<PAGE>
NUVEEN
Municipal
Bond Funds
November 30, 1998
- --------------------------------------------------------------------------------
Semiannual Report
- --------------------------------------------------------------------------------
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Arizona
Colorado
New Mexico
<PAGE>
HIGHLIGHTS
As of November 30, 1998
For Class A shares on net asset value
Credit Quality Performance Highlights
Nuveen Flagship Arizona Municipal Bond Fund
. One-year total return of 7.61%
[PIE CHART . Outperformed Lipper Peer Group average for one year
APPEARS HERE] period
. Good credit quality, with 82% of the fund's assets
AAA/U.S. Guaranteed 75% invested in AAA or AA rated bonds
AA 7%
A 9%
BBB/NR 9%
Nuveen Flagship Colorado Municipal Bond Fund
. One-year total return of 7.85%
[PIE CHART . Outperformed the Lehman Brothers Municipal Bond
APPEARS HERE] Index and Lipper Peer Group average for one year
period
. Good credit quality, with 80% of the fund's assets
AAA/U.S. Guaranteed 56% invested in AAA or AA rated bonds
AA 24%
A 3%
BBB/NR 17%
Nuveen Flagship New Mexico Municipal Bond Fund
. One-year total return of 7.76%
[PIE CHART . Outperformed Lipper Peer Group average and equaled
APPEARS HERE] the performance of the Lehman Brothers Municipal
Bond Index for one year period
. Good credit quality, with 73% of the fund's assets
AAA/U.S. Guaranteed 62% invested in AAA or AA rated bonds
AA 11%
A 14%
BBB/NR 13%
CONTENTS
1 Dear Shareholder
4 Nuveen Flagship Arizona Municipal Bond Fund Commentary and Overview
6 Nuveen Flagship Colorado Municipal Bond Fund Commentary and Overview
8 Nuveen Flagship New Mexico Municipal Bond Fund Commentary and Overview
10 Portfolio of Investments
22 Statement of Net Assets
23 Statement of Operations
24 Statement of Changes in Net Assets
25 Notes to Financial Statements
30 Financial Highlights
32 Building Better Portfolios
33 Fund Information
<PAGE>
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
Dear Shareholder
I'm pleased to report on the performance of your Nuveen Municipal Bond Fund for
the 12 months ended November 30, 1998. Providing a high level of current
interest income exempt from regular federal, state and, in some cases, local
income taxes as is consistent with the preservation of capital remains the
primary investment objective for each of the funds covered in this report. In
each case, we achieved this objective, illustrating once again that Nuveen tax-
free mutual funds can provide an excellent investment option for income-oriented
investors.
THE YEAR IN REVIEW
Over the past year, the markets endured bouts of volatility, as the Asian
financial crisis spilled over into emerging markets and affected economies
around the globe. This economic turmoil affected the U.S. equity market, which
was very volatile over the past year. The Federal Reserve intervened in an
attempt to soften the impact of the financial crises by lowering short-term
interest rates in September by a quarter of a point. Since that time, the Fed
has twice again reduced rates, bringing the federal funds rate to 4.75%. As
long-term interest rates fell to historic lows, investors were reminded of the
importance of a well balanced portfolio and professional management. Despite the
market volatility throughout the year, your Nuveen Municipal Bond Fund continued
to provide attractive current market yields and after-tax total returns. Your
fund represented a bright spot among fixed-income investments. In addition, the
funds have maintained good levels of call protection, which provides a strong
foundation for potentially stable income streams in the near future. Looking
ahead, we will continue to focus on new municipal bond issuance while leveraging
our institutional position to buy and sell securities at competitive prices and
identifying undervalued securities through proprietary market research.
1
<PAGE>
MUNICIPAL MARKET REVIEW
Over the past year, declining interest rates drove yields on 30-year Treasuries
to their lowest levels since 1977. With yields on the long Treasury bond pushing
below 5% at times, the yield on the Bond Buyer 40, an unmanaged index of long-
term municipal bonds, fell just 26 basis points from - 5.36% to 5.10% - compared
with the 99-point drop, to 5.06%, in Treasury yields over the past 12 months. As
of November 30, 1998, the ratio of long-term municipal yields to 30-year
Treasury yields stood at 100.8%, compared with the more typical range of 86-87%.
Over the past few months, this ratio has climbed as high as 104%. For investors,
this means that long-term municipal bonds currently offer about the same yield
as Treasury bonds with comparable maturities, before taxes are taken into
account. On an after-tax basis, municipal bonds present an even more attractive
investment option relative to Treasuries.
One of the main factors in the steep decline in Treasury yields during the past
year was the strong interest in these investments by international investors. As
the financial turmoil in Asia continued to spread to economies worldwide and the
dollar strengthened against foreign currencies, the demand for U.S. dollar-
denominated Treasury securities increased. In the municipal market, where
foreign demand was limited by an inability of foreign investors to benefit from
the tax advantages of munis, low interest rates and a strong economy combined to
generate high levels of new issuance and a dramatic increase in the refinancing
of existing bonds. The first eleven months of 1998 saw over $255 billion of
municipal issuance, up 28.4% over the same period in 1997. In terms of total
issuance, this
2
<PAGE>
"The key to taking advantage of the exceptional values currently available in
the financial markets is the expertise of a market specialist, such as Nuveen
Investment Advisory Services."
put 1998 on pace to be the second largest year on record.
In addition, the continued strength of the U.S. economy brought about
improvements in the fundamental financial health of many municipalities and
boosted the overall credit quality of municipal bonds. In the third quarter of
1998, upgraded issues by the two major rating agencies outnumbered downgrades by
a margin of 7 to 2.
NUVEEN EXPERTISE IS KEY
The key to taking advantage of the exceptional values currently available in the
financial markets is the expertise of a market specialist, such as Nuveen
Investment Advisory Services. To this end, Nuveen has assembled the Premier
Advisers (SM), a growing group of experts that can provide time-tested
experience and insight in a variety of investment categories. In addition to
Nuveen Investment Advisory Services, our Premier Adviser for tax-free investing,
you can rely on our other Premier Advisers to share their wisdom in the equity
market, including Institutional Capital Corporation for value investing and
Rittenhouse Financial Services, Inc. for growth investing. For more information
about the funds managed by these Premier Advisers, including charges and
expenses, contact your financial adviser for a prospectus, or call Nuveen at
(800) 621-7227. Please read the prospectus carefully before you invest or send
money.
We encourage you to talk with your financial adviser about the ways Nuveen's
expanding selection of investments can assist you in establishing a diversified
portfolio designed to help you build and sustain long-term financial security.
Over the past 100 years, Nuveen has evolved from a company that dealt with only
municipal bonds into a nationally respected firm that handles a variety of
investment options. I look forward to continuing this exciting journey. We are
grateful for the confidence you have shown in us, and we intend to continue
earning your trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
TIMOTHY R. SCHWERTFEGER
Chairman of the Board
January 15, 1999
3
<PAGE>
Nuveen Flagship Arizona Municipal Bond Fund
PORTFOLIO MANAGER'S COMMENTS
PORTFOLIO MANAGER MIKE DAVERN DISCUSSES FUND PERFORMANCE, THE MUNICIPAL MARKET,
AND KEY INVESTMENT STRATEGIES FOR THE ARIZONA FUND FOR THE ONE-YEAR PERIOD ENDED
NOVEMBER 30, 1998.
Comments cover the one-year period ended November 30, 1998 and all performance
statistics are quoted for Class A shares at net asset value.
WHAT IS THE STATUS OF ARIZONA'S ECONOMY AND ITS MUNICIPAL MARKET?
Although Arizona's economy is based primarily on services, tourism, and high-
technology manufacturing, the military, agriculture, and mining sectors continue
to flourish as well.
The state has experienced remarkable economic and population growth in recent
years as businesses have relocated to Arizona for its high quality of life, an
educated workforce and a friendly business environment. Over the last five
years, in fact, Arizona has ranked second in the nation in job growth, and its
unemployment and per capita income growth numbers are better than the national
averages.
The state's municipal bond issuance grew at a brisk pace in 1998. This was due
to a variety of factors: low interest rates, expansive economic conditions, a
growing infrastructure, and school financing needs.
Arizona's total municipal issuance for the first 11 months of 1998 was $3.74
billion, which was up 30.9% over 1997.
HOW DID THE NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND'S UNDERLYING PORTFOLIO
PERFORM DURING THE PAST YEAR?
Over the past 12 months, the Nuveen Flagship Arizona Municipal Bond Fund
generated a total return on net asset value of 7.61%, equivalent to a taxable
total return of 10.17% for investors in the combined 34.3% federal and state
income tax bracket. That performance exceeded the 6.89% average annual total
return posted by the Lipper Arizona Municipal Debt Peer Group* of 39 municipal
bond funds.
WHAT KEY STRATEGIES WERE USED OVER THE COURSE OF THE YEAR? WERE THERE ANY
PARTICULAR SECTORS IN WHICH NUVEEN LOOKED FOR UNDERVALUED SECURITIES?
We spent the year trying to improve the fund's portfolio structure by adding
high-quality securities offering higher coupons, good protection against calls,
and attractive value relative to the larger market.
We sought out those securities in two ways. First, we looked to make new
purchases in sectors offering bonds that our managers believe were not fully
priced by the market. The fund's two largest sector allocations were general tax
obligation securities and U.S. Guaranteed bonds, which accounted for 25% and
24%, respectively, of the fund's investments. These sectors not only experienced
some of the state's heaviest issuance volume, offering some opportunities to
find value, they also performed well during the year.
Second, we took advantage of the slightly wider yield spreads between higher and
lower-rated securities. Typically, an investment-grade (at least BBB rated) bond
pays higher interest rates because of its lower credit rating. The bond's lower
credit rating is rewarded in the form of a higher yield. Conversely, AAA rated
securities pay lower interest rates due to the fact that there is less credit
risk to the issue.
While searching for investment-grade securities, Nuveen's extensive research
capabilities give us the ability to identify lower-rated debt that we believe
offers both strong quality characteristics and the opportunity for additional
yield. In Arizona, we found attractive, lower-rated bonds in a number of
sectors, although the fund's portfolio continues to be of very high quality,
with 82% of its holdings rated AAA or AA.
The fund also benefited from good call protection, which helped it maintain more
predictable income streams. Call protection insulates investors from income
erosion, especially in a declining interest rate environment.
WHAT IS YOUR OUTLOOK FOR THE NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND?
We will continue to manage the fund by seeking out undervalued securities that
provide both attractive income and the opportunity for price appreciation
relative to the market, consistent with the preservation of capital.
Housing bonds will be prime candidates for addition to the portfolio as a way to
increase yield. Single family housing bonds often have higher yields than other
bonds of similar maturities because the housing bonds are subject to early calls
if home owners pre-pay their mortgages. In today's market, however, we view this
prepayment risk as minimal due to the present low interest rate environment.
We will also continue working closely with Nuveen's research team to identify
lower rated, investment-grade bonds that we believe will add yield to the
portfolio without taking on undue credit risk.
*The Lipper Peer Group return represents the average annualized return of the 39
funds in the Lipper Arizona Municipal Debt category. The return assumes
reinvestment of dividends and does not reflect any applicable sales charges.
4
<PAGE>
Nuveen Flagship Arizona Municipal Bond Fund
PERFORMANCE OVERVIEW
As of November 30, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
[BAR CHART APPEARS HERE]
<TABLE>
<S> <C>
12/97 .0460
1/98 .0455
2/98 .0455
3/98 .0455
4/98 .0455
5/98 .0455
6/98 .0455
7/98 .0455
8/98 .0455
9/98 .0455
10/98 .0455
11/98 .0455
</TABLE>
Top 5 Sectors (as a % of total investments)
<TABLE>
<S> <C>
Tax Obligation (General) 25%
U.S. Guaranteed 24%
Health Care 14%
Tax Obligation (Limited) 11%
Water and Sewer 7%
- --------------------------------------
</TABLE>
Portfolio Statistics
<TABLE>
<CAPTION>
Share Class A B C R
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 10/86 2/97 2/94 2/97
Net Asset Value $11.56 $11.55 $11.56 $ 11.56
Total Net Assets ($000) $120,479
Effective Maturity (Years) 15.08
Modified Duration (Years) 7.26
- ----------------------------------------------------------------------------
</TABLE>
Annualized Total Return/2/
<TABLE>
<CAPTION>
Share Class A(NAV) A(Offer) B C R
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 7.61% 3.13% 6.83% 7.05% 7.83%
5-Year 6.52% 5.61% 5.85% 5.94% 6.60%
10-Year 8.28% 7.82% 7.81% 7.70% 8.32%
- -----------------------------------------------------------------------------
</TABLE>
/1/ The Fund also paid shareholders taxable distributions in December of $0.0180
per share.
/2/ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, w hich are primarily differences in distribution and service fees.
Class A shares have a 4.20% 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.
5
<PAGE>
Nuveen Flagship Colorado Municipal Bond Fund
PORTFOLIO MANAGER'S COMMENTS
PORTFOLIO MANAGER MIKE DAVERN DISCUSSES FUND PERFORMANCE, THE MUNICIPAL MARKET,
AND KEY INVESTMENT STRATEGIES FOR THE COLORADO FUND FOR THE ONE-YEAR PERIOD
ENDED NOVEMBER 30, 1998.
Comments cover the one-year period ended November 30, 1998 and all performance
statistics are quoted for Class A shares at net asset value.
WHAT IS THE STATUS OF COLORADO'S ECONOMY AND ITS MUNICIPAL MARKET?
Colorado's economy has posted strong gains in recent years. The state's trade
and service sectors represent over half of non-agricultural employment in the
economy and continue to expand. There are signs indicating, however, that the
state's economic growth may be slowing. Manufacturing employment is
comparatively small and continues to shrink due to a concentration in defense
production.
In spite of a mixed forecast for the state's economy, Colorado's unemployment
rate continued to be a full percentage point below the national average (3.4%
for the state vs. 4.4% for the nation) as of November 30, 1998, and per capita
income growth remained healthy. Despite heavy municipal bond issuance
nationwide for the first 11 months of 1998, Colorado's new issuance declined by
almost 39% in comparison to last year's numbers.
HOW DID THE NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND'S UNDERLYING PORTFOLIO
PERFORM DURING THE PAST YEAR?
Over the past 12 months, the Nuveen Flagship Colorado Municipal Bond Fund
generated a total return on net asset value of 7.85%, equivalent to a taxable
total return of 10.47% for investors in the 34.5% federal and state income tax
bracket. That performance exceeded the 7.08% average annual total return posted
by the Lipper Colorado Municipal Debt Peer Group* of 27 municipal bond funds.
WHAT KEY STRATEGIES WERE USED OVER THE COURSE OF THE YEAR? WERE THERE ANY
PARTICULAR SECTORS IN WHICH NUVEEN LOOKED FOR UNDERVALUED SECURITIES?
We spent the year trying to improve the fund's portfolio structure by adding
high-quality securities offering higher coupons, good protection against calls,
and attractive value relative to the larger market.
We sought out those securities in two ways. First, we looked to make new
purchases in sectors offering bonds that our managers believe were not fully
priced by the market. The fund's two largest sector allocations were U.S.
Guaranteed bonds and multifamily housing securities, which accounted for 34%
and 23%, respectively, of the fund's investments. These sectors not only
experienced some of the state's heaviest issuance volume, offering some
opportunities to find value, they also performed well during the year.
Second, we took advantage of the slightly wider yield spreads between higher
and lower-rated securities. Typically, an investment-grade (at least BBB rated)
bond pays higher interest rates because of its lower credit rating. The bond's
lower credit rating is rewarded in the form of a higher yield. Conversely, AAA
rated securities pay lower interest rates due to the fact that there is less
credit risk to the issue.
While searching for investment-grade securities, Nuveen's extensive research
capabilities give us the ability to identify lower-rated debt that we believe
offers both strong quality characteristics and the opportunity for additional
yield. In Colorado, we found attractive, lower-rated bonds in a number of
sectors, although the fund's portfolio continues to be of very high quality,
with 80% of its holdings rated AAA or AA.
The fund also benefited from good call protection, which helped it maintain
more predictable income streams. Call protection insulates investors from
income erosion, especially in a declining interest rate environment.
WHAT IS YOUR OUTLOOK FOR THE NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND?
We will continue to manage the fund by seeking out undervalued securities that
provide both attractive income and the opportunity for price appreciation
relative to the market, consistent with the preservation of capital.
Housing bonds will be prime candidates for addition to the portfolio as a way
to increase yield. Single family housing bonds often have higher yields than
other bonds of similar maturities because the housing bonds are subject to
early calls if home owners pre-pay their mortgages. In today's market, however,
we view this prepayment risk as minimal due to the present low interest rate
environment.
We will also continue working closely with Nuveen's research team to identify
lower rated, investment-grade bonds that we believe will add yield to the
portfolio without taking on undue credit risk.
*The Lipper Peer Group return represents the average annualized return of the 27
funds in the Lipper Colorado Municipal Debt category. The return assumes
reinvestment of dividends and does not reflect any applicable sales charges.
6
<PAGE>
Nuveen Flagship Colorado Municipal Bond Fund
PERFORMANCE OVERVIEW
As of November 30, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
[BAR CHART APPEARS HERE]
12/97 .0435
1/98 .0435
2/98 .0435
3/98 .0435
4/98 .0435
5/98 .0435
6/98 .0435
7/98 .0425
8/98 .0425
9/98 .0425
10/98 .0425
11/98 .0425
- ----------------------------------------------------------
Top 5 Sectors (as a % of total investments)
- ----------------------------------------------------------
<TABLE>
<S> <C>
U.S. Guaranteed 34%
- ----------------------------------------------------------
Housing (Multifamily) 23%
- ----------------------------------------------------------
Health Care 13%
- ----------------------------------------------------------
Education and Civic Organizations 7%
- ----------------------------------------------------------
Tax Obligation (General) 7%
- ----------------------------------------------------------
</TABLE>
- -----------------------------------------------------------------------------
Portfolio Statistics
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Share Class A B C R
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 5/87 2/97 2/97 2/97
- -----------------------------------------------------------------------------
Net Asset Value $10.95 $10.97 $10.94 $ 10.95
- -----------------------------------------------------------------------------
Total Net Assets ($000) $45,601
- -----------------------------------------------------------------------------
Effective Maturity (Years) 20.65
- -----------------------------------------------------------------------------
Modified Duration (Years) 8.53
- -----------------------------------------------------------------------------
</TABLE>
- ---------------------------------------------------------------------------
Annualized Total Return/2/
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Share Class A(NAV) A(Offer) B C R
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 7.85% 3.29% 7.07% 7.17% 7.98%
- ---------------------------------------------------------------------------
5-Year 7.14% 6.21% 6.52% 6.67% 7.21%
- ---------------------------------------------------------------------------
10-Year 8.32% 7.86% 7.84% 7.90% 8.36%
- ---------------------------------------------------------------------------
</TABLE>
1 The Fund paid shareholders taxable distributions in December of $0.0025 per
share.
2 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.20% 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.
7
<PAGE>
Nuveen Flagship New Mexico Municipal Bond Fund
PORTFOLIO MANAGER'S COMMENTS
PORTFOLIO MANAGER MIKE DAVERN DISCUSSES FUND PERFORMANCE, THE MUNICIPAL MARKET,
AND KEY INVESTMENT STRATEGIES FOR THE NEW MEXICO FUND FOR THE ONE-YEAR PERIOD
ENDED NOVEMBER 30, 1998.
Comments cover the one-year period ended November 30, 1998 and all performance
statistics are quoted for Class A shares at net asset value.
WHAT IS THE STATUS OF NEW MEXICO'S ECONOMY AND ITS MUNICIPAL MARKET?
New Mexico's major industries include energy resources, tourism, services,
crafts, agribusiness, manufacturing and mining. In 1997 alone, energy resource
production, including oil and gas sales, brought in more than $5 billion.
New Mexico's economy also benefits from the employment and technology resources
provided by federal government scientific research facilities at Los Alamos,
Albuquerque, and White Sands.
Although New Mexico's unemployment rate is higher than the national average, its
per capita income numbers are on the rise, and several major sectors of the
economy, including tourism and agribusiness, are expected to remain strong in
the near future.
The state's increase in municipal bond issuance was due to a variety of factors:
low interest rates, expansive economic conditions, a growing infrastructure, and
school financing needs. The total issuance for the first 11 months of 1998 was
over $1.35 billion, which was up slightly over 1997's total.
HOW DID THE NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL BOND FUND'S UNDERLYING
PORTFOLIO PERFORM DURING THE PAST YEAR?
Over the past 12 months, the Nuveen Flagship New Mexico Municipal Bond Fund
generated a total return on net asset value of 7.76%, equivalent to a taxable
total return of 10.61% for investors in the 36.9% federal and state income tax
bracket. That performance exceeded the 6.51% average annual total return posted
by the Lipper States Municipal Debt Peer Group* of 74 municipal bond funds.
WHAT KEY STRATEGIES WERE USED OVER THE COURSE OF THE YEAR? WERE THERE ANY
PARTICULAR SECTORS IN WHICH NUVEEN LOOKED FOR UNDERVALUED SECURITIES?
In general, we spent the year trying to improve the fund's portfolio structure
by adding high-quality securities offering higher coupons, good protection
against calls, and attractive value relative to the larger market.
We sought out those securities in two ways. First, we looked to make new
purchases in sectors offering bonds that our managers believe were not fully
priced by the market. The fund's two largest sector allocations were limited tax
obligation bonds and single family housing securities, which accounted for 28%
and 17%, respectively, of the fund's investments. These sectors not only
experienced some of the state's heaviest issuance volume, they also performed
well during the year and offered some opportunities to find value.
Second, we took advantage of the slightly wider yield spreads between higher and
lower-rated securities. Typically, an investment-grade (at least BBB rated) bond
pays higher interest rates because of its lower credit rating. The bond's lower
credit rating is rewarded in the form of a higher yield. Conversely, AAA rated
securities pay lower interest rates due to the fact that there is less credit
risk to the issue.
While searching for investment-grade securities, Nuveen's extensive research
capabilities give us the ability to identify lower-rated debt that we believe
offers both strong quality characteristics and the opportunity for additional
yield. In New Mexico, we found attractive, lower-rated bonds in a number of
sectors, although the fund's portfolio continues to be of very high quality,
with 73% of its holdings rated AAA or AA.
The fund also benefited from good call protection, which helped it maintain more
predictable income streams. Call protection insulates investors from income
erosion especially in a declining interest rate environment.
WHAT IS YOUR OUTLOOK FOR THE NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL BOND FUND?
Overall, we will continue to manage the fund by seeking out undervalued
securities that provide both attractive income and the opportunity for price
appreciation relative to the market, consistent with the preservation of
capital.
Housing bonds will be prime candidates for addition to the portfolio as a way to
increase yield. Single family housing bonds often have higher yields than other
bonds of similar maturities because the housing bonds are subject to early calls
if home owners pre-pay their mortgages. In today's market, however, we view this
prepayment risk as minimal due to the present low interest rate environment.
We will also continue working closely with Nuveen's research team to identify
lower rated, investment-grade bonds that we believe will add yield to the
portfolio without taking on undue credit risk.
*The Lipper Peer Group return represents the average annualized return of the 74
funds in the Lipper States Municipal Debt category. The return assumes
reinvestment of dividends and does not reflect any applicable sales charges.
8
<PAGE>
Nuveen Flagship New Mexico Municipal Bond Fund
PERFORMANCE OVERVIEW
As of November 30, 1998
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<S> <C>
12/97 .0420
1/98 .0420
2/98 .0420
3/98 .0420
4/98 .0420
5/98 .0420
6/98 .0420
7/98 .0410
8/98 .0410
9/98 .0410
10/98 .0410
11/98 .0410
</TABLE>
Top 5 Sectors (as a % of total investments)
<TABLE>
<S> <C>
Tax Obligation (Limited) 28%
Housing (Single Family) 17%
Education and Civic Organizations 16%
Utilities 9%
Housing (Multifamily) 8%
- ---------------------------------------------------
</TABLE>
Portfolio Statistics
<TABLE>
<CAPTION>
Share Class A B C R
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 9/92 2/97 2/97 2/97
Net Asset Value $10.79 $10.79 $10.79 $ 10.82
Total Net Assets ($000) $61,520
Effective Maturity (Years) 21.26
Modified Duration (Years) 7.95
- -------------------------------------------------------------------------------
</TABLE>
Annualized Total Return/1/
<TABLE>
<CAPTION>
Share Class A(NAV) A(Offer) B C R
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 7.76% 3.24% 7.09% 7.22% 8.09%
5-Year 6.35% 5.44% 5.69% 5.91% 6.48%
Inception 7.26% 6.53% 6.61% 6.83% 7.37%
- -------------------------------------------------------------------------------
</TABLE>
/1/ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.20% 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.
