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N U V E E N
Investments
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Municipal Bond
Funds
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ANNUAL REPORT MAY 31, 2000
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Dependable, tax-free income to help you keep more of what you earn.
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[PHOTOS APPEARS HERE]
INVEST WELL
LOOK AHEAD
LEAVE YOUR MARK(SM)
Arizona Municipal Bond Fund
Colorado Municipal Bond Fund
New Mexico Municipal Bond Fund
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Contents
1 Dear Shareholder
3 Nuveen Flagship Arizona Municipal Bond Fund
7 Nuveen Flagship Colorado Municipal Bond Fund
11 Nuveen Flagship New Mexico Municipal Bond Fund
15 Portfolio of Investments
26 Statement of Net Assets
27 Statement of Operations
28 Statement of Changes in Net Assets
29 Notes to Financial Statements
34 Financial Highlights
37 Report of Independent Public Accountants
41 Fund Information
Must be preceded by or accompanied by a prospectus.
<PAGE>
DEAR
Shareholder,
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
As personal wealth continues to grow at an ever-increasing rate, people are
realizing the power of their investments to do good and to make a difference in
their families and communities now and for generations to come.
Setting financial goals is an important first step toward building wealth. At
Nuveen Investments, we believe those goals should not be considered ends in
themselves. Rather, you and your financial advisor's focus should be on
realizing your life's dreams -- the things that matter most to you and how you
can make them happen -- or make them better.
Through a well-crafted financial plan, you have the chance to shape future
generations -- to broaden your sphere of influence -- to leave your legacy.
As you develop that plan, you'll want to consider the different ways your
success can benefit others. You may find that you want to create a new set of
goals to achieve this. Working with your financial advisor, you have the ability
to make those dreams a reality -- for yourself and future generations.
Family Wealth Management Too often, family wealth management is thought of in
one dimension -- as the stewardship of your household's financial resources. At
Nuveen Investments, we think of family wealth management as the map to help you
reach your financial, and your life's, destinations. It's a multi-faceted
strategy to plan for not just your needs, but the needs of future generations.
We are dedicated to helping you and your financial advisor develop a family
wealth management strategy unique to you and your goals and values.
A Trusted Resource As you face some of the most important, lasting decisions
you and your family will make, you'll want to draw upon the support, counsel and
objectivity of a trusted advisor. That's because your financial advisor has the
expertise and access to other professionals who can help you make informed
choices -- choices that affect not only your loved ones today, but those your
legacy will touch in the future.
Your financial advisor can provide sound financial insight, an integrated
approach to your investments and can serve as a knowledgeable friend with your
family's best interests at heart.
ANNUAL REPORT page 1
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In addition, we believe the potential presence of inflation and price
swings in the markets reinforce the importance of working with an advisor,
staying focused on the long term and adhering to your financial plan. With a
sound plan in place, you may be better positioned to weather the markets' ups
and downs.
In fact, you may be reading this report at the suggestion of your financial
advisor. We've prepared the following interview to let you know what the
investment and research management teams have done during your fund's fiscal
period.
For more information on any Nuveen investment, including a prospectus,
contact your financial advisor. Or call Nuveen at (800) 621-7227 or visit our
Internet site at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. We are committed to maintaining that reputation and working with
financial advisors to provide investment solutions that help individuals achieve
their dreams of a lifetime. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 17, 2000
ANNUAL REPORT page 2
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NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
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Nuveen Flagship Arizona Municipal Bond Fund features portfolio management by
Nuveen Investment Management, a team of portfolio managers and research analysts
committed to a disciplined, research-oriented investment strategy. To help you
understand the fund's performance for the fiscal year ended May 31, 2000, we
spoke with Portfolio Manager Mike Davern.
Q| Municipal bonds had a very challenging year as the Federal Reserve (the Fed)
-
implemented a series of interest rate hikes, which caused bond prices in general
to drop. Meanwhile, the equity markets have taken investors on a roller coaster
ride. What did investors seem to make of this environment during the fund's
fiscal year?
MIKE| Throughout 1999, there were several factors that diverted the attention of
----
investors away from municipal bonds. First, of course, the Fed began raising
interest rates in June 1999, backing that move up with five more rate hikes over
the course of the fiscal year. Since bond prices move inversely to interest
rates, the bear market in bonds went into full swing.
Second, at the end of 1999 the government announced an unprecedented
buyback of U.S. Treasury bonds that would begin in 2000. This caused an unusual
dislocation of demand as investors clamored for Treasury bonds and consequently
caused an unexpected rally, at the expense of other types of bonds.
Third, the stock market rally, mainly based on a few technology-related
names, obviously commanded much attention and diverted investor dollars.
However, demand for municipal bonds did pick up a bit once the most extreme
volatility in the stock market set in at the beginning of the year. We believe
investors reassessed their portfolios and recognized the potential stability of
municipal bonds, not to mention the extremely attractive yields, as the period
progressed.
Q| For the fiscal year ended May 31, 2000, the fund recorded a total return of
-
-3.75%, and its Lipper peer group average reported a total return of -2.96%. But
the year-to-date 2000 figures are positive: The fund returned 1.51% and the
Lipper peer group returned 1.58% on average.* Compare that to the S&P 500 Index,
which Bloomberg reports was down 2.82% for the period. Does this mean the bear
market in bonds could be over?
MIKE| We don't try to make market calls like that. What we do focus on is trying
----
to maintain an attractive, stable dividend and taking opportunities to position
the fund for the next market cycle, whenever that may happen. Obviously, bear
markets have a negative impact on prices. But a bear market in bonds is actually
very different from a bear market in stocks.
* The Lipper Peer Group returns represent the average annualized total return of
the 40 funds in the Lipper Arizona Municipal Debt Funds category for the year-
to-date period ended May 31, 2000, and 39 for the one-year period. The returns
assume reinvestment of dividends and do not reflect any applicable sales
charges.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the fiscal year ended May 31, 2000. The views expressed reflect those of
the portfolio management team and are subject to change at any time, based on
market and other conditions.
Returns reflect a voluntary expense limitation by the fund's investment advisor
which may be modified or discontinued at any time without notice.
ANNUAL REPORT page 3
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When you hold a stock, you basically just want it to go up in price. You
hold a bond for more than just price -- you also want attractive, stable income,
or yields, which move in the opposite direction as bond prices.
The other major difference is in price movements. A bond's price, no
matter how much it may drop, eventually must go back to $100, or "par," since
bonds are issued at par and mature at par. On the flip side, a stock could
conceivably drop from $100 per share to one cent, and never recover. (This
discussion applies to a fund's underlying securities -- stocks or bonds; the
share price of any mutual fund will fluctuate.)
In the midst of a bond bear market, all other factors being equal, it
doesn't make sense to sell simply because prices have fallen. And it's better to
buy a bond now at $86 than to wait for a bull market to come and pay $101 or
$102, knowing the price has to go back to $100. We feel there is upside
potential in the fund, since the average bond price as of the end of the fiscal
year was in the mid $80s.
"Arizona is a very pro-business state, with a high-tech presence, strong
manufacturing and a high quality of life."
Q| What does the fund's tax-exempt status mean for the numbers?
-
MIKE| The fund's tax-exempt status means the equivalent returns for a similar
----
taxable investment for taxpayers in the combined 34.5% federal and state income
tax bracket would be 2.62% for the year-to-date period.*
As of May 31, 2000, the SEC 30-day yield of the fund was 3.85%. For
investors in the combined 34.5% tax bracket, that is equivalent to a yield of
5.88% on a taxable investment.**
Q| How did the fund perform against the Lehman Brothers Municipal Bond Index?
-
MIKE| The fund, as we would expect, underperformed Lehman's national index.***
----
Lehman's 12-month average total return was -0.86% for the period ended May 31,
2000. We feel Lipper's Arizona-specific benchmark gives investors a truer
comparative picture. However, we give shareholders both so they can compare
their Arizona fund to other Arizona funds as well as to a national benchmark.
Q| What were some of those positioning measures you mentioned?
-
MIKE| Our goal in the fund was to extend its call protection by selling a number
----
of bonds with callable dates in 2001 and 2002. The bear market was a great
opportunity to do that.
When rates are falling, many issuers retire bonds early, then reissue to
reduce debt costs. This is known as "call risk" to bondholders, because it
interrupts their expected income stream.
The presence of call risk in a bond can stop its price from increasing,
because fewer investors are interested in buying it. Since rates were high and
demand was weak over the year, bonds with good call protection could be had at
attractive prices.
A strategy we call "tax-loss selling" was a huge part of what worked well
for the fund in this market. This involves selling bonds at a loss and using
that loss to help offset any capital gains (which are taxable to shareholders)
the fund may realize. We can apply an offsetting loss now or anytime in the next
eight years.
* Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state income tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
** Taxable equivalent yield is the yield an investor would have to realize on
a fully taxable investment to equal the stated yield on a tax-exempt
investment.
*** The Lehman Brothers Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds and does not reflect any initial or ongoing
expenses.
ANNUAL REPORT page 4
<PAGE>
We also used a combination of an offensive and defensive strategy
throughout the year. On the offensive side, the fund's duration -- a measure of
the sensitivity of its net asset value (NAV) to changes in interest rates -- was
rather long, which hurt performance. But we felt it was more important to
maintain the fund's dividend-paying capabilities, and we were willing to
sacrifice NAV slightly in order to do so.
On the defensive side, the fund held 21% of its assets in U.S. guaranteed
bonds.
Q| These strategies do not seem like measures that investors could practically
-
use on their own with individual bonds. Is that true?
MIKE| Yes, that's accurate. The amount of research involved, plus the
----
transaction costs to individuals trading in a bond market that deals in very
large blocks, would make it difficult or impossible for an individual to use
these strategies.
As a large institutional investor, Nuveen has the ability to trade in large
blocks and even negotiate the terms of an entire issue of municipal bonds. Some
very attractive bond issues never even make it to the retail market. Nuveen's
research team is instrumental in not only positioning strategy, but also in
simply finding and researching bond issues. That was particularly important in
Arizona, where there weren't many attractive new issues this past year.
Q| Did the low level of new issuance of municipal bonds in Arizona present a
-
problem in finding attractive buys?
MIKE| No, thanks to Nuveen research. Although issuance declined even more than
----
the overall national average, we were still able to make purchases like the
block of Maricopa County Industrial Development Authority bonds for the
statewide project backing seven charter schools. This issue gave the fund a
substantial yield pickup over similarly structured insured bonds. Charter
schools are key in Arizona -- five percent of the school population is in
charter schools.
Q| What is your outlook for the fund for the coming months?
-
MIKE| Arizona has been the second-fastest growing state in the nation, although
----
economic growth is expected to moderate a bit. Population growth has soared at
four times the national level for several years now. That growth has stimulated
the housing market and demand for services and is expected to continue. Arizona
is a very pro-business state, with a high-tech presence, strong manufacturing
and a high quality of life.
We feel that the impact of the Fed's interest rate increases should start
emerging, since these measures usually take about 12 to 18 months to have their
intended effect on the economy. If stock market volatility continues, as we
believe it will, consumer confidence should begin to dampen and possibly
encourage more investment in fixed income securities.
Our goal for the fund in the near term is to continue to hold bonds and try
to recapture NAV.
ARIZONA
Top Five Sectors
U.S Guaranteed 21%
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Tax Obligation (Limited) 17%
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Tax Obligation (General) 14%
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Healthcare 14%
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Water and Sewer 7%
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As a percentage of total bond holdings as of May 31, 2000. Holdings are subject
to change.
ARIZONA
Bond Credit: Quality
[PIE CHART APPEARS HERE]
AAA/U.S Guaranteed.................. 55%
AA.................................. 6%
A................................... 14%
BBB................................. 20%
NR.................................. 5%
As a percentage of total bond holdings as of May 31, 2000. Holdings are subject
to change.
ANNUAL REPORT page 5
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NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND
Fund Spotlight as of May 31, 2000
Terms To Know
The following are a few terms used throughout this report.
Distribution Rate Most recent dividend per share (annualized) divided by the
appropriate price per share (e.g., net asset value for purchases to be made
without a load such as reinvestments from Nuveen Unit Trusts, or the maximum
public offering price).
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Typically the shorter the duration, the
less price and return variability you can expect in the fund's price per share
as interest rates change.
Federal Fund Rate The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of short-term interest rates.
Municipal Bond A bond issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio. This figure is computed by dividing the net
investment income per share earned during the specified one-month or 30-day
period by the maximum offering price per share on the last day of the period.
Taxable Equivalent Yield The yield an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
Taxable Equivalent Total Return The total return an investor would have to
realize on a fully taxable investment to equal the stated total return on a tax-
exempt investment.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Quick Facts
A Shares B Shares C Shares R Shares
NAV $10.24 $ 10.23 $ 10.23 $ 10.24
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Latest Monthly Dividend* $0.0430 $0.0365 $0.0385 $0.0450
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Fund Symbol FAZTX N/A N/A N/A
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CUSIP 67065L104 67065L203 67065L302 67065L401
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Inception Date 10/86 2/97 2/94 2/97
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*Paid June 1, 2000
Total Returns as of 5/31/00+
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC NAV NAV
1-Year -3.75% -7.77% -4.48% -8.12% -4.28% -3.53%
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1-Year TER* -1.26% -5.38% -2.38% -6.02% -2.07% -0.92%
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5-Year 4.25% 3.35% 3.53% 3.36% 3.69% 4.40%
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5-Year TER* 6.92% 6.00% 5.83% 5.68% 6.07% 7.15%
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10-Year 6.54% 6.08% 6.04% 6.04% 5.95% 6.62%
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10-Year TER* 9.53% 9.07% 8.78% 8.78% 8.64% 9.65%
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*Taxable Equivalent Return (based on a combined federal and state income tax
rate of 34.5%).
Total Returns as of 3/31/00+
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC NAV NAV
1-Year -2.48% -6.58% -3.12% -6.81% -3.01% -2.26%
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5-Year 5.32% 4.42% 4.62% 4.45% 4.77% 5.46%
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10-Year 6.87% 6.41% 6.37% 6.37% 6.29% 6.94%
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+ 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. Class C shares have a 1%
CDSC for redemptions within one year which is not reflected in the one-year
total return.
Tax-Free Yields as of 5/31/00
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC
Distribution Rate* 5.04% 4.83% 4.28% 4.52% 5.27%
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SEC 30-Day Yield 3.85% 3.69% 3.10% 3.30% 4.04%
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Taxable Equivalent Yield 5.88% 5.63% 4.73% 5.04% 6.17%
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* The distribution rate differs from yield and total return and therefore is
not intended to be a complete measure of performance. Distribution rate may
sometimes differ from yield because a fund may be paying out more or less
than it is earning and because it may not include the effect of amortization
of bond premiums to the extent such premiums arise after the bonds were
purchased.
