRGINIA ** NET REALIZED AND DIVIDENDS NET TOTAL
ASSET UNREALIZED FROM TAX- ASSET RETURN
VALUE NET GAIN(LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
MAY 31, OF PERIOD INCOME (B) INVESTMENTS INCOME GAINS PERIOD VALUE(A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (3/86)
1998 (d) $10.66 $.29 $ .29 $(.29) $ -- $10.95 5.44%
1997 10.40 .58 .25 (.57) -- 10.66 8.20
1996 10.56 .57 (.15) (.58) -- 10.40 4.03
1995 10.36 .59 .20 (.59) -- 10.56 7.99
1994 10.82 .60 (.31) (.60) (.15) 10.36 2.62
1993 10.24 .62 .62 (.62) (.04) 10.82 12.41
1992 9.97 .63 .27 (.63) -- 10.24 9.37
1991 9.70 .63 .28 (.64) -- 9.97 9.72
1990 9.76 .64 (.06) (.64) -- 9.70 6.14
1989 9.29 .64 .46 (.63) -- 9.76 12.25
1988 9.09 .64 .19 (.63) -- 9.29 9.73
CLASS B (2/97)
1998 (d) 10.66 .25 .29 (.25) -- 10.95 5.07
1997 (c) 10.62 .16 .04 (.16) -- 10.66 1.94
CLASS C (10/93)
1998 (d) 10.65 .26 .30 (.26) -- 10.95 5.25
1997 10.39 .52 .26 (.52) -- 10.65 7.61
1996 10.56 .51 (.16) (.52) -- 10.39 3.37
1995 10.36 .53 .20 (.53) -- 10.56 7.40
1994 (c) 11.24 .34 (.78) (.34) (.10) 10.36 (7.13)*
CLASS R (2/97)
1998 (d) 10.66 .30 .29 (.30) -- 10.95 5.56
1997 (c) 10.62 .20 .04 (.20) -- 10.66 2.26
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ending May 31, 1997, reflects
the financial highlights of Flagship Virginia.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted.
(d) For the six months ending November 30, 1997.
_____
28
<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
NET ASSETS BEFORE BEFORE AFTER AFTER PORTFIOLIO
END OF PERIOD REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
(IN THOUSANDS) MENT MENT MENT (B) MENT (B) RATE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 126,958 .90%* 5.07%* .70%* 5.27%* 3%
122,252 1.00 5.19 .74 5.45 23
117,677 1.06 5.18 .83 5.41 17
112,643 1.10 5.50 .79 5.81 50
107,502 1.06 5.11 .64 5.53 17
96,105 1.07 5.43 .68 5.82 30
64,628 1.14 5.89 .75 5.28 27
48,062 1.18 6.21 .91 6.48 22
41,596 1.18 6.27 .91 6.54 35
37,151 1.25 6.41 .97 6.69 18
31,748 1.18 6.65 .88 6.95 75
1,329 1.66* 4.31* 1.45* 4.52* 3
381 1.66* 4.49* 1.47* 4.68* 23
14,105 1.45* 4.52* 1.25* 4.72* 3
11,700 1.55 4.63 1.29 4.89 23
10,978 1.60 4.62 1.38 4.84 17
6,537 1.65 4.93 1.34 5.24 50
4,759 1.79* 4.20 1.14* 4.85* 17
57,960 .70* 5.27* .50* 5.47* 3
57,002 .71* 5.50* .52* 5.69* 23
- --------------------------------------------------------------------------------------------------------------
</TABLE>
_____
29
<PAGE>
ADDITIONAL INVESTMENT OPPORTUNITIES
NUVEEN FAMILY OF MUTUAL FUNDS
Nuveen offers a variety of funds designed to help you reach your financial
goals.
GROWTH FUNDS
Nuveen Rittenhouse Growth Fund
GROWTH AND INCOME FUNDS
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
MUNICIPAL BOND FUNDS
NATIONAL FUNDS
Long-Term
Insured
Intermediate
Limited Term
STATE FUNDS
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Fund, contact your financial
adviser. If you would like to add to your current investment on a regular basis,
you can sign up for Nuveen's systematic investing program, which allows you to
invest a fixed dollar amount every month automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you give your investment the added
growth potential of long-term compounding.
For more information on any of these service options, call your adviser, or
Nuveen at (800) 225-8530.
_____
30
<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
Boston Financial Data Service
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
LEGAL COUNSEL
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, Illinois
_____
31
<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
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
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 products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 225-8530 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Il 60606-1286
(800) 225-8530
www.nuveen.com
<PAGE>
NUVEEN
MUNICIPAL
BOND FUNDS
NOVEMBER 30, 1997
Semiannual Report
[PHOTO APPEARS HERE]
DEPENDABLE, TAX FREE INCOME
TO HELP YOU KEEP MORE OF WHAT YOU EARN.
MARYLAND
<PAGE>
CONTENTS
1 DEAR SHAREHOLDER
3 ANSWERING YOUR QUESTIONS
6 PERFORMANCE OVERVIEW
8 PORTFOLIO OF INVESTMENTS
13 STATEMENT OF NET ASSETS
14 STATEMENT OF OPERATIONS
15 STATEMENT OF CHANGES IN NET ASSETS
16 NOTES TO FINANCIAL STATEMENTS
22 FINANCIAL HIGHLIGHTS
24 ADDITIONAL INVESTMENT OPPORTUNITIES
25 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.
It's a pleasure to share with you the Nuveen Maryland Municipal Bond Fund's
performance record for the 12 months ended November 30, 1997. Over the past
year, investors continued to enjoy attractive, tax-free dividends generated by
the fund's portfolio of municipal bonds. As of November 30, 1997, Class A
shareholders were receiving a current yield on net asset value of 4.16%. To
match this yield, investors in the 34.5% combined federal and state income tax
bracket would have had to earn at least 6.35% on taxable alternatives. During
this same period, the fund provided Class A shareholders with a total return on
net asset value of 5.91% with income reinvested. You will find additional
details on the fund's performance on pages 6-7.
THE YEAR IN REVIEW
Over the past year, U.S. investors have benefited from robust economic growth
with little evidence of inflationary pressures. With unemployment rates at 20-
year lows and the current economic expansion entering its seventh year, the
presence of benign inflation has sparked debate over whether the traditional
link between growth and inflation has been broken. During 1997, expectations
that excess growth would generate inflation disrupted the markets on several
occasions, most notably following the Federal Reserve's interest rate tightening
in March and speeches by Fed Chairman Alan Greenspan. Still, falling commodity
prices kept producer prices in check, while low import prices--due in part to
the
_____
1
<PAGE>
"The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation."
weakness in Asian markets--limited U.S. companies' ability to raise consumer
prices. This combination has kept inflation subdued and the Federal Reserve "on
hold" since March. The reduction in the federal deficit and passage of the
Taxpayer Relief Act of 1997 offer additional encouragement to long-term fixed-
income investors.
HELPING YOU BUILD A BETTER PORTFOLIO
The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation. Stock market volatility,
especially late in the year, provided a vivid illustration of the steadying
effect that fixed-income investments can provide in a well-constructed
investment portfolio. Nuveen mutual funds provide an excellent balance to other
stock and bond investments. Your financial adviser can introduce you to a
variety of other Nuveen products and services to round out your investment
portfolio, including the Nuveen Growth and Income Stock Fund and two balanced
stock and bond funds.
In addition, we recently expanded our private asset management capabilities
through the acquisition of Rittenhouse Financial Services, a well-respected
growth investment manager. We encourage you to talk with your financial adviser
about ways to complement your current Nuveen investments by taking advantage of
these additional products and services.
We at Nuveen remain committed to providing you with quality investment solutions
that withstand the test of time. We thank you for your confidence in us and our
family of investments, and we look forward to our next report to you.
Sincerely,
/s/ Timothy R. Schwertfeger
TIMOTHY R. SCHWERTFEGER
Chairman of the Board
January 15, 1998
_____
2
<PAGE>
ANSWERING YOUR QUESTIONS
[PHOTO OF TED NEILD APPEARS HERE]
TED NEILD, MANAGING DIRECTOR OF NUVEEN'S PORTFOLIO MANAGEMENT TEAM, TALKS ABOUT
THE MUNICIPAL BOND MARKET AND OFFERS INSIGHT INTO FACTORS THAT AFFECTED THE
PERFORMANCE OF THE FUND OVER THE PAST YEAR.
WHAT ECONOMIC AND MARKET FACTORS INFLUENCED THE PERFORMANCE OF MUNICIPAL BONDS
OVER THE PAST YEAR?
Over the past 12 months, the performance of the municipal bond market was
influenced by three major factors: the continued strength of the U.S. economy,
minimal inflation, and volatility in the equity markets. During 1997, these
factors contributed to a positive environment for fixed-income investments, as
reflected in the steady-to-declining interest rates evident during the year.
Between December 1996 and November 1997, the yield on the 30-year Treasury bond
dropped from 6.36% to 6.05%, and the municipal market followed suit, as the
yield on the Bond Buyer 40 declined from 5.63% to 5.36%. The spread between tax-
free municipal bonds and taxable Treasury bonds remained tight, making municipal
bonds very attractive. However, the limited supply of Maryland bonds constrained
our ability to find value in the marketplace.
HOW HAS THE FUND PERFORMED DURING THIS PERIOD?
As Tim mentioned in his letter to shareholders, the total return on net asset
value for Class A shares of the Nuveen Maryland Municipal Bond Fund was 5.91%
for the 12 months ended November 30, 1997.
The performance of the fund was affected by comparatively low turnover during
the past year. This reflects our deliberate decision to emphasize current
income, price stability and tax-efficiency, in keeping with the fund's
objectives. The portfolio currently maintains an embedded yield of 5.97%
compared with the 5.36% offered by today's long-term municipal bonds. This
difference of 61 basis points helps to sustain the tax-free dividends provided
by
_____
3
<PAGE>
"The majority of the bonds in the portfolio are trading at significant premiums,
which provides more price stability in volatile markets."
the fund. Additionally, the majority of the bonds in the portfolio are trading
at significant premiums, which provides more price stability in volatile
markets.
GIVEN THE CURRENT MUNICIPAL MARKET, WHERE WERE YOU ABLE TO FIND VALUE?
We concentrated on identifying individual bonds with current yields, prices,
credit quality and future prospects that are exceptionally attractive relative
to other bonds in the market. By doing so, we believe the portfolio is
positioned to deliver above-market performance. Currently, we feel there is
tremendous value in high-grade housing bonds. A few deals were unexpectedly
called by their issuers this year, so bond buyers appear to be avoiding the
entire sector and are effectively driving yields higher. Since Nuveen has such a
large, experienced housing research staff, we were able to buy these securities
with greater confidence. Additionally, we avoided lower-rated securities because
we felt that the marginally higher yield did not compensate the fund for the
increased credit risk.
WHAT ARE YOUR KEY STRATEGIES FOR THE COMING YEAR?
At Nuveen, we take a holistic approach to portfolio management--assessing all of
the factors that determine a fund's performance and taking advantage of all of
them to contribute to total return and dividend stability. In the coming year,
one focus will be maintaining good call protection, which helps sustain the
fund's dividend.
While credit spreads are tight, we will continue to take advantage of
opportunities to purchase bonds with high credit quality at yields that are
similar to bonds with lower ratings. During the past year, the yield
differentials between AAA and BBB bonds narrowed significantly.
_____
4
<PAGE>
"Look at the year ahead, we believe the overall market will continue to strike a
good balance between supply and demand."
We believe that if credit spreads widen, these high-quality issues will increase
in value relative to lower-rated bonds.
As part of our value investing approach, we will also continue to look for
individual bonds that offer good long-term value with the potential for
appreciating returns. Our thorough research helps us find investment quality
bonds that offer the best values--such as bonds from specific regions and
sectors that have the best potential for performance and appreciation. Recently,
research helped us uncover a number of bonds that were eventually pre-refunded
by their issuers, which adds tremendous value to the portfolios. We plan to
continue to search for bonds with pre-refunding potential that we feel are
undervalued by the market as a whole.
WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
Looking at the year ahead, we believe the overall market will continue to strike
a good balance between supply and demand. We expect supply to increase as new
issuers continue to enter the market. A continued decline in yields could also
cause new supply to come to market through refunding of current debt. On the
demand side, volatility in the equity markets, plus the potential for a
weakening of the economy, could spark increased interest in bonds of all types.
The financial crises in Asia, coupled with the continued strength of the dollar
and low commodity prices, are all contributing to the excellent inflation
picture. This backdrop should help offset stronger labor markets and limit the
effects of any bond market corrections. In the meantime, positive underlying
fundamentals provide good support for the municipal market.
_____
5
<PAGE>
Nuveen Maryland
Municipal Bond Fund
PERFORMANCE OVERVIEW
As of November 30, 1997
<TABLE>
<CAPTION>
- -----------------------------
MORNINGSTAR RATING/1/ FUND HIGHLIGHTS
- ----------------------------- ---------------------------------------------------------------------------
* * * *
Share Class A B C R
<S> <C> <C> <C> <C> <C>
Inception Date 9/94 3/97 9/94 12/91
...........................................................................
Net Asset Value (NAV) $10.46 $10.46 $10.46 $ 10.48
...........................................................................
CUSIP 67065L831 67065L823 67065L815 67065L799
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total Net Assets ($000) $64,009
...........................................................................
Average Weighted Maturity (Years) 19.88
...........................................................................
Average Weighted Duration (Years) 5.81
---------------------------------------------------------------------------
<CAPTION>
ANNUALIZED TOTAL RETURN/2/
---------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
1-Year 5.91% 1.51% 5.23% 5.38% 6.20%
...........................................................................
5-Year 6.45% 5.53% 5.79% 5.74% 6.73%
...........................................................................
Since Inception 6.68% 5.88% 5.95% 5.95% 6.96%
---------------------------------------------------------------------------
<CAPTION>
TAX-FREE YIELDS
---------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
Dist Rate 4.76% 4.56% 4.02% 4.19% 4.92%
...........................................................................
SEC 30-Day Yld 4.16% 3.98% 3.41% 3.61% 4.36%
...........................................................................
Taxable Equiv Yld/3/ 6.35% 6.08% 5.21% 5.51% 6.66%
---------------------------------------------------------------------------
</TABLE>
/1/ Overall rating for Class A shares within the municipal bond category for
the period ended November 30, 1997. 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. The fund earned four stars for the three-year
period ended November 30, 1997. In an investment category, 10% of funds
receive five stars and 22.5% receive four stars. For the period ending
November 30, 1997, 1,481 municipal bond funds were rated for the three-year
period, 695 for the five-year period, and 332 for the 10-year period.
/2/ 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 up-front sales charge. Class B shares
have a contingent deferred sales charge (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 B shares automatically convert to Class A shares eight years
after purchase. Class C shares have a 1% CDSC for redemptions within one
year which is not reflected in the one-year total return.
/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.
_____
6
<PAGE>
Credit Quality
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
AA 22%
A 9%
BBB/NR 8%
AAA/Pre-refunded 61%
</TABLE>
- --------------------------------------------------------------------------------
Diversification
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
General Obligations 21%
Health Care Facilities 12%
Escrowed Bonds 11%
Transportation 10%
Lease Rental 6%
Educational Facilities 5%
Other 4%
Pollution Control 5%
Water & Sewer 3%
Housing Facilities 23%
</TABLE>
- --------------------------------------------------------------------------------
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<S> <C>
0.0405 Dec. 1996
0.0405 Jan. 1997
0.041 Feb. 1997
0.041 Mar. 1997
0.0415 Apr. 1997
0.0415 May 1997
0.0415 June 1997
0.0415 July 1997
0.0415 Aug. 1997
0.0415 Sept. 1997
0.0415 Oct. 1997
0.0415 Nov. 1997
</TABLE>
_____
7
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
MARYLAND
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATIONAL FACILITIES -- 5.0%
$1,000,000 Maryland Health and Higher Educational Facilities 7/08 at 102 Aa2 $ 972,400
Authority, Refunding Revenue Bonds, The Johns
Hopkins University Issue, Series 1998, 5.125%,
7/01/20 (DD)
1,500,000 Morgan State University, Maryland, Academic Fees No Opt. Call Aaa 1,708,290
and Auxiliary Facilities Fees, Revenue Refunding
Bonds, 1993 Series, 6.100%, 7/01/20
500,000 University of Maryland System, Auxiliary Facility 10/03 at 101 AA+ 503,190
and Tuition Revenue Bonds, 1993 Refunding
Series C, 5.000%, 10/01/11
- ----------------------------------------------------------------------------------------------------------------------------
ESCROWED BONDS -- 11.0%
500,000 Maryland Health and Higher Educational Facilities 7/00 at 102 Aaa 544,740
Authority, Revenue Bonds, Sinai Hospital of
Baltimore Issue, Series 1990, 7.000%, 7/01/19
(Pre-refunded to 7/01/00)
500,000 Maryland Health and Higher Educational Facilities 7/00 at 102 Aaa 541,695
Authority, Revenue Bonds, Francis Scott Key
Medical Center Issue, Series 1990, 6.750%,
7/01/23 (Pre-refunded to 7/01/00)
1,005,000 Maryland Health and Higher Educational Facilities 7/00 at 102 Aaa 1,137,178
Authority, Doctors' Community Hospital Issue,
Series 1990, 8.750%, 7/01/22
(Pre-refunded to 7/01/00)
700,000 The Maryland National Capital Park and Planning 7/02 at 102 AA*** 764,050
Commission, Maryland (Prince George's County,
Maryland), General Obligation Bonds, Prince
George's County Park Acquisition and Development
Bonds, Series L-2, 6.125%, 7/01/10
(Pre-refunded to 7/01/02)
600,000 City of Baltimore, Maryland (Mayor and City Council 10/02 at 100 Aaa 658,488
of Baltimore), General Obligation Consolidated
Public Improvement Bonds, 1992 Series A,
6.500%, 10/15/12 (Pre-refunded to 10/15/02)
625,000 Mayor and City Council of Baltimore (Maryland), 7/00 at 100 Aaa 662,050
Project and Refunding Revenue Bonds (Water
Projects), Series 1990-A, 6.500%, 7/01/20
(Pre-refunded to 7/01/00)
500,000 Commonwealth of Puerto Rico, Public Improvement 7/02 at 101 1/2 Aaa 556,145
Bonds, Series 1992 (General Obligation Bonds),
6.600%, 7/01/13 (Pre-refunded to 7/01/02)
</TABLE>
_____
8
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ESCROWED BONDS -- CONTINUED
$1,750,000 Puerto Rico Aqueduct and Sewer 7/98 at 102 AAA $ 1,826,650
Authority, Revenue Bonds, Series
1988A, 7.875%, 7/01/17
(Pre-refunded to 7/01/98)
315,000 Puerto Rico Electric Power 7/99 at 101 1/2 AAA 334,933
Authority, Power Revenue Refunding
Bonds, Series 1989-O, 7.125%, 7/01/14
(Pre-refunded to 7/01/99)
- ----------------------------------------------------------------------------------------------------------------------------
GENERAL OBLIGATION BONDS -- 20.0%
2,000,000 State of Maryland, General 7/03 at 101 Aaa 2,021,720
Obligation Bonds, State and
Local Facilities Loan of 1993,
Third Series (Capital Improvement and
Refunding Bonds), 4.600%, 7/15/06
2,000,000 Baltimore County, Maryland, General 7/98 at 102 Aaa 2,072,640
Obligation Bonds, Baltimore County
Pension Funding Bonds, 1991 Refunding
Series, 6.700%, 7/01/11
2,295,000 Mayor and City Council of Baltimore No Opt. Call Aaa 2,655,659
(City of Baltimore, Maryland), General
Obligation Consolidated Public
Improvement Refunding Bonds, Series
1995 A, 7.375%, 10/15/03
2,500,000 Commonwealth of Puerto Rico, Public 7/07 at 101 1/2 A 2,674,275
Improvement Bonds of 1997, 6.000%, 7/01/26
1,170,000 Washington Suburban Sanitary No Opt. Call Aa1 1,334,069
District, Maryland (Montgomery
and Prince George's Counties,
Maryland), General Construction Bonds,
Series 1991 (Second Series), 8.000%, 1/01/02
1,000,000 Washington Suburban Sanitary 6/02 at 102 Aa1 1,079,730
District, General Construction Refunding
Bonds, Series 1992, 5.900%, 6/01/04
1,000,000 Washington Suburban Sanitary 6/07 at 100 Aa1 991,500
District (Montgomery and Prince
George's Counties), General Construction
Bonds,Series 1997, 5.125%, 6/01/19 (WI)
- ----------------------------------------------------------------------------------------------------------------------------
HEALTH CARE FACILITIES -- 11.7%
1,845,000 Maryland Economic Development 4/11 at 102 N/R 1,861,181
Corporation (Health and Mental Hygiene
Providers Facilities Acquisition Program),
Revenue Bonds, Series 1996A, 7.625%, 4/01/21
1,000,000 Maryland Health and Higher 7/03 at 102 Aaa 995,670
Educational Facilities Authority, Refunding
Revenue Bonds, Francis Scott Key Medical
Center Issue, Series 1993,
5.000%, 7/01/13
</TABLE>
_____
9
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP MARYLAND -- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH CARE FACILITIES -- CONTINUED
$1,000,000 Maryland Health and Higher Educational 7/03 at 102 Baa2 $ 1,015,290
Facilities Authority, Project and Refunding
Revenue Bonds, Doctors Community Hospital
Issue, Series 1993, 5.750%, 7/01/13
2,165,000 City of Gaithersburg, Maryland, Nursing Home No Opt. Call Aaa 2,507,092
Revenue Refunding Bonds (Shady Grove
Adventist Nursing and Rehabilitation Center
Project), Series 1992A, 6.500%, 9/01/12
1,000,000 Puerto Rico Industrial, Tourist, 1/05 at 102 Aaa 1,085,400
Educational, Medical and Environmental
Control Facilities Financing Authority, Hospital
Revenue Bonds, 1995 Series A (Hospital Auxilio
Mutuo Obligated Group Project), 6.250%, 7/01/16
- ----------------------------------------------------------------------------------------------------------------------------------
HOUSING FACILITIES -- 22.5%
1,385,000 Community Development Administration, Department 4/01 at 102 Aa2 1,464,554
of Housing and Community Development, State
of Maryland, Single Family Program Bonds, 1991
Fourth Series, 7.450%, 4/01/32 (Alternative
Minimum Tax)
Community Development Administration, Department
of Housing and Community Development, State of
Maryland, Multi-Family Housing Revenue Bonds
(Insured Mortgage Loans), 1992 Series D:
700,000 6.700%, 5/15/27 5/02 at 102 Aa3 737,387
500,000 6.750%, 5/15/33 5/02 at 102 Aa3 526,660
1,000,000 Baltimore City, Maryland, Mortgage 12/02 at 102 AAA 1,063,430
Revenue Refunding Bonds, Series 1992 (GNMA
Collateralized-Tindeco Wharf Apartments
Project), 6.700%, 12/20/28
990,000 Howard County, Maryland, Mortgage 7/02 at 102 Aaa 1,038,619
Revenue Refunding Bonds, Series 1992 (Howard
Hills Townhouses Project-FHA Insured Mortgage Loan),
6.400%, 7/01/24
2,000,000 Howard County, Maryland, Multifamily 7/02 at 104 Baa2 2,206,820
Housing Revenue Refunding Bonds, Series 1994
(Chase Glen Project), 7.000%, 7/01/24
(Mandatory put 7/01/04)
1,000,000 Housing Opportunities Commission of 7/05 at 102 Aa 1,031,560
Montgomery County (Montgomery County, Maryland),
Multifamily Housing Revenue Bonds, 1995
Series A, 6.000%, 7/01/20
</TABLE>
_____
10
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING FACILITIES -- CONTINUED
$ 1,615,000 Housing Opportunities Commission of Montgomery 7/04 at 102 Aa2 $ 1,711,432
County (Montgomery County, Maryland),
Single Family Mortgage Revenue Bonds,
1994 Series A, 6.600%, 7/01/14
1,550,000 Housing Authority of Prince George's County, 1/02 at 102 Aaa 1,650,595
Maryland, Mortgage Revenue Refunding Bonds,
Series 1992A (New Keystone Apartments Project-FHA
Insured Mortgage Loan), 6.800%, 7/01/25
3,000,000 Housing Authority of Prince George's County (Maryland), 8/07 at 102 AAA 3,035,340
FHLMC/FNMA/GNMA Collateralized, Single Family
Mortgage Revenue Bonds, Series 1997, 5.750%,
8/01/26 (Alternative Minimum Tax)
- ---------------------------------------------------------------------------------------------------------------------------------
LEASE RENTAL -- 6.2%
1,760,000 Maryland Stadium Authority, Convention Center 12/04 at 102 Aaa 1,875,544
Expansion Lease Revenue Bonds, Series 1994,
5.875%, 12/15/12
Maryland Stadium Authority, Sports Facilities Lease
Revenue Bonds, Series 1989D:
500,000 7.375%, 12/15/04 (Alternative Minimum Tax) 12/99 at 102 Aa 538,255
500,000 7.500%, 12/15/10 (Alternative Minimum Tax) 12/99 at 102 Aa 537,830
1,000,000 Mayor and City Council of Baltimore 10/07 at 102 Aaa 992,470
(City of Baltimore, Maryland), Certificates
of Participation (Emergency Telecommunications
Facilities), Series 1997A, 5.000%, 10/01/17
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER REVENUE -- 3.3%
1,000,000 Montgomery County, Maryland, Solid Waste System 6/03 at 102 Aaa 1,050,380
Revenue Bonds (1993 Series A), 5.875%, 6/01/13
(Alternative Minimum Tax)
1,000,000 Northeast Maryland Waste Disposal No Opt. Call Aaa 1,054,710
Authority, Resource Recovery Revenue Refunding
Bonds (Southwest Resource Recovery Facility),
Series 1993, 6.900%, 1/01/00
- ---------------------------------------------------------------------------------------------------------------------------------
POLLUTION CONTROL FACILITIES -- 5.1%
1,500,000 Mayor and City Council of Baltimore (Maryland), 4/02 at 103 AA- 1,642,830
Port Facilities Revenue Bonds (Consolidation Coal
Sales Company Project), Series 1984B, 6.500%, 10/01/11
1,500,000 Prince George's County, Maryland, Pollution Control 1/03 at 102 A1 1,606,335
Revenue Refunding Bonds (Potomac Electric Project),
1993 Series, 6.375%, 1/15/23
</TABLE>
_____
11
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
MARYLAND -- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSPORTATION -- 9.7%
$2,525,000 Maryland Transportation Authority, 7/04 at 102 Aaa $ 2,684,100
Special Obligation Revenue Bonds,
Baltimore/Washington International Airport Projects,
Series 1994-A (Qualified Airport Bonds), 6.400%,
7/01/19 (Alternative Minimum Tax)
1,000,000 Maryland Transportation Authority, Transportation 7/02 at 100 A1 1,029,970
Facilities Projects, Revenue Bonds, Series 1992,
5.750%, 7/01/15
2,500,000 Washington Metropolitan Area Transit Authority 1/04 at 102 Aaa 2,511,325
(District of Columbia), Gross Revenue Transit
Refunding Bonds, Series 1993, 5.250%, 7/01/14
- ----------------------------------------------------------------------------------------------------------------------------------
UTILITIES -- 0.3%
185,000 Puerto Rico Electric Power Authority, Power 7/99 at 101 1/2 Baa1 196,958
Revenue Refunding Bonds, Series 1989-N,
7.125%, 7/01/14
- ----------------------------------------------------------------------------------------------------------------------------------
WATER/SEWER FACILITIES -- 2.4%
1,500,000 City of Baltimore, Maryland (Mayor and City Council 7/06 at 101 Aaa 1,531,320
of Baltimore) Project and Refunding Revenue Bonds
(Water Projects) Series 1996-A, 5.500%, 7/01/26
- ----------------------------------------------------------------------------------------------------------------------------------
$58,680,000 Total Investments -- (cost $58,776,345) - 97.2% 62,222,459
- ----------------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES -- 2.0%
500,000 University of Maryland System, Revolving Equipment VMIG-1 500,000
Loan Program, Variable Rate Demand Bonds,
Series B, 3.800%, 7/01/15+
800,000 University of Maryland System, Revolving Equipment VMIG-1 800,000
Loan Program, Variable Rate Demand Bonds,
Series A, 3.800%, 7/01/15+
- ----------------------------------------------------------------------------------------------------------------------------------
$1,300,000 Total Temporary Investments -- 2.0% 1,300,000
- ----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.8% 486,602
--------------------------------------------------------------------------------------------------------
Net Assets -- 100% $64,009,061
--------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions: 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: Using the higher of Standard & Poor's or
Moody's ratings.