9
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited)
NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND
November 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSUMER CYCLICAL 0.9%
$1,000,000 Mesa, Arizona, Industrial Development Authority, Industrial No Opt. Call N/R $1,082,590
Revenue 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, 12/02 at 103 A1 277,865
Pollution Control 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 3/02 at 101 Aa2 615,036
Educational Loan Revenue Bonds, Series B, 7.000%,
3/01/05 (Alternative Minimum Tax)
100,000 Arizona Educational Loan Marketing Corporation, Educational 9/02 at 101 Aa 107,731
Loan Revenue Bonds, 6.375%, 9/01/05 (Alternative Minimum Tax)
1,500,000 Student Loan Acquisition Authority of Arizona, Student Loan 5/04 at 102 Aa 1,615,170
Revenue 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, 5/08 at 101 BBB+ 2,502,050
Arizona, Revenue Bonds, Midwestern University, Series 1998A,
5.375%, 5/15/28
115,000 The Industrial Development Authority of the City of Glendale, 5/06 at 102 AAA 126,973
Arizona, Revenue Bonds, Midwestern University, Series 1996A,
6.000%, 5/15/16
300,000 Arizona Board of Regents, University of Arizona, System Revenue 6/02 at 102 AA 327,237
Refunding Bonds, Series 1992, 6.250%, 6/01/11
335,000 Yavapai County Community College, District of Yavapai County, 7/03 at 101 A 356,681
Arizona, Revenue Bonds, Series 1993, 6.000%, 7/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE 14.0%
1,250,000 Arizona Health Facilities Authority, Revenue Bonds (Arizona 10/99 at 101 AAA 1,301,775
Voluntary Hospital Federation Pooled Loan Program), 1985
Series B, 7.250%, 10/01/13
1,500,000 The Industrial Development Authority of the County of Maricopa 7/08 at 101 A 1,478,370
(Arizona), Health Facility Revenue Bonds (Catholic Healthcare
West Project), 1998 Series A, 5.000%, 7/01/16 (WI)
2,775,000 The Industrial Development Authority of the County of Maricopa No Opt. Call AAA 3,530,799
(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 408,578
(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 627,054
(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+ 524,705
500,000 6.000%, 12/01/14 12/03 at 102 BBB+ 524,255
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 536,995
640,000 5.250%, 7/01/13 No Opt. Call AAA 684,173
1,500,000 Scottsdale Industrial Development Authority (Scottsdale No Opt. Call AAA 1,650,030
Memorial Hospitals), 5.500%, 9/01/12
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH CARE (continued)
Industrial Development Authority of the City of Scottsdale, Arizona, Hospital
Revenue
Refunding Bonds (Scottsdale Memorial Hospitals), Series 1997A:
$ 2,000,000 6.000%, 9/01/12 9/07 at 102 AAA $ 2,218,160
3,000,000 6.125%, 9/01/17 9/07 at 102 AAA 3,353,940
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 1.7%
295,000 Phoenix Housing Finance Corporation (Arizona), Mortgage Revenue Refunding Bonds, 7/02 at 101 AAA 312,216
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 213,368
425,000 6.800%, 11/01/25 11/02 at 101 AAA 451,044
500,000 The Industrial Development Authority of the City of Phoenix, Arizona, Multifamily 2/03 at 102 AAA 520,310
Housing Revenue Refunding Bonds, Series 1993 (GNMA Collateralized Meadow Glen
Apartment Project), 5.800%, 8/20/28
500,000 The Industrial Development Authority of the City of Tempe, Arizona, Multi-family 6/03 at 102 AAA 533,135
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 (Arizona), Single 6/08 at 108 AAA 1,634,055
Family Mortgage Revenue Refunding Bonds (Mortgage-Backed Securities Program),
Series 1998B, 4.750%, 12/01/30 (Alternative Minimum Tax)
470,000 The Industrial Development Authority of the City of Phoenix, Arizona, Statewide 6/05 at 102 AAA 494,303
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, Arizona, Statewide 4/08 at 101/2 AAA 1,416,016
Single Family Mortgage Revenue Bonds, 1998 Series C, 5.300%, 4/01/20
(Alternative Minimum Tax)
370,000 The Industrial Development Authority of the County of Pima, Arizona, Single 8/05 at 102 AAA 397,909
Family Mortgage Revenue Refunding Bonds, Series 1995A, 6.500%, 2/01/17
800,000 The Industrial Development Authority of the County of Pima, Arizona, Single 5/07 at 102 AAA 860,872
Family Mortgage Revenue Bonds, Series 1997A, 6.250%, 11/01/30
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM CARE 1.5%
1,660,000 The Industrial Development Authority of the County of Cochise, Tax Exempt 504 at 102 AAA 1,865,823
Mortgage Revenue Refunding Bonds, Series 1994A (GNMA Collateralized-Sierra
Vista Care Center), 6.750%, 11/20/19
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL 25.3%
800,000 City of Chandler, Arizona, General Obligation Refunding Bonds, Series 1991, 7/01 at 101 AAA 868,576
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 316,593
300,000 7.500%, 7/01/10 No Opt. Call AAA 383,850
375,000 Maricopa Rural Road Improvement District of Pinal County, Arizona, Refunding 7/99 at 101 N/R 383,201
Bonds, Series 1994, 6.000%, 7/01/05
1,000,000 Maricopa County School District No. 3, General Obligation Improvement and 7/04 at 102 AAA 1,106,460
Refunding Bonds, Series 1994, 6.000%, 7/01/13
675,000 Peoria Unified School District No. 11 of Maricopa County, Arizona, Refunding No Opt.Call AAA 493,918
Bonds, Second Series of 1992, 0.000%, 7/01/06
480,000 Peoria Unified School District No. 11 of Maricopa County, 7/01 at 101 AAA 513,816
Arizona, School Improvement and Refunding Bonds, Series 1992, 6.400%, 7/01/10
</TABLE>
11
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited)
NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND (continued)
November 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $2,794,720
1,870,000 0.000%, 1/01/09 No Opt. Call AAA 1,204,392
3,805,000 0.000%, 1/01/10 No Opt. Call AAA 2,325,768
2,500,000 0.000%, 7/01/10 No Opt. Call AAA 1,494,550
6,000,000 0.000%, 1/01/11 No Opt. Call AAA 3,466,980
50,000 Kyrene Elementary School District No. 28 of Maricopa County, 7/02 at 100 AAA 53,420
Arizona, School Improvement Bonds, Project of 1990, Series E,
(1993), 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 563,565
2,500,000 6.250%, 7/01/10 7/05 at 101 AAA 2,817,275
1,750,000 6.300%, 7/01/11 7/05 at 101 AAA 1,963,658
2,000,000 Gilbert Unified School District No. 41 of Maricopa County, No Opt. Call AAA 1,493,900
Arizona, Refunding Bonds, Series 1994, 0.000%, 1/01/06
500,000 Gilbert Unified School District No. 41 of Maricopa County, 7/08 at 100 AAA 567,710
Arizona, School Improvement Bonds, Project of 1993 Series D,
6.250%, 7/01/15
515,000 Alhambra Elementary School District No. 68 of Maricopa 7/04 at 102 AAA 588,897
County, Arizona, School Improvement and Refunding Bonds,
Series 1994A, 6.750%, 7/01/14
310,000 Chandler Unified School District No. 80 of Chandler County, No Opt. Call AAA 362,173
Arizona, 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 932,956
Unit Refunding, 0.000%, 7/01/06
635,000 Blue Ridge Unified School District No. 32 of Navajo County, 7/06 at 101 AAA 699,154
Arizona, School Improvement Bonds, Series 1996, 5.800%, 7/01/14
1,000,000 Tucson Unified School District No. 1 of Pima County, Arizona, No Opt. Call AAA 1,283,720
Refunding Bonds, Series 1992, 7.500%, 7/01/10
300,000 Tucson Unified School District No.1 of Pima County, Arizona, 7/02 at 102 AAA 329,277
School Improvement Bonds, Project of 1989, Series D, 6.100%,
7/01/12
500,000 Tanque Verde Unified School District No. 13 of Pima County, 7/04 at 102 AAA 573,080
Arizona, School Improvement and Refunding Bonds, Series 1994,
6.700%, 7/01/10
500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 7/07 at 101 1/2 A 518,410
5.375%, 7/01/25
315,000 Scottsdale Mountain Community Facilities District, Scottsdale, 7/03 at 102 A 340,112
Arizona, General Obligation Bonds, Series 1993A, 6.200%, 7/01/17
225,000 City of Tempe, Arizona, General Obligation Bonds, Series 1992B, 7/02 at 101 AA+ 244,076
6.000%, 7/01/08
600,000 Tempe Union High School District No. 213 of Maricopa County, 7/04 at 101 AAA 662,268
Arizona, School Improvement and Refunding Bonds, Series 1994,
6.000%, 7/01/12
1,130,000 City of Tucson, Arizona, General Obligation Refunding Bonds, 7/07 at 100 AA 1,136,611
Series 1997, 5.000%, 7/01/19
- -----------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED- 10.8%
700,000 Apache County, Arizona, Public Finance Corporation, Certificates 5/00 at 102 A 723,961
of Participation, Series 1994, Arizona Department of
Corrections, 5.500%, 5/01/10
250,000 State of Arizona Refunding Certificates of Participation, 9/02 at 102 AAA 272,063
Series 1992B, 6.250%, 9/01/10
225,000 Arizona Municipal Financing Program, Certificates of No Opt. Call AAA 268,418
Participation, Series 11, 8.000%, 8/01/17
965,000 City of Bullhead, Arizona, Bullhead Parkway Improvement 1/03 at 103 Baa 1,046,890
District Bonds, 6.100%, 1/01/13
350,000 City of Bullhead, Arizona, Municipal Property Corporation, 7/08 at 101 Aaa 352,132
Excise Tax Revenue Bonds (Wastewater Treatment Plant
Improvements), Series 1998, 5.000%, 7/01/17
550,000 City of Douglas, Arizona, Municipal Property Corporation, 7/05 at 101 AAA 595,342
Municipal Facilities Excise Tax Revenue Bonds, Series 1995,
5.750%, 7/01/15
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/LIMITED (continued)
$280,000 Eloy Municipal Property Corporation, Municipal 7/02 at 101 BBB $ 302,851
Facilities Revenue Bonds, Series 1992, 7.000%,
7/01/11
385,000 City of Flagstaff, Arizona, Junior Lien Street No Opt. Call AAA 439,031
and Highway User Revenue Bonds, Series 1992,
5.900%, 7/01/10
300,000 Hospital District No. One, Maricopa County, Arizona, 6/04 at 101 AAA 331,236
Hospital Facilities Refunding Bonds, Series B
(1992), 6.250%, 6/01/10
1,000,000 Hospital District No. One, Maricopa County, Arizona, 6/06 at 101 A 1,091,270
General Obligation Bonds Series 1996, 6.500%,
6/01/17
City of Peoria, Arizona, Improvement District No.
8801 (North Valley Power Center), Improvement
Bonds:
425,000 7.300%, 1/01/12 1/03 at 101 BBB 465,078
460,000 7.300%, 1/01/13 1/03 at 101 BBB 503,199
300,000 City of Phoenix, Arizona, Junior Lien Street and 7/02 at 102 A+ 327,165
Highway User Revenue Refunding Bonds, Series
1992, 6.250%, 7/01/11
Pinal County, Arizona, Certificates of Participation,
Series 1994:
300,000 6.375%, 6/01/06 6/02 at 100 AA 323,592
200,000 6.500%, 6/01/09 6/02 at 100 AA 216,704
2,050,000 Puerto Rico Highway and Transportation Authority, 7/16 at 100 A 2,212,688
Highway Revenue Bonds, Series Y of 1996, 5.500%,
7/01/36
2,350,000 Puerto Rico Public Buildings Authority, Government 7/07 at 101 1/2 A 2,390,961
Facilities 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, 7/04 at 100 AA 940,279
Series 1994, 6.375%, 7/01/09
175,000 Business Development Finance Corporation, Tucson 7/02 at 102 AAA 190,846
(Arizona), Local Development Lease Revenue Refunding
Bonds, Series 1992, 6.250%, 7/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION 2.2%
500,000 Phoenix Airport System, Alternative Minimum Tax, 6.400%, 7/04 at 102 AAA 556,475
7/01/12 (Alternative Minimum Tax)
1,000,000 City of Phoenix Civic Improvement Corporation (Arizona), 7/08 at 101 AAA 997,770
Senior Lien Airport Revenue Bonds,
Series 1998A, 5.000%, 7/01/25
500,000 Tucson, Airport Authority Inc. (Arizona), Airport Revenue 6/00 at 102 AAA 532,665
Bonds, Series 1990B, 7.125%, 6/01/15 (Alternative
Minimum Tax)
575,000 Tucson Airport Authority, Inc. Arizona), Airport Revenue 6/03 at 102 AAA 623,668
Bonds, Refunding Bonds, Series 1993, 5.700%, 6/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED 23.6%
300,000 Arizona Health Facilities Authority, Hospital System 9/03 at 100 AAA 331,044
Revenue Refunding Bonds (Phoenix Baptist Hospital,
and Medical Center, Inc. and Medical Environments,
Inc.), Series 1992, 6.250%, 9/01/11
200,000 Arizona Municipal Financing Program, Certificates of No Opt. Call AAA 253,428
Participation, Series 20, 7.700%, 8/01/10
500,000 State of Arizona, Arizona Transportation Board, Highway 7/00 at 101 AAA 532,245
Revenue Bonds, Series 1990, 7.000%, 7/01/09
(Pre-refunded to 7/01/00)
300,000 Arizona Board of Regents, Arizona State University, 7/02 at 101 Aaa 335,526
System Revenue Bonds, Series 1989, 7.000%, 7/01/15
(Pre-refunded to 7/01/02)
Sedona-Oak Creek Joint Unified School District No. 9 of
Coconino and Yavapai Counties, Arizona, School Improvement
Bonds, Project of 1992 Series A:
250,000 6.700%, 7/01/06 (Pre-refunded to 7/01/01) 7/01 at 101 A-*** 271,148
250,000 6.750%, 7/01/07 (Pre-refunded to 7/01/01) 7/01 at 101 A-*** 271,453
385,000 The Industrial Development Authority of the City of 5/06 at 102 AAA 438,750
Glendale, Arizona, Revenue Bonds, Midwestern
University, Series 1996A, 6.000%, 5/15/16
(Pre-refunded to 5/15/06)
365,000 Maricopa County, Arizona, Hospital Revenue Bonds, No Opt. Call AAA 456,356
Series 1980 (St. Lukes Hospital Medical Center),
8.750%, 2/01/10
</TABLE>
13
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited)
NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND (continued)
November 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GUARANTEED (continued)
$ 375,000 The Industrial Development Authority of the County of Maricopa 12/00 at 102 AAA $ 411,135
(Arizona), Hospital Refunding Revenue Bonds (John C. Lincoln Hospital and
Health Center), Series 1990, 7.500%, 12/01/13 (Pre-refunded to 12/01/00)
16,300,000 The Industrial Development Authority of the County of Maricopa No Opt. Call AAA 7,016,498
(Arizona),Single Family Mortgage Revenue Bonds,Series 1984, 0.000%, 2/01/16
1,250,000 The Industrial Development Authority of the County of Maricopa 7/99 at 102 AAA 1,304,288
(Arizona), Mercy Health System Insured Revenue Bonds, 1985 Series B,
7.150%, 7/01/12 (Pre-refunded to 7/03/99)
270,000 Peoria Unified School District No. 11 of Maricopa County, Arizona, 7/01 at 101 AAA 290,995
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, Arizona, 7/02 at 100 AAA 285,331
School Improvement Bonds, Project of 1990, Series E, 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 223,584
School Improvement and Refunding Bonds, Series 1994, 6.250%, 7/01/11
(Pre-refunded to 7/01/11)
Tolleson Union High School District No. 214, Maricopa County, Arizona,
School Improvement Bonds, Series 1991B:
575,000 6.500%, 7/01/09 (Pre-refunded to 7/01/00) 7/00 at 101 AAA 608,137
300,000 6.500%, 7/01/10 (Pre-refunded to 7/01/00) 7/00 at 101 AAA 317,289
1,250,000 Arizona Board of Regents, Northern Arizona University, System Revenue 6/99 at 100 Aaa 1,277,513
Bonds, Series 1989, 7.500%, 6/01/08 (Pre-refunded to 6/01/99)
700,000 Peoria Municipal Development Authority, Inc., Municipal Facilities 7/99 at 102 AAA 729,687
Revenue Bonds, Arizona, Series 1991, 7.000%, 7/01/10 (Pre-refunded
to 7/01/99)
1,000,000 City of Phoenix Civic Improvement Corporation (Arizona), Junior Lien 7/06 at 100 Aaa 1,100,680
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 Revenue 7/02 at 102 AA*** 551,560
Bonds, Series 1992, 6.250%, 7/01/11
650,000 Tucson Unified School District No. 1 of Pima County, Arizona, School 7/00 at 101 A*** 693,700
Improvement Bonds, Project of 1989 Series B, 7.200%, 7/01/09 (Pre-refunded
to 7/01/00)
460,000 Pima County, Arizona, Sewer Revenue Refunding Bonds, Series 1991, 7/01 at 101 AAA 499,712
6.750%, 7/01/15 (Pre-refunded to 7/01/01)
1,500,000 Price-Elliot Research Park, Inc., Arizona State University Research 7/01 at 102 AAA 1,651,965
Park, Development Refunding Bonds, Series 1991, 7.000%, 7/01/21
(Pre-refunded to 7/01/01)
1,925,000 Tatum Ranch Community Facilities District (Arizona), District General 7/02 at 102 A*** 2,160,793
Obligation Bonds, Series 1991A, 6.875%, 7/01/16 (Pre-refunded to 7/01/02)
11,570,000 Tucson and Pima County Industrial Development Authorities, Single No Opt. Call AAA 5,357,026
Family Mortgage, 0.000%, 12/01/14
500,000 City of Tucson, Arizona, General Obligation Bonds, Series 1984-G, 7/04 at 101 AAA 562,880
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 82,694
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 1994-A, 7/06 at 101 AAA 442,244
6.000%, 7/01/21 (Pre-refunded to 7/01/06)
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES 4.9%
500,000 Central Arizona Water Conservation District (Central Arizona No Opt. Call AA- 551,305
Project), Contract Revenue Refunding Bonds, Series A 1993, 5.500%,
11/01/10
5,000 Central Arizona Water Conservation District (Central Arizona 5/01 at 102 AA- 5,386
Project), Contract Revenue Bonds, Series B 1991, 6.500%, 11/01/11
2,000,000 Coconino County, Arizona, Pollution Control Corporation, Pollution 10/06 at 102 BBB- 2,184,380
Control Revenue Bonds (Nevada Power Company Project), Series 1996,
6.375%, 10/01/36 (Alternative Minimum Tax)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES (continued)
<S> <C> <C> <C> <C>
$ 500,000 Mohave County, Arizona, Industrial Development 2/00 at 101 AA- $ 520,660
Authority, 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 11/03 at 101 AA- 543,300
of Mohave (Arizona), Industrial Development Revenue
Bonds, 1994 Series (Citizens Utilities Company
Projects), 6.600%, 5/01/29 (Alternative Minimum
Tax)
225,000 The Industrial Development Authority of the County 1/02 at 103 AAA 251,075
of Pima (Arizona), Industrial Development Lease
Obligation Refunding Revenue Bonds, 1988 Series A
(Irvington Project), 7.250%, 7/15/10
200,000 Puerto Rico Electric Power Authority, Power 7/07 at 101 1/2 AAA 208,858
Revenue Bonds, Series AA, 5.375%, 7/01/27
500,000 Salt River Project Agricultural Improvement and No Opt. Call AA 561,265
Power District (Arizona), Electric System Revenue
Refunding Bonds, Series 1993A, 5.750%, 1/01/10
1,000,000 The Industrial Development Authority of the County 6/07 at 101 AA- 1,032,960
of Yavapai (Arizona), Industrial Development
Revenue Bonds, 1998 Series (Citizens Utilities
Company Project), 5.450%, 6/01/33 (Alternative
Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER 6.6%
175,000 Wastewater Management Authority of Arizona, 7/02 at 102 AAA 189,417
Wastewater Treatment Financial Assistance
Revenue Bonds, Series 1992A, 5.950%, 7/01/12
250,000 Wastewater Management Authority of Arizona, 7/05 at 102 AAA 270,838
Wastewater Treatment Financial Assistance
Revenue Bonds, Series 1995, 5.750%, 7/01/15
1,750,000 City of Chandler, Arizona, Water and Sewer Revenue 7/01 at 101 AAA 1,894,970
Refunding 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- 546,975
100,000 7.000%, 7/01/06 7/02 at 101 BBB- 108,782
100,000 7.000%, 7/01/07 7/02 at 101 BBB- 108,368
The Industrial Development Authority of the
County of Maricopa, Water System Improvement
Revenue Bonds (Chaparral City Water Company
Project), Series 1997A:
1,000,000 5.200%, 12/01/11 (Alternative Minimum Tax) 12/07 at 102 AAA 1,039,170
610,000 5.400%, 12/01/22 (Alternative Minimum Tax) 12/07 at 102 AAA 625,006
540,000 Pima County, Arizona, Sewer Revenue Refunding 7/01 at 101 AAA 582,585
Bonds, Series 1991, 6.750%, 7/01/15
800,000 Sedona, Arizona, Sewer Revenue Refunding, 7.000%, 7/04 at 101 BBB 884,600
7/01/12
1,100,000 City of Tucson, Arizona, Water System Revenue 7/07 at 100 AAA 1,106,435
Refunding Bonds, Series 1997, 5.000%, 7/01/19
500,000 City of Tucson, Arizona, Water System Revenue Bonds, 7/01 at 102 A+ 543,345
Series 1991, 6.700%, 7/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
$136,730,000 Total Investments - (cost $109,011,635) - 100.4% 120,953,929
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.4)% (474,507)
-------------------------------------------------------------------------------------------------------
Net Assets - 100% $120,479,422
=======================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
(WI) Security purchased on a when-issued basis (note 1).
N/R Investment is not rated.
See accompanying notes to financial statements.
15
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited)
NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND
November 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION AND CIVIC ORGANIZATIONS - 6.8%
$ 300,000 Colorado Student Obligation Bond Authority, Student Loan 9/00 at 100 A $ 311,451
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 256,493
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 1,638,870
Colorado, Special Revenue Refunding and Improvment Bonds,
Series 1996A, 6.750%, 12/15/15
900,000 Board of Trustees of the University of Northern Colorado, 6/08 at 100 AAA 899,352
Auxiliary Facilities System Revenue Refunding Bonds,
Series 1998A, 5.000%, 6/01/24
- ----------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 12.9%
Colorado Health Facilities Authority, Revenue Bonds
(Catholic Health Initiatives), Series 1997A:
500,000 5.125%, 12/01/22 12/07 at 101 AA 497,265
2,000,000 5.000%, 12/01/28 6/08 at 101 AA 1,958,900
750,000 Colorado Health Facilities Authority, Hospital Revenue 9/08 at 100 Baa1 733,155
Bonds (Parkview Medical Center, Inc. Project),
Series 1998, 5.300%, 9/01/25
500,000 City of Colorado Springs, Colorado, Hospital Revenue and 12/05 at 102 AAA 552,295
Refunding Bonds, Series 1995, 6.000%, 12/15/24
Board of Trustees for the Gunnison Valley Hospital
(Gunnison County, Colorado), Hospital Revenue Bonds,
Series 1998:
325,000 5.300%, 7/01/10 7/08 at 101 N/R 328,026
275,000 5.350%, 7/01/11 7/08 at 101 N/R 276,642
1,250,000 5.625%, 7/01/23 7/08 at 101 N/R 1,251,413
250,000 County of Pueblo, Colorado, Insured Hospital Refunding 9/01 at 101 AAA 273,418
Revenue Bonds Parkview Episcopal Medical Center, (Inc.
Project), Series 1991A, 7.000%, 9/01/09
- ----------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 22.2%
1,500,000 Colorado Housing and Finance Authority, Multifamily 10/06 at 102 AA 1,613,970
Housing Insured Mortgage Revenue Bonds, 1996 Series C3
(Non-AMT), 6.250%, 10/01/38
1,150,000 Colorado Housing and Finance Authority, Multifamily 4/07 at 101 1/2 AA 1,221,473
Housing Insured Mortgage Revenue Bonds, 1997 Series B2,
5.900%, 10/01/38 (Alternative Minimum Tax)
460,000 Colorado Housing and Finance Authority, Multifamily 4/05 at 102 AA 499,615
Housing Insured Mortgage Revenue Bonds, 1995 Series A,
6.650%, 10/01/28 (Alternative Minimum Tax)
1,265,000 Colorado Housing and Finance Authority, Multifamily 10/07 at 102 AA 1,326,264
Housing Insured Mortgage Revenue Bonds, 1997 Series C2,
5.750%, 10/01/39 (Alternative Minimum Tax)
1,215,000 Colorado Housing and Finance Authority, Multifamily 10/08 at 101 AA 1,243,881
Housing Insured Mortgage Revenue Bonds, 1998 Series B2,
5.450%, 10/01/28 (Alternative Minimum Tax)
2,000,000 City and County of Denver (Colorado), Multifamily Housing 10/07 at 102 AAA 2,087,960
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), Multifamily Housing 5/07 at 102 AAA 1,034,900
Revenue Bonds (FHA Insured Mortgage Loan - The
Buuerger Brothers and Denver Fire Clay Lofts Project),
Series 1997A, 5.700%, 11/01/28 (Alternative Minimum Tax)
1,000,000 City of Lakewood, Colorado, Multifamily Housing Mortgage 10/05 at 102 AAA 1,090,470
Revenue Bonds (FHA Insured Mortgage Loan - The Heights
by Marston Lake Project), Series 1995, 6.650%, 10/01/25
(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 - 3.2%
$ 225,000 Colorado Housing and Finance Authority, Single Family Program 8/01 at 102 AA+ $ 232,272
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 542,139
Revenue Refunding Bonds, 1991 Series A, 0.000%, 11/01/06
120,000 City of Commerce, Colorado Single Family Mortgage Revenue 3/02 at 101 Aaa 125,918
Refunding Bonds, 1992 Series A, 6.875%, 3/01/12
120,000 Pueblo County, Colorado, Single Family Mortgage Revenue Bonds 6/02 at 102 AA- 128,551
(GNMA and FNMA Mortgage Backed Securities Program), Series
1994A, 6.850%, 12/01/25
400,000 Pueblo County, Colorado, Single Family Mortgage Revenue Refunding 11/04 at 102 AAA 433,784
Bonds (GNMA and FNMA Mortgage-Backed Securities Program), Series
1994A, 7.050%, 11/01/27
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM CARE - 2.4%
1,000,000 Colorado Health Facilities Authority, First Mortgage Revenue Bonds 1/07 at 101 N/R 1,091,760
(Christian Living Campus Johnson Center Nursing Facility Refunding
Project), Series 1997A, 7.050%, 1/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 6.3%
450,000 Cherry Creek Vista Park and Recreation District, Colorado, General 10/02 at 100 N/R 480,294
Obligation Refunding and Improvement Bonds, Series 1992B, 6.875%,
10/01/11
500,000 El Paso School District No. RJ-1, El Paso and Elbert Counties, 12/05 at 100 AA- 567,635
Colorado, General Obligation Bonds, Series 1995, 6.800%, 12/01/14
School District No. 3, El Paso County, Colorado, General Obligation
Bonds, Series 1995A:
1,025,000 0.000%, 12/15/07 12/05 at 92 1/16 AAA 700,167
1,020,000 0.000%, 12/15/08 12/05 at 86 3/4 AAA 653,647
250,000 Pitkin County, Colorado, General Obligation Open Space Refunding 12/04 at 102 A 287,213
and Improvement Bonds, Series 1994, 6.875%, 12/01/24
190,000 Valley Metropolitan District, Colorado, Jefferson County, General 12/00 at 101 Baa 200,080
Obligation Refunding Bonds, Series 1992, 7.000%, 12/15/106
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 5.2%
500,000 School District No. 38, In the County of El Paso and State of 12/01 at 101 AAA 546,495
Colorado, 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
500,000 City of Fort Collins, Colorado, Lease Certificates of 12/08 at 100 AAA 506,720
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 195,813
Participation, 6.650%, 12/01/08
300,000 Puerto Rico Public Buildings Authority, Government Facilities 7/07 at 101 1/2 A 305,229
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 Bonds, 12/03 at 101 AA 823,268
Series 1994B, 6.400%, 12/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.3%
750,000 City and County of Denver, Colorado, Airport System Revenue Bonds, 11/07 at 101 AAA 773,640
Series 1997E, 5.250%, 11/15/17
500,000 City and County of Denver, Colorado, Special Facilities Airport 10/02 at 102 Baa3 537,680
Revenue Bonds (United Air Lines Project), Series 1992A, 6.875%,
10/01/32 (Alternative Minimum Tax)
1,000,000 Eagle County Air Terminal Corporation, Airport Terminal Project 5/06 at 101 N/R 1,093,570
Revenue Bonds, Series 1996, 7.500%, 5/01/21 (Alternative Minimum
Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 32.9%
4,300,000 E-470 Public Highway Authority, Capital Improvement Trust Fund 8/05 at 95 29/32 Aaa 3,115,522
Highway Revenue Bonds, 0.000%, 8/31/06 (Pre-refunded to 8/31/05)
6,500,000 Arapahoe County, Colorado, Single Family Mortgage Revenue Bonds, No Opt. Call AAA 3,861,650
Series 1984A, 0.000%, 9/01/10
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited)
NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND (continued)
November 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GUARANTEED (continued)
$ 100,000 Pueblo School District No. 60, Fixed Rate Certificates of 12/99 at 101 AAA $ 105,032
Participation (Colorado Association of
School Boards Lease Purchase Finance Program), Series 1989A, 7.250%,
12/01/09 (Pre-refunded to 12/01/99)
300,000 Colorado Health Facilities Authority, Revenue Bonds (Rose Medical 8/01 at 102 AAA 331,299
Center), Series 1991, 7.000%, 8/15/21 (Pre-refunded to 8/15/01)
500,000 Colorado Housing Finance Authority, Single Family Revenue Bonds, No Opt. Call Aaa 234,310
1985 Series A, 0.000%, 9/01/14
3,500,000 Colorado Health Facilities Authority, Retirement Facilities No Opt. Call AAA 922,950
(Liberty Heights), 0.000%, 7/15/24
900,000 City of Colorado Springs, Colorado, Utilities System Revenue No Opt. Call AAA 1,084,887
Bonds, Series 1978B, 6.600%, 11/15/18
300,000 Colorado Water Resources and Power Development Authority, Water 11/99 at 100 N/R*** 312,927
and Power Revenue Bonds, 1986 Series (Stagecoach Project), General
Obligation Bonds, 8.000%, 11/01/17 (Pre-refunded to 11/01/99)
250,000 City and County of Denver, Colorado, Industrial Development 3/01 at 102 AAA 275,523
Revenue Bonds (University of Denver Project), Series 1991,
7.500%, 3/01/16 (Pre-refunded to 3/01/01)
3,000,000 El Paso County, Colorado, Single Family Mortgage Revenue Bonds, No Opt. Call AAA 1,307,340
1984 Series A, 0.000%, 9/01/15
250,000 Fountain Valley Authority (Colorado), Water Treatment Refunding 6/01 at 100 AA*** 268,898
Revenue Bonds, Series 1991, 6.800%, 12/01/19 (Pre-refunded to
6/01/01)
250,000 County of Logan, Colorado, Health Care Facilities Revenue Bonds 1/99 at 102 AAA 255,943
(Western Health Network, Inc.), Series 1988A-7, 7.625%, 1/01/19
(Pre-refunded to 1/01/99)
4,000,000 Mesa County, Colorado, Residual Revenue and Refunding Bonds, No Opt. Call Aaa 2,219,960
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*** 323,220
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 107,715
Bonds, Series 1990, 7.100%, 11/01/10 (Pre-refunded to 11/01/00)
250,000 The Regents of the University of Colorado, Auxiliary Facilities 6/00 at 101 A1*** 265,435
System Revenue Bonds (Boulder Campus Projects), Series 1990,
7.050%, 6/01/15 (Pre-refunded to 6/01/00)
- --------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 0.3%
120,000 Colorado Water Resources and Power Development Authority, Small 11/02 at 100 AAA 131,937
Water Resources Revenue Bonds, 1992 Series A, 6.700%, 11/01/12
- --------------------------------------------------------------------------------------------------------------------------------
$ 53,925,000 Total Investments (cost $40,273,063) 97.5% 44,446,236
============--------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES - 0.9%
$ 400,000 Moffat County, Colorado, Pollution Control Revenue Bonds VMIG-1 400,000
============
(Pacificorp Project), Variable Rate
Demand Bonds, 3.350%, 5/01/13+
---------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities 1.6% 754,658
---------------------------------------------------------------------------------------------------------------
Net Assets 100% $45,600,894
===============================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate
and demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified marked index.
See accompanying notes to financial statements.
