<PAGE>
May 31, 1999 Annual Report
NUVEEN
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Municipal Bond Funds
Dependable, tax-free
income to help
you keep more
of what you earn.
[PHOTO APPEARS HERE]
Arizona
Colorado
New Mexico
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
Contents
1 Dear Shareholder
3 Nuveen Flagship Arizona Municipal Bond Fund
6 Nuveen Flagship Colorado Municipal Bond Fund
9 Nuveen Flagship New Mexico Municipal Bond Fund
12 Portfolio of Investments
24 Statement of Net Assets
25 Statement of Operations
26 Statement of Changes in Net Assets
27 Notes to Financial Statements
32 Financial Highlights
35 Report of Independent Public Accountants
36 Building a Better Portfolio
37 Fund Information
<PAGE>
[Photo of Timothy R. Schwertfeger Appears Here]
Timothy R. Schwertfeger
Chairman of the Board
DEAR Shareholder
I invite you to take a few minutes to read the annual report we've prepared for
you on the performance of your Nuveen state municipal bond fund for the fiscal
year ended May 31, 1999. You, along with your financial adviser, have made a
sound choice in choosing Nuveen to manage this portion of your assets. Since
1898, more than 1.3 million investors have trusted us to help them build and
sustain the wealth of a lifetime.
I'm pleased to report your fund continued to meet its primary objective of
providing you with dependable tax-free income and attractive after-tax total
returns. I will briefly describe the national economic environment during the
past 12 months. My discussion is followed by comments about the strategies
employed in managing your fund from the portfolio manager of each fund
represented in this report.
The Year In Review.
The Federal Reserve eased short-term rates for the first time in almost three
years by cutting the federal funds rate in the fall of 1998 three times,
bringing it to 4.75%. A month after the close of your fund's fiscal year, the
Fed raised its target by 25 basis points to 5%. (Be sure to read your fund
manager's comments about managing your fund in a rising interest rate
environment.)
The fed funds rate is the rate that banks charge each other for overnight
loans and serves as the basis many financial institutions use for setting
interest charges on a variety of products, from mortgage and car loans to credit
cards.
The Fed's rate cuts were made to avert a potential domestic credit crunch
and restore some stability to global markets. The moves seemed to have worked,
as the U.S. economy since has continued its pattern of non-inflationary growth,
accompanied by low interest rates and unemployment levels that remain among the
lowest in three decades, prompting the late June reversal by the Fed.
All indications point to a confident U.S. consumer who is comfortable with
the current state of the economy, especially the performance of the housing,
stock and job markets. This confidence is reflected in the most recent Consumer
Confidence Index report, issued by the University of Michigan's Conference Board
Inc., which showed a record-setting eighth consecutive month of gains in June.
On the global front, the turmoil of the past two years appears to be fading
somewhat, as international financial markets have begun to send recovery
signals.
Domestic inflation continues to be benign, with an increase of 2.1% for the
12 months ended May 31, 1999. The general backdrop of inflation indicators
continued to be mild, with the employment cost index, average hourly earnings,
and import and producer price trends all remaining favorable.
Federal Reserve Chairman Alan Greenspan recently stated that a key factor
in achieving today's peaceful coexistence of economic growth and low inflation
has been increased productivity. Improvements in productivity, spurred by
technological advances, have been responsible for
1
<PAGE>
offsetting wage and other inflationary pressures that we would normally expect
to see as part of a growing economy.
Why Municipal Bonds? Our municipal bond funds continued to offer attractive,
stable income in a market that places a high premium on yield. In 1998,
municipal bonds represented a reasonably insulated haven in an otherwise
turbulent market, with lower volatility relative to Treasury bonds and other
fixed-income investments. Even in 1999, with interest rates rising again,
municipals outperformed Treasuries through the end of May.
The high ratio of tax-exempt municipal yields to Treasury yields sheltered
municipal bonds, to some extent, from the price decline that occurred in the
Treasury market during the first part of the year. While the yield on 30-year
Treasury bonds rose from 5.10% at the end of December to 5.83% as of May 31,
1999, the yield on the Bond Buyer Revenue Bond Index, an unmanaged index of
long-term municipal revenue bonds, gained 15 basis points--from 5.26% to 5.41%.
Given the inverse relationship between interest rates and bond prices, we saw
bond prices fall as rates rose over this period.
Though municipal bond prices did decrease, the decline was not as dramatic
as the drop in Treasuries.
This performance differential reflects the fact that Treasuries had become
relatively expensive as the result of safe-haven buying during the international
economic crises in 1998. As the financial turmoil subsided, however, foreign
investors returned to investing in their own countries rather than in U.S.
dollar-denominated securities, and the decline in demand caused U.S. Treasuries
to drop in price.
At the end of May 1999, the ratio between long-term municipal yields and
30-year Treasury yields stood at 93%, compared with the historical average of
86% for the period of 1986-1999. For investors, this meant that quality long-
term municipal bonds offered yields comparable to those of long Treasury bonds--
even before the tax advantages of municipal bonds were taken into account.
During the funds' fiscal year, that ratio hit a high of 104% in December.
On an after-tax basis in today's market, municipal bonds continue to
present an exceptionally attractive investment option relative to Treasuries.
During 1998, lower interest rates and the strong economy combined to
generate high levels of new municipal issuance and a significant increase in the
refinancing of existing bonds. Municipal issuance in 1998 reached $284 billion,
up 29% over 1997.
In the first part of 1999, however, as the market settled into a more
stable interest rate environment, refunding activity has dropped off
dramatically, resulting in a drop in municipal supply. This, in turn, has
enhanced the attractiveness of the municipal bonds that were brought to market,
as demand--especially from individual investors--remained relatively strong.
The Value of Nuveen Expertise. Nuveen Mutual Funds are a diverse collection
of investments featuring highly regarded asset management firms--Premier
Advisers/SM/--who direct the investment activities of each portfolio.
The Premier Advisers are firms that have earned a reputation for excellence
in their field of expertise--including Nuveen Investment Advisory Services for
income investing, Rittenhouse Financial Services for growth investing and
Institutional Capital Corporation for value investing.
For more information on our funds, contact your financial adviser for a
prospectus, or call Nuveen at (800) 621-7227, or download one from
www.nuveen.com. Please read the prospectus carefully before you invest or send
money.
We encourage you to talk with your financial adviser about Nuveen's
expanding array of investments and the ways they can help you establish a
diversified portfolio designed to build and sustain long-term financial
security.
We are grateful for the confidence you have placed in us and are dedicated
to maintaining your trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
- --------------------------
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1999
<PAGE>
NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Mike Davern discusses fund performance, the municipal market
and key investment strategies for the Arizona fund for the fiscal year ended
May 31, 1999.
Comments cover the year ended May 31, 1999; performance statistics are quoted
for Class A shares at net asset value.
How strong is Arizona's economy? Arizona's economy is a healthy mixture of high-
technology manufacturing, retail trade, tourism, agriculture, mining and the
military. The state's economic and population growth are among the nation's
fastest, thanks to a pro-business tax regulatory environment and a high quality
of life, which make the state popular with corporations and individuals.
In 1998, Arizona was No. 1 in the nation for non-agricultural job growth,
increasing nearly 5% for the year. In manufacturing job growth, Arizona ranked
third behind California and Texas. Unemployment was about 4.7% at May 31,
slightly higher than the national average.
Retail sales are strong, although growth is down slightly from 1998 levels,
similar to the national trend. Housing permits are flat for the year, indicating
that the economy may be cooling somewhat. Services and retail trade dominate the
state's employment sector, which has seen about 30% job growth since 1994.
Arizona's expanding economy led to growing infrastructure and school
financing needs, resulting in strong municipal bond issuance in 1998. Rising
interest rates in 1999, however, significantly slowed municipal bond activity--
both new issuance and refundings--in the latter half of the fund's fiscal year.
There were two reasons the market slowed--the increased interest rates,
which primarily slowed new issuance, plus the fact that the refunding market has
essentially been exhausted. Municipalities flooded the market with refundings in
recent years when interest rates were dropping. A provision of the Tax Reform
Act of 1986, however, limits municipalities to only one tax-exempt refunding per
issue.
As was the case nationally, increasing concerns about rising economic
growth and potential inflation caused bond yields to rise and prices to fall.
However, municipal bonds held their values quite well compared to U.S. Treasury
bonds.
In this economic environment, how did Nuveen Flagship Arizona Municipal
Bond Fund perform? Nuveen Flagship Arizona Municipal Bond Fund generated a total
return on net asset value of 3.87% in the fiscal year ended May 31. That
compares to the 3.63% average annual total return posted by the Lipper Arizona
Municipal Debt Peer Group.* The fund ranked 12th out of 39 municipal bond funds
in its Lipper category for the fiscal year period. Total return equals a fund's
income and capital gains distributions, if any, plus or minus changes in net
asset value. The fund's taxable equivalent total return, for investors in the
34.5% combined federal and state income tax bracket, was 6.40%.**
As of May 31, 1999, the fund's SEC 30-day yield was 4.74%. For investors in
the combined 34.5% federal and state income tax bracket, that is equivalent to a
yield of 7.24% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates declined. To protect the fund's income
stream, we looked for bonds with call dates far in the future--or better yet,
that are noncallable.
* The Lipper Peer Group represents the average return annualized total return
of the 39 funds in the Lipper Arizona Municipal Debt category. The return
assumes reinvestment dividends and does not reflect any applicable sales
charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus minus or changes in net asset value.
3
<PAGE>
Only 2.5% of the Arizona portfolio is callable between now and the year 2001.
In addition to call protection, we continued to search for bonds that
offered attractive yields and sound underlying credit quality. We rely on Nuveen
Research to help identify these opportunities.
Nuveen Research also helps us monitor events in the municipal market and
analyze how those events affect individual state and national municipal markets.
For example, during spring 1998, a major not-for-profit healthcare provider in
Philadelphia declared bankruptcy. While the impact of this bankruptcy was most
pronounced in the healthcare sector of the Pennsylvania municipal market, it was
felt to a lesser extent throughout the municipal market.
Uncertainty created by the Philadelphia healthcare situation prompted
investors to demand higher yields for lower-rated issues across the country,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen. Prior to the bankruptcy,
this spread had been relatively narrow, suggesting that investors were not being
compensated adequately for taking on additional credit risk. With spreads having
widened, lower-rated securities have become more attractive on a risk-adjusted
basis.
With interest rates at a higher level, and the widening differential
between low-rated and high-rated credits, we took the opportunity to investigate
lower-rated issues.
For example, we used the fund's market presence to purchase 100% of an
issuance of Maricopa County multifamily housing bonds at a 6.7% yield,
representing a 1.50 percentage point premium over yields offered on insured
bonds.
After a thorough investigation by Nuveen Research, we determined that this
non-rated bond issue, which is financing apartment buildings for low-income
tenants and senior citizens in Maricopa County, met our stringent credit
standards.
In recent months, we have taken advantage of rising interest rates by
selling some bonds at a loss--because as interest rates rose, prices of the
bonds fell--and subsequently buying similar securities, whose yield now
reflected the higher interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income.
Tax losses were created by the swaps, which will benefit the fund and are used
to offset capital gains for up to eight years. The higher yield of the new bonds
should boost the fund's income as well.
What is your outlook for Nuveen Flagship Arizona Municipal Bond Fund? Rising
interest rates in 1999 have made it advantageous for us to lock in higher yields
by extending the portfolio's average maturity beyond that of our peer group. We
believe that bond yields are currently attractive in relation to inflation.
Should interest rates fall or remain stable, the portfolio's longer effective
maturity would be advantageous.
With Arizona's strong economy and influx of population, we expect buoyant
supply and demand for municipal bonds in areas such as housing and utilities.
We will continue to seek out undervalued securities that provide income and
the opportunity for price appreciation through credit rating upgrades.
"We used the fund's market presence to purchase 100% of an issuance of
Maricopa County multifamily housing bonds at a 6.75% yield."
4
<PAGE>
NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND
Highlights as of May 31, 1999
- ------------------------------------------------------------------------------
Quick Facts
- ------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV $11.25 $11.24 $11.24 $11.25
- ------------------------------------------------------------------------------
May's Declared Dividend* $0.0445 $0.0375 $0.0395 $0.0465
- ------------------------------------------------------------------------------
Fund Symbol FAZTX N/A FAZCX NMARX
- ------------------------------------------------------------------------------
CUSIP 67065L104 67065L203 67065L302 67065L401
- ------------------------------------------------------------------------------
Inception Date 10/86 2/97 2/94 2/97
- ------------------------------------------------------------------------------
* Paid June 1, 1999
- ------------------------------------------------------------------------------
Total Returns (Annualized)/+/
- ------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
1-Year 3.87% -0.49% 3.12% 3.33% 4.09%
- ------------------------------------------------------------------------------
1-Year TER** 6.40% 1.93% 5.25% 5.58% 6.74%
- ------------------------------------------------------------------------------
5-Year 7.07% 6.15% 6.38% 6.48% 7.18%
- ------------------------------------------------------------------------------
10-Year 7.52% 7.06% 7.05% 6.93% 7.58%
- ------------------------------------------------------------------------------
/+/ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate
of 34.5%).
- ------------------------------------------------------------------------------
Index Comparison/./
- ------------------------------------------------------------------------------
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
Arizona Arizona Lehman Brothers
Municipal Municipal Municipal
May Bond Fund (Offer) Bond Fund (NAV) Bond Index
<S> <C> <C> <C>
1989 9,580 10,000 10,000
1990 10,109 10,552 10,731
1991 11,039 11,523 11,813
1992 12,170 12,704 12,974
1993 13,795 14,400 14,526
1994 14,060 14,676 14,885
1995 15,472 16,150 16,240
1996 16,124 16,831 16,982
1997 17,389 18,151 18,391
1998 19,054 19,890 20,117
1999 19,793 20,661 21,058
</TABLE>
Nuveen Flagship Arizona Municipal Bond Fund (Offer) $19,793
Nuveen Flagship Arizona Municipal Bond Fund (NAV) $20,661
Lehman Brothers Municipal Bond Index $21,058
/./ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
- -------------------------------------------------------------------------------
Monthly Tax-Free Dividends (Class A Shares)/../
- -------------------------------------------------------------------------------
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Month
- -----
<S> <C>
June .0455
July .0445
August .0445
September .0445
October .0445
November .0445
December .0445
January .0445
February .0445
March .0445
April .0445
May .0445
</TABLE>
/../ The fund also paid shareholders capital gains and net ordinary income
distributions in December of $0.0539 per share.
- ------------------------------------------------------------------------------
Portfolio Statistics
- ------------------------------------------------------------------------------
Fund Net Assets $118.6 million
Effective Maturity 16.43 years
- ------------------------------------------------------------------------------
Average Effective Duration 8.36
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Top Five Sectors/1/
- ------------------------------------------------------------------------------
Tax Obligation (General) 24%
- ------------------------------------------------------------------------------
U.S. Guaranteed 19%
- ------------------------------------------------------------------------------
Health Care 15%
- ------------------------------------------------------------------------------
Tax Obligation (Limited) 11%
- ------------------------------------------------------------------------------
Utilities 6%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Bond Credit Quality/1/
- ------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed......67%
AA....................... 7%
A........................12%
BBB/NR...................14%
/1/ as a percentage of total bond holdings
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
5
<PAGE>
NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Mike Davern discusses fund performance, the municipal market
and key investment strategies for the Colorado fund for the fiscal year ended
May 31, 1999.
Comments cover the year ended May 31, 1999; performance statistics are quoted
for Class A shares at net asset value.
In what condition has Colorado's economy been during the fund's fiscal year?
Colorado's economy is notably strong, with an unemployment level of just 2.9% in
May, and is broadly diversified among high-technology manufacturing, retail
trade, tourism, agriculture, energy and mining. It enjoys a pro-business tax and
regulatory environment and high quality of life.
How does the economy's strength benefit the local municipal bond market?
Colorado's expanding economy led to growing infrastructure and school financing
needs, resulting in strong municipal bond issuance in 1998.
The strength in the economy, however, also led to rising interest rates in
1999, which significantly slowed municipal financing through bond issuance in
the latter half of the fund's fiscal year.
Another continuing constraint on supply in Colorado is that state's
Taxpayer's Bill of Rights (TABOR), which was enacted in 1992 and imposed new
constitutional limitations on taxes, revenue and debt.
As was the case nationally, increasing concerns about rising economic
growth and potential inflation caused bond yields to rise and prices to fall.
However, municipal bonds held their values quite well compared to U.S. Treasury
bonds.
How did Nuveen Flagship Colorado Municipal Bond Fund perform during its fiscal
year? Nuveen Flagship Colorado Municipal Bond Fund generated a total return on
net asset value of 3.76%. That compares to the 3.55% average annual total return
posted by the Lipper Colorado Municipal Debt Peer Group.* The fund ranked 8th
out of 28 municipal bond funds in the June 1, 1998 through May 31, 1999 period.
Total return equals a fund's income plus capital gains distributions, if any,
plus or minus changes in net asset value. The fund's taxable equivalent total
return, for investors in the 34.5% combined federal and state income tax
bracket, was 6.27.**
As of May 31, 1999, the fund's SEC 30-day yield was 4.80%. For investors in
the combined 34.5% federal and state income tax bracket, that is equivalent to a
yield of 7.33% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates declined.
To protect the fund's income stream, we looked for bonds with calls far
into the future--or better yet, that are noncallable. Only 2% of the fund's
portfolio is callable before 2002.
In addition to call protection, we continued to search for bonds that
offered attractive yields and sound underlying credit quality.
In addition to assessing the credit quality of individual issuers, Nuveen
Research helps us monitor events in the municipal market and how those events
affect individual state and national municipal markets.
For example, during spring 1998, a major not-for-profit healthcare provider
in Philadelphia declared bankruptcy.
* The Lipper Peer Group return represents the average annualized total
return of the 28 funds in the Lipper Colorado Municipal Debt category. The
return assumes reinvestment of dividends and does not reflect any applicable
sales charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
6
<PAGE>
While the impact of this bankruptcy was most pronounced in the healthcare sector
of the Pennsylvania municipal market, it was felt to a lesser extent throughout
the municipal market.
Uncertainty created by the Philadelphia healthcare situation prompted
investors to demand higher yields for lower-rated issues across the country,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen. Prior to the bankruptcy,
this spread had been relatively narrow, suggesting that investors were not being
compensated adequately for taking on additional credit risk. With spreads having
widened, lower-rated securities have become more attractive on a risk-adjusted
basis.
With interest rates at a higher level, and the widening differential
between low-rated and high-rated credits, we took the opportunity to investigate
lower-rated issues. Using the expertise of Nuveen Research, we considered only
those bonds that offered adequate compensation for the level of risk offered.
For example, one new issue that met Nuveen's strict credit criteria was
$1.25 million worth of non-rated Boulder County Multifamily Housing bonds issued
on behalf of the Thistle Community Project, a low income multifamily housing
project for the city of Boulder. We purchased these bonds at a 6.5% yield, a
full percentage point higher than what insured bonds were offering at the same
time.
We will continue to look for opportunities like the Thistle Community
Project bonds to enhance the fund's yield while continuing to apply the same
stringent selection process for lower-rated and non-rated purchases.
In recent months, we have taken advantage of rising interest rates by
selling some bonds at a loss--because as interest rates rose, prices of the
bonds fell--and subsequently buying similar securities, whose yield now
reflected the higher interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to seven years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for the Colorado fund? Rising interest rates in 1999 have
made it advantageous for us to lock in higher yields by extending the
portfolio's average maturity beyond that of our peer group. We believe that bond
yields are currently attractive in relation to inflation. Should interest rates
fall or remain stable, the portfolio's longer effective maturity would be
beneficial.
With Colorado's strong economy and influx of population, we expect a
buoyant supply and demand for municipal bonds in areas such as housing,
healthcare, education and utilities.
We will continue to seek out undervalued securities that provide income and
the opportunity for price appreciation through credit rating upgrades.
"We will continue to look for opportunities like the Thistle Community Project
bonds to enhance the fund's yield while continuing to apply the same stringent
selection process for lower-rated and non-rated purchases."
7
<PAGE>
NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND
Highlights as of May 31, 1999
- ------------------------------------------------------------------------------
Quick Facts
- ------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV $10.68 $10.70 $10.67 $10.69
- ------------------------------------------------------------------------------
May's Declared Dividend* $0.0410 $0.0345 $0.0360 $0.0430
- ------------------------------------------------------------------------------
Fund Symbol FA0TX N/A N/A N/A
- ------------------------------------------------------------------------------
CUSIP 67065L609 67065L500 67065L807 67065L880
- ------------------------------------------------------------------------------
Inception Date 5/87 2/97 2/97 2/97
- ------------------------------------------------------------------------------
* Paid June 1, 1999
- ------------------------------------------------------------------------------
Total Returns (Annualized)/+/
- ------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
1-Year 3.76% -0.57% 3.11% 3.19% 4.08%
- ------------------------------------------------------------------------------
1-Year TER** 6.27% 1.84% 5.22% 5.40% 6.71%
- ------------------------------------------------------------------------------
5-Year 7.65% 6.74% 7.02% 7.17% 7.78%
- ------------------------------------------------------------------------------
10-Year 7.65% 7.18% 7.18% 7.22% 7.71%
/+/ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate
of 34.5%).
- ------------------------------------------------------------------------------
Index Comparison/./
- ------------------------------------------------------------------------------
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Lehman Brothers
Colorado Municipal Colorado Municipal Municipal
May Bond Fund (Offer) Bond Fund (NAV) Bond Index
<S> <C> <C> <C>
1989 9,580 10,000 10,000
1990 10,116 10,559 10,731
1991 11,000 11,482 11,813
1992 12,076 12,606 12,974
1993 13,573 14,169 14,526
1994 13,849 14,456 14,885
1995 15,170 15,835 16,240
1996 15,797 16,489 16,982
1997 17,256 18,012 18,391
1998 19,299 20,145 21,117
1999 20,024 20,902 21,058
</TABLE>
Nuveen Flagship Colorado Municipal Bond Fund (Offer) $20,024
Nuveen Flagship Colorado Municipal Bond Fund (NAV) $20,902
Lehman Brothers Municipal Bond Index $21,058
/./ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
- -------------------------------------------------------------------------------
Monthly Tax-Free Dividends (Class A Shares)/../
- -------------------------------------------------------------------------------
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Month
- -----
<S> <C>
June .0435
July .0425
August .0425
September .0425
October .0425
November .0425
December .0425
January .0410
February .0410
March .0410
April .0410
May .0410
</TABLE>
/../ The fund also paid shareholders capital gains distributions in December of
$0.0300 per share.
- ------------------------------------------------------------------------------
Morningstar Rating/TM//1/
- ------------------------------------------------------------------------------
****
Overall rating among 1,586 municipal bond funds as of 5/31/99
- ------------------------------------------------------------------------------
Portfolio Statistics
- ------------------------------------------------------------------------------
Fund Net Assets $46.9 million
- ------------------------------------------------------------------------------
Effective Maturity 20.95 years
- ------------------------------------------------------------------------------
Average Effective Duration 9.34
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Top Five Sectors/2/
- ------------------------------------------------------------------------------
U.S. Guaranteed 32%
- ------------------------------------------------------------------------------
Housing (Multifamily) 24%
- ------------------------------------------------------------------------------
Health Care 13%
- ------------------------------------------------------------------------------
Transportation 12%
- ------------------------------------------------------------------------------
Education and Civic Organizations 7%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Bond Credit Quality/2/
- ------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed......56%
AA.......................19%
A........................ 4%
BBB/NR...................21%
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
/1/ The Morningstar rating is an overall rating for the municipal bond category
and relates to Class A Shares only; other classes may vary. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of
5/31/99 and are subject to change every month. Past performance is no
guarantee of future results. Ratings are calculated from the fund's three-,
five-, and 10-year average annual returns (if applicable) in excess of 90-
day Treasury bill returns, with appropriate fee adjustments, and a risk
factor that reflects fund performance below 90-day T-bill returns. A shares
of the fund received 4 stars for the 3-and 5-year periods and 3 stars for
the 10-year period. The top 10% of the funds in a broad asset class receive
5 stars and the next 22.5% receive 4 stars. The fund was rated among 1,586,
1,184, and 368 funds for the three-, five-, and 10-year periods,
respectively.
/2/ as a percentage of total bond holdings
8
<PAGE>
NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Mike Davern discusses fund performance, the municipal market
and key investment strategies for the New Mexico fund for the fiscal year ended
May 31, 1999.
Comments cover the year ended May 31, 1999; performance statistics are quoted
for Class A shares at net asset value.
In what condition is New Mexico's economy? Although New Mexico's unemployment
rate was 6.1% in May, which is higher than the national average, the state's
economy is improving. Its per capita income is increasing, and employment levels
in service industries have risen about 21% over the past five years.
In addition to services, New Mexico's major industries include energy,
tourism, crafts, agribusiness, manufacturing and mining. The state's economy
also benefits from scientific research facilities at Los Alamos, Albuquerque and
White Sands.
New Mexico's expanding economy and growing infrastructure and school financing
needs led to increased municipal bond issuance in 1998. Despite rising interest
rates in 1999, New Mexico municipal bond issuance continued to increase in
recent months. Even so, the state's municipal bond supply is among the smallest
in the country.
We were able to continue to invest the fund in high quality New Mexico bonds,
however, thanks to its market presence. That is, the fund's large size and
market power gave us access to deals that smaller or individual retail buyers
might not hear about.
As was the case nationally, increasing concerns about strong economic growth
and potential inflation caused bond yields to rise and prices to fall. However,
municipal bonds held their values quite well compared to U.S. Treasury bonds.
How did Nuveen Flagship New Mexico Municipal Bond Fund perform during its fiscal
year? Nuveen Flagship New Mexico Municipal Bond Fund generated a total return on
net asset value of 3.74%. That compares to the 3.50% average annual total return
posted by the Lipper Other States Municipal Debt Peer Group.* Total return
equals a fund's income plus capital gains distributions, if any, plus or minus
changes in net asset value. The fund's tax-equivalent total return, for
investors with a combined federal and state tax rate of 36.50%, was 6.41%.
As of May 31, 1999, the fund's SEC 30-day yield was 4.04%. For investors in
the combined 36.50% income tax bracket, that is equivalent to a yield of 6.36%
on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates declined. To protect the fund's income
stream, we looked for bonds with call dates far in the future--or better yet,
that are noncallable. Only 2.5% of the New Mexico portfolio is callable between
now and the year 2002.
For instance, we added two bonds that offered attractive yields and good call
protection. The first was a AA rated Albuquerque Gross Receipts Tax Revenue bond
with a 4.75% coupon maturing in 2022. The second was an insured AAA rated
Farmington Pollution Control Revenue Bond issued by Southern California Edison,
paying a coupon of 5.125% and maturing in 2029.
* The Lipper Peer Group return represents the average annualized total return of
the 79 funds in the Lipper Other States Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
**Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus charges in net asset value.
9
<PAGE>
We will continue to search for attractive opportunities to add to the portfolio
as supply comes to market.
Although the fund's portfolio continues to be of very high quality, with 75%
of its holdings rated AAA or AA, Nuveen's extensive research capabilities gives
us the ability to identify lower-rated debt that offers strong quality
characteristics and the opportunity for additional yield.
In addition to assessing the credit quality of individual issuers, Nuveen
Research helps us monitor events in the municipal market and analyze how those
events affect individual state and national municipal markets.
For example, during spring 1998, a major not-for-profit healthcare provider in
Philadelphia declared bankruptcy. While the impact of this bankruptcy was most
pronounced in the healthcare sector of the Pennsylvania municipal market, it was
felt to a lesser extent throughout the municipal market.
Uncertainty created by the Philadelphia health-care situation prompted
investors to demand higher yields for lower-rated issues across the country,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen. Prior to the bankruptcy,
this spread had been relatively narrow, suggesting that investors were not being
compensated adequately for taking on additional credit risk. With spreads having
widened, lower-rated securities have become more attractive on a risk-adjusted
basis.
With interest rates higher, and the widening differential between low-rated
and high-rated credits, we took the opportunity to investigate lower-rated
issues. Using the expertise of Nuveen Research, we considered only those bonds
that offered adequate compensation for the level of risk offered.
For instance, we invested in some lower-rated hospital revenue bonds that
offered a 5.5% coupon due June 2028. As a large purchaser in the state, we were
able to purchase a large percentage of the issue. We believe that this is an
example of a high-quality lower investment-grade credit that is hard to find in
a state with sporadic issuance.
In recent months, we have taken advantage of rising interest rates by selling
some bonds at a loss--because as interest rates rose, prices of the bonds fell--
and subsequently buying similar securities, whose yield now reflected the higher
interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Flagship New Mexico Municipal Bond Fund? Rising
interest rates in 1999 have made it advantageous for us to lock in higher yields
by extending the portfolio's average maturity beyond that of our peer group.
We believe that bond yields are currently attractive in relation to inflation.
Should interest rates fall or remain stable, the portfolio's longer effective
maturity would be advantageous.
We will continue to seek out undervalued securities that provide income and
the opportunity for price appreciation through credit rating upgrades.
"To protect the fund's income stream, we looked for bonds with call dates far in
the future--or better yet, that are noncallable. Only 2.5% of the New Mexico
portfolio is callable between now and the year 2002."
10
<PAGE>
NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL BOND FUND
Highlights as of May 31, 1999
- ------------------------------------------------------------------------------
Quick Facts
- ------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV $10.58 $10.57 $10.58 $10.60
- ------------------------------------------------------------------------------
May's Declared Dividend* $0.0395 $0.0330 $0.0350 $0.0415
- ------------------------------------------------------------------------------
Fund Symbol FNMTX N/A N/A N/A
- ------------------------------------------------------------------------------
CUSIP 67065L781 67065L773 67065L765 67065L757
- ------------------------------------------------------------------------------
Inception Date 9/92 2/97 2/97 2/97
- ------------------------------------------------------------------------------
* Paid June 1, 1999
- ------------------------------------------------------------------------------
Total Returns (Annualized)/+/
- ------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
1-Year 3.74% -0.64% 2.89% 3.22% 3.86%
- ------------------------------------------------------------------------------
1-Year TER** 6.41% 1.92% 5.13% 5.59% 6.66%
- ------------------------------------------------------------------------------
5-Year 7.00% 6.10% 6.31% 6.55% 7.15%
- ------------------------------------------------------------------------------
Since Inception 6.74% 6.06% 6.07% 6.31% 6.85%
/+/ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate
of 36.5%).