Index Comparison []
[MOUNTAIN CHART APPEARS HERE]
Nuveen Flagship Nuveen Flagship Lehman Brothers
Arizona Municipal Arizona Municipal Municipal
Bond Fund (Offer) Bond Fund (NAV) Bond Index
5/1990 $ 9,580 $10,000 $10,000
5/1991 10,462 10,920 11,008
5/1992 11,534 12,039 12,089
5/1993 13,074 13,647 13,536
5/1994 13,325 13,909 13,870
5/1995 14,662 15,305 15,133
5/1996 15,280 15,950 15,825
5/1997 16,479 17,202 17,137
5/1998 17,911 18,696 18,515
5/1999 18,758 19,580 19,622
5/2000 18,055 18,846 19,453
--- Nuveen Flagship Arizona Municipal Bond Fund (Offer) $18,055
--- Nuveen Flagship Arizona Municipal Bond Fund (NAV) $18,846
--- Lehman Brothers Municipal Bond Index $19,453
Portfolio Statistics
Total Net Assets $97.6 million
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Average Effective Maturity 18.11 years
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Average Duration 8.94
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[] The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Municipal Bond Index is comprised of a
broad range of investment-grade municipal bonds, and does not reflect any
initial or ongoing expenses. The Nuveen fund return depicted in the chart
reflects the initial maximum sales charge applicable to A shares (4.20%) and
all
ANNUAL REPORT page 6
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NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
--------------------------------------------------------------------------------
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within its specific
areas of expertise. Nuveen has chosen them for their rigorously disciplined
investment approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's income-oriented funds feature portfolio management by Nuveen Investment
Management (NIM). NIM follows a disciplined, research-driven investment approach
to uncover income securities that combine exceptional relative value with above-
average return potential. Drawing on 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
. A commitment to exhaustive research
. An active, value-oriented investment style
. The unmatched presence of trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen Municipal Bond Funds.
Nuveen Flagship Colorado Municipal Bond Fund features portfolio management by
Nuveen Investment Management, a team of portfolio managers and research analysts
committed to a disciplined, research-oriented investment strategy. To help you
understand the fund's performance for the fiscal year ended May 31, 2000, we
spoke with Portfolio Manager Mike Davern.
* The Lipper Peer Group returns represent the average annualized total return
of the 75 funds in the Lipper Other States Municipal Debt Funds category for
the year-to-date period ended May 31, 2000 and 72 funds for the one-year
period. The returns assume reinvestment of dividends and do not reflect any
applicable sales charges.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the fiscal year ended May 31, 2000. The views expressed reflect those of
the portfolio management team and are subject to change at any time, based on
market and other conditions.
Q| Municipal bonds had a challenging year as the Federal Reserve (the Fed)
--
implemented a series of interest rate hikes, which caused bond prices in general
to drop. Meanwhile, the equity markets have taken investors on a roller coaster
ride. What did investors seem to make of this environment during the fund's
fiscal year?
MIKE| Throughout 1999, several factors diverted investor attention from
-----
municipal bonds. First, of course, the Fed began raising interest rates in June
of 1999, with five more rate hikes over the course of the fiscal year. Since
bond prices move inversely to interest rates, the bear market in bonds went into
full swing.
Second, at the end of 1999 the government announced an unprecedented
buyback of U.S. Treasury bonds that would begin in 2000. This caused an
unexpected rally as investors clamored for Treasury bonds at the expense of
other types of bonds.
Third, the stock market rally, mainly based on a few technology-related
names, obviously commanded much attention and diverted investor dollars.
However, demand for municipal bonds did pick up a bit once the extreme
volatility in the stock market set in at the beginning of the year. Investors
reassessed their portfolios and apparently recognized the potential stability of
municipal bonds, not to mention extremely attractive yields, as the period
progressed.
Q| For the fiscal year ended May 31, 2000, the fund recorded a total return of
--
-6.18%, and its Lipper peer group average reported a return of -3.40%.* However,
the year-to-date 2000 performance numbers show the improvement in municipals:
The fund returned 0.52%, and the Lipper peer group returned 1.22%, on average.*
Compare that to the S&P 500 Index, which Bloomberg reports was down 2.82% for
the period. Does this mean the bear market in bonds might be over?
MIKE| We don't try to make market calls like that. We focus on trying to
-----
maintain an attractive, stable dividend and taking opportunities to position the
fund for the next market cycle, whenever that may happen. Obviously, bear
markets have a negative impact on prices. But a bear market in bonds is very
different from a bear market in stocks.
When you hold a stock, you basically want it to go up in price. You hold a
bond for more than just price - you also want attractive, stable income, or
yields, which move in the opposite direction as bond prices.
The other major difference is in price movements. A bond's price, no matter
how much it may drop, eventually must go back to $100, or "par," since bonds are
issued at par and mature at par. On the flip side, a stock could conceivably
drop from
ANNUAL REPORT page 7
<PAGE>
$100 per share to one cent, and never recover. (This discussion applies to a
fund's underlying securities - stocks or bonds; the share price of any mutual
fund will fluctuate.)
In a bond bear market, all other factors being equal, it doesn't make sense
to sell simply because prices have fallen. It?s better to buy a bond now at $86
than to wait for a bull market to come and pay $101 or $102, knowing the price
has to go back to $100.
"The state's population has grown twice as fast as the national average for
about eight years in a row, fueling housing and retail sales growth."
Q| Why did the fund underperform its peer group?
--
MIKE| The fund had relatively long duration, which is a measure of sensitivity
-----
to interest rates. Longer duration means the fund's NAV reacts with a greater
magnitude to a change in interest rates. We felt that shortening the fund's
duration would have sacrificed yield over the fiscal year, so we left it alone
to maintain yield. However, we expect that the actions we have taken will help
the fund recover NAV in the next market cycle.
Q| How did the fund perform against the Lehman Brothers Municipal Bond Index?
--
MIKE| The fund, as we would expect, underperformed Lehman's national index.
-----
Lehman's 12-month average total return was -0.86% for the period ended May 31,
2000.** However, we feel Lipper's state-specific benchmark gives investors a
truer comparative picture. We present both so shareholders can compare their
Colorado fund to other Colorado-specific funds as well as to a national
benchmark.
Q| You mentioned taking measures to position the fund for the next market cycle.
--
What were some of these measures?
MIKE| "Tax-loss selling" was a huge part of what worked well in this market.
-----
This involves selling bonds at a loss, which can help offset any capital gains
the fund may realize (which are taxable to shareholders), now or in any of the
next eight years.
Another strategy is to sell lower-yielding bonds and buy higher-yielding
bonds. This was fairly easy to do during the year as yields increased. For
instance, proceeds from the sale of lower-yielding Colorado Housing bonds were
used to purchase a Colorado Health Facility issue for the National Benevolent
Society. This issue, rated Baa2 by Moody's and BBB+ by Standard & Poor's,
offered substantial additional yield compared to similarly structured insured
bonds.
We also extended the fund's call protection by selling bonds with a call
date in the near future. When rates are falling, many issuers retire bonds
early, then reissue to reduce debt costs. This is known as "call risk" to
bondholders, because it can interrupt their expected income stream. The presence
of call risk in a bond can prevent its price from increasing, because fewer
investors may be interested in buying it.
Since rates are high and demand was weak, bonds with good call protection
could be bought at attractive prices.
** The Lehman Brothers Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds and does nor reflect any initial or ongoing
expenses.
ANNUAL REPORT page 8
<PAGE>
Q| These strategies do not seem like measures that investors could conceivably
--
use on their own with individual bonds. Is that true?
MIKE| That's correct. The amount of research involved, plus the transaction
-----
costs to individuals trading in a bond market that deals in very large blocks,
would make it difficult to impossible for an individual to use these strategies
at all.
As a large institutional investor, Nuveen has the ability to trade in large
blocks and even negotiate terms of entire issues of municipal bonds. Some very
attractive issues never even make it to the retail market. Nuveen's research
team is instrumental in not only positioning strategy, but also finding and
researching bond issues. That is particularly important to a single-state fund,
where the available bond options can be limited.
Q| What sectors are considered defensive in this type of market?
--
MIKE| The fund had 24% of its assets in U.S. guaranteed issues as of the end of
-----
the fiscal year. The housing sector, consisting of both multifamily and single
family housing, made up 26% of the fund. This sector has done well in bear
markets, since housing issues generally offer additional yield because of
associated call risk. The fund's overall call protection helped offset that
risk.
Nuveen's research team discovered Englewood Multifamily Housing Project for
the Marks Apartment. This issue was non-rated by Moody's (rated BBB+ by Standard
& Poor's) and paid a significantly higher yield than similarly structured AAA
bonds to compensate for the higher risk assumed.
Q| What was the economic environment in Colorado over the fiscal year, and what
--
is your outlook for the fund for the coming months?
MIKE| Colorado is one of the fastest growing states in the nation. The state's
-----
population has grown twice as fast as the national average for about eight years
in a row, fueling housing and retail sales growth. Colorado's unemployment rate
was 2.8% as of the end of May, well below the overall 4.1% rate for the nation.
Strong economic growth, higher than the national average, is expected to
continue in the state. Colorado's high-tech presence should also continue
attracting business from neighboring states.
As for the municipal bond market, we think the impact of the Fed's interest
rate increases should be emerging, since these measures usually take about 12 to
18 months to affect the economy. If stock market volatility continues, as we
believe it will, consumer confidence should begin to dampen and possibly
encourage more investment in fixed income securities.
COLORADO
Top Five Sectors
U.S. Guaranteed 24%
---------------------------------------------
Housing (Multifamily) 17%
---------------------------------------------
Healthcare 11%
---------------------------------------------
Tax Obligation (Limited) 10%
---------------------------------------------
Housing (Single Family) 9%
---------------------------------------------
As a percentage of total bond holdings as of May 31, 2000. Holdings are subject
to change.
COLORADO
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S.
AA..................... 17%
Guaranteed............. 37%
A...................... 7%
BBB.................... 15%
NR..................... 24%
As a percentage of total bond holdings as of May 31, 2000. Holdings are subject
to change.
ANNUAL REPORT page 9
<PAGE>
NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND
Fund Spotlight as of May 31, 2000
Terms To Know
The following are a few terms used throughout this report.
Distribution Rate Most recent dividend per share (annualized) divided by the
appropriate price per share (e.g., net asset value for purchases to be made
without a load such as reinvestments from Nuveen Unit Trusts, or the maximum
public offering price).
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Typically the shorter the duration, the
less price and return variability you can expect in the fund's price per share
as interest rates change.
Federal Fund Rate The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of short-term interest rates.
Municipal Bond A bond issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio. This figure is computed by dividing the net
investment income per share earned during the specified one-month or 30-day
period by the maximum offering price per share on the last day of the period.
Taxable Equivalent Yield The yield an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
Taxable Equivalent Total Return The total return an investor would have to
realize on a fully taxable investment to equal the stated total return on a tax-
exempt investment.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Peformance of classes
will differ. For additional information, please see the fund prospectus.
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $9.50 $9.52 $9.49 $9.50
--------------------------------------------------------------------------------------------------------------
Latest Monthly Dividend* $0.0420 $0.0360 $0.0375 $0.0435
--------------------------------------------------------------------------------------------------------------
Fund Symbol FCOTX N/A N/A N/A
--------------------------------------------------------------------------------------------------------------
CUSIP 67065L609 67065L500 67065L807 67065L880
--------------------------------------------------------------------------------------------------------------
Inception Date 5/87 2/97 2/97 2/97
--------------------------------------------------------------------------------------------------------------
</TABLE>
* Paid June 1, 2000
<TABLE>
<CAPTION>
Total Returns as of 5/31/00/1/
A Shares B Shares C Shares R Shares
NAV Offer w/o/CDSC w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -6.18% -10.13% -6.88% -10.43% -6.73% -6.08%
--------------------------------------------------------------------------------------------------------------
1-Year TER* -3.65% -7.71% -4.74% -8.30% -4.50% -3.46%
--------------------------------------------------------------------------------------------------------------
5-Year 4.37% 3.47% 3.71% 3.54% 3.85% 4.51%
--------------------------------------------------------------------------------------------------------------
5-Year TER* 7.10% 6.18% 6.07% 5.92% 6.31% 7.31%
--------------------------------------------------------------------------------------------------------------
10-Year 6.39% 5.93% 5.90% 5.90% 5.94% 6.46%
--------------------------------------------------------------------------------------------------------------
10-Year TER* 9.44% 8.97% 8.70% 8.70% 8.76% 9.55%
--------------------------------------------------------------------------------------------------------------
</TABLE>
*Taxable Equivalent Return (based on a combined federal and state income tax
rate of 34.5%).
<TABLE>
<CAPTION>
Total Returns as of 3/31/00/1/
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -5.27% -9.21% -6.06% -9.66% -5.82% -5.26%
--------------------------------------------------------------------------------------------------------------
5-Year 5.56% 4.66% 4.87% 4.71% 5.04% 5.67%
--------------------------------------------------------------------------------------------------------------
10-Year 6.63% 6.18% 6.16% 6.16% 6.19% 6.69%
--------------------------------------------------------------------------------------------------------------
</TABLE>
+ Class A share returns are actual. Class B, C, and R share returns are actual
for the period since class inception; returns prior to class inception are Class
A share returns adjusted for differences in sales charges and expenses, which
are primarily differences in distribution and service fees. Class A shares have
a 4.2% maximum sales charge. Class B shares have a CDSC that begins at 5% for
redemptions during the first year after purchase and declines periodically to
0% over the following five years. Class C shares have a 1% CDSC for redemptions
within one year which is not reflected in the one-year total return.
<TABLE>
<CAPTION>
Tax- Free Yields as of 5/31/00
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC
<S> <C> <C> <C> <C> <C>
Distribution Rate* 5.31% 5.08% 4.54% 4.74% 5.49%
--------------------------------------------------------------------------------------------------------------
SEC 30-Day Yield 2.37% 2.27% 1.62% 1.81% 2.33%
--------------------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 3.62% 3.47% 2.47% 2.76% 3.56%
--------------------------------------------------------------------------------------------------------------
</TABLE>
* The distribution rate differs from yield and total return and therefore is not
intended to be a complete measure of performance. Distribution rate may
sometimes differ from yield because a fund may be paying out more or less than
it is earning and because it may not include the effect of amortization of bond
premiums to the extent such premiums arise after the bonds were purchased.
<TABLE>
<CAPTION>
Index Comparison/3/ Portfolio Statistics
[MOUNTAIN CHART APPEARS HERE] <S> <C>
Total Net Assets $41.4 million
Lehman ---------------------------------------------
Nuveen Flagship Nuveen Flagship Brothers Average Effective
Colorado Municipal Colorado Municipal Municipal Maturity 19.40 years
Bond Fund (Offer) Bond Fund (NAV) Bond Index ---------------------------------------------
<S> <C> <C> <C> Average Duration 9.37
5/1990 $ 9,580 $ 10,000 $ 10,000 ---------------------------------------------
5/1991 10,418 10,874 11,008
5/1992 11,437 11,938 12,089
5/1993 12,855 13,418 13,536
5/1994 13,116 13,691 13,870
5/1995 14,367 14,997 15,133
5/1996 14,960 15,616 15,825
5/1997 16,342 17,059 17,137
5/1998 18,277 19,078 18,746
5/1999 18,964 19,795 19,622
5/2000 17,794 18,574 19,453
</TABLE>
====== Nuveen Flagship Colorado Municipal Bond Fund (Offer) $17,794
______ Nuveen Flagship Colorado Municipal Bond Fund (NAV) $18,574
====== Nuveen Brothers Municipal Bond Index $19,453
[_] The Index Comparison shows the change in the value of a $10,000 investment
in the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Municipal Bond Index is comprised of a broad
range of investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing fund
expenses.