18
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited)
NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL BOND FUND
November 30, 1998
<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 Bonds 4/03 at 102 A $1,103,370
(Phelps Dodge Corporation Project), Series 1993, 6.500%, 4/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 15.7%
1,600,000 New Mexico Educational Assistance Foundation, Student Loan Revenue 4/02 at 102 AAA 1,742,736
Bonds, Series 1992A, 6.850%, 4/01/05 (Alternative Minimum Tax)
400,000 New Mexico Educational Assistance Foundation, Student Loan Revenue 12/02 at 101 Aaa 418,640
Bonds, Senior 1992 Series One - A, 6.550%, 12/01/05 (Alternative
Minimum Tax)
185,000 New Mexico Educational Assistance Foundation, Student Loan Revenue 12/02 at 101 A 195,190
Bonds, Subordinate 1992 Series One - B, 6.850%, 12/01/05
(Alternative Minimum Tax)
810,000 New Mexico Educational Assistance Foundation, Student Loan Purchase 6/04 at 102 Aaa 835,847
Bonds, Senior 1994 Series II-A, 5.500%, 12/01/07 (Alternative
Minimum Tax)
950,000 New Mexico Educational Assistance Foundation, Student Loan Purchase No Opt. Call Aaa 1,012,767
Bonds, Senior 1995 Series IV-A1, 6.500%, 3/01/04 (Alternative
Minimum Tax)
435,000 Puerto Rico Industrial, Medical, Educational and Environmental Pollution No Opt. Call BBB- 465,115
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- 540,140
500,000 5.875%, 10/01/21 10/07 at 100 BBB- 521,290
500,000 City of Santa Fe, New Mexico, Educational Facilities Improvement 10/07 at 100 BBB- 505,010
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 Refunding No Opt. Call AA 3,422,820
Bonds, Series 1992A, 6.000%, 6/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 5.6%
450,000 City of Albuquerque, New Mexico, Hospital System Revenue Bonds, 1992 8/02 at 102 AAA 495,356
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 2,950,980
Series 1998 (Memorial Medical Center, Inc. Project), 5.500%, 6/01/28
- -----------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 8.1%
1,000,000 Las Cruces, New Mexico, Housing Development Corporation, Multifamily 4/03 at 102 A 1,055,610
Mortgage Revenue Refunding Bonds, Series 1993A, 6.400%, 10/01/19
500,000 New Mexico Mortgage Finance Authority, Multifamily Housing Revenue 7/07 at 102 AAA 520,180
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., Multifamily Housing Revenue 8/08 at 100 AAA 2,381,956
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 1,057,570
Multifamily Revenue Bonds (Villa Hermose Apartments Project),
Series 1997, 5.900%, 5/20/27 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 17.0%
1,985,000 New Mexico Mortgage Finance Authority, Single Family Mortgage Program 7/06 at 102 AAA 2,134,471
Bonds, 1996 Series D-1, 6.250%, 7/01/22
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited)
NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL BOND FUND (continued)
November 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING/SINGLE FAMILY (continued)
$ 1,430,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/07 at 102 AAA $1,531,973
Program Bonds, 1996 Series G-2 Bonds, 6.200%, 7/01/28
(Alternative Minimum Tax)
1,245,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/05 at 102 AAA 1,341,276
Program Bonds, 1995 Series A - Class D, 6.650%, 7/01/26
(Alternative Minimum Tax)
110,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/02 at 102 Aa1 115,410
Purchase Refunding Senior Bonds, 1992 Series A-1, 6.850%,
7/01/10
680,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/02 at 102 Aa1 723,588
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 1,554,210
Program Bonds, 1997 Series F-2 Bonds, 5.700%, 7/01/29
(Alternative Minimum Tax)
1,000,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/07 at 102 AAA 1,019,340
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 1,019,120
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 1,006,880
Program Bonds, 1998 Series E-2, 5.200%, 7/01/18
(Alternative Minimum Tax)
- -------------------------------------------------------------------------------------------------------------------------------
LONG TERM CARE - 5.9%
1,500,000 City of Albuquerque, New Mexico, Revenue Refunding Bonds (The 6/03 at 102 AAA 1,632,705
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 1,046,710
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 551,765
Bonds, Series 1992 (Evangelical Lutheran Good Samaritan
Society Project), 6.450%, 12/01/17
350,000 City of Socorro, New Mexico, Health Facilities Refunding Revenue 5/04 at 102 AAA 387,807
Bonds (The Evangelical Lutheran Good Samaritan Society Project),
Series 1994, 6.000%, 5/01/08
- -------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 2.2%
Grants/Cibola County School District 1, Cibola County, New
Mexico, General Obligation School Building Bonds, Series 1994:
480,000 6.250%, 5/01/08 5/04 at 100 Baa2 512,962
510,000 6.250%, 5/01/09 5/04 at 100 Baa2 542,523
100,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 7/07 at 101 1/2 A 103,682
5.375%, 7/01/25
200,000 Torrance County, New Mexico, General Obligation Bonds, Series 7/00 at 100 N/R 204,266
1993, 5.500%, 7/01/04
- -------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 28.0%
4,250,000 City of Albuquerque, New Mexico, Gross Receipts/Lodgers Tax No Opt. Call AAA 2,400,655
Refunding and Improvement Revenue Bonds, Series 1991B, 0.000%,
7/01/11
Bernalillo County, New Mexico, Gross Receipts Tax
Refunding Revenue Bonds, Series 1998:
335,000 5.000%, 4/01/12 No Opt. Call AA 350,782
1,000,000 5.200%, 4/01/21 No Opt. Call AA 1,049,450
1,050,000 Dona Ana County, New Mexico, Gross Receipts Tax Refunding and 6/03 at 102 AA 1,161,353
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 1,082,870
Improvement Revenue Bonds, Subordinate Series 1998, 5.500%,
6/01/16
250,000 City of Las Cruces, New Mexico, Gross Receipts Tax Revenue 12/02 at 101 A 271,685
Refunding Bonds, Series 1992, 6.250%, 12/01/05
1,000,000 City of Las Cruces, New Mexico, Revenue Bonds, Series 1995, No Opt. Call AAA 1,082,120
5.450%, 12/01/08 (Alternative Minimum Tax)
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 3,831,728
750,000 5.000%, 7/01/36 7/16 at 100 A 759,180
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/LIMITED - (continued)
Sandoval County, New Mexico, Gross Receipts Tax Revenue
Refunding Bonds Series 1992:
$ 130,000 6.500%, 12/01/06 12/02 at 102 Baa1 $ 140,533
375,000 6.900%, 11/01/12 11/02 at 102 Baa1 408,128
4,000,000 Santa Fe County, New Mexico, Correctional System Revenue No Opt. Call AAA 4,678,240
Bonds, Series 1997, 6.000%, 2/01/27
- ----------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 1.8%
1,000,000 City of Albuquerque, New Mexico, Airport Revenue Bonds, 7/00 at 105 AAA 1,086,240
Series 1995A, 6.600%, 7/01/16 (Alternative Minimum Tax)
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 3.0%
250,000 City of Albuquerque, New Mexico, Joint Water and Sewer System 7/00 at 100 AAA 259,888
Revenue Bonds, Series 1990A, 6.000%, 7/01/15 (Pre-refunded
to 7/01/00)
90,000 Las Cruces, New Mexico, Joint Utility Refunding and Improvement 7/02 at 102 A1*** 98,540
Revenue Bonds, Series 1992, 6.250%, 7/01/12
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*** 234,713
200,000 6.900%, 12/01/07 (Pre-refunded to 12/01/99) 12/99 at 100 N/R*** 209,352
500,000 County of Sandoval, New Mexico Gross Receipts Tax Revenue Bonds, 11/05 at 101 N/R*** 598,800
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 440,413
Project Revenue Bonds, Series 1990, 9.000%, 7/01/07
- ----------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 8.9%
985,000 City of Farmington, New Mexico, Pollution Control Revenue 12/02 at 102 AAA 1,086,908
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 Las Cruces, New Mexico, South Central Solid Waste 6/05 at 100 A 1,060,910
Authority, Environmental Services Gross Receipts Tax/Project
Revenue Bonds, Series 1995, 6.000%, 6/01/16
Incorporated County of Los Alamos, New Mexico, Utility System
Revenue Bonds, Series 1994A:
1,000,000 5.700%, 7/01/05 7/04 at 102 AAA 1,094,210
1,000,000 6.000%, 7/01/15 7/04 at 102 AAA 1,089,700
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 7/03 at 100 BBB+ 105,071
1,000,000 6.125%, 7/01/13 7/03 at 100 BBB+ 1,056,650
- ----------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 1.3%
1,000,000 City of Albuquerque, New Mexico, Joint Water and Sewer System No Opt. Call AAA 698,680
Revenue Bonds, Series 1990A, 0.000%, 7/01/07
100,000 City of Grants, New Mexico, Joint Water and Sewer Utility 1/02 at 100 Baa3 106,065
Refunding and Improvement Revenue Bonds, Series 1993,
5.600%, 1/01/08
- ----------------------------------------------------------------------------------------------------------------------------------
$ 59,227,000 Total Investments (cost $56,313,404) 99.3% 61,096,129
- ----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities 0.7% 423,715
--------------------------------------------------------------------------------------------------------------
Net Assets 100% $61,519,844
==============================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings: Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. government or U.S. government agency
securities which ensures the timely payment of
principal and interest. Securities are normally
considered to be equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
21
<PAGE>
STATEMENT OF NET ASSETS (Unaudited)
November 30, 1998
<TABLE>
<CAPTION>
ARIZONA COLORADO NEW MEXICO
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $120,953,929 $44,446,236 $61,096,129
Temporary investments in short-term municipal securities, at
amortized cost, which approximates market value (note 1) -- 400,000 --
Receivables:
Interest 1,884,450 525,383 1,127,467
Investments sold 5,000 317,172 100,000
Shares sold 109,347 3,000 7,149
Other assets 89,813 81,584 89,316
- ------------------------------------------------------------------------------------------------------------------------------
Total assets 123,042,539 45,773,375 62,420,061
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft 652,331 49,824 654,804
Payables:
Investments purchased 1,463,887 -- --
Shares redeemed 160,810 500 111,309
Accrued expenses:
Management fees (note 6) 52,449 20,434 25,135
12b-1 distribution and service fees (notes 1 and 6) 20,743 9,614 12,084
Other 13,639 24,015 14,671
Dividends payable 199,258 68,094 82,214
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,563,117 172,481 900,217
- ------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $120,479,422 $45,600,894 $61,519,844
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES (NOTE 1)
Net assets $ 88,829,046 $39,706,306 $56,992,425
Shares outstanding 7,685,216 3,626,928 5,280,616
Net asset value and redemption price per share $ 11.56 $ 10.95 $ 10.79
Offering price per share (net asset value per share plus maximum
sales charge of 4.20% of offering price) $ 12.07 $ 11.43 $ 11.26
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES (NOTE 1)
Net assets $ 2,956,054 $ 3,231,111 $ 2,158,535
Shares outstanding 255,944 294,668 200,078
Net asset value, offering and redemption price per share $ 11.55 $ 10.97 $ 10.79
- ------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES (NOTE 1)
Net assets $ 6,902,704 $ 1,739,924 $ 1,888,556
Shares outstanding 597,346 159,054 174,987
Net asset value, offering and redemption price per share $ 11.56 $ 10.94 $ 10.79
- ------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES (NOTE 1)
Net assets $ 21,791,618 $ 923,553 $ 480,328
Shares outstanding 1,885,514 84,305 44,408
Net asset value, offering and redemption price per share $ 11.56 $ 10.95 $ 10.82
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
STATEMENT OF OPERATIONS (Unaudited)
Six Months Ended November 30, 1998
<TABLE>
<CAPTION>
ARIZONA COLORADO NEW MEXICO
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (NOTE 1) $3,246,828 $1,204,775 $1,662,786
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees (note 6) 325,185 118,720 165,615
12b-1 service fees Class A (notes 1 and 6) 87,962 38,569 56,175
12b-1 distribution and service fees Class B (notes 1 and 6) 11,246 11,867 8,417
12b-1 distribution and service fees Class C (notes 1 and 6) 24,854 4,779 6,755
Shareholders' servicing agent fees and expenses 37,198 16,292 12,318
Custodian's fees and expenses 30,951 30,246 32,144
Trustees' fees and expenses (note 6) 1,384 998 1,370
Professional fees 5,689 5,533 6,045
Shareholders' reports printing and mailing expenses 24,456 5,989 8,800
Federal and state registration fees 4,876 2,603 2,060
Other expenses 3,277 1,094 1,690
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 557,078 236,690 301,389
Expense reimbursement (note 6) (33,765) -- (32,172)
- ----------------------------------------------------------------------------------------------------------------------------------
Net expenses 523,313 236,690 269,217
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income 2,723,515 968,085 1,393,569
- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 4) 269,659 388,757 355,052
Net change in unrealized appreciation or depreciation of investments 1,438,046 195,731 301,228
- ----------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 1,707,705 584,488 656,280
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $4,431,220 $1,552,573 $2,049,849
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
<TABLE>
<CAPTION>
ARIZONA COLORADO NEW MEXICO
------------------------------- ----------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
11/30/98 5/31/98 11/30/98 5/31/98 11/30/98 5/31/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 2,723,515 $ 5,346,805 $ 968,085 $ 1,744,521 $ 1,393,569 $ 2,580,223
Net realized gain from investment
transactions (notes 1 and 4) 269,659 546,400 388,757 231,489 355,052 184,412
Net change in unrealized appreciation
or depreciation of investments 1,438,046 4,023,073 195,731 1,920,494 301,228 2,447,338
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
operations 4,431,220 9,916,278 1,552,573 3,896,504 2,049,849 5,211,973
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment
income:
Class A (2,047,555) (4,135,375) (905,646) (1,680,403) (1,289,702) (2,506,960)
Class B (45,936) (22,463) (48,441) (41,768) (33,884) (37,062)
Class C (136,505) (172,117) (25,728) (14,892) (36,447) (25,798)
Class R (516,328) (1,018,591) (20,045) (33,606) (11,417) (16,170)
From accumulated net realized gains
from investment transactions:
Class A -- (132,275) -- -- -- --
Class B -- (677) -- -- -- --
Class C -- (5,284) -- -- -- --
Class R -- (31,231) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (2,746,324) (5,518,013) (999,860) (1,770,669) (1,371,450) (2,585,990)
- ------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from sale of shares 10,189,840 17,232,021 6,591,148 9,498,060 3,829,610 9,586,060
Net proceeds from shares issued to
shareholders due to reinvestment
of distributions 1,156,560 2,750,177 395,568 881,170 509,103 1,454,066
- -----------------------------------------------------------------------------------------------------------------------------------
11,346,400 19,982,198 6,986,716 10,379,230 4,338,713 11,040,126
- ------------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (6,925,557) (15,141,453) (2,510,347) (4,121,233) (1,817,182) (7,327,443)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from Fund share transactions 4,420,843 4,840,745 4,476,369 6,257,997 2,521,531 3,712,683
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 6,105,739 9,239,010 5,029,082 8,383,832 3,199,930 6,338,666
Net assets at the beginning of
period 114,373,683 105,134,673 40,571,812 32,187,980 58,319,914 51,981,248
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $120,479,422 $114,373,683 $45,600,894 $40,571,812 $61,519,844 $58,319,914
- ------------------------------------------------------------------------------------------------------------------------------------
Balance of undistributed/(over-
distributed) net investment income
at end of period $ (16,859) $ 5,950 $ (34,481) $ (2,706) $ 26,600 $ 4,481
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Arizona Municipal Bond Fund ("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
November 30, 1998, Arizona had an outstanding when-issued purchase commitment of
$1,463,887. There were no such outstanding purchase commitments in either of the
other two Funds.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences 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. Net
realized capital gain and market discount distributions are subject to federal
taxation.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (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 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the six months ended November 30, 1998.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
2. FUND SHARES
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
ARIZONA
---------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
11/30/98 5/31/98
--------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 576,272 $ 6,616,755 939,381 $ 10,594,838
Class B 128,742 1,474,514 119,506 1,355,584
Class C 53,144 607,862 316,012 3,587,493
Class R 130,428 1,490,709 150,054 1,694,106
Shares issued to shareholders due to reinvestment of distributions:
Class A 66,713 765,968 175,183 1,969,412
Class B 1,100 12,619 1,093 12,309
Class C 5,747 65,946 10,523 118,375
Class R 27,161 312,027 57,709 650,081
- -----------------------------------------------------------------------------------------------------------------------------
989,307 11,346,400 1,769,461 19,982,198
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (497,868) (5,727,557) (1,120,408) (12,656,620)
Class B (16,133) (183,340) (10,128) (112,911)
Class C (16,980) (194,768) (62,551) (705,918)
Class R (71,427) (819,892) (147,567) (1,666,004)
- -----------------------------------------------------------------------------------------------------------------------------
(602,408) (6,925,557) (1,340,654) (15,141,453)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase 386,899 $ 4,420,843 428,807 $ 4,840,745
=============================================================================================================================
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
COLORADO
--------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
11/30/98 5/31/98
--------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 369,274 $ 4,018,197 681,355 $ 7,321,628
Class B 139,508 1,519,251 107,622 1,152,203
Class C 83,639 909,762 70,146 756,209
Class R 13,207 143,938 25,721 268,020
Shares issued to shareholders due to reinvestment of distributions:
Class A 31,232 339,871 76,970 817,880
Class B 2,462 26,889 2,159 22,985
Class C 912 9,929 752 8,060
Class R 1,733 18,879 3,027 32,245
- --------------------------------------------------------------------------------------------------------------------------
641,967 6,986,716 967,752 10,379,230
- --------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (223,588) (2,431,263) (385,803) (4,121,180)
Class B (721) (7,806) (5) (53)
Class C (6,542) (71,169) -- --
Class R (10) (109) -- --
- --------------------------------------------------------------------------------------------------------------------------
(230,861) (2,510,347) (385,808) (4,121,233)
- --------------------------------------------------------------------------------------------------------------------------
Net increase 411,106 $ 4,476,369 581,944 $ 6,257,997
==========================================================================================================================
<CAPTION>
NEW MEXICO
--------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
11/30/98 5/31/98
--------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 250,776 $ 2,691,129 698,030 $ 7,365,655
Class B 71,773 769,648 79,732 842,865
Class C 34,411 367,750 123,525 1,304,991
Class R 101 1,083 6,637 72,549
Shares issued to shareholders due to reinvestment of distributions:
Class A 43,729 469,177 136,279 1,420,855
Class B 1,555 16,685 1,262 13,257
Class C 1,420 15,250 525 5,545
Class R 743 7,991 1,369 14,409
- --------------------------------------------------------------------------------------------------------------------------
404,508 4,338,713 1,047,359 11,040,126
- --------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (164,228) (1,759,682) (686,757) (7,182,281)
Class B (5,212) (55,502) (13,762) (145,162)
Class C (177) (1,890) -- --
Class R (10) (108) -- --
- --------------------------------------------------------------------------------------------------------------------------
(169,627) (1,817,182) (700,519) (7,327,443)
- --------------------------------------------------------------------------------------------------------------------------
Net increase 234,881 $ 2,521,531 346,840 $ 3,712,683
==========================================================================================================================
</TABLE>
3. DISTRIBUTIONS TO SHAREHOLDERS
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on December 21, 1998, to shareholders of record on
December 9, 1998, as follows:
<TABLE>
<CAPTION>
ARIZONA COLORADO NEW MEXICO
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $.0445 $.0425 $.0410
Class B .0375 .0360 .0345
Class C .0395 .0375 .0365
Class R .0465 .0445 .0430
==========================================================================================================================
</TABLE>
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The following Funds also declared taxable distributions, which include capital
gains and/or market discount, which were paid on December 7, 1998, to
shareholders of record on December 2, 1998, as follows:
ARIZONA COLORADO
- --------------------------------------------------------------------------------
Taxable distributions per share: $ .0539 $ .0300
- --------------------------------------------------------------------------------
4. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the six months ended November
30, 1998, were as follows:
ARIZONA COLORADO NEW MEXICO
- --------------------------------------------------------------------------------
Purchases:
Investments in municipal securities $9,764,458 $7,452,970 $8,291,300
Temporary municipal investments 4,400,000 2,900,000 1,500,000
Sales:
Investments in municipal securities 4,147,522 4,393,865 5,417,124
Temporary municipal investments 4,900,000 2,500,000 1,500,000
- --------------------------------------------------------------------------------
At November 30, 1998, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for each Fund.
At May 31, 1998, the Funds' last fiscal year end, the following Funds had unused
capital loss carryforwards available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, the carryforwards
will expire as follows:
COLORADO NEW MEXICO
- --------------------------------------------------------------------------------
Expiration Year:
2003 $270,604 $ 812,701
2004 -- 290,586
- --------------------------------------------------------------------------------
Total $270,604 $1,103,287
- --------------------------------------------------------------------------------
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of investments
at November 30, 1998, were as follows:
ARIZONA COLORADO NEW MEXICO
- --------------------------------------------------------------------------------
Gross unrealized:
appreciation $11,942,294 $4,174,823 $4,782,725
depreciation -- (1,650) --
- --------------------------------------------------------------------------------
Net unrealized appreciation $11,942,294 $4,173,173 $4,782,725
- --------------------------------------------------------------------------------
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
AVERAGE DAILY NET ASSET VALUE 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 six months ended November 30, 1998, the Distributor collected sales
charges on purchases of Class A Shares, the majority of which 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.
28
<PAGE>
During the six months ended November 30, 1998, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
ARIZONA COLORADO NEW MEXICO
- ---------------------------------------------------------------------------
Commission advances $69,067 $73,374 $35,236
- ---------------------------------------------------------------------------
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees on Class B Shares, and all 12b-1 service and
distribution fees on Class C Shares during the first year following a purchase
are retained by the Distributor. During the six months ended November 30, 1998,
the Distributor retained such 12b-1 fees as follows:
ARIZONA COLORADO NEW MEXICO
- ---------------------------------------------------------------------------
12b-1 fees retained $25,399 $15,150 $13,548
- ---------------------------------------------------------------------------
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
six months ended November 30, 1998, as follows:
ARIZONA COLORADO NEW MEXICO
- ---------------------------------------------------------------------------
CDSC retained $ 7,157 $ 2,948 $ 2,250
- ---------------------------------------------------------------------------
7. COMPOSITION OF NET ASSETS
At November 30, 1998, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
ARIZONA COLORADO NEW MEXICO
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $107,943,614 $41,344,050 $57,461,467
Balance of undistributed/(over-distributed) net investment income (16,859) (34,481) 26,600
Accumulated net realized gain (loss) from investment transactions 610,373 118,152 (750,948)
Net unrealized appreciation of investments 11,942,294 4,173,173 4,782,725
- --------------------------------------------------------------------------------------------------------------------
Net assets $120,479,422 $45,600,894 $61,519,844
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
FINANCIAL HIGHLIGHTS (Unaudited)
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
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 GAIN TOTAL VALUE RETURN(B)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ARIZONA**
Class A (10/86)
1999 (d) $11.40 $ .27 $ .16 $ .43 $(.27) $ -- $(.27) $11.56 3.79%
1998 10.94 .55 .48 1.03 (.55) (.02) (.57) 11.40 9.56
1997 10.73 .56 .27 .83 (.56) (.06) (.62) 10.94 7.85
1996 10.85 .57 (.12) .45 (.57) -- (.57) 10.73 4.21
1995 10.43 .58 .42 1.00 (.58) -- (.58) 10.85 10.03
1994 10.81 .60 (.38) .22 (.60) -- (.60) 10.43 1.92
Class B (2/97)
1999 (d) 11.39 .22 .17 .39 (.23) -- (.23) 11.55 3.41
1998 10.94 .47 .47 .94 (.47) (.02) (.49) 11.39 8.67
1997 (c) 10.92 .16 .02 .18 (.16) -- (.16) 10.94 1.64
Class C (2/94)
1999 (d) 11.39 .23 .18 .41 (.24) -- (.24) 11.56 3.61
1998 10.94 .49 .47 .96 (.49) (.02) (.51) 11.39 8.89
1997 10.73 .50 .27 .77 (.50) (.06) (.56) 10.94 7.28
1996 10.84 .51 (.11) .40 (.51) -- (.51) 10.73 3.75
1995 10.43 .52 .41 .93 (.52) -- (.52) 10.84 9.32
1994 (c) 11.22 .14 (.79) (.65) (.14) -- (.14) 10.43 (16.61)*
Class R (2/97)
1999 (d) 11.40 .28 .16 .44 (.28) -- (.28) 11.56 3.89
1998 10.94 .57 .48 1.05 (.57) (.02) (.59) 11.40 9.79
1997 (c) 10.92 .19 .02 .21 (.19) -- (.19) 10.94 1.96
- ---------------------------------------------------------------------------------------------------------------------------
COLORADO***
Class A (5/87)
1999 (d) $10.81 $ .25 $ .15 $ .40 $(.26) $ -- $(.26) $10.95 3.70%
1998 10.15 .52 .66 1.18 (.52) -- (.52) 10.81 11.85
1997 9.79 .53 .35 .88 (.52) -- (.52) 10.15 9.22
1996 9.93 .54 (.13) .41 (.55) -- (.55) 9.79 4.14
1995 9.62 .57 .30 .87 (.56) -- (.56) 9.93 9.54
1994 10.04 .58 (.37) .21 (.58) (.05) (.63) 9.62 2.03
Class B (2/97)
1999 (d) 10.82 .21 .16 .37 (.22) -- (.22) 10.97 3.42
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 (d) 10.80 .22 .15 .37 (.23) -- (.23) 10.94 3.41
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 (d) 10.81 .26 .15 .41 (.27) -- (.27) 10.95 3.81
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
- ---------------------------------------------------------------------------------------------------------------------------
<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 BEFORE AFTER AFTER PORTFOLIO
ASSETS REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
(000) MENT MENT MENT(A) MENT(A) RATE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ARIZONA**
Class A (10/86)
1999 (d) $88,829 .93%* 4.57%* .88%* 4.62%* 4%
1998 85,922 .93 4.77 .83 4.87 16
1997 82,567 1.05 4.91 .83 5.13 25
1996 80,094 1.07 4.82 .69 5.20 38
1995 80,406 1.20 5.21 .82 5.59 27
1994 82,676 1.09 5.03 .64 5.48 21
Class B (2/97)
1999 (d) 2,956 1.69* 3.81* 1.63* 3.87* 4
1998 1,620 1.68 3.98 1.51 4.15 16
1997 (c) 347 1.67* 4.38* 1.62* 4.43* 25
Class C (2/94)
1999 (d) 6,903 1.48* 4.02* 1.43* 4.07* 4
1998 6,328 1.48 4.20 1.35 4.33 16
1997 3,189 1.59 4.37 1.38 4.58 25
1996 1,970 1.63 4.24 1.23 4.64 38
1995 1,621 1.75 4.62 1.36 5.01 27
1994 (c) 1,122 1.62* 3.94* 1.20* 4.36* 21
Class R (2/97)
1999 (d) 21,792 .73* 4.77* .68* 4.82* 4
1998 20,504 .73 4.97 .63 5.07 16
1997 (c) 19,031 .73* 5.32* .67* 5.38* 25
- ------------------------------------------------------------------------------------------------------
COLORADO***
Class A (5/87)
1999 (d) $39,706 1.04%* 4.54%* 1.04%* 4.54%* 10%
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
1994 35,796 1.27 4.81 .37 5.71 42
Class B (2/97)
1999 (d) 3,231 1.79* 3.80* 1.79* 3.80* 10
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 (d) 1,740 1.59* 3.99* 1.59* 3.99* 10
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 (d) 924 .84* 4.74* .84* 4.74* 10
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 Arizona.
*** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Colorado.
**** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship New Mexico.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
(d) For the six months ended November 30, 1998.
30
<PAGE>
Selected data for a share outstanding throughout each period is as follows:
CLASS (INCEPTION DATE)
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------- ------------------------------
NET
REALIZED/
BEGINNING NET INVEST- NET ENDING
NET INVEST- MENT INVEST- NET
ASSET MENT GAIN MENT CAPITAL ASSET TOTAL
MAY 31, VALUE INCOME(A) (LOSS) TOTAL INCOME GAIN TOTAL VALUE RETURN(B)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NEW MEXICO****
CLASS A (9/92)
1999 (d) $10.67 $ .25 $ .12 $ .37 $(.25) $ -- $(.25) $10.79 3.47%
1998 10.16 .50 .51 1.01 (.50) -- (.50) 10.67 10.17
1997 9.81 .51 .35 .86 (.51) -- (.51) 10.16 8.90
1996 10.01 .51 (.19) .32 (.52) -- (.52) 9.81 3.18
1995 9.68 .52 .33 .85 (.52) -- (.52) 10.01 9.25
1994 10.04 .53 (.33) .20 (.53) (.03) (.56) 9.68 1.92
CLASS B (2/97)
1999 (d) 10.67 .21 .12 .33 (.21) -- (.21) 10.79 3.10
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 (d) 10.67 .22 .12 .34 (.22) -- (.22) 10.79 3.21
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 (d) 10.70 .26 .12 .38 (.26) -- (.26) 10.82 3.58
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
<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 BEFORE AFTER ATFER PORTFOLIO
ASSETS REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
(000) MENT MENT MENT(A) MENT(A) RATE
- ------------------------------------------------------------------------------------------------------
NEW MEXICO****
CLASS A (9/92)
1999 (d) $56,992 .96%* 4.57%* .86%* 4.67%* 9%
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
1994 51,167 1.14 4.50 .40 5.24 39
CLASS B (2/97)
1999 (d) 2,159 1.72* 3.81* 1.61* 3.92* 9
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 (d) 1,889 1.52* 4.01* 1.41* 4.12* 9
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 (d) 480 .76* 4.77* .66* 4.87* 9
1998 466 .73 4.86 .58 5.01 13
1997 (c) 362 .73* 5.04* .59* 5.18* 43
</TABLE>
31
<PAGE>
BUILDING A BETTER PORTFOLIO CAN MAKE YOU A SUCCESSFUL INVESTOR
NUVEEN FAMILY OF MUTUAL FUNDS
Nuveen offers a variety of funds designed to help you reach your financial
goals.