*** Securities are backed by an escrow which ensures
the timely rated securities or trust containing
sufficient U.S. payment of principal and
Government or U.S. Government agency interest.
Securities are securities, normally considered to
be equivalent to AAA
+ 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.
(DD) Security purchased on a delayed delivery basis
(see note 1).
(WI) Security purchased on a when-issued
basis (note 1).
N/R - Investment is not rated.
_____
12 See accompanying notes to financial statements.
<PAGE>
STATEMENT OF NET ASSETS (UNAUDITED)
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
MARYLAND
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $62,222,459
Temporary investments in short-term municipal securities, at amortized cost,
which approximates market value (note 1) 1,300,000
Receivables:
Interest 1,307,430
Investments sold 1,495,972
Shares sold 130,130
Other assets 42,565
- -------------------------------------------------------------------------------------------------------------------
Total assets 66,498,556
===================================================================================================================
LIABILITIES
Cash overdraft 327,930
Payable for investments purchased 1,937,299
Accrued expenses:
Management fees (note 6) 25,776
12b-1 distribution and service fees (notes 1 and 6) 4,127
Other 28,805
Dividends payable 165,558
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 2,489,495
===================================================================================================================
Net assets (note 7) $64,009,061
===================================================================================================================
CLASS A SHARES (NOTE 1)
Net assets $16,224,035
Shares outstanding 1,550,652
Net asset value and redemption price per share $ 10.46
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 10.92
===================================================================================================================
CLASS B SHARES (NOTE 1)
Net assets $ 1,038,658
Shares outstanding 99,300
Net asset value, offering and redemption price per share $ 10.46
===================================================================================================================
CLASS C SHARES (NOTE 1)
Net assets $ 2,208,645
Shares outstanding 211,205
Net asset value, offering and redemption price per share $ 10.46
===================================================================================================================
CLASS R SHARES (NOTE 1)
Net assets $44,537,723
Shares outstanding 4,250,991
Net asset value, offering and redemption price per share $ 10.48
===================================================================================================================
</TABLE>
See accompanying notes to financial statements.
_____
13
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
MARYLAND
- -----------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $1,730,396
- -----------------------------------------------------------------------------------------
EXPENSES
Management fees (note 6) 169,843
12b-1 service fees -- Class A (notes 1 and 6) 14,929
12b-1 distribution and service fees -- Class B (notes 1 and 6) 2,998
12b-1 distribution and service fees -- Class C (notes 1 and 6) 7,832
Shareholders' servicing agent fees and expenses 25,942
Custodian's fees and expenses 22,670
Trustees' fees and expenses (note 6) 602
Professional fees 7,532
Shareholders' reports - printing and mailing expenses 14,517
Federal and state registration fees 2,901
Other expenses 892
- -----------------------------------------------------------------------------------------
Total expenses before expense reimbursement 270,658
Expense reimbursement (note 6) (17,303)
- -----------------------------------------------------------------------------------------
Net expenses 253,355
- -----------------------------------------------------------------------------------------
Net investment income 1,477,041
- -----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 4) 37,738
Net change in unrealized appreciation or depreciation of investments 1,270,847
- -----------------------------------------------------------------------------------------
Net gain from investments 1,308,585
- -----------------------------------------------------------------------------------------
Net increase in net assets from operations $2,785,626
=========================================================================================
</TABLE>
See accompanying notes to financial statements.
_____
14
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
MARYLAND
--------------------------------------------------
SIX MONTHS ENDED FOUR MONTHS ENDED YEAR ENDED
11/30/97 5/31/97 1/31/97
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net investment income $ 1,477,041 $ 961,469 $ 2,797,118
Net realized gain (loss) from investment
transactions (notes 1 and 4) 37,738 (122,456) 68,885
Net change in unrealized appreciation or
depreciation of investments 1,270,847 116,827 (1,067,755)
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 2,785,626 955,840 1,798,248
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (355,564) (202,348) (444,620)
Class B (12,017) (690) N/A
Class C (43,857) (28,646) (71,252)
Class R (1,091,367) (726,336) (2,248,162)
- -----------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions
to shareholders (1,502,805) (958,020) (2,764,034)
- -----------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from sale of shares 5,615,475 3,009,545 9,011,948
Net proceeds from shares issued to
shareholders due to reinvestment
of distributions 994,320 626,481 1,781,550
- -----------------------------------------------------------------------------------------------------------------------
6,609,795 3,636,026 10,793,498
- -----------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (2,419,753) (2,607,528) (8,005,106)
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund
share transactions 4,190,042 1,028,498 2,788,392
- -----------------------------------------------------------------------------------------------------------------------
Net increase in net assets 5,472,863 1,026,318 1,822,606
Net assets at the beginning of period 58,536,198 57,509,880 55,687,274
- -----------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $64,009,061 $58,536,198 $57,509,880
=======================================================================================================================
Balance of undistributed net investment
income at end of period $ 11,705 $ 37,469 $ 34,020
=======================================================================================================================
</TABLE>
N/A - The Fund was not authorized to issue Class B Shares prior to February 1,
1997 (see note 1).
See accompanying notes to financial statements.
_____
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 "Fund"), 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 Fund, 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 was reorganized into the Trust and renamed Nuveen Maryland Municipal Bond
Fund. 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.
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its 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 Fund has 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
November 30, 1997, the Fund had a when-issued purchase commitment of $990,089
and a delayed delivery purchase commitment of $947,210.
INTEREST INCOME
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
_____
16
<PAGE>
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 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
The Fund is a separate taxpayer for federal income tax purposes. The 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 Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Maryland state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Fund. Net
realized capital gain and market discount distributions are subject to federal
taxation.
FLEXIBLE SALES CHARGE PROGRAM
The Fund offers Class A, B, C and Class 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 (CDSC declines 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.
_____
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DERIVATIVE FINANCIAL INSTRUMENTS
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the six months ended November 30, 1997.
EXPENSE ALLOCATION
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
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.
_____
18
<PAGE>
2. FUND SHARES
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED 11/30/97 FOUR MONTHS ENDED 5/31/97 YEAR ENDED 1/31/97
-----------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 297,183 $ 3,082,323 173,922 $ 1,782,262 599,512 $ 6,107,242
Class B 84,210 874,029 14,619 149,109 N/A N/A
Class C 20,584 213,236 19,110 194,556 82,446 841,446
Class R 139,158 1,445,887 86,096 883,618 201,418 2,063,260
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 25,560 265,323 14,385 146,945 30,226 308,915
Class B 480 4,991 14 147 N/A N/A
Class C 3,410 35,347 2,157 22,020 5,415 55,286
Class R 66,307 688,659 44,709 457,369 138,494 1,417,349
- ----------------------------------------------------------------------------------------------------
636,892 6,609,795 355,012 3,636,026 1,057,511 10,793,498
- ----------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (38,647) (400,980) (72,253) (733,516) (137,185) (1,394,119)
Class B (23) (240) -- -- N/A N/A
Class C (18,172) (186,731) (9,738) (99,104) (32,039) (327,651)
Class R (176,159) (1,831,802) (173,454) (1,774,908) (615,881) (6,283,336)
- ----------------------------------------------------------------------------------------------------
(233,001) (2,419,753) (255,445) (2,607,528) (785,105) (8,005,106)
- ----------------------------------------------------------------------------------------------------
Net increase 403,891 $ 4,190,042 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.
3. DISTRIBUTIONS TO SHAREHOLDERS
On December 9, 1997, the Fund declared dividend distributions from its tax-
exempt net investment income which were paid on December 31, 1997, to
shareholders of record on December 9, 1997, as follows:
<TABLE>
- ----------------------------------------------------------------------------------------------------
<S> <C>
Dividend per share:
Class A $.0415
Class B .0350
Class C .0365
Class R .0430
- ----------------------------------------------------------------------------------------------------
</TABLE>
_____
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
4. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities for the six months ended November 30, 1997, aggregated $7,921,640 and
$3,552,750, respectively. Purchase and sales (including maturities) of temporary
municipal investments for the six months ended November 30, 1997, aggregated
$4,900,000 and $4,300,000, respectively.
At November 30, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for the Fund.
At May 31, 1997, the Fund's last fiscal year end, the Fund had unused capital
loss carryforwards of $634,930 available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, $135,110 of the
carryforwards will expire in the year 2002, $377,963 in the year 2003 and
$121,857 in the year 2005.
5. UNREALIZED APPRECIATION (DEPRECIATION)
At November 30, 1997, net unrealized appreciation aggregated $3,446,114, all of
which related to appreciated securities.
_____
20
<PAGE>
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Trust's investment management agreement with the Adviser, the 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 the 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 Adviser waived part of its management fees or reimbursed certain expenses of
the Fund in order to limit total expenses to .75 of 1% of the average daily net
assets, excluding any applicable 12b-1 fees. In addition, the Adviser may also
voluntarily reimburse additional expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $82,200 of which
approximately $67,100 were paid out as concessions to authorized dealers. The
Distributor also received 12b-1 service fees on Class A Shares, all of which
were paid to compensate dealers for providing services to shareholders relating
to their investments.
During the six months ended November 30, 1997, the Distributor compensated
authorized dealers directly with approximately $38,800 in commission advances at
the time of purchase. 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 six months
ended November 30, 1997, the Distributor retained approximately $5,300 in such
12b-1 fees. 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 approximately $1,100 of
CDSC on share redemptions during the six months ended November 30, 1997.
7. COMPOSITION OF NET ASSETS
At November 30, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
- ---------------------------------------------------------------------------------------------
<S> <C>
Capital paid-in $61,147,833
Balance of undistributed net investment income 11,705
Accumulated net realized gain (loss) from investment transactions (596,591)
Net unrealized appreciation of investments 3,446,114
- ---------------------------------------------------------------------------------------------
Net assets $64,009,061
=============================================================================================
</TABLE>
_____
21
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
Selected data for a share outstanding throughout each
period is as follows:
<TABLE>
<CAPTION>
CLASS (INCEPTION DATE) OPERATING PERFORMANCE LESS DISTRIBUTIONS
------------------------- ----------------------
NET
MARYLAND NET REALIZED AND DIVIDENDS NET TOTAL
ASSET UNREALIZED FROM TAX- ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
MAY 31, OF PERIOD INCOME (B) INVESTMENTS INCOME GAINS PERIOD VALUE (A)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (9/94)
1998 (g) $ 10.25 $.24 $ .22 $ (.25) $ -- $ 10.46 4.51%
1997 (f) 10.25 .16 .01 (.17) -- 10.25 1.63
1997 (e) 10.43 .46 (.15) (.49) -- 10.25 3.06
1996 (e) 9.60 .48 .85 (.50) -- 10.43 14.07
1995 (c) 9.84 .20 (.23) (.21) -- 9.60 (.26)
CLASS B (3/97)
1998 (g) 10.25 .20 .22 (.21) -- 10.46 4.13
1997 (d) 10.29 .10 (.04) (.10) -- 10.25 .83
Class C (9/94)
1998 (g) 10.24 .21 .23 (.22) -- 10.46 4.32
1997 (f) 10.24 .15 -- (.15) -- 10.24 1.43
1997 (e) 10.42 .39 (.16) (.41) -- 10.24 2.28
1996 (e) 9.59 .41 .84 (.42) -- 10.42 13.24
1995 (c) 9.75 .16 (.15) (.17) -- 9.59 .12
Class R (12/91)
1998 (g) 10.26 .25 .23 (.26) -- 10.48 4.70
1997 (f) 10.26 .17 -- (.17) -- 10.26 1.68
1997 (e) 10.44 .47 (.14) (.51) -- 10.26 3.29
1996 (e) 9.61 .51 .84 (.52) -- 10.44 14.33
1995 (e) 10.62 .51 (1.01) (.51) -- 9.61 (4.58)
1994 (e) 9.91 .51 .72 (.50) (.02) 10.62 12.71
1993 (e) 9.53 .44 .39 (.44) (.01) 9.91 8.96
1992 (c) 9.53 -- -- -- -- 9.53 --
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales
charge and are not annualized.
(b) After the waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(c) From commencement of class operations as noted through January
31.
(d) From commencement of class operations as noted through May 31.
(e) For year ending January 31.
(f) For the four months ending May 31.
(g) For the six months ending November 30, 1997.
_____
22
<PAGE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATE
- ----------------------------------------------------------------------------------------------------
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
NET ASSETS BEFORE BEFORE AFTER AFTER PORTFOLIO
END OF PERIOD REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
(IN THOUSANDS) MENT MENT MENT(B) MENT(B) RATE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 16,224 .99%* 4.62%* .94%* 4.67%* 6%
12,977 1.02* 4.83 .95* 4.90* 3
11,788 1.12 4.67 1.00 4.79 4
6,860 1.33 4.41 1.00 4.74 17
1,605 1.59* 4.67* 1.00* 5.26* 35
1,039 1.74* 3.84* 1.68* 3.90* 6
150 1.76* 3.94* 1.70* 4.00* 3
2,209 1.54* 4.07* 1.49* 4.12* 6
2,103 1.57* 4.28* 1.50* 4.35* 3
1,985 1.87 3.93 1.75 4.05 4
1,438 2.06 3.73 1.75 4.04 17
860 1.86* 4.44* 1.75* 4.55* 35
44,538 .79* 4.82* .74* 4.87* 6
43,306 .82* 5.03* .75* 5.10* 3
43,738 .87 4.94 .75 5.06 4
47,389 1.04 4.78 .75 5.07 17
42,741 .89 5.14 .75 5.28 35
47,822 .86 4.74 .75 4.85 4
28,283 1.02* 4.69* .75* 4.96* 20
15 -- -- -- -- --
- ----------------------------------------------------------------------------------------------------
</TABLE>
____
23
<PAGE>
ADDITIONAL INVESTMENT OPPORTUNITIES
NUVEEN FAMILY OF MUTUAL FUNDS
Nuveen offers a variety of funds designed to help you reach your financial
goals.
GROWTH FUNDS
Nuveen Rittenhouse Growth Fund
GROWTH AND INCOME FUNDS
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
MUNICIPAL BOND FUNDS
NATIONAL FUNDS
Long-Term
Insured
Intermediate
Limited Term
STATE FUNDS
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Fund, contact your financial
adviser. If you would like to add to your current investment on a regular basis,
you can sign up for Nuveen's systematic investing program, which allows you to
invest a fixed dollar amount every month automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you give your investment the added
growth potential of long-term compounding.
For more information on any of these service options, call your adviser, or
Nuveen at (800) 621-7227.
______
24
<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
Shareholder Services, Inc.
Nuveen Investor Services
P.O. Box 5330
Denver, CO 80217-5330
(800) 621-7227
LEGAL COUNSEL
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, Illinois
______
25
<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
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
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 products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security, or call us at (800) 621-7227 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
<PAGE>
NUVEEN
Municipal
Bond Funds
November 30, 1997
Semiannual Report
[PHOTO APPEARS HERE]
Dependable, tax-free income
to help you keep more of
what you earn.
Florida
Florida
Intermediate
<PAGE>
CONTENTS
1 DEAR SHAREHOLDER
3 ANSWERING YOUR QUESTIONS
6 FLORIDA PERFORMANCE OVERVIEW
8 FLORIDA INTERMEDIATE
PERFORMANCE OVERVIEW
10 PORTFOLIO OF INVESTMENTS
27 STATEMENT OF NET ASSETS
28 STATEMENT OF OPERATIONS
29 STATEMENT OF CHANGES IN NET ASSETS
31 NOTES TO FINANCIAL STATEMENTS
39 FINANCIAL HIGHLIGHTS
44 ADDITIONAL INVESTMENT OPPORTUNITIES
45 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.
It's a pleasure to share with you the outstanding performance records of the
Nuveen Flagship Florida and Florida Intermediate Municipal Bond Funds for the 12
months ended November 30, 1997. Over the past year, investors continued to enjoy
attractive, tax-free dividends generated by the portfolios of municipal bonds.
As of November 30, 1997, Class A shareholders in the Florida Fund were receiving
a current yield on net asset value of 4.38%. For the shorter-term Florida
Intermediate Fund, Class A shareholders were receiving a current yield on net
asset value of 4.13%. To match these yields, investors in the 31% federal income
tax bracket would have had to earn at least 6.35% and 5.99%, respectively, on
taxable alternatives.
During this same period, the Florida Fund provided Class A shareholders with a
competitive total return on net asset value of 6.51% with income and capital
gains reinvested, outpacing the average return of 6.47% for its peer group, the
Lipper Florida municipal bond fund category. The Florida Intermediate Fund
generated a 6.61% total return on net asset value, far outpacing its peer group
average of 5.28% for the Lipper Florida intermediate municipal bond fund
category. You will find additional details on the performance of the funds on
pages 6-9.
THE YEAR IN REVIEW
Over the past year, U.S. investors have benefited from robust economic growth
with little evidence of inflationary pressures. With unemployment rates at 20-
year lows and the current economic expansion entering its seventh year, the
presence of benign inflation has sparked debate over whether the traditional
link between growth and inflation has been broken. During 1997, expectations
that excess growth would generate inflation disrupted the markets on several
occasions, most notably following the Federal Reserve's interest rate tightening
in March and speeches
_____
1
<PAGE>
"The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation."
by Fed Chairman Alan Greenspan. Still, falling commodity prices kept producer
prices in check, while low import prices--due in part to the weakness in Asian
markets--limited U.S. companies' ability to raise prices. This combination has
kept inflation subdued and the Federal Reserve "on hold" since March. The
reduction in the federal deficit and the passage of the Taxpayer Relief Act of
1997 offer additional encouragement to long-term fixed-income investors.
HELPING YOU BUILD A BETTER PORTFOLIO
The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation. Stock market volatility,
especially late in the year, provided a vivid illustration of the steadying
effect that fixed-income investments can provide in a well-constructed
investment portfolio. Nuveen mutual funds provide an excellent balance to other
stock and bond investments. Your financial adviser can introduce you to a
variety of other Nuveen products and services to round out your investment
portfolio, including the Nuveen Growth and Income Stock Fund and two balanced
stock and bond funds.
In addition, we recently expanded our private asset management capabilities
through the acquisition of Rittenhouse Financial Services, a well-respected
growth investment manager. We encourage you to talk with your financial adviser
about ways to complement your current Nuveen investments by taking advantage of
these additional products and services.
We at Nuveen remain committed to providing you with quality investment solutions
that withstand the test of time. We thank you for your confidence in us and our
family of investments, and we look forward to our next report to you.
Sincerely,
/s/ Timothy R. Schwertfeger
TIMOTHY R. SCHWERTFEGER
Chairman of the Board
January 15, 1998
_____
2
<PAGE>
ANSWERING YOUR QUESTIONS
[PHOTO OF TED NEILD APPEARS HERE]
TED NEILD, MANAGING DIRECTOR OF NUVEEN'S PORTFOLIO MANAGEMENT TEAM, TALKS ABOUT
THE MUNICIPAL BOND MARKET AND OFFERS INSIGHTS INTO FACTORS THAT AFFECTED THE
PERFORMANCE OF THE FUNDS OVER THE PAST YEAR.
WHAT ECONOMIC AND MARKET FACTORS INFLUENCED THE PERFORMANCE OF THE MUNICIPAL
BONDS OVER THE PAST YEAR?
Over the past 12 months, the performance of the municipal bond market was
influenced by three major factors: the continued strength of the U.S. economy,
minimal inflation, and volatility in the equity markets. During 1997, these
factors contributed to a positive environment for fixed-income investments, as
reflected in the steady-to-declining interest rates evident during the year.
Between December 1996 and November 1997, the yield on the 30-year Treasury bond
dropped from 6.36% to 6.05%, and the municipal market followed suit, as the
yield on the Bond Buyer 40 declined from 5.63% to 5.36%. The spread between tax-
free municipal bonds and taxable Treasury bonds remained tight, making municipal
bonds very attractive. The strong total returns produced in this environment
were somewhat muted by a heavy supply of newly issued bonds that temporarily
reduced bond prices. The increased supply worked to our advantage, however, as
it expanded opportunities to find value in the marketplace.
HOW HAVE THE FUNDS PERFORMED DURING THIS PERIOD?
As Tim mentioned in his letter to shareholders, the funds performed well during
the one-year period ended November 30, 1997. The total return on net asset value
for Class A shares of the Florida Fund was 6.51%, which compares favorably with
the one-year average return of 6.47% for the peer group of Florida long-term
municipal bond funds tracked by Lipper Analytical Services. The Florida
Intermediate Fund generated a 6.61% total return on net asset value for the
period, compared with its peer group average of 5.28% - a 133 basis point
difference.
_____
3
<PAGE>
"The price appreciation of the bonds in the portfolios allowed us to maintain
strong dividends even as interest rates fell during the year."
GIVEN THE CURRENT MUNICIPAL MARKET, WHERE WERE YOU ABLE TO FIND VALUE?
One of the ways that we achieved such outstanding performance and created value
for shareholders was by finding well-structured bonds to add to the portfolios.
We looked for bonds with the combination of maturity, credit quality and call
protection that we felt would appreciate in value. Well-structured state bonds
are becoming more difficult to find in the competitive marketplace, so those
bonds in our portfolios are increasing in value. The price appreciation of the
bonds in the portfolios allowed us to maintain strong dividends even as interest
rates fell during the year. In addition, we uncovered a number of undervalued
securities in health care, airport and housing sectors that we feel will
appreciate in value relative to similar bonds. For the intermediate fund, we
also found value in some non-callable bonds with maturities in the long end of
the intermediate-term range.
WHAT ARE YOUR KEY STRATEGIES FOR THE COMING YEAR?
To sustain this level of performance, we take a holistic approach to portfolio
management - assessing all of the factors that determine a fund's performance
and taking advantage of all of them to contribute to total return and dividend
stability. In the coming year, we will continue to selectively purchase the
bonds that we feel will keep the portfolios balanced in all of these areas. With
the future of the economy so uncertain and many experts calling for a market
correction, we will lean toward a more cautious portfolio management strategy in
the coming months.
_____
4
<PAGE>
"Looking at the year ahead, we believe the overall market will continue to
strike a good balance between supply and demand."
As part of our value investing approach, we will also continue to look for
individual bonds that offer good long-term value with the potential for
appreciating returns. Our thorough research helps us find investment-quality
bonds that offer the best values - such as bonds from specific regions and
sectors that have the best potential for performance and appreciation. We plan
to continue to search for bonds with pre-refunding potential, as well as those
that we feel are undervalued by the market as a whole.
WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
Looking at the year ahead, we believe the overall market will continue to strike
a good balance between supply and demand. We expect supply to increase as new
issuers continue to enter the market. A continued decline in yields could also
cause new supply to come to market through refunding of current debt. On the
demand side, volatility in the equity markets, plus the potential for a
weakening of the economy, could spark increased interest in bonds of all types.
The financial crises in Asia, coupled with the continued strength of the dollar
and low commodity prices, are all contributing to the excellent inflation
picture. This backdrop should help offset stronger labor markets and limit the
effects of any bond market corrections. In the meantime, positive underlying
fundamentals provide good support for the municipal market.
_____
5
<PAGE>
Nuveen Flagship Florida
Municipal Bond Fund
PERFORMANCE OVERVIEW
As of November 30, 1997
<TABLE>
<CAPTION>
FUND HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------
SHARE CLASS A B C R
<S> <C> <C> <C> <C> <C>
Inception Date 6/90 2/97 9/95 2/97
.....................................................................................................
Net Asset Value (NAV) $10.86 $10.87 $10.87 $10.86
.....................................................................................................
CUSIP 67065L708 67065L658 67065L641 67065L872
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Total Net Assets ($000) $358,107
.....................................................................................................
Average Weighted Maturity (Years) 21.15
.....................................................................................................
Average Weighted Duration (Years) 7.28
- -----------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN/1/
- -----------------------------------------------------------------------------------------------------
SHARE CLASS A(NAV) A(OFFER) B C R
1-Year 6.51% 2.05% 5.86% 5.95% 6.70%
.....................................................................................................
5-Year 6.69% 5.78% 6.09% 6.13% 6.72%
.....................................................................................................
Since Inception 7.81% 7.20% 7.21% 7.24% 7.84%
- -----------------------------------------------------------------------------------------------------
TAX-FREE YIELDS
- -----------------------------------------------------------------------------------------------------
SHARE CLASS A(NAV) A(OFFER) B C R
Dist Rate 5.08% 4.87% 4.36% 4.53% 5.30%
.....................................................................................................
SEC 30-Day Yld 4.38% 4.20% 3.63% 3.83% 4.58%
.....................................................................................................
Taxable Equiv Yld/2/ 6.35% 6.09% 5.26% 5.55% 6.64%
- -----------------------------------------------------------------------------------------------------
</TABLE>
/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 up-front sales charge. Class B shares
have a contingent deferred sales charge (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 B shares automatically convert to Class A shares eight years
after purchase. Class C shares have a 1% CDSC for redemptions within one
year which is not reflected in the one-year total return.
/2/ 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.
/3/ The fund paid a capital gains distribution to shareholders in January of
$0.0010 per share.
_____
6
<PAGE>
Credit Quality
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
BBB/NR 15%
A 10%
AA 10%
AAA/Pre-refunded 65%
</TABLE>
- --------------------------------------------------------------------------------
Diversification
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Health Care 17%
Other 4%
Forest/Paper Products 5%
Water & Sewer 7%
Tax Obligation (G.O.) 7%
Long-Term Care 7%
Tax Obligation (Limited) 16%
Utilities 11%
U.S. Guaranteed 10%
Housing (Multi-Family) 9%
Housing (Single-Family) 7%
</TABLE>
- --------------------------------------------------------------------------------
Dividend History (A Shares)/3/
[BAR GRAPH APPEARS HERE]
<TABLE>
<S> <C>
0.04684 Dec. 1996
0.04857 Jan. 1997
0.0461 Feb. 1997
0.0461 Mar. 1997
0.0461 Apr. 1997
0.0461 May 1997
0.046 June 1997
0.046 July 1997
0.046 Aug. 1997
0.046 Sept. 1997
0.046 Oct. 1997
0.046 Nov. 1997
</TABLE>
7
<PAGE>
Nuveen Flagship Florida Intermediate
MUNICIPAL BOND FUND
PERFORMANCE OVERVIEW
As of November 30, 1997
<TABLE>
<CAPTION>
FUND HIGHLIGHTS
- -----------------------------------------------------------------------------------
SHARE CLASS A C R
<S> <C> <C> <C> <C>
Inception Date 9/94 2/94 2/97
...................................................................................
Net Asset Value (NAV) $10.39 $10.38 $ 10.41
...................................................................................
CUSIP 67065L864 67065L856 67065L849
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Total Net Assets ($000) $12,254
...................................................................................
Average Weighted Maturity (Years) 9.80
...................................................................................
Average Weighted Duration (Years) 7.28
- -----------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN/1/
- -----------------------------------------------------------------------------------
SHARE CLASS A(NAV) A(OFFER) C R
1-Year 6.61% 3.38% 5.95% 6.98%
...................................................................................
3-Year 8.76% 7.65% 8.18% 8.89%
...................................................................................
Since Inception 6.50% 5.66% 5.90% 6.60%
- -----------------------------------------------------------------------------------
TAX-FREE YIELDS
- -----------------------------------------------------------------------------------
SHARE CLASS A(NAV) A(OFFER) C R
Dist Rate 4.50% 4.37% 3.99% 4.73%
...................................................................................
SEC 30-Day Yld 4.13% 4.00% 3.58% 4.32%
...................................................................................