ANNUAL REPORT page 10
<PAGE>
NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
Nuveen Flagship New Mexico Municipal Bond Fund features portfolio management by
Nuveen Investment Management, a team of portfolio managers and research analysts
committed to a disciplined, research-oriented investment strategy. To help you
understand the fund's performance for the fiscal year ended May 31, 2000, we
spoke with Portfolio Manager Mike Davern.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within its specific
areas of expertise. Nuveen has chosen them for their rigorously disciplined
investment approaches and their consistent long-term performance. Drawing on
decades of experience and specialized knowledge, these skilled asset managers
have earned reputations for excellence in their fields of expertise, whether it
is blue-chip growth stocks, large-cap value stocks, bonds or international
securities. Nuveen's income-oriented funds feature portfolio management by
Nuveen Investment Management (NIM). NIM follows a disciplined, research-driven
investment approach to uncover income securities that combine exceptional
relative value with above-average return potential. Drawing on 300 combined
years of investment experience, the Nuveen team of portfolio managers and
research analysts offers:
. A commitment to exhaustive research
. An active, value-oriented investment style
. The unmatched presence of trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen Municipal Bond Funds.
* The Lipper Peer Group returns represent the average annualized total return
of the 75 funds in the Lipper Other States Municipal Debt Funds category for
the year-to-date period ended May 31, 2000 and 72 funds for the one-year
period. The returns assume reinvestment of dividends and do not reflect any
applicable sales charges.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the fiscal year ended May 31, 2000. The views expressed reflect those of
the portfolio management team and are subject to change at any time, based on
market and other conditions.
Q| Municipal bonds had a challenging year as the Federal Reserve (the Fed)
--
implemented a series of interest rate hikes, which caused bond prices in general
to drop. Meanwhile, the equity markets have taken investors on a roller coaster
ride. What did investors seem to make of this environment during the fund's
fiscal year?
MIKE| Throughout 1999, several factors diverted the attention of investors from
-----
municipal bonds. First, of course, the Fed began raising interest rates in June
1999, backing that move up with five more rate hikes over the course of the
fiscal year. Since bond prices move inversely to interest rates, the bear market
in bonds went into full swing.
Second, at the end of 1999, the government announced an unprecedented
buy-back of U.S. Treasury bonds that would begin in 2000. This caused investors
to clamor for Treasury bonds, and consequently caused an unexpected rally at the
expense of other types of bonds.
Third, the stock market rally, mainly based on a few technology-related
names, obviously commanded much attention and diverted investor dollars.
However, demand for municipal bonds did pick up a bit once the most extreme
volatility in the stock market set in at the beginning of the year. We believe
that investors reassessed their portfolios and recognized the potential
stability of municipal bonds, not to mention the extremely attractive yields, as
the period progressed.
Q| For the fiscal year ended May 31, 2000, the fund recorded a total return of
--
-4.09%, and its Lipper peer group average returned -2.90%. But the year-to-date
2000 figures are positive: The fund returned 1.05% and the Lipper peer group
returned 1.13% on average.* Compare that to the S&P 500 Index, which Bloomberg
reports was down 2.82% for the period. Does this mean the bear market in bonds
could be over?
MIKE| We don't try to make market calls like that. We focus on trying to
-----
maintain an attractive, stable dividend and taking opportunities to position the
fund for the next market cycle, whenever that may happen. Obviously, bear
markets have a negative impact on prices. But, a bear market in bonds is very
different from a bear market in stocks.
When you hold a stock, you basically want it to go up in price. You hold a
bond for more than just price -- you also want attractive, stable income, or
yields, which move in the opposite direction of bond prices.
The other major difference is in price movements. A bond's price, no matter
how much it may drop, eventually must go back to $100, or "par," since bonds are
issued at par and mature at par. On the flip side, a stock could conceivably
drop from
ANNUAL REPORT Page 11
<PAGE>
$100 per share to one cent, and never recover. (This discussion applies to a
fund's underlying securities -- stocks or bonds; the share price of any mutual
fund will fluctuate.)
In the midst of a bond bear market, all other factors being equal, it
doesn't make sense to sell simply because prices have fallen. It's better to buy
a bond now at $86 than to wait for a bull market to come and pay $101 or $102,
knowing the price has to go back to $100.
Q| What does the fund's tax-exempt status mean for the numbers?
--
MIKE| Equivalent returns for a similar taxable investment for taxpayers in the
-----
combined federal and state 36.5% income tax bracket would be 2.25% for the year-
to-date period and -1.41% for the fiscal year ending May 31, 2000.**
Q| How did the fund perform against the Lehman Brothers Municipal Bond Index?
--
MIKE| The fund, as we would expect, underperformed Lehman's national index.
-----
Lehman's 12-month average total return was -0.86% for the period ended May 31,
2000.*** We feel Lipper's state-specific benchmark gives investors a truer
comparative picture. However, we give shareholders both so they can compare
their New Mexico fund to other state-specific funds as well as to a national
benchmark.
Q| Why did the fund underperform its peer group?
--
MIKE| The fund had relatively long duration, which is a measure of sensitivity
-----
to interest rates. Longer duration means the fund's NAV reacts with a greater
magnitude to a change in interest rates. We felt that shortening the fund's
duration would have sacrificed yield over the fiscal period, so we left it alone
to maintain the fund's dividend. However, we expect that the positioning actions
we have taken will help the fund recover NAV in the next market cycle.
Q| What were some of those positioning measures you mentioned?
--
MIKE| "Tax-loss selling" was a huge part of what worked well for the fund in
----
this market. This involves selling bonds at a loss and using that loss to help
offset any capital gains the fund may realize (which are taxable to
shareholders). We can apply an offsetting loss now or anytime in the next eight
years.
We also helped extend call protection in the fund. When rates are falling,
many issuers retire their bonds early, if terms of the bond allow, then reissue
to save on debt costs. This is known as "call risk" to bondholders, because it
could interrupt their expected income stream. The presence of call risk in a
bond can prevent its price from increasing because fewer investors may be
interested in buying it. Since rates were high and demand was weak over the
year, bonds with good call protection could be had at attractive prices.
On the defensive side, the housing sector, consisting of both multifamily
and single family housing, made up 27% of the fund. This sector has done well in
bear
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state income tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
*** Lehman Brothers Municipal Bond Index is comprised of a broad range
of investment-grade municipal bonds and does not reflect any initial or ongoing
expenses.
ANNUAL REPORT page 12
<PAGE>
markets, as housing issues generally offer additional yield because of the call
risk associated with them. The fund's overall call protection helped offset that
risk.
Q| How did new issuance in the New Mexico municipal bond market compare to that
-
of the nation's, which declined over the last year?
MIKE| Issuance of municipal bonds in New Mexico declined by nearly 16%, but not
----
nearly as much as the 24% decline nationally. With tight supply and strong in-
state demand for municipal bonds, the New Mexico market remained competitive.
Still, it was difficult to find lower- and non-rated bonds to help provide
increased yield.
However, with the help of Nuveen research, we discovered selling
opportunities such as Donna Ana County bonds, which had a short call date and
lower yield. We used the proceeds to purchase Public Service Co. of New Mexico
Farmington County Pollution Control Revenue bonds, rated Baa3 by Moody's and
BBB- by Standard & Poor's, at a much higher yield and longer call protection.
Q| If it was difficult for a large institutional investor like Nuveen to find
-
opportunities in New Mexico, would it be even more challenging for individual
investors?
MIKE| It is difficult to impossible for individual investors to have access to
----
the market that institutional investors like Nuveen have. With our size, we have
the ability to trade in large blocks and even negotiate terms of entire issues
of municipal bonds. Some very attractive bond issues never even make it to the
retail market. Nuveen?s research team is instrumental in not only positioning
strategy, but also in researching bond issues and finding what we believe are
good deals.
Q| What is your outlook for the fund for the coming months?
-
MIKE| The state's economy has grown only moderately, well below the national
----
growth rate. New Mexico's unemployment rate of 5.5% is well above the national
average of 4.1%. Its somewhat lackluster economy likely will keep holding
population levels down and the unemployment rate up.
As for the fund, it is well-positioned to respond positively if a bond
rally comes along. We feel that the impact of interest rate increases should
start emerging, as these measures usually take about 12 to 18 months to affect
the economy. If stock market volatility continues, as we believe it will,
consumer confidence should begin to dampen and possibly encourage more
investment in fixed income securities.
NEW MEXICO
Top Five Sectors
Tax Obligation (Limited) 24%
----------------------------------------------
Housing (Single Family) 19%
----------------------------------------------
Education and Civic Organizations 12%
----------------------------------------------
Utilities 9%
----------------------------------------------
U.S. Guaranteed 8%
----------------------------------------------
As a percentage of total bond holdings as of May 31, 2000. Holdings are subject
to change.
NEW MEXICO
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed..... 55%
AA............. 8%
A.............. 18%
BBB............ 15%
NR............. 4%
As a percentage of total bond holdings as of May 31, 2000. Holdings are subject
to change.
ANNUAL REPORT page 13
<PAGE>
NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL BOND FUND
FUND SPOTLIGHT as of May 31, 2000
Terms To Know
The following are a few terms used throughout this report.
Distribution Rate Most recent dividend per share (annualized) divided by the
appropriate price per share (e.g., net asset value for purchases to be made
without a load such as reinvestments from Nuveen Unit Trusts, or the maximum
public offering price).
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Typically the shorter the duration, the
less price and return variability you can expect in the fund's price per share
as interest rates change.
Federal Fund Rate The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of short-term interest rates.
Municipal Bond A bond issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio. This figure is computed by dividing the net
investment income per share earned during the specified one-month or 30-day
period by the maximum offering price per share on the last day of the period.
Taxable Equivalent Yield The yield an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
Taxable Equivalent Total Return The total return an investor would have to
realize on a fully taxable investment to equal the stated total return on a tax-
exempt investment.
Returns are historical end do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 9.66 $ 9.66 $ 9.65 $ 9.68
-------------------------------------------------------------------------------
Latest Monthly Dividend* $O.0405 $0.0340 $0.0360 $0.0420
-------------------------------------------------------------------------------
Fund Symbol FNMTX N/A N/A N/A
-------------------------------------------------------------------------------
CUSIP 67065L781 67065L773 67065L765 67065L757
-------------------------------------------------------------------------------
Inception Date 9/92 2/97 2/97 2/97
-------------------------------------------------------------------------------
</TABLE>
*Paid June 1,2OOO
<TABLE>
<CAPTION>
Total Returns as of 5/31/00 Annualized
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
l-Year -4.09% -8.09% -4.75% -8.41% -4.71% -3.89%
-------------------------------------------------------------------------------
l-Year TER* -1.41% -5.51% -2.50% -6.16% -2.33% -1.09%
-------------------------------------------------------------------------------
5-Year 4.25% 3.36% 3.55% 3.38% 3.75% 4.43%
-------------------------------------------------------------------------------
5-Year TER* 7.12% 6.20% 6.01% 5.85% 6.34% 7.38%
-------------------------------------------------------------------------------
Since Inception 5.27% 4.68% 4.60% 4.60% 4.81% 5.39%
-------------------------------------------------------------------------------
Since Inception TER* 8.22% 7.62% 7.17% 7.17% 7.50% 8.39%
-------------------------------------------------------------------------------
</TABLE>
*Taxable Equivalent Return (based on a combined federal and state income tax
rate of 36.5%).
<TABLE>
<CAPTION>
Total returns as of 3/31/00 Annualized +
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -3.10% -7.18% -3.76% -7.45% -3.62% -2.89%
-------------------------------------------------------------------------------
5-Year 5.29% 4.38% 4.58% 4.42% 4.81% 5.46%
-------------------------------------------------------------------------------
Since Inception 5.57% 4.98% 4.91% 4.91% 5.13% 5.69%
-------------------------------------------------------------------------------
+ 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 expanses,
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. Class C shares have a 1%
CDSC for redemptions within one year which is not reflected in the one-year
total return.
</TABLE>
<TABLE>
<CAPTION>
Tax-Free Yields as of 5/31/00
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
Distribution Rate* 5.03% 4.82% 4.22% 4.48% 5.21%
-------------------------------------------------------------------------------
SEC 30-Day Yield 3.00% 2.87% 2.25% 2.44% 3.19%
-------------------------------------------------------------------------------
Taxable Equivalent Yield 4.72% 4.52% 3.54% 3.84% 5.02%
-------------------------------------------------------------------------------
</TABLE>
* The distribution rata differs from yield and total return and therefore is not
intended to be a complete measure of performance. Distribution rata may
sometimes differ from yield because a fund may be paying out more or less than
it is earning and because it may not include the affect of amortization of
bond premiums to the extent such premiums arise after the bonds were
purchased.
Index Comparison [_]
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Lehman Brothers
New Mexico Municipal New Mexico Municipal Municipal Bond
Bond Fund (Offer) Bond Fund (NAV) Index Portfolio Statistics
<S> <C> <C> <C> <C>
9/1992 $ 9,580 $10,000 $10,000 Total Net Assets $51.3 million
5/1993 10,421 10,878 10,726 ----------------------------------------------
5/1994 10,619 11,085 10,991 Average Effective Maturity 21.36 years
5/1995 11,603 12,111 11,992 ----------------------------------------------
5/1996 11,971 12,496 12,540 Average Duration 9.02
5/1997 13,037 13,609 13,580 ----------------------------------------------
5/1998 14,361 14,991 14,855
5/1999 14,897 15,550 15,549
5/2000 14,287 14,914 15,416
</TABLE>
-- Nuveen Flagship New Mexico Municipal Bond Fund (Offer) $14,287
-- Nuveen Flagship New Mexico Municipal Bond Fund (NAV) $14,914
-- Lehman Brothers Municipal Bond lndex $15,416
[_] The Index Comparison shows the change in value of a $10,000
investment in the Class A shares of the Nuveen fund compared with
the Lehman Brothers Municipal Bond Index. The Lehman Municipal Bond
Index is comprised of a broad range of investment-grade municipal
bonds, and does not reflect any initial or ongoing expenses. The
Nuveen fund return depicted in the chart reflects the initial
maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
ANNUAL REPORT page 14
<PAGE>
Portfolio of Investments
Nuveen Flagship Arizona Municipal Bond Fund
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer Cyclicals -- 1.0%
$ 1,000 Mesa Industrial Development Authority, Industrial Revenue Bonds No Opt. Call N/R $1,014,180
(TRW Vehicle Safety System Inc. Project), Series 1992, 7.250%.
10/15/04 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Consumer Staples -- 0.3%
250 Casa Grande industrial Development Authority, Pollution Control 12/02 at 103 A1 260,840
Revenue Bonds (Frito-Lay Inc/PepsiCo), Series 1984, 6.650%. 12/01/14.