- ------------------------------------------------------------------------------
Index Comparison/./
- ------------------------------------------------------------------------------
[LINE CHART APPEARS HERE]
Nuveen Flagship Nuveen Flagship
New Mexico Mew Mexico Lehman Brothers
Municipal Municipal Municipal
September Bond Fund (Offer) Bond Fund (NAV) Bond Index
- ---------
1992 9,580 10,000 10,000
May
---
1993 11,063 11,548 11,274
1994 10,547 11,010 10,999
1995 11,691 12,204 12,230
1996 12,423 12,967 12,969
1997 13,588 14,184 14,140
1998 14,830 15,480 15,372
1999 14,897 15,550 15,549
Nuveen Flagship New Mexico Municipal Bond Fund (Offer) $14,897
Nuveen Flagship New Mexico Municipal Bond Fund (NAV) $15,550
Lehman Brothers Municipal Bond Index $15,549
/./ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
- -------------------------------------------------------------------------------
Monthly Tax-Free Dividends (Class A Shares)
- -------------------------------------------------------------------------------
[BAR CHART APPEARS HERE]
Month
- -----
June .0420
July .0410
August .0410
September .0410
October .0410
November .0410
December .0410
January .0395
February .0395
March .0395
April .0395
May .0395
- ------------------------------------------------------------------------------
Portfolio Statistics
- ------------------------------------------------------------------------------
Fund Net Assets $61.9 million
- ------------------------------------------------------------------------------
Effective Maturity 21.23 years
- ------------------------------------------------------------------------------
Average Effective Duration 8.19
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Top Five Sectors/1/
- ------------------------------------------------------------------------------
Tax Obligation (Limited) 25%
- ------------------------------------------------------------------------------
Housing (Single Family) 17%
- ------------------------------------------------------------------------------
Education & Civic Organizations 15%
- ------------------------------------------------------------------------------
Housing (Multifamily) 8%
- ------------------------------------------------------------------------------
U.S. Guaranteed 8%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Bond Credit Quality/1/
- ------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed......62%
AA.......................13%
A........................15%
BBB/NR...................10%
/1/ as a percentage of total bond holdings
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Arizona Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Consumer Cyclical - 0.9%
$ 1,000,000 Mesa, Arizona, Industrial Development Authority, Industrial Revenue No Opt. Call N/R $1,065,730
Bonds (TRW Vehicle Safety System Inc. Project), Series 1992, 7.250%,
10/15/04 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples - 0.2%
250,000 Casa Grande, Arizona, Industrial Development Authority, Pollution Control 12/02 at 103 A1 274,583
Revenue Bonds (Frito-Lay Inc/PepsiCo), Series 1984, 6.650%, 12/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 4.7%
570,000 Arizona Educational Loan Marketing Corporation, 1992 Educational 3/02 at 101 Aa2 605,312
Loan Revenue Bonds, Series B, 7.000%, 3/01/05 (Alternative Minimum Tax)
100,000 Arizona Educational Loan Marketing Corporation, Educational Loan 9/02 at 101 Aa 106,983
Revenue Bonds, 6.375%, 9/01/05 (Alternative Minimum Tax)
1,500,000 Student Loan Acquisition Authority of Arizona, Student Loan Revenue 5/04 at 102 Aa 1,601,610
Bonds, Series 1994B, Subordinated Fixed Rate Bonds, 6.600%, 5/01/10
(Alternative Minimum Tax)
2,500,000 The Industrial Development Authority of the City of Glendale, Arizona, 5/08 at 101 BBB+ 2,444,300
Revenue Bonds, Midwestern University, Series 1998A, 5.375%, 5/15/28
115,000 The Industrial Development Authority of the City of Glendale, Arizona, 5/06 at 102 AAA 122,838
Revenue Bonds, Midwestern University, Series 1996A,
6.000%, 5/15/16
300,000 Arizona Board of Regents, University of Arizona, System Revenue Refunding 6/02 at 102 AA 323,124
Bonds, Series 1992, 6.250%, 6/01/11
335,000 Yavapai County Community College, District of Yavapai County, Arizona, 7/03 at 101 A- 351,814
Revenue Bonds, Series 1993, 6.000%, 7/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 15.3%
1,250,000 Arizona Health Facilities Authority, Revenue Bonds (Arizona Voluntary 10/99 at 101 AAA 1,278,250
Hospital Federation Pooled Loan Program), 1985 Series B, 7.250%,
10/01/13
4,500,000 The Industrial Development Authority of the County of Maricopa, 7/08 at 101 A 4,341,870
Arizona, Health Facility Revenue Bonds (Catholic Healthcare West
Project), 1998 Series A, 5.000%, 7/01/16
2,775,000 The Industrial Development Authority of the County of Maricopa, No Opt. Call AAA 3,426,709
Arizona, Samaritan Health Services, Hospital System Revenue Refunding
Bonds, Series 1990A, 7.000%, 12/01/16
375,000 The Industrial Development Authority of the County of Maricopa, 12/00 at 102 AAA 402,296
Arizona, Hospital Refunding Revenue Bonds (John C. Lincoln Hospital
and Health Center), Series 1990, 7.500%, 12/01/13
600,000 The Industrial Development Authority of the County of Maricopa, 9/05 at 101 AAA 611,706
Arizona, Baptist Hospital System, Revenue Refunding Bonds, Series 1995,
5.500%, 9/01/16
The Industrial Development Authority of the City of Phoenix, Arizona,
Hospital Revenue Bonds (John C. Lincoln Hospital and Health Center),
Series 1994:
500,000 6.000%, 12/01/10 12/03 at 102 BBB+ 517,835
500,000 6.000%, 12/01/14 12/03 at 102 BBB+ 517,145
The Industrial Development Authority of the County of Pima, Arizona,
Health Care System Revenue Bonds, Carondelet Health Care Corporation of
Arizona Issue, Series 1993:
500,000 5.250%, 7/01/12 No Opt. Call AAA 519,930
640,000 5.250%, 7/01/13 No Opt. Call AAA 664,890
1,500,000 Scottsdale Industrial Development Authority (Scottsdale Memorial No Opt. Call AAA 1,596,675
Hospitals), 5.500%, 9/01/12
3,000,000 Industrial Development Authority of the City of Scottsdale, Arizona, 9/07 at 102 AAA 3,234,270
Hospital Revenue Refunding Bonds (Scottsdale Memorial Hospitals),
Series 1997A, 6.125%, 9/01/17
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care (continued)
$1,055,000 The Industrial Development Authority of the City of Winslow, Arizona, 6/08 at 101 N/R $1,015,321
Hospital Revenue Bonds (Winslow Memorial Hospital Project), Series 1998,
5.500%, 6/01/22
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 6.2%
2,900,000 The Industrial Development Authority of the County of Maricopa, 10/09 at 102 N/R 2,866,273
Arizona, Multifamily Housing Revenue Bonds (Metro Gardens-Mesa Ridge
Apartments Project), Series 1999A, 6.700%, 10/01/29
295,000 Phoenix Housing Finance Corporation, Arizona, Mortgage Revenue 7/02 at 101 AAA 308,924
Refunding Bonds, Series 1992A (FHA-Insured Mortgage Loans - Section 8
Assisted Projects), 6.500%, 7/01/24
The Industrial Development Authority of the City of Phoenix, Arizona,
Mortgage Revenue Refunding Bonds, Series 1992 (FHA-Insured Mortgage Loan -
Chris Ridge Village Project):
200,000 6.750%, 11/01/12 11/02 at 101 AAA 211,342
425,000 6.800%, 11/01/25 11/02 at 101 AAA 449,076
500,000 The Industrial Development Authority of the City of Phoenix, Arizona, 2/03 at 102 Aaa 515,400
Multifamily Housing Revenue Refunding Bonds, Series 1993 (GNMA
Collateralized Meadow Glen Apartment Project), 5.800%, 8/20/28
2,500,000 The Industrial Development Authority of the City of Phoenix, Arizona, 12/05 at 103 AAA 2,477,000
Multifamily Housing Revenue Bonds, Series 1998A (Heather Ridge
Apartments Project), 5.200%, 12/15/21 (Alternative Minimum Tax)
500,000 The Industrial Development Authority of the City of Tempe, Arizona, 6/03 at 102 AAA 527,660
Multifamily Mortgage Refunding Bonds, Series 1993A (FHA-Insured
Mortgage Loan - Quadrangles Village Apartments), 6.250%, 6/01/26
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 4.0%
1,500,000 The Industrial Development Authority of the County of Maricopa, 6/08 at 108 Aaa 1,609,170
Arizona, Single Family Mortgage Revenue Refunding Bonds
(Mortgage-Backed Securities Program), Series 1998B, 4.750%,
12/01/30 (Alternative Minimum Tax)
440,000 The Industrial Development Authority of the City of Phoenix, Arizona, 6/05 at 102 AAA 457,631
Statewide Single Family Mortgage Revenue Bonds, Series 1995, 6.150%,
12/01/08 (Alternative Minimum Tax)
1,400,000 The Industrial Development Authority of the City of Phoenix, 4/08 at 101 1/2 AAA 1,398,138
Arizona, Statewide Single Family Mortgage Revenue Bonds, 1998
Series C, 5.300%, 4/01/20 (Alternative Minimum Tax)
355,000 The Industrial Development Authority of the County of Pima, Arizona, 8/05 at 102 A 377,127
Single Family Mortgage Revenue Refunding Bonds, Series 1995A, 6.500%,
2/01/17
800,000 The Industrial Development Authority of the County of Pima, 5/07 at 102 AAA 850,416
Arizona, Single Family Mortgage Revenue Bonds, Series 1997A, 6.250%,
11/01/30 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 1.5%
1,645,000 The Industrial Development Authority of the County of Cochise, 12/04 at 102 AAA 1,826,427
Arizona, Tax Exempt Mortgage Revenue Refunding Bonds, Series 1994A
(GNMA Collateralized - Sierra Vista Care Center), 6.750%, 11/20/19
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 23.7%
800,000 City of Chandler, Arizona, General Obligation Refunding Bonds, Series 7/01 at 101 AAA 856,528
1991, 7.000%, 7/01/12
Sierra Vista Unified School District No. 68 of Cochise County, Arizona,
General Obligation Refunding Bonds, Series 1992:
250,000 7.500%, 7/01/09 No Opt. Call AAA 307,128
300,000 7.500%, 7/01/10 No Opt. Call AAA 370,770
375,000 Maricopa Rural Road Improvement District of Pinal County, Arizona, 7/99 at 101 N/R 379,864
Refunding Bonds, Series 1994, 6.900%, 7/01/05
675,000 Peoria Unified School District No. 11 of Maricopa County, Arizona, No Opt. Call AAA 493,688
Refunding Bonds, Second Series of 1992, 0.000%, 7/01/06
480,000 Peoria Unified School District No. 11 of Maricopa County, Arizona, 7/01 at 101 AAA 507,590
School Improvement and Refunding Bonds, Series 1992, 6.400%, 7/01/10
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship Arizona Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/General (continued)
Kyrene Elementary School District No. 28 of Maricopa County, Arizona,
Refunding Bonds, Series 1993C:
$ 4,000,000 0.000%, 7/01/07 No Opt. Call AAA $ 2,777,240
1,870,000 0.000%, 1/01/09 No Opt. Call AAA 1,193,154
3,805,000 0.000%, 1/01/10 No Opt. Call AAA 2,288,099
2,500,000 0.000%, 7/01/10 No Opt. Call AAA 1,467,675
6,000,000 0.000%, 1/01/11 No Opt. Call AAA 3,407,880
50,000 Kyrene Elementary School District No. 28 of Maricopa County, 7/02 at 100 AAA 52,664
Arizona, School Improvement Bonds, Project of 1990,
Series 1993E, 6.000%, 7/01/12
Glendale Elementary School District No. 40 of Maricopa County, Arizona,
School Improvement and Refunding Bonds, Series 1995:
500,000 6.200%, 7/01/09 7/05 at 101 AAA 550,320
2,500,000 6.250%, 7/01/10 7/05 at 101 AAA 2,758,225
1,750,000 6.300%, 7/01/11 7/05 at 101 AAA 1,927,993
2,000,000 Gilbert Unified School District No. 41 of Maricopa County, Arizona, No Opt. Call AAA 1,495,400
Refunding Bonds, Series 1994, 0.000%, 1/01/06
500,000 Gilbert Unified School District No. 41 of Maricopa County, Arizona, 7/08 at 100 AAA 555,800
School Improvement Bonds, Project of 1993, Series D, 6.250%, 7/01/15
515,000 Alhambra Elementary School District No. 68 of Maricopa County, Arizona, 7/04 at 102 AAA 581,806
School Improvement and Refunding Bonds, Series 1994A, 6.750%, 7/01/14
310,000 Chandler Unified School District No. 80 of Chandler County, Arizona, No Opt. Call AAA 350,095
School Improvement and Refunding Bonds, Series 1994, 6.250%, 7/01/11
1,275,000 Maricopa County, Arizona, School District No. 98, Fountain Hills No Opt. Call AAA 932,522
Unit, Refunding Bonds, 0.000%, 7/01/06
635,000 Blue Ridge Unified School District No. 32 of Navajo County, Arizona, 7/06 at 101 AAA 681,526
School Improvement Bonds (Projects of 1994), Series 1996, 5.800%,
7/01/14
1,000,000 Tucson Unified School District No. 1 of Pima County, Arizona, Refunding No Opt. Call AAA 1,238,840
Bonds, Series 1992, 7.500%, 7/01/10
500,000 Tanque Verde Unified School District No. 13 of Pima County, Arizona, 7/04 at 102 AAA 562,870
School Improvement and Refunding Bonds, Series 1994, 6.700%, 7/01/10
500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 5.375%, 7/07 at 100 A 503,890
7/01/25
315,000 Scottsdale Mountain Community Facilities District, Scottsdale, Arizona, 7/03 at 102 A 336,319
District General Obligation Bonds, Series 1993A, 6.200%, 7/01/17
225,000 City of Tempe, Arizona, General Obligation Bonds, Series 1992B, 6.000%, 7/02 at 101 AA+ 240,658
7/01/08
180,000 Tempe Union High School District No. 213 of Maricopa County, Arizona, 7/04 at 101 AAA 194,402
School Improvement and Refunding Bonds, Series 1994, 6.000%, 7/01/12
1,130,000 City of Tucson, Arizona, General Obligation Refunding Bonds, Series 1997, 7/07 at 100 AA 1,110,960
5.000%, 7/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited--10.8%
250,000 State of Arizona, Refunding Certificates of Participation, Series 1992B, 9/02 at 102 AAA 268,770
6.250%, 9/01/10
225,000 Arizona Municipal Financing Program, Certificates of Participation, No Opt. Call AAA 263,747
Series 11, 8.000%, 8/01/17
965,000 City of Bullhead, Bullhead Parkway District Improvement Bonds, 6.100%, 1/03 at 103 Baa 1,035,291
1/01/13
550,000 City of Douglas, Arizona, Municipal Property Corporation, Municipal 7/05 at 101 AAA 581,235
Facilities Excise Tax Revenue Bonds, Series 1995, 5.750%, 7/01/15
280,000 Eloy Municipal Property Corporation, Municipal Facilities Revenue Bonds, 7/02 at 101 BBB 299,989
Series 1992, 7.000%, 7/01/11
385,000 City of Flagstaff, Arizona, Junior Lien Street and Highway User Revenue No Opt. Call AAA 425,086
Bonds, Series 1992, 5.900%, 7/01/10
300,000 Hospital District No. One, Maricopa County, Arizona, Hospital Facilities 6/04 at 101 AAA 325,989
Refunding Bonds, Series 1992B, 6.250%, 6/01/10
1,000,000 Hospital District No. One, Maricopa County, Arizona, General Obligation 6/06 at 101 A 1,071,570
Bonds, Series 1996, 6.500%, 6/01/17
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/Limited (continued)
City of Peoria, Arizona, Improvement District No. 8801 (North Valley
Power Center), Improvement Bonds:
$ 425,000 7.300%, 1/01/12 1/03 at 101 BBB $ 458,635
460,000 7.300%, 1/01/13 1/03 at 101 BBB 496,404
300,000 City of Phoenix, Arizona, Junior Lien Street and Highway User Revenue 7/02 at 102 A+ 323,556
Refunding Bonds, Series 1992, 6.250%, 7/01/11
Pinal County, Arizona, Certificates of Participation, Series 1994:
300,000 6.375%, 6/01/06 6/02 at 101 AA 323,154
200,000 6.500%, 6/01/09 6/02 at 101 AA 216,140
2,050,000 Puerto Rico Highway and Transportation Authority, Highway Revenue 7/16 at 100 A 2,108,425
Bonds, Series Y of 1996, 5.500%, 7/01/36
1,200,000 Puerto Rico Highway and Transportation Authority, Transportation 7/08 at 101 A 1,139,856
Revenue Bonds, Series A, 5.000%, 7/01/38
2,350,000 Puerto Rico Public Buildings Authority, Government Facilities 7/07 at 101 1/2 A 2,336,206
Revenue Bonds, Series B, Guaranteed by the Commonwealth of
Puerto Rico, 5.250%, 7/01/21
850,000 City of Tucson, Arizona, Certificates of Participation, Series 7/04 at 100 AA 924,579
1994, 6.375%, 7/01/09
175,000 Business Development Finance Corporation, Tucson, Arizona, Local 7/02 at 102 AAA 188,503
Development Lease Revenue Refunding Bonds, Series 1992,
6.250%, 7/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 1.7%
500,000 City of Phoenix, Arizona, Airport Revenue Bonds, Series 1994D, 7/04 at 102 AAA 547,510
6.400%, 7/01/12 (Alternative Minimum Tax)
1,000,000 City of Phoenix, Arizona, Civic Improvement Corporation, Senior 7/08 at 101 AAA 975,050
Lien Airport Revenue Bonds, Series 1998A, 5.000%, 7/01/25
500,000 Tucson, Arizona, Airport Authority Inc., Revenue Bonds, Series 6/00 at 102 AAA 526,055
1990B, 7.125%, 6/01/15 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 18.5%
300,000 Arizona Health Facilities Authority, Hospital System Revenue Refunding 9/03 at 100 AAA 327,528
Bonds (Phoenix Baptist Hospital and Medical Center, Inc. and Medical
Environments, Inc.), Series 1992, 6.250%, 9/01/11
200,000 Arizona Municipal Financing Program, Certificates of Participation, No Opt. Call AAA 248,170
Series 20, 7.700%, 8/01/10
300,000 Arizona Board of Regents, Arizona State University, System Revenue 7/02 at 101 Aaa 329,904
Bonds, Series 1989, 7.000%, 7/01/15 (Pre-refunded to 7/01/02)
Sedona-Oak Creek Joint Unified School District No. 9 of Coconino and
Yavapai Counties, Arizona, School Improvement Bonds, Project
of 1992, Series 1992A:
250,000 6.700%, 7/01/06 (Pre-refunded to 7/01/01) 7/01 at 101 A-*** 267,085
250,000 6.750%, 7/01/07 (Pre-refunded to 7/01/01) 7/01 at 101 A-*** 267,333
385,000 The Industrial Development Authority of the City of Glendale, 5/06 at 102 AAA 429,622
Arizona, Revenue Bonds, Midwestern University, Series 1996A,
6.000%, 5/15/16 (Pre-refunded to 5/15/06)
345,000 Maricopa County, Arizona, Hospital Revenue Bonds, Series 1980 No Opt. Call AAA 421,649
(St. Luke's Hospital Medical Center), 8.750%, 2/01/10
16,300,000 The Industrial Development Authority of the County of Maricopa, No Opt. Call AAA 6,992,863
Arizona, Single Family Mortgage Revenue Bonds, Series 1984,
0.000%, 2/01/16
270,000 Peoria Unified School District No. 11 of Maricopa County, Arizona, 7/01 at 101 AAA 287,061
School Improvement and Refunding Bonds, Series 1992, 6.400%,
7/01/10 (Pre-refunded to 7/01/01)
265,000 Kyrene Elementary School District No. 28 of Maricopa County, 7/02 at 100 AAA 281,406
Arizona, School Improvement Bonds, Project of 1990, Series 1993E,
6.000%, 7/01/12 (Pre-refunded to 7/01/02)
190,000 Chandler Unified School District No. 80 of Chandler County, Arizona, 7/11 at 100 AAA 217,392
School Improvement and Refunding Bonds, Series 1994, 6.250%,
7/01/11 (Pre-refunded to 7/01/11)
700,000 Peoria Municipal Development Authority, Inc., Municipal Facilities 7/99 at 102 AAA 716,275
Revenue Bonds, Series 1991, 7.000%, 7/01/10 (Pre-refunded to 7/01/99)
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship Arizona Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$1,000,000 City of Phoenix, Arizona, Civic Improvement Corporation, Junior 7/06 at 100 Aaa $1,078,380
Lien Water System Revenue Bonds, Series 1996, 5.600%,
7/01/18 (Pre-refunded to 7/01/06)
500,000 City of Phoenix, Arizona, Senior Lien Street and Highway User 7/02 at 102 AA*** 544,780
Revenue Bonds, Series 1992, 6.250%, 7/01/11
460,000 Pima County, Arizona, Sewer Revenue Refunding Bonds, Series 1991, 7/01 at 101 AAA 492,278
6.750%, 7/01/15 (Pre-refunded to 7/01/01)
1,925,000 Tatum Ranch Community Facilities District, Arizona, General 7/02 at 102 A*** 2,124,661
Obligation Bonds, Series 1991A, 6.875%, 7/01/16
(Pre-refunded to 7/01/02)
420,000 Tempe Union High School District No. 213 of Maricopa County, 7/04 at 101 AAA 459,837
Arizona, School Improvement and Refunding Bonds, Series 1994,
6.000%, 7/01/12 (Pre-refunded to 7/01/04)
11,570,000 Tucson and Pima County Industrial Development Authorities, Single No Opt. Call AAA 5,362,926
Family Mortgage Bonds, 0.000%, 12/01/14
500,000 City of Tucson, Arizona, General Obligation Bonds, Series 1984-G, 7/04 at 101 AAA 553,115
6.250%, 7/01/18 (Pre-refunded to 7/01/04)
75,000 Business Development Finance Corporation, Tucson, Arizona, Local 7/02 at 102 AAA 81,518
Development Lease Revenue Refunding Bonds, Series 1992, 6.250%,
7/01/12 (Pre-refunded to 7/01/02)
390,000 City of Tucson, Arizona, Water System Revenue Bonds, Series 7/06 at 101 AAA 432,896
1994-A, 6.000%, 7/01/21 (Pre-refunded to 7/01/06)
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities - 6.4%
500,000 Central Arizona Water Conservation District (Central Arizona No Opt. Call AA- 534,345
Project), Contract Revenue Refunding Bonds, Series 1993A,
5.500%, 11/01/10
5,000 Central Arizona Water Conservation District (Central Arizona 5/01 at 102 AA- 5,320
Project), Contract Revenue Bonds, Series 1991B, 6.500%, 11/01/11
2,000,000 Coconino County, Arizona, Pollution Control Corporation, 10/06 at 102 BBB 2,147,480
Pollution Control Revenue Bonds (Nevada Power Company Project),
Series 1996, 6.375%, 10/01/36 (Alternative Minimum Tax)
500,000 Mohave County, Arizona, Industrial Development Authority, 2/00 at 101 AA- 514,680
Industrial Development Revenue Bonds (Citizens Utilities
Company Project), Series 1991B, 7.150%, 2/01/26 (Alternative
Minimum Tax
500,000 The Industrial Development Authority of the County of Mohave, 11/03 at 101 AA- 536,530
Arizona, Industrial Development Revenue Bonds, 1994 Series
(Citizens Utilities Company Projects), 6.600%, 5/01/29
(Alternative Minimum Tax)
210,000 The Industrial Development Authority of the County of Pima, 1/02 at 103 AAA 230,660
Arizona, Industrial Development Lease Obligation Refunding
Revenue Bonds, 1988 Series A (Irvington Project), 7.250%,
7/15/10
2,000,000 Puerto Rico Electric Power Authority, Power Revenue Refunding 7/08 at 101 1/2 BBB+ 1,857,380
Bonds, Series EE, 4.750%, 7/01/24
200,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 7/07 at 101 1/2 AAA 203,418
AA, 5.375%, 7/01/27
500,000 Salt River Project Agricultural Improvement and Power District, No Opt. Call AA 544,040
Arizona, Electric System Revenue Refunding Bonds, Series 1993A,
5.750%, 1/01/10
1,000,000 The Industrial Development Authority of the County of Yavapai, 6/07 at 101 AA- 1,015,870
Arizona, Industrial Development Revenue Bonds (Citizens Utilities
Company Project), Series 1998, 5.450%, 6/01/33
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 4.8%
175,000 Wastewater Management Authority of Arizona, Wastewater Treatment 7/02 at 102 AAA 187,037
Financial Assistance Revenue Bonds, Series 1992A, 5.950%, 7/01/12
250,000 Wastewater Management Authority of Arizona, Wastewater Treatment 7/05 at 102 AAA 264,470
Financial Assistance Revenue Bonds, Series 1995, 5.750%, 7/01/15
1,750,000 City of Chandler, Arizona, Water and Sewer Revenue Refunding 7/01 at 101 AAA 1,868,230
Bonds, Series 1991, 6.750%, 7/01/06
City of Cottonwood, Arizona, Sewer Revenue Refunding Bonds,
Series 1992:
500,000 6.900%, 7/01/03 7/02 at 101 BBB 538,275
100,000 7.000%, 7/01/06 7/02 at 101 BBB 107,512
100,000 7.000%, 7/01/07 7/02 at 101 BBB 107,094
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer (continued)
$ 610,000 The Industrial Development Authority of the County of Maricopa, 12/07 at 102 AAA $ 610,238
Water System Improvement Revenue Bonds (Chaparral City Water
Company Project), Series 1997A, 5.400%, 12/01/22 (Alternative
Minimum Tax)
540,000 Pima County, Arizona, Sewer Revenue Refunding Bonds, Series 1991, 7/01 at 101 AAA 575,018
6.750%, 7/01/15
800,000 Sedona, Arizona, Sewer Revenue Refunding Bonds, Series 1992, 7/04 at 101 BBB+ 869,991
7.000%, 7/01/12
500,000 City of Tucson, Arizona, Water System Revenue Bonds, Series 1991, 7/01 at 102 A+ 536,954
6.700%, 7/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
$135,865,000 Total Investments -- (cost $108,460,415) -- 98.7% 117,028,652
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.3% 1,562,695
---------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $118,591,347
=====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices
at later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to
be equivalent to AAA rated securities.
See accompanying notes to financial statements.
17
<PAGE>
Portfolio of Investments
Nuveen Flagship Colorado Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 6.5%
$ 300,000 Colorado Student Obligation Bond Authority, Student Loan 9/00 at 100 A $ 308,865
Revenue Bonds, 1991 Series A3, 7.250%, 9/01/05 (Alternative
Minimum Tax)
240,000 Colorado Student Obligation Bond Authority, Student Loan 9/02 at 102 A 254,640
Revenue Bonds, 1992 Series C, 7.150%, 9/01/06 (Alternative
Minimum Tax)
1,500,000 Hyland Hills Park and Recreation District, Adams County, 12/06 at 101 N/R 1,614,345
Colorado Special Revenue Refunding and Improvement Bonds,
Series 1996A, 6.750%, 12/15/15
900,000 Board of Trustees of the University of Northern Colorado, 6/08 at 100 AAA 876,807
Auxiliary Facilities System Revenue Refunding Bonds,
Series 1998A, 5.000%, 6/01/24
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 12.2%
500,000 Colorado Health Facilities Authority, Revenue Bonds (Catholic 12/07 at 101 AA 480,845
Health Initiatives), Series 1997A, 5.125%, 12/01/22
750,000 Colorado Health Facilities Authority, Hospital Revenue Bonds 9/08 at 100 Baa1 721,170
(Parkview Medical Center, Inc. Project), Series 1998, 5.300%, 9/01/25
2,500,000 Colorado Health Facilities Authority, Revenue Bonds (Steamboat 9/09 at 101 N/R 2,454,625
Springs Health Care Association Project), Series 1999, 5.700%, 9/15/23
Board of Trustees for the Gunnison Valley Hospital, Gunnison County, Colorado,
Hospital Revenue:
325,000 5.300%, 7/01/10 7/08 at 101 N/R 321,389
275,000 5.350%, 7/01/11 7/08 at 101 N/R 270,782
1,250,000 5.625%, 7/01/23 7/08 at 101 N/R 1,212,263
250,000 County of Pueblo, Colorado, Insured Hospital Refunding Revenue 9/01 at 101 AAA 269,320
Bonds (Parkview Episcopal Medical Center, Inc. Project),
Series 1991A, 7.000%, 9/01/09
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 23.4%
1,500,000 Colorado Housing and Finance Authority, Multi-Family Housing 10/06 at 102 AA+ 1,590,195
Insured Mortgage Revenue Bonds, 1996 Series C3, 6.250%, 10/01/38
1,150,000 Colorado Housing and Finance Authority, Multi-Family Housing 4/07 at 101 1/2 AA+ 1,208,179
Insured Mortgage Revenue Bonds, 1997 Series B2, 5.900%, 10/01/38
(Alternative Minimum Tax)
460,000 Colorado Housing and Finance Authority, Multi-Family Housing 4/05 at 102 AA+ 493,980
Insured Mortgage Revenue Bonds, 1995 Series A, 6.650%, 10/01/28
(Alternative Minimum Tax)
1,265,000 Colorado Housing and Finance Authority, Multi-Family Housing 10/07 at 102 AA+ 1,309,768
Insured Mortgage Revenue Bonds, 1997 Series C2, 5.750%, 10/01/39
(Alternative Minimum Tax)
1,215,000 Colorado Housing and Finance Authority, Multi-Family Housing 10/08 at 101 AA+ 1,225,425
Insured Mortgage Revenue Bonds, 1998 Series B2, 5.450%, 10/01/28
(Alternative Minimum Tax)
2,000,000 City and County of Denver, Colorado, Multi-Family Housing 10/07 at 102 AAA 2,060,840
Revenue Bonds (FHA-Insured Mortgage Loan - The Boston Lofts Project),
Series 1997A, 5.850%, 10/01/38 (Alternative Minimum Tax)
1,000,000 City and County of Denver, Colorado, Multi-Family Housing 5/07 at 102 AAA 1,022,000
Revenue Bonds (FHA-Insured Mortgage Loan - The Buerger Brothers and
Denver Fire Clay Lofts Project), Series 1997A, 5.700%, 11/01/28
(Alternative Minimum Tax)
1,000,000 City and County of Denver, Colorado, Multi-Family Housing 7/08 at 102 AAA 999,950
Mortgage Revenue Bonds (FHA-Insured Mortgage Loan - Garden Court
Community), Series 1998, 5.300%, 7/01/28
1,000,000 City of Lakewood, Colorado, Multi-Family Housing Mortgage 10/05 at 102 AAA 1,077,740
Revenue Bonds (FHA-Insured Mortgage Loan - The Heights by Marston
Lake Project), Series 1995, 6.650%, 10/01/25 (Alternative Minimum Tax)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family - 2.8%
$ 185,000 Colorado Housing and Finance Authority, Single Family Program 8/01 at 102 AA+ $ 192,783
Senior Bonds, 1991 Issue C-2 (Federally Insured or Guaranteed
Mortgage Loans), 7.375%, 8/01/23 (Alternative Minimum Tax)
850,000 Colorado Housing and Finance Authority, Single Family Housing No Opt. Call Aa1 550,783
Revenue Refunding Bonds, 1991 Series A, 0.000%, 11/01/06
100,000 Commerce City, Colorado, Single Family Mortgage Revenue Refunding 3/02 at 101 Aaa 104,012
Bonds, 1992 Series A, 6.875%, 3/01/12
115,000 Pueblo County, Colorado, Single Family Mortgage Revenue Bonds 6/02 at 102 AA- 121,961
(GNMA and FNMA Mortgage-Backed Securities Program), Series 1994A,
6.850%, 12/01/25
300,000 Pueblo County, Colorado, Single Family Mortgage Revenue Refunding 11/04 at 102 AAA 321,912
Bonds (GNMA and FNMA Mortgage-Backed Securities Program), Series
1994A, 7.050%, 11/01/27
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 2.3%
1,000,000 Colorado Health Facilities Authority, First Mortgage Revenue Bonds 1/07 at 101 N/R 1,071,800
(Christian Living Campus - Johnson Center Nursing Facility Refunding
Project), Series 1997A, 7.050%, 1/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 4.2%
450,000 Cherry Creek Vista Park and Recreation District, Colorado, General 10/02 at 100 N/R 474,201
Obligation Refunding and Improvement Bonds, Series 1992B,
6.875%, 10/01/11
500,000 El Paso School District No. RJ-1, El Paso and Elbert Counties, 12/04 at 100 AA- 556,815
Colorado, General Obligation Bonds, Series 1995, 6.800%, 12/01/14
250,000 Pitkin County, Colorado, General Obligation Open Space Refunding 12/04 at 102 A2 282,073
and Improvement Bonds, Series 1994, 6.875%, 12/01/24
500,000 Commonwealth of Puerto Rico, General Obligation Public Improvement 7/08 at 101 A 479,640
Bonds, Series 1998, 5.000%, 7/01/28
190,000 Valley Metropolitan District, Colorado, Jefferson County, General 12/00 at 101 Baa2 200,070
Obligation Refunding Bonds, Series 1992, 7.000%, 12/15/06
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 3.8%
500,000 City of Fort Collins, Colorado, Lease Certificates of 12/08 at 100 AAA 494,530
Participation (Civic Center Facilities Project), Series 1998,
5.125%, 12/01/18
175,000 Jefferson County, Colorado, Refunding Certificates of 12/02 at 102 AAA 192,903
Participation, 6.650%, 12/01/08
300,000 Puerto Rico Public Buildings Authority, Government Facilities 7/07 at 101 1/2 A 298,239
Revenue Bonds, Series B, Guaranteed by the Commonwealth of
Puerto Rico, 5.250%, 7/01/21
750,000 City of Woodland Park, Colorado, Limited Sales Tax Refunding 12/03 at 101 AA 812,258
Bonds, Series 1994B, 6.400%, 12/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 11.2%
750,000 City and County of Denver, Colorado, Airport System Revenue Bonds, 11/07 at 101 AAA 753,885
Series 1997E, 5.250%, 11/15/17
500,000 City and County of Denver, Colorado, Special Facilities Airport 10/02 at 102 Baa3 531,860
Revenue Bonds (United Air Lines Project), Series 1992A, 6.875%,
10/01/32 (Alternative Minimum Tax)
1,005,000 E-470 Public Highway Authority, Colorado, Senior Revenue Bonds, 9/09 at 100 AAA 935,786
Series 1997A, 4.750%, 9/01/23
6,790,000 E-470 Public Highway Authority, Colorado, Senior Revenue Bonds, No Opt. Call AAA 1,978,334
Series 1997B, 0.000%, 9/01/22
1,000,000 Eagle County Air Terminal Corporation, Airport Terminal Project 5/06 at 101 N/R 1,075,680
Revenue Bonds, Series 1996, 7.500%, 5/01/21 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 30.9%
4,300,000 E-470 Public Highway Authority, Capital Improvement Trust Fund 8/05 at 95 29/32 Aaa 3,147,256
Highway Revenue Bonds, Senior Bonds of Arapahoe County, Colorado,
0.000%, 8/31/06 (Pre-refunded to 8/31/05)
6,500,000 Arapahoe County, Colorado, Single Family Mortgage Revenue Bonds, No Opt. Call AAA 3,810,625
Series 1984A, 0.000%, 9/01/10
300,000 Colorado Health Facilities Authority, Revenue Bonds (Rose Medical 8/01 at 102 AAA 326,334
Center), Series 1991, 7.000%, 8/15/21 (Pre-refunded to 8/15/01)
</TABLE>
19
<PAGE>
Portfolio of Investments
Nuveen Flagship Colorado Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 500,000 Colorado Housing Finance Authority, Single Family Revenue Bonds, No Opt. Call Aaa $ 233,710
1985 Series A, 0.000%, 9/01/14
3,500,000 Colorado Health Facilities Authority, Retirement Facilities No Opt. Call AAA 863,975
(Liberty Heights), 0.000%, 7/15/24
900,000 City of Colorado Springs, Colorado, Utilities System Revenue No Opt. Call AAA 1,067,760
Bonds, Series 1978B, 6.600%, 11/15/18
250,000 City and County of Denver, Colorado Industrial Development 3/01 at 102 AAA 270,865
Revenue Bonds (University of Denver Project), Series 1991,
7.500%, 3/01/16 (Pre-refunded to 3/01/01)
500,000 School District No. 38, County of El Paso and State of Colorado, 12/01 at 101 AAA 542,490
General Obligation Bonds, Collateralized Project Fixed Rate
Certificates of Participation (Colorado Association of School
Boards Lease Purchase Finance Program), Series 1992A, 6.900%, 12/01/13
(Pre-refunded to 12/01/01)
3,000,000 El Paso County, Colorado, Single Family Mortgage Revenue Bonds, No Opt. Call AAA 1,318,710
1984 Series A, 0.000%, 9/01/15
250,000 Fountain Valley Authority, Colorado, Water Treatment Refunding 6/01 at 100 AA*** 264,878
Revenue Bonds, Series 1991, 6.800%, 12/01/19 (Pre-refunded to 6/01/01)
4,000,000 Mesa County, Colorado, Residual Revenue and Refunding Bonds, No Opt. Call Aaa 2,199,200
Series 1992, 0.000%, 12/01/11
300,000 Town of Parker, Colorado, Sales and Use Tax Revenue Improvement 11/00 at 100 N/R*** 317,535
Bonds, Series 1991B, 7.600%, 11/01/10 (Pre-refunded to 11/01/00)
100,000 Regional Transportation District, Colorado, Sales Tax Revenue 11/00 at 101 AAA 106,082
Bonds, Series 1990, 7.100%, 11/01/10 (Pre-refunded to 11/01/00)
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 0.3%
120,000 Colorado Water Resources and Power Development Authority, Small 11/02 at 100 AAA 129,690
Water Resources Revenue Bonds, 1992 Series A, 6.700%, 11/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
$60,110,000 Total Investments - (cost $42,821,034) - 97.6% 45,801,763
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.4% 1,140,325
---------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $46,942,088
=====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of
independent public accountants): Dates (month and year) and
prices of the earliest optional call or redemption. There
may be other call provisions at varying prices at later
dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. government or U.S. government agency
securities which ensures the timely payment of principal and
interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
20
<PAGE>
Portfolio of Investments
Nuveen Flagship New Mexico Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 1.8%
$ 1,000,000 Lordsburg, New Mexico, Pollution Control Revenue Refunding 4/03 at 102 A2 $ 1,086,810
Bonds (Phelps Dodge Corporation Project), Series 1993, 6.500%, 4/01/13
- ------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 15.0%
1,600,000 New Mexico Educational Assistance Foundation, Student Loan 4/02 at 102 AAA 1,725,984
Revenue Bonds, Series 1992A, 6.850%, 4/01/05 (Alternative Minimum Tax)
400,000 New Mexico Educational Assistance Foundation, Student Loan 12/02 at 101 Aaa 412,608
Revenue Bonds, Senior 1992 Series One-A, 6.550%, 12/01/05
(Alternative Minimum Tax)
185,000 New Mexico Educational Assistance Foundation, Student Loan 12/02 at 101 A 193,928
Revenue Bonds, 1992 Series One, Subordinate 1992 Series One B,
6.850%, 12/01/05 (Alternative Minimum Tax)
810,000 New Mexico Educational Assistance Foundation, Student Loan 6/04 at 102 Aaa 834,899
Purchase Bonds, Senior 1994 Series II-A, 5.500%, 12/01/07
(Alternative Minimum Tax)
750,000 New Mexico Educational Assistance Foundation, Student Loan No Opt. Call Aaa 790,845
Purchase Bonds, Senior 1995 Series IV-A1, 6.500%, 3/01/04
(Alternative Minimum Tax)
435,000 Puerto Rico Industrial, Medical, Educational and Environmental No Opt. Call BBB- 456,902
Pollution Control Facilities Financing Authority, Higher
Education Revenue Refunding Bonds, 1993 Series A (Catholic University
of Puerto Rico Project), 5.600%, 12/01/07
City of Santa Fe, New Mexico, Educational Facilities Revenue
Improvement and Refunding Revenue Bonds (College of Santa Fe Project),
Series 1997:
500,000 6.000%, 10/01/13 10/07 at 100 BBB- 531,095
500,000 5.875%, 10/01/21 10/07 at 100 BBB- 508,855
500,000 City of Santa Fe, New Mexico Educational Facilities 10/07 at 100 BBB- 486,830
Improvement Revenue Bonds (College of Santa Fe Project),
Series 1998A, 5.500%, 10/01/28
3,000,000 Regents of the University of New Mexico, System Revenue No Opt. Call AA 3,327,090
Refunding Bonds, Series 1992A, 6.000%, 6/01/21
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 5.5%
450,000 City of Albuquerque, New Mexico, Hospital System Revenue 8/02 at 102 AAA 488,628
Bonds, 1992 Series A (Presbyterian Healthcare Services),
6.375%, 8/01/07
3,000,000 New Mexico Hospital Equipment Loan Council, Hospital Revenue Bonds, 6/08 at 101 Baa1 2,911,200
Series 1998 (Memorial Medical Center Inc. Project), 5.500%, 6/01/28
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 8.0%
1,000,000 Las Cruces, New Mexico, Housing Development Corporation, 4/02 at 102 A 1,046,900
Multi-family Mortgage Revenue Refunding Bonds, Series 1993A,
6.400%, 10/01/19
500,000 New Mexico Mortgage Finance Authority, Multi-family Housing 7/07 at 102 AAA 514,305
Revenue Bonds (Rio Volcan II Apartments Project), Series 1997,