GROWTH
Nuveen Rittenhouse Growth Fund
GROWTH AND
INCOME
European Value Fund
Growth and
Income Stock Fund
Balanced Stock
and Bond Fund
Balanced Municipal
and Stock Fund
TAX-FREE INCOME
NATIONAL FUNDS
Long-Term
Insured
Intermediate-Term
Limited-Term
STATE FUNDS
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
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MUNIPREFERRED(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
32
<PAGE>
Fund Information
BOARD OF TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
FUND MANAGER
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
TRANSFER AGENT AND
SHAREHOLDER SERVICES
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
LEGAL COUNSEL
Morgan, Lewis &
Bockius LLP
Washington, D.C.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, IL
33
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR., APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time. We emphasize quality securities carefully chosen through
in-depth research, and we follow those securities closely over time to ensure
that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
1898
NUVEEN
1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime./SM/
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
<PAGE>
NUVEEN
Municipal
Bond Funds
November 30, 1998
Semiannual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Florida
<PAGE>
Highlights
As of November 30, 1998
For Class A shares at net asset value
Credit Quality Performance Highlights
Nuveen Flagship Florida Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed 69%
AA 7%
A 12%
BBB/NR 12%
. One-year total return of 6.89%
. Steady dividend for 18 consecutive months
. Good credit quality with 76% of the funds assets
invested in AAA or AA rated bonds
Contents
1 Dear Shareholder
3 Nuveen Flagship Florida Municipal Bond
Fund Commentary and Overview
5 Portfolio of Investments
13 Statement of Net Assets
14 Statement of Operations
15 Statement of Changes in Net Assets
16 Notes to Financial Statements
19 Financial Highlights
20 Building Better Portfolios
21 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
I'm pleased to report on the performance of your Nuveen Flagship Florida
Municipal Bond Fund for the 12 months ended November 30, 1998. Providing a high
level of current interest income exempt from regular federal, state and, in some
cases, local income taxes as is consistent with the preservation of capital
remains the primary investment objective for this fund. We achieved this
objective, illustrating once again that Nuveen tax-free mutual funds can provide
an excellent investment option for income-oriented investors.
The Year in Review
Over the past year, the markets endured bouts of volatility, as the Asian
financial crisis spilled over into emerging markets and affected economies
around the globe. The Federal Reserve intervened in an attempt to soften the
impact of the financial crises by lowering short-term interest rates in
September by a quarter of a point. Since that time, the Fed has twice again
reduced rates, bringing the federal funds rate to 4.75%. As long-term interest
rates fell to historic lows, investors were reminded of the importance of a well
balanced portfolio and professional management. Despite the market volatility
throughout the year, your Nuveen Flagship Florida Municipal Bond Fund continued
to provide an attractive current market yield and after-tax total return. Your
fund represented a bright spot among fixed-income investments. In addition, the
fund maintained a good level of call protection, which provides a strong
foundation for a potentially stable income stream in the future. Looking ahead,
we will continue to focus on new municipal bond issuance while leveraging our
institutional position to buy and sell securities at competitive prices and
identifying undervalued securities through proprietary market research.
Municipal Market Review
Over the past year, declining interest rates drove yields on 30-year Treasuries
to their lowest levels since 1977. With yields on the long Treasury bond pushing
below 5% at times, the yield on the Bond Buyer 40, an unmanaged index of long-
term municipal bonds, fell just 26 basis points--from 5.36% to 5.10%--compared
with the 99-point drop, to 5.06%, in Treasury yields over the past 12 months. As
of November 30, 1998, the ratio of long-term municipal yields to 30-year
Treasury yields stood at 100.8%, compared with the more typical range of 86-87%.
Over the past few months, this ratio has climbed as high as 104%. For investors,
this means that long-term municipal bonds currently offer about the same yield
as Treasury bonds with comparable maturities, before taxes are taken into
account. On an after-tax basis, municipal bonds present an even more attractive
investment option relative to Treasuries.
1
<PAGE>
"The key to taking advantage of the exceptional values currently available in
the financial markets is the expertise of a market specialist, such as Nuveen
Investment Advisory Services."
One of the main factors in the steep decline in Treasury yields during the past
year was the strong interest in these investments by international investors. As
the financial turmoil in Asia continued to spread to economies worldwide and the
dollar strengthened against foreign currencies, the demand for U.S. Treasury
securities increased. In the municipal market, where foreign demand was limited
by an inability of foreign investors to benefit from the tax advantages of
municipals, low interest rates and a strong economy combined to generate high
levels of new issuance and a dramatic increase in the refinancing of existing
bonds. The first eleven months of 1998 saw over $255 billion of municipal
issuance, up 28.4% over the same period in 1997. In terms of total issuance,
this put 1998 on pace to be the second largest year on record.
In addition, the continued strength of the U.S. economy brought about
improvements in the fundamental financial health of many municipalities and
boosted the overall credit quality of municipal bonds. In the third quarter of
1998, upgraded issues by the two major rating agencies outnumbered downgrades by
a margin of 7 to 2.
Nuveen Expertise Is Key
The key to taking advantage of the exceptional values currently available in the
financial markets is the expertise of a market specialist, such as Nuveen
Investment Advisory Services. To this end, Nuveen has assembled the Premier
Advisers/(SM)/, a growing group of experts that provide time-tested experience
and insight in a variety of investment categories. In addition to Nuveen
Investment Advisory Services, our Premier Adviser for tax-free investing, you
can rely on our other Premier Advisers for equity investments, including
Institutional Capital Corporation for value investing and Rittenhouse Financial
Services, Inc. for growth investing. For more information about the funds
managed by these Premier Advisers, including charges and expenses, contact your
financial adviser for a prospectus, or call Nuveen at (800) 621-7227. Please
read the prospectus carefully before you invest or send money.
We encourage you to talk with your financial adviser about the ways Nuveen's
expanding selection of investments can assist you in establishing a diversified
portfolio designed to help you build and sustain long-term financial security.
Over the past 100 years, Nuveen has evolved from a company that dealt with only
municipal bonds into a nationally respected firm that handles a variety of
investment options. I look forward to continuing this exciting journey. We are
grateful for the confidence you have shown in us, and we intend to continue
earning your trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
January 15, 1999
2
<PAGE>
Nuveen Flagship Florida Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Tom O'Shaughnessy discusses the Nuveen Flagship Florida
Municipal Bond Fund and reviews factors that affected performance over the past
12 months.
Comments cover the 12-month period ended November 30, 1998 and all performance
statistics are quoted for Class A shares.
What is the status of Florida's economy and its municipal market?
Florida's economy continues to flourish. In late 1998, the state's unemployment
rate dropped to its lowest level since 1973, job and population growth continued
to be strong, and tourism for the year was up versus 1997. Job growth in the
state has been centered in construction, healthcare, engineering, and management
services.
Although Florida's rate of growth is expected to slow in 1999, economic
performance should remain strong and could move Florida ahead of South Carolina
as the Southeast's top performing state (in terms of gross state product).
Florida has historically ranked among the nation's largest issuers of municipal
bonds, and 1998 was no exception. The state ranked fifth nationwide in year to
date issuance as of November 30, 1998, and securities came to market from a
variety of different sectors. In addition, due to low interest rates, expansive
state and national economic conditions, a growing infrastructure, and school
financing needs, supply is expected to remain strong throughout the foreseeable
future.
How did the Nuveen Flagship Florida Municipal Bond Fund's underlying portfolio
perform during the past year?
For the 12 months ended November 30, 1998, the Nuveen Flagship Florida Municipal
Bond Fund generated a total return on net asset value of 6.89%, equivalent to a
taxable total return of 9.23% for investors in the 31% federal income tax
bracket. That performance compares to the 6.93% average annual total return
posted by the Lipper Florida Municipal Debt Peer Group* of 62 municipal bond
funds.
What key strategies were used over
the course of the year? Were there any particular sectors in which Nuveen
looked for undervalued securities?
The fund continued to enjoy success with its sector strategy during the recent
period. Healthy issuance in a variety of sectors increased our ability to find
attractive securities while maintaining the portfolio's strong diversification.
The two largest sector allocations were U.S. Guaranteed bonds and healthcare
securities, which accounted for 16% and 12%, respectively, of the fund's
investments. These sectors not only experienced some of the state's heaviest
issuance volume, they performed well during the period.
Another event of note this year was a slight steepening of the yield curve,
meaning that bonds at the long end of the maturity spectrum began offering more
attractive yields than those with slightly shorter maturities. As a result of
that move, we found value among longer-term bonds during the year.
The fund also benefited from good call protection, which helped it maintain a
more predictable income stream. Call protection insulates investors from income
erosion, especially in a declining interest rate environment. The Nuveen
Flagship Florida Municipal Bond Fund has paid shareholders the same dividend for
18 consecutive months.
The fund also maintained its primary focus on high-quality securities, with
76% of the portfolio invested in bonds rated AAA or AA, as of November 30, 1998.
However, Nuveen's extensive research capabilities also made it possible for us
to identify lower-rated debt that we believe offered both strong quality
characteristics and the opportunity for additional yield.
What is your outlook for the Nuveen Flagship Florida Municipal Bond Fund?
We will continue to manage the fund by seeking out undervalued securities that
provide both attractive income and the opportunity for price appreciation
relative to the market, consistent with the preservation of capital.
In the coming months, housing bonds will be prime candidates for addition to the
portfolio. Single family housing bonds often have higher yields than other bonds
of similar maturities because the housing bonds are subject to early calls if
home owners pre-pay their mortgages. In today's market, however, we view this
prepayment risk as minimal due to the present low level of interest rates.
We also expect to see fewer insured issues coming to market, which should make
the portfolio's current insured holdings even more attractive as time passes.
* The Lipper Peer Group return represents the average annualized return of
the 62 funds in the Lipper Florida Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
3
<PAGE>
Nuveen Flagship Florida Municipal Bond Fund
Performance Overview
As of November 30, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
[BAR CHART APPEARS HERE]
12/97 .046
1/98 .046
2/98 .046
3/98 .046
4/98 .046
5/98 .046
6/98 .046
7/98 .046
8/98 .046
9/98 .046
10/98 .046
11/98 .046
Top 5 Sectors (as a % of total investments)
U.S. Guaranteed 16%
- -------------------------------------------
Health Care 12%
- -------------------------------------------
Tax Obligation (Limited) 11%
- -------------------------------------------
Utilities 11%
- -------------------------------------------
Housing (Multifamily) 10%
- -------------------------------------------
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 6/90 2/97 9/95 2/97
- ------------------------------------------------------------------------------
Net Asset Value $11.03 $11.04 $11.03 $ 11.03
- ------------------------------------------------------------------------------
Total Net Assets ($000) $379,518
- ------------------------------------------------------------------------------
Effective Maturity (Years) 19.37
- ------------------------------------------------------------------------------
Modified Duration (Years) 6.13
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/2/
Share Class A(NAV) A(Offer) B C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 6.89% 2.37% 6.13% 6.21% 7.13%
- ------------------------------------------------------------------------------
5-Year 5.61% 4.71% 4.99% 5.04% 5.70%
- ------------------------------------------------------------------------------
Inception 7.71% 7.16% 7.13% 7.12% 7.76%
- ------------------------------------------------------------------------------
</TABLE>
1 The Fund also paid shareholders taxable distributions in December of $0.0101
per share.
2 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
4
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Florida Municipal Bond Fund
November 30,1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials -- 0.4%
$ 750,000 Clay County Development Authority, Industrial Development Revenue 7/02 at 102 AA- $ 813,758
Refunding Bonds (Cargill, Incorporated Project), Series 1992, 6.400%,
3/01/11
600,000 City of Jacksonville, Florida, Industrial Development Revenue 3/02 at 102 AA- 643,578
Refunding Bonds (Cargill Incorporated Project), Series 1992,
6.400%, 3/01/11
- ------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations -- 0.1%
300,000 Brevard County Educational Facilities Authority (Florida), Educational 11/02 at 102 BBB 323,001
Facilities Refunding and Improvement Revenue Bonds, Series 1992,
6.875% 11/01/22
- ------------------------------------------------------------------------------------------------------------------------------------
Energy -- 0.3%
1,000,000 Gulf Coast Industrial Development Authority, Waste Disposal Revenue 6/08 at 102 BBB- 992,560
Bonds (Valero Refining and Marketing Company Project), Series 1997,
5.600%, 12/01/31 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products -- 4.4%
5,500,000 Escambia County, Florida, Pollution Control Revenue Bonds (Champion 8/04 at 102 Baa1 6,042,850
International Project), Series 1994, 6.900%, 8/01/22 (Alternative
Minimum Tax)
8,350,000 Escambia County, Florida, Pollution Control Revenue Bonds (Champion 9/06 at 102 Baa1 9,011,905
International Project), Series 1996, 6.400%, 9/01/30 (Alternative
Minimum Tax)
1,500,000 Nassau County, Florida, Pollution Control Revenue Refunding Bonds (ITT 7/03 at 102 BBB+ 1,583,355
Rayonier Inc. Project), Series 1993, 6.200%, 7/01/15
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care -- 12.1%
3,000,000 Jacksonville Health Facilities Authority, Florida, Hospital Facilities 11/01 at 102 AA+ 3,284,580
Refunding Revenue Bonds, Series 1991 (St. Lukes Hospital Association
Project), 7.125%, 11/15/20
6,000,000 City of Lakeland, Florida, Hospital Revenue Refunding Bonds (Lakeland 11/06 at 102 AAA 6,095,220
Regional Medical Center Project), Series 1996, 5.250%, 11/15/25
2,100,000 Hospital Board of Directors of Lee County, Florida, Hospital Revenue 4/07 at 102 AAA 2,260,125
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 2,517,687
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 1,024,810
3,000,000 5.375%, 1/15/24 1/07 at 101 AAA 3,084,750
1,230,000 City of North Miami, Florida, Health Facilities Authority, Health 9/00 at 102 A+ 1,323,763
Facility Revenue Bonds (Villa Maria Nursing and Rehabilitation
Center Project), Series 1985B, Remarketed (Bon Secours Health System),
7.500%, 9/01/12
2,500,000 Orange County Health Facilities Authority, Florida, Hospital Revenue 11/01 at 102 AAA 2,747,875
Bonds, Series 1991-A (Adventist Health System/Sunbelt, Inc.), 6.875%,
11/15/15
2,500,000 Orange County Health Facilities Authority, Florida, Hospital Revenue 11/01 at 102 AAA 2,739,225
Bonds, Series 1991-B (Adventist Health System/Sunbelt, Inc.), 6.750%,
11/15/21
10,645,000 Orange County Health Facilities Authority, Florida, Hospital Revenue 11/05 at 102 AAA 10,800,417
Bonds, Series 1995 (Adventist Health System/Sunbelt Obligated
Group), 5.250%, 11/15/20
2,070,000 Orange County Health Facilities Authority, Florida, Hospital Revenue No Opt. Call AAA 2,429,104
Bonds (Orlando Regional Healthcare System), Series 1996A, 6.250%,
10/01/18
5,455,000 Orange County Health Facilities Authority, Florida, Hospital Revenue No Opt. Call AAA 6,472,521
Bonds (Orlando Regional Healthcare System), Series 1996C, 6.250%,
10/01/21
1,000,000 St. Johns County Industrial Development Authority, Hospital Revenue 8/02 at 102 A2 1,048,000
Bonds (Flagler Hospital Project), Series 1992, 6.000%, 8/01/22
</TABLE>
5
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Florida Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Housing/Multifamily--9.4%
$ 600,000 Housing Finance Authority of Broward County, Florida, Multifamily 2/05 at 102 AAA $ 665,400
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 271,985
Housing Revenue Refunding Bonds (Boardwalk Apartments Project),
Series 1996, 6.200%, 8/01/16
940,000 Housing Finance Authority of Broward County, Florida, Multifamily 10/08 at 102 N/R 990,412
Housing Revenue Bonds (Stirling Apartments Project), Series 1998,
5.400%, 10/01/11 (Alternative Minimum Tax)
2,700,000 Duval County Housing Finance Authority, Florida, Multi-Family Housing 4/05 at 102 BBB+ 2,948,427
Revenue Refunding Bonds,Series 1995 (Greentree Place Project),
6.750%, 4/01/25
710,000 Florida Housing Finance Agency, General Mortgage Revenue Refunding Bonds, 6/02 at 103 AAA 759,970
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 1,102,090
5,000,000 6.875%, 8/01/26 (Alternative Minimum Tax) 2/05 at 102 AAA 5,529,150
1,115,000 Florida Housing Finance Agency, Housing Revenue Bonds (Brittany of 2/05 at 102 AAA 1,233,000
Rosemont Apartments Project), 1995 Series C1, 6.875%, 8/01/26
(Alternative Minimum Tax)
2,250,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1997 Series C 12/07 at 102 AAA 2,391,210
(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+ 1,349,107
1,660,000 6.500%, 11/01/25 11/05 at 102 BBB+ 1,779,072
2,000,000 Florida Housing Finance Agency, Multi-Family Housing Revenue Refunding 8/06 at 102 AAA 2,173,200
Bond, Revenue Bonds, 1991 Series C, 6.200%, 8/01/16
3,500,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series H 10/06 at 102 AAA 3,773,420
(Villas of Capri Project), 6.100%, 4/01/17 (Alternative Minimum Tax)
1,000,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series N 9/06 at 102 AAA 1,082,790
(Leigh Meadows Apartments Project), 6.300%, 9/01/36
(Alternative Minimum Tax)
1,000,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series O 9/06 at 102 AAA 1,082,790
(Stoddert Arms Apartments Project), 6.300%, 9/01/36
(Alternative Minimum Tax)
700,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series T 12/06 at 102 AAA 745,948
(The Landings at Sea Front Apartments Project), 6.050%, 12/01/36
(Alternative Minimum Tax)
1,440,000 Florida Housing Finance Agency, Multi-Family Housing Revenue Bonds, 6/99 at 103 AAA 1,500,178
1989 Series I (GNMA Collateralized--Driftwood Terrace Apartments
Project), 7.650%, 12/20/31 (Alternative Minimum Tax)
2,500,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1997 Series L 5/08 at 102 AAA 2,542,525
(Sarahs Place Apartments Project), 5.400%, 11/01/32
(Alternative Minimum Tax)
1,000,000 Orange County Housing Finance Authority (Florida), Multifamily Housing 10/01 at 101 BBB+ 1,040,080
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, Multifamily Housing 6/07 at 100 AAA 2,003,559
Revenue Bonds (Tierra Vista Apartments Project), Series 1997A,
5.800%, 12/01/29 (Alternative Minimum Tax)
750,000 Housing Finance Authority of Palm Beach County, Florida, Multifamily 6/08 at 102 N/R 784,440
Housing Revenue Bonds (Windsor Park Apartments Project), Series 1998,
5.900%, 6/01/38 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family--8.6%
3,770,000 Housing Finance Authority of Broward County, Florida, Home Mortgage No Opt. Call AAA 669,175
Revenue Bonds, 1985 Series A, 0.000%, 4/01/16
1,380,000 Housing Finance Authority of Broward County, Florida, GNMA Collateralized 3/00 at 102 AA+ 1,435,448
Home Mortgage Revenue Bonds, 1990 Series A, 7.900%, 3/01/23
(Alternative Minimum Tax)
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 1,825,000 Housing Finance Authority of Clay County, Florida, Single Family 3/05 at 102 Aaa $1,962,094
Mortgage Revenue Bonds, Series 1995 (Multi-County Program),
6.550%, 3/01/28 (Alternative Minimum Tax)
2,000,000 Housing Finance Authority of Clay County, Florida, Single Family 4/07 at 102 Aaa 2,036,240
Mortgage Revenue Bonds, Series 1998, (Multi-County Program),
5.450%, 4/01/31 (Alternative Minimum Tax)
220,000 Housing Finance Authority of Dade County (Florida), Single Family 9/00 at 102 Aaa 231,002
Mortgage Revenue Bonds, 1990 Series B, 7.750%, 3/01/17
(Alternative Minimum Tax)
710,000 Housing Finance Authority of Dade County (Florida), Single Family 3/01 at 102 Aaa 747,232
Mortgage Revenue Bonds, Series B, 7.250%, 9/01/23
(Alternative Minimum Tax)
616,000 Housing Finance Authority of Dade County (Florida), Single Family 12/01 at 102 AAA 655,054
Mortgage Revenue Refunding Bonds, 1991 Series D, 6.950%, 12/15/12
40,000 Housing Finance Authority of Dade County (Florida), Single Family 3/01 at 102 Aaa 42,063
Mortgage Revenue Bonds, 1991 Series E, 7.000%, 3/01/24
1,000,000 Housing Finance Authority of Dade County (Florida), Single Family 4/05 at 102 AAA 1,075,720
Mortgage Revenue Bonds, Series 1995, 6.700%, 4/01/28
(Alternative Minimum Tax)
320,000 Duval County Housing Finance Authority, Single Family Mortgage Revenue 6/00 at 102 Aaa 334,749
Bonds (GNMA Mortgage Backed Securities Program), Series 1990B,
7.500%, 6/01/15
160,000 Duval County Housing Finance Authority, Single Family Mortgage Revenue 6/00 at 102 Aaa 167,376
Bonds (GNMA Mortgage Backed Securities Program), Series 1990A,
7.850%, 12/01/22 (Alternative Minimum Tax)
Duval County Housing Finance Authority, Single Family Mortgage Revenue
Bonds (GNMA Mortgage Backed Securities Program), Series 1990A:
350,000 7.650%, 9/01/10 9/00 at 103 AAA 370,157
695,000 6.550%, 10/01/15 (Alternative Minimum Tax) 10/04 at 102 Aaa 745,040
1,570,000 Escambia County Housing Finance Authority (Florida), Single Family 4/01 at 102 Aaa 1,653,917
Mortgage Revenue Bonds, Series 1991A (Multi-County Program),
7.400%, 10/01/23 (Alternative Minimum Tax)
310,000 Escambia County Housing Finance Authority (Florida), Single Family 10/02 at 102 Aaa 328,306
Mortgage Revenue Bonds, Series 1992A (Multi-County Program),
6.900%, 4/01/20 (Alternative Minimum Tax)
565,000 Escambia County Housing Finance Authority (Florida), Single Family 4/05 at 102 AAA 614,387
Mortgage Revenue Bonds (Multi-County Program), Series 1995,
6.950%, 10/01/27 (Alternative Minimum Tax)
1,220,000 Florida Housing Finance Agency, Single Family Mortgage Revenue 7/04 at 102 AAA 1,308,267
Refunding Bonds, Series A (Non-AMT), 6.250%, 7/01/11
Florida Housing Finance Agency, Single Family Mortgage
Revenue Refunding Bonds, Series 1995A:
705,000 6.550%, 7/01/14 (Alternative Minimum Tax) 1/05 at 102 AAA 760,166
705,000 6.650%, 1/01/24 (Alternative Minimum Tax) 1/05 at 102 AAA 764,178
1,000,000 Housing Finance Authority of Lee County, Florida, Single Family 3/08 at 105 Aaa 1,121,550
Mortgage Revenue Bonds, Series 1998A, Subseries 1,2,3,4,
6.300%, 3/01/29 (Alternative Minimum Tax)
325,000 Housing Finance Authority of Leon County (Florida), Single Family 4/01 at 102 Aaa 341,744
Mortgage Revenue Bonds, 1991 Series A, (Multi-County Program),
7.300%, 4/01/21 (Alternative Minimum Tax)
2,065,000 Housing Finance Authority of Leon County (Florida), Single Family No Opt. Call AAA 2,409,793
Mortgage Revenue Bonds (Multi County Program), Series 1995B,
7.300%, 1/01/28 (Alternative Minimum Tax)
705,000 Housing Finance Authority of Manatee County, Florida, Single Family 11/05 at 105 Aaa 794,500
Mortgage Revenue Bonds, Series 1994, Sub Series 3, 7.600%,
11/01/26 (Alternative Minimum Tax)
910,000 Orange County, Housing Finance Authority, Florida, Mortgage Revenue 5/99 at 103 Aaa 945,445
Bonds, Series 1989B, 8.100%, 11/01/21 (Alternative Minimum Tax)
280,000 Orange County Housing Finance Authority, Florida, GNMA Collateralized 7/00 at 103 AAA 297,161
Mortgage Revenue Refunding Bonds, 1990 Series A, 7.600%, 1/01/24
2,740,000 Orange County Housing Finance Authority, Florida, Homeowner Revenue 9/07 at 102 Aaa 2,755,481
Bonds, 1998 Series A-1, 5.200%, 9/01/23 (Alternative Minimum Tax)
915,000 Housing Finance Authority of Palm Beach County, Florida, Single Family 9/00 at 103 Aaa 966,963
Mortgage Revenue Bonds, 1990 Series B, 7.600%, 3/01/23
1,595,000 Pinellas County, Florida, Housing Finance Authority, Single Family 2/05 at 102 AAA 1,727,194
Mortgage Revenue Bonds (Multi-County Program), Series 1995A,
6.650%, 8/01/21 (Alternative Minimum Tax)
</TABLE>
7
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Florida Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 3,000,000 Pinellas County, Florida, Housing Finance Authority, Single Family 3/07 at 102 Aaa $ 3,263,250
Mortgage Revenue Bonds, Series 1998A (Multi-County Program),
6.850%, 3/01/29 (Alternative Minimum Tax)
1,050,000 Pinellas County, Florida, Housing Finance Authority, Single Family 3/07 at 102 Aaa 1,091,024
Mortgage Revenue Bonds (Multi-County Program), Series 1997C, 5.800%,
3/01/29 (Alternative Minimum Tax)
1,160,000 Polk County, Florida, Housing Finance Authority, Single Family Mortgage 3/01 at 102 Aaa 1,219,926
Revenue Refunding Bonds, Series 1991A, 7.150%, 9/01/23
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Care--6.8%
2,735,000 Dade County Health Facilities Authority, Revenue and Revenue Refunding 8/00 at 102 A1 2,900,960
Bonds, Series 1990 (Catholic Health and Rehabilitiation Services, Inc.
Project), 7.125%, 8/15/09
Escambia County Health Facilities Authority (Florida), Health Facilities
Revenue Bonds (Azalea Trace, Inc.), Series 1997:
1,000,000 6.000%, 1/01/15 1/07 at 102 N/R 1,039,430
1,595,000 6.100%, 1/01/19 1/07 at 102 N/R 1,670,125
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 736,520
1,000,000 6.250%, 12/01/26 12/06 at 102 Baa1 1,073,830
1,550,000 Osceola County Industrial Development Authority (Osceola County, 5/01 at 102 AAA 1,677,906
Florida), Revenue Bonds, Series 1991 (The Evangelical Lutheran Good
Samaritan Society Project), 6.750%, 5/01/16
8,000,000 Palm Beach County, Florida, Health Facilities Authority, Retirement 11/06 at 102 A- 8,385,040
Community Revenue Bonds (Adult Communities Total Services, Inc.
Obligated Group), Series 1996, 5.625%, 11/15/20
4,000,000 Palm Beach County, Florida, Industrial Development Revenue Bonds, 12/06 at 102 A+ 4,393,280
Series 1996 (Lourdes-Noreen McKeen Residence for Geriatric Care, Inc.