------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations -- 6.8%
570 Arizona Educational Loan Marketing Corporation, 1992 Educational 3/02 at 101 Aa2 588,668
Loan Revenue Bonds, Series B, 7.000%, 3/01/05 (Alternative Minimum
Tax)
100 Arizona Educational Loan Marketing Corporation, Educational 9/02 at 101 Aa2 102,501
Loan Revenue Bonds, 6.375%, 9/01/05 (Alternative Minimum Tax)
1,500 Student Loan Acquisition Authority of Arizona, Student Loan Revenue 5/04 at 102 Aa1 1,569,270
Bonds, Series 1994B. Subordinated Fixed Rate Bonds, 6.600%, 5/01/10
(Alternative Minimum Tax)
1,500 Student Loan Acquisition Authority of Arizona, Student Loan 11/O9 at 102 Aaa 1,463,700
Revenue Refunding Bonds, Senior Series 1999A-1, 5.900%, 5/01/24
2,500 The Industrial Development Authority of the City of Glendale, 5/08 at 101 BBB+ 2,124,875
Revenue Bonds, Midwestern University, Series 1998A, 5.375%, 5/15/28
115 The Industrial Development Authority of the City of Glendale, 5/06 at 102 AAA 116,190
Revenue Bonds, Midwestern University, Series 1996A, 6.000%, 5/15/16
300 Arizona Board of Regents, University of Arizona, System Revenue 6/02 at 102 AA 309,141
Refunding Bonds, Series 1992, 6.250%, 6/01/11
335 Yavapai County Community College District, Revenue Bonds, 7/03 at 101 BBB+ 331,439
Series 1993, 6.000%, 7/01/12
------------------------------------------------------------------------------------------------------------------------------------
Healthcare -- 13.7%
4,000 Arizona Health Facilities Authority, Hospital Revenue Bonds 11/09 at 100 A2 3,821,680
(Phoenix Children's Hospital), Series 1999A, 6.125%, 11/15/22
1,000 Arizona Health Facilities Authority, Revenue Bonds (Catholic 7/10 at 101 BBB+ 968,160
Healthcare West), 1999 Series A, 6.625%, 7/01/20
930 Maricopa County, Hospital Revenue and Refunding Bonds, Series 4/07 at 102 Baa1 879,343
1997 (Sun Health Corporation), 6.125%, 4/01/18
4,500 The Industrial Development Authority of the County of Maricopa, 7/08 at 101 BBB+ 3,557,520
Health Facility Revenue Bonds (Catholic Healthcare West Project),
1998 Series A, 5.000%, 7/01/16
375 The Industrial Development Authority of the County of Maricopa, 12/00 at 102 AAA 387,113
Hospital Refunding Revenue Bonds (John C. Lincoln Hospital and
Health Center), Series 1990, 7.500%, 12/01/13
600 The Industrial Development Authority of the County of Maricopa, 9/05 at 101 AAA 574,170
Baptist Hospital System Revenue Refunding Bonds, Series 1995,
5.500%, 9/01/16
1,500 The Industrial Development Authority of the City of Mesa, Revenue 1/10 at 101 AAA 1,445,490
Bonds (Discovery Health System), Series 1999A, 5.750%, 1/01/25
The Industrial Development Authority of the City of Phoenix,
Hospital Revenue Bonds (John C. Lincoln Hospital and Health Center),
Series 1994:
500 6.000%, 12/01/10 12/03 at 102 BBB+ 465,890
500 6.000%, 12/01/14 12/03 at 102 BBB+ 449,660
1,055 The Industrial Development Authority of the City of Winslow, 6/08 at 102 N/R 815,810
Hospital Revenue Bonds (Winslow Memorial Hospital Project),
Series 1998, 5.500%, 6/01/22
</TABLE>
_____
15
<PAGE>
Portfolio of Investments
Nuveen Flagship Arizona Municipal Bond Fund (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily - 5.7%
$2,900 The Industrial Development Authority of the County of Maricopa, 10/09 at 102 N/R $ 2,629,111
Multifamily Housing Revenue Bonds (Arborwood Apartments Project),
Subordinate Series 1999B, 6.700%, 10/01/29
1,000 The Industrial Development Authority of the County of Maricopa, 7/09 at 102 Aaa 970,220
Multifamily Housing Revenue Bonds (Whispering Palms Apartments
Project), Series 1999A, 5.900%, 7/01/29
295 Phoenix Housing Finance Corporation, Mortgage Revenue Refunding 7/02 at 101 AAA 300,236
Bonds, Series 1992A (FHA - Insured Mortgage Loans - Section 8
Assisted Projects), 6.500%, 7/01/24
The Industrial Development Authority of the City of Phoenix, Mortgage
Revenue Refunding Bonds, Series 1992 (FHA-Insured Mortgage Loan-Chris
Ridge Village Project):
200 6.750%, 1l/01/12 1l/O2 at 101 AAA 205,410
425 6.800%, 1l/01/25 11/02 at 101 AAA 436,488
500 The Industrial Development Authority of the City of Phoenix, 2/03 at 102 Aaa 468,405
Multifamily Housing Revenue Refunding Bonds, Series 1993 (GNMA
Collateralized - Meadow Glen Apartment Project), 5.800%, 8/20/28
500 The Industrial Development Authority of the City of Tempe, Multifamily 6/03 at 102 AAA 502,550
Mortgage Refunding Bonds, Series 1993A (FHA-Insured Mortgage Loan-
Quadrangles Village Apartments), 6.250%, 6/01/26
------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 4.4%
1,500 The Industrial Development Authority of the County of Maricopa, 6/08 at 108 Aaa 1,500,000
Single Family Mortgage Revenue Refunding Bonds (Mortgage-Backed
Securities Program), Series 1998B, 6.200%, 12/01/30 (Alternative
Minimum Tax)
380 The Industrial Development Authority of the City of Phoenix, 6/05 at 102 AAA 390,640
Statewide Single Family Mortgage Revenue Bonds, Series 1995, 6.150%,
12/01/08 (Alternative Minimum Tax)
1,400 The Industrial Development Authority of the City of Phoenix, 4/08 at 101 1/2 AAA 1,268,148
Statewide Single Family Mortgage Revenue Bonds, 1998 Series C, 5.300%,
4/01/20 (Alternative Minimum Tax)
325 The Industrial Development Authority of the County of Pima, Single 8/O5 at 102 A 326,807
Family Mortgage Revenue Refunding Bonds, Series 1995A, 6.500%,
2/01/17
800 The Industrial Development Authority of the County of Pima, Single 5/07 at 102 AAA 796,704
Family Mortgage Revenue Bonds, Series 1997A, 6.250%, 1l/01/30
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 1.7%
1,605 The Industrial Development Authority of the County of Cochise, 12/04 at 102 AAA 1,688,492
Tax-Exempt Mortgage Revenue Refunding Bonds, Series 1994A (GNMA
Collateralized - Sierra Vista Care Center), 6.750%, 1l/20/19
------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General- 13.9%
645 City of Chandler, General Obligation Refunding Bonds, Series 1991, 7/01 at 101 AAA 664,621
7.000%, 7/01/12
965 City of Chandler, General Obligation Bonds, Series 2000, 5.000%, 7/01/19 7/10 at 101 Aa2 844,742
Sierra Vista Unified School District No. 68 of Cochise County, General
Obligation Refunding Bonds, Series 1992:
250 7.500%, 7/01/09 No Opt. Call AAA 287,093
300 7.500%, 7/01/10 No Opt. Call AAA 347,334
675 Peoria Unified School District No. 11 of Maricopa County, No Opt. Call AAA 486,972
Refunding Bonds, Second Series of 1992, 0.000%, 7/01/06
480 Peoria Unified School District No. 11 of Maricopa County, 7/01 at 101 AAA 491,525
School Improvement and Refunding Bonds, Series 1992, 6.400%, 7/01/10
50 Kyrene Elementary School District No. 28 of Maricopa County, 7/02 at 100 AAA 50,674
School Improvement Bonds Project of 1990, Series E, 6.000%, 7/01/12
Glendale Elementary School District No. 40 of Maricopa County, School
Improvement and Refunding Bonds, Series 1995:
500 6.200%, 7/01/09 7/05 at 101 AAA 521,905
750 6.250%, 7/01/10 7/05 at 101 AAA 784,710
500 Gilbert Unified School District No. 41 of Maricopa County, 7/08 at 100 AAA 520,375
School Improvement Bonds, Project of 1993, Series D, 6.250%, 7/01/15
515 Alhambra Elementary School District No. 68 of Maricopa County, 7/04 at 102 AAA 549,505
School Improvement and Refunding Bonds, Series 1994A, 6.750%, 7/01/14
</TABLE>
____
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 310 Chandler Unified School District No. 80 of Chandler County, No Opt. Call AAA $ 330,810
School Improvement and Refunding Bonds, Series 1994, 6.250%, 7/01/11
1,275 Maricopa County School District No. 98, Fountain Hills Unit, No Opt. Call AAA 919,836
Refunding Bonds, 0.000%, 7/01/06
4,750 City of Mesa, General Obligation Bonds, Series 1999, 5.000%, 7/01/17 7/09 at 100 AAA 4,329,293
1,000 Tucson Unified School District No. 1 of Pima County, Refunding No Opt. Call AAA 1,161,150
Bonds, Series 1992, 7.500%, 7/01/10
500 Tanque Verde Unified School District No. 13 of Pima County, School 7/04 at 102 AAA 533,450
Improvement and Refunding Bonds, Series 1994, 6.700%, 7/01/10
315 Scottsdale Mountain Community Facilities District, District General 7/03 at 102 A 315,318
Obligation Bonds, Series 1993A, 6.200%, 7/01/17
225 City of Tempe, General Obligation Bonds, Series 19926, 6.000% 7/01/08 7/02 at 101 AA+ 231,620
180 Tempe Union High School District No. 213 of Maricopa County, School 7/04 at 101 AAA 184,916
Improvement and Refunding Bonds, Series 1994, 6.000%, 7/01/12
------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 16.8%
250 State of Arizona, Refunding Certificates of Participation, Series 1992B, 9/02 at 102 AAA 256,995
6.250%, 9/01/10
225 Arizona Municipal Financing Program, Certificates of Participation, No Opt. Call AAA 254,167
Series 11, 8.000%, 8/01/17
965 City of Bullhead, Bullhead Parkway Improvement District Bonds, 6.100%, 1/03 at 103 Baa2 970,501
1/01/13
280 Eloy Municipal Property Corporation, Municipal Facilities Revenue Bonds, 7/02 at 101 BBB 288,305
Series 1992, 7.000%, 7/01/11
385 City of Flagstaff, Junior Lien Street and Highway User Revenue Bonds, No Opt. Call AAA 400,554
Series 1992, 5.900%, 7/01/l0
300 Hospital District No. One, Maricopa County, Hospital Facilities Refunding 6/04 at 101 AAA 314,883
Bonds, Series B (1992), 6.250%, 6/01/10
3,195 The Industrial Development Authority of the County of Maricopa, Education 7/10 at 102 Baa3 3,067,551
Revenue Bonds (Arizona Charter Schools Project I), Series 2000, 6.625%,
7/01/20
City of Peoria, Improvement District No. 8801 (North Valley Power Center),
Improvement Bonds.