5.650%, 7/01/18 (Alternative Minimum Tax)
2,340,000 Santa Fe Civic Housing Authority, Inc., Multi-family Housing 8/08 at 100 AAA 2,368,384
Revenue Bonds (The Tuscany at St. Francis Project), Tax-Exempt
Series 1998A, 5.500%, 8/01/30 (Alternative Minimum Tax)
1,000,000 Villa Hermosa Affordable Housing Corporation, New Mexico, 5/07 at 102 AAA 1,046,360
Multi-family Revenue Bonds (Villa Hermosa Apartments Project),
Series 1997, 5.900%, 5/20/27 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 16.5%
1,960,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/06 at 102 AAA 2,081,226
Program Bonds, 1996 Series D1, 6.250%, 7/01/22
1,430,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/07 at 102 AAA 1,511,181
Program Bonds, 1996 Series G-2, 6.200%, 7/01/28 (Alternative Minimum Tax)
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen Flagship New Mexico Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 1,245,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/05 at 102 AAA $ 1,327,382
Program Bonds, 1995 Series A, Class D, 6.650%, 7/01/26
(Alternative Minimum Tax)
85,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/02 at 102 Aa1 88,293
Purchase Refunding Senior Bonds, 1992 Series A-1, 6.850%, 7/01/10
625,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/02 at 102 Aa1 658,813
Purchase Refunding Senior Bonds, 1992 Series A-2, 6.900%, 7/01/24
1,500,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/07 at 102 AAA 1,536,915
Program Bonds, 1997 Series F-2, 5.700%, 7/01/29 (Alternative
Minimum Tax)
1,000,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/07 at 102 AAA 1,006,910
Program Bonds, 1997 Series G-2, 5.400%, 7/01/29 (Alternative
Minimum Tax)
1,000,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 1/08 at 102 AAA 1,007,950
Program Bonds, 1998 Series A-2, 5.450%, 7/01/28 (Alternative
Minimum Tax)
1,000,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/08 at 102 AAA 993,970
Program Bonds, 1998 Series E-2, 5.200%, 7/01/18 (Alternative
Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 5.7%
1,500,000 City of Albuquerque, New Mexico, Revenue Refunding Bonds (The 6/03 at 102 AAA 1,609,170
Evangelical Lutheran Good Samaritan Society), Series 1993,
5.900%, 6/01/13
1,000,000 City of Hobbs, New Mexico, Health Facilities Revenue Bonds, 5/06 at 102 AAA 1,021,520
Series 1996 (The Evangelical Lutheran Good Samaritan Society
Project), 5.500%, 5/01/26
500,000 Las Cruces, New Mexico, Health Facilities Revenue Refunding 12/02 at 102 AAA 544,555
Bonds, Series 1992 (The Evangelical Lutheran Good Samaritan
Society Project), 6.450%, 12/01/17
350,000 City of Socorro, New Mexico, Health Facilities Refunding 5/04 at 102 AAA 381,819
Revenue Bonds (The Evangelical Lutheran Good Samaritan Society
Project), Series 1994, 6.000%, 5/01/08
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 3.8%
Grants/Cibola County School District Number One, Cibola County, New Mexico,
General Obligation School Building Bonds, Series 1994:
480,000 6.250%, 5/01/08 5/04 at 100 Baa2 510,187
510,000 6.250%, 5/01/09 5/04 at 100 Baa2 540,926
100,000 Commonwealth of Puerto Rico, General Obligation Public 7/07 at 100 A 100,778
Improvement Bonds of 1997, 5.375%, 7/01/25
1,000,000 Commonwealth of Puerto Rico, General Obligation Public No Opt. Call A 1,021,190
Improvement Bonds of 1998, 5.250%, 7/01/18
200,000 Torrance County, New Mexico, General Obligation Bonds, Series 7/00 at 100 N/R 202,598
1993, 5.500%, 7/01/04
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 24.7%
1,880,000 City of Albuquerque, New Mexico, Gross Receipts/Lodgers Tax No Opt. Call AAA 1,035,936
Refunding and Improvement Revenue Bonds, Series 1991B, 0.000%, 7/01/11
1,000,000 City of Albuquerque, New Mexico, Gross Receipts/Lodgers Tax 7/09 at 100 AA 961,220
Refunding Revenue Bonds, Series 1999B, 5.000%, 7/01/25
1,000,000 City of Albuquerque, New Mexico Gross Receipts Tax Refunding 7/09 at 100 AA 931,600
Revenue Bonds, Series 1999C, 4.750%, 7/01/22
1,000,000 Bernalillo County New Mexico, Gross Receipts Tax Refunding No Opt. Call AA 1,014,860
Revenue Bonds, Series 1998, 5.200%, 4/01/21
1,050,000 Dona Ana County, New Mexico, Gross Receipts Tax Refunding and 6/03 at 102 AA 1,142,726
Improvement Revenue Bonds, Series 1993, 6.000%, 6/01/19
1,000,000 Dona Ana County, New Mexico, Gross Receipts Tax Refunding and No Opt. Call Aaa 1,056,230
Improvement Revenue Bonds, Subordinate Series 1998, 5.500%, 6/01/16
250,000 Las Cruces, New Mexico, Gross Receipts Tax Revenue Refunding 12/02 at 101 A 268,210
Bonds, Series 1992, 6.250%, 12/01/05
Puerto Rico Highway and Transportation Authority, Highway
Revenue Bonds, Series Y of 1996:
3,550,000 5.500%, 7/01/36 7/16 at 100 A 3,651,175
750,000 5.000%, 7/01/36 7/16 at 100 A 723,623
4,000,000 Santa Fe County, New Mexico, Correctional System Revenue No Opt. Call AAA 4,488,640
Bonds, Series 1997, 6.000%, 2/01/27
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation - 1.7%
$1,000,000 City of Albuquerque, New Mexico, Airport Revenue Bonds, Series 7/00 at 105 AAA $ 1,075,060
1995A, 6.600%, 7/01/16 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 7.9%
2,370,000 City of Albuquerque, New Mexico, Gross Receipts/Lodgers Tax No Opt. Call AAA 1,327,698
Refunding and Improvement Revenue Bonds, Series 1991B, 0.000%,
7/01/11
250,000 City of Albuquerque, New Mexico, Joint Water and Sewer System 7/00 at 100 AAA 257,158
Revenue Bonds, Series 1990 A, 6.000%, 7/01/15 (Pre-refunded to
7/01/00)
90,000 Las Cruces, New Mexico, Joint Utility Refunding and Improvement 7/02 at 102 A1*** 98,060
Revenue Bonds, Series 1992, 6.250%, 7/01/12
Rio Grande Natural Gas Association, Dona Ana County, New Mexico, Natural
Gas System Refunding and Improvement Revenue Bonds, Series 1993:
100,000 6.000%, 7/01/07 (Pre-refunded to 7/01/03) 7/03 at 100 A3*** 107,028
1,000,000 6.125%, 7/01/13 (Pre-refunded to 7/01/03) 7/03 at 100 A3*** 1,074,940
Sandoval County, New Mexico, Gross Receipts Tax / Fire District
Revenue Bonds, Series 1993:
225,000 6.600%, 12/01/04 (Pre-refunded to 12/01/99) 12/99 at 100 N/R*** 229,298
200,000 6.900%, 12/01/07 (Pre-refunded to 12/01/99) 12/99 at 100 N/R*** 204,120
375,000 Sandoval County, New Mexico, Gross Receipts Tax Revenue 11/02 at 102 Baa1*** 416,085
Refunding Bonds, Series 1992, 6.900%, 11/01/12 (Pre-refunded
to 11/01/02)
130,000 Sandoval County, New Mexico, Gross Receipts Tax Revenue 12/02 at 102 Baa1*** 142,825
Refunding Bonds, Series 1992A, 6.500%, 12/01/06 (Pre-refunded
to 12/01/02)
500,000 Sandoval County, New Mexico, Gross Receipts Tax Revenue Bonds, 11/05 at 101 N/R*** 586,205
Subordinate Series 1994, 7.150%, 11/01/10 (Pre-refunded to
11/01/05)
327,000 Santa Fe County, New Mexico, Office and Training Facilities No Opt. Call Aaa 427,804
Project Revenue Bonds, Series 1990, 9.000%, 7/01/07
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 6.8%
985,000 City of Farmington, New Mexico, Pollution Control Revenue 12/02 at 102 AAA 1,072,754
Refunding Bonds, 1992 Series A (Public Service Company of New
Mexico, San Juan and Four Corners Projects), 6.375%, 12/15/22
1,000,000 City of Farmington, New Mexico, Pollution Control Refunding 4/09 at 102 AAA 976,040
Revenue Bonds (Southern California Edison Company Four Corners
Project), 1999 Series A, 5.125%, 4/01/29
1,000,000 City of Las Cruces, New Mexico, South Central Solid Waste 6/05 at 100 A 1,044,230
Authority, Environmental Services Gross Receipts Tax/Project
Revenue Bonds, Series 1995, 6.000%, 6/01/16
1,000,000 Incorporated County of Los Alamos, New Mexico, Utility System 7/04 at 102 AAA 1,086,100
Revenue Bonds, Series 1994A, 6.000%, 7/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 1.3%
1,000,000 City of Albuquerque, New Mexico, Joint Water and Sewer System No Opt. Call AAA 692,659
Revenue Bonds, Series 1990 A, 0.000%, 7/01/07
100,000 City of Grants, New Mexico, Joint Water and Sewer Utility 7/99 at 106 Baa3 105,897
Refunding and Improvement Revenue Bonds, Series 1993, 5.600%,
1/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
$60,587,000 Total Investments - (cost $57,714,529) - 98.7 61,075,187
=========== --------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 832,741
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $61,907,928
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
23
<PAGE>
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $117,028,652 $45,801,763 $61,075,187
Cash -- 487,653 --
Receivables:
Fund manager (note 6) -- 339 --
Interest 1,931,742 501,732 1,212,942
Investments sold 2,240,817 10,115 --
Shares sold 124,179 189,267 93,601
Other assets 109,083 95,267 105,796
- ----------------------------------------------------------------------------------------------------------------
Total assets 121,434,473 47,086,136 62,487,526
- ----------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft 407,546 -- 284,473
Payables:
Investments purchased 1,894,327 -- --
Shares redeemed 278,100 25,995 143,526
Accrued expenses:
Management fees (note 6) 12,864 -- 29,021
12b-1 distribution and service fees (notes 1 and 6) 21,951 11,357 13,284
Other 23,775 34,854 31,504
Dividends payable 204,563 71,842 77,790
- ----------------------------------------------------------------------------------------------------------------
Total liabilities 2,843,126 144,048 579,598
- ----------------------------------------------------------------------------------------------------------------
Net assets (note 7) $118,591,347 $46,942,088 $61,907,928
================================================================================================================
Class A Shares (note 1)
Net assets $ 86,451,615 $39,189,178 $56,314,794
Shares outstanding 7,685,510 3,669,777 5,323,124
Net asset value and redemption price per share $ 11.25 $ 10.68 $ 10.58
Offering price per share (net asset value per share plus maximum
sales charge of 4.20% of offering price) $ 11.74 $ 11.15 $ 11.04
================================================================================================================
Class B Shares (note 1)
Net assets $ 4,180,287 $ 4,424,454 $ 2,721,154
Shares outstanding 371,950 413,680 257,343
Net asset value, offering and redemption price per share $ 11.24 $ 10.70 $ 10.57
================================================================================================================
Class C Shares (note 1)
Net assets $ 6,425,618 $ 2,464,350 $ 2,393,400
Shares outstanding 571,440 230,941 226,284
Net asset value, offering and redemption price per share $ 11.24 $ 10.67 $ 10.58
================================================================================================================
Class R Shares (note 1)
Net assets $ 21,533,827 $ 864,106 $ 478,580
Shares outstanding 1,914,576 80,865 45,146
Net asset value, offering and redemption price per share $ 11.25 $ 10.69 $ 10.60
================================================================================================================
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
Statement of Operations
Year Ended May 31,1999
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $ 6,546,903 $2,508,406 $ 3,354,965
- --------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 654,071 247,714 336,445
12b-1 service fees - Class A (notes 1 and 6) 175,649 78,533 113,081
12b-1 distribution and service fees - Class B (notes 1 and 6) 28,034 30,378 20,117
12b-1 distribution and service fees - Class C (notes 1 and 6) 50,336 12,612 15,270
Shareholders' servicing agent fees and expenses 74,585 16,625 22,873
Custodian's fees and expenses 63,163 37,344 44,937
Trustees' fees and expenses (note 6) 2,949 1,331 1,872
Professional fees 12,923 16,207 11,880
Shareholders' reports - printing and mailing expenses 46,862 48,481 42,328
Federal and state registration fees 7,449 4,759 4,954
Other expenses 7,278 2,311 3,414
- --------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 1,123,299 496,295 617,171
Custodian fee credit (note 1) (825) (1,662) (2,529)
Expense reimbursement (note 6) (113,607) (33,939) (36,645)
- --------------------------------------------------------------------------------------------------------------
Net expenses 1,008,867 460,694 577,997
- --------------------------------------------------------------------------------------------------------------
Net investment income 5,538,036 2,047,712 2,776,968
- --------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain from investment transactions (notes 1 and 4) 935,923 511,179 514,535
Net change in unrealized appreciation or depreciation of investments (1,936,011) (996,714) (1,120,839)
- --------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (1,000,088) (485,535) (606,304)
- --------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 4,537,948 $1,562,177 $ 2,170,664
==============================================================================================================
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
--------------------------- ------------------------- -------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
5/31/99 5/31/98 5/31/99 5/31/98 5/31/99 5/31/98
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 5,538,036 $ 5,346,805 $ 2,047,712 $ 1,744,521 $ 2,776,968 $ 2,580,223
Net realized gain from investment
transactions (notes 1 and 4) 935,923 546,400 511,179 231,489 514,535 184,412
Net change in unrealized appreciation
or depreciation of investments (1,936,011) 4,023,073 (996,714) 1,920,494 (1,120,839) 2,447,338
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 4,537,948 9,916,278 1,562,177 3,896,504 2,170,664 5,211,973
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (4,101,755) (4,135,375) (1,812,447) (1,680,403) (2,560,974) (2,506,960)
Class B (114,786) (22,463) (122,188) (41,768) (79,582) (37,062)
Class C (278,780) (172,117) (66,954) (14,892) (81,442) (25,798)
Class R (1,045,871) (1,018,591) (42,768) (33,606) (22,648) (16,170)
From accumulated net realized gains
from investment transactions:
Class A (412,344) (132,275) (108,785) -- -- --
Class B (13,676) (677) (8,851) -- -- --
Class C (32,343) (5,284) (4,777) -- -- --
Class R (101,198) (31,231) (2,536) -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (6,100,753) (5,518,013) (2,169,306) (1,770,669) (2,744,646) (2,585,990)
- --------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 18,304,296 17,232,021 12,388,138 9,498,060 8,678,647 9,586,060
Net proceeds from shares issued to
shareholders due to reinvestment
of distributions 2,660,537 2,750,177 854,120 881,170 1,006,025 1,454,066
- --------------------------------------------------------------------------------------------------------------------------------
20,964,833 19,982,198 13,242,258 10,379,230 9,684,672 11,040,126
Cost of shares redeemed (15,184,364) (15,141,453) (6,264,853) (4,121,233) (5,522,676) (7,327,443)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from Fund share transactions 5,780,469 4,840,745 6,977,405 6,257,997 4,161,996 3,712,683
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 4,217,664 9,239,010 6,370,276 8,383,832 3,588,014 6,338,666
Net assets at the beginning of year 114,373,683 105,134,673 40,571,812 32,187,980 58,319,914 51,981,248
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $118,591,347 $114,373,683 $46,942,088 $40,571,812 $61,907,928 $58,319,914
================================================================================================================================
Balance of undistributed/(over-distributed)
net investment income at end of year $ 2,794 $ 5,950 $ 649 $ (2,706) $ 36,803 $ 4,481
================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Arizona Municipal Bond Fund ("Arizona"), the
Nuveen Flagship Colorado Municipal Bond Fund ("Colorado") and the Nuveen
Flagship New Mexico Municipal Bond Fund ("New Mexico") (collectively, the
"Funds"), among others. The Trust was organized as a Massachusetts business
trust on July 1, 1996.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1999, there were no such outstanding purchase commitments in any of the
Funds.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend 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
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, the Funds intend to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain such
tax-exempt status when distributed to the shareholders of the Funds. All monthly
tax-exempt income dividends paid during the fiscal year ended May 31, 1999, have
been designated Exempt Interest Dividends. Net realized capital gain and market
discount distributions are subject to federal taxation.
27
<PAGE>
Notes to Financial Statements (continued)
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a 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 only under limited circumstances, or by specified classes
of investors.
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 fiscal year ended May 31, 1999.
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. Actual results may differ
from those estimates.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Arizona
-----------------------------------------------------------
Year Ended Year Ended
5/31/99 5/31/98
---------------------------- --------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,012,200 $ 11,573,874 939,381 $ 10,594,838
Class B 263,892 3,014,513 119,506 1,355,584
Class C 128,946 1,472,159 316,012 3,587,493
Class R 196,220 2,243,750 150,054 1,694,106
Shares issued to shareholders due to reinvestment of distributions:
Class A 151,919 1,743,724 175,183 1,969,412
Class B 3,175 36,412 1,093 12,309
Class C 12,655 145,186 10,523 118,375
Class R 64,055 735,215 57,709 650,081
- ----------------------------------------------------------------------------------------------------------------------------------
1,833,062 20,964,833 1,769,461 19,982,198
- ----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,018,708) (11,664,214) (1,120,408) (12,656,620)
Class B (37,352) (424,518) (10,128) (112,911)
Class C (125,596) (1,433,816) (62,551) (705,918)
Class R (145,051) (1,661,816) (147,567) (1,666,004)
- ----------------------------------------------------------------------------------------------------------------------------------
(1,326,707) (15,184,364) (1,340,654) (15,141,453)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase 506,355 $ 5,780,469 428,807 $ 4,840,745
==================================================================================================================================
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Colorado
-------------------------------------------------
Year Ended Year Ended
5/31/99 5/31/98
----------------------- -----------------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
Shares sold:
Class A 671,535 $ 7,279,788 681,355 $ 7,321,628
Class B 267,870 2,914,260 107,622 1,152,203
Class C 181,898 1,970,240 70,146 756,209
Class R 20,587 223,850 25,721 268,020
Shares issued to shareholders due to reinvestment of distributions:
Class A 65,037 707,625 76,970 817,880
Class B 7,439 81,081 2,159 22,985
Class C 2,392 26,018 752 8,060
Class R 3,619 39,396 3,027 32,245
- ------------------------------------------------------------------------------------------------------------------------
1,220,377 13,242,258 967,752 10,379,230
- ------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (516,805) (5,592,710) (385,803) (4,121,180)
Class B (15,048) (162,708) (5) (53)
Class C (34,394) (371,975) -- --
Class R (12,716) (137,460) -- --
- ------------------------------------------------------------------------------------------------------------------------
(578,963) (6,264,853) (385,808) (4,121,233)
- ------------------------------------------------------------------------------------------------------------------------
Net increase 641,414 $ 6,977,405 581,944 $ 6,257,997
========================================================================================================================
New Mexico
-------------------------------------------------
Year Ended Year Ended
5/31/99 5/31/98
----------------------- -----------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 564,095 $ 6,050,839 698,030 $ 7,365,655
Class B 139,498 1,495,072 79,732 842,865
Class C 105,480 1,131,654 123,525 1,304,991
Class R 101 1,082 6,637 72,549
Shares issued to shareholders due to reinvestment of distributions:
Class A 85,290 915,668 136,279 1,420,855
Class B 3,639 39,054 1,262 13,257
Class C 3,293 35,364 525 5,545
Class R 1,481 15,939 1,369 14,409
- ------------------------------------------------------------------------------------------------------------------------
902,877 9,684,672 1,047,359 11,040,126
- ------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (476,600) (5,099,274) (686,757) (7,182,281)
Class B (17,756) (189,721) (13,762) (145,162)
Class C (21,822) (233,573) -- --
Class R (10) (108) -- --
- ------------------------------------------------------------------------------------------------------------------------
(516,188) (5,522,676) (700,519) (7,327,443)
- ------------------------------------------------------------------------------------------------------------------------
Net increase 386,689 $ 4,161,996 346,840 $ 3,712,683
========================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on July 1, 1999, to shareholders of record on
June 9, 1999, as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- -----------------------------------------------------------
Dividend per share:
<S> <C> <C> <C>
Class A $ .0445 $ .0410 $ .0395
Class B .0375 .0345 .0330
Class C .0395 .0360 .0350
Class R .0465 .0430 .0415
===========================================================
</TABLE>
29
<PAGE>
Notes to Financial Statements (continued)
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the fiscal year ended May 31,
1999, were as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Long-term municipal securities $23,139,895 $15,388,351 $12,267,110
Short-term municipal securities 4,900,000 4,900,000 3,500,000
Sales:
Long-term municipal securities 19,395,213 10,259,898 8,224,180
Short-term municipal securities 5,400,000 4,900,000 3,500,000
==========================================================================================================
</TABLE>
At May 31, 1999, 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, 1999, New Mexico 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>
New Mexico
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Expiration Year:
2003 $ 296,633
2004 290,586
- -----------------------------------------------------------------------------------------------------------
Total $ 587,219
===========================================================================================================
</TABLE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 1999, were as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $8,753,084 $3,169,606 $3,489,342
depreciation (184,847) (188,877) (128,684)
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation $8,568,237 $2,980,729 $3,360,658
===========================================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of each Fund:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
- -----------------------------------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
===========================================================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 1999, John Nuveen & Co. Incorporated (the
"Distributor"), a wholly owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares, the majority of which were paid
out as concessions to authorized dealers as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales charges collected $277,951 $187,343 $153,938
Paid to authorized dealers 253,758 159,862 133,432
===========================================================================================================
</TABLE>
30
<PAGE>
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the fiscal year ended May 31, 1999, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commission advances $144,020 $140,211 $68,466
======================================================================================================================
</TABLE>
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees on Class B Shares, and all 12b-1 service and
distribution fees on Class C Shares during the first year following a purchase
are retained by the Distributor. During the fiscal year ended May 31, 1999, the
Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 fees retained $54,887 $37,785 $29,757
======================================================================================================================
</TABLE>
The remaining 12b-1 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
fiscal year ended May 31, 1999, as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CDSC retained $4,433 $11,541 $4,923
======================================================================================================================
</TABLE>
7. Composition of Net Assets
At May 31, 1999, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $109,303,240 $43,845,085 $59,100,970
Balance of undistributed net investment income 2,794 649 36,803
Accumulated net realized gain (loss) from investment transactions 717,076 115,625 (590,503)
Net unrealized appreciation of investments 8,568,237 2,980,729 3,360,658
- ----------------------------------------------------------------------------------------------------------------------
Net assets $118,591,347 $46,942,088 $61,907,928
======================================================================================================================
</TABLE>
31
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------ --------------------------
ARIZONA** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending Ending
Net Invest- ment Invest- Net Net
Year Ended Asset ment Gain ment Capital Asset Total Assets
May 31, Value Income (a) (Loss) Total Income Gains Total Value Return (b) Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/86)
1999 $11.40 $.53 $(.09) $ .44 $(.54) $(.05) $(.59) $11.25 3.87% $86,452
1998 10.94 .55 .48 1.03 (.55) (.02) (.57) 11.40 9.56 85,922
1997 10.73 .56 .27 .83 (.56) (.06) (.62) 10.94 7.85 82,567
1996 10.85 .57 (.12) .45 (.57) -- (.57) 10.73 4.21 80,094
1995 10.43 .58 .42 1.00 (.58) -- (.58) 10.85 10.03 80,406
Class B (2/97)
1999 11.39 .45 (.10) .35 (.45) (.05) (.50) 11.24 3.12 4,180
1998 10.94 .47 .47 .94 (.47) (.02) (.49) 11.39 8.67 1,620
1997 (c) 10.92 .16 .02 .18 (.16) -- (.16) 10.94 1.64 347
Class C (2/94)
1999 11.39 .47 (.09) .38 (.48) (.05) (.53) 11.24 3.33 6,426
1998 10.94 .49 .47 .96 (.49) (.02) (.51) 11.39 8.89 6,328
1997 10.73 .50 .27 .77 (.50) (.06) (.56) 10.94 7.28 3,189
1996 10.84 .51 (.11) .40 (.51) -- (.51) 10.73 3.75 1,970
1995 10.43 .52 .41 .93 (.52) -- (.52) 10.84 9.32 1,621
Class R (2/97)
1999 11.40 .56 (.10) .46 (.56) (.05) (.61) 11.25 4.09 21,534
1998 10.94 .57 .48 1.05 (.57) (.02) (.59) 11.40 9.79 20,504
1997 (c) 10.92 .19 .02 .21 (.19) -- (.19) 10.94 1.96 19,031
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
---------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
ARIZONA** Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Year Ended Reimburse- Reimburse- Reimburse- Reimburse- Turnover
May 31, ment ment ment (a) ment (a) Rate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (10/86)
1999 .93% 4.58% .84% 4.67% 16%
1998 .93 4.77 .83 4.87 16
1997 1.05 4.91 .83 5.13 25
1996 1.07 4.82 .69 5.20 38
1995 1.20 5.21 .82 5.59 27
Class B (2/97)
1999 1.69 3.84 1.58 3.95 16
1998 1.68 3.98 1.51 4.15 16
1997 (c) 1.67* 4.38* 1.62* 4.43* 25
Class C (2/94)
1999 1.48 4.03 1.39 4.12 16
1998 1.48 4.20 1.35 4.33 16
1997 1.59 4.37 1.38 4.58 25
1996 1.63 4.24 1.23 4.64 38
1995 1.75 4.62 1.36 5.01 27
Class R (2/97)
1999 .73 4.77 .63 4.87 16
1998 .73 4.97 .63 5.07 16
1997 (c) .73* 5.32* .67* 5.38* 25
===================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31,
1997, reflects the financial highlights of Flagship Arizona.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
32
<PAGE>
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------ --------------------------
COLORADO** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (5/87)
1999 $10.81 $.50 $(.10) $ .40 $(.50) $(.03) $(.53) $10.68 3.76%
1998 10.15 .52 .66 1.18 (.52) -- (.52) 10.81 11.85
1997 9.79 .53 .35 .88 (.52) -- (.52) 10.15 9.22
1996 9.93 .54 (.13) .41 (.55) -- (.55) 9.79 4.14
1995 9.62 .57 .30 .87 (.56) -- (.56) 9.93 9.54
Class B (2/97)
1999 10.82 .42 (.08) .34 (.43) (.03) (.46) 10.70 3.11
1998 10.16 .43 .68 1.11 (.45) -- (.45) 10.82 11.03
1997 (c) 10.21 .12 (.06) .06 (.11) -- (.11) 10.16 .61
Class C (2/97)
1999 10.80 .44 (.10) .34 (.44) (.03) (.47) 10.67 3.19
1998 10.15 .46 .66 1.12 (.47) -- (.47) 10.80 11.17
1997 (c) 10.13 .16 .02 .18 (.16) -- (.16) 10.15 1.75
Class R (2/97)
1999 10.81 .52 (.08) .44 (.53) (.03) (.56) 10.69 4.08
1998 10.16 .54 .66 1.20 (.55) -- (.55) 10.81 11.98
1997 (c) 10.21 .15 (.06) .09 (.14) -- (.14) 10.16 .85
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
----------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
COLORADO** Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Year Ended Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
May 31, (000) ment ment ment (a) ment (a) Rate
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (5/87)
1999 $39,189 1.03% 4.55% .96% 4.62% 23%
1998 37,285 1.01 4.83 1.00 4.84 19
1997 31,229 1.18 4.87 .74 5.31 27
1996 33,637 1.27 4.69 .55 5.41 70
1995 34,982 1.27 5.22 .50 5.99 38
Class B (2/97)
1999 4,424 1.79 3.80 1.68 3.91 23
1998 1,661 1.76 4.05 1.75 4.06 19
1997 (c) 444 1.78* 4.35* 1.53* 4.60* 27
Class C (2/97)
1999 2,464 1.58 4.01 1.49 4.10 23
1998 875 1.56 4.24 1.55 4.25 19
1997 (c) 103 1.58* 4.67* 1.31* 4.94* 27
Class R (2/97)
1999 864 .83 4.74 .75 4.82 23
1998 750 .81 5.02 .80 5.03 19
1997 (c) 413 .83* 5.35* .58* 5.60* 27
==========================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Colorado.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
33
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------ --------------------------
NEW MEXICO** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/92)
1999 $10.67 $.49 $(.09) $ .40 $(.49) $ -- $(.49) $10.58 3.74%
1998 10.16 .50 .51 1.01 (.50) -- (.50) 10.67 10.17
1997 9.81 .51 .35 .86 (.51) -- (.51) 10.16 8.90
1996 10.01 .51 (.19) .32 (.52) -- (.52) 9.81 3.18
1995 9.68 .52 .33 .85 (.52) -- (.52) 10.01 9.25
Class B (2/97)
1999 10.67 .41 (.10) .31 (.41) -- (.41) 10.57 2.89
1998 10.15 .43 .52 .95 (.43) -- (.43) 10.67 9.46
1997 (c) 10.24 .12 (.10) .02 (.11) -- (.11) 10.15 .18
Class C (2/97)
1999 10.67 .43 (.09) .34 (.43) -- (.43) 10.58 3.22
1998 10.16 .45 .51 .96 (.45) -- (.45) 10.67 9.60
1997 (c) 10.23 .12 (.08) .04 (.11) -- (.11) 10.16 .43
Class R (2/97)
1999 10.70 .51 (.10) .41 (.51) -- (.51) 10.60 3.86
1998 10.17 .53 .53 1.06 (.53) -- (.53) 10.70 10.59
1997 (c) 10.23 .14 (.07) .07 (.13) -- (.13) 10.17 .71
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
----------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
NEW MEXICO** Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Year Ended Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
May 31, (000) ment ment ment (a) ment (a) Rate
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (9/92)
1999 $56,315 .97% 4.51% .90% 4.58% 14%
1998 54,959 .93 4.65 .79 4.79 13
1997 50,807 1.08 4.76 .77 5.07 43
1996 51,173 1.09 4.69 .68 5.10 57
1995 52,150 1.17 4.98 .67 5.48 38
Class B (2/97)
1999 2,721 1.72 3.78 1.67 3.83 14
1998 1,408 1.68 3.88 1.53 4.03 13
1997 (c) 657 1.68* 4.05* 1.54* 4.19* 43
Class C (2/97)
1999 2,393 1.52 3.97 1.46 4.03 14
1998 1,487 1.48 4.06 1.31 4.23 13
1997 (c) 155 1.48* 4.26* 1.34* 4.40* 43
Class R (2/97)
1999 479 .77 4.71 .70 4.78 14
1998 466 .73 4.86 .58 5.01 13
1997 (c) 362 .73* 5.04* .59* 5.18* 43
==========================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship New Mexico.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
34
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust I:
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Flagship Arizona Municipal Bond Fund,
Nuveen Flagship Colorado Municipal Bond Fund and Nuveen Flagship New Mexico
Municipal Bond Fund (collectively, the "Funds") (three of the portfolios
constituting the Nuveen Flagship Multistate Trust I (a Massachusetts business
trust)), as of May 31, 1999, the related statements of operations for the year
then ended, and the statements of changes in net assets and the financial
highlights for each of the two years then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1999, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers, and when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Flagship Arizona Municipal Bond Fund, Nuveen Flagship Colorado Municipal Bond
Fund, and Nuveen Flagship New Mexico Municipal Bond Fund of the Nuveen Flagship
Multistate Trust I as of May 31, 1999, and the results of their operations for
the year then ended, and the changes in their net assets and the financial
highlights for each of the two years then ended, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 20, 1999
35
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Dividend and Growth Fund
Income
Income Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio -- one that balances
different types of investments, levels of risk and tax management -- can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers/SM/ including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
quality municipal bonds. The fund shares are listed and traded on the New York
and American stock exchanges. Exchange-traded funds provide the investment
convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
36
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
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
Chase Global Fund Services Company
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
37
<PAGE>
SERVING
Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive 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 income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
[Photo of John Nuveen, Sr. Appears Here]
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
VAN-3-5-99
<PAGE>
May 31, 1999 Annual Report
NUVEEN
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Municipal Bond Funds
Dependable, tax-free
[PHOTO APPEARS HERE] income to help
you keep more
of what you earn.
Florida
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser(SM) for Income Investing
<PAGE>
Contents
1 Dear Shareholder
3 Nuveen Flagship Florida Municipal Bond Fund
6 Portfolio of Investments
14 Statement of Net Assets
15 Statement of Operations
15 Statement of Changes in Net Assets
16 Notes to Financial Statements
19 Financial Highlights
20 Report of Independent Public Accountants
21 Fund Information
<PAGE>
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
DEAR
Shareholder
I invite you to take a few minutes to read the annual report we've prepared for
you on the performance of your Nuveen state municipal bond fund for the fiscal
year ended May 31, 1999. You, along with your financial adviser, have made a
sound choice in choosing Nuveen to manage this portion of your assets. Since
1898, more than 1.3 million investors have trusted us to help them build and
sustain the wealth of a lifetime.
I'm pleased to report your fund continued to meet its primary objective of
providing you with dependable tax-free income and attractive after-tax total
returns. I will briefly describe the national economic environment during the
past 12 months. My discussion is followed by comments from the portfolio manager
about the strategies employed in managing your fund.
The Year In Review. The Federal Reserve eased short-term rates for the first
time in almost three years by cutting the federal funds rate in the fall of 1998
three times, bringing it to 4.75%. A month after the close of your fund's fiscal
year, the Fed raised its target by 25 basis points to 5%. (Be sure to read your
fund manager's comments about managing your fund in a rising interest rate
environment.)
The fed funds rate is the rate that banks charge each other for overnight
loans and serves as the basis many financial institutions use for setting
interest charges on a variety of products, from mortgage and car loans to
credit cards.
The Fed's rate cuts were made to avert a potential domestic credit crunch
and restore some stability to global markets. The moves seemed to have worked,
as the U.S. economy since has continued its pattern of non-inflationary growth,
accompanied by low interest rates and unemployment levels that remain among the
lowest in three decades, prompting the late June reversal by the Fed.