Taxable Equiv Yld/2/ 5.99% 5.80% 5.19% 6.26%
- -----------------------------------------------------------------------------------
</TABLE>
/1/ 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% maximum up-front sales charge. Class C Shares have
a 1% contingent deferred sales charge (CDSC) for redemptions within one
year which is not reflected in the one-year total return.
/2/ 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.
/3/ The fund paid a capital gains distribution to shareholders in December of
$0.0174 per share.
_____
8
<PAGE>
Credit Quality
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
BBB/NR 13%
AA 9%
A 8%
AAA 72%
</TABLE>
- --------------------------------------------------------------------------------
Diversification
<TABLE>
<S> <C>
Tax Obligation (G.O.) 17%
Transportation 15%
Water & Sewer 8%
Health Care 7%
Housing (Multi-Family) 7%
Housing (Single-Family) 6%
Utilities 5%
Other 4%
Long-Term Care 3%
Tax Obligation (Limited) 28%
</TABLE>
- --------------------------------------------------------------------------------
Dividend History (A Shares)/3/
[BAR GRAPH APPEARS HERE]
<TABLE>
<S> <C>
0.03939 Dec. 1996
0.03949 Jan. 1997
0.0388 Feb. 1997
0.0388 Mar. 1997
0.0388 Apr. 1997
0.0388 May 1997
0.039 June 1997
0.039 July 1997
0.039 Aug. 1997
0.039 Sept. 1997
0.039 Oct. 1997
0.039 Nov. 1997
</TABLE>
9
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP FLORIDA
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION -- 0.1%
$ 300,000 Brevard County, Florida, Revenue Educational 11/02 at 102 BBB $ 320,553
Facilities Authority, Refunding and Improvement,
Florida Institute Technology, 6.875%, 11/01/22
- -------------------------------------------------------------------------------------------------------------------------------
FOREST AND PAPER PRODUCTS -- 4.7%
Escambia County, Florida, Pollution Control
Revenue, Champion International
Corporation Project:
5,500,000 6.900%, 8/01/22 8/04 at 102 Baa1 6,118,970
8,350,000 6.400%, 9/01/30 9/06 at 102 Baa1 9,073,277
1,500,000 Nassau County, Florida, Pollution Control Revenue 7/03 at 102 BBB+ 1,567,950
Refunding, Itt Rayonier Inc. Project,
6.200%, 7/01/15
- -------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE -- 16.5%
1,750,000 Jacksonville, Florida, Health Facilities Authority, 6/01 at 102 AAA 1,938,248
Hospital Revenue, New Childrens Hospital
at Baptist, 7.000%, 6/01/21
3,000,000 Jacksonville, Florida, Health Facilities Authority, 11/01 at 102 AA+ 3,312,450
Hospital Revenue Refunding Facilities, St. Lukes
Hospital Association Project, 7.125%, 11/15/20
2,000,000 Jacksonville, Florida, Health Facilities Authority, 8/07 at 101 AAA 1,944,840
Hospital Revenue, Charity Obligation Group,
Series A, 5.125%, 8/15/27
6,000,000 Lakeland, Florida, Hospital System Revenue, 11/06 at 102 AAA 5,913,360
Lakeland Regional Medical Center, Series A,
5.250%, 11/15/25
2,100,000 Lee County, Florida, Hospital Board Directors, 4/07 at 102 AAA 2,184,714
Hospital Revenue, Lee Memorial Health System,
Series A, 5.625%, 4/01/16
2,320,000 Martin County, Florida, Health Facilities Authority, 11/00 at 102 AAA 2,543,462
Hospital Revenue Refunding, Martin Memorial
Hospital, Series A, 7.125%, 11/15/04
1,000,000 Martin County, Florida, Health Facilities Authority, 11/00 at 102 AAA 1,101,380
Hospital Revenue Refunding, Martin Memorial
Hospital, Series B, 7.100%, 11/15/20
North Broward, Florida, Hospital District Revenue
Refunding and Improvement:
1,000,000 5.250%, 1/15/17 1/07 at 101 AAA 996,350
3,000,000 5.375%, 1/15/24 1/07 at 101 AAA 3,003,540
</TABLE>
_____
10
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH CARE -- CONTINUED
$ 1,260,000 North Miami, Florida, Health Facilities Authority, 9/00 at 102 A+ $ 1,375,857
Health Facility Revenue, Villa Maria Housing,
Series B, Bon Secours, 7.500%, 9/01/12
2,500,000 Orange County, Florida, Health Facilities Authority, 11/01 at 102 AAA 2,752,350
Hospital Revenue, Adventist Health/Sunbelt,
Series A, 6.875%, 11/15/15
2,500,000 Orange County, Florida, Health Facilities Authority, 11/01 at 102 AAA 2,741,125
Hospital Revenue, Adventist Health/Sunbelt,
Series B, 6.750%, 11/15/21
11,895,000 Orange County, Florida, Health Facilities Authority, 11/05 at 102 AAA 11,754,044
Hospital Revenue, Adventist Health System
Refunding, 5.250%, 11/15/20
2,070,000 Orange County, Florida, Health Facilities Authority, No Opt. Call AAA 2,366,817
Hospital Revenue, Orlando Regional Healthcare,
Series A, 6.250%, 10/01/18
5,455,000 Orange County, Florida, Health Facilities Authority, No Opt. Call AAA 6,279,632
Hospital Revenue, Refunding, Orlando, Regional
Healthcare, Series C, 6.250%, 10/01/21
1,000,000 St. Johns County, Florida, Industrial Development 8/02 at 102 A2 1,026,410
Authority, Hospital Revenue, Flagler Hospital
Project, 6.000%, 8/01/22
630,000 Saint Petersburg, Florida, Health Facilities Authority, 12/01 at 102 AAA 696,982
Allegany Health, Series A, 7.000%, 12/01/15
2,000,000 Saint Petersburg, Florida, Health Facilities 12/01 at 102 AAA 2,194,500
Authority, Allegany Health System, St. Anthony's,
6.750%, 12/01/21
1,610,000 Saint Petersburg, Florida, Health Facilities 12/01 at 102 AAA 1,781,175
Authority, Allegany Health System, St. Mary's,
7.000%, 12/01/21
Tampa, Florida, Allegany Health System,
St. Joseph:
1,000,000 6.750%, 12/01/17 12/01 at 102 AAA 1,097,250
2,000,000 6.500%, 12/01/23 12/04 at 102 AAA 2,205,080
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY -- 8.6%
600,000 Broward County, Florida, Housing Finance 2/05 at 102 AAA 650,772
Authority, Multifamily Housing Revenue
Refunding, Lakeside Apartments Project,
7.000%, 2/01/25
</TABLE>
_____
11
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP FLORIDA -- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING/MULTIFAMILY -- CONTINUED
$ 250,000 Broward County, Florida, Housing Finance 8/06 at 102 AAA $ 263,758
Authority, Multifamily Housing Revenue
Refunding, Boardwalk Apartments Project,
6.200%, 8/01/16
2,700,000 Duval County, Florida, Housing Finance Authority, 4/05 at 102 BBB+ 2,860,137
Multifamily Housing Revenue Refunding,
Greentree Place Project, 6.750%, 4/01/25
750,000 Florida Housing Finance Agency, Refunding, General 6/02 at 103 AAA 790,590
Mortgage, Series A, 6.400%, 6/01/24
Florida Housing Finance Agency,
Antigua Club Apartments, Series A:
1,000,000 6.750%, 8/01/14 2/05 at 102 AAA 1,084,870
5,000,000 6.875%, 8/01/26 2/05 at 102 AAA 5,414,450
1,115,000 Florida Housing Finance Agency, Brittany Rosemont 2/05 at 102 AAA 1,207,422
Apartments, Series C, 6.875%, 8/01/26
2,250,000 Florida Housing Finance Agency, Housing, Windchase 12/07 at 102 AAA 2,320,178
Apartments Project, Series C, 5.900%, 12/01/27
Florida Housing Finance Agency, Refunding, Vineyards
Project, Series H:
1,260,000 6.400%, 11/01/15 11/05 at 102 BBB+ 1,306,746
1,660,000 6.500%, 11/01/25 11/05 at 102 BBB+ 1,727,595
2,000,000 Florida Housing Finance Agency, Refunding, 8/06 at 102 AAA 2,120,020
Multifamily Housing, Series C, 6.200%, 8/01/16
3,500,000 Florida Housing Finance Agency, Housing, 10/06 at 102 AAA 3,681,160
Villas of Capri Project, Series H, 6.100%, 4/01/17
1,000,000 Florida Housing Finance Agency, Leigh Meadows 9/06 at 102 AAA 1,056,720
Apartments, Series N, 6.300%, 9/01/36
1,000,000 Florida Housing Finance Agency, Housing, 9/06 at 102 AAA 1,056,720
Stoddert Arms Apartments, Series O,
6.300%, 9/01/36
700,000 Florida Housing Finance Agency, Housing Revenue, 12/06 at 102 AAA 725,620
The Landings at the Sea Apartment Project,
Series Q, 6.050%, 12/01/36
1,440,000 Florida Housing Finance Agency, Multifamily 6/99 at 103 AAA 1,518,264
Housing, Driftwood Terrace, Series I,
7.650%, 12/20/31
</TABLE>
_____
12
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING/MULTIFAMILY -- CONTINUED
$ 1,000,000 Orange County, Florida, Housing Finance Authority, 10/01 at 101 BBB+ $ 1,036,190
Multifamily Housing Revenue, Ashley Point
Apartments, Series A, 7.100%, 10/01/24
1,925,000 Osceola County, Florida, Housing Finance Authority, 6/07 at 100 AAA 1,955,916
Multifamily Revenue, Tierra Vista Apartments
Project, Series A, 5.800%, 12/01/29
- -----------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY -- 7.2%
Broward County, Florida, Housing Finance Authority,
Home Mortgage, Series A:
4,650,000 0.000%, 4/01/16 No Opt. Call AAA 740,141
1,690,000 7.900%, 3/01/23 3/00 at 102 AAA 1,773,080
1,825,000 Clay County, Florida, Housing Finance Authority, 3/05 at 102 Aaa 1,936,544
Single Family Mortgage, 6.550%, 3/01/28
Dade County, Florida, Housing Finance Authority,
Single Family Mortgage Revenue, Series B:
260,000 7.750%, 3/01/17 9/00 at 102 Aaa 275,179
745,000 7.250%, 9/01/23 3/01 at 102 Aaa 786,876
1,005,000 Dade County, Florida, Housing Finance Authority, 12/01 at 102 AAA 1,069,561
Single Family Mortgage Revenue Refunding,
Series D, 6.750%, 12/15/12
40,000 Dade County, Florida, Housing Finance Authority, 3/01 at 102 Aaa 42,212
Single Family Mortgage Revenue Refunding,
Series E, 7.000%, 3/01/24
1,000,000 Dade County, Florida, Housing Finance Authority, 4/05 at 102 AAA 1,062,400
Single Family Mortgage Revenue, 6.700%, 4/01/28
390,000 Duval County, Florida, Housing Finance Authority, 6/00 at 102 Aaa 411,579
Single Family Mortgage Revenue Refunding,
Series B, 7.500%, 6/01/15
195,000 Duval County, Florida, Housing Finance Authority, 6/00 at 102 Aaa 205,764
Single Family Mortgage Revenue, Series A,
7.850%, 12/01/22
415,000 Duval County, Florida, Housing Finance Authority, 9/00 at 103 AAA 441,813
Single Family Mortgage Revenue, Series C,
7.650%, 9/01/10
720,000 Duval County, Florida, Housing Finance Authority, 10/04 at 102 Aaa 762,487
Single Family Mortgage Revenue, GNMA Mortgage
Backed Security Program, 6.550%, 10/01/15
</TABLE>
_____
13
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP FLORIDA -- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING/SINGLE FAMILY -- CONTINUED
$ 1,690,000 Escambia County, Florida, Housing Finance Authority, 4/01 at 102 Aaa $ 1,787,175
Single Family Mortgage Revenue, Series A,
7.400%, 10/01/23
Escambia County, Florida, Housing Finance Authority,
Single Family Mortgage Revenue, Multi-County
Program, Series A:
325,000 6.900%, 4/01/20 10/02 at 102 Aaa 343,844
630,000 6.950%, 10/01/27 4/05 at 102 AAA 679,071
Florida Housing Finance Agency, Refunding, Single
Family Mortgage, Series A:
1,270,000 6.250%, 7/01/11 7/04 at 102 AAA 1,346,937
705,000 6.550%, 7/01/14 1/05 at 102 AAA 751,650
705,000 6.650%, 1/01/24 1/05 at 102 AAA 751,445
375,000 Leon County, Florida, Housing Finance Authority, 4/01 at 102 Aaa 395,561
Single Family Mortgage Revenue, Multi-County
Program, Series A, 7.300%, 4/01/21
2,245,000 Leon County, Florida, Housing Finance Authority, No Opt. Call AAA 2,529,486
Single Family Mortgage Revenue, Multi-County
Program, Series B, 7.300%, 1/01/28
845,000 Manatee County, Florida, Housing Finance Authority, 11/05 at 105 Aaa 934,384
Mortgage Revenue, Single Family, Sub Series 3,
7.600%, 11/01/26
1,115,000 Orange County, Florida, Housing Finance Authority, 5/99 at 103 Aaa 1,177,239
Mortgage Revenue, Series B, 8.100%, 11/01/21
280,000 Orange County, Florida, Housing Finance Authority, 7/00 at 103 AAA 300,297
Mortgage Revenue Refunding, Series A,
7.600%, 1/01/24
1,055,000 Palm Beach County, Florida, Housing Finance 9/00 at 103 Aaa 1,121,845
Authority, Single Family Mortgage Purchase
Revenue, Series B, 7.600%, 3/01/23
1,595,000 Pinellas County, Florida, Housing Finance Authority, 2/05 at 102 AAA 1,697,240
Single Family Mortgage Revenue, Multi-County
Program, Series A, 6.650%, 8/01/21
1,050,000 Pinellas County, Florida, Housing Finance Authority, 3/07 at 102 Aaa 1,068,134
Single Family Mortgage Revenue, Multi-County
Program, Series C, 5.800%, 3/01/29
1,160,000 Polk County, Florida, Housing Finance Authority, 3/01 at 102 Aaa 1,224,647
Refunding, Series A, 7.150%, 9/1/23
</TABLE>
_____
14
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL/OTHER -- 2.2%
$ 750,000 Clay County, Florida, Development Authority, 7/02 at 102 AA- $ 812,018
Industrial Development Revenue Refunding,
Cargill Inc. Project, 6.400%, 3/01/11
600,000 Jacksonville, Florida, Industrial Development 3/02 at 102 AA- 643,992
Revenue Refunding, Cargill Inc. Project,
6.400%, 3/01/11
Sanford, Florida, Airport Authority, Industrial
Development Revenue, Central Florida Terminals
Inc. Project A:
3,000,000 7.500%, 5/01/15 5/06 at 102 N/R 3,123,420
3,270,000 7.750%, 5/01/21 5/06 at 102 N/R 3,444,618
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM CARE -- 7.0%
2,735,000 Dade County, Florida, Health Facilities Authority, 8/00 at 102 A1 2,940,152
Revenue, Refunding, Catholic Health and
Rehabilitation Inc., Series P, 7.125%, 8/15/09
Escambia County, Florida, Health Facilities Authority,
Health Facility Revenue, Azalea Trace Inc., Refunding:
1,000,000 6.000%, 1/01/15 1/07 at 102 N/R 1,021,300
1,595,000 6.100%, 1/01/19 1/07 at 102 N/R 1,635,736
Jacksonville, Florida, Health Facilities Authority,
Industrial Development Revenue, National Benevolent,
Cypress Village, Series A:
345,000 6.125%, 12/01/16 12/06 at 102 Baa1 362,336
1,000,000 6.250%, 12/01/26 12/06 at 102 Baa1 1,060,040
1,550,000 Osceola County, Florida, Industrial Development 5/01 at 102 AAA 1,684,556
Authority, Evangelical Lutheran Project,
6.750%, 5/01/16
8,000,000 Palm Beach County, Florida, Health Facilities 11/06 at 102 A- 8,107,600
Authority, Retirement Community, Adult
Communities Total Services Inc., 5.625%, 11/15/20
4,000,000 Palm Beach County, Florida, Industrial Development 12/06 at 102 A+ 4,325,640
Revenue, Lourdes Noreen McKeen Residence,
Geriatric Care Inc., 6.625%, 12/01/26
</TABLE>
_____
15
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP FLORIDA -- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG TERM CARE -- CONTINUED
Sarasota County, Florida, Health Facility
Authority, Revenue Refunding, Health
Facilities, Sunnyside Properties:
$ 855,000 5.500%, 5/15/01 No Opt. Call N/R $ 873,596
540,000 5.500%, 5/15/02 No Opt. Call N/R 552,836
570,000 5.500%, 5/15/03 No Opt. Call N/R 583,469
600,000 5.500%, 5/15/04 No Opt. Call N/R 613,062
170,000 5.500%, 5/15/05 No Opt. Call N/R 175,557
1,000,000 6.000%, 5/15/10 5/06 at 102 N/R 1,025,430
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL -- 6.9%
Florida State, Broward County Expressway Authority:
4,000,000 9.875%, 7/01/09 No Opt. Call AA+ 5,668,800
1,000,000 10.000%, 7/01/14 No Opt. Call AA+ 1,524,690
2,165,000 Florida State Board Education, Capital Outlay, No Opt. Call AA+ 3,092,811
9.125%, 6/01/14
2,990,000 Hillsborough County, Florida, Refunding, 7/02 at 102 Aa3 3,241,788
Environmentally Sensitive Lands Acquisition
and Protection, 6.250%, 7/01/08
7,000,000 New York City, Series G, 5.750%, 2/01/20 2/06 at 101 1/2 BBB+ 7,107,100
1,000,000 New York, New York, Refunding, Series F, 8/06 at 101 1/2 BBB+ 1,026,630
5.875%, 8/01/24
2,000,000 Puerto Rico Commonwealth, Public Improvement, No Opt. Call AAA 2,346,900
6.500%, 7/01/15
700,000 Puerto Rico Commonwealth, Refunding, Public 7/07 at 101 1/2 A 697,466
Improvement, 5.375%, 7/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED -- 15.3%
Brevard County, Florida, School Board Certificates
of Participation, Series A, Refunding:
500,000 5.400%, 7/01/11 No Opt. Call AAA 528,650
500,000 5.400%, 7/01/12 No Opt. Call AAA 527,160
3,100,000 Brevard County, Florida, School Board Certificates 7/06 at 102 AAA 3,139,556
of Participation, Series B, Refunding,
5.500%, 7/01/21
6,230,000 Dade County, Florida, Professional Sports Franchise 10/05 at 102 AAA 6,152,623
Facilities Tax Revenue, 5.250%, 10/01/30
4,425,000 Dade County, Florida, School Board Certificates 5/06 at 101 AAA 4,480,844
of Participation, Series A, 5.500%, 5/01/25
</TABLE>
_____
16
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/LIMITED -- CONTINUED
$ 255,000 Dade County, Florida, Special Obligation, 4/04 at 102 A3 $ 278,136
Courthouse Center Project, 6.300%, 4/01/14
Dade County, Florida, Special Obligation, Refunding,
Series B:
4,835,000 0.000%, 10/01/07 No Opt. Call AAA 3,049,048
4,585,000 5.000%, 10/01/35 10/06 at 102 AAA 4,375,374
190,000 Escambia County, Florida, School Board Certificates 2/02 at 100 AAA 201,974
of Participation, 6.375%, 2/01/12
1,500,000 Florida State Department of Corrections, Certificates 3/04 at 102 A+ 1,585,785
of Participation, Gadsen County Correctional
Facility, 6.000%, 3/01/14
3,105,000 Gulf Breeze, Florida, Local Government, Series E, 12/99 at 102 AAA 3,367,279
7.750%, 12/01/15
1,000,000 Gulf Breeze, Florida, Local Government Loan, 12/11 at 100 AAA 1,079,390
Series B, 5.900%, 12/01/15
5,000,000 Hernando County, Florida, Criminal Justice Complex No Opt. Call AAA 6,508,000
Financing Program, 7.650%, 7/01/16
250,000 Jacksonville, Florida, Excise Taxes Revenue 10/02 at 102 AAA 274,630
Refunding, 6.500%, 10/01/13
1,010,000 Martin County, Florida, Special Assessment Revenue, 11/05 at 100 A2 1,057,399
Tropical Farms Water, 5.900%, 11/01/11
1,000,000 Miami Beach, Florida, Redevelopment Agency, 12/04 at 102 BBB 1,009,390
Tax Increment Revenue, City Center, Historic
Convention Village, 5.875%, 12/01/22
4,115,000 Orange County, Florida, School Board Certificates 8/07 at 101 Aaa 4,129,608
of Participation, Refunding, Series A,
5.375%, 8/01/22
1,000,000 Palm Beach County, Florida, Criminal Justice Facilities No Opt. Call AAA 1,056,500
Revenue Refunding, 5.375%, 6/01/10
1,000,000 Palm Beach County, Florida, School Board Certificates 8/04 at 101 AAA 1,121,490
of Participation, Series A, 6.375%, 8/01/15
1,000,000 Palm Beach Gardens, Florida, Special Obligation 7/99 at 102 AAA 1,063,870
Revenue, 7.250%, 7/01/15
2,000,000 Puerto Rico Commonwealth, Highway and 7/16 at 100 A 2,030,240
Transportation Authority, Highway Revenue,
Series Y, 5.500%, 7/01/36
</TABLE>
_____
17
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP FLORIDA -- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/LIMITED -- CONTINUED
$ 5,000,000 Sunrise Lakes, Florida, Phase 4 Recreation District, 8/05 at 102 BBB- $ 5,532,150
Series A, 6.750%, 8/01/24
3,300,000 Tampa, Florida, Utility Tax, 0.000%, 4/01/17 No Opt. Call AAA 1,204,335
1,000,000 Turtle Run, Florida, Community Development District 5/03 at 100 A1 1,077,560
Revenue Refunding, Water Management Benefit
Tax, 6.400%, 5/01/11
- --------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 2.0%
1,000,000 Dade County, Florida, Aviation Revenue, Series B, 10/02 at 102 AAA 1,091,080
6.550%, 10/01/13
Greater Orlando Aviation Authority, Orlando,
Florida, Airport Facilities Revenue:
500,000 5.750%, 10/01/10 (WI) No Opt. Call AAA 538,135
1,000,000 5.125%, 10/01/17 (WI) 10/07 at 101 AAA 977,400
1,250,000 5.250%, 10/01/23 (WI) 10/07 at 101 AAA 1,225,650
1,000,000 Hillsborough County, Florida, Aviation Authority, 10/06 at 102 AAA 1,057,020
Tampa International Airport, Series B,
5.875%, 10/01/23
2,185,000 Palm Beach County, Florida, Airport System No Opt. Call AAA 2,379,443
Revenue Refunding, 7.500%, 10/01/00
- --------------------------------------------------------------------------------------------------------------------------------
U.S.GUARANTEED - 10.4%
1,925,000 Boynton Beach, Florida, Water and Sewer Revenue, 11/00 at 102 AAA 2,136,211
7.400%, 11/01/15 (Pre-refunded to 11/01/00)
1,500,000 Broward County, Florida, School Board Certificates 7/00 at 102 AAA 1,639,950
of Participation, Series A, 7.125%, 7/01/10
(Pre-refunded to 7/01/00)
250,000 Dade County, Florida, Health Facilities Authority, 10/99 at 102 AAA 267,750
Hospital Revenue Refunding, South Miami
Hospital, 7.000%, 10/01/18
(Pre-refunded to 10/01/99)
1,500,000 Dade County, Florida, Health Facilities Authority, No Opt. Call AAA 1,574,160
Hospital Revenue, Baptist Hospital of Miami
Project, Series A, 5.750%, 5/01/21
300,000 Dade County, Florida, Health Facilities Authority, 8/02 at 102 AAA 333,117
Hospital Revenue Refunding, North Shore
Medical Center Project, 6.500%, 8/15/15
(Pre-refunded to 8/15/02)
</TABLE>
_____
18
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GUARANTEED -- CONTINUED
$ 310,000 Escambia County, Florida, School Board Certificates 2/02 at 100 AAA $ 335,119
of Participation, 6.375%, 2/01/12
(Pre-refunded to 2/01/02)
300,000 Florida State, Double Barrell, Pollution Control, 7/03 at 100 AA+*** 331,257
Series Y, 6.600%, 7/01/17
1,160,000 Florida State Board Education, Capital Outlay, No Opt. Call AAA 1,243,624
Series C, 7.100%, 6/01/07
335,000 Florida State Board Education, Capital Outlay, No Opt. Call AAA 474,960
9.125%, 6/01/14
5,000,000 Florida State Board Education, Capital Outlay, 6/01 at 101 AAA 5,453,000
Series B, 6.700%, 6/01/22
(Pre-refunded to 6/01/01)
2,000,000 Florida State Board Education, Capital Outlay, 6/02 at 101 Aaa 2,210,860
Series 91C, 6.625%, 6/01/17
(Pre-refunded to 6/01/02)
1,000,000 Hillsborough County, Florida, Port District Revenue, 12/00 at 102 Baa1*** 1,133,060
Tampa Port Authority, 8.250%, 6/01/09
(Pre-refunded to 12/01/00)
250,000 Hillsborough County, Florida, Capital Improvement 1/00 at 102 A*** 266,073
Revenue, Museum of Science and Industry,
6.400%,1/01/12 (Pre-refunded to 1/01/00)
1,635,000 Hillsborough County, Florida, Utility Refunding 8/01 at 102 BBB+*** 1,814,082
Revenue, Series A, 7.000%, 8/01/14
(Pre-refunded to 8/01/01)
250,000 Hollywood, Florida, Water and Sewer Revenue, 10/01 at 102 AAA 278,073
6.875%, 10/01/21 (Pre-refunded to 10/01/01)
1,810,000 Jacksonville, Florida, Electric Authority, Bulk Power 10/00 at 101 1/2 Aaa 1,976,828
Supply, Series A, 7.000%, 10/01/12 (Pre-refunded
to 10/01/00)
1,500,000 Lady Lake, Florida, Industrial Development Revenue, 7/00 at 102 N/R*** 1,725,735
Sunbelt Utilities Inc. Project, 9.625%, 7/01/15
(Pre-refunded to 7/01/00)
1,050,000 Naples, Florida, Hospital Revenue, Naples 10/00 at 102 AAA 1,155,851
Community Hospital Inc. Project, Refunding,
7.200%, 10/01/19 (Pre-refunded to 10/01/00)
3,400,000 North Springs, Florida, Improvement District 10/01 at 102 N/R*** 3,928,088
Water and Sewer Revenue, 8.000%, 10/01/16
(Pre-refunded to 10/01/01)
</TABLE>
_____
19
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP FLORIDA -- CONTINUED
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GUARANTEED -- CONTINUED
$145,000 Orange County, Florida Sales Tax Revenue, 1/00 at 102 AAA $ 153,742
6.125%, 1/01/19 (Pre-refunded to 1/01/00)
1,750,000 Orange County, Florida, Tourist Development Tax 10/00 at 102 AAA 1,930,740
Revenue, 7.250%, 10/01/10
(Pre-refunded to 10/01/00)
1,750,000 Palm Beach County, Florida, Criminal Justice
Facilities Revenue, 7.250%, 6/01/11 6/00 at 102 AAA 1,914,605
(Pre-refunded to 6/01/00)
1,425,000 Puerto Rico Electric Power Authority, Power Revenue, 7/01 at 102 Aaa 1,586,025
Formerly Puerto Rico Commonwealth Water
Resource Authority, Series P, 7.000%, 7/01/21
(Pre-refunded to 7/01/01)
2,500,000 Seminole County, Florida, School Board Certificates 7/04 at 101 AAA 2,853,950
of Participation, Series B, 6.750%, 7/01/14
(Pre-refunded to 7/01/04)
335,000 Tampa, Florida, Water and Sewer Revenue, Series A, 10/02 at 101 AAA 363,351
6.000%, 10/01/17 (Pre-refunded to 10/01/02)
------------------------------------------------------------------------------------------------------------------------------
UTILITIES -- 11.0%
4,210,000 Broward County, Florida, Resource Recovery Revenue, 12/99 at 103 A 4,590,331
Ses Broward Company LP South Project,
7.950%, 12/01/08
6,000,000 Citrus County, Florida, Pollution Control Revenue 1/02 at 102 A+ 6,472,980
Refunding, Florida Power Corporation Crystal River,
Series A, 6.625%, 1/01/27
1,500,000 Gainesville, Florida, Utilities System Revenue 10/06 at 102 AA 1,475,235
Refunding, Series A, 5.200%, 10/01/22
2,500,000 Hillsborough County, Florida, Industrial Development 8/01 at 103 AA 2,850,900
Authority, Pollution Control Revenue Refunding,
Tampa Electric Company Project, Series 91,
7.875%, 8/01/21
1,000,000 Lakeland, Florida, Electric and Water Revenue No Opt. Call AAA 1,117,780
Refunding and Improvement, Junior Sub Lien,
Series B, 6.000%, 10/01/12
2,125,000 Lee County, Florida, Solid Waste System Revenue, 10/01 at 102 AAA 2,320,118
Series A, 7.000%, 10/01/11
2,000,000 Martin County, Florida, Pollution Control Revenue 7/00 at 102 AAA 2,169,540
Refunding, Florida Power and Light Company
Project, 7.300%, 7/01/20
</TABLE>
_____
20
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITIES -- CONTINUED
$ 1,000,000 Orlando, Florida, Utilities Commission Water and No Opt. Call Aa $ 1,204,330
Electric Revenue Refunding, Subseries D,
6.750%, 10/01/17
1,250,000 Orlando, Florida, Utilities Commission Water and 10/02 at 102 Aa 1,314,925
Electric Revenue, Subseries A, 6.000%, 10/01/20
4,000,000 Pinellas County, Florida, Pollution Control Revenue 6/01 at 102 AA 4,405,720
Refunding, Florida Power Corporation, Anclote and
Bartow, 7.200%, 12/01/14
6,000,000 Polk County, Florida, Industrial Development Authority, 12/06 at 102 AA 6,197,220
Solid Waste Disposal Facility Revenue, Tampa
Electric Company Project, 5.850%, 12/01/30
3,000,000 St. Lucie County, Florida, Solid Waste Disposal
Revenue, Florida Power and Light Company Project:
7.150%, 2/01/23 2/01 at 102 AA- 3,244,470
2,000,000 6.700%, 5/01/27 5/02 at 102 AA- 2,165,120
- ------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER -- 7.1%
1,000,000 Callaway/Bay County, Florida, Wastewater System 9/99 at 100 AAA 1,078,880
Revenue, Series A, 6.000%, 9/01/26
1,000,000 Charlotte County, Florida, Utility Revenue Refunding, No Opt. Call AAA 1,001,160
Series A, 6.200%, 10/01/23
Dade County, Florida, Water and Sewer System
Revenue:
3,000,000 5.250%, 10/01/21 10/07 at 101 AAA 2,979,600
7,500,000 5.250%, 10/01/26 10/07 at 101 AAA 7,422,450
1,000,000 Davie, Florida, Water and Sewer Revenue and 10/02 at 102 AAA 1,085,950
Improvement, 6.250%, 10/01/17
600,000 Daytona Beach, Florida, Water and Sewer Revenue 11/02 at 102 AAA 634,548
Refunding, 6.000%, 11/15/14
2,000,000 Escambia County, Florida, Utilities Authority, Utility No Opt. Call AAA 827,580
System Revenue, Series B, 0.000%, 1/01/15
2,250,000 Hillsborough County, Florida, Utility Revenue 8/01 at 102 AAA 2,440,485
Refunding, Series A, 6.500%, 8/01/16
3,500,000 Hillsborough County, Florida, Utility Revenue 8/01 at 102 AAA 3,796,310
Refunding, Series B, 6.500%, 8/01/16
375,000 Jacksonville, Florida, Water and Sewer Development 6/02 at 102 A 405,836
Revenue, Jacksonville Suburban Utilities
Corporation Project, 6.750%, 6/01/22
</TABLE>
_____
21
<PAGE>
PORTFOLIO OF INVESTMENTS(UNAUDITED)
NUVEEN FLAGSHIP FLORIDA -- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WATER AND SEWER -- CONTINUED
$ 250,000 Jupiter,Florida, Water Revenue,Series B, 10/01 at 102 AAA $ 270,028
6.250%, 10/01/18
Manatee County, Florida, Public Utilities Revenue
Refunding and Improvement, Series C:
1,850,000 0.000%, 10/01/08 No Opt. Call AAA 1,101,526
2,800,000 0.000%, 10/01/09 No Opt. Call AAA 1,571,052
500,000 Orange County, Florida, Water and Wastewater 4/02 at 102 AAA 539,485
Revenue Refunding, 6.250%, 10/01/17
165,000 Tampa, Florida, Water and Sewer Revenue, Series A, 10/02 at 101 AAA 173,884
6.000%, 10/01/17
- --------------------------------------------------------------------------------------------------------------------------------
$341,895,000 Total Investments -- (cost $326,528,430) - 99.0% 354,412,951
- --------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.0% 3,694,287
-----------------------------------------------------------------------------------------------------
Net Assets -- 100% $358,107,238
-----------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions: 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: Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities, which ensures the timely payment of
principal and interest. Securities are normally
considered to be equivalent to AAA rated securities.