425 7.300%, l/01/12 1/O3 at 101 BBB+ 444,197
460 7.300%, l/01/13 1/O3 at 101 BBB+ 480,778
300 City of Phoenix, Junior Lien Street and Highway User Revenue Refunding 7/02 at 102 A+ 309,216
Bonds, Series 1992, 6.250%, 7/01/11
Pinal County, Arizona, Certificates of Participation, Series 1994:
300 6.375%, 6/01/06 6/02 at 101 AA 310,524
200 6.500%, 6/01/09 6/02 at 101 AA 207,486
8,450 Puerto Rico Highway and Transportation Authority, Highway Revenue 7/16 at 100 A 7,043,920
Bonds, Series Y of 1996, 5.000%, 7/01/36
1,200 Puerto Rico Highway and Transportation Authority, Transportation 7/08 at 101 A 991,128
Revenue Bonds, Series A, 5.000%, 7/01/38
850 City of Tucson, Certificates of Participation, Series 1994, 6.375%, 7/01/09 7/04 at 100 AA 889,610
175 Business Development Finance Corporation, Tucson, Local Development Lease 7/02 at 102 AAA 180,086
Revenue Refunding Bonds, Series 1992, 6.250%, 7/01/12
------------------------------------------------------------------------------------------------------------------------------------
Transportation - 1.1%
500 City of Phoenix, Airport Revenue Bonds, Series 1994D, 6.400%, 7/04 at 102 AAA 519,180
7/01/12 (Alternative Minimum Tax)
500 Tucson Airport Authority Inc., Revenue Bonds, Series 199OB, 7.125%, 6/00 at 102 AAA 510,810
6/01/15 (Alternative Minimum Tax)
</TABLE>
____
17
<PAGE>
Portfolio of Investments
Nuveen Flagship Arizona Municipal Bond Fund (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - 21.0%
$ 300 Arizona Health Facilities Authority, Hospital System 9/03 at 100 AAA $ 310,218
Revenue Refunding Bonds (Phoenix Baptist Hospital and
Medical Center, Inc. and Medical Environments, Inc.),
Series 1992, 6.250%, 9/01/11
200 Arizona Municipal Financing Program, Certificates of No Opt. Call AAA 230,154
Participation, Series 20, 7.700%, 8/01/10
300 Arizona Board of Regents, Arizona State University, 7/02 at 101 Aaa 314,877
System Revenue Bonds, Series 1989, 7.000%,
7/01/15 (Pre-refunded to 7/01/02)
155 City of Chandler, General Obligation Refunding Bonds, 7/01 at 101 AAA 160,262
Series 1991, 7.000%, 7/01/12 (Pre-refunded to 7/01/01)
Sedona-Oak Creek Joint Unified School District No. 9
of Coconino and Yavapai Counties, School Improvement
Bonds, Project of 1992, Series A:
250 6.700%, 7/01/06 (Pre-refunded to 7/01/01) 7/01 at 101 A-*** 257,625
250 6.750%, 7/01/07 (Pre-refunded to 7/01/01) 7/01 at 101 A-*** 257,755
385 The Industrial Development Authority of the City of 5/06 at 102 AAA 406,972
Glendale, Revenue Bonds, Midwestern University,
Series 1996A, 6.000%, 5/15/16 (Pre-refunded to
5/15/06)
1,000 Hospital District No. One, Maricopa County, General 6/06 at 101 A*** 1,065,910
Obligation Bonds, Series 1996, 6.500%, 6/01/17
(Pre-refunded to 6/01/06)
325 Maricopa County, Hospital Revenue Bonds, Series 1980 No Opt. Call AAA 371,963
(St. Lukes Hospital Medical Center), 8.750%, 2/01/10
2,775 The Industrial Development Authority of the County of No Opt. Call AAA 3,091,961
Maricopa, Samaritan Health Services, Hospital System
Revenue Refunding Bonds, Series 1990A, 7.000%, 12/01/16
16,300 The Industrial Development Authority of the County of No Opt. Call AAA 6,407,041
Maricopa, Single Family Mortgage Revenue Bonds,
Series 1984, 0.000%, 2/01/16
270 Peoria Unified School District No. 11 of Maricopa 7/01 at 101 AAA 277,476
County, School Improvement and Refunding Bonds,
Series 1992, 6.400%, 7/01/10 (Pre-refunded to 7/01/01)
500 City of Phoenix, Senior Lien Street and Highway User 7/02 at 102 AA*** 521,960
Revenue Bonds, Series 1992, 6.250%, 7/01/11
460 Pima County, Sewer Revenue Refunding Bonds, Series 7/01 at 101 AAA 474,421
1991, 6.750%, 7/01/15 (Pre-refunded to 7/01/01)
1,925 Tatum Ranch Community Facilities District, General 7/02 at 102 N/R*** 2,028,238
Obligation Bonds, Series 1991A, 6.875%, 7/01/16
(Pre-refunded to 7/01/02)
420 Tempe Union High School District No. 213 of Maricopa 7/04 at 101 AAA 438,039
County, School Improvement and Refunding Bonds,
Series 1994, 6.000%, 7/01/12 (Pre-refunded to
7/01/04)
8,065 Tucson and Pima County Industrial Development No Opt. Call AAA 3,388,832
Authorities, Single Family Mortgage Revenue Bonds,
Series 1983A, 0.000%, 12/01/14
500 City of Tucson, General Obligation Bonds, Series 7/04 at 101 AAA 526,035
1984-G, 6.250%, 7/01/18 (Pre-refunded to 7/01/04)
75 Business Development Finance Corporation, Tucson, 7/02 at 102 AAA 78,312
Local Development Lease Revenue Refunding Bonds,
Series 1992, 6.250%, 7/01/12 (Pre-refunded to 7/01/02)
-----------------------------------------------------------------------------------------------------------------------------------
Utilities ... 6.3%
5 Central Arizona Water Conservation District 5/01 at 102 AA- 5,161
(Central Arizona Project), Contract Revenue
Bonds, Series B 1991, 6.500%, 11/01/11
2,000 Coconino County, Pollution Control Corporation, 10/06 at 102 BBB 1,853,060
Pollution Control Revenue Bonds (Nevada Power
Company Project), Series 1996, 6.375%, 10/01/36
(Alternative Minimum Tax)
500 Mohave County Industrial Development Authority, 8/00 at 101 A+ 505,280
Industrial Development Revenue Bonds (Citizens
Utilities Company Project), Series 1991B, 7,150%,
2/01/26 (Alternative Minimum Tax)
500 The Industrial Development Authority of the County of 11/03 at 101 A-1 503,475
Mohave, Industrial Development Revenue Bonds, 1994
Series (Citizen Utilities Company Projects), 6.600%,
5/01/29 (Alternative Minimum Tax)
195 The Industrial Development Authority of the County of 1/02 at 103 AAA 205,083
Pima, Industrial Development Lease Obligation
Refunding Revenue Bonds, 1988 Series A (Irvington
Project), 7.250%, 7/15/10
2,000 Puerto Rico Electric Power Authority, Power Revenue 7/08 at 101 1/2 BBB+ 1,634,280
Refunding Bonds, Series EE, 4.750%, 7/01/24
</TABLE>
____
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Utilities (continued)
$ 500 Salt River Project Agricultural Improvement and No Opt. Call AA $ 513,120
Power District, Electric System Revenue
Refunding Bonds, Series 1993A, 5.750%, 1/01/10
1,000 The Industrial Development Authority of the 6/07 at 101 A-1 892,220
County of Yavapai. Industrial Development
Revenue Bonds, 1998 Series (Citizens Utilities
Company Project), 5.450%. 6/01/33 (Alternative
Minimum Tax)
--------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 7.0%
1,750 City of Chandler, Water and Sewer Revenue 7/01 at 101 AAA 1,801,205
Refunding Bonds, Series 1991, 6.750%, 7/01/06
City of Cottonwood, Sewer Revenue Refunding Bonds,
Series 1992:
500 6.900%, 7/01/03 7/02 at 101 BBB- 517,440
100 7.000%, 7/01/06 7/02 at 101 BBB- 103,363
100 7.000%, 7/01/07 7/02 at 101 BBB- 103,363
City of Phoenix Civic Improvement Corporation,
Junior Lien Wastewater System Revenue Bonds,
Series 2000:
1,290 6.125%, 7/01/14 (WI) 7/10 at 101 AAA 1,343,122
1,000 6.250%, 7/01/17 (WI) 7/10 at 101 AAA 1,040,090
540 Pima County, Sewer Revenue Refunding Bonds, 7/01 at 101 AAA 555,017
Series 1991, 6.750%, 7/01/15
800 Sedona, Sewer Revenue Refunding Bonds, Series 7/04 at 101 BBB+ 836,446
1992, 7.000%, 7/01/12
500 City of Tucson, Water System Revenue Bonds, 7/01 at 102 A+ 518,350
Series 1991, 6.700%, 7/01/12
-----------------------------------------------------------------------------------------------------------------------------------
$115,840 Total investments (cost $98, 319, 991) - 99.7% 97,262,717
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.3% 295,459
------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $97,558,176
==================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. Three may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensured 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.
See accompanying notes to financial statements.
_____
19
<PAGE>
Portfolio of Investments
Nuveen Flagship Colorado Municipal Bond Fund
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 6.2%
$ 500 Colorado Educational and Cultural Facilities Authority, 12/00 at 100 AA $ 493,650
School Revenue Bonds (Ave Maria School Project),
Series 2000, 6.125%, 12/01/25
300 Colorado Student Obligation Bond Authority, Student 9/00 at 100 A 301,908
Loan Revenue Bonds, 1991 Series A3, 7.250%, 9/01/05
(Alternative Minimum Tax)
240 Colorado Student Obligation Bond Authority, Student 9/02 at 102 A 251,074
Loan Revenue Bonds, 1992 Series C, 7.150%, 9/01/06
(Alternative Minimum Tax)
1,500 Hyland Hills Park and Recreation District, 12/06 at 101 N/R 1,535,055
Adams County, Special Revenue Refunding and Improvement
Bonds, Series 1996A, 6.750%, 12/15/15
-------------------------------------------------------------------------------------------------------------------------------
Healthcare - 11.6%
1,000 Aspen Valley Hospital District, Pitkin County, Revenue 4/10 at 100 N/R 990,270
Bonds, Series 2000, 6.800%, 10/15/24
750 Colorado Health Facilities Authority, Hospital Revenue 9/08 at 100 Baa1 576,285
Bonds (Parkview Medical Center, Inc. Project), Series
1998, 5.300%, 9/01/25
2,500 Colorado Health Facilities Authority, Revenue Bonds 9/09 at 101 N/R 2,003,050
(Steamboat Springs Health Care Association Project),
Series 1999, 5.700%, 9/15/23
1,250 Board of Trustees for the Gunnison Valley Hospital 7/08 at 101 N/R 976,950
(Gunnison County), Hospital Revenue Bonds, Series
1998, 5.625%, 7/01/23
250 County of Pueblo, Insured Hospital Refunding Revenue 9/01 at 101 AAA 258,615
Bonds (Parkview Episcopal Medical Center, Inc. Project),
Series 1991A, 7.000%, 9/01/09
--------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 17.6%
1,265 Boulder County, Multifamily Housing Refunding and 6/09 at 100 N/R 1,145,761
Improvement Revenue Bonds (Thistle Community Housing
Project), Series 1999, 6.375%, 6/01/29
460 Colorado Housing and Finance Authority, Multifamily 4/05 at 102 AA+ 469,030
Housing Insured Mortgage Revenue Bonds, 1995 Series A,
6.650%, 10/01/28 (Alternative Minimum Tax)
1,215 Colorado Housing and Finance Authority, Multifamily 10/08 at 101 AA+ 1,076,320
Housing Insured Mortgage Revenue Bonds, 1998 Series B2,
5.450%, 10/01/28 (Alternative Minimum Tax)
1,000 City and County of Denver, Multifamily Housing Mortgage 7/08 at 102 AAA 872,560
Revenue Bonds (FHA-Insured Mortgage Loan Garden Court
Community), Series 1998, 5.300%, 7/01/28
2,800 City of Englewood, Multifamily Housing Revenue Refunding 12/06 at 102 BBB+ 2,721,992
Bonds (Marks Apartments Project), Series 1996,
6.650%, 12/01/26
1,000 City of Lakewood, Multifamily Housing Mortgage Revenue 10/05 at 102 AAA 1,024,310
Bonds (FHA-Insured Mortgage Loan- The Heights by Marston
Lake Project), Series 1995, 6.650%, 10/01/25 (Alternative
Minimum Tax)
-------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 9.5%
1,000 Colorado Housing and Finance Authority, Single Family 10/09 at 105 Aa2 1,055,530
Program Bonds, 1999 Series C-3, Senior
Bonds, 6.750%, 10/01/21
1,700 Colorado Housing and Finance Authority, Single Family 10/09 at 105 Aa 1,866,141
Program Bonds, 2000 Series A-2, Senior Bonds, 7.450%,
10/01/16 (Alternative Minimum Tax)
130 Colorado Housing and Finance Authority, Single Family 8/01 at 102 AA+ 131,511
Program Senior Bonds, 1991 Issue C-2 (Federally Insured
or Guaranteed Mortgage Loans), 7.375%,
8/01/23 (Alternative Minimum Tax)
850 Colorado Housing and Finance Authority, Single Family No Opt. Call Aa1 558,272
Housing Revenue Refunding Bonds, 1991 Series A, 0.000%,
1l/01/06
85 Pueblo County, Single Family Mortgage Revenue Bonds 6/02 at 102 AA- 87,233
(GNMA and FNMA Mortgage-Backed Securities Program),
Series 1994A, 6.850%, 12/01/25
240 Pueblo County, Single Family Mortgage Revenue Refunding 11/04 at 102 AAA 246,564
Bonds (GNMA and FNMA Mortgage-Backed Securities Program),
Series 1994A, 7.050%, 1l/01/27
</TABLE>
____
20
<PAGE>
<TABLE>
<CAPTION>
Principal Option Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Care - 8.2%
$ 1,000 Colorado Health Facilities Authority, First Mortgage Revenue 1/07 at 101 N/R $ 969,280
Bonds (Christian Living Campus - Johnson Center Nursing
Facility Refunding Project), Series 1997A, 7.050%, 1/01/19
2,500 Colorado Health Facilities Authority, Health Facilities 9/09 at 102 Baa2 2,151,175
Revenue Bonds (National Benevolent Association -Village at
Skyline Project), Series 1999A, 6.375%, 9/01/29
300 Colorado Health Facilities Authority, Health Facilities 3/10 at 101 Baa2 289,281
Revenue Bonds (National Benevolent Association-Village at
Skyline Project), Series 2000C, 7.000%, 3/01/24
------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 3.5%
450 Cherry Creek Vista Park and Recreation District, General 10/02 at 100 N/R 461,925
Obligation Refunding and Improvement Bonds, Series 1992B,
6.875%, 10/01/11
500 El Paso School District No. RJ-1, El Paso and Elbert Counties, 12/04 at 100 AA- 526,720
General Obligation Bonds, Series 1995, 6.800%, 12/01/14
250 Pitkin County, General Obligation Open Space Refunding and 12/04 at 102 A2 266,478
Improvement Bonds, Series 1994, 6.875%, 12/01/24
190 Valley Metropolitan District, Jefferson County, General 12/00 at 101 Baa2 193,633
Obligation Refunding Bonds, Series 1992, 7.000%, 12/15/06
-----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 10.3%
1,000 Colorado Department of Transportation, Transportation 6/10 at 100 1/2 AAA 1,025,120
Revenue Anticipation Notes, Series 2000, 6.000%, 6/15/15 (WI)
175 Jefferson County, Refunding Certificates of Participation, 12/02 at 102 AAA 184,125
6.650%, 12/01/08
1,500 Puerto Rico Highway and Transportation Authority, 7/08 at 101 A 1,238,910
Transportation Revenue Bonds (Series A), 5.000%, 7/01/38
1,000 Puerto Rico Highway and Transportation Authority, 7/10 at 101 A 1,056,580
Transportation Revenue Bonds (Series B), 6.500%, 7/01/27 (WI)
750 City of Woodland Park, Limited Sales Tax Refunding Bonds, 12/03 at 101 AA 770,070
Series 1994B, 6.400%, 12/01/12
------------------------------------------------------------------------------------------------------------------------------------
Transportation - 7.0%
500 City and County of Denver, Special Facilities Airport 10/02 at 102 Baa3 479,055
Revenue Bonds (United Air Lines Project), Series 1992A,
6.875%, 10/01/32 (Alternative Minimum Tax)
3,500 E-470 Public Highway Authority, Senior Revenue Bonds, Series 9/l0 at 79 29/32 AAA 1,430,205
2000A and 2000B, 0.000%, 9/01/14
1,000 Eagle County Air Terminal Corporation, Airport Terminal 5/06 at 101 N/R 1,000,970
Project Revenue Bonds, Series 1996, 7.500%, 5/01/21
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 24.7%
4,300 E-470 Public Highway Authority, Capital Improvement Trust 8/05 at 95 29/32 AAA 3,116,511
Fund Highway Revenue Bonds (E-470 Project), Senior Bonds,
Arapahoe County, 0.000%, 8/31/06 (Pre-refunded to 8/31/05)
5,500 Arapahoe County, Single Family Mortgage Revenue Bonds, No Opt. Call AAA 3,085,390
Series 1984A, 0.000%, 9/01/10
300 Colorado Health Facilities Authority, Revenue Bonds (Rose 8/01 at 102 AAA 313,428
Medical Center), Series 1991, 7.000%, 8/15/21 (Pre-refunded
to 8/15/01)
3,500 Colorado Health Facilities Authority, Retirement Facilities No Opt. Call AAA 688,590
Revenue Bonds (Liberty Heights), Series 1991 B, 0.000%,
7/15/24
900 City of Colorado Springs, Utilities System Revenue Bonds, No Opt. Call AAA 988,479
Series 19788, 6.600%, 11/15/18
250 City and County of Denver, Industrial Development Revenue 3/01 at 102 AAA 260,068
Bonds (University of Denver Project), Series 1991, 7.500%,
3/01/16 (Pre-refunded to 3/01/01)
500 School District No. 38, In the County of El Paso and State 12/01 at 101 AAA 519,274
of 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 (Pre-refunded to l2/01/01)
3,000 El Paso County, Single Family Mortgage Revenue Bonds, 1984 No Opt. Call AAA 1,208,850
Series A, 0.000%, 9/01/15
</TABLE>
___
21
<PAGE>
Portfolio of Investments
Nuveen Flagship Colorado Municipal Bond Fund (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer - 2.7%
$ 1,000 Arapahoe County Water and Wastewater Authority, Water and 12/09 at 100 N/R $ 982,500
Wastewater Revenue Bonds, Series 1999, 6.600%, 12/01/24
120 Colorado Water Resources and Power Development Authority, 11/O2 at 100 AAA 123,960
Small Water Resources Revenue Bonds, Series A, 6.700%, 11/01/12
----------------------------------------------------------------------------------------------------------------------------------
$ 54,020 Total investments (cost $42,787,113) - 101.3% 41,972,658
=============---------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (1.3)% (537,329)
---------------------------------------------------------------------------------------------------------------
Net Assets - 100% $41,435,329
===============================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis.
See accompanying notes to financial statements.