All indications point to a confident U.S. consumer who is comfortable with
the current state of the economy, especially the performance of the housing,
stock and job markets. This confidence is reflected in the most recent Consumer
Confidence Index report, issued by the Conference Board Inc., which showed a
record-setting eighth consecutive month of gains in June.
On the global front, the turmoil of the past two years appears to be fading
somewhat, as international financial markets have begun to send recovery
signals.
Domestic inflation continues to be benign, with an increase of 2.1% for the
12 months ended May 31, 1999. The general backdrop of inflation indicators
continued to be mild, with the employment cost index, average hourly earnings,
and import and producer price trends all remaining favorable.
Federal Reserve Chairman Alan Greenspan recently stated that a key factor
in achieving today's peaceful coexistence of economic growth and low inflation
has been increased productivity. Improvements in productivity, spurred by
technological advances, have been responsible for
1
<PAGE>
offsetting wage and other inflationary pressures that we would normally expect
to see as part of a growing economy.
Why Municipal Bonds? Our municipal bond funds continued to offer attractive,
stable income in a market that places a high premium on yield. In 1998,
municipal bonds represented a reasonably insulated haven in an otherwise
turbulent market, with lower volatility relative to Treasury bonds and other
fixed-income investments. Even in 1999, with interest rates rising again,
municipals outperformed Treasuries through the end of May.
The high ratio of tax-exempt municipal yields to Treasury yields sheltered
municipal bonds, to some extent, from the price decline that occurred in the
Treasury market during the first part of the year. While the yield on 30-year
Treasury bonds, rose from 5.10% at the end of December to 5.83% as of May 31,
1999, the yield on the Bond Buyer Revenue Bond Index, an unmanaged index of
long-term municipal revenue bonds, gained 15 basis points--from 5.26% to 5.41%.
Given the inverse relationship between interest rates and bond prices, we saw
bond prices fall as rates rose over this period.
Though municipal bond prices did decrease, the decline was not as dramatic
as the drop in Treasuries.
This performance differential reflects the fact that Treasuries had become
relatively expensive as the result of safe-haven buying during the international
economic crises in 1998. As the financial turmoil subsided, however, foreign
investors returned to investing in their own countries rather than in U.S.
dollar-denominated securities, and the decline in demand caused U.S. Treasuries
to drop in price.
At the end of May 1999, the ratio between long-term municipal yields and
30-year Treasury yields stood at 93%, compared with the historical average of
86% for the period of 1986-1999. For investors, this meant that quality long-
term municipal bonds offered yields comparable to those of long Treasury bonds--
even before the tax advantages of municipal bonds were taken into account.
During the fund's fiscal year, that ratio hit a high of 104% in December.
On an after-tax basis in today's market, municipal bonds continue to
present an exceptionally attractive investment option relative to Treasuries.
During 1998, lower interest rates and the strong economy combined to
generate high levels of new municipal issuance and a significant increase in the
refinancing of existing bonds. Municipal issuance in 1998 reached $284 billion,
up 29% over 1997.
In the first part of 1999, however, as the market settled into a more
stable interest rate environment, refunding activity has dropped off
dramatically, resulting in a drop in municipal supply. This, in turn, has
enhanced the attractiveness of the municipal bonds that were brought to market,
as demand--especially from individual investors--remained relatively strong.
The Value of Nuveen Expertise. Nuveen Mutual Funds are a diverse collection of
investments featuring highly regarded asset management firms--Premier Advisers
(SM)--who direct the investment activities of each portfolio.
The Premier Advisers are firms that have earned a reputation for excellence
in their field of expertise--including Nuveen Investment Advisory Services for
income investing, Rittenhouse Financial Services for growth investing and
Institutional Capital Corporation for value investing.
For more information on our funds, contact your financial adviser for a
prospectus, or call Nuveen at (800) 621-7227, or download one from our Web site
www.nuveen.com. Please read the prospectus carefully before you invest or send
money.
We encourage you to talk with your financial adviser about Nuveen's
expanding array of investments and the ways they can help you establish a
diversified portfolio designed to build and sustain long-term financial
security.
We are grateful for the confidence you have placed in us and are dedicated
to maintaining your trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1999
2
<PAGE>
NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Tom O'Shaughnessy discusses fund performance, the municipal
market and key investment strategies for the Florida fund for the fiscal year
ended May 31, 1999.
How strong is Florida's economy? Florida is one of the fastest growing states in
the U.S. Both employment and income growth have outpaced the region and the
nation. The economy increasingly centers on growing trade and service
industries, while tourism and agriculture remain important sectors. In May, the
state's unemployment rate was 4.1%, down from 4.3% a year ago.
Florida's expanding economy has led to growing infrastructure and school
financing needs. Issuers in the state took advantage of low interest rates in
late 1998 and early 1999, bringing many sizable bond issues to market. The
market had some difficulty absorbing the new bonds on top of the plentiful
supply in late 1998, providing attractive opportunities to buy Florida bonds.
For instance, a temporary oversupply made Florida Board of Education bonds
particularly attractive, and we took advantage of low prices by purchasing these
high quality bonds for the fund.
As was the case on the national level, increasing concerns about rising
economic growth and potential inflation caused bond yields to rise and prices to
fall. However, municipal bonds held their values quite well compared to U.S.
Treasury bonds.
How did Nuveen Flagship Florida Municipal Bond Fund perform during its fiscal
year? Nuveen Flagship Florida Municipal Bond Fund generated a total return on
net asset value of 3.78%, which compares to the 3.33% average annual total
return posted by the Lipper Florida Municipal Debt Peer Group.* The fund ranked
17th out of 64 municipal bond funds for the fiscal year period in its Lipper
peer group. The fund's taxable equivalent total return, for investors in the 31%
federal income tax bracket, was 6.09%.** Total return equals a fund's income
plus capital gains distributions, if any, plus or minus changes in net asset
value.
As of May 31, 1999, the fund's SEC 30-day yield was 4.11%. For investors in
the 31% federal income tax bracket, that is equivalent to a yield of 5.96% on a
taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates decline. To protect the fund's income
stream, we looked for bonds with call dates far in the future--or better yet,
that are noncallable.
In addition to good call protection, we continued to search for bonds that
offered attractive yields and sound underlying credit quality. Nuveen Research
assists us with those tasks, as well as helps us monitor events in the municipal
market and analyze how those events affect individual state and national
municipal markets.
For example, during spring 1998, a major not-for-profit healthcare provider
in Philadelphia declared bankruptcy. While the impact of this bankruptcy was
most pronounced in the healthcare sector of the Pennsylvania municipal market,
it was felt to a lesser extent throughout the municipal market.
Comments cover the year ended May 31, 1999; performance statistics are quoted
for Class A shares at net asset value.
** The Lipper Peer Group return represents the average annual-ized total return
of the 64 funds in the Lipper Florida Municipal Debt category. The return
assumes reinvestment of divi-dends and does not reflect any applicable sales
charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
3
<PAGE>
Uncertainty created by the Philadelphia health-care situation prompted
investors to demand higher yields for lower-rated issues across the country,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen. Prior to the bankruptcy,
this spread had been relatively narrow, suggesting that investors were not being
compensated adequately for taking on additional credit risk. With spreads having
widened, lower-rated securities have become more attractive on a risk-adjusted
basis.
With interest rates at a higher level, and the widening differential
between low-rated and high-rated credits, we took the opportunity to investigate
lower-rated issues. Using the expertise of Nuveen Research, we considered only
those bonds that offered adequate compensation for the level of risk.
For instance, we added a sizable block of non-rated multi-family housing
bonds for a project in Naples. The bonds offered significantly higher yield than
similar insured bonds at the time, which provided adequate compensation for the
higher credit risk. This transaction represents added value to investors. Our
team's expertise and resources make us particularly qualified to analyze,
negotiate and price these bonds correctly.
In recent months, we have taken advantage of rising interest rates by
selling some bonds at a loss--because as interest rates rose, prices of the
bonds fell--and subsequently buying similar securities, whose yield reflected
the higher interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Flagship Florida Municipal Bond Fund? Rising
interest rates in 1999 have made it advantageous for us to lock in higher yields
by extending the portfolio's maturity beyond that of our Lipper peer group. We
believe that bond yields are currently attractive relative to inflation. Should
interest rates fall or remain stable, the portfolio's longer maturity would be
beneficial.
With Florida's strong economy and influx of population, there will continue
to be a healthy supply and demand for municipal bonds in areas such as housing,
healthcare, education and utilities. We will continue to seek out undervalued
securities that provide income and the opportunity for price appreciation
through credit rating upgrades.
"We added a sizable block of non-rated multi-family housing bonds for a project
in Naples... Our team's expertise and resources make us particularly qualified
to analyze, negotiate and price these bonds correctly."
4
<PAGE>
NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND
Highlights as of May 31, 1999
Quick Facts
A Shares B Shares C Shares R Shares
NAV $ 10.76 $ 10.77 $ 10.77 $ 10.76
- -----------------------------------------------------------------------------
May's Declared Dividend* $0.0455 $0.0390 $0.0405 $0.0475
- -----------------------------------------------------------------------------
Fund Symbol FLOTX N/A FLCTX NMFLX
- -----------------------------------------------------------------------------
CUSIP 67065L708 67065L658 67065L641 67065L872
- -----------------------------------------------------------------------------
Inception Date 6/90 2/97 9/95 2/97
- -----------------------------------------------------------------------------
* Paid June 1, 1999
Total Returns (Annualized)/+/
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
1-Year 3.78% -0.58% 3.05% 3.22% 4.01%
- -----------------------------------------------------------------------------
1-Year TER** 6.09% 1.64% 5.02% 5.27% 6.43%
- -----------------------------------------------------------------------------
5-Year 6.30% 5.38% 5.65% 5.74% 6.40%
- -----------------------------------------------------------------------------
Since Inception 7.31% 6.80% 6.77% 6.73% 7.37%
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate of
31%).
Index Comparison/./
[LINE CHART APPEARS HERE]
Nuveen Flagship Nuveen Flagship Lehman Brothers
Florida Municipal Florida Municipal Municipal
Bond Fund (Offer) Bond Fund (NAV) Bond Index
1990 9,580 10,000 10,000
1991 10,426 10,883 10,901
1992 11,818 12,336 12,186
1993 13,252 13,833 13,642
1994 13,192 13,771 13,665
1995 14,254 14,879 14,871
1996 14,984 15,641 15,858
1997 16,132 16,839 17,170
1998 17,449 18,241 18,655
1999 18,033 18,823 19,451
Nuveen Flagship Florida Municipal Bond Fund (Offer) $18,033
Nuveen Flagship Florida Municipal Bond Fund (NAV) $18,823
Lehman Brothers Municipal Bond Index $19,451
/./ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
Monthly Tax-Free Dividends (Class A Shares)*
[BAR CHART APPEARS HERE]
Month
- -----
June .0460
July .0460
August .0460
September .0460
October .0460
November .0460
December .0460
January .0455
February .0455
March .0455
April .0455
May .0455
* The fund also paid shareholders capital gains and net ordinary income
distributions in December of $0.0404 per share.
Portfolio Statistics
Fund Net Assets $390.8 million
- --------------------------------------------------------
Effective Maturity 19.76 years
- --------------------------------------------------------
Average
Effective Duration 7.08
- --------------------------------------------------------
Top Five Sectors/1/
U.S. Guaranteed 14%
- --------------------------------------------------------
Tax Obligation (General) 12%
- --------------------------------------------------------
Housing (Multifamily) 12%
- --------------------------------------------------------
Health Care 11%
- --------------------------------------------------------
Utilities 11%
- --------------------------------------------------------
Bond Credit Quality/1/
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed.... 65%
AA............ 11%
A............. 11%
BBB/NR........ 13%
/1/ as a percentage of total bond holdings
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
5
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 0.4%
$ 750,000 Clay County Development Authority, Industrial Development 7/02 at 102 AA- $ 803,288
Revenue Refunding Bonds (Cargill, Incorporated Project),
Series 1992, 6.400%, 3/01/11
600,000 City of Jacksonville, Florida, Industrial Development 3/02 at 102 AA- 635,610
Revenue Refunding Bonds (Carroll Incorporated Project),
Series 1992, 6.400%, 3/01/11
- ------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 0.1%
300,000 Brevard County Educational Facilities Authority (Florida), 11/02 at 102 BBB- 318,216
Educational Facilities Refunding and Improvement Revenue
Bonds, Series 1992, 6.875%, 11/01/22
----------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 4.2%
5,500,000 Escambia County, Florida, Pollution Control Revenue Bonds 8/04 at 102 Baa1 6,057,315
(Champion International Project), Series 1994, 6.900%,
8/01/22 (Alternative Minimum Tax)
8,350,000 Escambia County, Florida, Pollution Control Revenue Bonds 9/06 at 102 Baa1 8,922,977
(Champion International Project), Series 1996, 6.400%,
9/01/30 (Alternative Minimum Tax)
1,500,000 Nassau County, Florida, Pollution Control Revenue Refunding 7/03 at 102 BBB+ 1,578,570
Bonds (ITT Rayonier Inc. Project), Series 1993, 6.200%,
7/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 10.9%
3,000,000 Jacksonville Health Facilities Authority, Florida, Hospital 11/01 at 102 AA+ 3,237,240
Facilities Refunding Revenue Bonds, Series 1991 (St. Luke's
Hospital Association Project), 7.125%, 11/15/20
6,000,000 City of Lakeland, Florida, Hospital Revenue Refunding Bonds 11/06 at 102 AAA 5,987,100
(Lakeland Regional Medical Center Project), Series 1996,
5.250%, 11/15/25
2,100,000 Hospital Board of Directors of Lee County, Florida, Hospital 4/07 at 102 AAA 2,198,385
Revenue Bonds (Lee Memorial Health System), Fixed Rate
Hospital Revenue Bonds, 1997 Series A, 5.625%, 4/01/16
2,320,000 Martin County Health Facilities Authority, Florida, Hospital 11/00 at 102 AAA 2,480,382
Revenue Refunding Bonds, Series 1990A (Martin Memorial
Hospital), 7.125%, 11/15/04
North Broward Hospital District, Florida, Refunding and
Improvement Revenue Bonds, Series 1997:
1,000,000 5.250%, 1/15/17 1/07 at 101 AAA 1,000,310
3,000,000 5.375%, 1/15/24 1/07 at 101 AAA 3,019,980
1,230,000 City of North Miami, Florida, Health Facilities Authority, 8/00 at 102 A+ 1,300,331
Health Facility Revenue Bonds (Villa Maria Nursing and
Rehabilitation Center Project), Series 1985B, Remarketed
(Bon Secours Health System), 7.500%, 9/01/12
Health System), 7.500%, 9/01/12
2,500,000 Orange County, Florida, Health Facilities Authority, Hospital 11/01 at 102 AAA 2,711,175
Revenue Bonds (Adventist Health System/Sunbelt, Inc.), Series
1991 A, 6.875%, 11/15/15
2,500,000 Orange County, Florida, Health Facilities Authority, Hospital 11/01 at 102 AAA 2,703,925
Revenue Bonds (Adventist Health System/Sunbelt, Inc.), Series
1991 B, 6.750%, 11/15/21
10,645,000 Orange County, Florida, Health Facilities Authority, Hospital 11/05 at 102 AAA 10,624,349
Revenue Bonds (Adventist Health System/Sunbelt, Inc.), Series
1995, 5.250%, 11/15/20
5,455,000 Orange County, Florida, Health Facilities Authority, Hospital No Opt. Call AAA 6,241,611
Revenue Bonds (Orlando Regional Healthcare System), Series 1996C,
6.250%, 10/01/21
1,000,000 St. John's County Industrial Development Authority, Hospital 8/02 at 102 A2 1,035,120
Revenue Bonds, (Flagler Hospital Project), Series 1992, 6.000%,
8/01/22
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 12.0%
600,000 Housing Finance Authority of Broward County, Florida, Multifamily 2/05 at 102 AAA 663,894
Housing Revenue Refunding Bonds (Lakeside Apartments Project),
Series 1995, 7.000%, 2/01/25
250,000 Housing Finance Authority of Broward County, Florida, Multifamily 8/06 at 102 AAA 288,793
Housing Revenue Refunding Bonds (Boardwalk Apartments Project),
Series 1996, 6.200%, 8/01/16
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 940,000 Housing Finance Authority of Broward County, Florida, 10/08 at 102 N/R $ 977,139
Multifamily Housing Revenue Bonds (Stirling Apartments
Project), Series 1998, 5.400%, 10/01/11 (Alternative
Minimum Tax)
2,700,000 Duval County Housing Finance Authority, Florida, 4/05 at 102 BBB+ 2,917,026
Multifamily Housing Revenue Refunding Bonds
(Greentree Place Project), Series 1995, 6.750%, 4/01/25
710,000 Florida Housing Finance Agency, General Mortgage 6/02 at 103 AAA 752,721
Revenue Refunding Bonds, 1992 Series A, 6.400%, 6/01/24
Florida Housing Finance Agency, Housing Revenue Bonds
(Antigua Club Apartments Project), 1995 Series A1:
1,000,000 6.750%, 8/01/14 (Alternative Minimum Tax) 2/05 at 102 AAA 1,088,630
5,000,000 6.875%, 8/01/26 (Alternative Minimum Tax) 2/05 at 102 AAA 5,460,600
1,115,000 Florida Housing Finance Agency, Housing Revenue 2/05 at 102 AAA 1,217,714
Bonds (Brittany of Rosemont Apartments Project),
1995 Series C1, 6.875%, 8/01/26 (Alternative Minimum Tax)
2,250,000 Florida Housing Finance Agency, Housing Revenue 6/07 at 102 AAA 2,366,303
Bonds, 1997 Series C (Windchase Apartments
Project), 5.900%, 12/01/27
Florida Housing Finance Agency, Housing Revenue
Bonds, 1995 Series H (The Vineyards Project):
1,260,000 6.400%, 11/01/15 11/05 at 102 BBB+ 1,346,965
1,660,000 6.500%, 11/01/25 11/05 at 102 BBB+ 1,774,108
2,000,000 Florida Housing Finance Agency, Multifamily Housing 8/06 at 102 AAA 2,145,800
Revenue Refunding Bonds, 1991 Series C, 6.200%, 8/01/16
3,500,000 Florida Housing Finance Agency, Housing Revenue 10/06 at 102 AAA 3,727,815
Bonds, 1996 Series H (Villas of Capri Project),
6.100%, 4/01/17 (Alternative Minimum Tax)
1,000,000 Florida Housing Finance Agency, Housing Revenue Bonds, 9/06 at 102 AAA 1,070,060
1996 Series N (Leigh Meadows Apartments Project),
6.300%, 9/01/36 (Alternative Minimum Tax)
1,000,000 Florida Housing Finance Agency, Housing Revenue Bonds, 9/06 at 102 AAA 1,070,060
1996 Series O (Stoddert Arms Apartments Project), 6.300%,
9/01/36 (Alternative Minimum Tax)
700,000 Florida Housing Finance Agency, Housing Revenue Bonds, 12/06 at 102 AAA 737,219
1996 Series T (The Landings at Sea Front Apartments Project),
6.050%, 12/01/36 (Alternative Minimum Tax)
1,440,000 Florida Housing Finance Agency, Multifamily Housing Revenue 6/99 at 103 AAA 1,485,965
Bond, 1989 Series I (GNMA Collateralized-Driftwood
Terrace Apartments Project), 7.650%, 12/20/31 (Alternative
Minimum Tax)
2,500,000 Florida Housing Finance Agency, Housing Revenue Bonds, 5/08 at 102 AAA 2,524,550
1997 Series L (Sarah's Place Apartments Project), 5.400%,
11/01/32 (Alternative Minimum Tax)
10,000,000 Florida Housing Finance Agency, Housing Revenue Bonds, 7/08 at 102 N/R 9,845,500
Series 1998 T1 (Whistlers Cove Apartment Project), 6.500%,
1/01/39 (Alternative Minimum Tax) (Mandatory put 1/01/28)
1,670,000 Florida Housing Finance Corporation, Housing Revenue 12/08 at 102 A+ 1,672,856
Refunding Bonds, 1998 Series O (Hunters Ridge at Deerwood
Apartments), 5.250%, 12/01/18
1,000,000 Orange County, Florida, Housing Finance Authority, 10/01 at 101 BBB+ 1,032,070
Multifamily Housing Revenue Bonds (Ashley
Point Apartments Project), 1994 Series A, 7.100%,
10/01/24 (Alternative Minimum Tax)
1,925,000 Osceola County, Florida, Housing Finance Authority, 6/07 at 100 AAA 1,980,825
Multifamily Housing Revenue Bonds (Tierra Vista
Apartments Project), Series 1997A, 5.800%, 12/01/29
(Alternative Minimum Tax)
750,000 Palm Beach County, Florida, Housing Finance Authority, 6/08 at 102 N/R 781,448
Multifamily Housing Revenue Bonds (Windsor Park Apartments
Project), Series 1998, 5.900%, 6/01/38 (Alternative Minimum
Tax)
------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 7.7%
2,920,000 Housing Finance Authority of Broward County, Florida, Home No Opt. Call AAA 541,806
Mortgage Revenue Bonds, 1985 Series A, 0.000%, 4/01/16
1,225,000 Housing Finance Authority of Broward County, Florida, 3/00 at 102 AA+ 1,263,416
GNMA Collateralized Home Mortgage Revenue Bonds, 1990
Series A, 7.900%, 3/01/23 (Alternative Minimum Tax)
1,825,000 Housing Finance Authority of Clay County, Florida, 3/05 at 102 Aaa 1,942,129
Single Family Mortgage Revenue Bonds
(Multi-County Program), Series 1995, 6.550%,
3/01/28 (Alternative Minimum Tax)
2,000,000 Housing Finance Authority of Clay County, Florida, 4/07 at 102 Aaa 2,015,000
Single Family Mortgage Revenue Bonds (Multi-County Program),
Series 1998, 5.450%, 4/01/31 (Alternative Minimum Tax)
</TABLE>
_____
7
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 205,000 Housing Finance Authority of Dade County, Florida, 9/00 at 102 Aaa $ 213,241
Single Family Mortgage Revenue Bonds, 1990 Series B,
7.750%, 3/01/17 (Alternative Minimum Tax)
685,000 Housing Finance Authority of Dade County, Florida, 3/01 at 102 Aaa 714,736
Single Family Mortgage Revenue Bonds, Series B,
7.250%, 9/01/23 (Alternative Minimum Tax)
461,000 Housing Finance Authority of Dade County, Florida, 12/01 at 102 AAA 485,599
Single Family Mortgage Revenue Refunding Bonds,
1991 Series D, 6.950%, 12/15/12
40,000 Housing Finance Authority of Dade County, Florida, 3/01 at 102 Aaa 41,702
Single Family Mortgage Revenue Bonds, 1991 Series E,
7.000%, 3/01/24
1,000,000 Housing Finance Authority of Dade County, Florida, 4/05 at 102 AAA 1,064,830
Single Family Mortgage Revenue Bonds, Series 1995,
6.700%, 4/01/28 (Alternative Minimum Tax)
285,000 Duval County Housing Finance Authority, Single Family 6/00 at 102 Aaa 295,357
Mortgage Revenue Bonds (GNMA Mortgage Backed Securities
Program), Series 1990B, 7.500%, 6/01/15
Duval County Housing Finance Authority Single Family Mortgage
Revenue Bonds (GNMA Mortgage Backed Securities Program),
Series 1990A:
305,000 7.650%, 9/01/10 9/00 at 103 AAA 319,732
140,000 7.850%, 12/01/22 (Alternative Minimum Tax) 6/00 at 102 Aaa 145,104
655,000 Duval County Housing Finance Authority, Single Family 10/04 at 102 Aaa 695,210
Mortgage Revenue Bonds, (GNMA Mortgage-Backed Securities
Program), Series 1994, 6.550%, 10/01/15 (Alternative
Minimum Tax)
1,570,000 Escambia County Housing Finance Authority, Florida, 4/01 at 102 Aaa 1,639,692
Single Family Mortgage Revenue Bonds, Series 1991A
(Multi-County Program), 7.400%, 10/01/23
(Alternative Minimum Tax)
275,000 Escambia County Housing Finance Authority, Florida, 4/02 at 102 Aaa 288,797
Single Family Mortgage Revenue Bonds, Series 1992A
(Multi-County Program), 6.900%, 4/01/20
(Alternative Minimum Tax)
565,000 Escambia County Housing Finance Authority, Florida, 4/05 at 102 AAA 608,047
Single Family Mortgage Revenue Bonds (Multi-County Program),
Series 1995, 6.950%, 10/01/27 (Alternative Minimum Tax)
1,165,000 Florida Housing Finance Agency, Single Family Mortgage 7/04 at 102 AAA 1,236,717
Revenue Refunding Bonds, Series A, 6.250%, 7/01/11
705,000 Florida Housing Finance Agency, Single Family Mortgage 1/05 at 102 AAA 752,693
Revenue Refunding Bonds, Series 1995A, 6.550%, 7/01/14
(Alternative Minimum Tax)
705,000 Florida Housing Finance Agency, Single Family Mortgage 1/05 at 102 AAA 756,409
Revenue Refunding Bonds, Series 1995A, 6.650%, 1/01/24
(Alternative Minimum Tax)
970,000 Housing Finance Authority of Lee County, Florida, 3/08 at 105 Aaa 1,072,122
Single Family Mortgage Revenue Bonds, Series 1998A,
Subseries 1,2,3,4, 6.300%, 3/01/29 (Alternative
Minimum Tax)
305,000 Housing Finance Authority of Leon County, Florida, 4/01 at 102 Aaa 318,066
Single Family Mortgage Revenue Bonds (Multi-County Program),
Series 1991A, 7.300%, 4/01/21 (Alternative Minimum Tax)
1,945,000 Housing Finance Authority of Leon County, Florida, No Opt. Call AAA 2,212,515
Single Family Mortgage Revenue Bonds (Multi-County Program),
Series 1995B, 7.300%, 1/01/28 (Alternative Minimum Tax)
640,000 Housing Finance Authority of Manatee County, Florida, 11/05 at 102 Aaa 712,403
Single Family Mortgage Revenue Bonds, Series 1994,
Sub Series 3, 7.600%, 11/01/26 (Alternative Minimum Tax)
275,000 Orange County Housing Finance Authority, GNMA Collateralized 7/00 at 103 AAA 288,819
Mortgage Revenue Refunding Bonds, 1990 Series A, 7.600%,
1/01/24
2,740,000 Orange County Housing Finance Authority, Homeowner Revenue 9/07 at 102 Aaa 2,717,395
Bonds, 1998 Series A-1, 5.200%, 9/01/23 (Alternative
Minimum Tax)
820,000 Housing Finance Authority of Palm Beach County, Florida, 9/00 at 103 Aaa 859,122
Single Family Mortgage Revenue Bonds, 1990 Series B, 7.600%,
3/01/23
1,595,000 Housing Finance Authority of Pinellas County, Florida, 2/05 at 102 AAA 1,709,728
Single Family Mortgage Revenue Bonds (Multi-County Program),
Series 1995A, 6.650%, 8/01/21 (Alternative Minimum Tax)
2,530,000 Housing Finance Authority of Pinellas County, Florida, 3/07 at 102 Aaa 2,720,863
Single Family Mortgage Revenue Bonds (Multi-County Program),
Series 1998A, 6.850%, 3/01/29 (Alternative Minimum Tax)
1,050,000 Housing Finance Authority of Pinellas County, Florida, 3/07 at 102 Aaa 1,079,033
Single Family Mortgage Revenue Bonds (Multi-County Program),
Series 1997C, 5.800%, 3/01/29 (Alternative Minimum Tax)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 1,160,000 Housing Finance Authority of Polk County, Florida, 3/01 at 102 Aaa $ 1,209,428
Single Family Mortgage Revenue Refunding
Bonds, Series 1991A, 7.150%, 9/01/23
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 6.4%
2,735,000 Dade County Health Facilities 8/00 at 102 A1 2,865,405
Authority, Revenue and Revenue Refunding Bonds
(Catholic Health and Rehabilitation Services, Inc.