(WI) Security purchased on a when-issued basis (see note 1).
N/R - Investment is not rated.
See accompanying notes to financial statements.
_____
22
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP FLORIDA INTERMEDIATE
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOREST AND PAPER PRODUCTS -- 1.8%
$ 200,000 Escambia County, Florida, Pollution Control Revenue 11/02 at 102 Baa1 $219,414
Refunding, Champion International Corporation
Project, 6.950%, 11/01/07
- -----------------------------------------------------------------------------------------------------------------------------
HEALTH CARE -- 7.3%
200,000 Alachua County, Florida, Health Facilities Authority, 12/06 at 102 AAA 210,748
Health Facilities Revenue, Shands Teaching
Hospital, Series A, 5.300%, 12/01/08
200,000 Halifax Hospital Medical Center, Florida, Hospital 10/07 at 102 AAA 204,698
Revenue, Formerly Halifax Hospital District, Florida,
Refunding and Improvement, Series A,
5.000%, 10/01/08
250,000 Lee County, Florida, Hospital Board of Directors, 4/07 at 102 AAA 263,208
Hospital Revenue, Lee Memorial Health System,
Series A, 5.400%, 4/01/09
200,000 Leesburg, Florida, Hospital Revenue Refunding, 7/06 at 102 A- 210,758
Leesburg Regional Medical Center Project,
Series A, 5.600%, 7/01/08
- -----------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY -- 7.0%
300,000 Brevard County, Florida, Housing Finance Authority, 2/06 at 101 AAA 339,798
Multifamily Housing Revenue Refunding,
Windover Oaks, Series A, 6.900%, 2/01/27
500,000 Polk County, Florida, Housing Finance Authority, 7/05 at 101 AAA 512,835
Multifamily Housing Revenue Refunding,
Winter Oaks Apartments Project, Series A,
5.250%, 7/01/22
- -----------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY -- 6.5%
250,000 Escambia County, Florida, Housing Finance Authority, 4/07 at 102 Aaa 258,043
Single Family Mortgage Revenue, Multi-County
Program, Series A, 5.500%, 4/01/08
180,000 Florida Housing Finance Agency, Refunding, Single No Opt. Call AAA 185,110
Family Mortgage, Series A, 6.000%, 1/01/04
345,000 Orange County, Florida, Housing Finance Authority, 9/07 at 102 AAA 353,211
Single Family Mortgage Revenue Refunding,
Mortgage Backed Securities, Series B,
5.400%, 9/01/09
</TABLE>
_____
23
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP FLORIDA INTERMEDIATE -- CONTINUED
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL/OTHER -- 2.1%
$250,000 Sanford, Florida, Airport Authority, Industrial No Opt. Call N/R $262,765
Development Revenue, Central Florida Terminals
Inc. Project, Series C, 6.750%, 5/01/05
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM CARE -- 3.1%
165,000 Jacksonville, Florida, Health Facilities Authority, No Opt. Call Baa1 175,441
Industrial Development Revenue, National
Benevolent, Cypress Village, Series A,
5.850%, 12/01/06
200,000 Sarasota County, Florida, Health Facility Authority, No Opt. Call N/R 206,538
Revenue Refunding, Health Facilities,
Sunnyside Properties, 5.500%, 5/15/05
- --------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL -- 17.1%
200,000 Dade County, Florida, School District, Refunding, 7/06 at 101 AAA 195,528
4.500%, 7/15/08
500,000 Duval County, Florida, School District, Refunding, 8/02 at 102 AAA 547,645
6.300%, 8/01/08
225,000 Florida State, Broward County Expressway Authority, No Opt. Call AA+ 318,870
9.875%, 7/01/09
Florida State Board of Education Capital Outlay,
Refunding, Public Education, Series A:
100,000 6.000%, 6/01/07 6/02 at 101 AA+ 107,046
85,000 5.000%, 6/01/08 No Opt Call AA+ 87,879
325,000 Guam Government, Series A, 4.900%, 11/15/04 11/03 at 102 BBB 324,994
275,000 New York City, Refunding, Series A, 6.250%, 8/01/08 8/06 at 101 1/2 BBB+ 299,833
200,000 Puerto Rico Commonwealth, Refunding and No Opt. Call A 210,286
Improvement, 5.375%, 7/01/05
- --------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED -- 27.9%
200,000 Broward County, Florida, Professional Sports Facilities 9/06 at 101 AAA 209,816
Tax Revenue, Civic Arena Project, Series A,
5.200%, 9/01/07
100,000 Dade County, Florida, School Board Certificates of No Opt. Call AAA 105,631
Participation, Series A, 5.375%, 5/01/04 335,000
335,000 Dade County, Florida, Special Obligation, Refunding, 10/08 at 98 7/32 AAA 184,736
Series B, 0.000%, 10/01/09
325,000 Florida Ports Financing Commission, State No Opt. Call AAA 333,661
Transportation Tollroad Fund,
5.000%, 6/01/07
</TABLE>
_____
24
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/LIMITED -- CONTINUED
$ 250,000 Florida State Division of Bond Finance, Department 7/05 at 101 AAA $ 268,008
General Services Revenues, Department
Environmental of Preservation 2000, Series A,
5.500%, 7/01/06
405,000 Gulf Breeze, Florida, Local Government Loan 12/07 at 100 AAA 434,840
Program, Series B, 5.600%, 12/01/15
100,000 Gulf County, Florida, Gas Tax Revenue Refunding and 10/05 at 102 AAA 103,372
Improvement, 5.000%, 10/01/07
145,000 Gulf County, Florida, School District Sales Tax 6/07 at 101 AA 149,815
Revenue, 5.200%, 6/01/08
200,000 Hillsborough County, Florida, Capital Improvement No Opt. Call AAA 201,316
Program Revenue Refunding, 4.800%, 8/01/08
150,000 Indian Trace Community Development District, 5/05 at 102 AAA 160,634
Florida, Refunding, Water Management, Special
Benefit, Series A, 5.500%, 5/01/06
400,000 Lee County, Florida, Capital Revenue Refunding, No Opt. Call AAA 437,228
Series A, 5.750%, 10/01/11
290,000 Levy County, Florida, School Board Certificates of 7/05 at 102 AA 308,128
Participation, 5.500%, 7/01/06
125,000 Lynn Haven, Florida, Special Project Revenue, No Opt. Call AAA 129,499
5.250%, 10/01/05
250,000 Martin County, Florida, Special Assessment Revenue, No Opt. Call A2 264,820
Tropical Farms Water, 5.600%, 11/01/05
125,000 Pembroke Pines, Florida, Special Assessment, No Opt. Call Baa1 132,240
No. 94, 1, 5.750%, 11/01/05
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 14.7%
350,000 Dade County, Florida, Aviation Revenue Refunding, No Opt. Call AAA 379,999
Series A, 6.250%, 10/01/02
500,000 Dade County, Florida, Seaport Revenue Refunding, No Opt. Call AAA 567,000
Series 95, 6.200%, 10/01/10
200,000 Greater Orlando Aviation Authority, Orlando, Florida, No Opt. Call AAA 215,254
Airport Facilities Revenue, 5.750%, 10/01/10 (WI)
200,000 Hillsborough County, Florida, Aviation Authority, 10/06 at 101 AAA 215,156
Revenue Refunding, Tampa International Airport,
Series A, 5.750%, 10/01/07 (WI)
200,000 Pensacola, Florida, Airport Revenue, Series B, No Opt. Call AAA 211,078
5.400%, 10/01/07
</TABLE>
_____
25
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP FLORIDA INTERMEDIATE -- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSPORTATION -- CONTINUED
$ 200,000 Sarasota, Manatee Airport Authority, Florida, Airport 8/06 at 102 AAA $ 209,650
Revenue Refunding, 5.250%, 8/01/08
- ---------------------------------------------------------------------------------------------------------------------------------
UTILITIES -- 5.0%
120,000 Jacksonville, Florida, Electric Authority Revenue 4/06 at 101 Aa1 121,256
Refunding, St. Johns River Power Park System,
Issue 2, 4.750%, 10/01/07
375,000 Pasco County, Florida, Solid Waste Disposal and 4/07 at 101 AAA 387,060
Resource Recovery System Revenue, Series B,
5.250%, 4/01/09
100,000 Port St. Lucie, Florida, Utility Revenue, No Opt. Call AAA 106,574
5.500%, 9/01/04
- ---------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER -- 8.5%
485,000 Auburndale, Florida, Water and Sewer Revenue 12/05 at 102 AAA 512,086
Refunding, 5.375%, 12/01/08
250,000 Lee County, Florida, Industrial Development Authority, 11/06 at 101 AAA 266,155
Utilities Revenue Refunding, Bonita Springs
Utilities Project, 5.450%, 11/01/07
250,000 Plant City, Florida, Utility System Revenue Refunding 10/04 at 101 AAA 265,052
and Improvement, 5.400%, 10/01/06
- ---------------------------------------------------------------------------------------------------------------------------------
$ 11,780,000 Total Investments -- (cost $11,759,334) -- 101.0% 12,374,712
- ---------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (1.0%) (120,267)
---------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $ 12,254,445
---------------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions: 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: Using the higher of Standard & Poor's or
Moody's rating.
(WI) Security purchased on a when-issued basis (see note 1).
N/R - Investment is not rated.
See accompanying notes to financial statements
_____
26
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS (UNAUDITED)
NOVEMBER 30, 1997
NUVEEN FLAGSHIP NUVEEN FLAGSHIP
FLORIDA FLORIDA INTERMEDIATE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $ 354,412,951 $ 12,374,712
Cash 1,925,394 20,827
Receivables:
Fund Manager (note 6) --- 803
Interest 6,003,865 184,325
Investments sold 235,911 169,589
Shares sold 586,698 ---
Other assets 98,055 89
- -----------------------------------------------------------------------------------------------------------
Total assets 363,262,874 12,750,345
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
Payables:
Investments purchased 2,732,146 428,170
Shares redeemed 615,336 ---
Accrued expenses:
Management fees (note 6) 158,060 ---
12b-1 distribution and service fees (notes 1 and 6) 53,274 3,630
Other 71,298 19,877
Dividends payable 1,525,522 44,223
- -----------------------------------------------------------------------------------------------------------
Total liabilities 5,155,636 495,900
- -----------------------------------------------------------------------------------------------------------
Net assets (note 7) $ 358,107,238 $ 12,254,445
- -----------------------------------------------------------------------------------------------------------
CLASS A SHARES (NOTE 1)
Net assets $ 292,817,425 $ 8,464,746
Shares outstanding 26,958,474 814,656
Net asset value and redemption price per share $ 10.86 $ 10.39
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% and 3.00%,
respectively of offering price) $ 11.34 $ 10.71
- -----------------------------------------------------------------------------------------------------------
CLASS B SHARES (NOTE 1)
Net assets $ 2,547,965 N/A
Shares outstanding 234,422 N/A
Net asset value, offering and redemption price per share $ 10.87 N/A
- -----------------------------------------------------------------------------------------------------------
CLASS C SHARES (NOTE 1)
Net assets $ 6,695,535 $ 3,670,785
Shares outstanding 616,231 353,544
Net asset value, offering and redemption price per share $ 10.87 $ 10.38
- -----------------------------------------------------------------------------------------------------------
CLASS R SHARES (NOTE 1)
Net assets $ 56,046,313 $ 118,914
Shares outstanding 5,161,034 11,422
Net asset value, offering and redemption price per share $ 10.86 $ 10.41
- -----------------------------------------------------------------------------------------------------------
</TABLE>
N/A - Nuveen Flagship Florida Intermediate is not authorized to issue Class B
Shares.
See accompanying notes to financial statements.
_____
27
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP NUVEEN FLAGSHIP
FLORIDA FLORIDA INTERMEDIATE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $10,858,403 $326,932
- ------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees (note 6) 968,744 34,228
12b-1 service fees -- Class A (notes 1 and 6) 296,906 8,853
12b-1 distribution and service fees -- Class B (notes 1 and 6) 8,267 N/A
12b-1 distribution and service fees -- Class C (notes 1 and 6) 22,278 13,118
Shareholders' servicing agent fees and expenses 92,574 6,542
Custodian's fees and expenses 41,105 20,904
Trustees' fees and expenses (note 6) 3,839 115
Professional fees 5,688 7,496
Shareholders' reports -- printing and mailing expenses 29,254 410
Federal and state registration fees 1,808 1,034
Organizational expenses (note 1) -- 4,575
Other expenses 2,257 211
- ------------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 1,472,720 97,486
Expense reimbursement (note 6) -- (38,638)
- ------------------------------------------------------------------------------------------------------------------------
Net expenses 1,472,720 58,848
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 9,385,683 268,084
- ------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 4) 575,503 81,668
Net change in unrealized appreciation or depreciation
of investments 8,053,290 300,108
- ------------------------------------------------------------------------------------------------------------------------
Net gain from investments 8,628,793 381,776
- ------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $18,014,476 $649,860
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
N/A -- Nuveen Flagship Florida Intermediate is not authorized to issue Class B
Shares.
See accompanying notes to financial statements.
_____
28
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP FLORIDA
---------------------------------------
SIX MONTHS ENDED YEAR ENDED
11/30/97 5/31/97*
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 9,385,683 $ 17,560,647
Net realized gain from investment transactions (notes 1 and 4) 575,503 1,079,346
Net change in unrealized appreciation or depreciation
of investments 8,053,290 5,172,708
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 18,014,476 23,812,701
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (7,600,901) (16,417,162)
Class B (37,244) (6,544)
Class C (135,006) (136,909)
Class R (1,479,044) (978,903)
From accumulated net realized gains from investment transactions:
Class A -- (27,453)
Class B -- --
Class C -- (288)
Class R -- --
- ----------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (9,252,195) (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 16,947,430 30,465,913
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 4,532,343 5,587,408
- ----------------------------------------------------------------------------------------------------------
21,479,773 101,782,715
- ----------------------------------------------------------------------------------------------------------
Cost of shares redeemed (29,266,798) (70,527,219)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions (7,787,025) 31,255,496
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets 975,256 37,500,938
Net assets at the beginning of period 357,131,982 319,631,044
- ----------------------------------------------------------------------------------------------------------
Net assets at the end of period $358,107,238 $357,131,982
- ----------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at
end of period $ 154,617 $ 21,129
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Florida and four months of
Nuveen Flagship Florida (see note 1).
See accompanying notes to financial statements.
_____
29
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED) -- CONTINUED
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
FLORIDA INTERMEDIATE
-------------------------------------
SIX MONTHS ENDED YEAR ENDED
11/30/97 5/31/97*
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 268,084 $ 424,132
Net realized gain (loss) from investment transactions
(notes 1 and 4) 81,668 (26,511)
Net change in unrealized appreciation or depreciation
of investments 300,108 223,3951
- --------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 649,860 621,016
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (197,519) (312,115)
Class C (70,120) (123,497)
Class R (2,165) (406)
From accumulated net realized gains from investment transactions:
Class A -- (11,177)
Class C -- (5,494)
Class R -- --
- --------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (269,804) (452,689)
- --------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from sale of shares 1,324,009 13,641,821
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 154,651 160,751
- --------------------------------------------------------------------------------------------------------------
1,478,660 13,802,572
- --------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (5,801,979) (5,846,919)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share
transactions (4,323,319) 7,955,653
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (3,943,263) 8,123,980
Net assets at the beginning of period 16,197,708 8,073,728
- --------------------------------------------------------------------------------------------------------------
Net assets at the end of period $12,254,445 $16,197,708
- --------------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end
of period $ 9,174 $ 10,894
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Florida Intermediate and four
months of Nuveen Flagship Florida Intermediate (see note 1).
See accompanying notes to financial statements.
_____
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 ("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 Florida Double Tax
Exempt Fund ("Flagship Florida") and Nuveen Florida Tax-Free Value Fund ("Nuveen
Florida") reorganized into Nuveen Flagship Florida Municipal Bond Fund ("Nuveen
Florida"). Flagship Florida Intermediate Tax Exempt Fund ("Flagship Florida
Intermediate") was reorganized into the Trust and renamed Nuveen Flagship
Florida Intermediate Municipal Bond Fund ("Nuveen Flagship Florida
Intermediate"). Prior to these reorganizations, Flagship Florida and Flagship
Florida Intermediate were each a sub-trust of the 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 Nuveen Flagship Florida which has retained the fiscal year end of Flagship
Florida.
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
_____
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
when-issued and delayed delivery purchase commitments. At November 30, 1997,
Nuveen Flagship Florida and Nuveen Flagship Florida Intermediate had outstanding
when-issued purchase commitments of $2,732,146 and $428,170, respectively.
INTEREST INCOME
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
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 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 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. Net realized capital gains
and market discount distributions are subject to federal taxation.
FLEXIBLE SALES CHARGE PROGRAM
Each fund offers Class A, C and R Shares. Nuveen Flagship 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 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
_____
32
<PAGE>
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, and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the six months ended November 30, 1997.
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 Nuveen Flagship Florida
Intermediate (approximately $27,400) will be reimbursed to the Adviser on a
straight-line basis over a period of three years. As of November 30, 1997,
$13,696 has been reimbursed.
_____
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
2. FUND SHARES
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP FLORIDA
------------------------------------------------------
SIX MONTHS ENDED 11/30/97 YEAR ENDED 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 1,002,843 10,825,256 2,325,105 24,486,690
Class B 171,794 1,851,420 72,980 773,584
Class C 179,182 1,933,030 363,870 3,832,018
Class R 218,214 2,337,724 129,989 1,373,621
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 335,716 3,595,100 488,917 5,143,242
Class B 1,249 13,491 211 2,219
Class C 7,116 76,285 3,197 33,754
Class R 78,786 847,467 38,779 408,193
- ----------------------------------------------------------------------------------------------
1,994,900 21,479,773 9,629,707 101,782,715
- ----------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,397,878) (25,818,798) (6,499,240) (68,393,215)
Class B (12,600) (136,498) -- --
Class C (53,838) (580,244) (30,973) (324,954)
Class R (253,448) (2,731,258) (171,775) (1,809,050)
- ----------------------------------------------------------------------------------------------
(2,717,764) (29,266,798) (6,701,988) (70,527,219)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) (722,864) $(7,787,025) 2,927,719 $31,255,496
- ----------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Florida and four months of
Nuveen Flagship Florida (see note 1).
_____
34
<PAGE>
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP FLORIDA INTERMEDIATE
--------------------------------------------------
SIX MONTHS ENDED 11/30/97 YEAR ENDED 5/31/97*
--------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 56,443 $ 583,625 1,278,167 $12,883,393
Class C 68,155 702,985 65,754 657,819
Class R 3,620 37,399 10,011 100,609
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 9,904 101,194 11,064 110,935
Class C 5,008 51,180 4,973 49,816
Class R 221 2,277 -- --
- ------------------------------------------------------------------------------------------
143,351 1,478,660 1,369,969 13,802,572
- ------------------------------------------------------------------------------------------
Shares redeemed:
Class A (549,298) (5,593,955) (496,941) (5,002,329)
Class C (17,875) (183,024) (83,942) (844,590)
Class R (2,430) (25,000) -- --
- ------------------------------------------------------------------------------------------
(569,603) (5,801,979) (580,883) (5,846,919)
- ------------------------------------------------------------------------------------------
Net increase (decrease) (426,252) $(4,323,319) 789,086 $ 7,955,653
- ------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Florida Intermediate and four
months of Nuveen Flagship Florida Intermediate (see note 1).
3. DISTRIBUTIONS TO SHAREHOLDERS
On December 9, 1997, the Funds declared dividend distributions from their tax-
exempt net investment income which were paid on December 31, 1997, to
shareholders of record on December 9, 1997, as follows:
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP NUVEEN FLAGSHIP 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
- ------------------------------------------------------------------------------------------
</TABLE>
N/A -- Nuveen Flagship Florida Intermediate is not authorized to issue Class B
Shares.
At the same time, the Funds also declared taxable distributions, which includes
capital gains and/or taxable market discount, of $.0101 per share for Nuveen
Flagship Florida and $.0405 per share for Nuveen Flagship Florida Intermediate.
_____
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
4. SECURITIES TRANSACTION
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the six months ended November
30, 1997, were as follows:
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP NUVEEN FLAGSHIP
FLORIDA FLORIDA INTERMEDIATE
- --------------------------------------------------------------------------------------
<S> <C> <C>
PURCHASES:
Investments in municipal securities $13,959,953 $3,738,020
Temporary municipal investments 7,700,000 3,500,000
SALES:
Investments in municipal securities 21,046,096 4,582,526
Temporary municipal investments 7,700,000 3,500,000
- --------------------------------------------------------------------------------------
</TABLE>
At November 30, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for each Fund.
At May 31, 1997, the Funds' last fiscal year end, the Funds had unused capital
loss carryforwards available for federal income tax purposes to be applied
against future capital gains, if any. If not applied, the carryforwards will
expire as follows:
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP NUVEEN FLAGSHIP
FLORIDA FLORIDA INTERMEDIATE
- --------------------------------------------------------------------------------------
<S> <C> <C>
Expiration year:
2002 $187,294 $ --
2003 141,494 --
2004 213,030 --
2005 -- 4,069
- --------------------------------------------------------------------------------------
Total $541,818 $ 4,069
======================================================================================
</TABLE>
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of investments
at November 30, 1997, were as follows:
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP NUVEEN FLAGSHIP
FLORIDA FLORIDA INTERMEDIATE
- --------------------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $27,931,706 $615,378
depreciation (47,185) --
- --------------------------------------------------------------------------------------
Net unrealized appreciation $27,884,521 $615,378
- --------------------------------------------------------------------------------------
</TABLE>
_____
36
<PAGE>
6. MANAGEMENT FEES 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 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.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $248,900 and $11,200 for
Nuveen Flagship Florida and Nuveen Flagship Florida Intermediate, respectively,
of which approximately $213,400 and $9,200, respectively, were paid out as
concessions to authorized dealers. The Distributor also received 12b-1 service
fees on Class A Shares, substantially all of which were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments.
During the six months ended November 30, 1997, the Distributor compensated
authorized dealers directly with approximately $104,100 and $6,800 in commission
advances at the time of purchase for Nuveen Flagship Florida and Nuveen Flagship
Florida Intermediate, respectively. To compensate for commissions advanced to
authorized dealers, all 12b-1 service fees collected on Class B Shares for
Nuveen Flagship Florida during the first year following a purchase, all 12b-1
distribution fees on Class B Shares for Nuveen Flagship Florida, 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 six months ended November
30, 1997, the Distributor retained approximately $23,100 and $4,600 in in such
12b-1 fees for Nuveen Flagship Florida and Nuveen Flagship 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
$6,700 of CDSC on share redemptions for Nuveen Flagship Florida during the six
months ended November 30, 1997.