____
22
<PAGE>
Portfolio of Investments
Nuveen Flagship New Mexico Municipal Bond Fund
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 2.0%
$ 1,000 Lordsburg, New Mexico, Pollution Control Revenue Refunding Bonds 4/03 at 102 A2 $ 1,011,840
(Phelps Dodge Corporation Project), Series 1993, 6.500%, 4/01/13
-----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 12.3%
1,600 New Mexico Educational Assistance Foundation, Student Loan Revenue 4/02 at 102 AAA 1,660,608
Bonds, Series 1992A, 6.850%, 4/01/05 (Alternative Minimum Tax)
390 New Mexico Educational Assistance Foundation, Student Loan Revenue 12/02 at 101 Aaa 400,218
Bonds, Senior 1992 Series One-A, 6.550%, 12/01/05 (Alternative
Minimum Tax)
140 New Mexico Educational Assistance Foundation, Student Loan Revenue 12/02 at 101 A 142,201
Bonds, Subordinate 1992 Series One-B, 6.850%, 12/01/05 (Alternative
Minimum Tax)
650 New Mexico Educational Assistance Foundation, Student Loan Revenue No Opt. Call Aaa 673,686
Bonds, Senior 1995 Series IV-A1, 6.500%, 3/01/04 (Alternative
Minimum Tax)
City of Santa Fe, New Mexico, Educational Facilities Revenue
Improvement and Refunding Revenue Bonds, College of Santa Fe
Project), Series 1997:
500 6.000%, 10/01/13 10/07 at 100 BBB- 491,630
500 5.875%, 10/01/21 10/07 at 100 BBB- 459,840
500 City of Santa Fe, New Mexico, Educational Facilities Improvement 10/07 at 100 BBB- 421,195
Revenue Bonds (College of Santa Fe Project), Series 1998A,
5.500%, 10/01/28
2,000 Regents of the University of New Mexico, System Revenue Refunding No Opt. Call AA 2,042,100
Bonds, Series 1992A, 6.000%, 6/01/21
------------------------------------------------------------------------------------------------------------------------------------
Healthcare - 4.5%
3,000 New Mexico Hospital Equipment Loan Council, Hospital Revenue Bonds, 6/08 at 101 Baa2 2,313,180
Series 1998 (Memorial Medical Center Inc. Project), 5.500%, 6/01/28
------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 7.7%
2,000 Bernalillo County, New Mexico, Multifamily Housing Refunding and 6/09 at 101 N/R 1,733,560
Improvement Revenue Bonds, Series 1999 (El Centro Senior Housing
Complex), 5.850%, 6/15/29
1,000 Las Cruces Housing Development Corporation, Multifamily Mortgage 4/02 at 102 A2 1,005,610
Revenue Refunding Bonds, Series 1993A, 6.400%, 10/01/19
1,340 Santa Fe Civic Housing Authority, Inc., Multifamily Housing Revenue 8/08 at 100 AAA 1,205,866
Bonds (The Tuscany at St. Francis Project), Tax-Exempt Series 1998A,
5.500%, 8/01/30 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 19.0%
1,860 New Mexico Mortgage Finance Authority, Single Family Mortgage Program 7/06 at 102 AAA 1,864,557
Bonds, 1996 Series D1, 6.250%, 7/01/22
1,410 New Mexico Mortgage Finance Authority, Single Family Mortgage Program 7/07 at 102 AAA 1,387,793
Bonds, 1996 Series G-2 Bonds, 6.200%, 7/01/28 (Alternative Minimum
Tax)
1,245 New Mexico Mortgage Finance Authority, Single Family Mortgage Program 7/05 at 102 AAA 1,256,778
Bonds, 1995 Series A, 6.650%, 7/01/26 (Alternative Minimum Tax)
</TABLE>
____
23
<PAGE>
Portfolio of Investments
Nuveen Flagship New Mexico Municipal Bond Fund (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 30 New Mexico Mortgage Finance Authority, Single Family Mortgage Purchase 7/02 at 102 AAA $ 30,140
Refunding Senior Bonds, 1992 Series A-1, 6.850%, 7/01/10
500 New Mexico Mortgage Finance Authority, Single Family Mortgage Purchase 7/02 at 102 AAA 508,285
Refunding Senior Bonds, 1992 Series A-2, 6.900%, 7/01/24
700 New Mexico Mortgage Finance Authority, Single Family Mortgage Program 7/07 at 102 AAA 632,758
Bonds, 1997 Series F-2 Bonds, 7/01/29 (Alternative Minimum Tax)
1,000 New Mexico Mortgage Finance Authority, Single Family Mortgage Program 7/08 at 102 AAA 882,210
Bonds, 1998 Series E-2, 5.200%, 7/01/18 (Alternative Minimum Tax)
2,000 New Mexico Mortgage Finance Authority, Single Family Mortgage Program 11/09 at 101 1/2 AAA 2,124,720
2000 Series B, 7.000%, 9/01/31 (Alternative Minimum Tax)
1,060 New Mexico Mortgage Finance Authority, General Revenue Office Building 9/09 at 100 A+ 1,023,260
Bonds, Series 2000, 6.000%, 9/01/26
------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 4.6%
1,500 City of Albuquerque, New Mexico, Revenue Refunding Bonds (The 6/03 at 102 AAA 1,514,775
Evangelical Lutheran Good Samaritan Society), Series 1993, 5.900%,
6/01/13
500 Las Cruces, New Mexico, Health Facilities Revenue Refunding Bonds, 12/02 at 102 AAA 509,055
Series 1992 (Evangelical Lutheran Good Samaritan Society Project),
6.450%, 12/01/17
300 City of Socorro, New Mexico, Health Facilities Refunding Revenue Bonds 5/04 at 102 AAA 359,251
(The Evangelical Lutheran Good Samaritan Society Project), Series
1994, 6.000%, 5/01/08
------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 2.3%
Grants/Cibola County School District 1, General Obligation School
Building Bonds, Series 1994:
480 6.250%, 5/01/08 5/04 at 100 Baa2 487,493
510 6.250%, 5/01/09 5/04 at 100 Baa2 517,069
200 Torrance County, New Mexico, General Obligation Bonds, Series 1993, 7/00 at 100 N/R 199,994
5.500%, 7/01/04
------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 24.0%
1,880 City of Albuquerque, New Mexico, Gross Receipts/Lodgers Tax Refunding No. Opt. Call AAA 998,656
and Improvement Revenue Bonds, Series 1991B, 0.000%, 7/01/11
300 City of Albuquerque, New Mexico, Gross Receipts/Lodgers Tax Refunding 7/00 at 100 AA 257,355
Revenue Bonds, Series 1999B, 5.000%, 7/01/25
2,000 Bernalillo County, New Mexico, Gross Receipts Tax Revenue Bonds, Series 10/09 at 100 AA 1,782,000
1999, 5.250%, 10/01/26
250 Las Cruces, New Mexico, Gross Receipts Tax Revenue Refunding Bonds, 12/02 at 101 A 256,215
Series 1992, 6.250%, 12/01/05
Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds,
Series Y of 1996:
3,550 5.500%, 7/01/36 7/16 at 100 A 3,248,712
750 5.000%, 7/01/36 7/16 at 100 A 625,200
1,000 Puerto Rico Highway and Transportation Authority, Transportation Revenue 7/10 at 101 A 1,056,580
Bonds (Series B), 6.500%, 7/01/27 (WI)
4,000 Santa Fe County, New Mexico, Correctional System Revenue Bonds, Series No Opt. Call AAA 4,047,640
1997, 6.000%, 2/01/27
------------------------------------------------------------------------------------------------------------------------------------
Transportation - 3.9%
1,000 City of Albuquerque, New Mexico, Airport Revenue Bonds, Series 1995A, 7/00 at 105 AAA 1,044,050
6.600%, 7/01/16 (Alternative Minimum Tax)
1,000 Puerto Rico Ports Authority, Special Facilities Revenue Bonds, 1996 6/06 at 102 Baa2 949,650
Series A (American Airlines, Inc. Project), 6.250%, 6/01/26
(Alternative Minimum Tax)
</TABLE>
_____
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S Guaranteed - 8.0%
$ 2,370 City of Albuquerque, New Mexico, Gross Receipts/Lodgers Tax No Opt. Call AAA $ 1,263,020
Refunding and Improvement Revenue Bonds, Series 1991B, 0.000%,
7/01/11
250 City of Albuquerque, New Mexico, Joint Water and Sewer System 7/00 at 100 AAA 250,298
Revenue Bonds, Series 1990A, 6.000%, 7/01/15 (Pre-refunded
to 7/01/00)
90 Las Cruces, New Mexico, Joint Utility Refunding and Improvement 7/02 at 102 A1*** 93,953
Revenue Bonds, Series 1992, 6.250% 7/01/12
1,000 Rio Grande Natural Gas Association (Dona Ana County), Natural Gas 7/03 at 100 A3*** 1,026,990
System Refunding and Improvement Revenue Bonds, Series 1993,
6.125%, 7/01/13 (Pre-refunded to 7/01/03)
375 Sandoval County, New Mexico, Gross Receipts Tax Revenue Refunding 11/02 at 102 Baa1*** 397,039
Bonds, Series 1992, 6.900%, 11/01/12 (Pre-refunded to 11/01/02)
130 Sandoval County, New Mexico, Gross Receipts Tax Revenue Refunding 12/02 at 102 Baa1*** 136,624
Bonds, Series 1992A, 6.500%, 12/01/06 (Pre-refunded to 12/01/02)
500 Sandoval County, New Mexico, Gross Receipts Tax Revenue Bonds, 11/05 at 101 N/R*** 551,385
Subordinate Series 1994, 7.150%, 11/01/10 (Pre-refunded to
11/01/05)
327 Santa Fe County, New Mexico, Office and Training Facilities No Opt. Call Aaa 399,061
Project Revenue Bonds, Series 1990, 9.000%, 7/01/07
----------------------------------------------------------------------------------------------------------------------------------
Utilities - 9.3%
875 Farmington County, New Mexico, Pollution Control Revenue Refunding 12/02 at 102 AAA 887,141
Bonds (Public Service Company of New Mexico, San Juan and Four
Corners Projects), 1992 Series A, 6.375% 12/15/22
2,000 Farmington County, New Mexico, Pollution Control Revenue Bonds 10/09 at 102 BBB- 1,888,820
(Public Service Company of New Mexico), 1999 Series A, 6.600%,
10/01/29 (Alternative Minimum Tax)
1,000 City of Las Cruces, South Central Solid Waste Authority, 6/05 at 100 A3 990,380
Environmental Services Gross Receipts Tax/Project Revenue Bonds,
Series 1995, 6.000%, 6/01/16
1,000 Incorporated County of Los Alamos, Utility System Revenue Bonds 7/04 at 102 AAA 1,020,580
Series 1994A, 6.000%, 7/01/15
----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 1.3%
1,000 City of Albuquerque, Joint Water and Sewer System Revenue Bonds, No Opt. Call AAA 679,500
Series 1990A, 0.000%, 7/01/07
----------------------------------------------------------------------------------------------------------------------------------
$ 54,612 Total Investments (cost $51,770,533) - 98.9% 50,710,521
=============---------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.1% 556,078
---------------------------------------------------------------------------------------------------------------
Net Assets - 100% $51,266,599
===============================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis.
See accompanying notes to financial statements.
____
25
<PAGE>
Statements of Net Assets
May 31, 2000
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value $ 97,262,717 $ 41,972,658 $ 50,710,521
Cash 1,212,250 1,175,103 736,478
Receivables:
Interest 1,831,115 654,837 1,006,677
Investments sold 5,000 10,000 --
Shares sold 23,000 1,915 10,000
Other assets 2,427 711 1,527
-------------------------------------------------------------------------------------------------------------
Total assets 100,336,509 43,815,224 52,465,203
-------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 2,361,465 2,062,003 1,045,743
Shares redeemed 119,470 183,127 375
Accrued expenses:
Management fees 45,723 19,204 23,913
12b-1 distribution and service fees 17,929 10,818 11,414
Other 59,923 40,835 34,996
Dividends payable 173,823 63,908 82,163
-------------------------------------------------------------------------------------------------------------
Total liabilities 2,778,333 2,379,895 1,198,604
-------------------------------------------------------------------------------------------------------------
Net assets $ 97,558,176 $ 41,435,329 $ 51,266,599
=============================================================================================================
Class A Shares
Net assets $ 69,511,754 $ 32,447,651 $ 45,794,578
Shares outstanding 6,790,602 3,415,642 4,742,249
Net asset value and redemption price per share $ 10.24 $ 9.50 $ 9.66
Offering price per share (net asset value per share plus maximum
sales charge of 4.20% of offering price) $ 10.69 $ 9.92 $ 10.08
=============================================================================================================
Class B Shares
Net assets $ 3,680,195 $ 4,533,178 $ 2,716,566
Shares outstanding 359,760 476,414 281,355
Net asset value, offering and redemption price per share $ 10.23 $ 9.52 $ 9.66
=============================================================================================================
Class C Shares
Net assets $ 5,290,466 $ 3,112,557 $ 2,321,150
Shares outstanding 516,931 327,852 240,464
Net asset value, offering and redemption price per share $ 10.23 $ 9.49 $ 9.65
=============================================================================================================
Class R Shares
Net assets $ 19,075,761 $ 1,341,943 $ 434,305
Shares outstanding 1,863,618 141,323 44,872
Net asset value, offering and redemption price per share $ 10.24 $ 9.50 $ 9.68
=============================================================================================================
</TABLE>
See accompanying notes to financial statements.
____
26
<PAGE>
Statement of Operations
Year Ended May 31, 2000
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
----------------------------------------------------------------------------------------------------------------
Investment Income $ 6,448,382 $ 2,731,747 $ 3,310,393
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses
Management fees 595,003 241,911 307,075
12b-1 service fees - Class A 155,408 71,339 100,684
12b-1 distribution and service fees - Class B 38,284 43,440 25,536
12b-1 distribution and service fees - Class C 45,127 20,463 17,775
Shareholders' servicing agent fees and expenses 155,431 107,299 120,226
Custodian's fees and expenses 62,245 51,703 53,176
Trustees' fees and expenses 3,310 2,068 2,563
Professional fees 12,506 2,362 1,232
Shareholders' reports - printing and mailing expenses 109,726 57,748 60,791
Federal and state registration fees 28,273 5,245 8,261
Other expenses 9,488 2,517 2,838
----------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 1,214,801 606,095 700,157
Custodian fee credit (8,035) (3,994) (3,626)
Expense reimbursement (38,747) -- --
----------------------------------------------------------------------------------------------------------------
Net expenses 1,168,019 602,101 696,531
----------------------------------------------------------------------------------------------------------------
Net investment income 5,280,363 2,129,646 2,613,862
----------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (147,776) (1,306,721) (736,135)
Net change in unrealized appreciation or depreciation of investments (9,625,510) (3,795,185) (4,420,670)
----------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (9,773,286) (5,101,906) (5,156,805)
----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $(4,492,923) $(2,972,260) $(2,542,943)
================================================================================================================
</TABLE>
See accompanying notes to financial statements.