Project), 6.625%, 12/01/26
Sarasota County (Florida), Health Facilities Authority, Health
Facilities Revenue Refunding Bonds, Series 1995 (Sunnyside Properties
Project):
855,000 5.500%, 5/15/01 No Opt. Call N/R 877,008
540,000 5.500%, 5/15/02 No Opt. Call N/R 557,296
570,000 5.500%, 5/15/03 No Opt. Call N/R 590,708
600,000 5.500%, 5/15/04 No Opt. Call N/R 623,184
170,000 5.500%, 5/15/05 No Opt. Call N/R 176,642
1,000,000 6.000%, 5/15/10 5/06 at 102 N/R 1,043,960
- ----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General--3.6%
State of Florida, Full Faith and Credit, Broward County Expressway
Authority Bonds, Series of 1984:
4,000,000 9.875%, 7/01/09 No Opt. Call AA+ 5,696,880
1,000,000 10.000%, 7/01/14 No Opt. Call AA+ 1,543,280
2,165,000 State of Florida, Full Faith and Credit, State Board of Education, No Opt. Call AA+ 3,135,678
Public Education Capital Outlay Bonds, Series 1985, 9.125%, 6/01/14
Commonwealth of Puerto Rico, Public Improvement Bonds of 1997 (General
Obligation Bonds):
2,000,000 6.500%, 7/01/15 No Opt. Call AAA 2,430,900
700,000 5.375%, 7/01/25 7/07 at 101 1/2 A 725,774
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited--11.2%
The School Board of Brevard County, Florida, Certificates of
Participation, Series 1996A:
500,000 5.400%, 7/01/11 No Opt. Call AAA 541,610
500,000 5.400%, 7/01/12 No Opt. Call AAA 540,320
3,100,000 5.500%, 7/01/21 7/06 at 102 AAA 3,271,120
255,000 Dade County, Florida, Special Obligation Bonds (Courthouse Center 4/04 at 102 AAA 283,976
Project), Series 1994, 6.300%, 4/01/14
Dade County, Florida, Special Obligation and Refunding Bonds,
Series 1996B:
4,835,000 0.000%, 10/01/07 No Opt. Call AAA 3,354,620
4,585,000 5.000%, 10/01/35 10/06 at 102 AAA 4,586,467
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 190,000 Certificates of Participation, Series 2/02 at 100 AAA $ 203,091
1992, The School Board of Escambia County,
Florida, 6.375%, 2/01/12
1,500,000 Certificates of Participation, Series 3/04 at 102 A+ 1,623,075
1994, The Department of Corrections (State
of Florida), 6.000%, 3/01/14
3,105,000 City of Gulf Breeze (Florida), Local Government Loan 12/99 at 102 AAA 3,293,505
Program, 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 12/11 at 100 AAA 1,104,460
Program, Floating Rate Demand Revenue
Bonds, Series 1985 B, 5.900%, 12/01/15
5,000,000 The County of Hernando, Florida (Criminal Justice Complex No Opt. Call AAA 6,704,450
Financing Program), 1986 Series,
7.650%, 7/01/16
250,000 City of Jacksonville, Florida, Excise 10/02 at 102 AAA 276,443
Taxes Revenue Refunding Bonds, Series 1992,
6.500%, 10/01/13
1,010,000 Martin County, Florida, Special Assessment 11/05 at 100 A2 1,084,235
Bonds, Series 1995 (Tropical Farms Water
and Sewer Special Assessment District),
5.900%, 11/01/11
1,000,000 Miami Beach Redevelopment Agency 12/04 at 102 BBB 1,037,440
(Florida), Tax Increment Revenue Bonds,
Series 1993 (City Center/Historic Convention Village),
5.875%, 12/01/22 (Alternative Minimum Tax)
4,115,000 School Board of Orange County, Florida, 8/07 at 101 Aaa 4,262,194
Master Lease Program, Certificates of Participation,
Series 1997A, 5.375%, 8/01/22
1,000,000 The School Board of Palm Beach County, Florida, 8/04 at 101 AAA 1,135,230
Certificates of Participation, Series 1994A,
6.375%, 8/01/15
1,000,000 City of Palm Beach Gardens, Florida, 7/99 at 102 AAA 1,042,050
Special Obligation Revenue Bonds, Series 1990,
7.250%, 7/01/15
4,500,000 Puerto Rico Highway and Transportation Authority, Highway 7/16 at 100 A 4,857,120
Revenue Bonds, Series Y of 1996, 5.500%, 7/01/36
1,950,000 Puerto Rico Highway and Transportation Authority, 7/08 at 101 A 1,921,784
Transportation Revenue Bonds (Series A),
5.000%, 7/01/38
3,300,000 City of Tampa, Florida, Utilities Tax
Improvement Bonds, Series 1996, 0.000%, 4/01/17 No Opt. Call AAA 1,341,450
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation -- 5.9%
1,000,000 Dade County, Florida, Aviation Facilities 10/02 at 102 AAA 1,103,760
Revenue Bonds, 1992 Series B,
6.550%, 10/01/13 (Alternative Minimum Tax)
1,250,000 Greater Orlando Aviation Authority, Airport Facilities 10/07 at 101 AAA 1,260,713
Revenue Bonds of the City of Orlando, Florida,
Series 1997, 5.250%, 10/01/23 (Alternative Minimum Tax)
1,810,000 Greater Orlando Aviation Authority, Airport Facilities No Opt. Call AAA 1,945,931
Refunding Revenue Bonds of the City of
Orlando, Florida, Series 1998, 5.500%,
10/01/17 (Alternative Minimum Tax)
1,000,000 Hillsborough County Aviation Authority, Florida, Tampa 10/06 at 102 AAA 1,089,210
International Airport Revenue Bonds,
Series 1996B, 5.875%, 10/01/23
7,030,000 Miami -- Dade County, Florida, Aviation Revenue Bonds, 10/08 at 101 AAA 6,964,059
Series 1998A, Miami International Airport
(Hub of the Americas), 5.000%, 10/01/24
(Alternative Minimum Tax)
1,000,000 The City of Miami, Florida, Parking System No Opt. Call AAA 1,058,040
Revenue Refunding Bonds, Series 1998, 5.250%, 10/01/15
2,020,000 Palm Beach County, Florida, Airport System No Opt. Call AAA 2,139,907
Revenue 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 3,227,100
3,270,000 7.750%, 5/01/21 (Alternative Minimum Tax) 5/06 at 102 N/R 3,573,947
</TABLE>
9
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Florida Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed--16.1%
$ 1,925,000 City of Boynton Beach, Florida, Water and Sewer Utility Revenue 11/00 at 102 AAA $ 2,103,140
Bonds, Series 1990, 7.400%, 11/01/15 (Pre-refunded to 11/01/00)
1,500,000 Certificates of Participation, Series 1990A, The School Board 7/00 at 102 AAA 1,614,555
of Broward County, Florida, 7.125%, 7/01/10
(Pre-refunded to 7/01/00)
4,425,000 The School Board of Dade County, Florida, Certificates of 5/06 at 101 AAA 4,872,810
Participation, Series 1996A, 5.500%, 5/01/25
(Pre-refunded to 5/01/06)
250,000 Dade County Health Facilities Authority, Hospital Revenue 10/99 at 102 AAA 262,920
Refunding Bonds, Series 1989 (South Miami Hospital Project),
7.000%, 10/01/18 (Pre-refunded to 10/01/99)
1,500,000 Dade County Health Facilities Authority, Hospital Revenue No Opt. Call AAA 1,655,040
Bonds, Series 1991A (Baptist Hospital of Miami Project),
5.750%, 5/01/21
300,000 Dade County Health Facilities Authority, Hospital Revenue 8/02 at 102 AAA 334,131
Refunding Bonds, Series 1992 (North Shore Medical Center Project),
6.500%, 8/15/15 (Pre-refunded to 8/15/02)
310,000 Certificates of Participation, Series 1992, The School Board of 2/02 at 100 AAA 334,933
Escambia County, Florida, 6.375%, 2/01/12 (Pre-refunded to 2/01/02)
300,000 State of Florida, Full Faith and Credit, Pollution Control 7/02 at 101 AA+*** 331,638
Bonds, Series Y, Division of Bond Finance of the Department
of General Services, 6.600%, 7/01/17 (Pre-refunded to 7/01/02)
1,160,000 State of Florida, Full Faith and Credit, State Board of No Opt. Call AAA 1,190,844
Education, Public Education Capital Outlay Bonds, Series 1986-C,
7.100%, 6/01/07
335,000 State of Florida, Full Faith and Credit, State Board of No Opt. Call AAA 481,683
Education, 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 5,418,300
Education, Public Education Capital Outlay Bonds, Series 1991-B,
6.700%, 6/01/22 (Pre-refunded to 6/01/01)
2,000,000 State of Florida, Full Faith and Credit, State Board of 6/02 at 101 Aaa 2,209,860
Education, Public Education Capital Outlay Bonds, Series 1991-C,
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*** 3,296,714
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*** 1,109,720
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 1/00 at 102 A*** 263,060
Valorem 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+*** 1,801,508
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 276,570
Series 1991, 6.875%, 10/01/21 (Pre-refunded to 10/01/01)
1,810,000 Jacksonville Electric Authority (Jacksonville, Florida), Bulk 10/00 at 101 1/2 Aaa 1,950,945
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*** 1,668,765
Bonds (Sunbelt Utilities, Inc. Project), Series 1990, 9.625%,
7/01/15 (Pre-refunded to 7/01/00) (Alternative Minimum Tax)
1,000,000 Martin County Health Facilities Authority (Florida), Hospital 11/00 at 102 AAA 1,088,030
Revenue Bonds, Series 1990B (Martin Memorial Hospital South
Project), 7.100%, 11/15/20 (Pre-refunded to 11/15/00)
1,050,000 City of Naples, Florida, Hospital Revenue Bonds (Naples 10/00 at 102 AAA 1,140,017
Community Hospital, Inc. Project), Series 1990, 7.200%, 10/01/19
(Pre-refunded to 10/01/00)
3,400,000 North Springs Improvement District (Florida), Water and Sewer 10/01 at 102 N/R*** 3,865,086
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 1989, 1/00 at 102 AAA 152,233
6.125%, 1/01/19 (Pre-refunded to 1/01/00)
1,750,000 Orange County, Florida, Tourist Development Tax Revenue Bonds, 10/00 at 102 AAA 1,902,215
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 257,985
Series 1992, 6.250%, 10/01/17 (Pre-refunded to 4/01/02)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,750,000 Palm Beach County, Florida, Criminal Justice Facilities Revenue 6/00 at 102 AAA $ 1,881,915
Bonds, Series 1990, 7.250%, 6/01/11 (Pre-refunded to 6/01/00)
1,425,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 7/01 at 102 Aaa 1,572,730
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 556,310
Revenue Bonds, Series 1985 A (Allegany Health System Loan Program),
7.000%, 12/01/15 (Pre-refunded to 12/01/01)
2,000,000 City of St. Petersburg, Health Facilities Authority (Florida), 12/03 at 100 AAA 2,267,960
Allegany Health System Revenue Bonds, Series 1991
(St. Anthonys Health Care Center, Inc.), 6.750%, 12/01/21
(Pre-refunded to 12/01/03)
1,610,000 City of St. Petersburg Health Facilities Authority (Florida), 12/01 at 102 AAA 1,793,266
Allegany Health System Revenue Bonds, Series 1991
(St. Marys Hospital, Inc.), 7.000%, 12/01/21 (Pre-refunded to 12/01/01)
2,500,000 The School Board of Seminole County, Florida, Certificates of 7/04 at 101 AAA 2,880,700
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-*** 5,863,100
Obligation and Revenue Bonds, Series 1995A, 6.750%, 8/01/24
(Pre-refunded to 8/01/05)
1,000,000 City of Tampa (Florida), Allegany Health System Revenue Bonds, 12/01 at 102 AAA 1,105,870
Series 1991 (St. Josephs Hospital, Inc.), 6.750%, 12/01/17
(Pre-refunded to 12/01/01)
2,000,000 City of Tampa (Florida), Allegany Health System Revenue Bonds, 12/04 at 102 AAA 2,305,900
Series 1994 (St. Josephs Hospital, Inc.), 6.500%, 12/01/23
(Pre-refunded to 12/01/04)
335,000 City of Tampa, Florida, Water and Sewer Systems Revenue Bonds, 10/02 at 101 AAA 365,525
Series 1992, 6.000%, 10/01/17 (Pre-refunded to 10/01/02)
1,000,000 Turtle Run Community Development District (Coral Springs, 5/03 at 100 BBB+*** 1,102,040
Florida), Water Management Benefit Tax Refunding Bonds,
Series 1993, 6.400%, 5/01/11 (Pre-refunded to 5/01/03)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 11.1%
4,005,000 Broward County, Florida, Resource Recovery Revenue Bonds, Series 12/99 at 103 A- 4,270,612
1984 (SES Broward Company, L.P. South Project), 7.950%, 12/01/08
6,000,000 Citrus County, Florida, Pollution Control Refunding Revenue Bonds, 1/02 at 102 A+ 6,501,360
Series 1992A (Florida Power Corporation - Crystal River Power Plant
Project), 6.625%, 1/01/27
2,500,000 Hillsborough County Industrial Development Authority (Florida), 8/01 at 103 AA 2,814,000
Pollution Control Revenue Bonds (Tampa Electric Company Project),
Series 1991, 7.875%, 8/01/21
1,000,000 City of Lakeland, Florida, Electric and Water Revenue Bonds No Opt. Call AAA 1,154,860
(Junior Subordinate Lien), Refunding and Improvement, Series
1996B, 6.000%, 10/01/12
2,125,000 Lee County, Florida, Solid Waste System Revenue Bonds, Series 10/01 at 102 AAA 2,324,028
1991A, 7.000%, 10/01/11 (Alternative Minimum Tax)
2,000,000 Martin County, Florida, Pollution Control Revenue Refunding Bonds, 7/00 at 102 AAA 2,145,320
(Florida Power and Light Company Project), Series 1990,
7.300%, 7/01/20
1,000,000 Orlando Utilities Commission, Water and Electric Subordinated No Opt. Call Aa2 1,225,350
Revenue Bonds, Series 1989D, 6.750%, 10/01/17
1,250,000 Orlando Utilities Commission, Water and Electric Subordinated 10/02 at 102 Aa2 1,341,650
Revenue Bonds, Series 1992A, 6.000%, 10/01/20
4,000,000 Pinellas County, Florida, Pollution Control Refunding Revenue 6/01 at 102 A+ 4,378,960
Bonds (Florida Power Corporation - Anclote and Bartow Power Plants
Project), Series 1991, 7.200%, 12/01/14
4,000,000 Pinellas County, Florida, Resource Recovery Revenue Bonds, Series No Opt. Call AAA 4,277,760
1996, 5.250%, 10/01/05 (Alternative Minimum Tax)
6,000,000 Polk County Industrial Development Authority (Florida), Solid 12/06 at 102 A-1+ 6,448,920
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 3,244,440
(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- 2,182,940
(Florida Power and Light Company Project), Series 1992, 6.700%, 5/01/27
(Alternative Minimum Tax)
</TABLE>
11
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Florida Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Water and Sewer -- 8.7%
$ 1,000,000 City of Callaway, Bay County, Florida, Wastewater System Revenue Bonds, 9/06 at 102 AAA $ 1,110,300
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 1,097,089
1,000,000 0.000%, 12/01/13 12/08 at 80 15/16 AAA 477,610
1,000,000 0.000%, 12/01/18 12/08 at 62 1/8 AAA 361,640
Dade County, Florida, Water and Sewer System Revenue Bonds,
Series 1997:
3,000,000 5.250%, 10/01/21 10/07 at 101 AAA 3,078,360
7,500,000 5.250%, 10/01/26 10/07 at 101 AAA 7,695,900
1,000,000 Town of Davie, Florida, Water and Sewer Improvement and Refunding 10/02 at 102 AAA 1,096,960
Revenue Bonds, Series 1992, 6.250%, 10/01/17
600,000 The City of Daytona Beach, Florida, Water and Sewer Revenue Bonds, 11/02 at 102 AAA 651,816
Series 1992, 6.000%, 11/15/14
2,000,000 Escambia County Utilities Authority (Florida), Utility System Revenue No Opt. Call AAA 925,220
Bonds, Series 1992B, 0.000%, 1/01/15
5,750,000 Hillsborough County, Florida, Refunding Utility Revenue Bonds, Series 8/01 at 102 AAA 6,231,160
1991A, 6.500%, 8/01/16
375,000 City of Jacksonville, Florida, Water and Sewer Development Revenue 6/02 at 102 A 407,396
Bonds, Series 1992 (Jacksonville Suburban Utilities Corporation Project),
6.750%, 6/01/22 (Alternative Minimum Tax)
250,000 Town of Jupiter, Florida, Water Revenue Bonds, Series 1992B, 6.250%, 6/02 at 102 A 272,428
10/01/18
3,000,000 Town of Jupiter Island, Florida, Utility System Revenue Bonds, 10/08 at 101 AAA 3,006,450
Series 1998 (South Martin Regional Utility), 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 1,220,926
2,800,000 0.000%, 10/01/09 No Opt. Call AAA 1,752,743
265,000 Orange County, Florida, Water Utilities System Revenue Bonds, 4/02 at 102 AAA 288,200
Series 1992, 6.250%, 10/01/17
3,080,000 City of Palm Bay, Florida, Utility System Capital Improvement Revenue 10/08 at 101 AAA 3,072,670
Bonds, Series 1998, 5.000%, 10/01/28 (WI)
165,000 City of Tampa, Florida, Water and Sewer Systems Revenue Bonds, 10/02 at 101 AAA 177,150
Series 1992, 6.000%, 10/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
$357,081,000 Total Investments -- (cost $342,061,948) -- 98.7% 374,440,383
============-----------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities -- 0.6%
$ 2,300,000 Illinois Health Facilities Authority, The University of Chicago VMIG-1 2,300,000
============ Hospitals, Series 1998, Variable Rate Demand Bonds, 3.300%, 8/01/26+
-------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.7% 2,777,577
-------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $379,517,960
===================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
+ The security has a maturity of more than one year, but has variable rate
and demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified marked index.
See accompanying notes to financial statements.
12
<PAGE>
Statement of Net Assets (Unaudited)
November 30, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $374,440,383
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) 2,300,000
Receivables:
Interest 6,013,912
Investments sold 410,158
Shares sold 312,326
Other assets 220,999
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 383,697,778
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft 293,157
Payables:
Investments purchased 3,035,809
Shares redeemed 165,970
Accrued expenses:
Management fees (note 6) 165,342
12b-1 distribution and service fees (notes 1 and 6) 62,539
Other 18,826
Dividends payable 438,175
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 4,179,818
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $379,517,960
- ---------------------------------------------------------------------------------------------------------------------------------
Class A Shares (note 1)
Net assets $299,749,081
Shares outstanding 27,174,180
Net asset value and redemption price per share $ 11.03
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 11.51
- ---------------------------------------------------------------------------------------------------------------------------------
Class B Shares (note 1)
Net assets $ 11,006,330
Shares outstanding 997,279
Net asset value, offering and redemption price per share $ 11.04
- ---------------------------------------------------------------------------------------------------------------------------------
Class C Shares (note 1)
Net assets $ 11,438,508
Shares outstanding 1,036,644
Net asset value, offering and redemption price per share $ 11.03
- ---------------------------------------------------------------------------------------------------------------------------------
Class R Shares (note 1)
Net assets $ 57,324,041
Shares outstanding 5,198,849
Net asset value, offering and redemption price per share $ 11.03
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended November 30, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Investment Income (note 1) $10,713,350
- --------------------------------------------------------------------------------
<S> <C>
Expenses
Management fees (note 6) 989,167
12b-1 service fees - Class A (notes 1 and 6) 294,823
12b-1 distribution and service fees - Class B (notes 1 and 6) 35,214
12b-1 distribution and service fees - Class C (notes 1 and 6) 34,013
Shareholders' servicing agent fees and expenses 69,244
Custodian's fees and expenses 46,458
Trustees' fees and expenses (note 6) 1,921
Professional fees 11,916
Shareholders' reports - printing and mailing expenses 45,461
Federal and state registration fees 3,852
Other expenses 16,689
- --------------------------------------------------------------------------------
Total expenses 1,548,758
- --------------------------------------------------------------------------------
Net investment income 9,164,592
- --------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 325,596
Net change in unrealized appreciation or depreciation of investments 2,611,778
- --------------------------------------------------------------------------------
Net gain from investments 2,937,374
- --------------------------------------------------------------------------------
Net increase in net assets from operations $12,101,966
================================================================================
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
11/30/98 5/31/98
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 9,164,592 $ 18,535,807
Net realized gain from investment transactions (notes 1 and 4) 325,596 1,741,055
Net change in unrealized appreciation or depreciation of investments 2,611,778 9,935,425
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 12,101,966 30,212,287
- -------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (7,387,874) (15,043,556)
Class B (154,143) (111,486)
Class C (200,866) (298,769)
Class R (1,478,833) (2,978,766)
From accumulated net realized gains from investment transactions:
Class A -- (232,327)
Class B -- (2,178)
Class C -- (5,383)
Class R -- (44,456)
- -------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (9,221,716) (18,716,921)
- -------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 29,090,576 40,781,150
Net proceeds from shares issued to shareholders due to reinvestment of distributions 4,831,914 8,503,896
- -------------------------------------------------------------------------------------------------------------------
33,922,490 49,285,046
- -------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (19,023,686) (56,173,488)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions 14,898,804 (6,888,442)
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets 17,779,054 4,606,924
Net assets at the beginning of period 361,738,906 357,131,982
- -------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $379,517,960 $361,738,906
===================================================================================================================
Balance of undistributed net investment income at end of period $ 67,235 $ 124,359
===================================================================================================================
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen 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
November 30, 1998, the Fund had an outstanding when-issued purchase commitment
of $3,035,809.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions are distributed to shareholders not less frequently
than annually. Furthermore, capital gains are distributed only to the extent
they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
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. 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 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
16
<PAGE>
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap 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 the six months ended November 30, 1998.
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.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
11/30/98 5/31/98
------------------------- --------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,580,346 $ 17,381,935 2,575,627 $ 28,008,973
Class B 550,024 6,051,927 420,285 4,565,047
Class C 362,673 3,994,183 328,848 3,571,148
Class R 151,381 1,662,531 428,140 4,635,982
Shares issued to shareholders due to reinvestment of distributions:
Class A 353,040 3,874,519 606,794 6,557,242
Class B 3,763 41,391 3,957 43,099
Class C 8,512 93,410 14,699 159,154
Class R 74,842 822,594 160,928 1,744,401
- -----------------------------------------------------------------------------------------------------------------------------
3,084,581 33,922,490 4,539,278 49,285,046
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,477,002) (16,223,051) (4,482,418) (48,620,708)
Class B (37,345) (410,145) (17,384) (188,950)
Class C (32,962) (362,107) (128,897) (1,402,431)
Class R (184,954) (2,028,383) (548,970) (5,961,399)
- -----------------------------------------------------------------------------------------------------------------------------
(1,732,263) (19,023,686) (5,177,669) (56,173,488)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 1,352,318 $ 14,898,804 (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 December 21, 1998, to shareholders of record on
December 9, 1998, as follows:
<TABLE>
<S> <C>
- -----------------------------
Dividend per share:
Class A $.0460
Class B .0395
Class C .0410
Class R .0480
=============================
</TABLE>
The Fund also declared taxable distributions, which include capital gains and/or
market discount, of $.0404 per share which were paid on December 7, 1998, to
shareholders of record on DECEMBER 2, 1998.
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities for the six months ended November 30, 1998, aggregated $29,672,744
and $16,111,734, respectively. Purchases and sales (including maturities) of
temporary municipal investments for the six months ended November 30, 1998,
aggregated $15,200,000 and $12,900,000, respectively.
At November 30, 1998, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes.
17
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
5. Unrealized Appreciation (Depreciation)
At November 30, 1998, net unrealized appreciation of investments aggregated
$32,378,435 of which $32,457,382 related to appreciated securities and $78,947
related to depreciated securities.
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, the Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- -----------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
=============================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1998, the Distributor collected sales
charges on purchases of Class A Shares of which the majority were paid out as
concessions to authorized dealers. The Distributor also received 12b-1 service
fees on Class A Shares, substantially all of which were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments.
During the six months ended November 30, 1998, the Distributor compensated
authorized dealers directly with approximately $306,800 in commission advances
at the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the six months
ended November 30, 1998, the Distributor retained approximately $52,400 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 $9,000 of
CDSC on share redemptions during the six months ended November 30, 1998.
7. Composition of Net Assets
At November 30, 1998, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
<S> <C>
Capital paid-in $345,902,091
Balance of undistributed net investment income 67,235
Accumulated net realized gain from investment transactions 1,170,199
Net unrealized appreciation of investments 32,378,435
- -----------------------------------------------------------------------------
Net assets $379,517,960
=============================================================================
</TABLE>
18
<PAGE>
Financial Highlights (Unaudited)
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 Gain Total Value Return(b)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/90)**
1999 (d) $10.94 $.27 $ .10 $.37 $(.28) $ -- $(.28) $11.03 3.38%
1998 10.60 .56 .34 .90 (.55) (.01) (.56) 10.94 8.67
1997 10.39 .56 .21 .77 (.56) -- (.56) 10.60 7.59
1996 10.63 .57 (.24) .33 (.57) -- (.57) 10.39 3.14
1995 10.38 .58 .26 .84 (.59) -- (.59) 10.63 8.43
1994 10.76 .60 (.38) .22 (.60) -- (.60) 10.38 2.00
Class B (2/97)
1999 (d) 10.95 .23 .10 .33 (.24) -- (.24) 11.04 3.01
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 (d) 10.95 .24 .09 .33 (.25) -- (.25) 11.03 3.00
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 (d) 10.94 .29 .09 .38 (.29) -- (.29) 11.03 3.49
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
===================================================================================================================
</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 Before After After 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 (6/90)**
1999 (d) $ 299,749 .84%* 4.98%* .84%* 4.98%* 4%
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
1994 372,082 1.00 5.09 .58 5.51 32
Class B (2/97)
1999 (d) 11,006 1.60* 4.24* 1.60* 4.24* 4
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 (d) 11,439 1.40* 4.43* 1.40* 4.43* 4
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 (d) 57,324 .64* 5.18* .64* 5.18* 4
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 the waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized except where noted.
(c) From commencement of class operations as noted.
(d) For the six months ended November 30, 1998.
19
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family
of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
National Funds
Long-Term Insured
Intermediate-Term
Limited-Term
State Funds
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
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
20
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
21
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR., APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time. We emphasize quality securities carefully chosen through
in-depth research, and we follow those securities closely over time to ensure
that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
1898
NUVEEN
1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime./SM/
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
VSA-2-11-98
<PAGE>
NUVEEN
Municipal
Bond Funds
November 30, 1998
Semiannual Report
Dependable, tax-free income to help you keep more of what you earn.
[PHOTO APPEARS HERE]
Maryland
Pennsylvania
Virginia
<PAGE>
Highlights
As of November 30, 1998
For Class A shares on net asset value
Credit Quality Performance Highlights
<TABLE>
<CAPTION>
Nuveen Maryland Municipal Bond Fund
[PIE CHART APPEARS HERE]
<S> <C>
AAA/U.S. Guaranteed 69%
AA 16%
A 7%
BBB/NR 8%
</TABLE>
. One-year total return of 6.84%*
. Outperformed Lipper Peer Group average for one-year period
. Good credit quality, with 85% of the funds assets invested in AAA or AA rated
bonds
<TABLE>
<CAPTION>
Nuveen Flagship Pennsylvania Municipal Bond Fund
[PIE CHART APPEARS HERE]
<S> <C>
AAA/U.S. Guaranteed 45%
AA 11%
A 11%
BBB/NR 33%
</TABLE>
. One-year total return of 6.99%*
. Outperformed Lipper Peer Group average for one-year period
. Attractive call protection with only approximately 1% of the fund's holdings
callable prior to 2002
<TABLE>
<CAPTION>
Nuveen Flagship Virginia Municipal Bond Fund
[PIE CHART APPEARS HERE]
<S> <C>
AAA/U.S. Guaranteed 34%
AA 31%
A 22%
BBB/NR 13%
</TABLE>
. One-year total return of 7.36%*
. Outperformed Lipper Peer Group average for one-year period
. ****Four-star Morningstar Rating(TM)**
Contents
1 Dear Shareholder
4 Nuveen Maryland Municipal Bond Fund Commentary and Overview
6 Nuveen Flagship Pennsylvania Municipal Bond Fund Commentary and Overview
8 Nuveen Flagship Virginia Municipal Bond Fund Commentary and Overview
10 Portfolio of Investments
24 Statement of Net Assets
25 Statement of Operations
26 Statement of Changes in Net Assets
28 Notes to Financial Statements
33 Financial Highlights
36 Building Better Portfolios
37 Fund Information
* See your fund's performance overview in this report for more information.
** Overall rating within the municipal bond category for Class A shares for
the period ended November 30, 1998. Morningstar proprietary ratings reflect
historical risk-adjusted performance. The ratings are subject to change
every month. Past performance is no guarantee of future results.
Morningstar ratings are calculated from a 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. The Virginia fund received 4
stars, 4 stars, 3 stars for the three-, five-, and 10-year periods,
respectively. The top 10% of the funds in an investment class receive 5
stars, the next 22.5% receive 4 stars, and the next 35% receive 3 stars.
The funds were rated among 1,572 funds for the three-year period, 991 funds
for the five-year period, and 369 funds for the 10-year period.
<PAGE>
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
Dear Shareholder
I'm pleased to report on the performance of your Nuveen Municipal Bond Fund for
the 12 months ended November 30, 1998. Providing a high level of current
interest income exempt from regular federal, state and, in some cases, local
income taxes as is consistent with the preservation of capital remains the
primary investment objective for each of the funds covered in this report. In
each case, we achieved this objective, illustrating once again that Nuveen tax-
free mutual funds can provide an excellent investment option for income-oriented
investors.