_____
37
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
7. COMPOSITION OF NET ASSETS
At November 30, 1997, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP NUVEEN FLAGSHIP
FLORIDA FLORIDA INTERMEDIATE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in $330,104,813 $11,574,736
Balance of undistributed net investment income 154,617 9,174
Accumulated net realized gain (loss)
from investment transaction (36,713) 55,157
Net unrealized appreciation of investments 27,884,521 615,378
- ---------------------------------------------------------------------------------------------
Net assets $358,107,238 $12,254,445
- ---------------------------------------------------------------------------------------------
</TABLE>
_____
38
<PAGE>
FINANCIAL HIGHLIGHTS
_____
39
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
Selected data for a common share outstanding throughout
each period is as follows:
<TABLE>
<CAPTION>
CLASS (INCEPTION DATE) OPERATING PERFORMANCE LESS DISTRIBUTIONS
------------------------- ----------------------
NET
NUVEEN FLAGSHIP FLORIDA** NET REALIZED AND DIVIDENDS NET TOTAL
ASSET UNREALIZED FROM TAX- ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
MAY 31, OF PERIOD INCOME (B) INVESTMENTS INCOME GAINS PERIOD VALUE (A)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (6/90)
1998 (d) $ 10.60 $ .28 $ .26 $ (.28) $ -- $ 10.86 5.10%
1997 10.39 .56 .21 (.56) -- 10.60 7.59
1996 10.63 .57 (.24) (.57) -- 10.39 3.14
1995 10.38 .58 .26 (.59) -- 10.63 8.43
1994 10.76 .60 (.38) (.60) -- 10.38 2.00
1993 10.18 .63 .61 (.64) (.02) 10.76 12.49
1992 9.87 .66 .33 (.67) (.01) 10.18 10.32
1991 (c) 9.58 .64 .29 (.64) -- 9.87 9.81*
CLASS B (2/97)
1998 (d) 10.61 .24 .26 (.24) -- 10.87 4.72
1997 (c) 10.59 .16 .02 (.16) -- 10.61 1.70
CLASS C (9/95)
1998 (d) 10.60 .25 .27 (.25) -- 10.87 4.92
1997 10.39 .50 .21 (.50) -- 10.60 7.00
1996 (c) 10.65 .35 (.26) (.35) -- 10.39 1.30*
CLASS R (2/97)
1998 (d) 10.60 .29 .26 (.29) -- 10.86 5.22
1997 (c) 10.59 .19 .01 (.19) -- 10.60 1.93
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the year ending May 31, 1997,
reflects the financial highlights of Flagship Florida.
(a) Total returns are calculated on net asset value without any
sales charge and are not annualized except where noted.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its predecessor
Flagship Financial.
(c) From commencement of class operation as noted.
(d) For the six months ending November 30, 1997.
_____
40
<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
NET ASSETS BEFORE BEFORE AFTER AFTER PORTFOLIO
END OF PERIOD REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
(IN THOUSANDS) MENT MENT MENT (B) MENT (B) RATE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 292,817 .84%* 5.19%* .84%* 5.19%* 4%
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
369,123 .99 5.47 .45 6.01 23
276,811 1.03 5.82 .26 6.59 50
136,509 1.05 6.00* .19* 6.86* 152
2,548 1.59* 4.42* 1.59* 4.42* 4
785 1.58* 4.52* 1.58* 4.52* 54
6,696 1.39* 4.64* 1.39* 4.64* 4
5,130 1.46 4.64 1.35 4.75 54
1,175 1.55* 4.42* 1.38* 4.59* 94
56,046 .64* 5.39* .64* 5.39* 4
54,247 .64* 5.55* .64* 5.55* 54
- ---------------------------------------------------------------------------------------------
</TABLE>
_____
41
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED) - CONTINUED
Selected data for a common share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
CLASS (INCEPTION DATE) OPERATING PERFORMANCE LESS DISTRIBUTIONS
------------------------ ----------------------
NUVEEN FLAGSHIP NET
FLORIDA INTERMEDIATE** NET REALIZED AND DIVIDENDS NET TOTAL
ASSET UNREALIZED FROM TAX- ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
MAY 31, OF PERIOD INCOME (B) INVESTMENTS INCOME GAINS PERIOD VALUE (A)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (9/94)
1998 (d) $ 10.09 $ .23 $ .30 $ (.23) $ -- $ 10.39 5.33%
1997 9.88 .45 .25 (.47) (.02) 10.09 7.16
1996 10.05 .46 (.12) (.46) (.05) 9.88 3.41
1995 9.66 .46 .33 (.40) -- 10.05 8.42
1994 (c) 9.70 .12 (.04) (.12) -- 9.66 1.75*
CLASS C (2/94)
1998 (d) 10.08 .20 .31 (.21) -- 10.38 5.06
1997 9.88 .40 .23 (.41) (.02) 10.08 6.47
1996 10.05 .40 (.11) (.41) (.05) 9.88 2.88
1995 9.66 .40 .33 (.34) -- 10.05 7.80
1994 (c) 9.70 .11 (.06) (.09) -- 9.66 1.33*
CLASS R (2/97)
1988 (d) 10.11 .24 .31 (.25) -- 10.41 5.43
1997 (c) 10.20 .12 (.09) (.12) -- 10.11 .32
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the year ending May 31, 1997,
reflects the financial highlights of Flagship Florida Intermediate.
(a) Total returns are calculated on net asset value without any sales
charge and are not annualized except where noted.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its predecessor
Flagship Financial.
(c) From commencement of class operations as noted.
(d) For the six months ending November 30, 1997.
_____
42
<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
NET ASSETS BEFORE BEFORE AFTER AFTER PORTFOLIO
END OF PERIOD REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
(IN THOUSANDS) MENT MENT MENT (B) MENT (B) RATE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 8,465 1.41%* 3.84%* .79%* 4.46%* 30%
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
3,671 1.97* 3.29* 1.34* 3.92* 30
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
119 1.22* 4.07* .60* 4.69* 30
101 1.21* 3.82* .56* 4.47* 35
- ----------------------------------------------------------------------------------------------
</TABLE>
_____
43
<PAGE>
ADDITIONAL INVESTMENT OPPORTUNITIES
NUVEEN FAMILY OF MUTUAL FUNDS
Nuveen offers a variety of funds designed to help you reach your financial
goals.
GROWTH FUNDS
Nuveen Rittenhouse Growth Fund
GROWTH AND INCOME FUNDS
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
MUNICIPAL BOND FUNDS
NATIONAL FUNDS
Long-Term
Insured
Intermediate
Limited Term
STATE FUNDS
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Fund, contact your financial
adviser. If you would like to add to your current investment on a regular basis,
you can sign up for Nuveen's systematic investing program, which allows you to
invest a fixed dollar amount every month automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you give your investment the added
growth potential of long-term compounding.
For more information on any of these service options, call your adviser, or
Nuveen at (800) 225-8530.
_____
44
<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
Boston Financial Data Service
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
LEGAL COUNSEL
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, Illinois
_____
45
<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
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
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 products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 225-8530 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 225-8530
www.nuveen.com
VSA-FL-11.97
<PAGE>
[NUVEEN LOGO]
Municipal
Bonds Funds
November 30, 1997
Semiannual Report
[PHOTO APPEARS HERE]
Dependable, tax-free income
to help you keep more of
what you earn.
Arizona
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Performance Overview
8 Portfolio of Investments
17 Statement of Net Assets
18 Statement of Operations
19 Statement of Changes in Net Assets
20 Notes to Financial Statements
26 Financial Highlights
28 Additional Investment Opportunities
29 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.
It's a pleasure to share with you the Nuveen Flagship Arizona Municipal Bond
Fund's outstanding performance record for the 12 months ended November 30, 1997.
Over the past year, investors continued to enjoy attractive, tax-free dividends
generated by the fund's portfolio of municipal bonds. As of November 30, 1997,
Class A shareholders were receiving a current yield on net asset value of 4.20%.
To match this yield, investors in the 34.5% combined federal and state income
tax bracket would have had to earn at least 6.41% on taxable alternatives.
During this same period, the fund provided Class A shareholders with a highly
competitive total return on net asset value of 7.12% with income and capital
gains reinvested, outpacing the average return of 6.52% for its peer group, the
Lipper Arizona municipal bond fund category. You will find additional details on
the fund's performance on pages 6-7.
The Year in Review
Over the past year, U.S. investors have benefited from robust economic growth
with little evidence of inflationary pressures. With unemployment rates at 20-
year lows and the current economic expansion entering its seventh year, the
presence of benign inflation has sparked debate over whether the traditional
link between growth and inflation has been broken. During 1997, expectations
that excess growth would generate inflation disrupted the markets on several
occasions, most notably following the Federal Reserve's interest rate tightening
in March and speeches by Fed Chairman Alan Greenspan. Still, falling commodity
prices kept producer prices in check, while low import prices--due in part to
the weakness in Asian markets--
1
<PAGE>
"The events of 1997
have focused renewed
attention on the need
for diversification and
appropriate asset allocation."
limited U.S. companies' ability to raise consumer prices. This combination has
kept inflation subdued and the Federal Reserve "on hold" since March. The
reduction in the federal deficit and passage of the Taxpayer Relief Act of 1997
offer additional encouragement to long-term fixed-income investors.
Helping You Build A Better Portfolio
The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation. Stock market volatility,
especially late in the year, provided a vivid illustration of the steadying
effect that fixed-income investments can provide in a well-constructed
investment portfolio. Nuveen mutual funds provide an excellent balance to other
stock and bond investments. Your financial adviser can introduce you to a
variety of other Nuveen products and services to round out your investment
portfolio, including the Nuveen Growth and Income Stock Fund and two balanced
stock and bond funds.
In addition, we recently expanded our private asset management capabilities
through the acquisition of Rittenhouse Financial Services, a well-respected
growth investment manager. We encourage you to talk with your financial adviser
about ways to complement your current Nuveen investments by taking advantage of
these additional products and services.
We at Nuveen remain committed to providing you with quality investment solutions
that withstand the test of time. We thank you for your confidence in us and our
family of investments, and we look forward to our next report to you.
Sincerely,
/s/ Timothy R. Schwertfeger
- ---------------------------
Timothy R. Schwertfeger
Chairman of the Board
January 15, 1998
2
<PAGE>
Answering Your Questions
[PHOTO OF TED NEILD APPEARS HERE]
Ted Neild, managing director of Nuveen's portfolio management team, talks about
the municipal bond market and offers insights into factors that affected the
performance of the fund over the past year.
What economic and market factors influenced the performance of municipal bonds
over the past year?
Over the past 12 months, the performance of the municipal bond market was
influenced by three major factors: the continued strength of the U.S. economy,
minimal inflation, and volatility in the equity markets. During 1997, these
factors contributed to a positive environment for fixed-income investments, as
reflected in the steady-to-declining interest rates evident during the year.
Between December 1996 and November 1997, the yield on the 30-year Treasury bond
dropped from 6.36% to 6.05%, and the municipal market followed suit, as the
yield on the Bond Buyer 40 declined from 5.63% to 5.36%. The spread between tax-
free municipal bonds and taxable Treasury bonds remained tight, making municipal
bonds very attractive. The strong total returns produced in this environment
were somewhat muted by a heavy supply of newly issued bonds that temporarily
reduced bond prices. The increased supply worked to our advantage, however, as
it expanded opportunities to find value in the marketplace.
How has the fund performed during this period?
As Tim mentioned in his letter to shareholders, the fund performed well during
the one-year period ended November 30, 1997. The total return on net asset value
for Class A shares of the fund was 7.12%, which compares favorably with the one-
year average return of 6.52% for the peer group of Arizona municipal bond funds
tracked by Lipper Analytical Services--a 60 basis point difference. Once again,
this fund was one of the top performers in its category, ranking ninth among the
37 municipal bond funds in the grouping.
3
<PAGE>
Given the current municipal market, where were you able to find value?
We concentrated on identifying individual bonds with current yields, prices,
credit quality and future prospects that are exceptionally attractive relative
to other bonds in the market. By doing so, we believe the portfolio is
positioned to deliver above-market performance. Currently, we feel there is
tremendous value in high-grade housing bonds. A few issues had unexpected calls
this year and this has led to buyers avoiding the entire sector, driving yields
higher. Since Nuveen has such a large, experienced housing research staff, we
were able to buy these securities with greater confidence. Additionally, we have
avoided lower-rated securities because we felt the marginally higher yield did
not compensate the fund for the increased credit risk.
What are your key strategies for the coming year?
To sustain such outstanding performance, we take a holistic approach to
portfolio management--assessing all of the factors that determine a fund's
performance and taking advantage of all of them to contribute to total return
and dividend stability. In the coming year, one focus will be maintaining good
call protection, which helps sustain the fund's dividend.
While credit spreads are tight, we will continue to take advantage of
opportunities to purchase bonds with high credit quality at yields that are
similar to bonds with lower ratings. During the past year, the yield
differentials between AAA and BBB bonds narrowed significantly, enhancing the
credit quality of the portfolio. We believe that if credit spreads widen, these
high-quality issues will increase in value relative to lower-rated bonds.
"Our thorough research
helps us find investment
quality bonds that offer the
best values--such as bonds
from specific regions and
sectors that have the best
potential for performance
and appreciation."
4
<PAGE>
"Looking at the year ahead,
we believe the overall
market will continue to
strike a good balance
between supply and
demand."
As part of our value investing approach, we will also continue to look for
individual bonds that offer good long-term value with the potential for
appreciating returns. Our thorough research helps us find investment quality
bonds that offer the best values--such as bonds from specific regions and
sectors that have the best potential for performance and appreciation. Recently,
research helped us uncover a number of bonds that were eventually pre-refunded
by their issuers, which adds tremendous value to the portfolios. We plan to
continue to search for bonds with pre-refunding potential that we feel are
undervalued by the market as a whole.
What is your outlook for the municipal market?
Looking at the year ahead, we believe the overall market will continue to strike
a good balance between supply and demand. We expect supply to increase as new
issuers continue to enter the market. A continued decline in yields could also
cause new supply to come to market through refunding of current debt. On the
demand side, volatility in the equity markets, plus the potential for a
weakening of the economy, could spark increased interest in bonds of all types.
The financial crises in Asia, coupled with the continued strength of the dollar
and low commodity prices, are all contributing to the excellent inflation
picture. This backdrop should help offset stronger labor markets and limit the
effects of any bond market corrections. In the meantime, positive underlying
fundamentals provide good support for the municipal market.
5
<PAGE>
Nuveen Flagship Arizona
Municipal Bond Fund
Performance Overview
As of November 30, 1997
<TABLE>
<CAPTION>
Fund Highlights
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares Class A B C R
Inception Date 10/86 2/97 2/94 2/97
Net Asset Value (NAV) $11.28 $11.27 $11.28 $11.28
CUSIP 67065L104 67065L203 67065L302 67065L401
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Total Net Assets ($000) $109,159
Average Weighted Maturity (Years) 15.48
Average Weighted Duration (Years) 8.12
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/1/
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Share Class A(NAV) A(Offer) B C R
1-Year 7.12% 2.61% 6.28% 6.54% 7.31%
5-Year 7.36% 6.44% 6.73% 6.78% 7.40%
10-Year 8.74% 8.27% 8.26% 8.14% 8.75%
- ------------------------------------------------------------------------------------
Tax-Free Yields
- ------------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
Dist Rate 4.89% 4.69% 4.15% 4.36% 5.11%
SEC 30-Day Yld 4.20% 4.02% 3.45% 3.65% 4.40%
Taxable Equiv Yld2 6.41% 6.14% 5.27% 5.57% 6.72%
- ------------------------------------------------------------------------------------
</TABLE>
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 up-front sales charge. Class B shares have a
contingent deferred sales charge (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 B
shares automatically convert to Class A shares eight years after purchase.
Class C shares have a 1% CDSC for redemptions within one year which is not
reflected in the one-year total return.
2 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.
3 The fund paid capital gains distributions to shareholders of $0.0457 per share
in December and $0.0114 per share in January.
6
<PAGE>
Credit Quality
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 71%
BBB/NR 11%
A 9%
AA 9%
Diversification
[PIE CHART APPEARS HERE]
Tax Obligation (Limited) 10%
Water & Sewer 8%
Tax Obligation (G.O.) 29%
Education/Civic Org. 3%
U.S. Guaranteed 23%
Utilities 7%
Health Care 12%
Other 8%
Dividend History (A Shares)/3/
[BAR CHART APPEARS HERE]
December 1996 0.04692
January 1997 0.04926
February 1997 0.0462
March 1997 0.0462
April 1997 0.0462
May 1997 0.0462
June 1997 0.046
July 1997 0.046
August 1997 0.046
September 1997 0.046
October 1997 0.046
November 1997 0.046
7
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Arizona
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer Cyclical -- 1.0%
$ 1,000,000 Mesa, Arizona, Industrial Development Authority, No Opt. Call N/R $1,079,750
Industrial Revenue, Vehicle Safety System Inc.
Project, 7.250%, 10/15/04
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Staples -- 0.3%
250,000 Casa Grande, Arizona, Industrial Development 12/02 at 103 A1 274,343
Authority, Industrial Development Revenue, Frito
Lay/Pepsico, 6.650%, 12/01/14
- ------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations -- 3.3%
570,000 Arizona Educational Loan Marketing Corporation, 3/02 at 101 A 623,529
Educational Loan Revenue, Series B,
7.000%, 3/01/05
100,000 Arizona Educational Loan Marketing Corporation, 9/02 at 101 Aa 106,759
Educational Loan Revenue, Senior Series,
6.375%, 9/01/05
1,500,000 Arizona Student Loan Acquisition Authority, 5/04 at 102 Aa 1,629,795
Student Loan Revenue, Senior Series B,
6.600%, 5/01/10
500,000 Glendale, Arizona, Industrial Development Authority, 5/06 at 102 AAA 531,540
Midwestern University, Series A, 6.000%, 5/15/16
300,000 University of Arizona, University Revenue 6/02 at 102 AA 325,347
Refunding System, 6.250%, 6/01/11
335,000 Yavapai County, Arizona, Community College 7/03 at 101 A- 351,351
District Revenue, 6.000%, 7/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care -- 11.8%
1,250,000 Arizona Health Facilities Authority, 10/99 at 101 AAA 1,325,400
Arizona Vol Hospital, B, 7.250%, 10/01/13
2,775,000 Maricopa County, Arizona, Industrial Development No Opt. Call AAA 3,429,345
Authority, Hospital Facility Revenue, Samaritan
Health Services, Series A, Refunding,
7.000%, 12/01/16
375,000 Maricopa County, Arizona, Industrial Development 12/00 at 102 AAA 413,666
Authority, Hospital Facility Revenue,
7.500%, 12/01/13
600,000 Maricopa County, Arizona, Industrial Development 9/05 at 101 AAA 612,204
Authority, Revenue Refunding, Baptist Hospital
System, 5.500%, 9/01/16
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care--continued
Phoenix, Arizona, Industrial Development Authority,
Hospital Revenue, John C Lincoln Hospital & Health:
$ 500,000 6.000%, 12/01/10 12/03 at 102 BBB+ $ 519,825
500,000 6.000%, 12/01/14 12/03 at 102 BBB+ 516,325
Pima County, Arizona, Industrial Development
Authority, Health Care Corporation Revenue
Refunding, Carondelet Health Care Corporation:
500,000 5.250%, 7/01/12 No Opt. Call AAA 516,750
640,000 5.250%, 7/01/13 No Opt. Call AAA 658,906
1,500,000 Scottsdale, Arizona, Industrial Development No Opt. Call AAA 1,589,595
Authority, Hospital Revenue, Scottsdale
Memorial Hospitals, 5.500%, 9/01/12
3,000,000 Scottsdale, Arizona, Industrial Development 9/07 at 102 AAA 3,277,470
Authority, Hospital Revenue Refunding,
Scottsdale Memorial, Series A, 6.125%, 9/01/17
- -----------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 1.8%
295,000 Phoenix, Arizona, Housing Finance Corporation, 7/02 at 101 AAA 308,151
Mortgage Revenue, Project, Series A,
6.500%, 7/01/24
Phoenix, Arizona, Industrial Development Authority,
Mortgage Revenue Refunding, Chris Ridge
Village Project:
200,000 6.750%, 11/01/12 11/02 at 101 AAA 212,444
425,000 6.800%, 11/01/25 11/02 at 101 AAA 447,653
500,000 Phoenix, Arizona, Industrial Development Authority, 2/03 at 102 Aaa 508,500
Multifamily Housing Revenue Refunding,
Meadow Glen Apartments, 5.800%, 8/20/28
500,000 Tempe, Arizona, Industrial Development Authority, 6/03 at 102 AAA 519,385
Multifamily Revenue Refunding Mortgage,
Quadrangles Building Apartments, Series A,
6.250%, 6/01/26
- -----------------------------------------------------------------------------------------------------------------------
Housing Single/Family -- 1.8%
485,000 Phoenix, Arizona, Industrial Development Authority, 6/05 at 102 AAA 501,315
Single Family Mortgage Revenue, Statewide,
6.150%, 12/01/08
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Arizona -- continued
Principal Optional Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Housing Single/Family -- continued
$ 410,000 Pima County, Arizona, Industrial Development 8/05 at 102 A $ 433,468
Authority, Single Family Mortgage Revenue
Refunding, Series A, 6.500%, 2/01/17
1,000,000 Pima County, Arizona, Industrial Development 5/07 at 102 AAA 1,048,230
Authority, Single Family Mortgage Revenue,
Series A, 6.250%, 11/01/30
- -----------------------------------------------------------------------------------------------------------------------
Long Term Care -- 1.7%
1,670,000 Cochise County, Arizona, Industrial Development 5/04 at 102 AAA 1,857,124
Authority, Mortgage Revenue Refunding, Sierra
Vista Care Center, Series A, 6.750%, 11/20/19
- -----------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 28.2%
800,000 Chandler, Arizona, Refunding, 7.000%, 7/01/12 7/01 at 101 AAA 872,976
Cochise County, Arizona, Unit School District No. 68
Sierra Vista, Formerly Cochise County, Arizona
School, Refunding:
250,000 7.500%, 7/01/09 No Opt. Call AAA 311,235
300,000 7.500%, 7/01/10 No Opt. Call AAA 375,216
Coconino & Yavapai Counties, Arizona, Joint Unit
School District No. 9, Sedona Oak Creek, Series A:
250,000 6.700%, 7/01/06 7/01 at 101 A- 272,473
250,000 6.750%, 7/01/07 7/01 at 101 A- 272,883
250,000 Guam Government, Series A, 5.400%, 11/15/18 11/03 at 102 BBB 247,828
375,000 Maricopa, Arizona, Rural Road Improvement 7/99 at 101 N/R 390,034
District, Refunding, 6.900%, 7/01/05
750,000 Maricopa, County, Arizona, School District No. 11 7/01 at 101 AAA 803,648
Peoria Unit, Refunding, 6.400%, 7/01/10
675,000 Maricopa County, Arizona, School District No. 11 No Opt. Call AAA 452,480
Peoria Unit, Refunding, Second Series, 0.000%,
7/01/06
Maricopa County, Arizona, School District No. 28
Kyrene Elementary, Refunding, Series C:
4,000,000 0.000%, 7/01/07 No Opt. Call AAA 2,540,280
1,870,000 0.000%, 1/01/09 No Opt. Call AAA 1,082,487
3,805,000 0.000%, 1/01/10 No Opt. Call AAA 2,072,089
6,000,000 0.000%, 1/01/11 No Opt. Call AAA 3,087,480
50,000 Maricopa County, Arizona, School District No. 28 7/02 at 100 AAA 52,192
Kyrene Elementary, Series E, 6.000%, 7/01/12
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/General -- continued
Maricopa County, Arizona, School District No. 40,
Glendale:
$ 500,000 6.200%, 7/01/09 7/05 at 101 AAA $ 550,845
2,500,000 6.250%, 7/01/10 7/05 at 101 AAA 2,747,350
1,750,000 6.300%, 7/01/11 7/05 at 101 AAA 1,922,795
Maricopa County, Arizona, Unit School District No. 41,
Gilbert, Refunding:
2,000,000 0.000%, 1/01/06 No Opt. Call AAA 1,372,240
500,000 6.250%, 7/01/15 7/08 at 100 AAA 553,485
515,000 Maricopa County, Arizona, Elementary School 7/04 at 102 AAA 580,240
District 68, Alhambra, Series A, 6.750%, 7/01/14
500,000 Maricopa County, Arizona, Unit School District No. 80, No Opt. Call AAA 569,055
Chandler, 6.250%, 7/01/11
1,275,000 Maricopa County, Arizona, School District No. 98, No Opt. Call AAA 854,683
Fountain Hills Unit, 0.000%, 7/01/06
635,000 Navajo County, Arizona, Unit School District No. 32, 7/06 at 101 AAA 671,811
Blue Ridge Formerly Navajo County Arizona Unit,
Projects of 1994, School Improvement,
5.800%, 7/01/14
1,000,000 Pima County, Arizona, Unit School District No. 1, No Opt. Call AAA 1,252,880
Tucson, Refunding, 7.500%, 7/01/10
300,000 Pima County, Arizona, Unit School District No. 1, 7/02 at 102 AAA 327,666
Tucson School Improvement, Series D,
6.100%, 7/01/12
500,000 Pima County, Arizona, Unit School District No. 13, 7/04 at 102 AAA 564,065
Tanque Verde, Refunding & Improvement,
6.700%, 7/01/10
315,000 Scottsdale Mountain Community Facilities District, 7/03 at 102 A 336,729
Arizona, Series A, 6.200%, 7/01/17
1,925,000 Tatum Ranch, Arizona, Community Facilities District, 7/02 at 102 A 2,112,861
Series A, 6.875%, 7/01/16
225,000 Tempe, Arizona, Series B, 6.000%, 7/01/08 7/02 at 101 AA+ 240,973
600,000 Tempe, Arizona, Unit High School District No. 213, 7/04 at 101 AAA 640,428
Refunding & Improvement, 6.000%, 7/01/12
2,000,000 Tucson, Arizona, Refunding, 5.000%, 7/01/19 7/07 at 100 AA 1,958,540
675,000 Yuma County, Arizona, Unit High School District No. 70, 7/02 at 101 AAA 714,022
Yuma, 5.700%, 7/01/06
</TABLE>
11
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Arizona -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/Limited -- 9.5%
$ 700,000 Apache County, Arizona, Public Finance 5/00 at 102 A $ 720,167
Corporation, Certificates of Participation,
5.500%, 5/01/10
250,000 Arizona State Certificates of Participation, 9/02 at 102 AAA 270,560
Refunding, Series B, 6.250%, 9/01/10
225,000 Arizona State Municipal Financing Program, No Opt. Call AAA 304,729
Certificates of Participation, Series 11,
8.000%, 8/01/17
965,000 Bullhead City, Arizona, Special Assessment, 1/03 at 103 Baa 1,011,137
Bullhead Parkway Improvement District,
6.100%, 1/01/13
550,000 Douglas, Arizona, Municipal Property Corporation, 7/05 at 101 AAA 575,371
Municipal Facilities Excise Tax Revenue,
5.750%, 7/01/15
280,000 Eloy, Arizona, Municipal Property Corporation, 7/02 at 101 BBB 303,979
Municipal Facilities Revenue Refunding,
7.000%, 7/01/11
385,000 Flagstaff, Arizona, Street and Highway User No Opt. Call AAA 424,655
Revenue, Junior Lien, 5.900%, 7/01/10
300,000 Maricopa County, Arizona, Hospital District No. 1, 6/04 at 101 AAA 323,136
Refunding, Series B, 6.250%, 6/01/10
1,000,000 Maricopa County, Arizona, Hospital District No. 1, 6/06 at 101 A 1,069,720
6.500%, 6/01/17
Peoria, Arizona, Improvement District, Special
Assessment, North Valley Power Center #8801:
425,000 7.300%, 1/01/12 1/03 at 101 BBB 465,528
460,000 7.300%, 1/01/13 1/03 at 101 BBB 503,649
205,000 Phoenix, Arizona, Civic Improvement Corporation, 7/01 at 100 AA+ 209,697
Airport Term Excise Tax Revenue, 7.800%, 7/01/11
300,000 Phoenix, Arizona, Street & Highway User Revenue 7/02 at 102 A+ 323,448
Refunding, Junior Lien, 6.250%, 7/01/11
Pinal County, Arizona, Certificates of Participation:
300,000 6.375%, 6/01/06 6/02 at 100 AA 323,901
200,000 6.500%, 6/01/09 6/02 at 100 AA 215,420
2,050,000 Puerto Rico Commonwealth, Highway & 7/16 at 100 A 2,080,996
Transportation Authority, Highway Revenue,
Series Y, 5.500%, 7/01/36
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited -- continued
$ 850,000 Tucson, Arizona, Certificates of Participation, 7/04 at 100 AA $ 921,697
6.375%, 7/01/09
250,000 Tucson, Arizona, Local Development, Business 7/02 at 102 AAA 271,162
Development Finance Corporation Lease Revenue,
Refunding, 6.250%, 7/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation -- 1.5%
500,000 Phoenix, Arizona, Airport Revenue, Series D, 7/04 at 102 AAA 543,440
6.400%, 7/01/12
500,000 Tucson, Arizona, Airport Authority Inc. Revenue, 6/00 at 102 AAA 537,520
Series B, 7.125%, 6/01/15
575,000 Tucson, Arizona, Airport Authority Inc. Revenue, 6/03 at 102 AAA 597,385
Refunding, 5.700%, 6/01/13
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 22.2%
300,000 Arizona Health Facilities Authority, Hospital System 9/03 at 100 AAA 329,475
Revenue Refunding, Phoenix Baptist Hospital &
Medical, 6.250%, 9/01/11
200,000 Arizona State Municipal Financing Program, Certificates No Opt. Call AAA 249,688
of Participation, Series 20, 7.700%, 8/01/10
500,000 Arizona State Transportation Board, Highway 7/00 at 101 AAA 540,235
Revenue, 7.000%, 7/01/09 (Pre-refunded to 7/01/00)
300,000 Arizona State University Revenue System, 7/02 at 101 Aaa 336,345
7.000%, 7/01/15 (Pre-refunded to 7/01/02)
1,195,000 Central Arizona Water Conservation District, 5/01 at 102 AA-*** 1,301,104
Contract Revenue, Central Arizona Project,
Series B, 6.500%, 11/01/11
(Pre-refunded to 5/01/01)
380,000 Maricopa County, Arizona, Hospital Revenue, St. Lukes No Opt. Call AAA 472,165
Hospital Medical Center Project, 8.750%, 2/01/10
375,000 Maricopa County, Arizona, Industrial Development 12/00 at 102 AAA 417,322
Authority, Hospital Facility Revenue, 7.500%,
12/01/13 (Pre-refunded to 12/01/00)