Project), Series 1990, 7.125%, 8/15/09
Escambia County Health Facilities Authority
(Florida), Health Facilities Revenue Bonds
(Azalea Trace, Inc.), Series 1997:
1,000,000 6.000%, 1/01/15 1/07 at 102 N/R 1,024,100
1,595,000 6.100%, 1/01/19 1/07 at 102 N/R 1,645,099
Jacksonville Health Facilities Authority
(Florida), Tax Exempt Industrial Development
Revenue Bonds (National Benevolent Association
- Cypress Village Florida Project), Series 1996A:
690,000 6.125%, 12/01/16 12/06 at 102 Baa1 721,595
1,000,000 6.250%, 12/01/26 12/06 at 102 Baa1 1,051,930
1,550,000 Osceola County Industrial Development Authority 5/01 at 102 AAA 1,657,152
(Florida), Revenue Bonds (The Evangelical
Lutheran Good Samaritan Society Project),
Series 1991, 6.750%, 5/01/16
8,000,000 Palm Beach County (Florida), Health Facilities 11/06 at 102 A- 8,117,040
Authority, Retirement Community Revenue Bonds
(Adult Communities Total Services, Inc. Obligated
Group), Series 1996, 5.625%, 11/15/20
4,000,000 Palm Beach County (Florida), 12/06 at 102 A+ 4,318,000
Industrial Development Revenue Bonds (Lourdes-Noreen
McKeen Residence for Geriatric Care, Inc. Project),
Series 1996, 6.625%, 12/01/26
Sarasota County (Florida), Health Facilities
Authority, Health Facilities Revenue Refunding Bonds,
Series 1995 (Sunnyside Properties Project):
585,000 5.500%, 5/15/01 No Opt. Call N/R 597,999
540,000 5.500%, 5/15/02 No Opt. Call N/R 556,659
570,000 5.500%, 5/15/03 No Opt. Call N/R 589,238
600,000 5.500%, 5/15/04 No Opt. Call N/R 621,828
170,000 5.500%, 5/15/05 No Opt. Call N/R 176,113
1,000,000 6.000%, 5/15/10 5/06 at 102 N/R 1,024,330
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 12.2%
Village of Bolingbrook, Illinois, General Obligation
Bonds, Series 1999C Refunding:
2,540,000 0.000%, 1/01/29 1/09 at 33 7/8 AAA 484,505
3,750,000 0.000%, 1/01/30 1/09 at 32 1/32 AAA 675,938
4,000,000 0.000%, 1/01/31 1/09 at 30 5/16 AAA 681,120
3,750,000 0.000%, 1/01/32 1/09 at 28 5/8 AAA 603,375
4,000,000 0.000%, 1/01/33 1/09 at 27 3/32 AAA 607,920
1,325,000 0.000%, 1/01/34 1/09 at 25 21/32 AAA 190,257
4,000,000 State of Florida, Full Faith No Opt. Call AA+ 5,508,320
and Credit, Broward County Expressway Authority
Bonds, Series of 1984, 9.875%, 7/01/09
1,000,000 State of Florida, Full Faith No Opt. Call AA+ 1,489,290
and Credit, Broward County Expressway Authority
Bonds, Series of 1984, (General Obligation Bonds.),
10.000%, 7/01/14
10,000,000 State of Florida, Full Faith and Credit, 7/09 at 101 AA+ 9,621,600
Department of Transportation, Right-of-Way
Acquisition and Bridge Construction Bonds,
Series 1999A, 5.000%, 7/01/28
2,165,000 State of Florida, Full Faith and Credit, State No Opt. Call AA+ 3,034,139
Board of Education, Public Education Capital Outlay
Bonds, Series 1985, 9.125%, 6/01/14
State of Florida, Full Faith and Credit, State
Board of Education, Public Education Capital Outlay
Bonds, 1996 Series B:
2,220,000 4.750%, 6/01/21 6/07 at 101 AA+ 2,072,037
4,120,000 4.500%, 6/01/27 6/07 at 101 AA+ 3,639,031
5,000,000 State of Florida, Full Faith and Credit, State 6/08 at 101 AAA 4,657,800
Board of Education, Public Education Capital Outlay
1997 Series B, 4.750%, 6/01/23
10,000,000 State of Florida, Full Faith and Credit, State 6/09 at 101 AAA 8,951,700
Board of Education, Public Education Capital Outlay
Refunding Bonds, 1999 Series A, 4.500%, 6/01/23
3,000,000 State of Florida, Full Faith and Credit, State 6/09 at 101 AAA 2,679,090
Board of Education, Public Education Capital Outlay
Refunding Bonds, 1999 Series B, 4.500%, 6/01/24
</TABLE>
________
9
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds No Opt. Call AAA $ 2,359,440
(General Obligation Bonds), Series 1997, 6.500%, 7/01/15
700,000 Commonwealth of Puerto Rico, Public Improvement Bonds, 7/07 at 100 A 705,446
Series 1997, 5.375%, 7/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 9.8%
The School Board of Brevard County, Florida, Certificates
of Participation, Series 1996A:
500,000 5.400%, 7/01/11 No Opt. Call AAA 526,080
500,000 5.400%, 7/01/12 No Opt. Call AAA 525,160
3,100,000 5.500%, 7/01/21 7/06 at 102 AAA 3,190,303
Dade County, Florida, Special Obligation and Refunding Bonds,
Series 1996B:
4,835,000 0.000%, 10/01/07 No Opt. Call AAA 3,330,203
3,585,000 5.000%, 10/01/35 10/06 at 102 AAA 3,431,598
190,000 The School Board of Escambia County, Florida, Certificates 2/02 at 100 AAA 200,365
of Participation, Series 1992, 6.375%, 2/01/12
1,500,000 The Department of Corrections, Florida, Certificates of 3/04 at 102 A+ 1,599,240
Participation, Series 1994, 6.000%, 3/01/14
3,105,000 City of Gulf Breeze, Florida, Local Government Loan Program, 12/99 at 102 AAA 3,232,243
Floating Rate Demand Revenue Bonds, Boca Raton Projects,
Series 1985E, 7.750%, 12/01/15
1,000,000 City of Gulf Breeze, Florida, Local Government Loan Program, No Opt. Call AAA 1,087,320
Floating Rate Demand Revenue Bonds, Series 1985B Remarketed,
5.900%, 12/01/15 (Mandatory put 12/01/11)
5,000,000 The County of Hernando, Florida, Criminal Justice Complex No Opt. Call AAA 6,506,850
Financing Program, 1986 Series, 7.650%, 7/01/16
250,000 City of Jacksonville, Florida, Excise Taxes Revenue Refunding 10/02 at 102 AAA 272,703
Bonds, Series 1992, 6.500%, 10/01/13
1,010,000 Martin County, Florida, Tropical Farms Water and Sewer Special 11/05 at 100 A2 1,065,338
Assessment District, Special Assessment Bonds, Series 1995,
5.900%, 11/01/11
1,000,000 Miami Beach Redevelopment Agency, Florida, Tax Increment 12/04 at 102 BBB 1,013,910
Revenue Bonds Series 1993 (City Center/Historic Convention
Village), 5.875%, 12/01/22 (Alternative Minimum Tax)
4,115,000 The School Board of Orange County, Florida, Master Lease Program, 8/07 at 101 Aaa 4,159,195
Certificates of Participation, Series 1997A, 5.375%, 8/01/22
1,000,000 The School Board of Palm Beach County, Florida, Certificates 8/04 at 101 AAA 1,115,380
of Participation, Series 1994A, 6.375%, 8/01/15
1,000,000 City of Palm Beach Gardens, Florida, Special Obligation 7/99 at 102 AAA 1,023,370
Revenue Bonds, Series 1990, 7.250%, 7/01/15
4,500,000 Puerto Rico Highway and Transportation Authority, Highway 7/16 at 100 A4 4,628,250
Revenue Bonds, Series 1996Y, 5.500%, 7/01/36
3,300,000 City of Tampa, Florida, Utilities Tax Improvement Bonds, No Opt. Call AAA 1,309,077
Series 1996, 0.000%, 4/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 3.1%
1,000,000 Dade County, Florida, Aviation Facilities Revenue Bonds, 10/02 at 102 AAA 1,087,440
1992 Series B, 6.550%, 10/01/13 (Alternative Minimum Tax)
1,250,000 City of Orlando, Florida, Greater Orlando Aviation Authority, 10/07 at 101 AAA 1,237,200
Airport Facilities Revenue Bonds, Series 1997, 5.250%,
10/01/23 (Alternative Minimum Tax)
1,000,000 Hillsborough County Aviation Authority, Florida,Tampa 10/06 at 102 AAA 1,068,060
International Airport Revenue Bonds, Series 1996B,
5.875%, 10/01/23
2,020,000 Palm Beach County, Florida, Airport System Revenue No Opt. Call AAA 2,117,889
Refunding Bonds, Series 1991, 7.500%, 10/01/00
Sanford Airport Authority, Florida, Industrial
Development Revenue Bonds (Central Florida Terminals
Inc. Project), Series 1995A:
3,000,000 7.500%, 5/01/15 (Alternative Minimum Tax) 5/06 at 102 N/R 3,170,790
3,270,000 7.750%, 5/01/21 (Alternative Minimum Tax) 5/06 at 102 N/R 3,517,801
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - 14.0%
$ 1,925,000 City of Boynton Beach, Florida, Water and Sewer Utility Revenue 11/00 at 102 AAA $ 2,068,066
Bonds, Series 1990, 7.400%, 11/01/15 (Pre-refunded to 11/01/00)
1,500,000 The School Board of Broward County, Florida, Certificates of 7/00 at 102 AAA 1,589,985
Participation, Series 1990A, 7.125%, 7/01/10 (Pre-refunded to
7/01/00)
255,000 Dade County, Florida, Special Obligation Bonds (Courthouse Center 4/04 at 102 A3*** 283,047
Project), Series 1994, 6.300%, 4/01/14 (Pre-refunded to 4/01/04)
250,000 Dade County Health Facilities Authority, Florida, Hospital 10/99 at 102 AAA 258,078
Revenue Refunding Bonds (South Miami Hospital Project),
Series 1989, 7.000%, 10/01/18 (Pre-refunded to 10/01/99)
1,500,000 Dade County Health Facilities Authority, Florida, Hospital No Opt. Call AAA 1,616,610
Revenue Bonds (Baptist Hospital of Miami Project), Series
1991A, 5.750%, 5/01/21
300,000 Dade County Health Facilities Authority, Florida, Hospital 8/02 at 102 AAA 328,959
Revenue Refunding Bonds (North Shore Medical Center Project),
Series 1992, 6.500%, 8/15/15 (Pre-refunded to 8/15/02)
310,000 The School Board of Escambia County, Florida, Certificates of 2/02 at 100 AAA 329,899
Participation, Series 1992, 6.375%, 2/01/12 (Pre-refunded to
2/01/02)
300,000 State of Florida, Full Faith and Credit, Division of Bond Finance 7/02 at 101 AA+*** 326,346
of the Department of General Services, Pollution Control
Bonds, Series Y, 6.600%, 7/01/17 (Pre-refunded to 7/01/02)
335,000 State of Florida, Full Faith and Credit, State Board of Education, No Opt. Call AAA 466,615
Public Education Capital Outlay Bonds, Series 1985, 9.125%,
6/01/14
5,000,000 State of Florida, Full Faith and Credit, State Board of 6/01 at 101 AAA 5,338,400
Education, Public Education Capital Outlay Bonds, Series
1991B, 6.700%, 6/01/22 (Pre-refunded to 6/01/01)
2,000,000 State Board of Education of Florida, Public Education Capital 6/02 at 101 Aaa 2,175,560
Outlay Bonds, Series 1991C, 6.625%, 6/01/17 (Pre-refunded to
6/01/02)
2,990,000 Hillsborough County, Florida, Environmentally Sensitive Land 7/02 at 102 Aa3*** 3,248,934
Acquisition and Protection Program Bonds, Series 1992, 6.250%,
7/01/08 (Pre-refunded to 7/01/02)
1,000,000 Hillsborough County Port District, Florida (Tampa Port 12/00 at 102 Baa1*** 1,087,150
Authority), Revenue Bonds, Series 1990, 8.250%, 6/01/09
(Pre-refunded to 12/01/00)
250,000 Hillsborough County, Florida, Capital Improvement, Non-Ad Valorem 1/00 at 102 A*** 259,483
Revenue Bonds (Museum of Science and Industry Project),
Series 1992, 6.400%, 1/01/12 (Pre-refunded to 1/01/00)
1,635,000 Hillsborough County, Florida, Refunding Utility Revenue Bonds, 8/01 at 102 BBB+*** 1,772,700
Series 1991A, 7.000%, 8/01/14 (Pre-refunded to 8/01/01)
250,000 City of Hollywood, Florida, Water and Sewer Revenue Bonds, 10/01 at 102 AAA 272,428
Series 1991, 6.875%, 10/01/21 (Pre-refunded to 10/01/01)
1,810,000 Jacksonville Electric Authority, Jacksonville, Florida, 10/00 at 101 1/2 Aaa 1,921,822
Bulk Power Supply System Revenue Bonds (Scherer 4 Project,
Issue One), Series 1991A, 7.000%, 10/01/12 (Pre-refunded to
10/01/00)
1,500,000 Town of Lady Lake, Florida, Industrial Development Revenue 7/00 at 102 N/R*** 1,626,630
Bonds (Sunbelt Utilities, Inc. Project), Series 1990, 9.625%,
7/01/15 (Alternative Minimum Tax) (Pre-refunded to 7/01/00)
1,000,000 Martin County Health Facilities Authority, Florida, Hospital 11/00 at 102 AAA 1,070,970
Revenue Bonds (Martin Memorial Hospital South Project),
Series 1990B, 7.100%, 11/15/20 (Pre-refunded to 11/15/00)
1,050,000 City of Naples, Florida, Hospital Revenue Bonds (Naples Community 10/00 at 102 AAA 1,121,820
Hospital, Inc. Project), Series 1990, 7.200%, 10/01/19
(Pre-refunded to 10/01/00)
3,400,000 North Springs Improvement District, Florida, Water and 10/01 at 102 N/R*** 3,790,048
Sewer Revenue Bonds, Series 1991, 8.000%, 10/01/16
(Pre-refunded to 10/01/01)
145,000 Orange County, Florida, Sales Tax Revenue Bonds, Series 1/00 at 102 AAA 150,337
1989, 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 1,871,695
Revenue Bonds, Series 1990, 7.250%, 10/01/10
(Pre-refunded to 10/01/00)
235,000 Orange County, Florida, Water Utilities System Revenue Bonds, 4/02 at 102 AAA 254,413
Series 1992, 6.250%, 10/01/17 (Pre-refunded to 4/01/02)
1,750,000 Palm Beach County, Florida, Criminal Justice Facilities 6/00 at 102 AAA 1,852,235
Revenue Bonds, Series 1990, 7.250%, 6/01/11 (Pre-refunded to
6/01/00)
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,425,000 Puerto Rico Electric Power Authority, Power Revenue 7/01 at 102 Aaa $ 1,548,320
Bonds, Series P, 7.000%, 7/01/21 (Pre-refunded to 7/01/01)
500,000 City of St. Petersburg Health Facilities Authority, Florida 12/01 at 102 AAA 546,845
(Allegheny Health System Loan Program), Revenue Bonds,
Series 1985 A, 7.000%, 12/01/15 (Pre-refunded to 12/01/01)
2,000,000 City of St. Petersburg Health Facilities Authority, Florida, 12/03 at 100 AAA 2,227,000
Allegheny Health System Revenue Bonds (St. Anthony's Health
Care Center, Inc.), Series 1991, 6.750%, 12/01/21
(Pre-refunded to 12/01/03)
1,610,000 City of St. Petersburg Health Facilities Authority, Florida, 12/01 at 102 AAA 1,765,317
Allegheny Health System Revenue Bonds (St. Mary's Hospital,
Inc.), Series 1991, 7.000%, 12/01/21 (Pre-refunded to
12/01/01)
2,500,000 The School Board of Seminole County, Florida, Certificates 7/04 at 101 AAA 2,827,400
of Participation, Series 1994B, 6.750%, 7/01/14 (Pre-refunded
to 7/01/04)
5,000,000 Sunrise Lakes Phase 4 Recreation District, Florida, General 8/05 at 102 BBB-*** 5,730,250
Obligation and Revenue Bonds, Series 1995A, 6.750%, 8/01/24
(Pre-refunded to 8/01/05)
1,000,000 City of Tampa, Florida, Allegheny Health System Revenue Bonds 12/01 at 102 AAA 1,089,270
(St. Joseph's Hospital, Inc.), Series 1991, 6.750%, 12/01/17
(Pre-refunded to 12/01/01)
2,000,000 City of Tampa, Florida, Allegheny Health System Revenue 12/04 at 102 AAA 2,261,740
Bonds, St. Joseph's Hospital, Inc. Issue, Series 1994, 6.500%,
12/01/23 (Pre-refunded to 12/01/04)
335,000 City of Tampa, Florida, Water and Sewer Systems Revenue 10/02 at 101 AAA 360,584
Bonds, Series 1992, 6.000%, 10/01/17 (Pre-refunded to
10/01/02)
1,000,000 Coral Springs, Florida, Turtle Run Community Development 5/03 at 100 BBB+*** 1,083,130
District, Water Management Benefit Tax Refunding Bonds,
Series 1993, 6.400%, 5/01/11 (Pre-refunded to 5/01/03)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 10.8%
4,005,000 Broward County, Florida Resource Recovery Revenue Bonds 12/99 at 103 A- 4,197,560
(SES Broward Company, L.P. South Project), Series 1984,
7.950%, 12/01/08
6,000,000 Citrus County, Florida, Pollution Control Refunding Revenue 1/02 at 102 A+ 6,412,920
Bonds (Florida Power Corporation Crystal River Power Plant
Project), Series 1992A, 6.625%, 1/01/27
2,500,000 Hillsborough County Industrial Development Authority, Florida, 8/01 at 103 AA 2,758,750
Pollution Control Revenue Bonds (Tampa Electric Company
Project), Series 1991, 7.875%, 8/01/21
5,000,000 Indiana Municipal Power Agency, Power Supply System 1/01 at 100 AAA 4,910,600
Refunding Revenue Bonds, 1999 Series A, 5.300%, 1/01/23
1,000,000 City of Lakeland, Florida, Electric and Water Revenue Bonds No Opt. Call AAA 1,116,630
(Junior Subordinate Lien), Refunding and Improvement Bonds, Series
1996B, 6.000%, 10/01/12
2,125,000 Lee County, Florida, Solid Waste System Revenue Bonds, 10/01 at 102 AAA 2,292,790
Series 1991A, 7.000%, 10/01/11 (Alternative Minimum Tax)
2,000,000 Martin County, Florida, Pollution Control Revenue Refunding 7/00 at 102 AAA 2,112,520
Bonds (Florida Power and Light Company Project), Series 1990,
7.300%, 7/01/20
1,000,000 Orlando Utilities Commission, Water and Electric No Opt. Call Aa2 1,196,050
Subordinated Revenue Bonds, Series 1989D, 6.750%, 10/01/17
1,250,000 Orlando Utilities Commission, Water and Electric Subordinated 10/02 at 102 Aa2 1,323,625
Revenue Bonds, Series 1992A, 6.000%, 10/01/20
4,000,000 Pinellas County, Florida, Pollution Control Refunding Revenue 6/01 at 102 A+ 4,311,680
Bonds (Florida Power Corporation Anclote and Bartow Power
Plants Project), Series 1991, 7.200%, 12/01/14
6,000,000 Polk County Industrial Development Authority, Florida, Solid 12/06 at 102 A-1+ 6,301,080
Waste Disposal Facility Revenue Bonds (Tampa Electric Company
Project), Series 1996, 5.850%, 12/01/30 (Alternative Minimum Tax)
3,000,000 St. Lucie County, Florida, Solid Waste Disposal Revenue Bonds 2/01 at 102 AA- 3,196,170
(Florida Power and Light Company Project), Series 1991, 7.150%,
2/01/23 (Alternative Minimum Tax)
2,000,000 St. Lucie County, Florida, Solid Waste Disposal Revenue Bonds 5/02 at 102 AA- 2,150,360
(Florida Power and Light Company Project), Series 1992, 6.700%,
5/01/27 (Alternative Minimum Tax)
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Option Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer - 7.2%
$ 1,000,000 City of Callaway, Bay County, Florida, Wastewater System 9/06 at 102 AAA $ 1,073,680
Revenue Bonds, Series 1996A, 6.000%, 9/01/26
City of Clearwater, Florida, Water and Sewer Revenue
Refunding Bonds, Series 1998:
2,155,000 0.000%, 12/01/12 12/08 at 85 7/16 AAA 1,084,999
1,000,000 0.000%, 12/01/13 12/08 at 80 15/16 AAA 475,170
1,000,000 0.000%, 12/01/18 12/08 at 62 1/8 AAA 347,320
Dade County, Florida, Water and Sewer System Revenue
Bonds, Series 1997:
3,000,000 5.250%, 10/01/21 10/07 at 101 AAA 3,015,240
7,500,000 5.250%, 10/01/26 10/07 at 101 AAA 7,532,175
1,000,000 Town of Davie, Florida, Water and Sewer Improvement and 10/02 at 102 AAA 1,083,080
Refunding, Revenue Bonds, Series 1992, 6.250%, 10/01/17
600,000 The City of Daytona Beach, Florida, Water and Sewer 11/02 at 102 AAA 643,752
Revenue Bonds, Series 1992, 6.000%, 11/15/14
2,000,000 Escambia County Utilities Authority, Florida, Utility No Opt. Call AAA 903,780
System Revenue Bonds, Series 1992B, 0.000%, 1/01/15
5,750,000 Hillsborough County, Florida, Refunding Utility 8/01 at 102 AAA 6,157,445
Revenue Bonds, Series 1991A, 6.500%, 8/01/16
375,000 City of Jacksonville, Florida, Water and Sewer Development 6/02 at 102 A 403,016
Revenue Bonds (Jacksonville Suburban Utilities Corporation
Project), Series 1992, 6.750%, 6/01/22 (Alternative Minimum
Tax)
250,000 Town of Jupiter, Florida, Water Revenue Bonds, Series 10/01 at 102 AAA 268,953
1992B, 6.250%, 10/01/18
2,000,000 Town of Jupiter Island, Florida, Utility System 10/08 at 101 AAA 1,926,880
Revenue Bonds (South Martin Regional Utility),
Series 1998, 5.000%, 10/01/28
Manatee County, Florida, Public Utilities Revenue
Refunding and Improvement Bonds, Series 1991 C:
1,850,000 0.000%, 10/01/08 No Opt. Call AAA 1,207,457
2,800,000 0.000%, 10/01/09 No Opt. Call AAA 1,731,825
265,000 Orange County, Florida, Water Utilities System 4/02 at 102 AAA 284,655
Revenue Bonds, Series 1992, 6.250%, 10/01/17
165,000 City of Tampa, Florida, Water and Sewer Systems 10/02 at 101 AAA 175,725
Revenue Bonds, Series 1992, 6.000%, 10/01/17
- ---------------------------------------------------------------------------------------------------------------------------
$394,516,000 Total Investments - (cost $362,304,047) - 98.8% 386,144,890
- ---------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -1.2% 4,658,111
--------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 390,803,001
--------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions (not covered by the report of
independent public accountants): Dates (month and year)
and prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. government or U.S. government agency
securities which ensures the timely payment of principal
and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements
_____
13
<PAGE>
Statement of Net Assets
Nuveen Flagship Florida Municipal Bond Fund
May 31, 1999
<TABLE>
- -----------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $386,144,890
Receivables:
Interest 6,648,081
Investments sold 4,694,954
Shares sold 1,284,453
Other assets 265,423
- -----------------------------------------------------------------------------
Total assets 399,037,801
- -----------------------------------------------------------------------------
Liabilities
Cash overdraft 1,242,370
Payables:
Investments purchased 4,622,550
Shares redeemed 654,858
Accrued expenses:
Management fees (note 6) 178,146
12b-1 distribution and service fees (notes 1 and 6) 72,585
Other 27,548
Dividends payable 1,436,743
- -----------------------------------------------------------------------------
Total liabilities 8,234,800
- -----------------------------------------------------------------------------
Net assets (note 7) $390,803,001
- -----------------------------------------------------------------------------
Class A Shares (note 1)
Net assets $297,505,380
Shares outstanding 27,642,746
Net asset value and redemption price per share $ 10.76
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 11.23
- -----------------------------------------------------------------------------
Class B Shares (note 1)
Net assets $ 15,767,619
Shares outstanding 1,464,572
Net asset value, offering and redemption price per share $ 10.77
- -----------------------------------------------------------------------------
Class C Shares (note 1)
Net assets $ 16,033,511
Shares outstanding 1,489,375
Net asset value, offering and redemption price per share $ 10.77
- -----------------------------------------------------------------------------
Class R Shares (note 1)
Net assets $ 61,496,491
Shares outstanding 5,717,077
Net asset value, offering and redemption price per share $ 10.76
- -----------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
______
14
<PAGE>
Statement of Net Assets
Nuveen Flagship Florida Municipal Bond Fund
Year Ended May 31, 1999
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Investment Income (note 1) $ 22,034,764
- -----------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 2,027,580
12b-1 service fees - Class A (notes 1 and 6) 593,582
12b-1 distribution and service fees - Class B (notes 1 and 6) 99,243
12b-1 distribution and service fees - Class C (notes 1 and 6) 86,121
Shareholders' servicing agent fees and expenses 154,513
Custodian's fees and expenses 91,188
Trustees' fees and expenses (note 6) 6,479
Professional fees 19,856
Shareholders' reports - printing and mailing expenses 84,237
Federal and state registration fees 5,370
Other expenses 32,572
- -----------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit 3,200,741
Custodian fee credit (note 1) (912)
- -----------------------------------------------------------------------------------------------------------
Net expenses 3,199,829
- -----------------------------------------------------------------------------------------------------------
Net investment income 18,834,935
- -----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain from investment transactions (notes 1 and 4) 759,812
Net change in unrealized appreciation or depreciation of investments (5,925,814)
- -----------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (5,166,002)
- -----------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 13,668,933
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Year Ended Year Ended
5/31/99 5/31/98
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 18,834,935 $ 18,535,807
Net realized gain from investment transactions (notes 1 and 4) 759,812 1,741,055
Net change in unrealized appreciation or depreciation of investments (5,925,814) 9,935,425
- -----------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 13,668,933 30,212,287
- -----------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (14,921,960) (15,043,556)
Class B (442,577) (111,486)
Class C (508,583) (298,769)
Class R (3,072,260) (2,978,766)
From accumulated net realized gains from investment transactions:
Class A (1,072,990) (232,327)
Class B (39,163) (2,178)
Class C (40,494) (5,383)
Class R (204,848) (44,456)
- -----------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (20,302,875) (18,716,921)
- -----------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 77,448,397 40,781,150
Net proceeds from shares issued to shareholders due to reinvestment of
distributions 8,202,477 8,503,896
- -----------------------------------------------------------------------------------------------------------
85,650,874 49,285,046
Cost of shares redeemed (49,952,837) (56,173,488)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions 35,698,037 (6,888,442)
- -----------------------------------------------------------------------------------------------------------
Net increase in net assets 29,064,095 4,606,924
Net assets at the beginning of year 361,738,906 357,131,982
- -----------------------------------------------------------------------------------------------------------
Net assets at the end of year $390,803,001 $361,738,906
- -----------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at the end of year $ 13,914 $ 124,359
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
______
15
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Florida Municipal Bond Fund (the "Fund"),
among others. The Trust was organized as a Massachusetts business trust on July
1, 1996.
The Fund seeks 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
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 May
31, 1999, there were no such outstanding purchase commitments in the Fund.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions are distributed to shareholders not less frequently
than annually. Furthermore, capital gains are distributed only to the extent
they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
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 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 income taxes, to retain such tax-exempt
status when distributed to the shareholders of the Fund. All monthly tax-exempt
income dividends paid during the fiscal year ended May 31, 1999, have been
designated Exempt Interest Dividends. 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 any up-front sales charge
but may be subject to a 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
_____
16
<PAGE>
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 only under limited circumstances or by specified classes of
shareholders.
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap and 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 fiscal year ended May 31, 1999.
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. Actual results may differ
from those estimates.
Custodian Fee Credit
The Fund has an agreement with the custodian bank whereby the custodian fees and
expenses are reduced by credits earned on each Fund's cash on deposit with the
bank. Such deposit arrangements are an alternative to overnight investments.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
5/31/99 5/31/98
---------------------------- ---------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 4,391,925 $ 48,059,545 2,575,627 $ 28,008,973
Class B 1,052,216 11,537,205 420,285 4,565,047
Class C 889,995 9,754,281 328,848 3,571,148
Class R 740,527 8,097,366 428,140 4,635,982
Shares issued to shareholders due to reinvestment of distributions:
Class A 550,411 6,036,519 606,794 6,557,242
Class B 9,759 107,077 3,957 43,099
Class C 14,513 159,110 14,699 159,154
Class R 173,280 1,899,771 160,928 1,744,401
- ------------------------------------------------------------------------------------------------------------------------------
7,822,626 85,650,874 4,539,278 49,285,046
- ------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (4,017,386) (43,978,264) (4,482,418) (48,620,708)
Class B (78,240) (856,729) (17,384) (188,950)
Class C (113,554) (1,243,022) (128,897) (1,402,431)
Class R (354,310) (3,874,822) (548,970) (5,961,399)
- ------------------------------------------------------------------------------------------------------------------------------
(4,563,490) (49,952,837) (5,177,669) (56,173,488)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 3,259,136 $ 35,698,037 (638,391) $ (6,888,442)
==============================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Fund declared dividend distributions from its tax-exempt net investment
income which were paid on July 1, 1999, to shareholders of record on June 9,
1999, as follows:
- --------------------------------------------------------------------------------
Dividend per share:
Class A $.0455
Class B .0390
Class C .0405
Class R .0475
================================================================================
______
17
<PAGE>
Notes to Financial Statements (continued)
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities for the fiscal year ended May 31, 1999, aggregated $104,941,965 and
$71,839,135, respectively. Purchases and sales (including maturities) of
investments in short-term municipal securities for the fiscal year ended May 31,
1999, aggregated $31,200,000 and $31,200,000, respectively.
At May 31, 1999, the identified cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes.
5. Unrealized Appreciation (Depreciation)
At May 31, 1999, net unrealized appreciation of investments aggregated
$23,840,843 of which $24,825,083, related to appreciated securities and $984,240
related to depreciated securities.
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, the Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of the Fund as follows:
Average Daily Net Assets Management Fee
- --------------------------------------------------------------------------------
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
================================================================================
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 1999, John Nuveen & Co., Incorporated (the
"Distributor"), a wholly owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares of approximately $730,000, of which
approximately $640,300 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 fiscal year ended May 31, 1999, the Distributor compensated
authorized dealers directly with approximately $579,900 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 fiscal year
ended May 31, 1999, the Distributor retained approximately $140,800 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. The Distributor also collected and retained approximately $18,300
of CDSC on share redemptions during the fiscal year ended May 31, 1999.
7. Composition of Net Assets
At May 31, 1999, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
- --------------------------------------------------------------------------------
Capital paid-in $366,701,424
Balance of undistributed net investment income 13,914
Accumulated net realized gain from investment transactions 246,820
Net unrealized appreciation of investments 23,840,843
- --------------------------------------------------------------------------------
Net assets $390,803,001
================================================================================
_____
18
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is
as follows:
Class (Inception Date)
<TABLE>
<CAPTION>
Investment Operations Less Distributions
------------------------------- --------------------------
Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/90)**
1999 $10.94 $.55 $(.14) $.41 $(.55) $(.04) $(.59) $10.76 3.78%
1998 10.60 .56 .34 .90 (.55) (.01) (.56) 10.94 8.67
1997 10.39 .56 .21 .77 (.56) -- (.56) 10.60 7.59
1996 10.63 .57 (.24) .33 (.57) -- (.57) 10.39 3.14
1995 10.38 .58 .26 .84 (.59) -- (.59) 10.63 8.43
Class B (2/97)
1999 10.95 .47 (.14) .33 (.47) (.04) (.51) 10.77 3.05
1998 10.61 .48 .35 .83 (.48) (.01) (.49) 10.95 7.89
1997 (c) 10.59 .16 .02 .18 (.16) -- (.16) 10.61 1.70
Class C (9/95)**
1999 10.95 .49 (.14) .35 (.49) (.04) (.53) 10.77 3.22
1998 10.60 .50 .36 .86 (.50) (.01) (.51) 10.95 8.20
1997 10.39 .50 .21 .71 (.50) -- (.50) 10.60 7.00
1996 (c) 10.65 .35 (.26) .09 (.35) -- (.35) 10.39 1.30*
Class R (2/97)
1999 10.94 .57 (.14) .43 (.57) (.04) (.61) 10.76 4.01
1998 10.60 .58 .35 .93 (.58) (.01) (.59) 10.94 8.91
1997 (c) 10.59 .19 .01 .20 (.19) -- (.19) 10.60 1.93
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
-----------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
(000) ment ment ment (a) ment (a) Rate
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (6/90)**
1999 $297,505 .84% 5.00% .84% 5.00% 19%
1998 292,399 .84 5.13 .84 5.13 14
1997 296,970 .96 5.20 .82 5.34 54
1996 318,456 1.02 5.17 .83 5.36 94
1995 341,374 1.04 5.40 .73 5.71 53
Class B (2/97)
1999 15,768 1.59 4.25 1.59 4.25 19
1998 5,266 1.59 4.35 1.59 4.35 14
1997 (c) 785 1.58* 4.52* 1.58* 4.52* 54
Class C (9/95)**
1999 16,034 1.39 4.45 1.39 4.45 19
1998 7,646 1.39 4.58 1.39 4.58 14
1997 5,130 1.46 4.64 1.35 4.75 54
1996 (c) 1,175 1.55* 4.42* 1.38* 4.59* 94
Class R (2/97)
1999 61,496 .64 5.20 .64 5.20 19
1998 56,428 .64 5.33 .64 5.33 14
1997 (c) 54,247 .64* 5.55* .64* 5.55* 54
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Florida.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(c) From commencement of class operations as noted.
____
19
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust I:
We have audited the accompanying statement of net assets, including the
portfolio of investments, of Nuveen Flagship Florida Municipal Bond Fund (the
"Fund") (one of the portfolios constituting the Nuveen Flagship Multistate Trust
I (a Massachusetts business trust)), as of May 31, 1999, the related statement
of operations for the year then ended, and the statements of changes in net
assets and the financial highlights for each of the two years then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1999, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Flagship Florida Municipal Bond Fund of the Nuveen Flagship Multistate Trust I
as of May 31, 1999, and the results of its operations for the year then ended,
and the changes in its net assets and the financial highlights for each of the
two years then ended, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 20, 1999
____
20
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
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
Chase Global Fund Services Company
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
<PAGE>
SERVING
Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive 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 income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
NUVEEN
John Nuveen & Co Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
<PAGE>
May 31, 1999 Annual Report
NUVEEN
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Municipal Bond Funds
Dependable, tax-free
income to help
you keep more
[Photo appears here]
of what you earn.
Maryland
Pennsylvania
Virginia
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
<TABLE>
<CAPTION>
Contents
<C> <S>
1 Dear Shareholder
3 Nuveen Maryland Municipal Bond Fund
6 Nuveen Flagship Pennsylvania Municipal Bond Fund
9 Nuveen Flagship Virginia Municipal Bond Fund
12 Portfolio of Investments
26 Statement of Net Assets
27 Statement of Operations
28 Statement of Changes in Net Assets
30 Notes to Financial Statements
35 Financial Highlights
39 Report of Independent Public Accountants
40 Building a Better Portfolio
41 Fund Information
</TABLE>
<PAGE>
[Photo of Timothy R. Schwertfeger Appears Here]
Timothy R. Schwertfeger
Chairman of the Board
DEAR
Shareholder
I invite you to take a few minutes to read the annual report we've prepared for
you on the performance of your Nuveen state municipal bond fund for the fiscal
year ended May 31, 1999. You, along with your financial adviser, have made a
sound choice in choosing Nuveen to manage this portion of your assets. Since
1898, more than 1.3 million investors have trusted us to help them build and
sustain the wealth of a lifetime.
I'm pleased to report your fund continued to meet its primary objective of
providing you with dependable tax-free income and attractive after-tax total
returns. I will briefly describe the national economic environment during the
past 12 months. My discussion is followed by comments about the strategies
employed in managing your fund from the portfolio manager of each fund
represented in this report.
The Year In Review. The Federal Reserve eased short-term rates for the first
time in almost three years by cutting the federal funds rate in the fall of 1998
three times, bringing it to 4.75%. A month after the close of your fund's fiscal
year, the Fed raised its target by 25 basis points to 5%. (Be sure to read your
fund manager's comments about managing your fund in a rising interest rate
environment.)
The fed funds rate is the rate that banks charge each other for overnight
loans and serves as the basis many financial institutions use for setting
interest charges on a variety of products, from mortgage and car loans to credit
cards.
The Fed's rate cuts were made to avert a potential domestic credit crunch
and restore some stability to global markets. The moves seemed to have worked,
as the U.S. economy since has continued its pattern of non-inflationary growth,
accompanied by low interest rates and unemployment levels that remain among the
lowest in three decades, prompting the late June reversal by the Fed.
All indications point to a confident U.S. consumer who is comfortable with
the current state of the economy, especially the performance of the housing,
stock and job markets. This confidence is reflected in the most recent Consumer
Confidence Index report, issued by the University of Michigan's Conference Board
Inc., which showed a record-setting eighth consecutive month of gains in June.
On the global front, the turmoil of the past two years appears to be fading
somewhat, as international financial markets have begun to send recovery
signals.
Domestic inflation continues to be benign, with an increase of 2.1% for the
12 months ended May 31, 1999. The general backdrop of inflation indicators
continued to be mild, with the employment cost index, average hourly earnings,
and import and producer price trends all remaining favorable.
Federal Reserve Chairman Alan Greenspan recently stated that a key factor
in achieving today's peaceful coexistence of economic growth and low inflation
has been increased productivity. Improvements in productivity, spurred by
technological advances, have been responsible for
1
<PAGE>
offsetting wage and other inflationary pressures that we would normally expect
to see as part of a growing economy.
Why Municipal Bonds? Our municipal bond funds continued to offer attractive,
stable income in a market that places a high premium on yield. In 1998,
municipal bonds represented a reasonably insulated haven in an otherwise
turbulent market, with lower volatility relative to Treasury bonds and other
fixed-income investments. Even in 1999, with interest rates rising again,
municipals outperformed Treasuries through the end of May.
The high ratio of tax-exempt municipal yields to Treasury yields sheltered
municipal bonds, to some extent, from the price decline that occurred in the
Treasury market during the first part of the year. While the yield on 30-year
Treasury bonds rose from 5.10% at the end of December to 5.83% as of May 31,
1999, the yield on the Bond Buyer Revenue Bond Index, an unmanaged index of
long-term municipal revenue bonds, gained 15 basis points--from 5.26% to 5.41%.
Given the inverse relationship between interest rates and bond prices, we saw
bond prices fall as rates rose over this period.
Though municipal bond prices did decrease, the decline was not as dramatic
as the drop in Treasuries.
This performance differential reflects the fact that Treasuries had become
relatively expensive as the result of safe-haven buying during the international
economic crises in 1998. As the financial turmoil subsided, however, foreign
investors returned to investing in their own countries rather than in U.S.
dollar-denominated securities, and the decline in demand caused U.S. Treasuries
to drop in price.
At the end of May 1999, the ratio between long-term municipal yields and
30-year Treasury yields stood at 93%, compared with the historical average of
86% for the period of 1986-1999. For investors, this meant that quality long-
term municipal bonds offered yields comparable to those of long Treasury bonds
- --even before the tax advantages of municipal bonds were taken into account.
During the funds' fiscal year, that ratio hit a high of 104% in December.
On an after-tax basis in today's market, municipal bonds continue to
present an exceptionally attractive investment option relative to Treasuries.
During 1998, lower interest rates and the strong economy combined to
generate high levels of new municipal issuance and a significant increase in the
refinancing of existing bonds. Municipal issuance in 1998 reached $284 billion,
up 29% over 1997.
In the first part of 1999, however, as the market settled into a more
stable interest rate environment, refunding activity has dropped off
dramatically, resulting in a drop in municipal supply. This, in turn, has
enhanced the attractiveness of the municipal bonds that were brought to market,
as demand--especially from individual investors--remained relatively strong.
The Value of Nuveen Expertise. Nuveen Mutual Funds are a diverse collection of
investments featuring highly regarded asset management firms--Premier
Advisers/SM/--who direct the investment activities of each portfolio.
The Premier Advisers are firms that have earned a reputation for excellence
in their field of expertise--including Nuveen Investment Advisory Services for
income investing, Rittenhouse Financial Services for growth investing and
Institutional Capital Corporation for value investing.
For more information on our funds, contact your financial adviser for a
prospectus, or call Nuveen at (800) 621-7227, or download one from
www.nuveen.com. Please read the prospectus carefully before you invest or send
money.
We encourage you to talk with your financial adviser about Nuveen's
expanding array of investments and the ways they can help you establish a
diversified portfolio designed to build and sustain long-term financial
security.
We are grateful for the confidence you have placed in us and are dedicated
to maintaining your trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1999
2
<PAGE>
NUVEEN MARYLAND MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Tom Futrell discusses fund performance, the municipal market
and key investment strategies for the Maryland fund for the fiscal year ended
May 31, 1999.
Comments cover the year ended May 31, 1999; performance statistics are quoted
for Class A shares at net asset value.
How strong is Maryland's economy? Maryland continues to experience modest but
steady economic growth. Growth in the business services and high technology
sectors have helped diversify the state's economy, lessening its reliance on
federal government employment. Some of the employment growth, however, has come
from lower paying service-sector fields such as data processing and security
services, which has reduced Maryland's per capita income advantage over the
national average. Still, Maryland ranks 5th in the nation in per capita income.
Maryland is currently implementing a 10% tax cut that is being phased in over
several years.
In response to low interest rates, the state's municipal bond issuance was
up sharply in 1998.
Rising interest rates in 1999, however, significantly slowed municipal bond
activity--both new issuance and refundings--in the latter half of the fund's
fiscal year. There were two reasons the market slowed--the increased interest
rates, which primarily slowed new issuance, plus the fact that the refunding
market has essentially been exhausted. Municipalities flooded the market with
refundings in recent years when interest rates were dropping. A provision of the
Tax Reform Act of 1986, however, limits municipalities to only one tax-exempt
refunding per issue.
As is the case on the national level, increasing concerns about rising
economic growth and potential inflation caused bond yields to rise and prices to
fall. However, municipal bonds held their values quite well compared to U.S.
Treasury bonds.
How did Nuveen Maryland Municipal Bond Fund perform during its fiscal year?
Nuveen Maryland Municipal Bond Fund generated a total return on net asset value
of 3.65%. That compares to the 3.43% average annual total return posted by the
Lipper Maryland Municipal Debt Peer Group.* The Nuveen Maryland Municipal Bond
Fund ranked 16th out of 36 municipal bond funds for the fiscal year period.