The Year in Review
Over the past year, the markets endured bouts of volatility, as the Asian
financial crisis spilled over into emerging markets and affected economies
around the globe. The Federal Reserve intervened in an attempt to soften the
impact of the financial crises by lowering short-term interest rates in
September by a quarter of a point. Since that time, the Fed has twice again
reduced rates, bringing the federal funds rate to 4.75%. As long-term interest
rates fell to historic lows, investors were reminded of the importance of a well
balanced portfolio and professional management. Despite the market volatility
throughout the year, your Nuveen Municipal Bond Fund continued to provide
attractive current market yields and after-tax total returns. Your fund
represented a bright spot among fixed-income investments. In addition, the funds
have maintained good levels of call protection, which provides a strong
foundation for potentially stable income streams in the future. Looking ahead,
we will continue to focus on new municipal bond issuance while leveraging our
institutional position to buy and sell securities at competitive prices and
identifying undervalued securities through proprietary market research.
Municipal Market Review
Over the past year, declining interest rates drove yields on 30-year
1
<PAGE>
Treasuries to their lowest levels since 1977. With yields on the long Treasury
bond pushing below 5% at times, the yield on the Bond Buyer 40, an unmanaged
index of long-term municipal bonds, fell just 26 basis points - from 5.36% to
5.10% - compared with the 99-point drop, to 5.06%, in Treasury yields over the
past 12 months. As of November 30, 1998, the ratio of long-term municipal yields
to 30-year Treasury yields stood at 100.8%, compared with the more typical range
of 86-87%. Over the past few months, this ratio has climbed as high as 104%. For
investors, this means that long-term municipal bonds currently offer about the
same yield as Treasury bonds with comparable maturities, before taxes are taken
into account. On an after-tax basis, municipal bonds present an even more
attractive investment option relative to Treasuries.
One of the main factors in the steep decline in Treasury yields during the past
year was the strong interest in these investments by international investors. As
the financial turmoil in Asia continued to spread to economies worldwide and the
dollar strengthened against foreign currencies, the demand for U.S. Treasury
securities increased. In the municipal market, where foreign demand was limited
by an inability of foreign investors to benefit from the tax advantages of
municipals, low interest rates and a strong economy combined to generate high
levels of new issuance and a dramatic increase in the refinancing of existing
bonds. The first eleven months of 1998 saw over $255 billion of municipal
issuance, up 28.4% over the same period in 1997. In terms of total issuance,
this put 1998 on pace to be the second largest year on record.
2
<PAGE>
"The key to taking advantage of the exceptional values currently available in
the financial markets is the expertise of a market specialist, such as Nuveen
Investment Advisory Services."
In addition, the continued strength of the U.S. economy brought about
improvements in the fundamental financial health of many municipalities and
boosted the overall credit quality of municipal bonds. In the third quarter of
1998, upgraded issues by the two major rating agencies outnumbered downgrades by
a margin of 7 to 2.
Nuveen Expertise Is Key
The key to taking advantage of the exceptional values currently available in the
financial markets is the expertise of a market specialist, such as Nuveen
Investment Advisory Services. To this end, Nuveen has assembled the Premier
Advisers(SM), a growing group of experts that can provide time-tested experience
and insight in a variety of investment categories. In addition to Nuveen
Investment Advisory Services, our Premier Adviser for tax-free investing, you
can rely on our other Premier Advisers for equity investments, including
Institutional Capital Corporation for value investing and Rittenhouse Financial
Services, Inc. for growth investing. For more information about the funds
managed by these Premier Advisers, including charges and expenses, contact your
financial adviser for a prospectus, or call Nuveen at (800) 621-7227. Please
read the prospectus carefully before you invest or send money.
We encourage you to talk with your financial adviser about the ways Nuveen's
expanding selection of investments can assist you in establishing a diversified
portfolio designed to help you build and sustain long-term financial security.
Over the past 100 years, Nuveen has evolved from a company that dealt with only
municipal bonds into a nationally respected firm that handles a variety of
investment options. I look forward to continuing this exciting journey. We are
grateful for the confidence you have shown in us, and we intend to continue
earning your trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
January 15, 1999
3
<PAGE>
Nuveen Maryland Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Dan Solender discusses the Nuveen Maryland Municipal Bond Fund
and reviews factors that affected performance over the past 12 months.
Comments cover the 12-month period ended November 30, 1998 and all performance
statistics are quoted for Class A shares.
What is the status of Maryland's economy and its municipal market?
Although total municipal issuance was up 28.3% compared to a year ago, Maryland
is a relatively quiet participant in the municipal market, ranking 24th in total
issuance for the 12 months ended November 30, 1998. Its total issuance was just
over $3 billion since the start of 1998, compared to the $34 billion that New
York issued. The bonds that are issued are, for the most part, highly rated
credits.
The state's economy continues to recover from the recession of the early 1990's
with good job growth coming mainly from business services, non-banking financial
services (credit card companies), construction, and technology. Given the
state's high level of federal employees, Maryland's per capita income ranks
sixth in the nation.
Maryland is currently implementing a 10% tax cut that is being phased in over
multiple years. It was originally scheduled to be enacted at 2% per year for
five years, but the cut was accelerated so that a cumulative 5% cut became
effective in 1998. The cut will increase to 6% (cumulative) in 1999. It will
remain unchanged in the year 2000, with an increase of 2% for the two subsequent
years.
How did the Nuveen Maryland Municipal Bond Fund's underlying portfolio perform
during the past year?
Over the past 12 months, the Nuveen Maryland Municipal Bond Fund generated a
total return on net asset value of 6.84%, equivalent to a taxable total return
of 9.31% for investors in the combined 34.4% federal and state income tax
bracket. That performance exceeded the 6.62% average annual total return posted
by the Lipper Maryland Municipal Debt Peer Group* of 38 municipal bond funds.
What key strategies were used over the course of the year? Were there any
particular sectors in which Nuveen looked for undervalued securities?
The fund continued to enjoy success with its sector strategy during the recent
period. This year, the portfolio found value in a variety of sector issues,
especially housing and healthcare. They were the two largest sector allocations,
accounting for 23% and 21%, respectively, of the fund's investments, as of
November 30, 1998.
Another event of note this year was a slight steepening of the yield curve,
meaning that bonds at the long end of the maturity spectrum began offering more
attractive yields than those with slightly shorter maturities. As a result of
that move, we began finding value among longer-term bonds during the period.
Finding bonds with good call protection was also important. Call protection
insulates investors from income erosion, especially in a declining interest rate
environment. Regarding the Maryland fund, less than 10% of the portfolio is
callable prior to 2002.
The fund also maintained its primary focus on high-quality securities, with 85%
of the portfolio invested in bonds rated AAA or AA as of November 30, 1998.
However, Nuveen's extensive research capabilities also make it possible for us
to identify lower-rated debt that we believe offers both strong quality
characteristics and the opportunity for additional yield.
What is your outlook for the Nuveen Maryland Municipal Bond Fund?
We will continue to manage the fund by seeking out undervalued securities that
provide both attractive income and the opportunity for price appreciation
relative to the market, consistent with the preservation of capital. We will
continue looking for bonds rated A or BBB to provide the fund with attractive
yield opportunities.
If supply remains near its current levels, we will look to the new issue market
as the main source for adding bonds to the portfolio. Due to the relative
inactivity in Maryland's municipal market, taking advantage of these new issues
will be very important in terms of infusing the fund with new capital and
swapping bonds for yield purposes.
Due to the fund's reliance on healthcare and housing bonds, we want to diversify
the fund's holdings by looking at different sectors like: education, water and
sewer, and various general obligation issues. Additionally, we will focus on
bonds with 25-30 year maturities.
* The Lipper Peer Group return represents the average annualized return of
the 38 funds in the Lipper Maryland Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
4
<PAGE>
Nuveen Maryland Municipal Bond Fund
Performance Overview
As of November 30, 1998
<TABLE>
<CAPTION>
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
<S> <C>
12/97 .0415
1/98 .0400
2/98 .0400
3/98 .0400
4/98 .0400
5/98 .0400
6/98 .0400
7/98 .0400
8/98 .0400
9/98 .0400
10/98 .0400
11/98 .0400
</TABLE>
<TABLE>
<CAPTION>
Top 5 Sectors (as a % of total investments)
<S> <C>
Housing (Multifamily) 23%
- --------------------------------------------------------------------------------
Health Care 21%
- --------------------------------------------------------------------------------
Housing (Single Family) 10%
- --------------------------------------------------------------------------------
U.S. Guaranteed 10%
- --------------------------------------------------------------------------------
Tax Obligation (Limited) 9%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 9/94 3/97 9/94 12/91
- --------------------------------------------------------------------------------
Net Asset Value $10.68 $10.68 $10.67 $ 10.70
- --------------------------------------------------------------------------------
Total Net Assets ($000) $72,242
- --------------------------------------------------------------------------------
Effective Maturity (Years) 20.6
- --------------------------------------------------------------------------------
Modified Duration (Years) 6.15
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/1/
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 6.84% 2.34% 6.05% 6.14% 7.01%
- --------------------------------------------------------------------------------
5-Year 5.51% 4.60% 4.79% 4.83% 5.78%
- --------------------------------------------------------------------------------
Since Inception 6.70% 6.02% 5.97% 5.98% 6.97%
- --------------------------------------------------------------------------------
</TABLE>
1 Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
5
<PAGE>
Nuveen Flagship Pennsylvania Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Tom O'Shaughnessy discusses the Nuveen Flagship Pennsylvania
Municipal Bond Fund and reviews factors that affected performance over the past
12 months.
Comments cover the 12-month period ended November 30, 1998 and all performance
statistics are quoted for Class A shares.
What is the status of Pennsylvania's economy and its municipal market?
Although Pennsylvania's growth remains below the national average - due in part
to the relative maturity of its economy - the state's economic base is
strengthening and diversifying. In addition, unemployment and per capita incomes
are in-line with national numbers.
One event of note in Pennsylvania recently was the elimination of a personal
property tax on out-of-state investments. The result might be that some counties
as well as the city of Philadelphia may have to rebate some of those tax
proceeds. Eliminating the tax, therefore, could be positive for the state over
time but may have some short-term financial drawbacks.
But if Pennsylvania's economic performance was unspectacular, it didn't impact
the state's healthy and diverse municipal market. In 1998, Pennsylvania ranked
4th among the states in year-to-date issuance as of November 30, 1998, and
strong supply was available in a wide variety of sectors. The one negative event
of note was the bankruptcy of Allegheny Health Education and Research
Foundation's (AHERF) Philadelphia hospitals, which has created uncertainty in
municipal market healthcare sectors nationwide. Nuveen did not hold any of these
bonds.
How did the Nuveen Flagship Pennsylvania Municipal Bond Fund's underlying
portfolio perform during the past year?
Over the past 12 months, the Nuveen Flagship Pennsylvania Municipal Bond Fund
generated a total return on net asset value of 6.99%, equivalent to a taxable
total return of 9.61% for investors in the combined 32.9% federal and state
income tax bracket. That performance exceeded the 6.50% average annual total
return posted by the Lipper Pennsylvania Municipal Debt Peer Group* of 61
municipal bond funds.
What key strategies were used over the course of the year? Were there any
particular sectors in which Nuveen looked for undervalued securities?
The fund continued to enjoy success with its sector strategy during the recent
period. Healthy issuance in a variety of sectors increased our ability to find
attractive securities while maintaining the portfolio's strong diversification.
The two largest sector allocations were education and civic organization bonds
and single family housing securities, which accounted for 18% and 16%,
respectively, of the fund's investments, as of November 30, 1998. These sectors
not only experienced some of the state's heaviest issuance volume, they
performed well during the period.
Another event of note this year was a slight steepening of the yield curve,
meaning that bonds at the long end of the maturity spectrum began offering more
attractive yields than those with slightly shorter maturities. As a result of
that move, we began finding value among longer-term bonds during the period.
Finding bonds with good call protection was also important. Call protection
insulates investors from income erosion, especially in a declining interest rate
environment. Regarding the Pennsylvania fund, less than 10% of the portfolio is
callable prior to 2002.
The fund also maintained its primary focus on high-quality securities, with 56%
of the portfolio invested in bonds rated AAA or AA as of November 30, 1998.
However, Nuveen's extensive research capabilities also make it possible for us
to identify lower-rated debt that we believe offers both strong quality
characteristics and the opportunity for additional yield.
What is your outlook for the Nuveen Flagship Pennsylvania Municipal Bond Fund?
We will continue to manage the fund by seeking out undervalued securities that
provide both attractive income and the opportunity for price appreciation
relative to the market, consistent with the preservation of capital.
Specifically in the months ahead, we will look for fundamentally high-quality
healthcare bonds that have been undervalued as a result of the AHERF bankruptcy.
In addition, housing bonds will be prime candidates for addition to the
portfolio as a way to increase yield. Single family housing bonds often have
higher yields than other bonds of similar maturities because the housing bonds
are subject to early calls if home owners pre-pay their mortgages. In today's
market, however, we view this prepayment risk as minimal due to the present low
level of interest rates.
We also expect to see fewer insured issues coming to market, which should create
more buying opportunities in the months ahead and make the portfolio's current
insured holdings even more attractive.
* The Lipper Peer Group return represents the average annualized return of
the 61 funds in the Lipper Pennsylvania Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
6
<PAGE>
Nuveen Flagship Pennsylvania Municipal Bond Fund
Performance Overview
As of November 30, 1998
<TABLE>
<CAPTION>
Monthly Tax-Free Dividends (Class A Shares)/1/
[BAR CHART APPEARS HERE]
<S> <C>
12/97 .0465
1/98 .0465
2/98 .0465
3/98 .0465
4/98 .0465
5/98 .0465
6/98 .0465
7/98 .0450
8/98 .0450
9/98 .0450
10/98 .0450
11/98 .0450
</TABLE>
<TABLE>
<CAPTION>
Top 5 Sectors (as a % of total investments)
<S> <C>
Education and Civic Organizations 18%
- --------------------------------------------------------------------------------
Housing (Single Family) 16%
- --------------------------------------------------------------------------------
Health Care 12%
- --------------------------------------------------------------------------------
Utilities 11%
- --------------------------------------------------------------------------------
Tax Obligation (General) 10%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 10/86 2/97 2/94 2/97
- --------------------------------------------------------------------------------
Net Asset Value $10.71 $10.73 $10.70 $ 10.71
- --------------------------------------------------------------------------------
Total Net Assets ($000) $147,591
- --------------------------------------------------------------------------------
Effective Maturity (Years) 21.98
- --------------------------------------------------------------------------------
Modified Duration (Years) 7.57
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/2/
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 6.99% 2.52% 6.20% 6.35% 7.23%
- --------------------------------------------------------------------------------
5-Year 6.21% 5.31% 5.60% 5.63% 6.30%
- --------------------------------------------------------------------------------
10-Year 7.78% 7.31% 7.31% 7.19% 7.82%
- --------------------------------------------------------------------------------
</TABLE>
1 The Fund also paid shareholders taxable distributions in December of
$0.0217 per share.
2 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
7
<PAGE>
Nuveen Flagship Virginia Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Dan Solender discusses the Nuveen Flagship Virginia Municipal
Bond Fund and reviews factors that affected performance over the past 12 months.
Comments cover the 12-month period ended November 30, 1998 and all performance
statistics are quoted for Class A shares.
What is the status of Virginia's economy and its municipal market?
In recent years, Virginia has been successful in decreasing its reliance on
federal defense-related spending while maintaining a relatively robust economy.
A sign of economic health is the state's unemployment and population growth
numbers, both of which are better than the national averages.
Virginia continues to be aggressive in pursuing development opportunities,
targeting sectors that can help diversify its economy away from the federal
government. To date, the commonwealth has had particular success in the business
services, retail and trade and construction sectors.
Virginia's municipal market in 1998 benefited from a relatively healthy supply.
The commonwealth ranked 13th among the states in year-to-date issuance as of
November 30, 1998. The state's issuance provided ample opportunities to seek out
good values among both large and small issues in a wide variety of market
sectors.
How did the Nuveen Flagship Virginia Municipal Bond Fund's underlying portfolio
perform during the past year?
Over the past 12 months, the Nuveen Flagship Virginia Municipal Bond Fund
generated a total return on net asset value of 7.36%, equivalent to a taxable
total return of 10.12% for investors in the combined 35% federal and state
income tax bracket. That performance exceeded the 6.88% average annual total
return posted by the Lipper Virginia Municipal Debt Peer Group* of 34 municipal
bond funds.
What key strategies were used over the course of the year? Were there any
particular sectors in which Nuveen looked for undervalued securities?
The fund continued to enjoy success with its sector strategy during the recent
period. This year, the portfolio found value in a variety of sector issues,
including bonds from the housing and education sectors. The two largest sector
allocations were in healthcare and limited tax obligations, which each accounted
for 14% of the fund's investments, as of November 30, 1998.
Another event of note this year was a slight steepening of the yield curve,
meaning that bonds at the long end of the maturity spectrum began offering more
attractive yields than those with slightly shorter maturities. As a result of
that move, we felt we were better rewarded for buying longer-term bonds during
the period.
Finding bonds with good call protection was also important. Call protection
insulates investors from income erosion, especially in a declining interest rate
environment. Regarding the Virginia fund, less than 10% of the portfolio is
callable prior to 2002.
The fund also maintained its primary focus on high-quality securities, with 65%
of the portfolio invested in bonds rated AAA or AA as of November 30, 1998.
However, Nuveen's extensive research capabilities also make it possible for us
to identify lower-rated debt that we believe offers both strong quality
characteristics and the opportunity for additional yield.
What is your outlook for the Nuveen Flagship Virginia Municipal Bond Fund?
We will continue to manage the fund by seeking out undervalued securities that
provide both attractive income and the opportunity for price appreciation
relative to the market, consistent with the preservation of capital. We will
continue looking for bonds rated A or BBB to provide the fund with attractive
yield opportunities.
If supply remains near its current levels, we will look to the new issue market
as the main source for adding bonds to the portfolio. Due to the relative
inactivity in Virginia's municipal market, taking advantage of these new issues
will be very important in terms of infusing the fund with new capital and
swapping bonds for yield purposes.
Healthcare and education will be two sectors where we will focus our attention,
as we work to maintain the fund's already solid diversification. Additionally,
we will focus on bonds with 25-30 year maturities.
* The Lipper Peer Group return represents the average annualized return of
the 34 funds in the Lipper Virginia Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
8
<PAGE>
Nuveen Flagship Virginia Municipal Bond Fund
Performance Overview
As of November 30, 1998
<TABLE>
<CAPTION>
Monthly Tax-Free Dividends (Class A Shares)/1/
[BAR CHART APPEARS HERE]
<S> <C>
12/97 .0475
1/98 .0460
2/98 .0460
3/98 .0460
4/98 .0460
5/98 .0460
6/98 .0460
7/98 .0450
8/98 .0450
9/98 .0450
10/98 .0450
11/98 .0450
</TABLE>
<TABLE>
<CAPTION>
Top 5 Sectors (as a % of total investments)
<S> <C>
Health Care 14%
- --------------------------------------------------------------------------------
Tax Obligation (Limited) 14%
- --------------------------------------------------------------------------------
Education and Civic Organizations 12%
- --------------------------------------------------------------------------------
Water and Sewer 11%
- --------------------------------------------------------------------------------
U.S. Guaranteed 9%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 3/86 2/97 10/93 2/97
- --------------------------------------------------------------------------------
Net Asset Value $11.18 $11.17 $11.17 $ 11.18
- --------------------------------------------------------------------------------
Total Net Assets ($000) $220,720
- --------------------------------------------------------------------------------
Effective Maturity (Years) 20.24
- --------------------------------------------------------------------------------
Modified Duration (Years) 5.96
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/2/
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 7.36% 2.85% 6.51% 6.69% 7.59%
- --------------------------------------------------------------------------------
5-Year 6.13% 5.23% 5.47% 5.55% 6.22%
- --------------------------------------------------------------------------------
10-Year 7.92% 7.45% 7.44% 7.32% 7.96%
- --------------------------------------------------------------------------------
</TABLE>
1 The Fund also paid shareholders taxable distributions in December of $0.01
per share.
2 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
9
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Maryland Municipal Bond Fund
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials--2.3%
$ 1,500,000 Mayor and City Council of Baltimore (Maryland), Port Facilities Revenue 4/02 at 103 AA- $1,651,125
Bonds (Consolidation Coal Sales Company Project), Series 1984B,
6.500%, 10/01/11
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations--5.4%
Maryland Health and Higher Educational Facilities Authority, Educational
Facilities Mortgage Revenue Bonds, Green Acres School Issue, Series 1998:
420,000 5.300%, 7/01/18 7/06 at 102 BBB- 421,390
725,000 5.300%, 7/01/28 7/06 at 102 BBB- 721,208
1,000,000 Maryland Health and Higher Educational Facilities Authority, Refunding 7/08 at 102 Aa2 1,006,040
Revenue Bonds, The Johns Hopkins University Issue, Series 1998,
5.125%, 7/01/20
1,500,000 Morgan State University, Maryland, Academic Fees and Auxiliary Facilities No Opt. Call AAA 1,756,905
Fees, Revenue Refunding Bonds, 1993 Series, 6.100%, 7/01/20
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care--22.1%
2,165,000 City of Gaithersburg, Maryland, Nursing Home Revenue Refunding Bonds No Opt. Call AAA 2,601,529
(Shady Grove Adventist Nursing and Rehabilitation Center Project),
Series 1992A, 6.500%, 9/01/12
1,820,000 Maryland Economic Development Corporation (Health and Mental Hygiene 4/11 at 102 N/R 1,883,081
Providers Facilities Acquisition Program), Revenue Bonds, Series
1996A, 7.625%, 4/01/21
1,000,000 Maryland Health and Higher Educational Facilities Authority, Refunding 7/03 at 102 AAA 1,016,500
Revenue Bonds, Francis Scott Key Medical Center Issue, Series 1993,
5.000%, 7/01/13
500,000 Maryland Health and Higher Educational Facilities Authority, Revenue 7/08 at 102 A2 493,135
Bonds, Calvert Memorial Hospital Issue, Series 1998, 5.000%, 7/01/28
2,250,000 Maryland Health and Higher Educational Facilities Authority, Revenue 7/08 at 101 AAA 2,254,478
Bonds, Johns Hopkins Medicine, Howard County General Hospital
Acquisition Issue, Series 1998, 5.000%, 7/01/29
1,000,000 Maryland Health and Higher Educational Facilities Authority, Project 7/03 at 102 Baa1 1,023,300
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, Revenue 1/08 at 101 Aaa 3,505,320
Bonds, Upper Chesapeake Hospitals Issue, Series 1998A, 5.125%, 1/01/38
2,000,000 Prince Georges County, Maryland, Project and Refunding Revenue Bonds 7/04 at 102 A 2,037,300
(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 1,122,570
Control Facilities Financing Authority, Hospital Revenue Bonds,
1995 Series A (Hospital Auxilio Mutuo Obligated Group Project),
6.250% 7/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily--24.5%
1,500,000 Baltimore County, Maryland, Mortgage Revenue Refunding Bonds (GNMA 10/08 at 102 AAA 1,514,460
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 1,076,510
1992 (GNMA Collateralized - Tindeco Wharf Apartments Project),
6.700%, 12/20/28
1,000,000 Howard County, Maryland, Mortgage Revenue Refunding Bonds, Series 1992 7/02 at 102 AAA 1,061,460
(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 2,218,500
Series 1994 (Chase Glen Project), 7.000%, 7/01/24
Community Development Administration, Department of Housing and Community
Development, State of Maryland, Multi-Family Housing Revenue Bonds
(Insured Mortgage Loans), 1992 Series D:
700,000 6.700%, 5/15/27 5/02 at 102 Aa 750,533
500,000 6.750%, 5/15/33 5/02 at 102 Aa 536,055
</TABLE>
10
<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 10/08 at 101 1/2 Aaa $ 1,020,210
Housing and Community Development, Multifamily Development
Revenue Bonds (Auburn Manor Project), Series 1998A, 5.300%,
10/01/28 (Alternative Minimum Tax)
1,000,000 Housing Opportunities Commission of Montgomery County (Montgomery 7/05 at 102 Aa 1,060,470
County, Maryland), Multifamily Housing Revenue Bonds,
1995 Series A, 6.000%, 7/01/20
Housing Opportunities Commission of Montgomery County
(Montgomery County, Maryland), Multifamily Housing
Development Bonds, 1998 Series A:
4,420,000 5.250%, 7/01/29 (Alternative Minimum Tax) (WI) 7/08 at 101 Aaa 4,438,829
1,500,000 5.200%, 7/01/30 (WI) 7/08 at 101 Aaa 1,506,405
1,550,000 Prince Georges County Housing Authority (New Keystone Apartments 1/02 at 102 AAA 1,659,089
- FHA Insured), 6.800%, 7/01/25
860,000 Housing Authority of Prince Georges County (Maryland), Mortgage 5/00 at 100 AAA 863,827
Revenue Refunding Bonds (Collateralized Foxglenn Apartments
Project), Series 1998A, 5.450%, 5/20/14 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family--10.9%
1,385,000 Community Development Administration, Department of Housing and 4/01 at 102 Aa2 1,458,959
Community 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 3/08 at 101 1/2 Aa2 1,524,030
Housing 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 (Montgomery 7/04 at 102 Aa2 1,744,281
County, Maryland), Single Family Mortgage Revenue Bonds,
1994 Series A, 6.600%, 7/01/14
3,000,000 Housing Authority of Prince Georges County (Maryland), 8/07 at 102 AAA 3,128,580
FHLMC/FNMA/GNMA Collateralized, Single Family Mortgage Revenue
Bonds, Series 1997, 5.750%, 8/01/26 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General--2.9%
2,000,000 State of Maryland, General Obligation Bonds, State and Local 7/03 at 101 AAA 2,068,060
Facilities Loan of 1993, Third Series (Capital Improvement and
Refunding Bonds), 4.600%, 7/15/06
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited--9.7%
1,000,000 Mayor and City Council of Baltimore (Maryland), Certificates of 10/07 at 102 AAA 1,017,100
Participation (Emergency Telecommunications Facilities),
Series 1997A, 5.000%, 10/01/17
2,000,000 Mayor and City Council of Baltimore (Maryland), Convention Center 9/08 at 102 AAA 2,013,120
Refunding Revenue Bonds, Series 1998, 5.000%, 9/01/19
1,760,000 Maryland Stadium Authority, Convention Center Expansion Lease 12/04 at 102 AAA 1,946,701
Revenue Bonds, Series 1994, 5.875%, 12/15/12
Maryland Stadium Authority, Sports Facilities Lease Revenue Bonds,
Series 1989D:
500,000 7.375%, 12/15/04 (Alternative Minimum Tax) 12/99 at 102 Aa 529,470
500,000 7.500%, 12/15/10 (Alternative Minimum Tax) 12/99 at 102 Aa 529,200
1,000,000 Washington Suburban Sanitary District, Maryland (Montgomery and 6/07 at 100 Aa1 1,014,520
Prince Georges Counties, Maryland), General Construction Bonds of
1997, 5.125%, 6/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation--6.9%
1,285,000 Maryland Transportation Authority, Special Obligation Revenue 7/04 at 102 AAA 1,370,530
Bonds, Baltimore/Washington International Airport Projects,
Series 1994-A (Qualified Airport Bonds), 6.400%, 7/01/19
(Alternative Minimum Tax)
1,000,000 Maryland Transportation Authority, Transportation Facilities 7/02 at 100 A+ 1,046,150
Projects, Revenue Bonds, Series 1992, 5.750%, 7/01/15
2,500,000 Washington Metropolitan Area Transit Authority (District of 1/04 at 102 AAA 2,582,700
Columbia), Gross Revenue Transit Refunding Bonds, Series
1993, 5.250%, 7/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed--10.2%
600,000 Mayor and City Council of Baltimore (Maryland), General Obligation 10/02 at 100 AAA 660,210
Consolidated Public Improvement Bonds of 1992-Series A,
6.500%, 10/15/12 (Pre-refunded to 10/15/02)
</TABLE>
11
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Maryland Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 700,000 The Maryland National Capital Park and Planning Commission, Maryland 7/02 at 102 AA*** $ 768,397
(Prince Georges County, Maryland), General Obligation Bonds, Prince
Georges County Park Acquisition and Development Bonds, Series L-2,
6.125%, 7/01/10 (Pre-refunded to 7/01/02)
500,000 Maryland Health and Higher Educational Facilities Authority, Revenue 7/00 at 102 AAA 536,985
Bonds, Sinai Hospital of Baltimore Issue, Series 1990, 7.000%,
7/01/19 (Pre-refunded to 7/01/00)
500,000 Maryland Health and Higher Educational Facilities Authority, Revenue 7/00 at 102 AAA 535,150
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 1,106,093
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, 6.000%, 7/07 at 101 1/2 AAA 2,878,050
7/01/26 (Pre-refunded to 7/01/07)
500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1992 (General 7/02 at 101 1/2 AAA 556,710
Obligation Bonds), 6.600%, 7/01/13 (Pre-refunded to 7/01/02)
315,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, 7/99 at 101 1/2 AAA 327,058
Series 1989-O, 7.125%, 7/01/14 (Pre-refunded to 7/01/99)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities--5.4%
1,000,000 Montgomery County, Maryland, Solid Waste System Revenue Bonds 6/03 at 102 AAA 1,064,880
(1993 Series A), 5.875%, 6/01/13 (Alternative Minimum Tax)
1,000,000 Northeast Maryland Waste Disposal Authority, Resource Recovery No Opt. Call AAA 1,037,330
Revenue Refunding Bonds (Southwest Resource Recovery Facility),
Series 1993, 6.900%, 1/01/00
1,500,000 Prince Georges County, Maryland, Pollution Control Revenue 1/03 at 102 A1 1,635,330
Refunding Bonds (Potomac Electric Project), 1993 Series, 6.375%,
1/15/23
185,000 Puerto Rico Electric Power Authority, Power Revenue Refunding 7/99 at 101 1/2 BBB+ 191,795
Bonds, Series 1989-N, 7.125%, 7/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer--5.0%
Mayor and City Council of Baltimore (Maryland), Project and Refunding
Revenue Bonds (Water Projects), Series 1996-A:
1,500,000 5.500%, 7/01/26 7/06 at 101 AAA 1,583,850
2,000,000 5.000%, 7/01/28 7/08 at 101 AAA 2,006,020
- -----------------------------------------------------------------------------------------------------------------------------------
$72,260,000 Total Investments--(cost $71,512,438)--105.3% 76,061,488
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--(5.3)% (3,819,611)
--------------------------------------------------------------------------------------------------------------------
Net Assets--100% $72,241,877
--------------------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices
of the earliest optional call or redemption. There may be
other call provisions at varying prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's
rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. government or U.S.government agency
securities which ensures the timely payment of principal and
interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
12
See accompanying notes to financial statements.