____
27
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
--------------------------- -------------------------- --------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
5/31/00 5/31/99 5/31/00 5/31/99 5/31/00 5/31/99
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 5,280,363 $ 5,538,036 $ 2,129,646 $ 2,047,712 $ 2,613,862 $ 2,776,968
Net realized gain (loss) from investment
transactions (147,776) 935,923 (1,306,721) 511,179 (736,135) 514,535
Net change in unrealized appreciation
or depreciation of investments (9,625,510) (1,936,011) (3,795,185) (996,714) (4,420,670) (1,120,839)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations (4,492,923) 4,537,948 (2,972,260) 1,562,177 (2,542,943) 2,170,664
-----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
From undistributed net investment income:
Class A (3,837,164) (4,101,755) (1,799,890) (1,812,447) (2,481,236) (2,560,974)
Class B (168,450) (114,786) (195,981) (122,188) (110,796) (79,582)
Class C (264,023) (278,780) (122,161) (66,954) (103,680) (81,442)
Class R (1,050,036) (1,045,871) (52,929) (42,768) (22,146) (22,648)
From accumulated net realized gains
from investment transactions:
Class A (517,437) (412,344) (94,558) (108,785) -- --
Class B (27,725) (13,676) (12,163) (8,851) -- --
Class C (38,643) (32,343) (6,962) (4,777) -- --
Class R (134,127) (101,198) (2,226) (2,536) -- --
-----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (6,037,605) (6,100,753) (2,286,870) (2,169,306) (2,717,858) (2,744,646)
-----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from sale of shares 11,878,838 18,304,296 10,560,611 12,388,138 4,468,682 8,678,647
Net proceeds from shares issued to
shareholders due to reinvestment
of distributions 2,671,878 2,660,537 881,892 854,120 1,021,846 1,006,025
-----------------------------------------------------------------------------------------------------------------------------------
14,550,716 20,964,833 11,442,503 13,242,258 5,490,528 9,684,672
Cost of shares redeemed (25,053,359) (15,184,364) (11,690,132) (6,264,853) (10,871,056) (5,522,676)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions (10,502,643) 5,780,469 (247,629) 6,977,405 (5,380,528) 4,161,996
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (21,033,171) 4,217,664 (5,506,759) 6,370,276 (10,641,329) 3,588,014
Net assets at the beginning of year 118,591,347 114,373,683 46,942,088 40,571,812 61,907,928 58,319,914
-----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 97,558,176 $118,591,347 $ 41,435,329 $46,942,088 $ 51,266,599 $61,907,928
===================================================================================================================================
Undistributed (Over-distribution of) net
investment income at the end of year $ (36,516) $ 2,794 $ (40,666) $ 649 $ (67,193) $ 36,803
===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
____
28
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Arizona Municipal Bond Fund ("Arizona"), the
Nuveen Flagship Colorado Municipal Bond Fund ("Colorado") and the Nuveen
Flagship New Mexico Municipal Bond Fund ("New Mexico") (collectively, the
"Funds"), among others. The Trust was organized as a Massachusetts business
trust on July 1, 1996.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
accounting principles generally accepted in the United States.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 2000, Arizona, Colorado and New Mexico had outstanding when-issued purchase
commitments of $2,361,465, $2,062,003 and $1,045,743, respectively.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from accounting principles generally
accepted in the United States. 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 shareholders of the Funds. All monthly
tax-exempt income dividends paid during the fiscal year ended May 31, 2000, have
been designated Exempt Interest Dividends. Net realized capital gain and market
discount distributions are subject to federal taxation.
_____
29
<PAGE>
Notes to Financial Statements (continued)
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances, or by specified classes
of investors.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the fiscal year ended May 31, 2000.
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.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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
-----------------------------------------------------
Year Ended Year Ended
5/31/00 5/31/99
------------------------- -------------------------
Shares Amount Shares Amount
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 726,643 $ 7,660,379 1,012,200 $ 11,573,874
Class B 74,778 798,568 263,892 3,014,513
Class C 142,388 1,504,921 128,946 1,472,159
Class R 183,749 1,914,970 196,220 2,243,750
Shares issued to shareholders due to reinvestment of distributions:
Class A 159,034 1,681,809 151,919 1,743,724
Class B 5,876 62,104 3,175 36,412
Class C 13,050 137,901 12,655 145,186
Class R 74,773 790,064 64,055 735,215
----------------------------------------------------------------------------------------------------------------------------
1,380,291 14,550,716 1,833,062 20,964,833
----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,780,585) (18,652,260) (1,018,708) (11,664,214)
Class B (92,844) (971,413) (37,352) (424,518)
Class C (209,947) (2,201,029) (125,596) (1,433,816)
Class R (309,480) (3,228,657) (145,051) (1,661,816)
----------------------------------------------------------------------------------------------------------------------------
(2,392,856) (25,053,359) (1,326,707) (15,184,364)
----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (1,012,565) $(10,502,643) 506,355 $ 5,780,469
============================================================================================================================
</TABLE>
_____
30
<PAGE>
<TABLE>
<CAPTION>
Colorado
-----------------------------------------------------
Year Ended Year Ended
5/31/00 5/31/99
------------------------- -------------------------
Shares Amount Shares Amount
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 496,701 $ 5,003,526 671,535 $ 7,279,788
Class B 161,447 1,601,899 267,870 2,914,260
Class C 142,069 1,392,811 181,898 1,970,240
Class R 259,710 2,562,375 20,587 223,850
Shares issued to shareholders due to reinvestment of distributions:
Class A 68,272 678,948 65,037 707,625
Class B 11,906 118,577 7,439 81,081
Class C 3,436 34,089 2,392 26,018
Class R 5,085 50,278 3,619 39,396
----------------------------------------------------------------------------------------------------------------------------
1,148,626 11,442,503 1,220,377 13,242,258
----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (819,108) (8,096,918) (516,805) (5,592,710)
Class B (110,619) (1,077,525) (15,048) (162,708)
Class C (48,594) (475,455) (34,394) (371,975)
Class R (204,337) (2,040,234) (12,716) (137,460)
----------------------------------------------------------------------------------------------------------------------------
(1,182,658) (11,690,132) (578,963) (6,264,853)
----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (34,032) $ (247,629) 641,414 $ 6,977,405
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
New Mexico
------------------------------------------------------
Year Ended Year Ended
5/31/00 5/31/99
------------------------- -------------------------
Shares Amount Shares Amount
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 338,017 $ 3,386,367 564,095 $ 6,050,839
Class B 68,420 687,416 139,498 1,495,072
Class C 28,292 286,236 105,480 1,131,654
Class R 11,121 108,663 101 1,082
Shares issued to shareholders due to reinvestment of distributions:
Class A 90,985 908,337 85,290 915,668
Class B 5,889 58,613 3,639 39,054
Class C 3,709 37,102 3,293 35,364
Class R 1,781 17,794 1,481 15,939
----------------------------------------------------------------------------------------------------------------------------
548,214 5,490,528 902,877 9,684,672
----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,009,877) (10,055,696) (476,600) (5,099,274)
Class B (50,297) (509,158) (17,756) (189,721)
Class C (17,821) (175,367) (21,822) (233,573)
Class R (13,176) (130,835) (10) (108)
----------------------------------------------------------------------------------------------------------------------------
(1,091,171) (10,871,056) (516,188) (5,522,676)
----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (542,957) $ (5,380,528) 386,689 $ 4,161,996
============================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on July 3, 2000, to shareholders of record on June 9,
2000, as follows:
Arizona Colorado New Mexico
--------------------------------------------------------------------------------
Dividend per share:
Class A $ .0430 $ .0420 $ .0405
Class B .0365 .0360 .0340
Class C .0385 .0375 .0360
Class R .0450 .0435 .0420
================================================================================
_____
31
<PAGE>
Notes to Financial Statements (continued)
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the fiscal year ended May 31,
2000, were as follows:
Arizona Colorado New Mexico
--------------------------------------------------------------------------------
Purchases:
Long-term municipal securities $43,928,430 $23,895,279 $13,471,222
Short-term municipal securities 9,700,000 5,450,000 3,400,000
Sales and maturities:
Long-term municipal securities 54,973,246 23,266,148 18,850,271
Short-term municipal securities 9,700,000 5,450,000 3,400,000
================================================================================
At May 31, 2000, the identified cost of investments owned for federal income tax
purposes were as follows:
Arizona Colorado New Mexico
--------------------------------------------------------------------------------
$98,319,991 $43,623,631 $52,098,473
================================================================================
At May 31, 2000, the Funds had unused capital loss carryforwards available for
federal income tax purposes to be applied against future capital gains, if any.
If not applied, the carryforwards will expire as follows:
Arizona Colorado New Mexico
--------------------------------------------------------------------------------
Expiration Year:
2003 $ -- $ -- $296,633
2004 -- -- 290,586
2005 -- -- --
2006 -- -- --
2007 -- -- --
2008 148,632 470,202 411,479
--------------------------------------------------------------------------------
Total $148,632 $470,202 $998,698
================================================================================
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at May 31, 2000, were as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $ 2,388,848 $ 936,211 $ 588,083
depreciation (3,446,122) (2,587,184) (1,976,035)
-----------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) $(1,057,274) $(1,650,973) $(1,387,952)
===============================================================================================
</TABLE>
___
32
<PAGE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of each Fund:
Average Daily Net Assets Management Fee
--------------------------------------------------------------------------------
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
================================================================================
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 2000, John Nuveen & Co. Incorporated (the
"Distributor"), a wholly owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares, the majority of which were paid
out as concessions to authorized dealers as follows:
Arizona Colorado New Mexico
--------------------------------------------------------------------------------
Sales charges collected $71,863 $39,780 $45,944
Paid to authorized dealers 65,747 39,780 39,160
================================================================================
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the fiscal year ended May 31, 2000, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
Arizona Colorado New Mexico
--------------------------------------------------------------------------------
Commission advances $41,273 $71,389 $34,045
================================================================================
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 collected on Class B Shares, and all 12b-1 service and
distribution fees collected on Class C Shares during the first year following a
purchase are retained by the Distributor. During the fiscal year ended May 31,
2000, the Distributor retained such 12b-1 fees as follows:
Arizona Colorado New Mexico
--------------------------------------------------------------------------------
12b-1 fees retained $42,234 $46,909 $26,796
================================================================================
The remaining 12b-1 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
fiscal year ended May 31, 2000, as follows:
Arizona Colorado New Mexico
--------------------------------------------------------------------------------
CDSC retained $36,969 $33,480 $16,339
================================================================================
7. Composition of Net Assets
At May 31, 2000, 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 $98,800,598 $43,597,170 $53,720,442
Undistributed (Over-distribution of) net investment income (36,516) (40,666) (67,193)
Accumulated net realized gain (loss) from investment transactions (148,632) (1,306,720) (1,326,638)
Net unrealized appreciation (depreciation) of investments (1,057,274) (814,455) (1,060,012)
------------------------------------------------------------------------------------------------------------------------------------
Net assets $97,558,176 $41,435,329 $51,266,599
====================================================================================================================================
</TABLE>
___
33
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
---------------------------- ----------------------------
ARIZONA**
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 (Loss) Total Income Gains Total Value Return (a)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/86)
2000 $ 11.25 $ .52 $ (.94) $(.42) $(.52) $ (.07) $ (.59) $ 10.24 (3.75)%
1999 11.40 .53 (.09) .44 (.54) (.05) (.59) 11.25 3.87
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
Class B (2/97)
2000 11.24 .44 (.94) (.50) (.44) (.07) (.51) 10.23 (4.48)
1999 11.39 .45 (.10) .35 (.45) (.05) (.50) 11.24 3.12
1998 10.94 .47 .47 .94 (.47) (.02) (.49) 11.39 8.67
1997 (d) 10.92 .16 .02 .18 (.16) -- (.16) 10.94 1.64
Class C (2/94)
2000 11.24 .46 (.94) (.48) (.46) (.07) (.53) 10.23 (4.28)
1999 11.39 .47 (.09) .38 (.48) (.05) (.53) 11.24 3.33
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
Class R (2/97)
2000 11.25 .54 (.94) (.40) (.54) (.07) (.61) 10.24 (3.53)
1999 11.40 .56 (.10) .46 (.56) (.05) (.61) 11.25 4.09
1998 10.94 .57 .48 1.05 (.57) (.02) (.59) 11.40 9.79
1997 (d) 10.92 .19 .02 .21 (.19) -- (.19) 10.94 1.96
================================================================================================================
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
------------------- ------------------- -------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
May 31, (000) Assets Assets Assets Assets Assets Assets Rate
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/86)
2000 $ 69,512 1.10% 4.85% 1.06% 4.89% 1.06% 4.90% 41%
1999 86,452 .93 4.57 .84 4.67 .84 4.67 16
1998 85,922 .93 4.77 .83 4.87 .83 4.87 16
1997 82,567 1.05 4.91 .83 5.13 .83 5.13 25
1996 80,094 1.07 4.82 .69 5.20 .69 5.20 38
Class B (2/97)
2000 3,680 1.85 4.11 1.82 4.14 1.81 4.15 41
1999 4,180 1.69 3.84 1.58 3.95 1.58 3.95 16
1998 1,620 1.68 3.98 1.51 4.15 1.51 4.15 16
1997 (d) 347 1.67* 4.38* 1.62* 4.43* 1.62* 4.43* 25
Class C (2/94)
2000 5,290 1.65 4.31 1.61 4.34 1.60 4.35 41
1999 6,426 1.48 4.03 1.39 4.12 1.39 4.12 16
1998 6,328 1.48 4.20 1.35 4.33 1.35 4.33 16
1997 3,189 1.59 4.37 1.38 4.58 1.38 4.58 25
1996 1,970 1.63 4.24 1.23 4.64 1.23 4.64 38
Class R (2/97)
2000 19,076 .91 5.06 .87 5.09 .87 5.10 41
1999 21,534 .73 4.78 .64 4.87 .63 4.87 16
1998 20,504 .73 4.97 .63 5.07 .63 5.07 16
1997 (d) 19,031 .73* 5.32* .67* 5.38* .67* 5.38* 25
============================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Arizona.