17,300,000 Maricopa County, Arizona, Industrial Development No Opt. Call AAA 6,632,647
Authority, Single Family Mortgage Revenue,
Capital Appreciation, 0.000%, 2/01/16
</TABLE>
13
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Arizona -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed -- continued
$ 1,250,000 Maricopa County, Arizona, Industrial Development 7/99 at 102 AAA $1,333,237
Authority, Mercy Health System Revenue,
Series B, 7.150%, 7/01/12 (Pre-refunded to 7/03/99)
265,000 Maricopa County, Arizona, School District No. 28 7/02 at 100 AAA 283,977
Kyrene Elementary, 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 (Pre-refunded to 7/01/00) 7/00 at 101 AAA 616,026
300,000 6.500%, 7/01/10 (Pre-refunded to 7/01/00) 7/00 at 101 AAA 321,405
1,250,000 Northern Arizona University Revenue, 7.500%, 6/99 at 100 Aaa 1,314,262
6/01/08 (Pre-refunded to 6/01/99)
700,000 Peoria, Arizona, Municipal Development Authority, 7/99 at 102 AAA 745,353
Municipal Facilities Revenue, 7.000%, 7/01/10
(Pre-refunded to 7/01/99)
400,000 Phoenix, Arizona, Civic Improvement Corporation, 7/03 at 102 AAA 440,860
Wastewater System Lease Revenue,
6.125%, 7/01/23 (Pre-refunded to 7/01/03)
500,000 Phoenix, Arizona, Street & Highway User Revenue, No Opt. Call AA*** 547,965
Senior Lien, 6.250%, 7/01/11
650,000 Pima County, Arizona, Unit School District No. 1, 7/00 at 101 A*** 704,802
Tucson, Series B, 7.200%, 7/01/09
(Pre-refunded to 7/01/00)
460,000 Pima County, Arizona, Sewer Revenue Refunding, 7/01 at 101 AAA 502,748
6.750%, 7/01/15 (Pre-refunded to 7/01/01)
1,500,000 Price, Elliott Resh Park Inc., Arizona, Revenue 7/01 102 AAA 1,664,700
Refunding, Arizona State University Resh Park,
7.000%, 7/01/21 (Pre-refunded to 7/01/01)
Salt River Project, Arizona, Agricultural Improvement
& Power District, Elecsys Revenue, Series E:
100,000 8.250%, 1/01/13 (Pre-refunded to 1/01/98) 1/98 at 100 AAA 100,402
100,000 8.250%, 1/01/28 (Pre-refunded to 1/01/98) 1/98 at 100 AAA 100,402
11,570,000 Tucson & Pima County, Arizona, Industrial Development No Opt. Call AAA 4,772,394
Authority, Single Family Mortgage Revenue, Series
1983A, 0.000%, 12/01/14
500,000 Tucson, Arizona, Series 1984 G, 6.250%, 7/01/18 7/04 at 101 AAA 555,705
(Pre-refunded to 7/01/04)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities 6.3%
$ 500,000 Central Arizona Water Conservation District, No Opt. Call AA- $ 532,405
Contract Revenue Refunding, Central Arizona
Project, Series A, 5.500%, 11/01/10
5,000 Central Arizona Water Conservation District, 5/01 at 102 AA- 5,411
Contract Revenue, Central Arizona Project,
Series B, 6.500%, 11/01/11
2,000,000 Coconino County, Arizona, Pollution Control 10/06 at 102 BBB- 2,128,180
Corporation Revenue, Nevada
Power Company Project, 6.375%, 10/01/36
1,750,000 Guam Power Authority, Series A, 10/03 at 102 BBB 1,692,232
5.250%, 10/01/23
500,000 Mohave County, Arizona, Industrial Development 2/00 at 101 AA+ 527,080
Authority, Industrial Development Revenue,
Citizens Utilities Company Project, Series B,
7.150%, 2/01/26
500,000 Mohave County, Arizona, Industrial Development 11/03 at 101 A-1+ 538,250
Authority, Industrial Development Revenue, Citizens
Utilities Company Projects, 6.600%, 5/01/29
240,000 Pima County, Arizona, Industrial Development 1/02 at 103 AAA 267,888
Authority, Industrial Revenue Refunding, Lease
Obligation, Series A, Irvington Project Tucson
Electric Power Company, 7.250%, 7/15/10
500,000 Puerto Rico Electric Power Authority, Power 7/05 at 100 BBB+ 492,000
Revenue, Formerly Puerto Rico Commonwealth
Water Resource Authority, Refunding, Series Z,
5.250%, 7/01/21
200,000 Puerto Rico Electric Power Authority, Power 7/07 at 101.50 AAA 200,932
Revenue, Formerly Puerto Rico Commonwealth
Water Resource Authority, Series Aa,
5.375%, 7/01/27
500,000 Salt River Project, Arizona, Agricultural Improvement No Opt. Call AA 543,165
& Power District Elecsys Revenue Refunding,
Series A, 5.750%, 1/01/10
- -------------------------------------------------------------------------------------------------------------------------
Water and Sewer 7.9%
175,000 Arizona State Wastewater Management Authority, 7/02 at 102 AAA 184,973
Wastewater Treatment Financial Assistance
Revenue, Series A, 5.950%, 7/01/12
</TABLE>
15
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Arizona - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings* Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer continued
$250,000 Arizona State Wastewater Management Authority, 7/05 at 102 AAA $ 262,580
Wastewater Treatment Financial Assistance,
Revenue Refunding, 5.750%, 7/01/15
1,750,000 Chandler, Arizona, Water & Sewer Revenue 7/01 at 101 AAA 1,906,222
Refunding, 6.750%, 7/01/06
Cottonwood, Arizona, Sewer Revenue Refunding:
500,000 6.900%, 7/01/03 7/02 at 101 BBB- 545,185
100,000 7.000%, 7/01/06 7/02 at 101 BBB- 109,336
100,000 7.000%, 7/01/07 7/02 at 101 BBB- 108,820
1,000,000 Phoenix, Arizona, Civic Improvement Corporation, 7/04 at 102 Aa3 968,710
Wastewater System Lease Revenue Refunding,
5.000%, 7/01/18
1,000,000 Phoenix, Arizona, Civic Improvement Corporation, 7/06 at 100 Aa 1,023,210
Water System Revenue, Junior Lien, 5.600%,7/01/18
540,000 Pima County, Arizona, Sewer Revenue Refunding, 7/01 at 101 AAA 584,831
6.750%, 7/01/15
800,000 Sedona, Arizona, Sewer Revenue Refunding, 7/04 at 101 BBB 879,048
7.000%, 7/01/12
Tucson, Arizona, Water Revenue Refunding:
500,000 6.700%, 7/01/12 7/01 at 102 A+ 545,650
1,100,000 5.000%, 7/01/19 7/07 at 100 AAA 1,072,995
390,000 Tucson, Arizona, Water Revenue, Series 1994, A, 7/06 at 101 AAA 433,504
6.000%, 7/01/21
- --------------------------------------------------------------------------------------------------------------------------
$125,860,000 Total Investment (cost $96,752,157) 97.3% 106,255,262
- --------------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities 0.3%
$300,000 Maricopa County, Arizona, Pollution Control, Variable
Rate Demand Bonds, 3.900%, 5/01/29+ A-1+ 300,000
- --------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities 2.4% 2,603,611
-------------------------------------------------------------------------------------------------
Net Assets 100% $109,158,873
================================================================================================
</TABLE>
* Optional Call Provisions: 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: 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.
16 See accompanying notes to financial statements.
<PAGE>
Statement of Net Assets (Unaudited)
November 30, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Arizona
- ------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $106,255,262
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) 300,000
Cash 90,667
Receivables:
Interest 1,795,031
Investments sold 1,022,379
Shares sold 250,000
Other assets 4,316
- ------------------------------------------------------------------------------------------------------
Total assets 109,717,655
- ------------------------------------------------------------------------------------------------------
Liabilities
Payable for Shares redeemed 50,102
Accrued expenses:
Management fees (note 6) 44,982
12b-1 distribution and service fees (notes 1 and 6) 16,053
Other 2,587
Dividends payable 445,058
- ------------------------------------------------------------------------------------------------------
Total liabilities 558,782
- ------------------------------------------------------------------------------------------------------
Net assets (note 7) $109,158,873
======================================================================================================
Class A Shares (note 1)
Net assets $ 85,305,240
Shares outstanding 7,564,247
Net asset value and redemption price per share $ 11.28
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 11.77
======================================================================================================
Class B Shares (note 1)
Net assets $ 434,382
Shares outstanding 38,544
Net asset value, offering and redemption price per share $ 11.27
======================================================================================================
Class C Shares (note 1)
Net assets $ 3,380,201
Shares outstanding 299,752
Net asset value, offering and redemption price per share $ 11.28
======================================================================================================
Class R Shares (note 1)
Net assets $ 20,039,050
Shares outstanding 1,776,911
Net asset value, offering and redemption price per share $ 11.28
======================================================================================================
</TABLE>
17
<PAGE>
Statement of Operations (Unaudited)
Six months ended November 30, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Arizona
- ------------------------------------------------------------------------------------------------------
<S> <C>
Investment Income
Tax-exempt interest income (note 1) $3,121,337
- ------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 296,451
12b-1 service fees Class A (notes 1 and 6) 84,512
12b-1 distribution and service fees Class B (notes 1 and 6) 1,533
12b-1 distribution and service fees Class C (notes 1 and 6) 12,259
Shareholders' servicing agent fees and expenses 42,129
Custodian's fees and expenses 28,446
Trustees' fees and expenses (note 6) 1,003
Professional fees 7,047
Shareholders' reports printing and mailing expenses 13,445
Federal and state registration fees 1,786
Other expenses 779
- ------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 489,390
Expense reimbursement (note 6) (19,876)
- ------------------------------------------------------------------------------------------------------
Net expenses 469,514
- ------------------------------------------------------------------------------------------------------
Net investment income 2,651,823
- ------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 237,303
Net change in unrealized appreciation or depreciation of investments 3,021,930
- ------------------------------------------------------------------------------------------------------
Net gain from investments 3,259,233
- ------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $5,911,056
======================================================================================================
</TABLE>
18 See accompanying notes to financial statements.
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Nuveen Flagship Arizona
---------------------------------
Six months ended Year ended
11/30/97 5/31/97*
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 2,651,823 $ 4,626,500
Net realized gain from investment transactions
(notes 1 and 4) 237,303 344,913
Net change in unrealized appreciation or depreciation
of investments 3,021,930 1,724,243
- ---------------------------------------------------------------------------------------------
Net increase in net assets from operations 5,911,056 6,695,656
- ---------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (2,076,339) (4,163,497)
Class B (6,763) (2,842)
Class C (71,772) (117,169)
Class R (504,641) (335,301)
In excess of undistributed net investment income:
Class A (4,663) --
Class B (15) --
Class C (161) --
Class R (1,133) --
From accumulated net realized gains from investment
transactions:
Class A -- (414,050)
Class B -- --
Class C -- (12,740)
Class R -- --
- ---------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (2,665,487) (5,045,599)
- ---------------------------------------------------------------------------------------------
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 6,593,940 9,311,968
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 1,381,021 2,094,732
- ---------------------------------------------------------------------------------------------
7,974,961 36,661,723
- ---------------------------------------------------------------------------------------------
Cost of shares redeemed (7,196,330) (15,241,517)
- ---------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 778,631 21,420,206
- ---------------------------------------------------------------------------------------------
Net increase in net assets 4,024,200 23,070,263
Net assets at the beginning of period 105,134,673 82,064,410
- ---------------------------------------------------------------------------------------------
Net assets at the end of period $109,158,873 $105,134,673
=============================================================================================
Balance of undistributed (overdistributed) net investment
income at end of period $ (5,973) $ 7,691
=============================================================================================
</TABLE>
* Information represents eight months of Flagship Arizona and four
months of Nuveen Flagship Arizona (see note 1).
See accompanying notes to financial statements.
19
<PAGE>
Notes to Financial Statements (Unaudited)
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 "Fund"),
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 Fund, 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 ("Nuveen
Flagship Arizona"). Prior to the reorganization, Flagship Arizona was 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 Nuveen Flagship Arizona which has
retained the fiscal year end of Flagship Arizona.
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
The prices of municipal bonds in the 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 Fund has 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
November 30, 1997, the Fund had no such outstanding purchase commitments.
20
<PAGE>
Interest Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
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 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
The Fund is a separate taxpayer for federal income tax purposes. The 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 Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Arizona state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Fund. Net
realized capital gain and market discount distributions are subject to federal
taxation.
Flexible Sales Charge Program
The 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
21
<PAGE>
Notes to Financial Statements (Unaudited) - continued
distribution or service fees. Class R Shares are available for purchases of over
$1 million and in other limited circumstances.
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, option contracts and other financial instruments with
similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the six months ended November 30, 1997.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
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.
22
<PAGE>
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six months ended 11/30/97 Year ended 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 449,665 5,022,455 712,114 7,768,419
Class B 13,820 154,522 30,949 339,939
Class C 41,164 461,908 86,515 940,835
Class R 85,506 955,055 23,885 262,775
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 91,196 1,014,865 172,561 1,878,199
Class B 423 4,717 51 556
Class C 4,938 54,930 6,676 72,706
Class R 27,479 306,509 13,166 143,271
714,191 7,974,961 3,358,981 36,661,723
- ----------------------------------------------------------------------------------------------
Shares redeemed:
Class A (522,557) (5,848,615) (1,294,344) (14,116,042)
Class B (7,463) (82,536) -- --
Class C (37,801) (424,289) (34,699) (378,684)
Class R (75,230) (840,890) (68,442) (746,791)
- ----------------------------------------------------------------------------------------------
(643,051) (7,196,330) (1,397,485) (15,241,517)
- ----------------------------------------------------------------------------------------------
Net increase 71,140 $ 778,631 1,961,496 $ 21,420,206
==============================================================================================
</TABLE>
* Information represents eight months of Flagship Arizona and four months
of Nuveen Flagship Arizona (see note 1).
23
<PAGE>
Notes to Financial Statements (Unaudited) - continued
3. Distributions to Shareholders
On December 9, 1997, the Fund declared dividend distributions from its tax-
exempt net investment income which were paid on December 31, 1997, to
shareholders of record on December 9, 1997, as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Dividend per share:
<S> <C>
Class A $.0460
Class B .0390
Class C .0410
Class R .0480
- ---------------------------------------------------------------------------
</TABLE>
At the same time, the Fund also declared taxable distributions, which includes
capital gains and/or market discount, of $.0180 per share.
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities for the six months ended November 30, 1997, aggregated $9,331,774 and
$10,570,369, respectively. Purchases and sales (including maturities) of
temporary municipal investments for the six months ended November 30, 1997,
aggregated $4,600,000 and $4,300,000, respectively.
At November 30, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for the Fund.
At May 31, 1997, the Fund's last fiscal year end, the Fund had unused capital
loss carryforwards of $36,219 available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, $18,529 of the
carryforwards will expire in the year 2002 and $17,690 will expire in the year
2003.
5. Unrealized Appreciation (Depreciation)
At November 30, 1997, net unrealized appreciation aggregated $9,503,105, of
which $9,503,960 related to appreciated securities and $855 related to
depreciated securities.
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, the 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 the 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>
24
<PAGE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to its Trustees who are affiliated with the Adviser or to
its officers, all of whom receive remuneration for their services to the Trust
from the Adviser.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $114,600 of which
approximately $97,000 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 six months ended November 30, 1997, the Distributor compensated
authorized dealers directly with approximately $15,500 in commission advances at
the time of purchase. 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 six months
ended November 30, 1997, the Distributor retained approximately $6,700 in such
12b-1 fees. 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 approximately $5,500 of
CDSC on share redemptions during the six months ended November 30, 1997.
7. Composition of Net Assets
At November 30, 1997, the Fund had an unlimited number of $.01 par
value shares authorized. Net assets consisted of:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C>
Capital paid-in $ 99,459,729
Balance of undistributed (overdistributed) net investment income (5,973)
Accumulated net realized gain from investment transactions 202,012
Net unrealized appreciation of investments 9,503,105
- -------------------------------------------------------------------------------
Net assets $109,158,873
===============================================================================
</TABLE>
25
<PAGE>
Financial Highlights (Unaudited)
Selected data for a common share outstanding throughout each
period is as follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
Net
Nuveen Flagship Arizona** Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income (b) investments income gains period value (a)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (10/86)
1998 (d) $10.94 $.27 $ .35 $(.28) $ -- $11.28 5.67%
1997 10.73 .56 .27 (.56) (.06) 10.94 7.85
1996 10.85 .57 (.12) (.57) -- 10.73 4.21
1995 10.43 .58 .42 (.58) -- 10.85 10.03
1994 10.81 .60 (.38) (.60) -- 10.43 1.92
1993 10.13 .63 .69 (.64) -- 10.81 13.37
1992 9.81 .65 .32 (.65) -- 10.13 10.25
1991 9.60 .64 .21 (.64) -- 9.81 9.19
1990 9.72 .64 (.12) (.64) -- 9.60 5.53
1989 9.12 .64 .60 (.64) -- 9.72 14.04
1988 9.12 .64 -- (.64) -- 9.12 7.45
Class B (2/97)
1998 (d) 10.94 .23 .33 (.23) -- 11.27 5.19
1997 (c) 10.92 .16 .02 (.16) -- 10.94 1.64
Class C (2/94)
1998 (d) 10.94 .24 .35 (.25) -- 11.28 5.39
1997 10.73 .50 .27 (.50) (.06) 10.94 7.28
1996 10.84 .51 (.11) (.51) -- 10.73 3.75
1995 10.43 .52 .41 (.52) -- 10.84 9.32
1994 (c) 11.22 .14 (.79) (.14) -- 10.43 (16.61)*
Class R (2/97)
1998 (d) 10.94 .29 .34 (.29) -- 11.28 5.78
1997 (c) 10.92 .19 .02 (.19) -- 10.94 1.96
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ending May 31, 1997,
reflects the financial highlights of Flagship Arizona.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted.
(d) For the six months ending November 30, 1997.
26
<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
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment(b) ment(b) rate
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$85,305 .93%* 4.86%* .89%* 4.90%* 9%
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
72,778 1.11 5.36 .44 6.03 20
51,123 1.20 5.79 .44 6.55 34
38,933 1.25 6.15 .78 6.62 18
32,066 1.25 6.23 .85 6.63 37
29,433 1.27 6.50 .92 6.85 37
33,696 1.17 6.65 .86 6.96 68
434 1.68* 4.13* 1.64* 4.17* 9
347 1.67* 4.38* 1.62* 4.43* 25
3,380 1.48* 4.31* 1.44* 4.35* 9
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
20,039 .73* 5.06* .69* 5.10* 9
19,031 .73* 5.32* .67* 5.38* 25
- -------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
Additional Investment Opportunities
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth Funds
Nuveen Rittenhouse Growth Fund
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate
Limited Term
State Funds
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Fund, contact your financial
adviser. If you would like to add to your current investment on a regular basis,
you can sign up for Nuveen's systematic investing program, which allows you to
invest a fixed dollar amount every month automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you give your investment the added
growth potential of long-term compounding.
For more information on any of these service options, call your adviser, or
Nuveen at (800) 225-8530.
28
<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
Boston Financial Data Service
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, Illinois
29
<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
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
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 products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 225-8530 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 225-8530
www.nuveen.com
<PAGE>
[NUVEEN LOGO]
Municipal
Bond Funds
November 30, 1997
Semiannual Report
[PHOTO APPEARS HERE]
Dependable, tax-free income
to help you keep more of
what you earn.
Colorado
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Performance Overview
8 Portfolio of Investments
13 Statement of Net Assets
14 Statement of Operations
15 Statement of Changes in Net Assets
16 Notes to Financial Statements
22 Financial Highlights
24 Additional Investment Opportunities
25 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.
It's a pleasure to share with you the Nuveen Flagship Colorado Municipal Bond
Fund's outstanding performance record for the 12 months ended November 30, 1997.
Over the past year, investors continued to enjoy attractive, tax-free dividends
generated by the fund's portfolio of municipal bonds. As of November 30, 1997,
Class A shareholders were receiving a current yield on net asset value of 4.33%.
To match this yield, investors in the 34.5% combined federal and state income
tax bracket would have had to earn at least 6.61% on taxable alternatives.
During this same period, the fund provided Class A shareholders with a highly
competitive total return on net asset value of 9.40% with income reinvested, far
outpacing the average return of 7.19% for its peer group, the Lipper Colorado
municipal bond fund category. You will find additional details on the fund's
performance on pages 6-7.
The Year in Review
Over the past year, U.S. investors have benefited from robust economic growth
with little evidence of inflationary pressures. With unemployment rates at 20-
year lows and the current economic expansion entering its seventh year, the
presence of benign inflation has sparked debate over whether the traditional
link between growth and inflation has been broken. During 1997, expectations
that excess growth would generate inflation disrupted the markets on several
occasions, most notably following the Federal Reserve's interest rate tightening
in March and speeches by Fed Chairman Alan Greenspan. Still, falling commodity
prices kept producer prices in
1
<PAGE>
check, while low import prices -- due in part to the weakness in Asian markets
- -- limited U.S. companies' ability to raise consumer prices. This combination
has kept inflation subdued and the Federal Reserve "on hold" since March. The
reduction in the federal deficit and passage of the Taxpayer Relief Act of 1997
offer additional encouragement to long-term fixed-income investors.
Helping You Build A Better Portfolio
The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation. Stock market volatility,
especially late in the year, provided a vivid illustration of the steadying
effect that fixed-income investments can provide in a well-constructed
investment portfolio. Nuveen mutual funds provide an excellent balance to other
stock and bond investments. Your financial adviser can introduce you to a
variety of other Nuveen products and services to round out your investment
portfolio, including the Nuveen Growth and Income Stock Fund and two balanced
stock and bond funds.
In addition, we recently expanded our private asset management capabilities
through the acquisition of Rittenhouse Financial Services, a well-respected
growth investment manager. We encourage you to talk with your financial adviser
about ways to complement your current Nuveen investments by taking advantage of
these additional products and services.
We at Nuveen remain committed to providing you with quality investment solutions
that withstand the test of time. We thank you for your confidence in us and our
family of investments, and we look forward to our next report to you.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
January 15, 1998
"The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation."
2
<PAGE>
Answering Your Questions
[PHOTO OF TED NEILD APPEARS HERE]
Ted Neild, managing director of Nuveen's portfolio management team, talks about
the municipal bond market and offers insights into factors that affected the
performance of the fund over the past year.
What economic and market factors influenced the performance of municipal bonds
over the past year?
Over the past 12 months, the performance of the municipal bond market was
influenced by three major factors: the continued strength of the U.S. economy,
minimal inflation, and volatility in the equity markets. During 1997, these
factors contributed to a positive environment for fixed-income investments, as
reflected in the steady-to-declining interest rates evident during the year.
Between December 1996 and November 1997, the yield on the 30-year Treasury bond
dropped from 6.36% to 6.05%, and the municipal market followed suit, as the
yield on the Bond Buyer 40 declined from 5.63% to 5.36%. The spread between tax-
free municipal bonds and taxable Treasury bonds remained tight, making municipal
bonds very attractive. The strong total returns produced in this environment
were somewhat muted by a heavy supply of newly issued bonds that temporarily
reduced bond prices. The increased supply worked to our advantage, however, as
it expanded opportunities to find value in the marketplace.
How has the fund performed during this period?
As Tim mentioned in his letter to shareholders, the fund performed well during
the one-year period ended November 30, 1997. The total return on net asset value
for Class A shares of the fund was 9.40%, which compares favorably with the one-
year average return of 7.19% for the peer group of Colorado municipal bond funds
tracked by Lipper Analytical Services -- a 221 basis point difference. Once
again, this fund was the top performer in its category, ranking first among the
23 municipal bond funds in the grouping.
3
<PAGE>
"Our thorough research helps us find investment quality bonds that offer the
best values--such as bonds from specific regions and sectors that have the best
potential for performance and appreciation."
Given the current municipal market, where were you able to find value?
Through the quality research provided by Nuveen's renowned research team, we
continue to uncover bonds that we feel are undervalued by the market, such as
zero coupon bonds. These bonds are issued at a discount and generally grow in
value each year, rather than receiving coupon payments. One of the fund's large
zero coupon holdings was recently pre-refunded by its issuer, resulting in a
substantial increase in price for those bonds.
In addition, we feel there is tremendous value in high-grade housing bonds. A
few deals were unexpectedly called by their issuers this year, so bond buyers
appear to be avoiding the entire sector and are effectively driving yields
higher. Since Nuveen has such a large, experienced housing research staff, we
were able to buy these securities with greater confidence. We have also found
good value in higher-rated bonds because credit spreads remained tight. This
enabled us to purchase higher-rated securities without sacrificing much yield.
Presently, the marginally higher yield offered by lower-rated bonds does not
adequately compensate the fund for the increased credit risk.
What are your key strategies for the coming year?
To sustain such outstanding performance, we take a holistic approach to
portfolio management -- assessing all of the factors that determine a fund's
performance and taking advantage of all of them to contribute to total return
and dividend stability. In the coming year, one focus will be boosting the
credit quality of the fund. As long as credit spreads remain tight, we will
continue to take advantage of opportunities to purchase bonds with high credit
quality at yields that are similar to bonds with
4
<PAGE>
"Looking at the year ahead, we believe the overall market will continue to
strike a good balance between supply and demand."
lower ratings. We believe that if credit spreads widen, these high-quality
issues will increase in value relative to lower-rated bonds.