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Pennsylvania Municipal Bond Fund
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Goods - 2.2%
$ 3,000,000 Delaware County Industrial Development Authority (Pennsylvania), 1/08 at 102 A- $ 3,220,110
Refunding Revenue Bonds, Series A 1997 (Resource Recovery
Facility), 6.200%, 7/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 17.4%
3,000,000 Allegheny County Higher Education Building Authority (Commonwealth of 2/06 at 102 Baa3 3,183,930
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 1,258,116
1,500,000 6.000%, 5/01/28 No Opt. Call Baa3 1,715,280
Chester County Health and Education Facilities Authority (Pennsylvania),
College Revenue Bonds, Series of 1998 (Immaculata College):
1,300,000 5.600%, 10/15/18 10/08 at 102 BBB- 1,320,774
2,300,000 5.625%, 10/15/27 10/08 at 102 BBB- 2,325,668
2,315,000 Delaware County Authority (Pennsylvania), College Revenue Refunding 10/08 at 100 BBB- 2,316,574
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- 970,760
2,000,000 5.125%, 3/15/24 3/04 at 100 A- 1,955,480
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 1,280,903
935,000 5.350%, 3/01/28 3/08 at 100 Baa1 941,358
750,000 Northeastern Pennsylvania Hospital and Education Authority, College 2/05 at 100 AAA 857,010
Revenue, 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- 4,182,993
1,800,000 5.375%, 4/01/23 4/08 at 102 BBB- 1,782,972
865,000 Union County Higher Educational Facilities Financing Authority, 4/06 at 101 AAA 911,139
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, 12/00 at 100 N/R 658,824
Wilkes-Barre, College Misericordia Revenue Bonds, Refunding
Series A of 1992, 7.750%, 12/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Energy - 2.8%
3,500,000 Pennsylvania Economic Development Financing Authority (Sun Company, Inc. No Opt. Call BBB 4,069,520
(R&M) Project), Series 1994A, 7.600%, 12/01/24 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 1.5%
2,000,000 Pennsylvania Economic Development Financing Authority 12/05 at 102 Baa2 2,281,920
(MacMillan Bloedel Limited Partnership), 7.600%, 12/01/20
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 11.9%
1,525,000 Allegheny County Hospital Development Authority (Allegheny County, No Opt. Call N/R 1,380,125
Pennsylvania), Hospital Revenue Bonds, Series Q (Allegheny Valley
Hospital, Sublessee), 7.000%, 8/01/15
500,000 Clarion County Hospital Authority, Hospital Revenue Refunding 7/99 at 102 N/R 524,045
Bonds, Series 1989 (Clarion Hospital Project), 8.100%, 7/01/12
</TABLE>
13
<PAGE>
<TABLE>
Portfolio of Investments (Unaudited)
Nuveen Pennsylvania Municipal Bond Fund (continued)
November 30, 1998
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$ 1,585,000 The City of Jeannette Health Services Authority, Hospital Revenue 11/06 at 102 BBB+ $ 1,673,411
Bonds (Jeannette District Memorial Hospital), Series A of 1996,
6.000%, 11/01/18
2,000,000 Monroeville, Pennsylvania, Hospital Authority, Hospital Revenue 10/05 at 102 N/R 1,760,000
Refunding, Forbes Health System, 6.250%, 10/01/15
500,000 Montgomery County, Pennsylvania, Higher Education and Health 2/00 at 100 AAA 524,360
Authority, Series A, Holy Redeemer Hospital, 7.625%, 2/01/20
1,985,000 Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities 11/02 at 102 A- 2,125,915
Authority, Hospital Revenue Refunding, Chestnut Hill Hospital,
6.500%, 11/15/22
2,000,000 Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities No Opt. Call BBB+ 2,263,220
Authority, Hospital Revenue Refunding, Pennsylvania Hospital,
6.250%, 7/01/06
2,500,000 Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities 7/07 at 102 BBB+ 2,590,575
Authority, Hospital Revenue Refunding, Jeanes Hospital Project,
5.875%, 7/01/17
2,250,000 City of Pottsville Hospital Authority, Hospital Revenue Bonds (The 7/08 at 100 BBB 2,265,615
Pottsville Hospital and Warne Clinic), Series of 1998, 5.625%, 7/01/24
230,000 Health Care Facilities Authority of Sayre (Pennsylvania), Series 1991A, 3/01 at 102 AAA 249,177
Revenue Bonds, Guthrie Healthcare System, 7.100%, 3/01/17
350,000 Washington County Hospital Authority, Hospital Revenue Bonds, Series 4/02 at 102 A3 385,497
1992 (Monongahela Valley Hospital, Inc. Project), 6.750%, 12/01/08
1,750,000 Westmoreland County Industrial Development Authority (Pennsylvania), 7/99 at 100 Baa3 1,773,135
Hospital Revenue Refunding Bonds, Series A of 1987 (Citizens General
Hospital), 8.250%, 7/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 1.4%
500,000 Redevelopment Authority of the County of Bucks, Pennsylvania, Mortgage 2/02 at 100 AAA 524,730
Revenue Refunding Bonds (Warminster Heights -- Section 8 Assisted FHA
Insured Project), 1992 Series A, 6.875%, 8/01/23
1,540,000 Redevelopment Authority of the City of Philadelphia, Pennsylvania, 2/08 at 100 Aa2 1,562,068
Multifamily Housing Refunding Revenue Bonds, Series 1998 (FHA
Insured Mortgage Loan -- Woodstock Mutual Homes, Inc. Project),
5.450%, 2/01/23
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 16.3%
3,260,000 Allegheny County Residential Finance Authority, Single Family 11/08 at 102 Aaa 3,305,640
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 268,185
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+ 312,162
Series S, 7.600%, 4/01/16
110,000 Pennsylvania Housing Finance Agency, Single Family Mortgage, 4/01 at 102 AA+ 116,336
Series 30, 7.300%, 10/01/17
520,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 10/01 at 102 AA+ 552,661
Revenue Bonds, Series 1991-32, 7.150%, 4/01/15
2,500,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 10/06 at 102 AA+ 2,680,625
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+ 2,150,460
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+ 1,063,930
Series 53A, 6.050%, 4/01/18 (Alternative Minimum Tax)
3,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue No Opt. Call AA+ 3,081,120
Bonds, Series 1997-61A, 5.500%, 4/01/29 (Alternative Minimum Tax)
3,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 10/08 at 101 AA+ 2,994,990
Bonds, Series 1998-64A Bonds, 4.500%, 4/01/28 (Alternative
Minimum Tax)
2,980,000 Urban Redevelopment Authority of Pittsburgh, Home Improvement Loan 8/05 at 102 A 3,163,926
Bonds, 1995 Series A, 6.375%, 8/01/18 (Alternative Minimum Tax)
1,000,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue Bonds, 4/06 at 102 AAA 1,054,710
Series A, 6.000%, 4/01/19 (Alternative Minimum Tax)
1,000,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue Bonds, 4/06 at 102 AAA 1,074,500
Series D, 6.250%, 10/01/17
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Housing/Single Family (continued)
$ 1,000,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue Bonds, 10/07 at 102 AAA $ 1,070,830
1997 Series A, 6.200%, 10/01/21 (Alternative Minimum Tax)
1,060,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue Bonds, 4/04 at 102 AAA 1,143,051
1994 Series A, 6.625%, 4/01/22 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial/Other -- 0.2%
250,000 Philadelphia Authority for Industrial Development, Revenue Bonds, 5/02 at 102 A+ 272,868
Series of 1992 (National Board of Medical Examiners Project),
6.750%, 5/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Care -- 5.8%
2,935,000 Allegheny County Residential Finance Authority, Mortgage Revenue Bonds 10/05 at 100 AAA 3,237,657
(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 2,161,740
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 1,034,190
Pennsylvania), Health Center Revenue Refunding Bonds, Series 1993,
Pittsburgh Lifetime Care Community (Sherwood Oaks Project),
5.750%, 6/01/16
2,000,000 Montgomery County Higher Education and Health Authority, Mortgage 1/06 at 101 BBB 2,132,620
Revenue Bonds, Series of 1996 (Waverly Heights Project), 6.375%,
1/01/26
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 9.4%
2,000,000 Mckeesport Area School District (Allegheny County, Pennsylvania), 10/06 at 100 AAA 2,258,780
General Obligation Bonds, Series of 1996A, 6.000%, 10/01/25
2,195,000 Montour School District (Allegheny County, Pennsylvania), General No Opt. Call AAA 1,060,580
Obligation Bonds, Series B of 1993, 0.000%, 1/01/14
1,000,000 Pennsylvania State, First Series of 1996, 5.375%, 5/15/16 5/06 at 101 1/2 AAA 1,045,480
6,050,000 City of Philadelphia, Pennsylvania, General Obligation Bonds, 3/09 at 101 AAA 5,962,578
Series 1998, 5.000%, 3/15/28 (WI)
1,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 7/07 at 101 1/2 A 1,555,230
5.375%, 7/01/25
2,000,000 Radnor Township, General Obligation Bonds, Series 1996, 5.250%, 5/06 at 100 Aa2 2,017,640
11/01/26
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 4.3%
1,500,000 The Harrisburg Authority, Dauphin County, Pennsylvania, Revenue 4/06 at 102 AAA 1,590,390
Bonds Series I of 1996 (Pooled Bond Program), 5.625%, 4/01/19
1,390,000 Pennsylvania Intergovernmental Cooperative Authority (City of No Opt. Call AAA 1,629,219
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 3,112,320
Bonds, Series of 1997, 5.375%, 3/01/22
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation -- 5.1%
2,300,000 County of Allegheny, Pennsylvania, Airport Revenue Refunding Bonds, 1/08 at 101 AAA 2,355,085
Series 1997A, (Pittsburgh International Airport), 5.250%, 1/01/16
(Alternative Minimum Tax)
1,550,000 Pennsylvania Turnpike Commission, Pennsylvania Turnpike Revenue Bonds, 12/02 at 102 AAA 1,604,777
Series O of 1992, 5.500%, 12/01/17
3,500,000 Philadelphia, Pennsylvania, Airport Revenue Bonds, Philadelphia Airport 6/07 at 102 AAA 3,586,135
System, Series 1997B, 5.400%, 6/15/27 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 7.5%
200,000 Allegheny County Hospital Development Authority, Hospital Revenue Bonds, 10/01 at 100 BBB+*** 218,128
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 219,632
Revenue Bonds, Series 1991 A (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 3,159,738
Obligation Bonds, Series of 1995, 6.350%, 1/15/14
(Pre-refunded to 1/15/04)
</TABLE>
15
<PAGE>
<TABLE>
Portfolio of Investments (Unaudited)
Nuveen Pennsylvania Municipal Bond Fund (continued)
November 30, 1998
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,320,000 Delaware County Authority, Health Facilities Revenue Bonds, 12/06 at 102 Aaa $ 1,486,914
Series of 1996 (Mercy Health Corporation of Southeastern Pennsylvania
Obligated Group), 6.000%, 12/15/26
1,500,000 Pennsylvania Intergovernmental Cooperation Authority, Special 6/05 at 100 AAA 1,758,150
Tax Revenue Bonds (City of Philadelphia Funding Program), Series of
1994, 7.000%, 6/15/14 (Pre-refunded to 6/15/05)
650,000 City of Philadelphia, Pennsylvania, Gas Works Revenue Bonds, No Opt. Call AAA 801,782
Twelfth Series B, 7.000%, 5/15/20
1,450,000 The Philadelphia Municipal Authority, Philadelphia, 4/00 at 100 AAA 1,532,259
Pennsylvania, 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 7/02 at 102 AAA 554,735
1992A (Franciscan Health System/Saint Mary Hospital Of Langhorne
Inc.), 6.500%, 7/01/12
935,000 The Municipal Authority of the Borough of West View (Allegheny No Opt. Call AAA 1,330,019
County, Pennsylvania), Special Obligation Bonds, Series of 1985A,
9.500%, 11/15/14
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities -- 11.3%
2,000,000 Beaver County Industrial Development Authority, Pennsylvania, 6/08 at 102 AAA 2,033,480
Exempt 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), 11/05 at 102 AAA 2,159,700
Pollution 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, 11/02 at 100 A- 852,656
Solid Waste Revenue Bonds, Series of 1992, 7.000%, 11/15/04
1,500,000 Lawrence County, Pennsylvania, Industrial Development 9/01 at 102 Baa2 1,606,530
Authority, Pollution Control Revenue Refunding, Pennsylvania Power
Company - New Castle Project, Series A, 7.150%, 3/01/17
1,610,000 Lehigh County Industrial Development Authority Pollution 11/02 at 102 AAA 1,777,327
Control Revenue Refunding Bonds, 1992 Series A (Pennsylvania Power
and Light Company Project), 6.400%, 11/01/21
550,000 Lehigh County Industrial Development Authority, Pollution 8/05 at 102 AAA 616,528
Control Revenue Refunding Bonds, 1995 Series A (Pennsylvania Power
and Light Company Project), 6.150%, 8/01/29
950,000 Luzerne County Industrial Development Authority, Exempt 12/02 at 102 A- 1,044,193
Facilities 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 12/04 at 102 AAA 1,723,890
Facilities 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 7/05 at 102 AAA 1,115,880
(Pennsylvania), 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 2,218,480
1,400,000 6.375%, 7/01/26 7/03 at 102 Baa1 1,537,494
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer -- 2.0%
2,000,000 Allegheny County Sanitary Authority, Allegheny County, 12/07 at 102 AAA 2,079,200
Pennsylvania, Sewer Revenue Bonds, Series of 1997, 5.375%, 12/01/24
860,000 South Wayne County Water and Sewer Authority, Pennsylvania, 4/02 at 102 N/R 932,376
Revenue Refunding Sewer Bonds, 8.200%, 4/15/13 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
$141,040,000 Total Investments -- (cost $136,740,572) -- 99.1% 146,244,710
============-----------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Temporary Investments in Short-Term Municipal Securities--2.2%
$ 3,300,000 Geisinger Authority, Health System Revenue Bonds, Series VMIG-1 $ 3,300,000
============ 1998B, Variable Rate Demand Bonds, 3.250%, 8/15/28+
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--(1.3)% (1,953,515)
--------------------------------------------------------------------------------------------------------------------
Net Assets--100% $147,591,195
====================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
+ The security has a maturity of more than one year, but has variable rate
and demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified market index.
See accompanying notes to financial statements.
17
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Virginia Municipal Bond Fund
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Goods--1.0%
$ 2,000,000 Industrial Development Authority of the County of Henrico, No Opt. Call A- $ 2,119,540
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 Development Authority of the County of James City, Virginia, Sewage 4/07 at 101 A+ 1,619,040
and Solid Waste Disposal Facilities Revenue Bonds, Series 1997
(Anheuser Busch Project), 6.000%, 4/01/32 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations--11.8%
1,000,000 Industrial Development Authority of Arlington County, Virginia, 7/07 at 102 Aa1 1,047,910
Headquarters Facility Revenue Bonds (The Nature Conservancy),
Series 1997A, 5.450%, 7/01/27
500,000 Medical College of Hampton Roads (Virginia), General Revenue 11/01 at 102 A 541,810
Refunding Bonds, Series 1991A, 6.875%, 11/15/16
2,725,000 Industrial Development Authority of Loudoun County, Virginia, 5/02 at 102 A1 2,931,473
University Facilities Revenue Refunding Bonds (The George
Washington University), Series of 1992, 6.250%, 5/15/12
1,250,000 Industrial Development Authority of Rockingham County, Virginia, 10/03 at 102 Baa3 1,299,888
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 357,000
370,000 6.000%, 11/01/04 No Opt. Call N/R 378,658
2,000,000 University of Virginia, General University Revenues, Series B, 6/03 at 102 AA+ 2,054,040
5.375%, 6/01/20
4,420,000 The Rector and Visitors of The University of Virginia, General 6/08 at 101 AA+ 4,438,431
Revenue Pledge Bonds, Series 1998A, 5.000%, 6/01/24
750,000 Virginia College Building Authority, Educational Facilities 1/02 at 102 AAA 821,798
Revenue Refunding Bonds (Washington and Lee University Project),
6.400%, 1/01/12
800,000 Virginia College Building Authority, Educational Facilities 5/02 at 102 A 886,824
Revenue Bonds (Randolph-Macon College Project), Series of 1992,
6.625%, 5/01/13
2,000,000 Virginia College Building Authority, Educational Facilities 10/02 at 102 BBB+ 2,160,440
Revenue Refunding Bonds (Roanoke College Project), 6.625%,
10/15/12
3,250,000 Virginia College Building Authority, Educational Facilities 4/03 at 102 A+ 3,445,260
Revenue Refunding Bonds (Hampton University Project), Series
of 1993, 5.750%, 4/01/14
Virginia College Building Authority, Educational Facilities
Revenue Bonds (The Washington and Lee University Project),
Series of 1994:
420,000 5.750%, 1/01/14 1/04 at 102 AA 450,610
1,000,000 5.800%, 1/01/24 1/04 at 102 AAA 1,102,550
1,250,000 Virginia College Building Authority, Educational Facilities 7/08 at 102 AA 1,252,113
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 2,025,432
775,000 6.750%, 10/01/19 10/04 at 102 AA 874,030
- -----------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products--4.2%
2,000,000 Industrial Development Authority of Covington - Alleghany County, 9/04 at 102 A1 2,219,140
Virginia, Pollution Control Facilities Refunding Revenue Bonds
(Westvaco Corporation Project), Series 1994, 6.650%, 9/01/18
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Forest and Paper Products (continued)
$ 3,545,000 Industrial Development Authority of the Isle of Wight County, 4/04 at 102 A1 $ 3,877,344
Virginia, 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, 5/07 at 102 A- 3,203,730
Virginia, Solid Waste Disposal Facilities Revenue Bonds
(Union Camp Corporation Project), Series 1997, 6.100%, 5/01/27
(Alternative Minimum Tax)
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care--13.6%
1,125,000 Industrial Development Authority of Albemarle County, Virginia, 10/02 at 102 A+ 1,217,160
Health 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, 10/03 at 102 A2 2,173,485
Hospital Refunding Revenue Bonds (Martha Jefferson Hospital),
Series 1993, 5.875%, 10/01/13
2,000,000 Industrial Development Authority of Fairfax County, Virginia, 8/06 at102 AA 2,194,980
Health Care Revenue Bonds (Inova Health System Project),
Series 1996A, 6.000%, 8/15/26
2,000,000 Industrial Development Authority of the City of Fredericksburg, 6/07 at 102 AAA 2,026,620
Virginia, Hospital Facilities Revenue Refunding Bonds
(MediCorp Health System Obligated Group), Series 1996, 5.250%,
6/15/23
1,110,000 The Industrial Development Authority of the County of Giles, 12/05 at 102 A+ 1,169,651
Virginia, Exempt Facility Revenue Bonds, Hoechst Celanese
Project, Series 1995, 5.950%, 12/01/25 (Alternative
Minimum Tax)
500,000 Industrial Development Authority of the City of Hampton, Virginia, 11/04 at 102 Aa2 562,325
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 2,385,540
Hospital Revenue Bonds, Series 1995 (Memorial Regional Medical
Center Project at Hanover Medical Park) (Guaranteed by Bon Secours
Health System Obligated Group), 6.375%, 8/15/18
2,000,000 Industrial Development Authority of the County of Hanover (Virginia), 8/05 at 102 AAA 2,089,120
Hospital Revenue Bonds, Series 1995 (Bon Secours Health System
Obligated Group Projects), 5.500%, 8/15/25
1,250,000 Industrial Development Authority of Henry County, Virginia, Hospital 1/07 at 101 A+ 1,352,325
Revenue Bonds (Memorial Hospital of Martinsville and Henry County),
Series 1997, 6.000%, 1/01/27
1,700,000 Industrial Development Authority of Loudoun County, Virginia, 6/05 at 102 AAA 1,818,150
Hospital 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+ 1,002,880
3,000,000 5.200%, 1/01/28 1/08 at 101 A+ 3,003,630
3,320,000 Medical College of Virginia Hospitals Authority, General Revenue 7/08 at 102 AAA 3,325,611
Bonds, Series 1998, 5.125%, 7/01/23
1,000,000 Industrial Development Authority of the City of Norfolk (Virginia), 8/07 at 102 AAA 1,012,590
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 7/02 at 102 Aa2 2,280,949
and Refunding Bonds (Riverside Health System Project), Series
1992-A, 6.625%, 7/01/18
2,260,000 City of Virginia Beach Development Authority (Virginia), Hospital 11/01 at 102 AA 2,443,037
Revenue Bonds (Sentara Bayside Hospital), Series 1991, 6.300%,
11/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily--3.8%
1,200,000 Fairfax County (Virginia), Redevelopment and Housing Authority, 9/06 at 102 AAA 1,278,852
FHA-Insured Mortgage Housing for the Elderly Revenue Refunding
Bonds, Series 1996 (Little River Glen), 6.100%, 9/01/26
Harrisonburg (Virginia), Redevelopment and Housing Authority,
Multi-Family Housing Revenue Refunding Bonds (United Dominion
Projects), Series 1992:
1,415,000 7.000%, 12/01/08 12/02 at 102 BBB 1,508,899
2,040,000 7.100%, 12/01/15 12/02 at 102 BBB 2,172,008
2,000,000 Newport News, Virginia, Redevelopment and Housing Authority, Mortgage 1/02 at 102 AAA 2,101,880
Revenue Refunding, West Apartments, Series A, 6.550%, 7/01/24
480,000 Suffolk Redevelopment and Housing Authority, Multifamily Housing Revenue 7/02 at 104 Baa2 533,971
Refunding Bonds, Series 1994 (Chase Heritage at Dulles Project),
7.000%, 7/01/24
700,000 Virginia State Housing Development Authority, Multi-Family, Series F, 5/01 at 102 AA+ 743,750
7.000%, 5/01/04
</TABLE>
19
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Virginia Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family -- 8.2%
$ 250,000 Puerto Rico Housing Finance Corporation, Single Family 9/00 at 102 AAA $ 264,430
Mortgage Revenue, 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+ 3,137,250
1,000,000 7.100%, 1/01/22 1/02 at 102 AA+ 1,039,380
3,170,000 7.150%, 1/01/33 1/02 at 102 AA+ 3,337,122
1,000,000 Virginia State Housing Development Authority, Commonwealth 7/05 at 102 AA+ 1,069,630
Mortgage, Series C1, 6.300%, 7/01/25 (Alternative Minimum Tax)
2,000,000 Virginia State Housing Development Authority, Commonwealth 7/05 at 102 AA+ 2,129,560
Mortgage, Series C3, 6.125%, 7/01/22 (Alternative Minimum Tax)
7,000,000 Virginia State Housing Development Authority, Commonwealth 1/08 at 102 AA+ 7,078,680
Mortgage Bonds, 1996 Series G, Subseries G-1, 5.300%, 1/01/22
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial/Other -- 0.2%
400,000 Richmond, Virginia, Industrial Development Authority, Medical 2/00 at 100 AA- 409,176
Facility, Richmond Metropolitan Blood Service, 7.125%, 2/01/11
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term Care -- 1.9%
715,000 Industrial Development Authority of Albemarle County, 1/01 at 103 N/R 780,866
Virginia, Mortgage Revenue Refunding Bonds, Series 1986A
(H.C.M.F. XV -- FHA Insured Project), 8.900%, 7/15/26
1,000,000 Health Center Commission for the County of Chesterfield 12/06 at 102 AAA 1,081,710
(Virginia), 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 12/06 at 103 AAA 534,490
Housing Revenue Refunding Bonds (FHA Insured Mortgage Loan --
Paul Spring Retirement Center), Series 1996 A, 6.000%, 12/15/28
500,000 Front Royal and Warren County, Virginia, Industrial Development 1/06 at 100 A 542,230
Authority, Revenue Bonds (Heritage Hall XIII), Series 1986, 9.450%,
7/15/24
1,190,000 Industrial Development Authority of the County of Henrico, 7/03 at 102 AAA 1,266,517
Virginia, Nursing Facility Insured -- Mortgage Refunding Revenue
Bonds (Cambridge Manor Nursing Home), Series 1993, 5.875%, 7/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 5.7%
1,500,000 City of Portsmouth, Virginia, General Obligation Bonds, Public 8/03 at 102 AA- 1,554,450
Utility Refunding Bonds, Series 1993, 5.500%, 8/01/19
500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1996 7/06 at 101 1/2 A 521,055
(General Obligation Bonds), 5.400%, 7/01/25
1,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 7/07 at 101 1/2 A 1,555,230
5.375%, 7/01/25
2,575,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1994 7/04 at 102 AAA 2,946,032
(General Obligation Bonds), 6.450%, 7/01/17
2,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1994 7/04 at 101 1/2 AAA 2,866,475
(General Obligation Bonds), 6.500%, 7/01/23
3,005,000 City of Richmond, Virginia, General Obligation Public Improvement 7/03 at 102 AA 3,118,679
Bonds, Series 1993B, 5.500%, 7/15/23
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 13.3%
2,300,000 Big Stone Gap, Virginia, Redevelopment and Housing Authority, 9/05 at 102 AA- 2,416,288
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 3,167,970
Correctional Facility Lease Revenue Bonds, Series 1996, 5.500%, 7/01/17
1,355,000 Fairfax County Redevelopment and Housing Authority (Virginia), 6/02 at 102 N/R 1,556,326
Revenue Bonds, 1992 Issue A (FCRHA Office Building), 7.500%, 6/15/18
5,000,000 Hampton Roads (Virginia), Regional Jail Authority, Regional Jail 7/06 at 102 AAA 5,279,950
Facility Revenue Bonds, Series 1996A, 5.500%, 7/01/24
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 2,000,000 Industrial Development Authority of the County of Henrico, 8/05 at 102 AA $ 2,342,100
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 946,133
Series E, 7.200%, 10/01/10
1,500,000 Peninsula Airport Commission, Virginia, Airport Improvement, 7/01 at 102 AA 1,636,710
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 2,134,900
1,000,000 6.000%, 2/01/18 2/06 at 102 A2 1,077,170
2,500,000 Prince William County Park Authority (Virginia), Revenue 10/04 at 102 A- 2,838,400
Bonds, Series 1994, 6.875%, 10/15/16
2,250,000 Puerto Rico Highway and Transportation Authority, Highway 7/16 at 100 A 2,428,560
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 1,119,210
Series 1994 A, 6.200%, 8/01/13
Virginia State Public School Authority, Series 1995B:
1,000,000 5.750%, 8/01/15 8/05 at 102 Aa1 1,082,210
1,210,000 5.625%, 8/01/16 8/05 at 102 Aa1 1,290,187
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation--8.8%
2,250,000 Capital Region Airport Commission, Richmond (Virginia), 7/05 at 102 AAA 2,393,100
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 792,180
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:
210,000 6.625%, 1/01/00 (Alternative Minimum Tax) No Opt. Call N/R 213,614
3,000,000 7.000%, 1/01/09 (Alternative Minimum Tax) 1/01 at 102 N/R 3,132,660
600,000 6.500%, 1/01/09 (Alternative Minimum Tax) 1/06 at 102 N/R 635,952
1,000,000 Metropolitan Washington D.C. Airports Authority,Virginia 10/04 at 102 AAA 1,053,690
Airport System Revenue Bonds, Series 1994A, 5.750%,
10/01/20 (Alternative Minimum Tax)
770,000 Metropolitan Washington D.C. Airports Authority, Virginia, 10/07 at 101 AA- 793,724
General Airport Revenue Bonds, Series B, 5.500%,
10/01/23 (Alternative Minimum Tax)
Pocahontas Parkway Association, Route 895 Connector Toll
Road Revenue Bonds Senior Current Interest Series 1998A:
5,000,000 0.000%, 8/15/16 8/08 at 64 13/16 BBB- 1,837,500
5,500,000 5.500%, 8/15/28 8/08 at 102 BBB- 5,506,545
1,900,000 Puerto Rico Ports Authority, Special Facilities Revenue 6/06 at 102 BBB- 2,047,364
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 1,037,750
Series 1997, 5.500%, 7/01/24 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed--9.0%
1,000,000 Town of Abingdon, Virginia, General Obligation Capital 8/02 at 102 A2*** 1,104,710
Improvement Bonds, Series 1992, 6.250%, 8/01/12
(Pre-refunded to 8/01/02)
750,000 Chesapeake Bay Bridge and Tunnel District, General 7/01 at 102 AAA 814,508
Resolution Revenue Bonds, Refunding Series 1991,
6.375%, 7/01/22 (Pre-refunded to 7/01/01)
1,000,000 Industrial Development Authority of Covington--Alleghany 4/02 at 102 N/R*** 1,105,140
County, Virginia, Hospital Facility Revenue Bonds
(Alleghany Regional Hospital), Series 1992, 6.625%, 4/01/12
(Pre-refunded to 4/01/02)
730,000 City of Danville, Virginia, General Improvement Bonds of 5/02 at 102 A3*** 807,314
Fiscal Year 1991-1992, 6.500%, 5/01/12
(Pre-refunded to 5/01/02)
500,000 Fairfax County Redevelopment and Housing Authority 11/99 at 102 N/R*** 528,740
(Virginia), Revenue Bonds (Vinson Pavilion Project),
1989 Series A, 7.500%, 11/01/19 (Pre-refunded to 11/01/99)
</TABLE>
21
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Virginia Municipal Bond Fund (continued)
November 30, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 150,000 Fairfax County (Virginia), Water Authority, Water Refunding Revenue 4/07 at 102 AAA $ 172,139
Bonds, Series 1992, 6.000%, 4/01/22 (Pre-refunded to 4/01/07)
250,000 Martinsville, Virginia, Industrial Development Authority, Hospital 1/01 at 100 A2*** 266,483
Facility Revenue, 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+*** 2,355,900
Refunding, Mary Immaculate Project, 7.000%, 8/01/17 (Pre-refunded
to 8/01/06)
5,250,000 Industrial Development Authority of the County of Prince William 10/05 at 102 Aaa 6,227,708
(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 1,058,600
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 3/05 at 102 AAA 1,751,160
Revenue Bonds (1994 Old Manchester Project), Series 1994, 6.800%,
3/01/15 (Pre-refunded to 3/01/05)
2,400,000 Virginia College Building Authority, Educational Facilities Revenue 7/02 at 102 BBB-*** 2,695,752
Bonds, (Marymount University Project), 7.000%, 7/01/12 (Pre-refunded
to 7/01/02)
580,000 Virginia College Building Authority, Educational Facilities Revenue 1/04 at 102 AAA 638,157
Bonds (The Washington and Lee University Project), Series of 1994,
5.750%, 1/01/14 (Pre-refunded to 1/01/04)
410,000 Virginia State Resource Authority, Water and Sewer System Pooled 11/99 at 102 AA*** 432,673