Total return equals a fund's income and capital distributions, if any, plus or
minus changes in net asset value. The fund's taxable equivalent total return,
for investors in the 34.5% combined federal and state income tax bracket, was
6.11%.**
As of May 31, 1999, the fund's SEC 30-day yield was 4.10%. For investors in
the combined 34.5% federal and state income tax bracket, that is equivalent to a
yield of 6.26% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates declined. To protect the fund's income
stream, we looked for bonds with call dates far in the future--or better yet,
that are noncallable.
*The Lipper Peer Group return represents the average annualized total return of
the 36 funds in the Lipper Maryland Municipal Debt category. The return
assumes the reinvestment of dividends and does not reflect any applicable
sales charges.
**Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
3
<PAGE>
For example, we recently purchased non-callable insured AAA Baltimore Water
& Sewer bonds due in 2024, achieving a similar yield to what would have been
obtained with callable bonds.
In addition to good call protection, we continued to search for bonds that
offered attractive yields and sound underlying credit quality. With interest
rates at a higher level, and the widening differential between low-rated and
high-rated credits, we took the opportunity to investigate lower-rated issues.
Using the expertise of Nuveen Research, we considered only those bonds that
offered adequate compensation for the level of risk.
For example, we purchased bonds issued by Maryland Health and Educational
Facilities Authority for the Green Acres School, a small independent elementary
school. Because of the bonds' BBB- credit rating, the purchase involved
intensive research. Those efforts, however, paid off for the fund through the
bonds' very attractive 5.4% yield, which will help to boost the fund's income.
Another example was the purchase of Maryland Economic Development
Corporation for the Collegiate Housing Foundation University Courtyard Project.
These Baa3 rated bonds offered a 5.75% coupon and mature in 2019. The bonds,
which were issued to build student housing for the University of Maryland,
involve an innovative financing technique. Because of this unique structure and
the lower rating, the purchase required intensive research analysis. Both of
these bond issues offer significant yield premiums over AAA credits.
In recent months, we have taken advantage of rising interest rates by
selling some bonds at a loss--because as interest rates rose, prices of the
bonds fell--and subsequently buying similar securities, whose yield now
reflected the higher interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Maryland Municipal Bond Fund? With Maryland's
strong economy and expanding financing needs, we expect there will continue to
be a buoyant supply and demand for municipal bonds in areas such as housing,
healthcare, education and utilities.
We will continue to seek out lower investment grade and non-rated
opportunities to improve the incremental yield of the fund and boost income.
"With interest rates at a higher level, and the widening differential between
low-rated and high-rated credits, we took the opportunity to investigate lower-
rated issues."
4
<PAGE>
NUVEEN MARYLAND MUNICIPAL BOND FUND
Highlights as of May 31, 1999
Quick Facts
A Shares B Shares C Shares R Shares
NAV $ 10.46 $ 10.47 $ 10.46 $ 10.48
- --------------------------------------------------------------------------------
May's Declared Dividend* $0.0405 $0.0335 $0.0355 $0.0420
- --------------------------------------------------------------------------------
Fund Symbol NMDAX N/A NMDCX NMMDX
- --------------------------------------------------------------------------------
CUSIP 67065L831 67065L823 67065L815 67065L799
- --------------------------------------------------------------------------------
Inception Date 9/94 3/97 9/94 12/91
- --------------------------------------------------------------------------------
* Paid June 1, 1999
Total Returns (Annualized)/+/
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
1-Year 3.65% -0.68% 2.95% 3.07% 3.82%
- --------------------------------------------------------------------------------
1-Year TER** 6.11% 1.69% 4.98% 5.22% 6.37%
- --------------------------------------------------------------------------------
5-Year 6.18% 5.28% 5.47% 5.54% 6.44%
- --------------------------------------------------------------------------------
Since Inception 6.26% 5.63% 5.53% 5.56% 6.51%
+ Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate
of 34.5%).
Index Comparison/./
[Line Chart Appears Here]
<TABLE>
<CAPTION>
Nuveen Maryland Muveen Maryland Lehman Brothers
Municipal Municipal Municipal
Bond Fund (Offer) Bond Fund (NAV) Bond Index
<S> <C> <C> <C>
February 1992 9,580 10,000 10,000
May 1992 10,809 11,283 11,377
May 1993 11,394 11,893 12,005
May 1994 11,478 11,981 12,232
May 1995 12,620 13,174 13,584
May 1996 13,184 13,762 14,334
May 1997 14,202 14,825 15,645
May 1998 14,930 15,584 16,606
May 1999 14,874 15,526 16,574
</TABLE>
Nuveen Maryland Municipal Bond Fund (Offer) $14,874
Nuveen Maryland Municipal Bond Fund (NAV) $15,526
Lehman Brothers Municipal Bond Index $16,575
/./ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
Monthly Tax-Free Dividends (Class A Shares)
[Bar Chart Appears Here]
<TABLE>
<CAPTION>
Month
<S> <C>
June .0400
July .0400
August .0400
September .0400
October .0400
November .0400
December .0400
January .0405
February .0405
March .0405
April .0405
May .0405
</TABLE>
Portfolio Statistics
Fund Net Assets $75.3 million
- --------------------------------------------------
Effective Maturity 20.64 years
- --------------------------------------------------
Average
Effective Duration 7.86
- --------------------------------------------------
Top Five Sectors/1/
Housing (Multifamily) 23%
- --------------------------------------------------
Health Care 20%
- --------------------------------------------------
Housing (Single Family) 11%
- --------------------------------------------------
Tax Obligation (Limited) 9%
- --------------------------------------------------
U.S. Guaranteed 9%
- --------------------------------------------------
Bond Credit Quality/1/
[Pie Chart Appears Here]
AAA/U.S.
Guaranteed 65%
AA..........16%
A............6%
BBB/NR......13%
/1/ as a percentage of total bond holdings
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
5
<PAGE>
NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Tom O'Shaughnessy discusses fund performance, the municipal
market and key investment strategies for the Pennsylvania fund for the fiscal
year ended May 31, 1999.
Comments cover the year ended May 31, 1999; performance statistics are quoted
for Class A shares at net asset value.
How strong is Pennsylvania's economy? Although Pennsylvania's population growth
is below the national average, the state's economy is strengthening and
broadening beyond the economically cyclical heavy industrial base. Unemployment
registered 3.8% in May 1999, down from 4.6% a year ago. Per capita income is
about average for the nation.
Recently, the state has reduced its tax burden on individuals and business
in an effort to attract new industry.
In 1998, Pennsylvania was among the largest issuers of municipal bonds in
the country, and that plentiful supply continued into 1999. Several entities,
including Allegheny County and the University of Pittsburgh, sold bond issues
exceeding $100 million each.
As was the case on the national level, increasing concerns about rising
economic growth and potential inflation caused bond yields to rise and prices to
fall. However, municipal bonds held their values quite well compared to U.S.
Treasury bonds.
How did the fund perform during its fiscal year? Nuveen Flagship Pennsylvania
Municipal Bond Fund generated a total return on net asset value of 3.42%,
compared to the 3.23% average annual total return posted by the Lipper
Pennsylvania Municipal Debt Peer Group.* Nuveen Flagship Pennsylvania Municipal
Bond Fund ranked 27th out of 62 municipal bond funds for the fiscal year period
as ranked by Lipper. Total return equals a fund's income plus capital gains
distributions, if any, plus or minus changes in net asset value. The fund's
taxable equivalent total return, for investors in the 33% combined federal and
state income tax bracket, was 5.93%.**
As of May 31, 1999, the fund's SEC 30-day yield was 4.72%. For investors in
the combined 33% federal and state income tax bracket, that is equivalent to a
yield of 7.04% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates declined. To protect the fund's income
stream, we looked for bonds with call dates far in the future--or better yet,
that are noncallable. Only 5% of the Pennsylvania portfolio is callable between
now and the year 2001.
In addition to call protection, we continued to search for bonds that
offered attractive yields and sound underlying credit quality. Nuveen Research
helps us accomplish that. In addition, Nuveen Research helps us monitor events
in the municipal market and analyze how those events affect individual state and
national municipal markets.
For example, during spring 1998, a major not-for-profit healthcare provider
in Philadelphia declared bankruptcy. The fallout from Pittsburgh's Allegheny
Health Education and Research Foundation (AHERF) was most pronounced in the
healthcare sector of the Pennsylvania municipal market, but it was felt to a
lesser extent throughout the municipal market. Your fund did not own the
affected bonds.
* The Lipper Peer Group return represents the average annualized total return
of the 62 funds in the Lipper Pennsylvania Municipal Debt category. The
return assumes reinvestment of dividends and does not reflect any applicable
sales charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
6
<PAGE>
Uncertainty created by the Philadelphia healthcare situation prompted
investors to demand higher yields for lower-rated issues across the country,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen. Prior to the bankruptcy,
this spread had been relatively narrow, suggesting that investors were not being
compensated adequately for taking on additional credit risk. With spreads having
widened, lower-rated securities have become more attractive on a risk-adjusted
basis.
However, with interest rates at a higher level, and the widening
differential between low-rated and high-rated credits, we took the opportunity
to investigate lower-rated issues. Using the expertise of Nuveen Research, we
considered only those bonds that offered adequate compensation for the level of
risk.
Since AHERF, we added several financially sound Pennsylvania hospitals at
very attractive prices.
In recent months, we have taken advantage of rising interest rates by
selling some bonds at a loss--because as interest rates rose, prices of the
bonds fell--and subsequently buying similar securities, whose yield now
reflected the higher interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Flagship Pennsylvania Municipal Bond Fund?
Rising interest rates in 1999 have made it advantageous for us to lock in higher
yields by extending the portfolio's average maturity beyond that of our peer
group. We believe that bond yields are currently attractive in relation to
inflation. Should interest rates fall or remain stable, the portfolio's longer
effective maturity would be beneficial.
With Pennsylvania's increasingly diversified economy, we believe that there
will continue to be a buoyant supply and demand for municipal bonds in areas
such as housing, healthcare, education and utilities. We will continue to seek
out undervalued securities that provide income and the opportunity for price
appreciation through credit rating upgrades.
"During spring 1998, a major not-for-profit healthcare provider in Philadelphia
declared bankruptcy.
. . .
Your fund did not own the affected bonds."
7
<PAGE>
NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND
Highlights as of May 31, 1999
Quick Facts
A Shares B Shares C Shares R Shares
NAV $ 10.45 $ 10.47 $ 10.44 $ 10.44
- --------------------------------------------------------------------------------
May's Declared Dividend* $0.0430 $0.0365 $0.0385 $0.0450
- --------------------------------------------------------------------------------
Fund Symbol FPNTX N/A FPMBX NBPAX
- --------------------------------------------------------------------------------
CUSIP 67065L740 67065L732 67065L724 67065L716
- --------------------------------------------------------------------------------
Inception Date 10/86 2/97 2/94 2/97
- --------------------------------------------------------------------------------
* Paid June 1, 1999
Total Returns (Annualized)/+/
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
1-Year 3.42% -0.94% 2.66% 2.80% 3.55%
- --------------------------------------------------------------------------------
1-Year TER** 5.93% 1.46% 4.79% 5.06% 6.18%
- --------------------------------------------------------------------------------
5-Year 6.68% 5.77% 6.04% 6.10% 6.77%
- --------------------------------------------------------------------------------
10-Year 7.21% 6.75% 6.76% 6.63% 7.26%
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate
of 33%).
Index Comparison/./
[Line Chart Appears Here]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
Pennsylvania Pennsylvania Lehman Brothers
Municipal Municipal Municipal
Bond Fund Offer Bond Fund NAV Bond Index
<S> <C> <C> <C>
May 1989 9,580 10,000 10,000
1990 10,126 10,570 10,731
1991 11,063 11,548 11,813
1992 12,168 12,702 12,974
1993 13,551 14,145 14,526
1994 13,918 14,528 14,885
1995 15,016 15,674 16,240
1996 15,592 16,275 16,982
1997 16,897 17,638 18,391
1998 18,600 19,415 20,117
1999 19,236 20,080 21,058
</TABLE>
Nuveen Flagship Pennsylvania Municipal Bond Fund (Offer) $19,236
Nuveen Flagship Pennsylvania Municipal Bond Fund (NAV) $20,080
Lehman Brothers Municipal Bond Index $21,058
/./ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
Monthly Tax-Free Dividends (Class A Shares)/./
[Bar Chart Appears Here]
<TABLE>
<CAPTION>
Month
- -----
<S> <C>
June .0465
July .0450
August .0450
September .0450
October .0450
November .0450
December .0450
January .0430
February .0430
March .0430
April .0430
May .0430
</TABLE>
/./ The fund also paid shareholders capital gains and net ordinary income
distributions in December of $0.0593 per share.
Morningstar Rating/TM 1/
****
Overall rating among 1,586
municipal bond funds as
of 5/31/99.
Portfolio Statistics
Fund Net Assets $153 million
- --------------------------------------------------
Effective Maturity 21.29 years
- --------------------------------------------------
Average
Effective Duration 8.35
- --------------------------------------------------
Top Five Sectors/2/
Education and Civic Organizations 17%
- --------------------------------------------------
Housing (Single Family) 13%
- --------------------------------------------------
Health Care 13%
- --------------------------------------------------
Tax Obligation (General) 12%
- --------------------------------------------------
Utilities 11%
- --------------------------------------------------
Bond Credit Quality/2/
[Pie Chart Appears Here]
AAA/U.S.
Guaranteed 49%
AA...........9%
A...........10%
BBB/NR......32%
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
/1/ The Morningstar rating is an overall rating for the municipal bond category
and relates to Class A Shares only; other classes may vary. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of
5/31/99 and are subject to change every month. Past performance is no
guarantee of future results. Ratings are calculated from the fund's three-,
five-, and 10-year average annual returns (if applicable) in excess of 90-
day Treasury bill returns, with appropriate fee adjustments, and a risk
factor that reflects fund performance below 90-day T-bill returns. A shares
of the fund received 4 stars for the 3- and 5-year periods and 3 stars for
the 10-year period. The top 10% of the funds in a broad asset class receive
5 stars and the next 22.5% receive 4 stars. The fund was rated among 1,586,
1,184, and 368 funds for the three-, five-, and 10-year periods,
respectively.
/2/ as a percentage of total bond holdings
8
<PAGE>
NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager William Fitzgerald discusses fund performance, the municipal
market and key investment strategies for the Virginia fund for the fiscal year
ended May 31, 1999.
Comments cover the year ended May 31, 1999; performance statistics are quoted
for Class A shares at net asset value.
How strong is Virginia's economy? Because of its proximity to Washington, D.C.,
the state has traditionally had a significant reliance on the federal
government. However, the economy has diversified into the private sector in
recent years. With an unemployment rate of just 3.0% in May, job growth
continues to outpace the national average.
Virginia's expanding economy led to growing infrastructure and school
financing needs, resulting in strong municipal bond issuance in 1998.
Rising interest rates in 1999, however, significantly slowed municipal bond
activity--both new issuance and refundings--in the latter half of the fund's
fiscal year.
There were two reasons the market slowed--the increased interest rates,
which primarily slowed new issuance, plus the fact that the refunding market has
essentially been exhausted. Municipalities flooded the market with refundings in
recent years when interest rates were dropping. A provision of the Tax Reform
Act of 1986, however, limits municipalities to only one tax-exempt refunding per
issue.
As was the case on the national level, increasing concerns about rising
economic growth and potential inflation caused bond yields to rise and prices to
fall. However, municipal bonds held their values quite well compared to U.S.
Treasury bonds.
How did Nuveen Flagship Virginia Municipal Bond Fund perform during its fiscal
year? Nuveen Flagship Virginia Municipal Bond Fund generated a total return on
net asset value of 3.95%, outperforming the 3.51% average annual total return
posted by the Lipper Virginia Municipal Debt Peer Group.* The fund ranked 7th of
35 municipal bond funds in its Lipper peer category for the fiscal period. Total
return equals a fund's income plus capital gains distributions, if any, plus or
minus changes in net asset value. The fund's taxable equivalent return, for
investors in the 35% combined federal and state income tax bracket, was 6.61%.**
As of May 31, 1999, the fund's SEC 30-day yield was 4.24%. For investors in
the combined 35% federal and state income tax bracket, that is equivalent to a
yield of 6.52% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates declined. To protect the fund's income
stream, we looked for bonds with call dates far in the future--or better yet,
that are noncallable.
For instance, the fund sold water and sewer bonds with a higher coupon
issued by Henrico County that were callable in three years. Because of the
higher coupon, the bonds would very likely be called, forcing us to reinvest the
funds at what could be much lower yields. Instead, with the proceeds of that
sale, the fund purchased noncallable bonds, maturing in 2030, issued by the
Virginia College Building Authority for Washington & Lee University.
* The Lipper Peer Group return represents the average annualized total return
of the 35 funds in the Lipper Virginia Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
9
<PAGE>
In addition to call protection, we continued to search for bonds that
offered attractive yields and sound underlying credit quality. Because the fund
is well positioned in terms of call protection, we can afford to be particularly
selective in making new investments.
Nuveen Research also helps us monitor events in the municipal market and
analyze how those events affect individual state and national municipal markets.
For example, during spring 1998, a major not-for-profit healthcare provider
in Philadelphia declared bankruptcy. While the impact of this bankruptcy was
most pronounced in the healthcare sector of the Pennsylvania municipal market,
it was felt to a lesser extent throughout the municipal market.
Uncertainty created by the Philadelphia healthcare situation prompted
investors to demand higher yields for lower-rated issues across the country,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen. Prior to the bankruptcy,
this spread had been relatively narrow, suggesting that investors were not being
compensated adequately for taking on additional credit risk. With spreads having
widened, lower-rated securities have become more attractive on a risk-adjusted
basis.
With interest rates at a higher level, and the widening differential
between low-rated and high-rated credits, we took the opportunity to investigate
lower-rated issues. Using the expertise of Nuveen Research, we considered only
those bonds that offered adequate compensation for the level of risk were
considered for purchase.
In recent months, we have taken advantage of rising interest rates by
selling some bonds at a loss--because as interest rates rose, prices of the
bonds fell--and subsequently buying similar securities, whose yield now
reflected the higher interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Flagship Virginia Municipal Bond Fund? Rising
interest rates in 1999 have made it advantageous for us to lock in higher yields
by extending the portfolio's average maturity beyond that of our peer group. We
believe that bond yields are currently attractive in relation to inflation.
Should interest rates fall or remain stable, the portfolio's longer maturity
would be advantageous.
With Virginia's strong economy and influx of population, we expect there
will continue to be a buoyant supply and demand for municipal bonds in areas
such as housing, healthcare, education and utilities.
We will continue to seek out undervalued securities that provide income and
the opportunity for price appreciation through credit rating upgrades.
"Because the fund is well positioned in terms of call protection, we can afford
to be particularly selective in making new investments."
10
<PAGE>
NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND
Highlights as of May 31, 1999
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 10.93 $ 10.93 $ 10.92 $ 10.93
- -----------------------------------------------------------------------------
May's Declared Dividend* $0.0435 $0.0365 $0.0385 $0.0455
- -----------------------------------------------------------------------------
Fund Symbol FVATX N/A FVACX NMVAX
- -----------------------------------------------------------------------------
CUSIP 67065L690 67065L682 67065L674 67065L666
- -----------------------------------------------------------------------------
Inception Date 3/86 2/97 10/93 2/97
- -----------------------------------------------------------------------------
* Paid June 1, 1999
</TABLE>
Total Returns (Annualized)/+/
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
1-Year 3.95% -0.37% 3.20% 3.30% 4.18%
- ----------------------------------------------------------------
1-Year TER** 6.61% 2.18% 5.44% 5.66% 6.96%
- ----------------------------------------------------------------
5-Year 6.67% 5.77% 6.00% 6.07% 6.78%
- ----------------------------------------------------------------
10-Year 7.33% 6.87% 6.86% 6.74% 7.39%
</TABLE>
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate of
35%).
Index Comparison*
[Line Chart Appears Here]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
Virginia Virginia Lehman Brothers
Municipal Municipal Municipal
May Bond Fund (Offer) Bond Fund (NAV) Bond Index
- ---
<S> <C> <C> <C>
1989 9,580 10,000 10,000
1990 10,168 10,614 10,731
1991 11,154 11,643 11,813
1992 12,198 12,733 12,974
1993 13,707 14,308 14,526
1994 14,066 14,682 14,885
1995 15,190 15,856 16,240
1996 15,802 16,495 16,982
1997 17,101 17,851 18,391
1998 18,691 19,511 20,117
1999 19,430 20,282 21,058
</TABLE>
- --- Nuveen Flagship Virginia Municipal Bond Fund (Offer) $19,430
- --- Nuveen Flagship Virginia Municipal Bond Fund (NAV) $20,282
- --- Lehman Brothers Municipal Bond Index $21,058
* The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Index is comprised of a broad range of investment-
grade municipal bonds, and does not reflect any initial or ongoing expenses.
The Nuveen fund return depicted in the chart reflects the initial maximum
sales charge applicable to A shares (4.20%) and all ongoing fund expenses.
Monthly Tax-Free Dividends (Class A Shares)*
[Bar Chart Appears Here]
<TABLE>
<CAPTION>
Month
- -----
<S> <C>
June .0460
July .0450
August .0450
September .0450
October .0450
November .0450
December .0450
January .0435
February .0435
March .0435
April .0435
May .0435
</TABLE>
* The fund also paid shareholders capital gains and net ordinary income
distributions in December of $0.0298 per share.
Morningstar Rating/TM 1/
****
Overall rating among 1,586 municipal bond funds as of 5/31/99.
Portfolio Statistics
<TABLE>
<CAPTION>
<S> <C>
Fund Net Assets $ 223.8 million
- -------------------------------------------
Effective Maturity 20.17 years
- -------------------------------------------
Average Effective Duration 6.96
- -------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Top Five Sectors/2/
<S> <C>
Health Care 14%
- -------------------------------------------
Tax Obligation (Limited) 11%
- -------------------------------------------
Education and Civic Organizations 11%
- -------------------------------------------
U.S. Guaranteed 11%
- -------------------------------------------
Water and Sewer 11%
- -------------------------------------------
</TABLE>
Bond Credit Quality/2/
[Pie Chart Appears Here]
<TABLE>
<CAPTION>
<S> <C>
AAA/U.S.
Guaranteed...... 37%
AA.............. 31%
A............... 20%
BBB/NR.......... 12%
</TABLE>
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
/1/ The Morningstar rating is an overall rating for the municipal bond category
and relates to Class A Shares only; other classes may vary. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of
5/31/99 and are subject to change every month. Past performance is no
guarantee of future results. Ratings are calculated from the fund's three-,
five-, and 10-year average annual returns (if applicable) in excess of 90-
day Treasury bill returns, with appropriate fee adjustments, and a risk
factor that reflects fund performance below 90-day T-bill returns. A shares
of the fund received 4 stars for the 3- and 5-year periods and 3 stars for
the 10-year period. The top 10% of the funds in a broad asset class receive
5 stars and the next 22.5% receive 4 stars. The fund was rated among 1,586,
1,184, and 368 funds for the three-, five-, and 10-year periods,
respectively.
/2/ as a percentage of total bond holdings
11
<PAGE>
Portfolio of Investments
Nuveen Maryland Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials -- 2.2%
$ 1,500,000 Mayor and City Council of Baltimore (Maryland), Port Facilities 4/02 at 103 AA- $ 1,627,575
Revenue Bonds (Consolidation Coal Sales Company Project), Series
1984B, 6.500%, 10/01/11
- ----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations -- 6.2%
Maryland Health and Higher Educational Facilities Authority,
Educational Facilities Mortgage Revenue Bonds, Green Acres School
Issue, Series 1998:
665,000 5.300%, 7/01/18 7/06 at 102 BBB- 647,451
1,425,000 5.300%, 7/01/28 7/06 at 102 BBB- 1,358,980
1,000,000 Maryland Health and Higher Educational Facilities Authority, 7/08 at 102 Aa2 999,950
Refunding Revenue Bonds, The Johns Hopkins University Issue,
Series 1998, 5.125%, 7/01/20
1,500,000 Morgan State University, Maryland, Academic Fees and No Opt. Call AAA 1,695,495
Auxiliary Facilities Fees Revenue Refunding Bonds, 1993
Series, 6.100%, 7/01/20
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care -- 19.5%
2,165,000 City of Gaithersburg, Maryland, Nursing Home Revenue Refunding No Opt. Call AAA 2,519,259
Bonds (Shady Grove Adventist Nursing and Rehabilitation Center
Project), Series 1992A, 6.500%, 9/01/12
1,790,000 Maryland Economic Development Corporation (Health and Mental 4/11 at 102 N/R 1,811,713
Hygiene Providers Facilities Acquisition Program), Revenue Bonds,
Series 1996A, 7.625%, 4/01/21
2,000,000 Maryland Health and Higher Educational Facilities Authority, 6/09 at 101 A 2,018,500
Kaiser Permanente, Revenue Bonds, 1998 Series A, 5.375%, 7/01/15
1,000,000 Maryland Health and Higher Educational Facilities Authority, 7/03 at 102 AAA 998,450
Refunding Revenue Bonds, Francis Scott Key Medical Center Issue,
Series 1993, 5.000%, 7/01/13
1,000,000 Maryland Health and Higher Educational Facilities Authority, 7/03 at 102 Baa1 1,017,390
Project and Refunding Revenue Bonds, Doctors Community
Hospital Issue, Series 1993, 5.750%, 7/01/13
3,500,000 Maryland Health and Higher Educational Facilities Authority, 1/08 at 101 Aaa 3,413,655
Revenue Bonds, Upper Chesapeake Hospitals Issue,
Series 1998A, 5.125%, 1/01/38
2,000,000 Prince George's County, Maryland, Project and Refunding Revenue Bonds 7/04 at 102 Baa1 1,891,140
(Dimensions Health Corporation Issue), Series 1994, 5.375%, 7/01/14
1,000,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental 1/05 at 102 AAA 1,096,260
Control Facilities Financing Authority, Hospital Revenue Bonds,
1995 Series A (Hospital Auxilio Mutuo Obligated Group Project),
6.250%, 7/01/16
- ----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 22.5%
1,500,000 Baltimore County, Maryland, Mortgage Revenue Refunding Bonds 10/08 at 102 AAA 1,497,540
(GNMA Collateralized -- Cross Creek Apartments Project), Series
1998A, 5.250%, 10/20/33
1,000,000 Baltimore City, Maryland, Mortgage Revenue Refunding Bonds, Series 12/02 at 102 AAA 1,065,480
1992 (GNMA Collateralized-Tindeco Wharf Apartments Project), 6.700%,
12/20/28
1,000,000 Howard County, Maryland, Mortgage Revenue Refunding Bonds, Series 7/02 at 102 AAA 1,051,160
1992 (Howard Hills Townhouses Project, FHA-Insured Mortgage
Loan), 6.400%, 7/01/24
2,000,000 Howard County, Maryland, Multifamily Housing Revenue Refunding Bonds, 7/02 at 104 Baa2 2,195,840
Refunding Bonds, Series 1994 (Chase Glen Project), 7.000%, 7/01/24
(Mandatory put 7/01/04)
Community Development Administration, Department of Housing and Community
Development, State of Maryland, Multifamily Housing Revenue Bonds
(Insured Mortgage Loans), 1992 Series D:
700,000 6.700%, 5/15/27 5/02 at 102 Aa 742,889
500,000 6.750%, 5/15/33 5/02 at 102 Aa 531,170
1,000,000 Community Development Administration, Maryland Department of Housing 1/09 at 101 Aa2 986,760
of Housing and Community Development, Housing Revenue Bonds, 1999
Series A, 5.350%, 7/01/41 (Alternative Minimum Tax)
</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 Community Development Administration, Maryland Department of Housing 10/08 at 101 1/2 Aaa $ 1,008,410
and Community Development, Multifamily Development Revenue Bonds
(Auburn Manor Project), Series 1998 A, 5.300%, 10/01/28
(Alternative Minimum Tax)
1,000,000 Housing Opportunities Commission of Montgomery County (Montgomery 7/05 at 102 Aaa 1,050,890
County, Maryland), Multifamily Housing Revenue Bonds,
1995 Series A., 6.000%, 7/01/20
4,420,000 Housing Opportunities Commission of Montgomery County (Montgomery 7/08 at 101 Aaa 4,354,009
County, Maryland), Multifamily Housing Development Bonds,
1998 Series A, 5.250%, 7/01/29 (Alternative Minimum Tax)
1,550,000 Prince George's County Housing Authority (New Keystone Apartments - 1/02 at 102 AAA 1,640,722
FHA-Insured), 6.800%, 7/01/25
860,000 Housing Authority of Prince George's County, Maryland, Mortgage 11/99 at 101 AAA 862,812
Revenue Refunding Bonds (Collateralized Foxglenn Apartments Project),
Series 1998A, 5.450%, 5/20/14 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 10.3%
1,385,000 Community Development Administration, Department of Housing and Community 4/01 at 102 Aa2 1,445,691
Development, State of Maryland, Single Family Program Bonds,
1991 Fourth Series, 7.450%, 4/01/32 (Alternative Minimum Tax)
1,500,000 Community Development Administration, Maryland Department of Housing 3/08 at 101 1/2 Aa2 1,503,525
and Community Development, Residential Revenue Bonds,
1998 Series A, 5.300%, 9/01/23 (Alternative Minimum Tax)
1,615,000 Housing Opportunities Commission of Montgomery County (Maryland), 7/04 at 102 Aa2 1,725,547
Single Family Mortgage Revenue Bonds, 1994 Series A, 6.600%, 7/01/14
2,970,000 Housing Authority of Prince George's County (Maryland), FHLMC/FNMA/GNMA 8/07 at 102 AAA 3,062,040
Collateralized, Single Family Mortgage Revenue Bonds, Series 1997,
5.750%, 8/01/26 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 9.2%
1,000,000 Mayor and City Council of Baltimore, Maryland, Certificates of 10/07 at 102 AAA 999,340
Participation (Emergency Telecommunications Facilities),
Series 1997A, 5.000%, 10/01/17
2,000,000 Mayor and City Council of Baltimore Maryland, Convention Center Refunding 9/08 at 102 AAA 1,968,560
Revenue Bonds, Series 1998, 5.000%, 9/01/19
1,760,000 Maryland Stadium Authority, Convention Center Expansion Lease Revenue 12/04 at 102 AAA 1,906,450
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 520,070
500,000 7.500%, 12/15/10 (Alternative Minimum Tax) 12/99 at 102 Aa 519,930
1,000,000 Washington Suburban Sanitary District (Montgomery and Prince George's 6/07 at 100 Aa1 1,000,650
Counties, Maryland), General Construction Bonds of 1997, 5.125%, 6/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 6.5%
1,285,000 Maryland Transportation Authority, Special Obligation Revenue Bonds, 7/04 at 102 AAA 1,304,031
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 Facilities Projects 7/02 at 100 A+ 1,038,140
Revenue Bonds, Series 1992, 5.750%, 7/01/15
2,500,000 Washington Metropolitan Area Transit Authority (District of Columbia), 1/04 at 102 AAA 2,532,500
Gross Revenue Transit Refunding Bonds, Series 1993, 5.250%, 7/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 9.2%
600,000 City of Baltimore, Maryland (Mayor and City Council of Baltimore), 10/02 at 100 AAA 650,412
General Obligation Consolidated Public Improvement Bonds,
Series 1992-A, 6.500%, 10/15/12 (Pre-refunded to 10/15/02)
700,000 The Maryland National Capital Park and Planning Commission, Maryland 7/02 at 102 AA*** 758,093
(Prince George's County), 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)
500,000 Maryland Health and Higher Educational Facilities Authority, Revenue 7/00 at 102 AAA 529,390
Bonds, Sinai Hospital of Baltimore Issue, Series 1990, 7.000%, 7/01/19
(Pre-refunded to 7/01/00)
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Maryland Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 500,000 Maryland Health and Higher Educational Facilities Authority, 7/00 at 102 AAA $ 528,060
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 Authority (Doctors 7/00 at 102 AAA 1,082,345
Community Hospital Issue), Series 1990, 8.750%, 7/01/22
(Pre-refunded to 7/01/00)
2,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 7/07 at 101 1/2 AAA 2,811,575
6.000%, 7/01/26 (Pre-refunded to 7/01/07)