As part of our value investing approach, we will also continue to look for
individual bonds that offer good long-term value with the potential for
appreciating returns. Our thorough research helps us find investment quality
bonds that offer the best values -- such as bonds from specific regions and
sectors that have the best potential for performance and appreciation. We plan
to continue to search for bonds with pre-refunding potential, as well as those
that we feel are undervalued by the market as a whole.
What is your outlook for the municipal market?
Looking at the year ahead, we believe the overall market will continue to strike
a good balance between supply and demand. We expect supply to increase as new
issuers continue to enter the market. A continued decline in yields could also
cause new supply to come to market through refunding of current debt. On the
demand side, volatility in the equity markets, plus the potential for a
weakening of the economy, could spark increased interest in bonds of all types.
The financial crises in Asia, coupled with the continued strength of the dollar
and low commodity prices, are all contributing to the excellent inflation
picture. This backdrop should help offset stronger labor markets and limit the
effects of any bond market corrections. In the meantime, positive underlying
fundamentals provide good support for the municipal market.
5
<PAGE>
Nuveen Flagship Colorado
Municipal Bond Fund
Performance Overview
As of November 30, 1997
Morningstar Rating/1/
****
<TABLE>
<CAPTION>
Fund Highlights
====================================================================================================
<S> <C> <C> <C> <C> <C>
Share Class A B C R
Inception Date 5/87 2/97 2/97 2/97
.....................................................................................................
Net Asset Value (NAV) $10.65 $10.67 $10.65 $ 10.66
.....................................................................................................
CUSIP 67065L609 67065L500 67065L807 67065L880
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Total Net Assets ($000) $35,321
.....................................................................................................
Average Weighted Maturity (Years) 19.59
.....................................................................................................
Average Weighted Duration (Years) 9.19
- -----------------------------------------------------------------------------------------------------
Annualized Total Return/2/
=====================================================================================================
Share Class A(NAV) A(Offer) B C R
1-Year 9.40% 4.79% 8.84% 8.86% 9.67%
.....................................................................................................
5-Year 7.86% 6.93% 7.27% 7.45% 7.91%
.....................................................................................................
10-Year 8.59% 8.13% 8.11% 8.20% 8.62%
- -----------------------------------------------------------------------------------------------------
Tax-Free Yields
=====================================================================================================
Share Class A(NAV) A(Offer) B C R
Dist Rate 4.90% 4.69% 4.16% 4.39% 5.12%
.....................................................................................................
SEC 30-Day Yld 4.33% 4.14% 3.58% 3.78% 4.53%
.....................................................................................................
Taxable Equiv Yld/3/ 6.61% 6.32% 5.47% 5.77% 6.92%
- -----------------------------------------------------------------------------------------------------
</TABLE>
1 Overall rating for Class A shares within the municipal bond category for the
period ended November 30, 1997. Morningstar proprietary ratings reflect
historical risk-adjusted performance and are subject to change every month.
Ratings are calculated from a fundOs 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. The fund earned four stars for the three- and five-year
periods and three stars for the 10-year period ended November 30, 1997. In an
investment category, 10% of funds receive five stars, 22.5% receive four
stars, and 35% receive three stars. For the period ending November 30, 1997,
1,481 municipal bond funds were rated for the three-year period, 695 for the
five-year period, and 332 for the 10-year period.
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 up-front sales charge. Class B shares have a
contingent deferred sales charge (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 B
shares automatically convert to Class A shares eight years after purchase.
Class C shares have a 1% CDSC for redemptions within one year which is not
reflected in the one-year total return.
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.
6
<PAGE>
Credit Quality
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 66%
A 3%
BBB/NR 14%
AA 17%
- --------------------------------------------------------------------------------
Diversification
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Transportation 7%
Housing (Single-Family) 5%
Education/Civic Org. 7%
Long-Term Care 3%
Tax Obligation (G.O.) 9%
Tax Obligation (Limited) 3%
Housing (Multi-Family) 21%
Other 1%
U.S. Guaranteed 44%
</TABLE>
- --------------------------------------------------------------------------------
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
December 1996 0.04421
January 1997 0.04433
February 0.0435
March 0.0435
April 0.0435
May 0.0435
June 0.0435
July 0.0435
August 0.0435
September 0.0435
October 0.0435
November 0.0435
7
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Colorado
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations -- 6.5%
$ 400,000 Colorado Student Obligation Bond Authority, Student Loan 9/00 at 100 A $ 418,892
Revenue, Series A-3, 7.250%, 9/01/05
245,000 Colorado Student Obligation Bond Authority, Student Loan 9/02 at 102 A 263,556
Revenue, Series C, 7.150%, 9/01/06
1,500,000 Hyland Hills Metropolitan Park and Recreation District, 12/06 at 101 N/R 1,616,445
Colorado, Special Revenue Refunding and Improvement,
Series A, 6.750%, 12/15/15
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care -- 0.8%
250,000 Pueblo County, Colorado, Hospital Facility Refunding, 90/01 at 101 AAA 274,573
Series A, Parkview Episcopal, 7.000%, 9/01/09
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 21.4%
100,000 Aurora, Colorado, Multifamily Revenue, Dayton Place 7/98 at 103 AAA 104,339
Project, Series A, 8.250%, 1/20/29
1,500,000 Colorado Housing Finance Authority, Multifamily Housing 10/06 at 102 AA 1,573,320
Insured Mortgage, Series C, 6.250%, 10/01/38
460,000 Colorado Housing Finance Authority, Multifamily Housing 4/05 at 102 AA 491,956
Insured Mortgage, Series A, 6.650%, 10/01/28
1,265,000 Colorado Housing Finance Authority, Multifamily 10/07 at 102 AA 1,272,451
Insured Mortgage, Series C, 5.750%, 10/01/39
2,000,000 Denver, Colorado, City and County Multifamily Housing 10/07 at 102 AAA 2,023,680
Revenue, The Boston Lofts Project, Series A,
5.850%, 10/01/38
1,000,000 Denver, Colorado, City and County Multifamily Housing 5/07 at 102 AAA 1,007,470
Revenue, Buerger Brothers Project, Series A,
5.700%, 11/01/28 (DD)
1,000,000 Lakewood, Colorado, Multifamily Housing Revenue, 10/05 at 102 AAA 1,071,490
FHA Insured Mortgage Loan, 6.650%, 10/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 4.6%
105,000 Colorado Housing Finance Authority, Single Family 9/01 at 100 Aa1 107,310
Residential Housing Revenue, Series A, 8.125%, 9/01/17
275,000 Colorado Housing Finance Authority, Single Family, 8/01 at 102 AA+ 290,857
Senior, Issue C, 7.375%, 8/01/23
850,000 Colorado Housing Finance Authority, Refunding, Single No Opt. Call Aa1 492,252
Family Housing, Series A, 0.000%, 11/01/06
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family -- continued
$ 140,000 Commerce City, Colorado, Single 3/02 at 101 Aa1 $ 146,569
Family Mortgage Revenue Refunding,
Series A, 6.875%, 3/01/12
125,000 Pueblo County Colorado, Single 6/02 at 102 AA- 131,961
Family Mortgage Revenue, Series A,
6.850%, 12/01/25
415,000 Pueblo County, Colorado, Single 11/04 at 102 AAA 444,453
Family Mortgage Revenue Refunding,
Series A, 7.050%, 11/01/27
- -----------------------------------------------------------------------------------------------------------------
Long Term Care -- 2.9%
1,000,000 Colorado Health Facilities 1/07 at 101 N/R 1,031,190
Authority, Revenue Refunding,
1st Mortgage, Christian Living,
Series A, 7.050%, 1/01/19
- -----------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 9.4%
450,000 Cherry Creek Vista Park and 10/02 at 100 N/R 483,251
Recreation District, Colorado,
Refunding and Improvement, Series
B, 6.875%, 10/01/11
500,000 El Paso and Elbert Counties, 12/05 at 100 AA- 563,030
Colorado, School District
No. 1 El Paso, 6.800%, 12/01/14
El Paso County, Colorado, School
District Number 3 Widefield,
Series A:
1,025,000 0.000%, 12/15/07 12/05 at 92 AAA 633,942
1,020,000 0.000%, 12/15/08 12/05 at 86 AAA 594,935
500,000 El Paso County, Colorado, School 12/01 at 101 AAA 547,170
District No. 38, Certificates of
Participation, Colorado
Association of School Boards
Finance, Series 92A, 6.900%,
12/01/13
250,000 Pitkin County, Colorado, Refunding 12/04 at 102 A 283,190
and Improvement, 6.875%, 12/01/24
190,000 Valley Metropolitan District, 12/00 at 101 Baa 201,362
Colorado, Jefferson County,
Refunding, 7.000%, 12/15/06
- -----------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 3.4%
175,000 Jefferson County, Colorado, 12/02 at 102 AAA 194,754
Certificates of Participation,
Refunding, 6.650%, 12/01/08
200,000 Mesa County, Colorado, Sales Tax 12/98 at 100 AAA 207,160
Revenue Refunding, 7.750%, 12/01/13
750,000 Woodland Park, Colorado, Limited 12/03 at 101 AA 810,300
Sales Tax Revenue Refunding,
Series B, 6.400%, 12/01/12
</TABLE>
9
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Colorado -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Transportation -- 6.7%
$ 750,000 Denver, Colorado, City and County Airport Revenue, 11/07 at 101 AAA $ 750,645
Series E, 5.250%, 11/15/17
500,000 Denver, Colorado, City and County Special Facilities 10/02 at 102 Baa3 545,445
Airport Revenue, United Air Lines Project,
Series A, 6.875%, 10/01/32
1,000,000 Eagle County, Colorado, Air Terminal Corporation Revenue, No Opt. Call N/R 1,075,370
Airport Terminal Project, 7.500%, 5/01/21
- -------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 43.4%
4,300,000 Arapahoe County, Colorado, Capital Improvement Tollroad 8/05 at 95 Aaa 2,893,169
Fund Highway Revenue, Issue E, 470 Series C, 0.000%,
8/31/06 (Pre-refunded to 8/31/05)
6,500,000 Arapahoe County, Colorado, Single Family Mortgage No Opt. Call AAA 3,423,030
Revenue, 1984 Series A, 0.000%, 9/01/10
175,000 Aspen, Colorado, Certificates of Participation, 9/98 at 105 1/2 AAA 180,005
7.000%, 9/01/09 (Pre-refunded to 9/01/98)
100,000 Colorado Association of School Boards, Certificates of 12/99 at 101 AAA 107,125
Participation, Pueblo School District Number 60 Project,
Series A, 7.250%, 12/01/09 (Pre-refunded to 12/01/99)
300,000 Colorado Health Facilities Authority, Rose Medical 8/01 at 102 AAA 333,339
Center, 7.000%, 8/15/20 (Pre-refunded to 8/15/01)
7,500,000 Colorado Health Facilities Authority, Retirement Facilities No Opt. Call AAA 1,791,300
Revenue, Liberty Heights, Series B, 0.000%, 7/15/24
900,000 Colorado Springs, Colorado, Utilities Revenue, Utility No Opt. Call AAA 1,002,231
Improvement, Series B, 6.600%, 11/15/18
100,000 Colorado State Board Agricultural, Colorado State 4/98 at 102 AAA 103,296
University Sports Recreation Facilities, 7.700%,
4/01/09 (Pre-refunded to 4/01/98)
300,000 Colorado Water Resource Power Development Authority, 11/99 at 100 N/R*** 321,459
Water and Power Revenue, Stagecoach Project, 8.000%,
11/01/17 (Pre-refunded to 11/01/99)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed -- continued
$ 250,000 Denver, Colorado, City and County Industrial Development 3/01 at 102 AAA $ 279,508
Revenue, University of Denver Project,
7.500%, 3/01/16 (Pre-refunded to 3/01/01)
350,000 Denver, Colorado, City and County Revenue, Mercy Medical 5/98 at 102 AAA 362,586
Center Project, 7.700%, 5/01/07 (Pre-refunded to 5/01/98)
100,000 El Paso County, Colorado, Revenue Refunding, 5/98 at 102 AAA 103,617
St. Francis Hospital System, 7.750%, 5/01/14
(Pre-refunded to 5/01/98)
3,000,000 El Paso County, Colorado, Single Family Mortgage No Opt. Call AAA 1,155,570
Revenue, Series 1984 A, 0.000%, 9/01/15
250,000 Fountain Valley Authority, Colorado, Water 6/01 at 100 AA*** 270,703
Treatment Revenue, 6.800%, 12/01/19
(Pre-refunded to 6/01/01)
250,000 Logan County, Colorado, Health Care Facilities Revenue, 1/99 at 102 AAA 264,693
Western Health Network, Series A-7, 7.625%, 1/01/19
(Pre-refunded to 1/01/99)
4,000,000 Mesa County, Colorado, Residual Revenue Refunding, No Opt. Call Aaa 1,955,360
0.000%, 12/01/11
300,000 Parker, Colorado, Sales and Use Tax Revenue, Improvement, 11/00 at 100 N/R*** 329,739
Series B, 7.600%, 11/01/10 (Pre-refunded to 11/01/00)
100,000 Regional Transportation District, Colorado, 11/00 at 101 AAA 109,175
Sales Tax Revenue, 7.100%, 11/01/10
(Pre-refunded to 11/01/00)
100,000 University of Colorado, Certificates of Participation, 12/98 at 102 A2*** 105,365
Series D, Colorado Association of School
Boards Lease Purchase Finance Program,
7.400%, 12/01/05 (Pre-refunded to 12/01/98)
250,000 University of Colorado University, Auxiliary Facilities 6/00 at 101 A1*** 269,450
System, Boulder Projects, 7.050%, 6/01/15
(Pre-refunded to 6/01/00)
</TABLE>
11
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Colorado -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer -- 0.4%
$ 120,000 Colorado Water Resource and Power Development 11/02 at 100 AAA $ 131,372
Authority, Small Water Resource Revenue,
Series A, 6.700%, 11/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
$49,185,000 Total Investments -- (cost $31,726,732) -- 99.5% 35,145,410
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.5% 175,524
--------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $35,320,934
====================================================================================================================
</TABLE>
* Optional Call Provisions: 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: 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.
(DD) Security purchased on a delayed delivery basis (see
note 1).
12 See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets (Unaudited)
November 30, 1997
Nuveen Flagship
Colorado
- ----------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $35,145,410
Cash 730,514
Receivables:
Interest 371,184
Investments sold 207,000
Shares sold 35,193
Other assets 35,644
- ----------------------------------------------------------------------------------------------
Total assets 36,524,945
- ----------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 1,009,500
Shares redeemed 670
Accrued expenses:
Management fees (note 6) 15,886
12b-1 distribution and service fees (notes 1 and 6) 5,989
Other 28,775
Dividends payable 143,191
- ----------------------------------------------------------------------------------------------
Total liabilities 1,204,011
- ----------------------------------------------------------------------------------------------
Net assets (note 7) $35,320,934
==============================================================================================
Class A Shares (note 1)
Net assets $33,485,087
Shares outstanding 3,143,040
Net asset value and redemption price per share $ 10.65
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 11.12
==============================================================================================
Class B Shares (note 1)
Net assets $ 986,346
Shares outstanding 92,429
Net asset value, offering and redemption price per share $ 10.67
==============================================================================================
Class C Shares (note 1)
Net assets $ 183,549
Shares outstanding 17,234
Net asset value, offering and redemption price per share $ 10.65
==============================================================================================
Class R Shares (note 1)
Net assets $ 665,952
Shares outstanding 62,460
Net asset value, offering and redemption price per share $ 10.66
==============================================================================================
</TABLE>
13
<PAGE>
Statement of Operations (Unaudited)
Six months ended November 30, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Colorado
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Tax-exempt interest income (note 1) $1,015,807
- -------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 93,758
12b-1 service fees - Class A (notes 1 and 6) 32,613
12b-1 distribution and service fees - Class B (notes 1 and 6) 3,421
12b-1 distribution and service fees - Class C (notes 1 and 6) 549
Shareholders' servicing agent fees and expenses 7,853
Custodian's fees and expenses 16,035
Trustees' fees and expenses (note 6) 307
Professional fees 7,496
Shareholders' reports - printing and mailing expenses 3,676
Federal and state registration fees 1,486
Organizational expenses (note 1) 8,381
Other expenses 797
- -------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 176,372
Expense reimbursement (note 6) (3,777)
- -------------------------------------------------------------------------------------------------------
Net expenses 172,595
- -------------------------------------------------------------------------------------------------------
Net investment income 843,212
- -------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1and 4) 259,323
Net change in unrealized appreciation or depreciation of investments 1,361,730
- -------------------------------------------------------------------------------------------------------
Net gain from investments 1,621,053
- -------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $2,464,265
=======================================================================================================
</TABLE>
14 See accompanying notes to financial statements.
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Nuveen Flagship Colorado
----------------------------------
Six months ended Year ended
11/30/97 5/31/97*
- -----------------------------------------------------------------------------------------------------
Operations
<S> <C> <C>
Net investment income $ 843,212 $ 1,715,756
Net realized gain from investment transactions
(notes 1 and 4) 259,323 64,238
Net change in unrealized appreciation or depreciation
of investments 1,361,730 1,095,182
- -----------------------------------------------------------------------------------------------------
Net increase in net assets from operations 2,464,265 2,875,176
- -----------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (808,326) (1,687,245)
Class B (14,659) (1,292)
Class C (3,213) (1,256)
Class R (15,626) (2,521)
- -----------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (841,824) (1,692,314)
- -----------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 2,621,191 5,390,547
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 456,845 767,704
- -----------------------------------------------------------------------------------------------------
3,078,036 6,158,251
- -----------------------------------------------------------------------------------------------------
Cost of shares redeemed (1,567,523) (8,789,634)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions 1,510,513 (2,631,383)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 3,132,954 (1,448,521)
Net assets at the beginning of period 32,187,980 33,636,501
- -----------------------------------------------------------------------------------------------------
Net assets at the end of period $35,320,934 $32,187,980
=====================================================================================================
Balance of undistributed net investment income at end of period $ 24,830 $ 23,442
=====================================================================================================
</TABLE>
* Information represents eight months of Flagship Colorado and four months of
Nuveen Flagship Colorado (see note 1).
15 See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements (Unaudited)
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 Colorado Municipal Bond Fund (the "Fund"),
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 Fund, 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 Colorado Double Tax
Exempt Fund ("Flagship Colorado") was reorganized into the Trust and renamed
Nuveen Flagship Colorado Municipal Bond Fund ("Nuveen Flagship Colorado"). Prior
to the reorganization, Flagship Colorado was a sub-trust of the Flagship Tax
Exempt Funds Trust.
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
The prices of municipal bonds in the 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 Fund has 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
November 30, 1997, the Fund had an outstanding delayed delivery purchase
commitment of $1,009,500.
Interest Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
16
<PAGE>
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 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
The Fund is a separate taxpayer for federal income tax purposes. The 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 Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Colorado state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Fund. Net
realized capital gain and market discount distributions are subject to federal
taxation.
Flexible Sales Charge Program
The 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.
17
<PAGE>
Notes to Financial Statements (Unaudited) - continued
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the six months ended November 30, 1997.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
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 the Fund (approximately
$83,600) will be reimbursed to the Adviser on a straight-line basis over a
period of five years. As of November 30, 1997, $75,295 has been reimbursed.
18
<PAGE>
<TABLE>
<CAPTION>
2. Fund Shares
Transactions in Fund shares were as follows:
Six months ended 11/30/97 Year ended 5/31/97*
- -------------------------------------------------------------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold:
Class A 174,308 $ 1,830,550 442,011 $ 4,440,932
Class B 47,914 506,588 43,588 440,150
Class C 6,921 72,794 10,094 102,708
Class R 20,443 211,259 40,559 406,757
Shares issued to
shareholders
due to reinvestment
of distributions:
Class A 41,053 431,286 76,620 765,931
Class B 872 9,186 55 553
Class C 166 1,747 53 536
Class R 1,390 14,626 68 684
- -------------------------------------------------------------------------------
293,067 3,078,036 613,048 6,158,251
- -------------------------------------------------------------------------------
Shares redeemed:
Class A (149,809) (1,567,523) (877,171) (8,789,634)
Class B -- -- -- --
Class C -- -- -- --
Class R -- -- -- --
- -------------------------------------------------------------------------------
(149,809) (1,567,523) (877,171) (8,789,634)
- -------------------------------------------------------------------------------
Net increase (decrease) 143,258 $ 1,510,513 (264,123) $(2,631,383)
===============================================================================
</TABLE>
* Information represents eight months of Flagship Colorado and four months of
Nuveen Flagship Colorado (see note 1).
3. Distributions to Shareholders
On December 9, 1997, the Fund declared dividend distributions from its tax-
exempt net investment income which were paid on December 31, 1997, to
shareholders of record on December 9, 1997, as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Dividend per share:
<S> <C>
Class A $.0435
Class B .0370
Class C .0390
Class R .0455
- -------------------------------------------------------------------------------
At the same time, the Fund also declared taxable distributions, which includes
capital gains and/or taxable market discount, of $.0025 per share.
</TABLE>
19
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities for the six months ended November 30, 1997, aggregated $6,417,200 and
$4,763,807, respectively. Purchases and sales (including maturities) of
temporary municipal investments for the six months ended November 30, 1997,
aggregated $1,500,000 and $1,500,000, respectively.
At November 30, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for the Fund.
At May 31, 1997, the Fund's last fiscal year end, the Fund had an unused capital
loss carryforward of $495,637 available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, the carryforward
will expire in the year 2003.
5. Unrealized Appreciation (Depreciation)
At November 30, 1997, net unrealized appreciation aggregated $3,418,678, all of
which related to appreciated securities.
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, the 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 the 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 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.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $40,500 of which
approximately $35,300 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.
20
<PAGE>
During the six months ended November 30, 1997, the Distributor compensated
authorized dealers directly with approximately $25,700 in commission advances at
the time of purchase. 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 six months
ended November 30, 1997, the Distributor retained approximately $3,800 in such
12b-1 fees. The remaining 12b-1 fees charged to the Fund were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments.
7. Composition of Net Assets
At November 30, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
- -------------------------------------------------------------------------------
Capital paid-in $32,120,199
Balance of undistributed net investment income 24,830
Accumulated net realized gain (loss) from investment transactions (242,773)
Net unrealized appreciation of investments 3,418,678
- -------------------------------------------------------------------------------
Net assets $35,320,934
===============================================================================
21
<PAGE>
Financial Highlights (Unaudited)
Selected data for a common share outstanding throughout each
period is as follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
--------------------- ------------------
Net
Nuveen Flagship Colorado** Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income (b) investments income gains period value(a)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (5/87)
1998 (d) $10.15 $.26 $ .50 $(.26) $ - $10.65 7.54%
1997 9.79 .53 .35 (.52) - 10.15 9.22
1996 9.93 .54 (.13) (.55) - 9.79 4.14
1995 9.62 .57 .30 (.56) - 9.93 9.54
1994 10.04 .58 (.37) (.58) (.05) 9.62 2.03
1993 9.56 .60 .55 (.60) (.07) 10.04 12.41
1992 9.29 .61 .27 (.61) - 9.56 9.80
1991 9.13 .60 .17 (.61) - 9.29 8.75
1990 9.24 .62 (.12) (.61) - 9.13 5.59
1989 8.78 .63 .46 (.63) - 9.24 12.83
1988 9.27 .62 (.46) (.65) - 8.78 2.13
Class B (2/97)
1998 (d) 10.16 .22 .51 (.22) - 10.67 7.24
1997 (c) 10.21 .12 (.06) (.11) - 10.16 .61
Class C (2/97)
1998 (d) 10.15 .23 .50 (.23) - 10.65 7.27
1997 (c) 10.13 .16 .02 (.16) - 10.15 1.75
Class R (2/97)
1998 (d) 10.16 .27 .50 (.27) - 10.66 7.65
1997 (c) 10.21 .15 (.06) (.14) - 10.16 .85
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ending May 31, 1997, reflects
the financial highlights of Flagship Colorado.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(c) From commencement of class operations as noted.
(d) For the six months ending November 30, 1997.
-----
22
22
<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
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment (b) ment (b) rate
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 33,485 1.02%* 4.94%* 1.00%* 4.96%* 14%
31,229 1.18 4.87 .74 5.31 27
33,638 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
26,656 1.35 5.11 .41 6.05 30
15,699 1.51 5.40 .49 6.42 39
9,108 1.80 5.66 .84 6.62 29
7,386 1.87 5.70 .87 6.70 16
7,545 2.10 5.61 .67 7.04 19
7,561 1.54 6.04 .55 7.03 138
986 1.77* 4.16* 1.75* 4.18* 14
444 1.78 4.35* 1.53* 4.60* 27
184 1.58* 4.39* 1.56* 4.41* 14
103 1.58* 4.67* 1.31* 4.94* 27
666 .82* 5.13* .80* 5.15* 14
413 .83* 5.35* .58* 5.60* 27
- ------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
Additional Investment Opportunities
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth Funds
Nuveen Rittenhouse Growth Fund
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate
Limited Term
State Funds
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Fund, contact your financial
adviser. If you would like to add to your current investment on a regular basis,
you can sign up for Nuveen's systematic investing program, which allows you to
invest a fixed dollar amount every month automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you give your investment the added
growth potential of long-term compounding.
For more information on any of these service options, call your adviser, or
Nuveen at (800) 225-8530.
24
<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
Boston Financial Data Service
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, Illinois
-----
25
<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
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
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 products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 225-8530 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 225-8530
www.nuveen.com
<PAGE>
NUVEEN
Municipal
Bond Funds
November 30, 1997
Semiannual Report
[PHOTO APPEARS HERE]
Dependable, tax-free income
to help you keep more of
what you earn.
New Mexico
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Performance Overview
8 Portfolio of Investments
12 Statement of Net Assets
13 Statement of Operations
14 Statement of Changes in Net Assets
15 Notes to Financial Statements
21 Financial Highlights
24 Additional Investment Opportunities
25 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.
It's a pleasure to share with you the Nuveen Flagship New Mexico Municipal Bond
Fund's outstanding performance record for the 12 months ended November 30,
1997. Over the past year, investors continued to enjoy attractive, tax-free
dividends generated by the fund's portfolio of municipal bonds. As of November
30, 1997, Class A shareholders were receiving a current yield on net asset value
of 4.57%. To match this yield, investors in the 37% combined federal and state
income tax bracket would have had to earn at least 7.25% on taxable
alternatives.
During this same period, the fund provided Class A shareholders with a
competitive total return on net asset value of 7.61% with income reinvested,
outpacing the average return of 6.61% for its peer group, the Lipper other state
long-term municipal bond fund category. You will find additional details on the
fund's performance on pages 6-7.
The Year in Review
Over the past year, U.S. investors leave benefited from robust economic growth
with little evidence of inflationary pressures. With unemployment rates at 20-
year lows and the current economic expansion entering its seventh year, the
presence of benign inflation has sparked debate over whether the traditional
link between growth and inflation has been broken. During 1997, expectations
that excess growth would generate inflation disrupted the markets on several
occasions, most notably following the Federal Reserve's interest rate tightening
in March and speeches by Fed Chairman Alan Greenspan. Still, falling commodity
prices kept producer prices in check, while low import prices--due in part to
<PAGE>
"The events of 1997 have
focused renewed
attention on the need for
diversification and
appropriate asset allocation."
the weakness in Asian markets--limited U.S. companies' ability to raise consumer
prices. This combination has kept inflation subdued and the Federal Reserve "on
hold" since March. The reduction in the federal deficit and passage of the
Taxpayer Relief Act of 1997 offer additional encouragement to long-term fixed-
income investors.
Helping You Build A Better Portfolio
The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation. Stock market volatility,
especially late in the year, provided a vivid illustration of the steadying
effect that fixed-income investments can provide in a well-constructed
investment portfolio. Nuveen mutual funds provide an excellent balance to other
stock and bond investments. Your financial adviser can introduce you to a
variety of other Nuveen products and services to round out your investment
portfolio, including the Nuveen Growth and Income Stock Fund and two balanced
stock and bond funds.
In addition, we recently expanded our private asset management capabilities
through the acquisition of Rittenhouse Financial Services, a well-respected
growth investment manager. We encourage you to talk with your financial adviser
about ways to complement your current Nuveen investments by taking advantage of
these additional products and services.