Revenue Bonds, Series 1986A, 7.650%, 11/01/16 (Pre-refunded to
11/01/99)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities -- 5.8%
2,110,000 Halifax County Industrial Development Authority (Old Dominion Electric 12/02 at 102 A+ 2,278,378
Cooperative), 6.500%, 12/01/12 (Alternative Minimum Tax)
2,500,000 Mecklenburg County, Virginia, Industrial Development Authority, Exempt 5/01 at 102 BBB+ 2,611,275
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+ 1,987,900
Series 1998A, 5.125%, 1/15/28
1,000,000 Industrial Development Authority of Russell County, Virginia, Pollution 11/00 at 102 Baa1 1,073,890
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 7/03 at 102 A- 1,575,075
Bonds, 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 1,112,650
Bonds, Series B, 6.750%, 11/01/12
1,960,000 Virginia State Resource Authority, Solid Waste Disposal System Revenue 4/05 at 102 AA 2,059,392
Bonds (County of Prince William - Refunding), 1995 Series A, 5.500%,
4/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer -- 10.4%
1,000,000 Blacksburg - Virginia Polytechnic Institute Sanitation Authority 11/02 at 102 A 1,076,930
(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 950,428
1,625,000 5.750%, 4/01/29 4/02 at 100 AA 1,692,015
1,000,000 Frederick -- Winchester Service Authority (Virginia), Regional Sewer 10/03 at 102 AAA 1,066,010
System Refunding Revenue Bonds, Series 1993, 5.750%, 10/01/15
2,500,000 Henrico County, Virginia, Water and Sewer System Refunding Revenue 5/02 at 100 Aa2 2,651,600
Bonds, Series 1992, 6.250%, 5/01/13
4,250,000 Leesburg, Virginia, Utility System Revenue Refunding, 5.125%, 7/01/22 7/07 at 102 AAA 4,256,673
1,000,000 Loudoun County Sanitation Authority (Virginia), Water and Sewer System 1/03 at 102 AAA 1,097,630
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 1,001,520
Revenue Bonds, Refunding Series 1996, 5.125%, 1/01/26
1,500,000 Prince William County Service Authority (Virginia), Water and Sewer 7/08 at 101 AAA 1,447,185
System Refunding Revenue Bonds, Series 1997, 4.750%, 7/01/29
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer (continued)
$ 4,000,000 Upper Occoquan Sewage Authority (Virginia), Regional Sewerage 1/04 at 102 AAA $ 3,965,080
System Revenue Refunding Bonds, Series of 1993, 5.000%, 7/01/21
1,000,000 Virginia Resources Authority, Sewer System Revenue Bonds, 10/05 at 102 AA 1,080,270
1995 Series A (Hopewell Regional Wastewater Treatment Facility
Project), 6.000%, 10/01/25 (Alternative Minimum Tax)
1,000,000 Virginia Resources Authority, Water and Sewer System 10/05 at 102 AA 1,108,240
Revenue Bonds, 1995 Series A (Sussex County Project), 5.600%,
10/01/25
1,500,000 Virginia Resources Authority, Water System Refunding Revenue 4/02 at 100 AA 1,594,436
Bonds, 1992 Series A, 6.125%, 4/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
$206,910,000 Total Investments -- (cost $199,575,858) -- 98.4% 217,143,190
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.6% 3,576,474
--------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $220,719,664
====================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
23
<PAGE>
Statement of Net Assets (Unaudited)
November 30, 1998
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $76,061,488 $146,244,710 $217,143,190
Temporary investments in short-term municipal securities, at
amortized cost, which approximates market value (note 1) -- 3,300,000 --
Cash 854,067 1,802,111 --
Receivables:
Interest 1,443,039 2,291,299 3,844,754
Investments sold -- -- 668,552
Shares sold 33,924 211,942 164,318
Other assets 46,469 110,679 127,088
- --------------------------------------------------------------------------------------------------------------------------
Total assets 78,438,987 153,960,741 221,947,902
- --------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- -- 477,049
Payables:
Investments purchased 5,953,589 5,928,153 --
Shares redeemed 16,163 66,871 177,238
Accrued expenses:
Management fees (note 6) 29,331 38,038 94,411
12b-1 distribution and service fees (notes 1 and 6) 7,363 22,066 38,370
Other 18,414 32,002 44,250
Dividends payable 172,250 282,416 396,920
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,197,110 6,369,546 1,228,238
- --------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $72,241,877 $147,591,195 $220,719,664
=========================================================================================================================
Class A Shares (note 1)
Net assets $19,699,736 $ 68,667,279 $137,741,154
Shares outstanding 1,845,297 6,409,536 12,319,051
Net asset value and redemption price per share $ 10.68 $ 10.71 $ 11.18
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 11.15 $ 11.18 $ 11.67
=========================================================================================================================
Class B Shares (note 1)
Net assets $ 3,773,074 $ 5,565,710 $ 7,280,954
Shares outstanding 353,321 518,587 651,654
Net asset value, offering and redemption price per share $ 10.68 $ 10.73 $ 11.17
=========================================================================================================================
Class C Shares (note 1)
Net assets $ 3,191,577 $ 11,415,817 $ 17,324,231
Shares outstanding 299,013 1,066,691 1,550,601
Net asset value, offering and redemption price per share $ 10.67 $ 10.70 $ 11.17
=========================================================================================================================
Class R Shares (note 1)
Net assets $45,577,490 $ 61,942,389 $ 58,373,325
Shares outstanding 4,261,170 5,784,283 5,222,759
Net asset value, offering and redemption price per share $ 10.70 $ 10.71 $ 11.18
=========================================================================================================================
</TABLE>
24
See accompanying notes to financial statements.
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended November 30, 1998
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $1,911,994 $4,089,936 $6,193,514
- ----------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 192,185 393,856 592,849
12b-1 service fees -- Class A (notes 1 and 6) 18,689 67,300 136,868
12b-1 distribution and service fees -- Class B (notes 1 and 6) 14,677 20,733 26,478
12b-1 distribution and service fees -- Class C (notes 1 and 6) 10,645 37,801 61,936
Shareholders' servicing agent fees and expenses 34,911 33,652 57,269
Custodian's fees and expenses 23,476 30,125 38,725
Trustees' fees and expenses (note 6) 1,651 1,645 1,923
Professional fees 5,923 9,177 8,361
Shareholders' reports -- printing and mailing expenses 25,872 33,071 31,072
Federal and state registration fees 5,171 29,237 19,666
Other expenses 1,250 3,851 5,509
- ----------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 334,450 660,448 980,656
Expense reimbursement (note 6) (28,370) (206,104) (49,014)
- ----------------------------------------------------------------------------------------------------------------
Net expenses 306,080 454,344 931,642
- ----------------------------------------------------------------------------------------------------------------
Net investment income 1,605,914 3,635,592 5,261,872
- ----------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain from investment transactions (notes 1 and 4) 264,989 441,224 1,005,006
Net change in unrealized appreciation or depreciation of investments 500,820 (54,600) 1,316,011
- ----------------------------------------------------------------------------------------------------------------
Net gain from investments 765,809 386,624 2,321,017
- ----------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $2,371,723 $4,022,216 $7,582,889
================================================================================================================
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Maryland
-------------------------------
Six Months Ended Year Ended
11/30/98 5/31/98
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 1,605,914 $ 3,014,635
Net realized gain from investment transactions
(notes 1 and 4) 264,989 38,164
Net change in unrealized appreciation or depreciation
of investments 500,820 1,872,963
- ---------------------------------------------------------------------------------------------
Net increase in net assets from operations 2,371,723 4,925,762
- ---------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (418,664) (744,781)
Class B (56,799) (45,159)
Class C (55,784) (91,846)
Class R (1,056,068) (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 (1,587,315) (3,034,047)
- ---------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 6,045,338 9,987,470
Net proceeds from shares issued to shareholders due
to reinvestment of distributions 1,019,700 2,015,880
- ---------------------------------------------------------------------------------------------
7,065,038 12,003,350
- ---------------------------------------------------------------------------------------------
Cost of shares redeemed (2,570,721) (5,468,111)
- ---------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 4,494,317 6,535,239
- ---------------------------------------------------------------------------------------------
Net increase in net assets 5,278,725 8,426,954
Net assets at the beginning of period 66,963,152 58,536,198
- ---------------------------------------------------------------------------------------------
Net assets at the end of period $72,241,877 $66,963,152
=============================================================================================
Balance of undistributed (over-distributed) net investment
income at end of period $ 36,656 $ 18,057
=============================================================================================
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania Virginia
------------------------------- -------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
11/30/98 5/31/98 11/30/98 5/31/98
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 3,635,592 $ 6,884,447 $ 5,261,872 $ 10,446,823
Net realized gain from investment transactions
(notes 1 and 4) 441,224 1,203,144 1,005,006 382,323
Net change in unrealized appreciation or depreciation
of investments (54,600) 4,263,803 1,316,011 7,151,615
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 4,022,216 12,351,394 7,582,889 17,980,761
- -------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,700,808) (3,203,991) (3,330,454) (6,589,893)
Class B (91,643) (49,039) (112,364) (72,610)
Class C (230,187) (346,415) (356,856) (637,996)
Class R (1,635,087) (3,306,035) (1,491,734) (3,128,186)
From accumulated net realized gains from investment
transactions:
Class A -- (123,729) -- (116,144)
Class B -- (1,903) -- (1,295)
Class C -- (14,187) -- (12,972)
Class R -- (122,743) -- (53,068)
- -------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (3,657,725) (7,168,042) (5,291,408) (10,612,164)
- -------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 12,819,691 20,611,181 14,748,750 26,410,433
Net proceeds from shares issued to shareholders due
to reinvestment of distributions 1,717,565 4,302,789 2,533,558 6,677,292
- -------------------------------------------------------------------------------------------------------------------------------
14,537,256 24,913,970 17,282,308 33,087,725
- -------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (5,868,973) (11,137,451) (11,107,711) (19,538,617)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 8,668,283 13,776,519 6,174,597 13,549,108
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 9,032,774 18,959,871 8,466,078 20,917,705
Net assets at the beginning of period 138,558,421 119,598,550 212,253,586 191,335,881
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $147,591,195 $138,558,421 $220,719,664 $212,253,586
- -------------------------------------------------------------------------------------------------------------------------------
Balance of undistributed (over-distributed) net investment
income at end of period $ (15,946) $ 6,187 $ (5,387) $ 24,149
===============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Maryland Municipal Bond Fund ("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
November 30, 1998, Maryland and Pennsylvania had outstanding when-issued
purchase commitments of $5,953,589 and $5,928,153, respectively. There were no
such outstanding purchase commitments in Virginia.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
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. Net
realized capital gain and market discount distributions are subject to federal
taxation.
28
<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 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the six months ended November 30, 1998.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
<TABLE>
<CAPTION>
2. Fund Shares
Transactions in Fund shares were as follows:
Maryland
---------------------------------------------------
Six Months Ended 11/30/98 Year Ended 5/31/98
---------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 250,916 $ 2,654,703 464,364 $ 4,845,395
Class B 131,470 1,396,381 213,521 2,237,985
Class C 55,414 588,420 68,184 714,237
Class R 132,920 1,405,834 209,535 2,189,853
Shares issued to shareholders due to reinvestment of distributions:
Class A 28,168 298,956 53,642 561,120
Class B 2,187 23,214 1,687 17,707
Class C 3,822 40,556 6,886 71,952
Class R 61,774 656,974 130,430 1,365,101
- -----------------------------------------------------------------------------------------------------------------------------
666,671 7,065,038 1,148,249 12,003,350
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (83,902) (891,647) (134,447) (1,409,630)
Class B (1,218) (12,895) (8,959) (93,717)
Class C (7,062) (74,483) (33,614) (349,287)
Class R (149,950) (1,591,696) (345,224) (3,615,477)
- -----------------------------------------------------------------------------------------------------------------------------
(242,132) (2,570,721) (522,244) (5,468,111)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase 424,539 $ 4,494,317 626,005 $ 6,535,239
=============================================================================================================================
</TABLE>
29
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
<TABLE>
<CAPTION>
Pennsylvania
------------------------------------------------------
Six Months Ended 11/30/98 Year Ended 5/31/98
------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 458,198 $ 4,903,662 1,036,447 $ 10,930,439
Class B 294,137 3,151,250 223,667 2,375,027
Class C 242,015 2,591,154 290,257 3,081,110
Class R 203,541 2,173,625 401,273 4,224,605
Shares issued to shareholders due to reinvestment of distributions:
Class A 56,117 601,167 172,750 1,815,747
Class B 2,594 27,845 2,572 27,340
Class C 6,732 71,970 25,872 271,646
Class R 95,040 1,016,583 207,616 2,188,056
- -----------------------------------------------------------------------------------------------------------------------------
1,358,374 14,537,256 2,360,454 24,913,970
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (265,544) (2,839,480) (477,420) (5,039,815)
Class B (24,731) (265,512) (1,898) (20,305)
Class C (16,818) (179,865) (98,010) (1,035,568)
Class R (241,931) (2,584,116) (477,624) (5,041,763)
- -----------------------------------------------------------------------------------------------------------------------------
(549,024) (5,868,973) (1,054,952) (11,137,451)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase 809,350 $ 8,668,283 1,305,502 $ 13,776,519
=============================================================================================================================
Virginia
------------------------------------------------------
Six Months Ended 11/30/98 Year Ended 5/31/98
------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
Shares sold:
Class A 745,932 $ 8,291,748 1,437,801 $ 15,756,900
Class B 301,429 3,349,206 326,829 3,585,765
Class C 179,317 1,991,395 363,753 3,972,294
Class R 100,551 1,116,401 282,345 3,095,474
Shares issued to shareholders due to reinvestment of distributions:
Class A 128,899 1,434,058 370,069 4,035,466
Class B 6,777 75,327 3,820 41,944
Class C 11,371 126,360 59,523 649,924
Class R 80,700 897,813 178,519 1,949,958
- -----------------------------------------------------------------------------------------------------------------------------
1,554,976 17,282,308 3,022,659 33,087,725
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (665,503) (7,397,428) (1,169,518) (12,775,202)
Class B (8,747) (97,428) (14,233) (156,135)
Class C (56,451) (625,221) (105,398) (1,154,489)
Class R (268,918) (2,987,634) (499,196) (5,452,791)
- -----------------------------------------------------------------------------------------------------------------------------
(999,619) (11,107,711) (1,788,345) (19,538,617)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase 555,357 $ 6,174,597 1,234,314 $ 13,549,108
=============================================================================================================================
</TABLE>
30
<PAGE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on December 21, 1998, to shareholders of record on
December 9, 1998, as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $.0400 $.0450 $.0450
Class B .0330 .0385 .0380
Class C .0350 .0405 .0400
Class R .0415 .0470 .0470
- --------------------------------------------------------------------------------
</TABLE>
The following Funds also declared taxable distributions, which include capital
gains and/or market discount, which were paid on December 7, 1998, to
shareholders of record on December 2, 1998, as follows:
<TABLE>
<CAPTION>
Pennsylvania Virginia
- --------------------------------------------------------------------------------
<S> <C> <C>
Taxable distributions per share: $.0593 $.0298
- --------------------------------------------------------------------------------
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the six months ended November
30, 1998, were as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------
Purchases:
<S> <C> <C> <C>
Investments in municipal securities $23,008,374 $24,895,072 $32,776,959
Temporary municipal investments 1,400,000 19,200,000 6,600,000
Sales:
Investments in municipal securities 13,046,884 16,351,823 25,543,190
Temporary municipal investments 1,400,000 16,900,000 7,600,000
- --------------------------------------------------------------------------------
</TABLE>
At November 30, 1998, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for each Fund.
At May 31, 1998, the Funds' last Fiscal year end, the following Funds had unused
capital loss carryforwards available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, the carryforwards
will expire as follows:
<TABLE>
<CAPTION>
Maryland Virginia
- --------------------------------------------------------------------------------
Expiration Year:
<S> <C> <C>
2002 $ 96,343 $ 70,165
2003 377,963 --
2004 -- 152,699
2005 121,857 --
- --------------------------------------------------------------------------------
Total $596,163 $222,864
- --------------------------------------------------------------------------------
</TABLE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at November 30, 1998, were as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------
Gross unrealized:
<S> <C> <C> <C>
appreciation $4,549,050 $9,954,216 $17,567,332
depreciation -- (450,078) --
- --------------------------------------------------------------------------------
Net unrealized appreciation $4,549,050 $9,504,138 $17,567,332
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
- -------------------------------------------------------------------------------
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1998, the Distributor collected sales
charges on purchases of Class A Shares of which the majority were paid out as
concessions to authorized dealers. The Distributor also received 12b-1 service
fees on Class A Shares, substantially all of which were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments.
During the six months ended November 30, 1998, the Distributor compensated
authorized dealers directly with approximately $62,900, $144,200 and $152,900 in
commission advances at the time of purchase for Maryland, Pennsylvania and
Virginia, respectively. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the six months
ended November 30, 1998, the distributor retained approximately $17,800, $36,500
and $45,100 in such 12b-1 fees for Maryland, Pennsylvania and Virginia,
respectively. The remaining 12b-1 fees charged to the Funds were paid to
compensate authorized dealers for providing services to shareholders relating to
their investments. The Distributor retained approximately $1,000, $9,000 and
$5,500 of CDSC on share redemptions for Maryland, Pennsylvania and Virginia,
respectively, during the six months ended November 30, 1998.
7. Composition of Net Assets
At November 30, 1998, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $67,987,345 $136,869,917 $202,386,094
Balance of undistributed (over-distributed) net investment income 36,656 (15,946) (5,387)
Accumulated net realized gain (loss) from investment transactions (331,174) 1,233,086 771,625
Net unrealized appreciation of investments 4,549,050 9,504,138 17,567,332
- -----------------------------------------------------------------------------------------------------------------
Net assets $72,241,877 $147,591,195 $220,719,664
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period is as follows:
Class (Inception Date)
<TABLE>
<CAPTION>
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 Gain Total Value Return (b)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1999 (g) $10.56 $.24 $ .12 $ .36 $(.24) $ -- $(.24) $10.68 3.44%
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 (g) 10.56 .20 .12 .32 (.20) -- (.20) 10.68 3.05
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 (g) 10.56 .21 .11 .32 (.21) -- (.21) 10.67 3.05
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 (g) 10.58 .25 .12 .37 (.25) -- (.25) 10.70 3.52
1998 10.26 .51 .32 .83 (.51) -- (.51) 10.58 8.23
1997 (c) 10.26 .17 -- .17 (.17) -- (.17) 10.26 1.68
1997 (d) 10.44 .47 (.14) .33 (.51) -- (.51) 10.26 3.29
1996 (d) 9.61 .51 .84 1.35 (.52) -- (.52) 10.44 14.33
1995 (d) 10.62 .51 (1.01) (.50) (.51) -- (.51) 9.61 (4.58)
1994 (d) 9.91 .51 .72 1.23 (.50) (.02) (.52) 10.62 12.71
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income
to Average to Average to Average to Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Before After After Portfolio
Year Ended Asset Reimburse- Reimburse- Reimburse- Reimburse- Turnover
May 31, (000) ment ment ment(a) ment(a) Rate
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1999 (g) $19,700 1.03%* 4.44%* .95%* 4.52%* 19%
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 (g) 3,773 1.78* 3.69* 1.70* 3.77* 19
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 (g) 3,192 1.58* 3.89* 1.50* 3.97* 19
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 (g) 45,577 .83* 4.64* .75* 4.72* 19
1998 44,599 .80 4.76 .74 4.82 7
1997 (c) 43,306 .82* 5.03* .75* 5.10* 3
1997 (d) 43,738 .87 4.94 .75 5.06 4
1996 (d) 47,389 1.04 4.78 .75 5.07 17
1995 (d) 42,741 .89 5.14 .75 5.28 35
1994 (d) 47,822 .86 4.74 .75 4.85 4
==============================================================================================
</TABLE>
* Annualized.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(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.
(g) For the six months ended November 30, 1998.
33
<PAGE>
Financial Highlights (Unaudited)(continued)
Selected data for a share outstanding throughout each period is as follows:
Class (Inception Date)
<TABLE>
<CAPTION>
Investment Operations Less Distributions
------------------------------ -------------------------
PENNSYLVANIA** 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 Gain Total Value Return (b)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/86)
1999 (d) $10.68 $.27 $ .03 $ .30 $(.27) $ -- $(.27) $10.71 2.85%
1998 10.25 .56 .45 1.01 (.56) (.02) (.58) 10.68 10.05
1997 10.00 .57 .25 .82 (.57) -- (.57) 10.25 8.37
1996 10.21 .59 (.20) .39 (.60) -- (.60) 10.00 3.83
1995 10.06 .60 .16 .76 (.61) -- (.61) 10.21 7.90
1994 10.38 .61 (.32) .29 (.61) -- (.61) 10.06 2.70
Class B (2/97)
1999 (d) 10.70 .23 .03 .26 (.23) -- (.23) 10.73 2.47
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 (d) 10.68 .24 .02 .26 (.24) -- (.24) 10.70 2.50
1998 10.25 .50 .45 .95 (.50) (.02) (.52) 10.68 9.50
1997 9.99 .51 .26 .77 (.51) -- (.51) 10.25 7.88
1996 10.21 .53 (.21) .32 (.54) -- (.54) 9.99 3.16
1995 10.06 .54 .16 .70 (.55) -- (.55) 10.21 7.31
1994 (c) 10.71 .16 (.64) (.48) (.17) -- (.17) 10.06 (13.46)*
Class R (2/97)
1999 (d) 10.68 .28 .03 .31 (.28) -- (.28) 10.71 2.96
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 Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income
to Average to Average to Average to Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Before After After 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 (10/86)
1999 (d) $68,667 .94%* 4.76%* .66%* 5.04%* 12%
1998 65,826 .95 4.94 .61 5.28 20
1997 55,667 1.09 5.22 .70 5.61 46
1996 44,392 1.13 5.42 .79 5.76 65
1995 42,600 1.29 5.68 .89 6.08 50
1994 42,226 1.17 5.54 .91 5.80 21
Class B (2/97)
1999 (d) 5,566 1.70* 4.00* 1.42* 4.28* 12
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 (d) 11,416 1.49* 4.21* 1.21* 4.49* 12
1998 8,912 1.50 4.39 1.16 4.73 20
1997 6,320 1.63 4.68 1.25 5.06 46
1996 4,442 1.34 5.19 1.68 4.85 65
1995 3,118 1.39 5.50 1.84 5.05 50
1994 (c) 1,697 1.41* 4.91* 1.68* 4.64* 21
Class R (2/97)
1999 (d) 61,942 .74* 4.96* .46* 5.24* 12
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 waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized except where noted.
(c) From commencement of class operations as noted.
(d) For the six months ended November 30, 1998.
34
<PAGE>
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 Gain Total Value Return (b)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (3/86)
1999 (d) $11.06 $.27 $ .12 $ .39 $(.27) $ -- $(.27) $11.18 3.57%
1998 10.66 .56 .41 .97 (.56) (.01) (.57) 11.06 9.30
1997 10.40 .58 .25 .83 (.57) -- (.57) 10.66 8.20
1996 10.56 .57 (.15) .42 (.58) -- (.58) 10.40 4.03
1995 10.36 .59 .20 .79 (.59) -- (.59) 10.56 7.99
1994 10.82 .60 (.31) .29 (.60) (.15) (.75) 10.36 2.62
Class B (2/97)
1999 (d) 11.06 .23 .11 .34 (.23) -- (.23) 11.17 3.11
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 (d) 11.06 .24 .11 .35 (.24) -- (.24) 11.17 3.20
1998 10.65 .50 .42 .92 (.50) (.01) (.51) 11.06 8.81
1997 10.39 .52 .26 .78 (.52) -- (.52) 10.65 7.61
1996 10.56 .51 (.16) .35 (.52) -- (.52) 10.39 3.37
1995 10.36 .53 .20 .73 (.53) -- (.53) 10.56 7.40
1994 (c) 11.24 .34 (.78) (.44) (.34) (.10) (.44) 10.36 (7.13)*
Class R (2/97)
1999 (d) 11.06 .28 .12 .40 (.28) -- (.28) 11.18 3.68
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 Average to Average to Average to Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Before After After Portfolio
Year Ended Asset Reimburse- Reimburse- Reimburse- Reimburse- Turnover
May 31, (000) ment ment ment(a) ment(a) Rate
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (3/86)
1999 (d) $137,741 .89%* 4.80%* .85%* 4.84%* 12%
1998 133,966 .90 4.99 .74 5.15 3
1997 122,252 1.00 5.19 .74 5.45 23
1996 117,677 1.06 5.18 .83 5.41 17
1995 112,643 1.10 5.50 .79 5.81 50
1994 107,502 1.06 5.11 .64 5.53 17
Class B (2/97)
1999 (d) 7,281 1.64* 4.04* 1.60* 4.08* 12
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 (d) 17,324 1.44* 4.25* 1.40* 4.29* 12
1998 15,660 1.44 4.44 1.29 4.59 3
1997 11,700 1.55 4.63 1.29 4.89 23
1996 10,978 1.60 4.62 1.38 4.84 17
1995 6,537 1.65 4.93 1.34 5.24 50
1994 (c) 4,759 1.79* 4.20* 1.14* 4.85* 17
Class R (2/97)
1999 (d) 58,373 .69* 5.00* .65* 5.04* 12
1998 58,734 .70 5.19 .54 5.35 3
1997 (c) 57,002 .71* 5.50* .52* 5.69* 23
==============================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Virginia.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized except where noted.
(c) From commencement of class operations as noted.
(d) For the six months ended November 30, 1998.
35
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
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
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred/R/
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
36
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
37
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR., APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time. We emphasize quality securities carefully chosen through
in-depth research, and we follow those securities closely over time to ensure
that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
1898
NUVEEN
1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime./SM/
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com VSA-1-11-98