500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1992 7/02 at 101 1/2 AAA 547,820
(General Obligation Bonds), 6.600%, 7/01/13
(Pre-refunded to 7/01/02)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 3.8%
1,000,000 Montgomery County, Maryland, Solid Waste System Revenue Bonds, 6/03 at 102 AAA 1,058,510
1993 Series A, 5.875%, 6/01/13 (Alternative Minimum Tax)
1,500,000 Prince George's County, Maryland, Pollution Control Revenue Refunding 1/03 at 102 A1 1,621,560
Bonds (Potomac Electric Project), 1993 Series, 6.375%, 1/15/23
185,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, 7/99 at 101 1/2 BBB+ 188,376
Series 1989-N, 7.125%, 7/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 7.3%
2,000,000 City of Baltimore, Maryland (Mayor and City Council of Baltimore), No Opt. Call AAA 1,975,960
Project and Refunding Revenue Bonds (Water Projects),
Series 1994-A, 5.000%, 7/01/24
2,000,000 City of Baltimore, Maryland (Mayor and City Council of Baltimore), 7/08 at 101 AAA 1,950,499
Project and Refunding Revenue Bonds (Water Projects),
Series 1998-A, 5.000%, 7/01/28
1,500,000 City of Baltimore, Maryland (Mayor and City Council of Baltimore), 7/06 at 101 AAA 1,550,309
Project and Refunding Revenue Bonds (Water Projects),
Series 1996-A, 5.500%, 7/01/26
- -----------------------------------------------------------------------------------------------------------------------------------
$70,580,000 Total Investments - (cost $70,194,062) - 96.7% 72,862,883
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less - Liabilities - 3.3% 2,461,394
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $75,324,277
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of
independent public accountants): Dates (month and year) and
prices of the earliest optional call or redemption. There may
be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. government or U.S. government agency
securities which ensures the timely payment of principal and
interest. Securities are normally considered to be equivalent
to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
14
<PAGE>
Portfolio of Investments
Nuveen Flagship Pennsylvania Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Goods - 2.0%
$3,000,000 Delaware County Industrial Development Authority (Pennsylvania), 1/08 at 102 A- $3,099,540
Refunding Revenue Bonds, Series A 1997 (Resource Recovery Facility),
6.200%, 7/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 17.1%
3,000,000 Allegheny County Higher Education Building Authority (Commonwealth 2/06 at 102 Baa3 3,135,870
of Pennsylvania), College Revenue Bonds, Series A of 1996
(Robert Morris College), 6.250%, 2/15/26
Allegheny County Higher Education Building Authority (Commonwealth
of Pennsylvania), College Revenue Refunding Bonds, Series A of
1998 (Robert Morris College):
1,190,000 5.500%, 5/01/15 No Opt. Call Baa3 1,219,845
1,500,000 6.000%, 5/01/28 No Opt. Call Baa3 1,661,550
Chester County Health and Education Facilities Authority
(Pennsylvania), College Revenue Bonds, Series of 1998 (Immaculate College):
1,300,000 5.600%, 10/15/18 10/08 at 102 BBB- 1,285,531
2,300,000 5.625%, 10/15/27 10/08 at 102 BBB- 2,270,928
2,315,000 Delaware County Authority (Pennsylvania), College Revenue 10/08 at 100 BBB- 2,212,746
Refunding Bonds (Neumann College), Series 1998A, 5.375%, 10/01/26
Delaware County Authority, School Revenue Bonds, Series of 1998 (The
Haverford School Project):
1,000,000 5.000%, 3/15/19 3/04 at 100 A- 941,790
2,000,000 5.125%, 3/15/24 3/04 at 100 A- 1,882,240
New Wilmington Municipal Authority (Lawrence County, Pennsylvania),
College Revenue Bonds, Series 1998 (Westminster College):
1,275,000 5.300%, 3/01/18 3/08 at 100 Baa1 1,243,100
935,000 5.350%, 3/01/28 3/08 at 100 Baa1 906,239
750,000 Northeastern Pennsylvania Hospital and Education Authority, College 2/05 at 100 AAA 839,258
Revenue, Bonds, Luzerne County Community College, 6.625%, 8/15/15
Pennsylvania Higher Educational Facilities Authority (Commonwealth
of Pennsylvania), Geneva College Revenue Bonds, Series of 1998:
4,150,000 5.375%, 4/01/15 4/08 at 102 BBB- 4,082,355
1,800,000 5.375%, 4/01/23 4/08 at 102 BBB- 1,707,264
1,250,000 Pennsylvania Higher Educational Facilities Authority, Thomas 7/09 at 100 AAA 1,218,238
Jefferson University Revenue Bonds, Series 1999, 5.000%, 7/01/19 (WI)
865,000 Union County Higher Educational Facilities Financing Authority, 4/06 at 101 AAA 892,109
Union County, Pennsylvania, University Revenue Bonds, Series 1996
(Bucknell University), 5.500%, 4/01/16
600,000 The General Municipal Authority of the City of Wilkes-Barre, College 12/00 at 100 N/R 646,278
Misericordia Revenue Refunding Bonds, Series A of 1992, 7.750%, 12/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Energy - 2.6%
3,500,000 Pennsylvania Economic Development Financing Authority (Sun Company, 12/04 at 102 BBB 3,945,235
Inc. (R&M) Project), Series 1994A, 7.600%, 12/01/24
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 12.7%
1,525,000 Allegheny County Hospital Development Authority (Allegheny County, No Opt. Call N/R 1,525,000
Pennsylvania), Hospital Revenue Bonds, Series Q (Allegheny Valley
Hospital, Sublessee), 7.000%, 8/01/15
500,000 Clarion County Hospital Authority, Hospital Revenue Refunding Bonds, 7/99 at 102 N/R 512,045
Series 1989 (Clarion Hospital Project), 8.100%, 7/01/12
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship Pennsylvania Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care (continued)
Columbia County Hospital Authority, Columbia County, Pennsylvania,
Health Care Revenue Bonds (The Bloomsburg Hospital Obligated Group
Project), Series of 1999:
$ 3,735,000 5.850%, 6/01/24 6/09 at 100 BBB- $ 3,667,621
1,000,000 5.900%, 6/01/29 6/09 at 100 BBB- 980,700
1,585,000 The City of Jeannette Health Services Authority, Hospital 11/06 at 102 BBB+ 1,636,719
Revenue Bonds (Jeannette District Memorial Hospital),
Series A of 1996, 6.000%, 11/01/18
2,000,000 Monroeville, Pennsylvania, Hospital Authority, Hospital 10/05 at 102 N/R 1,980,000
Revenue Refunding Bonds, Forbes Health System, 6.250%, 10/01/15
500,000 Montgomery County, Pennsylvania, Higher Education and Health 2/00 at 100 AAA 514,525
Authority, Hospital Revenue Bonds (Holy Redeemer Hospital), Series
1990A, 7.625%, 2/01/20
1,985,000 Philadelphia, Pennsylvania, Hospitals and Higher Education 11/02 at 102 A- 2,052,490
Facilities Authority, Hospital Revenue Refunding Bonds,
Chestnut Hill Hospital, 6.500%, 11/15/22
2,500,000 Philadelphia Pennsylvania Hospitals and Higher Education 7/07 at 102 BBB+ 2,529,250
Facilities Authority, Hospital Revenue Refunding Bonds,
Jeanes Hospital Project, 5.875%, 7/01/17
City of Pottsville Hospital Authority, Hospital Revenue Bonds
(The Pottsville Hospital and Warne Clinic), Series of 1998:
1,265,000 5.250%, 7/01/10 No Opt. Call BBB 1,221,927
2,250,000 5.625%, 7/01/24 7/08 at 100 BBB 2,143,935
230,000 Health Care Facilities Authority of Sayre (Pennsylvania), Series 3/01 at 102 AAA 246,017
1991A, Revenue Bonds, Guthrie Healthcare System,
7.100%, 3/01/17
350,000 Washington County Hospital Authority, Hospital Revenue Bonds, 12/02 at 102 A2 380,447
Series 1992 (Monongahela Valley Hospital, Inc. Project), 6.750%,
12/01/08
- ----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 1.3%
500,000 Redevelopment Authority of the County of Bucks, Pennsylvania, 2/02 at 100 AAA 518,975
Mortgage Revenue Refunding Bonds (Warminster Heights Section 8
Assisted FHA-Insured Project), 1992 Series A, 6.875%, 8/01/23
1,535,000 Redevelopment Authority of the City of Philadelphia, 2/08 at 100 Aa2 1,545,883
Pennsylvania, Multifamily Housing Refunding Revenue Bonds,
Series 1998 (FHA-Insured Mortgage Loan - Woodstock Mutual
Homes, Inc. Project), 5.450%, 2/01/23
- ----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 13.1%
3,260,000 Allegheny County Residential Finance Authority, Single Family 11/08 at 102 Aaa 3,268,117
Mortgage Revenue Bonds, 1998 Series DD-2, 5.400%, 11/01/29
(Alternative Minimum Tax)
1,670,000 Allegheny County Residential Finance Authority, Single Family No Opt. Call Aaa 260,871
Mortgage Revenue Bonds, 1994 Series Y, 0.000%, 5/01/27
(Alternative Minimum Tax)
300,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 10/99 at 102 AA+ 308,355
Revenue Bonds, Series S, 7.600%, 4/01/16
85,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 4/01 at 102 AA+ 88,564
Revenue Bonds, Series 30, 7.300%, 10/01/17
520,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 10/01 at 102 AA+ 547,248
Revenue Bonds, Series 1991-32, 7.150%, 4/01/15
2,500,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 4/06 at 102 AA+ 2,645,575
Revenue Bonds, Series 1996-50A, 6.000%, 10/01/13
2,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 4/06 at 102 AA+ 2,121,060
Revenue Bonds, Series 1996-51, 6.375%, 4/01/28 (Alternative
Minimum Tax)
1,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 10/06 at 102 AA+ 1,049,360
Revenue Bonds, Series 53A, 6.050%, 4/01/18 (Alternative
Minimum Tax)
3,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 10/07 at 101 AA+ 3,039,900
Revenue Bonds, Series 1997-61A, 5.500%, 4/01/29 (Alternative
Minimum Tax)
2,600,000 Urban Redevelopment Authority of Pittsburgh, Home Improvement Loan 8/05 at 102 A 2,725,268
Bonds, 1995 Series A, 6.375%, 8/01/18 (Alternative Minimum Tax)
970,000 Pittsburgh, Pennsylvania, Urban Redevelopment Authority, Mortgage 4/06 at 102 AAA 1,010,410
Revenue Bonds, Series A, 6.000%, 4/01/19 (Alternative
Minimum Tax)
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 995,000 Pittsburgh, Pennsylvania, Urban Redevelopment Authority, Mortgage 4/06 at 102 AAA $ 1,055,904
Revenue Bonds, Series D, 6.250%, 10/01/17
765,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue 4/07 at 102 AAA 809,385
Bonds, 1997 Series A, 6.200%, 10/01/21 (Alternative Minimum Tax)
1,055,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue 4/04 at 102 AAA 1,126,550
Bonds, 1994 Series A, 6.625%, 4/01/22 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care -- 6.8%
2,920,000 Allegheny County Residential Finance Authority, Mortgage Revenue 10/05 at 100 AAA 3,167,207
Bonds (FHA-Insured Mortgage, Ladies Grand Army of the Republic
Health Facility Project), 1995 Series G, 6.350%, 10/01/36
2,000,000 Armstrong County Hospital Authority (Armstrong County, Pennsylvania), 12/01 at 100 AAA 2,131,740
Health Center Revenue Refunding Bonds, Series 1991 (Canterbury Place
Project), 6.500%, 12/01/21
1,000,000 Butler County Industrial Development Authority (Butler County, 6/03 at 102 A 1,013,910
Pennsylvania), Health Center Revenue Refunding Bonds,
Series 1993, Pittsburgh Lifetime Care Community (Sherwood
Oaks Project), 5.750%, 6/01/16
Chester County Health and Educational Facilities Authority
(Pennsylvania), Mortgage Revenue Refunding Bonds (Tel Hai
Obligated Group Project), Series of 1998:
1,000,000 5.400%, 6/01/18 12/08 at 100 BBB 957,620
1,100,000 5.500%, 6/01/25 12/08 at 100 BBB 1,046,056
2,000,000 Montgomery County Higher Education and Health Authority, Mortgage 1/06 at 101 BBB 2,097,660
Revenue Bonds, Series 1996 (Waverly Heights Project),
6.375%, 1/01/26
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 12.2%
Girard School District (Erie County, Pennsylvania), General Obligation
Bonds, Series of 1999B:
1,645,000 0.000%, 11/15/26 No Opt. Call AAA 379,518
1,635,000 0.000%, 11/05/28 No Opt. Call AAA 338,510
2,000,000 McKeesport Area School District (Allegheny County, Pennsylvania), 10/06 at 100 AAA 2,206,020
General Obligation Bonds, Series of 1996A, 6.000%, 10/01/25
4,875,000 McKeesport Area School District (Allegheny County, Pennsylvania), No Opt. Call AAA 1,265,599
General Obligation Bonds, Series of 1997D, 0.000%, 10/01/24
2,195,000 Montour School District (Allegheny County, Pennsylvania), General No Opt. Call AAA 1,023,155
Obligation Bonds, Series B of 1993, 0.000%, 1/01/14
1,000,000 Commonwealth of Pennsylvania, General Obligation Bonds, First 5/06 at 101 1/2 AAA 1,020,800
Series of 1996, 5.375%, 5/15/16
6,050,000 City of Philadelphia, Pennsylvania, General Obligation Bonds, 3/09 at 101 AAA 5,795,000
Series 1998, 5.000%, 3/15/28
3,500,000 The School District of Philadelphia, Pennsylvania, General 4/09 at 100 AAA 3,125,430
Obligation Bonds, Series A of 1999, 4.500%, 4/01/23
1,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 7/07 at 100 A 1,511,670
5.375%, 7/01/25
2,000,000 Radnor Township, General Obligation Bonds, Series 1996, 5.250%, 11/01/26 5/06 at 100 Aa2 1,967,080
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 4.0%
1,500,000 The Harrisburg Authority, Dauphin County, Pennsylvania, Series I 4/06 at 102 AAA 1,557,000
of 1996 (Pooled Bond Program), 5.625%, 4/01/19
1,390,000 Pennsylvania Intergovernmental Cooperative Authority (City of No Opt. Call AAA 1,595,512
Philadelphia Funding Program), Series of 1994, 7.000%, 6/15/05
3,000,000 Southeastern Pennsylvania Transportation Authority, Special Revenue 3/07 at 102 AAA 3,026,940
Bonds, Series of 1997, 5.375%, 3/01/22
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation -- 4.8%
2,300,000 County of Allegheny, Pennsylvania, Airport Revenue Refunding Bonds, 1/08 at 101 AAA 2,291,053
Series 1997A (Pittsburgh International Airport), 5.250%, 1/01/16
(Alternative Minimum Tax)
1,550,000 Pennsylvania Turnpike Commission, Pennsylvania Turnpike Revenue 12/02 at 102 AAA 1,579,063
Bonds, Series O of 1992, 5.500%, 12/01/17
3,500,000 Philadelphia, Pennsylvania, Airport Revenue Bonds, Philadelphia 6/07 at 102 AAA 3,472,385
Airport System, Series 1997B, 5.400%, 6/15/27
(Alternative Minimum Tax)
</TABLE>
17
<PAGE>
Portfolio of Investments
Nuveen Flagship Pennsylvania Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - 10.3%
$ 200,000 Allegheny County Hospital Development Authority, Hospital Revenue Bonds, 10/01 at 100 BBB+*** $ 214,542
Series 1991 A (St. Margaret Memorial Hospital), 7.125%, 10/01/21
(Pre-refunded to 10/01/01)
200,000 Butler County Hospital Authority (Butler County, Pennsylvania), Hospital 6/01 at 102 AAA 216,304
Revenue Bonds, Series 1991A (North Hills Passavant Hospital),
7.000%, 6/01/22 (Pre-refunded to 6/01/01)
2,850,000 Deer Lakes School District (Allegheny County, Pennsylvania), General 1/04 at 100 AAA 3,131,210
Obligation Bonds, Series of 1995, 6.350%, 1/15/14 (Pre-refunded to
1/15/04)
1,320,000 Delaware County Authority, Health Facilities Revenue Bonds, Series of 12/06 at 102 Aaa 1,461,148
1996 (Mercy Health Corporation of Southeastern Pennsylvania Obligated
Group), 6.000%, 12/15/26
2,000,000 Pennsylvania Economic Development Financing Authority (MacMillan Bloedel 12/05 at 102 Baa2*** 2,379,500
Limited Partnership), 7.600%, 12/01/20 (Alternative Minimum Tax)
(Pre-refunded to 12/01/05)
1,500,000 Pennsylvania Intergovernmental Cooperation Authority, Special Tax 6/05 at 100 AAA 1,721,775
Revenue Bonds (City of Philadelphia Funding Program), Series of 1994,
7.000%, 6/15/14 (Pre-refunded to 6/15/05)
250,000 Philadelphia Authority for Industrial Development Revenue Bonds, Series 5/02 at 102 A+*** 273,718
of 1992 (National Board of Medical Examiners Project), 6.750%, 5/01/12
(Pre-refunded to 5/01/02)
650,000 City of Philadelphia, Pennsylvania, Gas Works Revenue Bonds, Twelfth No Opt. Call AAA 785,285
Series B, 7.000%, 5/15/20
2,000,000 Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities No Opt. Call BBB+*** 2,211,040
Authority, Hospital Revenue Refunding Bonds, Pennsylvania Hospital,
6.250%, 7/01/06
1,450,000 The Philadelphia Municipal Authority, Philadelphia, Pennsylvania, 4/00 at 100 AAA 1,504,158
Criminal Justice Center Refunding Revenue Bonds, Series of 1988,
7.800%, 4/01/18 (Pre-refunded to 4/01/00)
500,000 Saint Mary Hospital Authority, Hospital Revenue Bonds, Series 1992A 7/02 at 102 AAA 546,600
(Franciscan Health System/Saint Mary Hospital of Langhorne Inc.),
6.500%, 7/01/12 (Pre-refunded to 7/01/02)
935,000 The Municipal Authority of the Borough of West View (Allegheny County, No Opt. Call AAA 1,290,487
Pennsylvania), Special Obligation Bonds, Series of 1985A,
9.500%, 11/15/14
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 10.7%
2,000,000 Beaver County Industrial Development Authority, Pennsylvania, Exempt 6/08 at 102 AAA 1,973,940
Facilities Revenue Bonds, 1998 Series A (Shippingport Project),
5.375%, 6/01/28 (Alternative Minimum Tax)
2,000,000 Cambria County Industrial Development Authority (Pennsylvania), Pollution 11/05 at 102 AAA 2,115,440
Control Revenue Refunding Bonds, 1995 Series A (Pennsylvania Electric
Company Project), 5.800%, 11/01/20
800,000 Greater Lebanon Refuse Authority, Lebanon County, Pennsylvania, Solid 11/02 at 100 A- 847,168
Waste Revenue Bonds, Series of 1992, 7.000%, 11/15/04
1,500,000 Lawrence County, Pennsylvania, Industrial Development Authority, 9/01 at 102 Baa2 1,593,570
Pollution Control Revenue Refunding Bonds, Pennsylvania Power Company,
New Castle Project, Series A, 7.150%, 3/01/17
1,610,000 Lehigh County Industrial Development Authority, Pollution Control Revenue 11/02 at 102 AAA 1,753,805
Refunding Bonds, 1992 Series A (Pennsylvania Power and Light Company
Project), 6.400%, 11/01/21
550,000 Lehigh County Industrial Development Authority, Pollution Control Revenue 8/05 at 102 AAA 597,284
Refunding Bonds, 1995 Series A (Pennsylvania Power and Light Company
Project), 6.150%, 8/01/29
950,000 Luzerne County Industrial Development Authority, Exempt Facilities 12/02 at 102 A- 1,042,283
Revenue Bonds, 1992 Series B (Pennsylvania Gas and Water Company
Project), 7.125%, 12/01/22 (Alternative Minimum Tax)
1,500,000 Luzerne County Industrial Development Authority, Exempt Facilities 12/04 at 102 AAA 1,694,025
Revenue Refunding Bonds, 1994 Series A (Pennsylvania Gas and Water
Company Project), 7.000%, 12/01/17 (Alternative Minimum Tax)
1,000,000 Northampton County Industrial Development Authority (Pennsylvania), 7/05 at 102 AAA 1,080,340
Pollution Control Revenue Refunding Bonds, 1995 Series A (Metropolitan
Edison Company Project), 6.100%, 7/15/21
City of Philadelphia, Pennsylvania, Gas Works Revenue Bonds, Fourteenth
Series:
2,000,000 6.375%, 7/01/14 7/03 at 102 AAA 2,188,099
1,400,000 6.375%, 7/01/26 7/03 at 102 BBB 1,520,651
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer 1.9%
$ 2,000,000 Allegheny County Sanitary Authority, Allegheny County, Pennsylvania, 12/07 at 102 AAA $ 2,019,179
Sewer Revenue Bonds, Series of 1997, 5.375%, 12/01/24
830,000 South Wayne County Water and Sewer Authority, Pennsylvania, Revenue 4/02 at 102 N/R 891,494
Refunding Sewer Bonds, 8.200%, 4/15/13 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
$156,565,000 Total Investments (cost $145,733,737) - 99.5% 152,325,090
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.5% 717,301
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $153,042,391
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices
at later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to
be equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
19
<PAGE>
Portfolio of Investments
Nuveen Flagship Virginia Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Goods -- 0.9%
$ 2,000,000 Industrial Development Authority of the County of No Opt. Call A- $ 1,972,400
Henrico, Virginia, Solid Waste Disposal
Revenue Bonds, Series 1996A (Browning-Ferris
Industries of South Atlantic, Inc. Project),
5.450%, 1/01/14 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples -- 0.7%
1,500,000 Industrial Development Authority of the County 4/07 at 101 A+ 1,577,010
of James City, Virginia, Sewage and Solid Waste
Disposal Facilities Revenue Bonds, Series 1997
(Anheuser Busch Project), 6.000%, 4/01/32
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations -- 10.4%
1,000,000 Industrial Development Authority of Arlington 7/07 at 102 Aa1 1,022,140
County, Virginia, Headquarters Facility Revenue
Bonds (The Nature Conservancy), Series 1997A,
5.450%, 7/01/27
500,000 Medical College of Hampton Roads, Virginia, 11/01 at 102 A- 534,230
General Revenue Refunding Bonds, Series 1991A,
6.875%, 11/15/16
Industrial Development Authority of Loudoun
County, Virginia, University Facilities Revenue
Refunding Bonds (The George Washington University), Series of 1992:
500,000 6.250%, 5/15/12 5/02 at 102 A1 535,305
2,225,000 6.250%, 5/15/22 5/02 at 102 A1 2,378,881
1,250,000 Industrial Development Authority of Rockingham 10/03 at 102 Baa3 1,281,288
County, Virginia, Educational Facilities Revenue Bonds
(Bridgewater College), Series 1993, 6.000%, 10/01/23
Staunton Industrial Development Authority, Educational
Facilities Revenue Bonds (Mary Baldwin College):
350,000 5.900%, 11/01/03 No Opt. Call N/R 361,526
370,000 6.000%, 11/01/04 No Opt. Call N/R 384,260
2,000,000 The Rector and Visitors of the University of 6/03 at 102 AA+ 2,021,440
Virginia, General Revenue Bonds, Series 1993B,
5.375%, 6/01/20
1,000,000 The Rector and Visitors of the University of 6/08 at 101 AA+ 968,250
Virginia, General Revenue Pledge Bonds, Series
1998A, 5.000%, 6/01/24
750,000 Virginia College Building Authority, Educational 1/02 at 102 AAA 809,813
Facilities Revenue Refunding Bonds, Washington
and Lee University Project,
6.400%, 1/01/12
800,000 Virginia College Building Authority, Educational 5/02 at 102 Aa2 874,552
Facilities Revenue Bonds (Randolph-Macon College
Project), Series of 1992,
6.625%, 5/01/13
2,000,000 Virginia College Building Authority, Educational 10/02 at 102 BBB+ 2,141,720
Facilities Revenue Refunding Bonds, Roanoke
College Project, 6.625%, 10/15/12
3,250,000 Virginia College Building Authority, Educational 4/03 at 102 Aa2 3,392,805
Facilities Revenue Refunding Bonds (Hampton
University Project), Series of
1993, 5.750%, 4/01/14
2,000,000 Virginia College Building Authority, Educational No Opt. Call AAA 2,016,880
Facilities Revenue Bonds (The Washington and
Lee University Project), Series 1998, 5.250%, 1/01/31
420,000 Virginia College Building Authority, Educational 1/04 at 102 AA 445,238
Facilities Revenue Bonds (The Washington and
Lee University Project), Series of 1994,
5.750%, 1/01/14
1,250,000 Virginia College Building Authority, Educational 7/08 at 102 AA 1,211,375
Facilities Revenue and Refunding Bonds
(Marymount University Project), Series 1998,
5.125%, 7/01/28
Industrial Development Authority of the City of
Winchester, Virginia, Educational Facilities
First Mortgage Revenue Bonds
(Shenandoah University Project), Series 1994:
1,800,000 6.700%, 10/01/14 10/04 at 102 AA 2,038,788
775,000 6.750%, 10/01/19 10/04 at 102 AA 879,641
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Forest and Paper Products -- 5.2%
$ 2,000,000 Industrial Development Authority of Covington-Allegheny County, 9/04 at 102 A1 $ 2,183,540
Virginia, Pollution Control Facilities Refunding Revenue Bonds
(Westvaco Corporation Project), Series 1994, 6.650%, 9/01/18
2,500,000 Industrial Development Authority of Goochland County, Virginia, 12/08 at 101 Baa2 2,509,225
Industrial Development Refunding Revenue Bonds (Nekoosa Packaging
Corporation Project), Series 1998, 5.650%, 12/01/25
(Alternative Minimum Tax)
3,545,000 Industrial Development Authority of the Isle of Wight County, Virginia, 4/04 at 102 A1 3,819,915
Solid Waste Disposal Facilities Revenue Bonds (Union Camp Corporation
Project), Series 1994, 6.550%, 4/01/24 (Alternative Minimum Tax)
3,000,000 Industrial Development Authority of the Isle of Wight County, Virginia, 5/07 at 102 BBB+ 3,130,290
Solid Waste Disposal Facilities Revenue Bonds (Union Camp Corporation
Project), Series 1997, 6.100%, 5/01/27 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care -- 14.1%
1,125,000 Industrial Development Authority of Albemarle County, Virginia, Health 10/02 at 102 N/R 1,230,491
Services Revenue Bonds (The University of Virginia Health Services
Foundation), Series 1992, 6.500%, 10/01/22
2,060,000 Industrial Development Authority of Albemarle County, Virginia, Hospital 10/03 at 102 A2 2,119,019
Refunding Revenue Bonds (Martha Jefferson Hospital), Series 1993,
5.875%, 10/01/13
2,000,000 Industrial Development Authority of Fairfax County, Virginia, Health 8/06 at 102 AA 2,142,240
Care Revenue Bonds (Inova Health System Project), Series 1996A,
6.000%, 8/15/26
2,000,000 Industrial Development Authority of the City of Fredericksburg, Virginia, 6/07 at 102 AAA 1,971,720
Hospital Facilities Revenue Refunding Bonds (MediCorp Health System
Obligated Group), Series 1996, 5.250%, 6/15/23
1,110,000 Industrial Development Authority of the County of Giles, Virginia, Exempt 12/05 at 102 A+ 1,140,159
Facility Revenue Bonds, Hoechst Celanese Project, Series 1995, 5.950%,
12/01/25 (Alternative Minimum Tax)
500,000 Industrial Development Authority of the City of Hampton, Virginia, 11/04 at 102 Aa2 552,055
Hospital Revenue and Refunding Bonds (Sentara Hampton General Hospital),
Series 1994A, 6.500%, 11/01/12
2,000,000 Industrial Development Authority of the County of Hanover, Virginia, No Opt. Call AAA 2,308,460
Hospital Revenue Bonds, Series 1995 (Memorial Regional Medical Center
Project at Hanover Medical Park) (Guaranteed by Bon Secours Health
System Obligated Group), 6.375%, 8/15/18
2,000,000 Bon Secours Health System Obligated Group Revenue Bonds, Industrial 8/05 at 102 AAA 2,038,860
Development Authority of the County of Hanover, Virginia, Hospital
Revenue Bonds, Series 1995 (Bon Secours Health System Projects),
5.500%, 8/15/25
1,250,000 Industrial Development Authority of Henry County, Virginia, Hospital 1/07 at 101 A+ 1,304,875
Revenue Bonds (Memorial Hospital of Martinsville and Henry County),
Series 1997, 6.000%, 1/01/27
1,700,000 Industrial Development Authority of Loudoun County, Virginia, Hospital 6/05 at 102 AAA 1,776,857
Revenue Bonds (Loudoun Hospital Center), Series 1995, 5.800%, 6/01/20
Industrial Development Authority of the City of Lynchburg, Virginia,
Healthcare Facilities Revenue and Refunding Bonds (Centra Health),
Series 1998:
1,000,000 5.200%, 1/01/23 1/08 at 101 A+ 971,500
3,000,000 5.200%, 1/01/28 1/08 at 101 A+ 2,885,520
5,320,000 Medical College of Virginia Hospitals Authority, General Revenue Bonds, 7/08 at 102 AAA 5,176,254
Series 1998, 5.125%, 7/01/23
1,000,000 Industrial Development Authority of the City of Norfolk, Virginia, 8/07 at 102 AAA 984,960
Health Care Revenue Bonds, Series 1997 (Bon Secours Health System),
5.250%, 8/15/26
2,080,000 Peninsula Ports Authority of Virginia, Health System Revenue and Refunding 7/02 at 102 Aa2 2,278,806
Bonds (Riverside Health System Project), Series 1992-A, 6.625%, 7/01/18
400,000 Richmond, Virginia, Industrial Development Authority, Medical Facility 8/99 at 101 AA- 405,032
Revenue Bonds, Richmond Metropolitan Blood Service, 7.125%, 2/01/11
2,260,000 City of Virginia Beach Development Authority, Virginia, Hospital Revenue 11/01 at 102 AA 2,432,800
Bonds (Sentara Bayside Hospital), Series 1991, 6.300%, 11/01/21
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen Flagship Virginia Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily - 2.1%
$1,200,000 Fairfax County (Virginia), Redevelopment and Housing Authority, 9/06 at 102 AAA $1,260,456
FHA-Insured Mortgage Housing for the Elderly Revenue Refunding Bonds,
Series 1996 (Little River Glen), 6.100%, 9/01/26
2,000,000 Newport News, Virginia, Redevelopment and Housing Authority, Mortgage 1/02 at 102 AAA 2,079,340
Revenue Refunding Bonds, West Apartments, Series A, 6.550%, 7/01/24
480,000 Suffolk Redevelopment and Housing Authority, Multifamily Housing Revenue 7/02 at 104 Baa2 522,206
Refunding Bonds, Series 1994 (Chase Heritage at Dulles Project), 7.000%,
7/01/24 (Mandatory put 7/01/04)
700,000 Virginia State Housing Development Authority, Multifamily Housing Bonds, 5/01 at 102 AA+ 736,099
Series 1991F, 7.000%, 5/01/04
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 7.9%
180,000 Puerto Rico Housing Finance Corporation, Single Family Mortgage Revenue 9/00 at 102 AAA 188,276
Bonds, Portfolio 1, Series B, 7.650%, 10/15/22
Virginia Housing Development Authority, Commonwealth Mortgage Bonds,
1992 Series A:
3,000,000 7.100%, 1/01/17 1/02 at 102 AA+ 3,116,520
1,000,000 7.100%, 1/01/22 1/02 at 102 AA+ 1,030,030
3,170,000 7.150%, 1/01/33 1/02 at 102 AA+ 3,309,987
1,000,000 Virginia State Housing Development Authority, Commonwealth Mortgage Bonds, 7/05 at 102 AA+ 1,055,630
Series C1, 6.300%, 7/01/25 (Alternative Minimum Tax)
2,000,000 Virginia State Housing Development Authority, Commonwealth Mortgage Bonds, 7/05 at 102 AA+ 2,101,940
Series C3, 6.125%, 7/01/22 (Alternative Minimum Tax)
7,000,000 Virginia Housing Development Authority, Commonwealth Mortgage Bonds, 1996 1/08 at 102 AA+ 6,976,830
Series G, Subseries G-1, 5.300%, 1/01/22 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 2.3%
715,000 Industrial Development Authority of Albemarle County, Virginia, Mortgage 1/01 at 103 N/R 768,053
Revenue Refunding Bonds, Series 1986A (FHA-Insured Project), 8.900%,
7/15/26
1,000,000 Health Center Commission for the County of Chesterfield, Virginia, 12/06 at 102 AAA 1,055,120
Mortgage Revenue Bonds (GNMA Collateralized - Lucy Corr Nursing Home
Project), Series 1996, 5.875%, 12/01/21
500,000 Fairfax County Redevelopment and Housing Authority, Multifamily Housing 12/06 at 103 AAA 529,575
Revenue Refunding Bonds (FHA-Insured Mortgage Loan - Paul Spring
Retirement Center), Series 1996 A, 6.000%, 12/15/28
500,000 Front Royal and Warren County, Virginia Industrial Development Authority 7/99 at 107 A 537,240
(Heritage Hall XIII), Series 1986, 9.450%, 7/15/24
1,190,000 Industrial Development Authority of the County of Henrico, Virginia, 7/03 at 102 AAA 1,244,359
Nursing Facility Insured - Mortgage Refunding Revenue Bonds (Cambridge
Manor Nursing Home), Series 1993, 5.875%, 7/01/19
1,000,000 Northern Virginia Health Center Commission, Nursing Home Mortgage 7/08 at 102 AAA 945,090
Revenue Refunding Bonds (Birmingham Green Project), Series 1998,
5.000%, 7/01/28
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 8.7%
1,500,000 City of Portsmouth, Virginia, General Obligation Bonds, Public Utility 8/03 at 102 AA- 1,532,520
Refunding Bonds, Series 1993, 5.500%, 8/01/19
500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1996 (General 7/06 at 101 1/2 A 506,245
Obligation Bonds), 5.400%, 7/01/25
1,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997 (General 7/07 at 100 A 1,511,670
Obligation Bonds), 5.375%, 7/01/25
Commonwealth of Puerto Rico, Public Improvement Bonds of 1994 (General
Obligation Bonds):
2,575,000 6.450%, 7/01/17 7/04 at 102 AAA 2,892,575
2,500,000 6.500%, 7/01/23 7/04 at 101 1/2 AAA 2,814,025
5,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1998 (General 7/08 at 101 A 4,796,400
Obligation Bonds), 5.000%, 7/01/28
3,005,000 City of Richmond, Virginia, General Obligation Public Improvement Bonds, 7/03 at 102 AA 3,069,788
Series 1993B, 5.500%, 7/15/23
Virginia Public School Authority, School Financing Bonds (1991 Resolution),
Series 1995B:
1,000,000 5.750%, 8/01/15 8/05 at 102 Aa1 1,066,670
1,210,000 5.625%, 8/01/16 8/05 at 102 Aa1 1,261,377
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited -- 11.0%
$2,300,000 Big Stone Gap, Virginia, Redevelopment and Housing Authority, 9/05 at 102 AA $ 2,357,293
Commonwealth of Virginia Correctional Facility, Lease Revenue
Bonds (Wallens Ridge Development Project), Series 1995,
5.500%, 9/01/15
3,000,000 Industrial Development Authority of Brunswick County, Virginia, 7/06 at 102 AAA 3,087,390
Correctional Facility Lease Revenue Bonds, Series 1996, 5.500%,
7/01/17
5,000,000 Hampton Roads, Virginia, Regional Jail Authority, Regional Jail 7/06 at 102 AAA 5,141,950
Facility Revenue Bonds, Series 1996A, 5.500%, 7/01/24
2,000,000 Industrial Development Authority of the County of Henrico, 8/05 at 102 AA 2,298,940
Virginia, Public Facility Lease Revenue Bonds, Henrico
County Regional Jail Project, Series 1994, 7.000%, 8/01/13
750,000 Loudoun County, Virginia, Certificates of Participation, No Opt. Call AAA 888,653
Series E, 7.200%, 10/01/10
1,500,000 Peninsula Airport Commission, Virginia, Airport Improvement 7/01 at 102 AA 1,608,570
Revenue Bonds, 7.300%, 7/15/21 (Alternative Minimum Tax)
Prince William County, Virginia, Industrial Development
Authority, Lease Revenue, ATCC Project:
2,000,000 6.000%, 2/01/14 2/06 at 102 A2 2,096,880
1,000,000 6.000%, 2/01/18 2/06 at 102 A2 1,057,560
2,500,000 Prince William County Park Authority, Virginia, Revenue 10/04 at 102 A- 2,790,200
Bonds, Series 1994, 6.875%, 10/15/16
2,250,000 Puerto Rico Highway and Transportation Authority, Highway 7/16 at 100 A 2,314,125
Revenue Bonds, Series Y of 1996, 5.500%, 7/01/36
1,000,000 Virginia Public School Authority, School Financing Bonds, 8/04 at 102 Aa1 1,101,570
Series 1994 A, 6.200%, 8/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation -- 8.5%
2,250,000 Capital Region Airport Commission, Richmond (Virginia), 7/05 at 102 AAA 2,337,233
International Airport Projects, Airport Revenue Bonds,
Series 1995A, 5.625%, 7/01/25
750,000 Charlottesville-Albemarle Airport Authority (Virginia), 12/05 at 102 BBB 777,330
Airport Revenue Refunding Bonds, Series 1995, 6.125%,
12/01/13 (Alternative Minimum Tax)
Loudoun County (Virginia), Industrial Development Authority,
Air Cargo Facility Revenue, Washington Dulles Air Cargo:
110,000 6.625%, 1/01/00 (Alternative Minimum Tax) No Opt. Call N/R 110,894
3,000,000 7.000%, 1/01/09 (Alternative Minimum TaX) 1/01 at 102 N/R 3,105,540
600,000 6.500%, 1/01/09 (Alternative Minimum Tax) 1/06 at 102 N/R 624,978
1,000,000 Metropolitan Washington D.C. Airports Authority, Airport 10/04 at 102 AAA 1,034,060
System Revenue Bonds, Series 1994A, 5.750%, 10/01/20
(Alternative Minimum Tax)
770,000 Metropolitan Washington D.C. Apartments Authority, General 10/07 at 101 AA- 774,466
Airport Revenue, Series B, 5.500%, 10/01/23
(Alternative Minimum Tax)
5,500,000 Pocahontas Parkway Association, Route 895 Connector Toll 8/08 at 102 BBB- 5,378,285
Road Revenue Bonds, Senior Current Interest,
Series 1998A, 5.500%, 8/15/28
5,000,000 Pocahantas Parkway Association, Route 895 Connector 8/08 at 64 13/16 BBB- 1,850,650
Toll Road Revenue Bonds, Senior Current Interest,
Series 1998B, 0.000%, 8/15/16
1,900,000 Puerto Rico Ports Authority, Special Facilities Revenue 6/06 at 102 BBB- 2,037,807
Bonds, 1996 Series A (American Airlines, Inc. Project),
6.250%, 6/01/26 (Alternative Minimum Tax)
1,000,000 Virginia Port Authority, Port Facilities Revenue Bonds, 7/07 at 101 AAA 1,014,250
Series 1997, 5.500%, 7/01/24 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 10.4%
1,000,000 Town of Abingdon, Virginia, General Obligation Capital 8/02 at 102 A2*** 1,089,840
Improvement Bonds, Series 1992, 6.250%, 8/01/12
(Pre-refunded to 8/01/02)
750,000 Chesapeake Bay Bridge and Tunnel District, General Resolution 7/01 at 102 AAA 804,278
Revenue Bonds, Refunding Series 1991, 6.375%, 7/01/22
(Pre-refunded to 7/01/01)
1,000,000 Industrial Development Authority of Covington-Allegheny County, 4/02 at 102 N/R*** 1,088,080
Virginia, Hospital Facility Revenue Bonds (Allegheny Regional
Hospital), Series 1992, 6.625%, 4/01/12
(Pre-refunded to 4/01/02)
</TABLE>
23
<PAGE>
Portfolio of Investments
Nuveen Flagship Virginia Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 730,000 City of Danville, Virginia, General Improvement Bonds of Fiscal Year 5/02 at 102 A3*** $ 795,532
1991-1992, 6.500%, 5/01/12 (Pre-refunded to 5/01/02)