We at Nuveen remain committed to providing you with quality investment solutions
that withstand the test of time. We thank you for your confidence in us and our
family of investments, and we look forward to our next report to you.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
January 15, 1998
2
<PAGE>
[PHOTO OF TED NEILD APPEARS HERE]
Ted Neild, managing director of Nuveen's
portfolio management team, talks about the
municipal bond market and offers insights into
factors that affected the performance of the fund
over the past year.
Answering Your Questions
What economic and market factors influenced the performance of municipal bonds
over the past year?
Over the past 12 months, the performance of the municipal bond market was
influenced by three major factors: the continued strength of the U.S. economy,
minimal inflation, and volatility in the equity markets. During 1997, these
factors contributed to a positive environment for fixed-income investments, as
reflected in the steady-to-declining interest rates evident during the year.
Between December 1996 and November 1997, the yield on the 30-year Treasury bond
dropped from 6.36% to 6.05%, and the municipal market followed suit, as the
yield on the Bond Buyer 40 declined from 5.63% to 5.36%. The spread between tax-
free municipal bonds and taxable Treasury bonds remained tight, making municipal
bonds very attractive. The strong total returns produced in this environment
were somewhat muted by a heavy supply of newly issued bonds that temporarily
reduced bond prices. The increased supply worked to our advantage, however, as
it expanded opportunities to find value in the marketplace.
How has the fund performed during this period?
As Tim mentioned in his letter to shareholders, the fund performed well during
the one-year period ended November 30, 1997. The total return on net asset value
for Class A shares of the fund was 7.61%, which compares favorably with the one-
year average return of 6.61% for the peer group of long-term state municipal
bond funds tracked by Lipper Analytical Services--a 100 basis point difference.
Once again, this fund was one of the top performers in its category, ranking
ninth among the 67 municipal bond funds in the grouping.
3
<PAGE>
"Through the quality research provided by Nuveen's renowned research team, we
continue to uncover bonds that we feel are undervalued by the rest of the
market."
Given the current municipal market, where were you able to find value?
Through the quality research provided by Nuveen's renowned research team, we
continue to uncover bonds that we feel are undervalued by the rest of the
market. For example, we have found tremendous value in high-grade housing bonds.
A few deals were unexpectedly called by their issuers this year, so bond buyers
appear to be avoiding the entire sector and are effectively driving yields
higher. Since Nuveen has such a large, experienced housing research staff, we
were able to buy these securities with greater confidence. We have also found
good value in higher-rated bonds because credit spreads remained tight. This
enabled us to purchase higher-rated securities without sacrificing much yield.
Presently, the marginally higher yield offered by lower-rated bonds does not
adequately compensate the fund for the increased credit risk.
What are your key strategies for the coming year?
To sustain such outstanding performance, we take a holistic approach to
portfolio management--assessing all of the factors that determine a fund's
performance and taking advantage of all of them to contribute to total return
and dividend stability. In the coming year, one focus will be boosting the
credit quality of the fund. As long as credit spreads remain tight, we will
continue to take advantage of opportunities to purchase bonds with high credit
quality at yields that are similar to bonds with lower ratings. We believe that
if credit spreads widen, these high-quality issues will increase in value
relative to lower-rated bonds.
4
<PAGE>
"Looking at the year ahead, we believe the overall market will continue to
strike a good balance between supply and demand."
As part of our value investing approach, we will also continue to look for
individual bonds that offer good long-term value with the potential for
appreciating returns. Our thorough research helps us find investment quality
bonds that offer the best values--such as bonds from specific regions and
sectors that have the best potential for performance and appreciation. We plan
to continue to search for bonds with pre-refunding potential, as well as those
that we feel are undervalued by the market as a whole.
What is your outlook for the municipal market?
Looking at the year ahead, we believe the overall market will continue to strike
a good balance between supply and demand. We expect supply to increase as new
issuers continue to enter the market. A continued decline in yields could also
cause new supply to come to market through refunding of current debt. On the
demand side, volatility in the equity markets, plus the potential for a
weakening of the economy, could spark increased interest in bonds of all types.
The financial crises in Asia, coupled with the continued strength of the dollar
and low commodity prices, are all contributing to the excellent inflation
picture. This backdrop should help offset stronger labor markets and limit the
effects of any bond market corrections. In the meantime, positive underlying
fundamentals provide good support for the municipal market.
5
<PAGE>
Nuveen Flagship New Mexico
Municipal Bond Fund
Performance Overview
As of November 30, 1997
<TABLE>
<CAPTION>
Fund Highlights
====================================================================================================
Share Class A B C R
<S> <C> <C> <C> <C>
Inception Date 9/92 2/97 2/97 2/97
....................................................................................................
Net Asset Value (NAV) $10.49 $10.48 $10.49 $ 10.51
....................................................................................................
CUSIP 67065L781 67065L773 67065L765 67065L757
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Total Net Assets ($000) $52,693
....................................................................................................
Average Weighted Maturity (Years) 20.76
....................................................................................................
Average Weighted Duration (Years) 8.64
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/1/
=====================================================================================================
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
1-Year 7.61% 3.08% 6.76% 7.09% 7.98%
.....................................................................................................
5-Year 7.39% 6.47% 6.75% 6.98% 7.46%
.....................................................................................................
Since Inception 7.16% 6.28% 6.52% 6.75% 7.23%
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Tax-Free Yields
=====================================================================================================
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
Dist Rate 4.80% 4.60% 4.06% 4.29% 5.02%
.....................................................................................................
SEC 30-Day Yld 4.57% 4.37% 3.82% 4.02% 4.77%
.....................................................................................................
Taxable Equiv Yld/2/ 7.25% 6.94% 6.06% 6.38% 7.57%
- -----------------------------------------------------------------------------------------------------
</TABLE>
/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 up-front sales charge. Class B shares
have a contingent deferred sales charge (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 B shares convert to Class A shares eight years after
purchase. Class C shares have a 1% CDSC for redemptions within one year
which is not reflected in the one-year total return.
/2/ Based on SEC Yield and a combined federal and state income tax rate of 37%.
Represents the yield on a taxable investment necessary to equal the yield
of the Nuveen fund on an after-tax basis.
6
<PAGE>
Credit Quality
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 58%
A 16%
AA 11%
BBB/NR 15%
- --------------------------------------------------------------------------------
Diversification
[PIE CHART APPEARS HERE]
Tax Obligation (Limited) 28%
Education/Civic Org. 18%
Housing (Single-Family) 14%
Utilities 14%
Long-Term Care 7%
Tax Obligation (G.O.) 5%
U.S. Guaranteed 4%
Housing (Multi-Family) 3%
Other 7%
- --------------------------------------------------------------------------------
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
December 1996 0.04269
January 1997 0.04281
February 0.042
March 0.042
April 0.042
May 0.042
June 0.042
July 0.042
August 0.042
September 0.042
October 0.042
November 0.042
7
<PAGE>
<TABLE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New Mexico
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials -- 2.1%
$1,000,000 Lordsburg, New Mexico, Pollution Control Revenue 4/03 at 102 A $ 1,085,030
Refunding, Phelps Dodge Corporation Project,
6.500%, 4/01/13
- ------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations -- 17.4%
1,600,000 New Mexico Educational Assistance Foundation, 4/02 at 102 AAA 1,703,712
Student Loan Revenue, Series 1A, 6.850%,
4/01/05
New Mexico Educational Assistance Foundation,
Student Loan Revenue, Senior Series 1A:
400,000 6.550%, 12/01/05 12/02 at 101 Aaa 421,036
870,000 5.500%, 12/01/07 6/04 at 102 Aaa 902,895
225,000 New Mexico Educational Assistance Foundation, 12/02 at 101 A 240,669
Student Loan Revenue, Sub-Series 1B,
6.850%, 12/01/05
1,040,000 New Mexico Educational Assistance Foundation, No Opt. Call Aaa 1,103,638
Student Loan Revenue, Senior Series A1,
6.500%, 3/01/04
435,000 Puerto Rico Industrial Medical and No Opt. Call BBB- 450,155
Environmental Pollution Control Facilities
Financing Authority, Revenue Refunding,
Formerly Puerto Rico Higher Education,
Catholic University, Series A, 5.600%, 12/01/07
Santa Fe, New Mexico, Educational Facilities
Revenue Refunding and Improvement, College of
Santa Fe Project:
500,000 6.000%, 10/01/13 10/07 at 100 BBB- 518,760
500,000 5.875%, 10/01/21 10/07 at 100 BBB- 506,100
3,000,000 University of New Mexico, University Revenue No Opt. Call AA 3,340,920
Refunding, Series A, 6.000%, 6/01/21
- ------------------------------------------------------------------------------------------------------------------------
Health Care -- 0.9%
450,000 Albuquerque, New Mexico, Hospital Revenue, 8/02 at 102 AAA 492,093
Crossover Refunding, Series A, Presbyterian
Healthcare Services, 6.375%, 8/01/07
- ------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 2.9%
1,000,000 Las Cruces, New Mexico, Housing Development 4/03 at 102 A 1,029,760
Corporation, Multifamily Revenue Refunding
Mortgage, Series A, 6.400%, 10/01/19
500,000 New Mexico Mortgage Finance Authority, 7/07 at 102 AAA 502,930
Multifamily Housing Revenue, Rio Volcan
Apartments Project, 5.650%, 7/01/18
-----
8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Account Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Housing/Single Family 14.1%
$ 2,000,000 New Mexico Mortgage Finance Authority, Single 7/06 at 102 AAA $ 2,104,320
Family Mortgage Program, Series D1, 6.250%, 7/01/22
1,445,000 New Mexico Mortgage Finance Authority, Single 7/07 at 102 AAA 1,506,831
Family, Series G 2, 6.200%, 7/01/28
1,245,000 New Mexico Mortgage Finance Authority, Single Family 7/05 at 102 AAA 1,322,875
Mortgage Program, Series A, Class D, 6.650%, 7/01/26
155,000 New Mexico Mortgage Finance Authority, Single 7/02 at 102 Aa1 163,471
Family Mortgage Purchase Refunding, Senior
Series 1A, 6.850%, 7/01/10
755,000 New Mexico Mortgage Finance Authority, Single 7/02 at 102 Aa1 797,371
Family Mortgage Purchase Refunding, Senior
Series 2A, 6.900%, 7/01/24
1,500,000 New Mexico Mortgage Finance Authority, Single 7/07 at 102 AAA 1,508,760
Family Mortgage Program, Series 2F,
5.700%, 7/01/29
- ---------------------------------------------------------------------------------------------------------------------------------
Long Term Care 6.7%
1,500,000 Albuquerque, New Mexico, Revenue Refunding, 6/03 at 102 AAA 1,577,325
The Evangelical Lutheran, 5.900%, 6/01/13
1,000,000 Hobbs, New Mexico, Health Facilities Revenue, 5/06 at 102 AAA 1,010,230
Evangelical Lutheran Project, 5.500%, 5/01/26
500,000 Las Cruces, New Mexico, Health Facilities Revenue 12/03 at 102 AAA 545,395
Refunding, Evangelical Lutheran Project,
6.450%, 12/01/17
350,000 Socorro, New Mexico, Health Facility Revenue 5/04 at 102 AAA 379,550
Refunding, Evangelical Lutheran Good
Samaritan, 6.000%, 5/01/08
- ---------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General 5.4%
25,000 Albuquerque, New Mexico, Municipal School District No Opt. Call AA 25,829
No. 12, 5.000%, 8/01/02
80,000 Bernalillo County, New Mexico, 5.750%, 10/01/05 10/04 at 100 Aa1 86,120
Grants/Cibola County, New Mexico,
School District No. 1:
480,000 6.250%, 5/01/08 5/04 at 100 Baa2 510,168
510,000 6.250%, 5/01/09 5/04 at 100 Baa2 539,192
1,500,000 Guam Government, Series A, 5.375%, 11/15/13 11/03 at 102 BBB 1,491,225
200,000 Torrance County, New Mexico, 5.500%, 7/01/04 7/00 at 100 N/R 204,218
</TABLE>
9
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New Mexico - continued
<TABLE>
<CAPTION>
Principal Optional Call Ratings** Market
Amount Description Provisions* Value
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/Limited -- 26.9%
$ 4,250,000 Albuquerque, New Mexico, Gross Receipts Lodgers No Opt. Call AAA $ 2,132,140
Tax Revenue Refunding, Series B, 0.000%, 7/01/11
1,050,000 Dona Ana County, New Mexico, Gross Receipts Tax 6/03 at 102 AA 1,093,722
Revenue Refunding and Improvement, 6.000%, 6/01/19
250,000 Las Cruces, New Mexico, Gross Receipts Tax Revenue 12/02 at 101 A 268,515
Refunding, 6.250%, 12/01/05
1,000,000 Las Cruces, New Mexico, Revenue, 5.450%, 12/01/02 No Opt. Call AAA 1,046,800
35,000 New Mexico Finance Authority, Special No Opt. Call AAA 36,086
Cigarette Tax, University of New Mexico,
5.000%, 6/01/03
Puerto Rico Commonwealth Highway and
Transportation Authority, Highway Revenue, Series Y:
3,550,000 5.500%, 7/01/36 7/16 at 100 A 3,603,676
1,000,000 5.000%, 7/01/36 7/16 at 100 A 955,600
375,000 Sandoval County, New Mexico, Gross Receipts Tax 11/02 at 102 Baa1 408,191
Revenue Refunding, 6.900%, 11/01/12
130,000 Sandoval County, New Mexico, Gross Receipts Tax 12/02 at 102 Baa1 140,455
Revenue Refunding, Series A, 6.500%, 12/01/06
4,000,000 Sante Fe County, New Mexico, Correctional System No Opt. Call AAA 4,510,080
Revenue, 6.000%, 2/01/27
- -----------------------------------------------------------------------------------------------------------------------------
Transportation -- 2.1%
1,000,000 Albuquerque, New Mexico, Airport Revenue, Series A, 7/00 at 105 AAA 1,092,730
6.600, 7/01/16
- -----------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 3.5%
250,000 Albuquerque, New Mexico, Joint Water and Sewer 7/00 at 100 AAA 261,650
System Revenue, Series A, 6.000%, 7/01/15
(Pre-refunded to 7/01/00)
90,000 Las Cruces, New Mexico, Joint Utility Refunding and 7/02 at 102 A1*** 96,744
Improvement Revenue, 6.250%, 7/01/12
30,000 New Mexico Finance Authority, Revenue Public 6/05 at 100 AAA 31,962
Project, Revolving Fund, Series A, 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*** 230,265
200,000 6.900%, 12/01/07 (Pre-refunded to 12/01/99) 12/99 at 100 N/R*** 206,520
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed -- continued
$ 500,000 Sandoval County, New Mexico, Gross Receipts Tax 11/15 at 100 N/R*** $ 592,650
Revenue, 7.150%, 11/01/10 (Pre-refunded to 11/01/15)
327,000 Sante Fe County, New Mexico, Office and Training Facilities No Opt. Call Aaa 436,797
Project Revenue, 9.000%, 7/01/07
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities -- 14.0%
985,000 Farmington, New Mexico, Pollution Control Revenue 12/02 at 102 AAA 1,080,929
Refunding, Public Service Company of New Mexico,
Series A, 6.375%, 12/15/22
2,050,000 Guam Power Authority, Series A, 10/03 at 102 BBB 1,982,329
5.250%, 10/01/23
1,000,000 Las Cruces, New Mexico, South Central Solid Waste 6/05 at 100 A 1,033,520
Authority, Environmental Services, Gross Receipts
Tax, 6.000%, 6/01/16
Los Alamos County, New Mexico, Utility System,
Revenue Refunding, Series A:
1,000,000 5.700%, 7/01/05 7/04 at 102 AAA 1,075,070
1,000,000 6.000%, 7/01/15 7/04 at 102 AAA 1,061,930
Rio Grande, New Mexico, Natural Gas Association, Natural
Gas System Revenue Refunding and Improvement:
100,000 6.000%, 7/01/07 7/03 at 100 BBB+ 102,036
1,000,000 6.125%, 7/01/13 7/03 at 100 BBB+ 1,016,220
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer -- 1.5%
1,000,000 Albuquerque, New Mexico, Joint Water and Sewer No Opt. Call AAA 635,070
System Revenue, Series A, 0.000%, 7/01/07
100,000 Grants, New Mexico, Water and Sewer Revenue 1/02 at 100 Baa 104,422
Refunding and Improvement, 5.600%, 1/01/08
70,000 New Mexico Finance Authority, Public Project, No Opt. Call AAA 73,735
Series A, 5.500% 6/01/07
- ------------------------------------------------------------------------------------------------------------------------------------
$51,332,000 Total Investments - (cost $47,792,534) - 97.5% 51,380,422
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.5% 1,312,892
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 52,693,314
====================================================================================================================
</TABLE>
* Optional Call Provisions: 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: 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.
11
<PAGE>
Statement of Net Assets (Unaudited)
November 30, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
New Mexico
- -------------------------------------------------------------------------------------------------------
Assets
<S> <C>
Investments in municipal securities, at market value (note 1) $51,380,422
Cash 135,537
Receivables:
Interest 950,288
Investments sold 80,000
Shares sold 402,347
Other assets 35,670
- -------------------------------------------------------------------------------------------------------
Total assets 52,984,264
- -------------------------------------------------------------------------------------------------------
Liabilities
Payable for shares redeemed 27,921
Accrued expenses:
Management fees (note 6) 17,820
12b-1 distribution and service fees (notes 1 and 6) 9,258
Other 26,871
Dividends payable 209,080
- -------------------------------------------------------------------------------------------------------
Total liabilities 290,950
- -------------------------------------------------------------------------------------------------------
Net assets (note 7) $52,693,314
=======================================================================================================
Class A Shares (note 1)
Net assets $51,003,443
Shares outstanding 4,864,206
Net asset value and redemption price per share $ 10.49
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 10.95
=======================================================================================================
Class B Shares (note 1)
Net assets $ 853,681
Shares outstanding 81,439
Net asset value, offering and redemption price per share $ 10.48
=======================================================================================================
Class C Shares (note 1)
Net assets $ 525,951
Shares outstanding 50,142
Net asset value, offering and redemption price per share $ 10.49
=======================================================================================================
Class R Shares (note 1)
Net assets $ 310,239
Shares outstanding 29,516
Net asset value, offering and redemption price per share $ 10.51
=======================================================================================================
</TABLE>
12 See accompanying notes to financial statements.
<PAGE>
Statement of Operations (Unaudited)
Six months ended November 30, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
New Mexico
- --------------------------------------------------------------------------------
<S> <C>
Investment Income
Tax-exempt interest income (note 1) $ 1,483,564
- --------------------------------------------------------------------------------
Expenses
Management fees (note 6) 144,708
12b-1 service fees--Class A (notes 1 and 6) 51,261
12b-1 distribution and service fees--Class B (notes 1 and 6) 3,688
12b-1 distribution and service fees--Class C (notes 1 and 6) 1,023
Shareholders' servicing agent fees and expenses 9,055
Custodian's fees and expenses 18,071
Trustees' fees and expenses (note 6) 487
Professional fees 7,496
Shareholders' reports--printing and mailing expenses 4,246
Federal and state registration fees 3,439
Organizational expenses (note 1) 5,179
Other expenses 1,148
- --------------------------------------------------------------------------------
Total expenses before expense reimbursement 249,801
Expense reimbursement (note 6) (34,163)
- --------------------------------------------------------------------------------
Net expenses 215,638
- --------------------------------------------------------------------------------
Net investment income 1,267,926
- --------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 139,877
Net change in unrealized appreciation or depreciation
of investments 1,553,729
- --------------------------------------------------------------------------------
Net gain from investments 1,693,606
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 2,961,532
================================================================================
</TABLE>
13 See accompanying notes to financial statements.
<PAGE>
Statements of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Nuveen Flagship New Mexico
---------------------------------
Six months ended Year ended
11/30/97 5/31/97*
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 1,267,926 $ 2,606,587
Net realized gain from investment transactions
(notes 1 and 4) 139,877 92,293
Net change in unrealized appreciation or depreciation
of investments 1,553,729 1,740,188
-------------------------------------------------------------------------------------------------
Net increase in net assets from operations 2,961,532 4,439,068
-------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,244,483) (2,592,045)
Class B (15,838) (2,872)
Class C (5,752) (1,113)
Class R (7,682) (309)
-------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (1,273,755) (2,596,339)
-------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 3,554,758 7,206,729
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 801,837 1,155,487
-------------------------------------------------------------------------------------------------
4,356,595 8,362,216
-------------------------------------------------------------------------------------------------
Cost of shares redeemed (5,332,306) (9,396,878)
-------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions (975,711) (1,034,662)
-------------------------------------------------------------------------------------------------
Net increase in net assets 712,066 808,067
Net assets at the beginning of period 51,981,248 51,173,181
-------------------------------------------------------------------------------------------------
Net assets at the end of period $52,693,314 $51,981,248
=================================================================================================
Balance of undistributed net investment income at end of period $ 4,419 $ 10,248
=================================================================================================
* Information represents eight months of Flagship New Mexico and four months of Nuveen Flagship New Mexico (see note 1).
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
Notes to Financial Statements (Unaudited)
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 New Mexico Municipal Bond Fund (the "Fund"),
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 Fund, 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 New Mexico Double Tax
Exempt Fund ("Flagship New Mexico") was reorganized into the Trust and renamed
Nuveen Flagship New Mexico Municipal Bond Fund ("Nuveen Flagship New Mexico").
Prior to the reorganization, Flagship New Mexico was a sub-trust of the Flagship
Tax-Exempt Funds Trust.
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
The prices of municipal bonds in the 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 Fund has 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
November 30, 1997, the Fund had no such outstanding purchase commitments.
Interest Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
15
<PAGE>
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 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
The Fund is a separate taxpayer for federal income tax purposes. The 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 Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and New Mexico state income taxes, to
retain such tax-exempt status when distributed to the shareholders of the Fund.
Net realized capital gain and market discount distributions are subject to
federal taxation.
Flexible Sales Charge Program
The 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.
16
<PAGE>
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the six months ended November 30, 1997.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
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 the Fund (approximately
$51,700) will be reimbursed to the Adviser on a straight-line basis over a
period of five years. As of November 30, 1997, $46,527 has been reimbursed.
17
<PAGE>
Notes to Financial Statements (Unaudited) - continued
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six months ended 11/30/97 Year ended 5/31/97*
------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 262,809 $ 2,726,145 604,874 $ 6,044,381
Class B 20,321 210,502 64,688 647,809
Class C 34,769 361,111 15,271 153,600
Class R 25,349 257,000 35,553 360,939
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 76,747 789,315 115,338 1,154,792
Class B 488 5,052 42 418
Class C 90 933 12 123
Class R 629 6,537 15 154
- -----------------------------------------------------------------------------------
421,202 4,356,595 835,793 8,362,216
- -----------------------------------------------------------------------------------
Shares redeemed:
Class A (478,137) (4,963,717) (936,465) (9,396,878)
Class B (4,100) (42,841) -- --
Class C -- -- -- --
Class R (32,030) (325,748) -- --
- -----------------------------------------------------------------------------------
(514,267) (5,332,306) (936,465) (9,396,878)
- -----------------------------------------------------------------------------------
Net increase (decrease) (93,065) $ (975,711) (100,672) $(1,034,662)
===================================================================================
</TABLE>
* Information represents eight months of Flagship New Mexico and
four months of Nuveen Flagship New Mexico (see note 1).
18
<PAGE>
3. Distributions to Shareholders
On December 9, 1997, the Fund declared dividend distributions from its tax-
exempt net investment income which were paid on December 31, 1997, to
shareholders of record on December 9, 1997, as follows:
<TABLE>
- -------------------------------------------------------------------------------
Dividend per share:
<S> <C>
Class A $.0420
Class B .0355
Class C .0375
Class R .0440
- -------------------------------------------------------------------------------
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities for the six months ended November 30, 1997, aggregated $5,368,084 and
$5,321,876, respectively. Purchases and sales (including maturities) of
temporary municipal investments for the six months ended November 30, 1997,
aggregated $2,500,000 and $3,400,000, respectively.
At November 30, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for the Fund.
At May 31, 1997, the Fund's last fiscal year end, the Fund had unused capital
loss carryforwards of $1,287,752 available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, $997,166 of the
carryforwards will expire in the year 2003 and $290,586 will expire in the year
2004.
5. Unrealized Appreciation (Depreciation)
At November 30, 1997, net unrealized appreciation aggregated $3,587,888, all of
which related to appreciated securities.
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, the 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 the 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>
19
<PAGE>
Notes to Financial Statements (Unaudited) - continued
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to its Trustees who are affiliated with the Adviser or to
its officers, all of whom receive remuneration for their services to the Trust
from the Adviser.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $46,900 of which
approximately $40,300 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 six months ended November 30, 1997, the Distributor compensated
authorized dealers directly with approximately $13,100 in commission advances at
the time of purchase. 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 six months
ended November 30, 1997, the Distributor retained approximately $4,700 in such
12b-1 fees. The remaining 12b-1 fees charged to the Fund were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments.
7. Composition of Net Assets
At November 30, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
- ---------------------------------------------------------------------------------
<S> <C>
Capital paid-in $50,252,166
Balance of undistributed net investment income 4,419
Accumulated net realized gain (loss) from investment transactions (1,151,159)
Net unrealized appreciation of investments 3,587,888
- ---------------------------------------------------------------------------------
Net assets $52,693,314
=================================================================================
</TABLE>
20
<PAGE>
Financial Highlights
21
<PAGE>
Financial Highlights (Unaudited)
Selected data for a common share outstanding throughout each
period is as follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
-------------------------- ---------------------------
Net
Nuveen Flagship Net realized and Dividends Net Total
New Mexico** asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income (b) investments income gains period value (a)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/92)
1998 (d) $10.16 $.25 $ .33 $(.25) $ -- $10.49 5.79%
1997 9.81 .51 .35 (.51) -- 10.16 8.90
1996 10.01 .51 (.19) (.52) -- 9.81 3.18
1995 9.68 .52 .33 (.52) -- 10.01 9.25
1994 10.04 .53 (.33) (.53) (.03) 9.68 1.92
1993 (c) 9.58 .37 .46 (.37) -- 10.04 11.72*
Class B (2/97)
1998 (d) 10.15 .21 .33 (.21) -- 10.48 5.39
1997 (c) 10.24 .12 (.10) (.11) -- 10.15 .18
Class C (2/97)
1998 (d) 10.16 .22 .34 (.23) -- 10.49 5.50
1997 (c) 10.23 .12 (.08) (.11) -- 10.16 .43
Class R (2/97)
1998 (d) 10.17 .26 .34 (.26) -- 10.51 5.98
1997 (c) 10.23 .14 (.07) (.13) -- 10.17 .71
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ending May 31,
1997, reflects the financial highlights of Flagship New Mexico.
(a) Total returns are calculated on net asset value without any
sales charge and are not annualized except where noted.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its
predecessor Flagship Financial.
(c) From commencement of class operations as noted.
(d) For the six months ending November 30, 1997.
22
<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
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment (b) ment (b) rate
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 51,003 .94%* 4.70%* .81%* 4.83%* 10%
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
31,499 1.37* 4.05* .14* 5.28* 36
854 1.69* 3.95* 1.56* 4.08* 10
657 1.68* 4.05* 1.54* 4.19* 43
526 1.48* 4.11* 1.35* 4.24* 10
155 1.48* 4.26* 1.34* 4.40* 43
310 .74* 4.90* .61* 5.03* 10
362 .73* 5.04* .59* 5.18* 43
- --------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
Additional Investment Opportunities
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth Funds
Nuveen Rittenhouse Growth Fund
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate
Limited Term
State Funds
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Fund, contact your financial
adviser. If you would like to add to your current investment on a regular basis,
you can sign up for Nuveen's systematic investing program, which allows you to
invest a fixed dollar amount every month automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you give your investment the added
growth potential of long-term compounding.
For more information on any of these service options, call your adviser, or
Nuveen at (800) 225-8530.
24
<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
Boston Financial Data Service
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, Illinois
25
<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
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
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 products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 225-8530 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 225-8530
www.nuveen.com
VSA-NM-11.97