500,000 Fairfax County Redevelopment and Housing Authority, Virginia, Revenue 11/99 at 102 N/R*** 518,365
Bonds (Vinson Pavilion Project), 1989 Series A, 7.500%, 11/01/19
(Pre-refunded to 11/01/99)
1,355,000 Fairfax County Redevelopment and Housing Authority, Virginia, Revenue 6/02 at 102 N/R*** 1,527,058
Bonds, 1992 Issue A (FCRHA Office Building), 7.500%, 6/15/18
(Pre-refunded to 6/15/02)
150,000 Fairfax County, Virginia, Water Authority, Water Refunding Revenue 4/07 at 102 AAA 168,374
Bonds, Series 1992, 6.000%, 4/01/22 (Pre-refunded to 4/01/07)
995,000 Henrico County, Virginia, Water and Sewer System Refunding Revenue 5/02 at 100 Aa2*** 1,059,715
Bonds, Series 1992, 6.250%, 5/01/13 (Pre-refunded to 5/01/02)
250,000 Martinsville, Virginia, Industrial Development Authority, Hospital 1/01 at 100 A2*** 262,290
Facility Revenue Bonds, Memorial Hospital of Martinsville and Henry,
7.000%, 1/01/11 (Pre-refunded to 1/01/01)
2,000,000 Peninsula Ports Authority, Virginia, Health Care Facilities Revenue 8/06 at 100 BBB+*** 2,300,220
Refunding Bonds, Mary Immaculate Project, 7.000%, 8/01/17
(Pre-refunded to 8/01/06)
5,250,000 Industrial Development Authority of the County of Prince William, 10/05 at 102 Aaa 6,102,600
Virginia, Hospital Facility Revenue Bonds (Potomac Hospital
Corporation of Prince William), Series 1995, 6.850%, 10/01/25
(Pre-refunded to 10/01/05)
1,000,000 Prince William County Service Authority, Virginia, Water and Sewer 7/01 at 100 AAA 1,046,360
System Revenue Bonds, Series 1991, 6.000%, 7/01/29 (Pre-refunded to
7/01/01)
1,500,000 Richmond, Virginia, Redevelopment and Housing Authority, Project Revenue 3/05 at 102 AAA 1,714,905
Bonds (1994 Old Manchester Project), Series 1994, 6.800%, 3/01/15
(Pre-refunded to 3/01/05)
Virginia College Building Authority, Educational Facilities Revenue,
Marymount University Project:
1,000,000 7.000%, 7/01/12 (Pre-refunded to 7/01/02) 7/02 at 102 N/R*** 1,104,540
1,400,000 7.000%, 7/01/22 (Pre-refunded to 7/01/02) 7/02 at 102 N/R*** 1,546,356
Virginia College Building Authority, Educational Facilities Revenue
Bonds (The Washington and Lee University Project), Series of 1994:
580,000 5.750%, 1/01/14 (Pre-refunded to 1/01/04) 1/04 at 102 AAA 628,906
1,000,000 5.800%, 1/01/24 1/04 at 102 AAA 1,086,390
410,000 Virginia State Resource Authority, Water and Sewer System Pooled Revenue 11/99 at 102 AA*** 423,546
Bonds, Series 1986A, 7.650%, 11/01/16 (Pre-refunded to 11/01/99)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 5.6%
2,110,000 Halifax County Industrial Development Authority (Old Dominion Electric 12/02 at 102 A+ 2,248,142
Cooperative), 6.500%, 12/01/12 (Alternative Minimum Tax)
2,500,000 Mecklenburg County, Virginia, Industrial Development Authority, Exempt 5/01 at 102 Aa3 2,610,350
Facility, Mecklenburg Cogeneration Project, Series 1991A,
7.350%, 5/01/08 (Alternative Minimum Tax)
2,000,000 City of Richmond, Virginia, Public Utility Revenue and Refunding Bonds, 1/08 at 101 A+ 1,938,580
Series 1998A, 5.125%, 1/15/28
1,000,000 Industrial Development Authority of Russell County, Virginia, Pollution 11/00 at 102 Baa1 1,060,190
Control Revenue Bonds (Appalachian Power Company Project), Series G,
7.700%, 11/01/07
1,500,000 Southeastern Public Service Authority of Virginia, Senior Revenue Bonds, 7/03 at 102 A- 1,545,720
Series 1993 (Regional Solid Waste System), 6.000%, 7/01/13
(Alternative Minimum Tax)
1,000,000 Virginia State Resource Authority, Solid Waste Disposal System Revenue 11/02 at 102 AA 1,097,020
Bonds, Series B, 6.750%, 11/01/12
1,960,000 Virginia Resources Authority, Solid Waste Disposal System Revenue Bonds 4/05 at 102 AA 2,009,372
(County of Prince William, Virginia - Refunding), 1995 Series A,
5.500%, 4/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 10.7%
1,000,000 Blacksburg (Virginia), Polytechnic Institute Sanitation Authority 11/02 at 102 A 1,091,300
(Virginia), Sewer System Revenue Bonds, Series of 1992,
6.250%, 11/01/12
Fairfax County (Virginia), Water Authority, Water Refunding Revenue
Bonds, Series 1992:
850,000 6.000%, 4/01/22 4/07 at 102 AA 924,452
1,625,000 5.750%, 4/01/29 4/02 at 100 AA 1,672,613
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer (continued)
$ 1,000,000 Frederick-Winchester Service Authority (Virginia), Regional Sewer System 10/03 at 102 AAA $ 1,046,060
Refunding Revenue Bonds, Series 1993, 5.750%, 10/01/15
1,505,000 Henrico County (Virginia), Water and Sewer System Refunding Revenue 5/02 at 100 Aa2 1,585,006
Bonds, Series 1992, 6.250%, 5/01/13
4,250,000 Leesburg (Virginia), Utility System Revenue Refunding Bonds, 7/07 at 102 AAA 4,181,958
5.125%, 7/01/22
1,000,000 Loudoun County Sanitation Authority (Virginia), Water and Sewer System 1/03 at 102 AAA 1,083,290
Revenue Bonds, Refunding Series 1992, 6.250%, 1/01/16
1,000,000 Loudoun County Sanitation Authority (Virginia), Water and Sewer System 1/07 at 102 AAA 982,850
Revenue Bonds, Refunding Series 1996, 5.125%, 1/01/26
2,500,000 Loudoun County Sanitation Authority (Virginia), Water and Sewer System 1/09 at 102 AAA 2,291,049
Revenue Bonds, Series 1998, 4.750%, 1/01/30
1,500,000 Prince William County Service Authority (Virginia), Water and Sewer 7/08 at 101 AAA 1,386,044
System Refunding Revenue Bonds, Series 1997, 4.750%, 7/01/29
4,000,000 Upper Occoquan Sewage Authority (Virginia), Regional Sewerage System 1/04 at 102 AAA 3,867,399
Revenue Refunding Bonds, Series of 1993, 5.000%, 7/01/21
1,000,000 Virginia Resources Authority, Sewer System Revenue Bonds, 1995 Series A 10/05 at 102 AA 1,063,589
(Hopewell Regional Wastewater Treatment Facility Project),
6.000%, 10/01/25 (Alternative Minimum Tax)
1,000,000 Virginia Resources Authority, Water and Sewer System Revenue Bonds, 1995 10/05 at 102 AA 1,082,599
Series A (Sussex County Project), 5.600%, 10/01/25
1,500,000 Virginia Resources Authority, Water and Sewer System Refunding Revenue 4/02 at 100 AA 1,575,179
Bonds, 1992 Series A, 6.125%, 4/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
$214,865,000 Total Investments - (cost $207,326,496) - 98.5% 220,516,882
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.5% 3,250,163
-------------------------------------------------------------------------------------------------------------------
Net Assets 100% $223,767,045
===================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices
at later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to
be equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
25
<PAGE>
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $72,862,883 $152,325,090 $220,516,882
Cash 993,862 -- --
Receivables:
Interest 1,524,701 2,547,104 4,050,106
Shares sold 197,928 145,940 216,282
Other assets 62,655 131,028 145,909
- -----------------------------------------------------------------------------------------------------------------
Total assets 75,642,029 155,149,162 224,929,179
- -----------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 430,809 11,123
Payables:
Investments purchased -- 1,219,100 --
Shares redeemed 54,600 90,591 591,084
Accrued expenses:
Management fees (note 6) 32,113 18,342 87,054
12b-1 distribution and service fees (notes 1 and 6) 9,403 26,410 43,217
Other 39,864 37,321 38,128
Dividends payable 181,772 284,198 391,528
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 317,752 2,106,771 1,162,134
- -----------------------------------------------------------------------------------------------------------------
Net assets (note 7) $75,324,277 $153,042,391 $223,767,045
=================================================================================================================
Class A Shares (note 1)
Net assets $22,092,626 $ 70,865,040 $138,940,871
Shares outstanding 2,111,989 6,780,803 12,707,661
Net asset value and redemption price per share $ 10.46 $ 10.45 $ 10.93
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 10.92 $ 10.91 $ 11.41
=================================================================================================================
Class B Shares (note 1)
Net assets $ 4,731,691 $ 7,966,056 $ 10,419,054
Shares outstanding 452,102 760,809 953,686
Net asset value, offering and redemption price per share $ 10.47 $ 10.47 $ 10.93
=================================================================================================================
Class C Shares (note 1)
Net assets $ 4,089,393 $ 13,167,132 $ 17,678,623
Shares outstanding 390,962 1,261,491 1,618,237
Net asset value, offering and redemption price per share $ 10.46 $ 10.44 $ 10.92
=================================================================================================================
Class R Shares (note 1)
Net assets $44,410,567 $ 61,044,163 $ 56,728,497
Shares outstanding 4,236,689 5,844,477 5,191,058
Net asset value, offering and redemption price per share $ 10.48 $ 10.44 $ 10.93
=================================================================================================================
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
Statement of Operations
Year Ended May 31, 1999
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $ 4,010,907 $ 8,392,849 $12,452,492
- -----------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 395,007 808,227 1,195,842
12b-1 service fees - Class A (notes 1 and 6) 39,229 137,788 273,937
12b-1 distribution and service fees - Class B (notes 1 and 6) 34,859 51,898 68,330
12b-1 distribution and service fees - Class C (notes 1 and 6) 25,426 84,233 129,361
Shareholders' servicing agent fees and expenses 64,260 105,338 140,620
Custodian's fees and expenses 60,294 63,437 80,067
Trustees' fees and expenses (note 6) 2,256 2,866 3,838
Professional fees 11,816 15,528 14,815
Shareholders' reports - printing and mailing expenses 54,027 65,719 67,606
Federal and state registration fees 8,548 18,687 8,063
Other expenses 3,377 9,299 11,307
- -----------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 699,099 1,363,020 1,993,786
Custodian fee credit (note 1) (13,684) (6,072) (9,134)
Expense reimbursement (note 6) (47,257) (361,812) (71,949)
- -----------------------------------------------------------------------------------------------------------------
Net expenses 638,158 995,136 1,912,703
- -----------------------------------------------------------------------------------------------------------------
Net investment income 3,372,749 7,397,713 10,539,789
- -----------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain from investment transactions (notes 1 and 4) 571,636 395,831 944,358
Net change in unrealized appreciation or depreciation of investments (1,379,409) (2,967,385) (3,060,934)
- -----------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (807,773) (2,571,554) (2,116,576)
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 2,564,976 $ 4,826,159 $ 8,423,213
=================================================================================================================
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Maryland
---------------------------------
Year Ended Year Ended
5/31/99 5/31/98
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 3,372,749 $ 3,014,635
Net realized gain from investment transactions (notes 1 and 4) 571,636 38,164
Net change in unrealized appreciation or depreciation
of investments (1,379,409) 1,872,963
- -------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 2,564,976 4,925,762
- -------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (887,278) (744,781)
Class B (136,626) (45,159)
Class C (133,784) (91,846)
Class R (2,124,331) (2,152,261)
From accumulated net realized gains from investment transactions:
Class A -- --
Class B -- --
Class C -- --
Class R -- --
- -------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (3,282,019) (3,034,047)
- -------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 12,748,209 9,987,470
Net proceeds from shares issued to shareholders due
to reinvestment of distributions 2,071,522 2,015,880
- -------------------------------------------------------------------------------------------------------------
14,819,731 12,003,350
Cost of shares redeemed (5,741,563) (5,468,111)
- -------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 9,078,168 6,535,239
- -------------------------------------------------------------------------------------------------------------
Net increase in net assets 8,361,125 8,426,954
Net assets at the beginning of year 66,963,152 58,536,198
- -------------------------------------------------------------------------------------------------------------
Net assets at the end of year $75,324,277 $66,963,152
=============================================================================================================
Balance of undistributed net investment
income at the end of year $ 108,787 $ 18,057
=============================================================================================================
See accompanying notes to financial statements.
</TABLE>
_____
28
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania Virginia
--------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended
5/31/99 5/31/98 5/31/99 5/31/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income $ 7,397,713 $ 6,884,447 $ 10,539,789 $ 10,446,823
Net realized gain from investment transactions (notes 1 and 4) 395,831 1,203,144 944,358 382,323
Net change in unrealized appreciation or depreciation
of investments (2,967,385) 4,263,803 (3,060,934) 7,151,615
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 4,826,159 12,351,394 8,423,213 17,980,761
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (3,437,714) (3,203,991) (6,603,088) (6,589,893)
Class B (227,324) (49,039) (288,055) (72,610)
Class C (503,249) (346,415) (739,016) (637,996)
Class R (3,234,496) (3,306,035) (2,930,514) (3,128,186)
From accumulated net realized gains from investment transactions:
Class A (380,650) (123,729) (354,974) (116,144)
Class B (30,257) (1,903) (18,678) (1,295)
Class C (63,063) (14,187) (44,664) (12,972)
Class R (342,018) (122,743) (150,604) (53,068)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (8,218,771) (7,168,042) (11,129,593) (10,612,164)
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 26,410,992 20,611,181 33,800,119 26,410,433
Net proceeds from shares issued to shareholders due
to reinvestment of distributions 3,885,514 4,302,789 5,206,747 6,677,292
- ------------------------------------------------------------------------------------------------------------------------------------
30,296,506 24,913,970 39,006,866 33,087,725
Cost of shares redeemed (12,419,924) (11,137,451) (24,787,027) (19,538,617)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 17,876,582 13,776,519 14,219,839 13,549,108
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 14,483,970 18,959,871 11,513,459 20,917,705
Net assets at the beginning of year 138,558,421 119,598,550 212,253,586 191,335,881
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $153,042,391 $138,558,421 $223,767,045 $212,253,586
====================================================================================================================================
Balance of undistributed net investment
income at the end of year $ 1,117 $ 6,187 $ 3,265 $ 24,149
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Maryland Municipal Bond Fund ("Maryland"), the Nuveen
Flagship Pennsylvania Municipal Bond Fund ("Pennsylvania") and the Nuveen
Flagship Virginia Municipal Bond Fund ("Virginia") (collectively, the "Funds"),
among others. The Trust was organized as a Massachusetts business trust on July
1, 1996.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1999, Pennsylvania had an outstanding when-issued purchase commitment of
$1,219,100. There were no such outstanding purchase commitments in either of the
other funds.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend 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
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, the Funds intend to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Funds. All
monthly tax-exempt income dividends paid during the fiscal year ended May 31,
1999, have been designated Exempt Interest Dividends. Net realized capital gain
and market discount distributions are subject to federal taxation.
30
<PAGE>
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a 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 only under limited circumstances, or by specified classes
of investors.
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 fiscal year ended May 31, 1999.
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. Actual results may differ
from those estimates.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Maryland
-------------------------------------------------
Year Ended 5/31/99 Year Ended 5/31/98
----------------------- -----------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 577,632 $ 6,112,774 464,364 $ 4,845,395
Class B 235,116 2,495,746 213,521 2,237,985
Class C 187,416 1,988,761 68,184 714,237
Class R 203,056 2,150,928 209,535 2,189,853
Shares issued to shareholders due to reinvestment of distributions:
Class A 57,622 611,952 53,642 561,120
Class B 5,480 58,201 1,687 17,707
Class C 8,572 91,026 6,886 71,952
Class R 123,134 1,310,343 130,430 1,365,101
- -----------------------------------------------------------------------------------------------------------------------
1,398,028 14,819,731 1,148,249 12,003,350
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (173,380) (1,842,288) (134,447) (1,409,630)
Class B (9,376) (99,303) (8,959) (93,717)
Class C (51,865) (546,993) (33,614) (349,287)
Class R (305,927) (3,252,979) (345,224) (3,615,477)
- -----------------------------------------------------------------------------------------------------------------------
(540,548) (5,741,563) (522,244) (5,468,111)
- -----------------------------------------------------------------------------------------------------------------------
Net increase 857,480 $ 9,078,168 626,005 $ 6,535,239
=======================================================================================================================
</TABLE>
31
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
Pennsylvania
------------------------------------------------------------
Year Ended 5/31/99 Year Ended 5/31/98
----------------------------- ----------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,042,066 $ 11,085,436 1,036,447 $ 10,930,439
Class B 556,149 5,925,032 223,667 2,375,027
Class C 466,677 4,965,788 290,257 3,081,110
Class R 417,495 4,434,736 401,273 4,224,605
- -------------------------------------------------------------------------------------------------------------------------------
Shares issued to shareholders due to reinvestment of distributions:
Class A 127,403 1,358,196 172,750 1,815,747
Class B 6,887 73,512 2,572 27,340
Class C 14,586 155,250 25,872 271,646
Class R 215,836 2,298,556 207,616 2,188,056
- -------------------------------------------------------------------------------------------------------------------------------
2,847,099 30,296,506 2,360,454 24,913,970
- -------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (549,431) (5,838,055) (477,420) (5,039,815)
Class B (48,814) (522,051) (1,898) (20,305)
Class C (54,534) (578,008) (98,010) (1,035,568)
Class R (516,487) (5,481,810) (477,624) (5,041,763)
- -------------------------------------------------------------------------------------------------------------------------------
(1,169,266) (12,419,924) (1,054,952) (11,137,451)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase 1,677,833 $ 17,876,582 1,305,502 $ 13,776,519
===============================================================================================================================
Virginia
------------------------------------------------------------
Year Ended 5/31/99 Year Ended 5/31/98
----------------------------- ----------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,781,027 $ 19,736,719 1,437,801 $ 15,756,900
Class B 605,747 6,716,554 326,829 3,585,765
Class C 421,265 4,668,341 363,753 3,972,294
Class R 241,908 2,678,505 282,345 3,095,474
Shares issued to shareholders due to reinvestment of distributions:
Class A 261,217 2,903,901 370,069 4,035,466
Class B 14,259 158,363 3,820 41,944
Class C 23,019 255,663 59,523 649,924
Class R 169,963 1,888,820 178,519 1,949,958
- -------------------------------------------------------------------------------------------------------------------------------
3,518,405 39,006,866 3,022,659 33,087,725
- -------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,444,306) (16,020,885) (1,169,518) (12,775,202)
Class B (18,515) (205,614) (14,233) (156,135)
Class C (242,411) (2,672,615) (105,398) (1,154,489)
Class R (531,239) (5,887,913) (499,196) (5,452,791)
- -------------------------------------------------------------------------------------------------------------------------------
(2,236,471) (24,787,027) (1,788,345) (19,538,617)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase 1,281,934 $ 14,219,839 1,234,314 $ 13,549,108
===============================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on July 1, 1999, to shareholders of record on June 9,
1999, as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------
Dividend per share:
<S> <C> <C> <C>
Class A $.0405 $.0430 $.0435
Class B .0335 .0365 .0365
Class C .0355 .0385 .0385
Class R .0420 .0450 .0455
================================================================================
</TABLE>
32
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the fiscal year ended May 31,
1999, were as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------
Purchases:
<S> <C> <C> <C>
Long-term municipal securities $29,023,994 $44,032,604 $47,782,805
Short-term municipal securities 1,400,000 29,200,000 6,600,000
Sales:
Long-term municipal securities 20,741,225 26,505,673 32,802,744
Short-term municipal securities 1,400,000 30,200,000 7,600,000
================================================================================
</TABLE>
At May 31, 1999, 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, 1999, Maryland had an unused capital loss carryforward of $22,799
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 2005.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 1999, were as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------
Gross unrealized:
<S> <C> <C> <C>
appreciation $3,029,045 $7,321,348 $13,854,830
depreciation (360,224) (729,995) (664,444)
- --------------------------------------------------------------------------------
Net unrealized appreciation $2,668,821 $6,591,353 $13,190,386
================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of each Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
- --------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
================================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
33
<PAGE>
Notes to Financial Statements (continued)
During the fiscal year ended May 31, 1999, John Nuveen & Co. Incorporated (the
"Distributor"), a wholly owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares, the majority of which were paid
out as concessions to authorized dealers as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales charges collected $122,337 $223,813 $419,012
Paid to authorized dealers 103,713 204,837 366,627
===============================================================================
</TABLE>
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the fiscal year ended May 31, 1999, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Commission advances $119,242 $288,171 $321,047
===============================================================================
</TABLE>
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees on Class B Shares, and all 12b-1 service and
distribution fees on Class C Shares during the first year following a purchase
are retained by the Distributor. During the fiscal year ended May 31, 1998, the
Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 fees retained $43,598 $88,258 $109,765
===============================================================================
</TABLE>
The remaining 12b-1 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
fiscal year ended May 31, 1999, as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
CDSC retained $1,569 $9,124 $8,001
===============================================================================
</TABLE>
7. Composition of Net Assets
At May 31, 1999, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $72,569,469 $146,078,216 $210,431,337
Balance of undistributed net investment income 108,787 1,117 3,265
Accumulated net realized gain (loss) from investment transactions (22,800) 371,705 142,057
Net unrealized appreciation of investments 2,668,821 6,591,353 13,190,386
- ---------------------------------------------------------------------------------------------------------------
Net assets $75,324,277 $153,042,391 $223,767,045
===============================================================================================================
</TABLE>
34
<PAGE>
Financial Highlights
35
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
---------------------------------- -----------------------------
MARYLAND Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1999 $10.56 $.49 $ (.11) $ .38 $(.48) $ -- $(.48) $10.46 3.65%
1998 10.25 .48 .32 .80 (.49) -- (.49) 10.56 7.95
1997 (c) 10.25 .16 .01 .17 (.17) -- (.17) 10.25 1.63
1997 (d) 10.43 .46 (.15) .31 (.49) -- (.49) 10.25 3.06
1996 (d) 9.60 .48 .85 1.33 (.50) -- (.50) 10.43 14.07
1995 (e) 9.84 .20 (.23) (.03) (.21) -- (.21) 9.60 (.26)
Class B (3/97)
1999 10.56 .41 (.10) .31 (.40) -- (.40) 10.47 2.95
1998 10.25 .41 .31 .72 (.41) -- (.41) 10.56 7.16
1997 (f) 10.29 .10 (.04) .06 (.10) -- (.10) 10.25 .83
Class C (9/94)
1999 10.56 .43 (.11) .32 (.42) -- (.42) 10.46 3.07
1998 10.24 .43 .32 .75 (.43) -- (.43) 10.56 7.44
1997 (c) 10.24 .15 -- .15 (.15) -- (.15) 10.24 1.43
1997 (d) 10.42 .39 (.16) .23 (.41) -- (.41) 10.24 2.28
1996 (d) 9.59 .41 .84 1.25 (.42) -- (.42) 10.42 13.24
1995 (e) 9.75 .16 (.15) .01 (.17) -- (.17) 9.59 .12
Class R (12/91)
1999 10.58 .51 (.11) .40 (.50) -- (.50) 10.48 3.82
1998 10.26 .51 .32 .83 (.51) -- (.51) 10.58 8.23
1997 (c) 10.26 .17 -- .17 (.17) -- (.17) 10.26 1.68
1997 (d) 10.44 .47 (.14) .33 (.51) -- (.51) 10.26 3.29
1996 (d) 9.61 .51 .84 1.35 (.52) -- (.52) 10.44 14.33
1995 (d) 10.62 .51 (1.01) (.50) (.51) -- (.51) 9.61 (4.58)
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
(000) ment ment ment (a) ment (a) Rate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1999 $22,093 1.04% 4.55% .95% 4.64% 29%
1998 17,427 1.00 4.56 .94 4.62 7
1997 (c) 12,977 1.02* 4.83* .95* 4.90* 3
1997 (d) 11,788 1.12 4.67 1.00 4.79 4
1996 (d) 6,860 1.33 4.41 1.00 4.74 17
1995 (e) 1,605 1.59* 4.67* 1.00* 5.26* 35
Class B (3/97)
1999 4,732 1.80 3.81 1.71 3.90 29
1998 2,332 1.75 3.79 1.69 3.85 7
1997 (f) 150 1.76* 3.94* 1.70* 4.00* 3
Class C (9/94)
1999 4,089 1.59 4.01 1.50 4.10 29
1998 2,606 1.55 4.01 1.49 4.07 7
1997 (c) 2,103 1.57* 4.28* 1.50* 4.35* 3
1997 (d) 1,985 1.87 3.93 1.75 4.05 4
1996 (d) 1,438 2.06 3.73 1.75 4.04 17
1995 (e) 860 1.86* 4.44* 1.75* 4.55* 35
Class R (12/91)
1999 44,411 .83 4.75 .75 4.83 29
1998 44,599 .80 4.76 .74 4.82 7
1997 (c) 43,306 .82* 5.03* .75* 5.10* 3
1997 (d) 43,738 .87 4.94 .75 5.06 4
1996 (d) 47,389 1.04 4.78 .75 5.07 17
1995 (d) 42,741 .89 5.14 .75 5.28 35
==============================================================================================================
</TABLE>
* Annualized.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(c) For the four months ended May 31.
(d) For the year ended January 31.
(e) From commencement of class operations as noted through January 31.
(f) From commencement of class operations as noted.
36
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
---------------------------------- ----------------------------
PENNSYLVANIA** Net Realized/
Beginning Net Unrealized Net Ending
Year Ended Net Asset Investment Investment Investment Capital Net Asset Net Total
May 31, Value Income (a) Gain (Loss) Total Income Gains Total Value Return (b)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/86)
1999 $10.68 $.53 $(.17) $ .36 $(.53) $(.06) $(.59) $10.45 3.42%
1998 10.25 .56 .45 1.01 (.56) (.02) (.58) 10.68 10.05
1997 10.00 .57 .25 .82 (.57) -- (.57) 10.25 8.37
1996 10.21 .59 (.20) .39 (.60) -- (.60) 10.00 3.83
1995 10.06 .60 .16 .76 (.61) -- (.61) 10.21 7.90
Class B (2/97)
1999 10.70 .45 (.17) .28 (.45) (.06) (.51) 10.47 2.66
1998 10.27 .48 .45 .93 (.48) (.02) (.50) 10.70 9.23
1997 (c) 10.21 .16 .06 .22 (.16) -- (.16) 10.27 2.18
Class C (2/94)
1999 10.68 .47 (.17) .30 (.48) (.06) (.54) 10.44 2.80
1998 10.25 .50 .45 .95 (.50) (.02) (.52) 10.68 9.50
1997 9.99 .51 .26 .77 (.51) -- (.51) 10.25 7.88
1996 10.21 .53 (.21) .32 (.54) -- (.54) 9.99 3.16
1995 10.06 .54 .16 .70 (.55) -- (.55) 10.21 7.31
Class R (2/97)
1999 10.68 .55 (.17) .38 (.56) (.06) (.62) 10.44 3.55
1998 10.25 .58 .45 1.03 (.58) (.02) (.60) 10.68 10.30
1997 (c) 10.21 .20 .03 .23 (.19) -- (.19) 10.25 2.31
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------------------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income
to Average to Average to Average to Average
Net Assets Net Assets Net Assets Net Assets Portfolio
Year Ended Ending Net Before Credit/ Before Credit/ After Credit/ After Credit/ Turnover
May 31, Assets (000) Reimbursement Reimbursement Reimbursement Reimbursement Rate
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (10/86)
1999 $70,865 .94% 4.75% .69% 5.00% 18%
1998 65,826 .95 4.94 .61 5.28 20
1997 55,667 1.09 5.22 .70 5.61 46
1996 44,392 1.13 5.42 .79 5.76 65
1995 42,600 1.29 5.68 .89 6.08 50
Class B (2/97)
1999 7,966 1.70 4.01 1.45 4.26 18
1998 2,640 1.70 4.14 1.34 4.50 20
1997 (c) 229 1.72* 4.47* 1.35* 4.84* 46
Class C (2/94)
1999 13,167 1.49 4.21 1.24 4.46 18
1998 8,912 1.50 4.39 1.16 4.73 20
1997 6,320 1.63 4.68 1.25 5.06 46
1996 4,442 1.34 5.19 1.68 4.85 65
1995 3,118 1.39 5.50 1.84 5.05 50
Class R (2/97)
1999 61,044 .74 4.95 .49 5.20 18
1998 61,180 .75 5.14 .41 5.48 20
1997 (c) 57,383 .77* 5.45* .39* 5.83* 46
=========================================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Pennsylvania.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
37
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is
as follows:
Class (Inception Date)
<TABLE>
<CAPTION>
Investment Operations Less Distributions
---------------------------------- -----------------------------
VIRGINIA** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (3/86)
1999 $11.06 $.53 $(.10) $ .43 $(.53) $(.03) $(.56) $10.93 3.95%
1998 10.66 .56 .41 .97 (.56) (.01) (.57) 11.06 9.30
1997 10.40 .58 .25 .83 (.57) -- (.57) 10.66 8.20
1996 10.56 .57 (.15) .42 (.58) -- (.58) 10.40 4.03
1995 10.36 .59 .20 .79 (.59) -- (.59) 10.56 7.99
Class B (2/97)
1999 11.06 .45 (.10) .35 (.45) (.03) (.48) 10.93 3.20
1998 10.66 .48 .41 .89 (.48) (.01) (.49) 11.06 8.53
1997 (c) 10.62 .16 .04 .20 (.16) -- (.16) 10.66 1.94
Class C (10/93)
1999 11.06 .47 (.11) .36 (.47) (.03) (.50) 10.92 3.30
1998 10.65 .50 .42 .92 (.50) (.01) (.51) 11.06 8.81
1997 10.39 .52 .26 .78 (.52) -- (.52) 10.65 7.61
1996 10.56 .51 (.16) .35 (.52) -- (.52) 10.39 3.37
1995 10.36 .53 .20 .73 (.53) -- (.53) 10.56 7.40
Class R (2/97)
1999 11.06 .56 (.10) .46 (.56) (.03) (.59) 10.93 4.18
1998 10.66 .59 .41 1.00 (.59) (.01) (.60) 11.06 9.54
1997 (c) 10.62 .20 .04 .24 (.20) -- (.20) 10.66 2.26
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
(000) ment ment ment (a) ment (a) Rate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (3/86)
1999 $138,941 .89% 4.78% .86% 4.81% 15%
1998 133,966 .90 4.99 .74 5.15 3
1997 122,252 1.00 5.19 .74 5.45 23
1996 117,677 1.06 5.18 .83 5.41 17
1995 112,643 1.10 5.50 .79 5.81 50
Class B (2/97)
1999 10,419 1.64 4.03 1.61 4.06 15
1998 3,894 1.64 4.20 1.51 4.33 3
1997 (c) 381 1.66* 4.49* 1.47* 4.68* 23
Class C (10/93)
1999 17,679 1.44 4.23 1.41 4.26 15
1998 15,660 1.44 4.44 1.29 4.59 3
1997 11,700 1.55 4.63 1.29 4.89 23
1996 10,978 1.60 4.62 1.38 4.84 17
1995 6,537 1.65 4.93 1.34 5.24 50
Class R (2/97)
1999 56,728 .69 4.99 .66 5.02 15
1998 58,734 .70 5.19 .54 5.35 3
1997 (c) 57,002 .71* 5.50* .52* 5.69* 23
==============================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Virginia.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
38
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust I:
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Maryland Municipal Bond Fund (Maryland),
Nuveen Flagship Pennsylvania Municipal Bond Fund (Pennsylvania), and Nuveen
Flagship Virginia Municipal Bond Fund (Virginia) (collectively, the "Funds")
(three of the portfolios constituting the Nuveen Flagship Multistate Trust I (a
Massachusetts business trust)), as of May 31, 1999, the related statements of
operations for the year then ended, and the statements of changes in net assets
and the financial highlights for each of the two years then ended. We have also
audited the financial statements and financial highlights of Maryland for the
years ended January 31, 1997 and prior. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1999, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Maryland Municipal Bond Fund, Nuveen Flagship Pennsylvania Municipal Bond Fund,
and Nuveen Flagship Virginia Municipal Bond Fund of the Nuveen Flagship
Multistate Trust I as of May 31, 1999, and the results of their operations for
the year then ended, and the changes in their net assets and the financial
highlights for each of the two years then ended, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 20, 1999
39
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family
of Mutual Funds
Nuveen offers a variety of
funds designed to
help you reach your
financial goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and
Income
European Value Fund
Growth and
Income Stock Fund
Balanced Stock
and Bond Fund
Balanced Municipal
and Stock Fund
Dividend and
Growth Fund
Income
Income Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio -- one that balances
different types of investments, levels of risk and tax management -- can be the
foundation for building and sustaining wealth. That's why Nuveen offers you
and your financial adviser a wide range of quality investments that can help
you build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers/SM/ including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
quality municipal bonds. The fund shares are listed and traded on the New York
and American stock exchanges. Exchange-traded funds provide the investment
convenience, price visibility and liquidity of common stocks.
MuniPreferred/(R)/
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
40
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
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
Chase Global Fund Services Company
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
41
<PAGE>
SERVING
Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive 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 income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
VAN-1-5-99