(a) Total returns are calculated on net asset value without any sales charge
and not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
_____
34
<PAGE>
<TABLE>
<CAPTION>
Selected data for a share outstanding throughout each period:
Class (Inception Date)
Investment Operations Less Distributions
-------------------------------------- ---------------------------------
COLORADO** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (Loss) Total Income Gains Total Value Return(a)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (5/87)
2000 $10.68 $ .49 $ (1.14) $ .65 $ (.50) $ (.03) $ (.53) $ 9.50 (6.18)%
1999 10.81 .50 (.1O) .40 (.50) (.03) (.53) 10.68 3.76
1998 10.15 .52 .66 1.18 (.52) - (.52) 10.81 11.85
1997 9.79 .53 .35 .88 (.52) - (.52) 10.15 9.22
1996 9.93 .54 (.13) .41 (.55) - (.55) 9.79 4.14
Class B (2/97)
2000 10.70 .42 (1.15) (.73) (.42) (.03) (.45) 9.52 (6.88)
1999 10.82 .42 (.08) .34 (.43) (.03) (.46) 10.70 3.11
1998 10.16 .43 .68 1.11 (.45) - (.45) 10.82 11.03
1997 (d) 10.21 .12 (.06) .06 (.11) - (.11) 10.16 .61
Class C (2/97)
2000 10.67 .43 (1.14) (.71) (.44) (.03) (.47) 9.49 (6.73)
1999 10.80 .44 (.10) .34 (.44) (.03) (.47) 10.67 3.19
1998 10.15 .46 .66 1.12 (.47) - (.47) 10.80 11.17
1997 (d) 10.13 .16 .02 .18 (.16) - (.16) 10.15 1.75
Class R (2/97)
2000 10.69 .51 (1.15) (.64) (.52) (.03) (.55) 9.50 (6.08)
1999 10.81 .52 (.08) .44 (.53) (.03) (.56) 10.69 4.08
1998 10.16 .54 .66 1.20 (.55) - (.55) 10.81 11.98
1997 (d) 10.21 .15 (.06) .09 (.14) - (.14) 10.16 .85
====================================================================================================================================
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
-------------------- ------------------- -------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
May 31, (000) Assets Assets Assets Assets Assets Assets Rate
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (5/87)
2000 $32,448 1.26% 4.94% 1.26% 4.94% 1.25% 4.95% 54%
1999 39,189 1.03 4.54 .96 4.61 .96 4.62 23
1998 37,285 1.01 4.83 1.00 4.84 1.00 4.84 19
1997 31,229 1.18 4.87 .74 5.31 .74 5.31 27
1996 33,637 1.27 4.69 .55 5.41 .55 5.41 70
Class B (2/97)
2000 4,533 2.04 4.19 2.04 4.19 2.03 4.20 54
1999 4,424 1.78 3.80 1.68 3.90 1.68 3.91 23
1998 1,661 1.76 4.05 1.75 4.06 1.75 4.06 19
1997 (d) 444 1.78* 4.35* 1.53* 4.60* 1.53* 4.60* 27
Class C (2/97)
2000 3,113 1.89 4.38 1.89 4.38 1.86 4.39 54
1999 2,464 1.58 4.00 1.49 4.10 1.49 4.10 23
1998 875 1.56 4.24 1.55 4.25 1.55 4.25 19
1997 (d) 103 1.58* 4.67* 1.31* 4.94* 1.31* 4.94* 27
Class R (2/97)
2000 1,342 1.11 5.16 1.11 5.16 1.10 5.17 54
1999 864 .83 4.74 .76 4.81 .75 4.82 23
1998 750 .81 5.02 .80 5.03 .80 5.03 19
1997 (d) 413 .83* 5.35* .58* 5.60* .58* 5.60* 27
======================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Colorado.
(a) Total returns are calculated on net asset value without any sales charge
and not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
_____
35
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------- -------------------------------
NEW MEXICO** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (Loss) Total Income Gains Total Value Return(a)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/92)
2000 $10.58 $ .47 $ (.90) $ (.43) $ (.49) $ - $ (.49) $ 9.66 (4.09)%
1999 10.67 .49 (O.9) .40 (.49) - (.49) 10.58 3.74
1998 10.16 .50 .51 1.01 (.50) - (.50) 10.67 10.17
1997 9.81 .51 .35 .86 (.51) - (.51) 10.16 8.90
1996 10.01 .51 (.19) .32 (.52) - (.52) 9.81 3.18
Class B (2/97)
2000 10.57 .40 (.90) (.50) (.41) - (.41) 9.66 (4.75)
1999 10.67 .41 (.10) .31 (.41) - (.41) 10.57 2.89
1998 10.15 .43 .52 .95 (.43) - (.43) 10.67 9.46
1997 (d) 10.24 .12 (.10) .02 (.11) - (.11) 10.15 .18
Class C (2/97)
2000 10.58 .42 (.92) (.50) (.43) - (.43) 9.65 (4.71)
1999 10.67 .43 (.09) .34 (.43) - (.43) 10.58 3.22
1998 10.16 .45 .51 .96 (.45) - (.45) 10.67 9.60
1997 (d) 10.23 .12 (.08) .04 (.11) - (.11) 10.16 .43
Class R (2/97)
2000 10.60 .49 (.90) (.41) (.51) - (.51) 9.68 (3.89)
1999 10.70 .51 (.10) .41 (.51) - (.51) 10.60 3.86
1998 10.17 .53 .53 1.06 (.53) - (.53) 10.70 10.59
1997 (d) 10.23 .14 (.07) .07 (.13) - (.13) 10.17 .71
===============================================================================================================================
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement Reimbursement
-------------- ------------- -------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
May 31, (000) Assets Assets Assets Assets Assets Assets Rate
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/92)
2000 $45,795 1.19% 4.73% 1.19% 4.73% 1.19% 4.74% 24%
1999 56,315 .97 4.52 .91 4.58 .90 4.58 14
1998 54,959 .93 4.65 .79 4.79 .79 4.79 13
1997 50,807 1.08 4.76 .77 5.07 .77 5.07 43
1996 51,173 1.09 4.69 .68 5.10 .68 5.10 57
Class B (2/97)
2000 2,717 1.97 3.98 1.97 3.98 1.96 3.98 24
1999 2,721 1.72 3.77 1.67 3.82 1.67 3.83 14
1998 1,408 1.68 3.88 1.53 4.03 1.53 4.03 13
1997 (d) 657 1.68* 4.05* 1.54* 4.19* 1.54* 4.19* 43
Class C (2/97)
2000 2,321 1.76 4.18 1.76 4.18 1.75 4.18 24
1999 2,393 1.52 3.97 1.47 4.03 1.46 4.03 14
1998 1,487 1.48 4.06 1.31 4.23 1.31 4.23 13
1997 (d) 155 1.48* 4.26* 1.34* 4.40* 1.34* 4.40* 43
Class R (2/97)
2000 434 1.01 4.91 1.01 4.91 1.00 4.91 24
1999 479 .77 4.72 .71 4.78 .70 4.78 14
1998 466 .73 4.86 .58 5.01 .58 5.01 13
1997 (d) 362 .73* 5.04* .59* 5.18* .59* 5.18* 43
=====================================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship New Mexico.
(a) Total returns are calculated on net asset value without any sales charge and
not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
____
36
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust I:
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Flagship Arizona Municipal Bond Fund,
Nuveen Flagship Colorado Municipal Bond Fund and Nuveen Flagship New Mexico
Municipal Bond Fund (collectively, the "Funds") (three of the portfolios
constituting the Nuveen Flagship Multistate Trust I (a Massachusetts business
trust)), as of May 31, 2000, the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two years
then ended and the financial highlights for each of the three years then ended.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for the Funds for the years ended May 31, 1997 and prior were audited
by other auditors whose report dated July 11, 1997, expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of May 31, 2000, by correspondence with the custodian and brokers. As
to securities purchased but not received, we requested confirmation from
brokers, and when replies were not received, we carried out alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Flagship Arizona Municipal Bond Fund, Nuveen Flagship Colorado Municipal Bond
Fund, and Nuveen Flagship New Mexico Municipal Bond Fund of the Nuveen Flagship
Multistate Trust I as of May 31, 2000, and the results of their operations for
the year then ended, the changes in their net assets for each of the two years
then ended and the financial highlights for each of the three years then ended,
in conformity with accounting principles generally accepted in the United
States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 18, 2000
______
37
<PAGE>
Notes
-----
______
38
<PAGE>
Notes
-----
______
39
<PAGE>
Notes
-----
______
40
<PAGE>
Fund Information
Board of Trustees Transfer Agent and
Shareholder Services
Robert P. Bremner Chase Global Funds Services Company
73 Tremont Street
Lawrence H. Brown Boston, MA 02108
Anne E. Impellizzeri (800) 257-8787
Peter R. Sawers Legal Counsel
Morgan, Lewis &
William J. Schneider Bockius LLP
Washington, D.C.
Timothy R. Schwertfeger
Independent Public Accountants
Judith M. Stockdale Arthur Andersen LLP
Chicago, IL
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
____
41
<PAGE>
[Photo of John Nuveen, Sr. Since 1898, John Nuveen & Co. Incorporated
Appears here] has been synonymous with investments that
John Nuveen, Sr. withstand the test of time. In fact, more
than 1.3 million investors have trusted
Nuveen to help them build and sustain the
wealth of a lifetime.
Whether your focus is long-term growth,
dependable income or sustaining
accumulated wealth, Nuveen offers a wide
variety of investments and services to
help meet your unique circumstances and
financial planning needs. We can help you
build a better, well-diversified
portfolio.
Call Your Financial Advisor Today
To find out how Nuveen Mutual Funds might
round out your investment portfolio,
contact your financial advisor today. Or
call Nuveen at (800) 257-8787 for more
information. Ask your advisor or call for
a prospectus, which details risks, fees
and expenses. Please read the prospectus
carefully before you invest.
NUVEEN
Investments
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
www.nuveen.com
<PAGE>
NUVEEN
Investments
Municipal Bond
Funds
ANNUAL REPORT MAY 31, 2000
Dependable, tax-free income to help you keep more of what you earn.
[PHOTOS APPEAR HERE]
INVEST WELL
LOOK AHEAD
LEAVE YOUR MARK/sm/
Florida Municipal Bond Fund
<PAGE>
Contents
1 Dear Shareholder
3 Nuveen Flagship Florida Municipal Bond Fund
6 Portfolio of Investments
13 Statement of Net Assets
14 Statement of Operations
14 Statement of Changes in Net Assets
15 Notes to Financial Statements
18 Financial Highlights
19 Report of Independent Public Accountants
21 Fund Information
Must be preceded by or accompanied by a prospectus.
<PAGE>
DEAR
Shareholder,
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
As personal wealth continues to grow at an ever-increasing rate, people are
realizing the power of their investments to do good and to make a difference in
their families and communities now and for generations to come.
Setting financial goals is an important first step toward building wealth. At
Nuveen Investments, we believe those goals should not be considered ends in
themselves. Rather, you and your financial advisor's focus should be on
realizing your life's dreams -- the things that matter most to you and how you
can make them happen -- or make them better.
Through a well-crafted financial plan, you have the chance to shape future
generations -- to broaden your sphere of influence -- to leave your legacy.
As you develop that plan, you'll want to consider the different ways your
success can benefit others. You may find that you want to create a new set of
goals to achieve this. Working with your financial advisor, you have the ability
to make those dreams a reality -- for yourself and future generations.
Family Wealth Management Too often, family wealth management is thought of in
one dimension -- as the stewardship of your household's financial resources. At
Nuveen Investments, we think of family wealth management as the map to help you
reach your financial, and your life's, destinations. It's a multi-faceted
strategy to plan for not just your needs, but the needs of future generations.
We are dedicated to helping you and your financial advisor develop a family
wealth management strategy unique to you and your goals and values.
A Trusted Resource As you face some of the most important, lasting decisions you
and your family will make, you'll want to draw upon the support, counsel and
objectivity of a trusted advisor. That's because your financial advisor has the
expertise and access to other professionals who can help you make informed
choices -- choices that affect not only your loved ones today, but those your
legacy will touch in the future.
Your financial advisor can provide sound financial insight, an integrated
approach to your investments and can serve as a knowledgeable friend with your
family's best interests at heart.
ANNUAL REPORT page 1
<PAGE>
In addition, we believe the potential presence of inflation and price
swings in the markets reinforce the importance of working with an advisor,
staying focused on the long term and adhering to your financial plan. With a
sound plan in place, you may be better positioned to weather the markets' ups
and downs.
In fact, you may be reading this report at the suggestion of your financial
advisor. We've prepared the following interview to let you know what the
investment and research management teams have done during your fund's fiscal
period.
For more information on any Nuveen investment, including a prospectus,
contact your financial advisor. Or call Nuveen at (800) 621-7227 or visit our
Internet site at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. We are committed to maintaining that reputation and working with
financial advisors to provide investment solutions that help individuals achieve
their dreams of a lifetime. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 17, 2000
ANNUAL REPORT page 2
<PAGE>
NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
--------------------------------------------------------------------------------
Nuveen Flagship Florida Municipal Bond Fund features portfolio management by
Nuveen Investment Management, a team of portfolio managers and research analysts
committed to a disciplined, research-oriented investment strategy. To help you
understand the fund's performance for the fiscal year ended May 31, 2000, we
spoke with Portfolio Manager Tom O'Shaughnessy.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within its specific
areas of expertise. Nuveen has chosen them for their rigorously disciplined
investment approaches and their consistent long-term performance. Drawing on
decades of experience and specialized knowledge, these skilled asset managers
have earned reputations for excellence in their fields of expertise, whether it
is blue-chip growth stocks, large-cap value stocks, bonds or international
securities. Nuveen's income-oriented funds feature portfolio management by
Nuveen Investment Management (NIM). NIM follows a disciplined, research-driven
investment approach to uncover income securities that combine exceptional
relative value with above-average return potential. Drawing on 300 combined
years of investment experience, the Nuveen team of portfolio managers and
research analysts offers:
. A commitment to exhaustive research
. An active, value-oriented investment style
. The unmatched presence of trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen Municipal Bond Funds.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the fiscal year ended May 31, 2000. The views expressed reflect those of
the portfolio management team and are subject to change at any time, based on
market and other conditions.
Q Can you begin our discussion by addressing the reasons why municipal bonds,
like most fixed-income securities, performed poorly during the past 12 months?
TOM Sure. In an effort to rein in the economy and the stock market, the Federal
Reserve (the Fed) made six short-term interest rate increases during the past 12
months. The most recent was a half-percentage-point increase in May, the largest
in five years. That boosted short-term interest rates to their highest levels
since 1991.
One of the basic tenets of bond investing is that when interest rates rise,
bond yields generally follow suit and bond prices, which move in the opposite
direction, decline. The 25-year municipal bond as measured by the Bond Buyer 25,
for example, started the period yielding 5.46% and ended it at 6.27%, a jump of
81 basis points. Amid this rising interest rate environment, demand for most
fixed-income securities -- including municipals -- was weak.
Fortunately, we saw evidence of mitigating factors that may bode well for
future performance. The effects of reduced demand for bonds was offset somewhat
by a dramatic decrease in supply, as municipal issuers, flush with cash from
increased tax collections and revenues, have reduced borrowings. Furthermore,
the economy continued to benefit from solid trends in tourism and international
trade, especially with Latin America. Miami, in particular, was a beneficiary,
with Mercedes-Benz relocating its Latin headquarters there.
Q How did Nuveen Flagship Florida Municipal Bond Fund perform during the fiscal
year ended May 31, 2000?
TOM The fund generated a 12-month total return on net asset value of -2.17%,
which compares favorably to the -3.22% total return posted by the Lipper Florida
Municipal Debt Peer Group.* The fund's one-year taxable equivalent total return,
for investors in a 31% federal income tax bracket, was 0.17%.**
Q How did the fund perform against the Lehman Brothers Municipal Bond Index?
TOM The fund underperformed the broader Lehman index with a 12-month average
total return of -0.86% for the period ended May 31, 2000.*** However, we feel
Lipper's Florida-specific benchmark gives investors a truer comparative picture.
We
ANNUAL REPORT page 3
<PAGE>
present both so they can compare the fund to other Florida funds as well as to a
national benchmark.
FLORIDA
Top Five Sectors
Housing (Multifamily).........19%
U.S. Guaranteed...............15%
Long-Term Care................10%
Tax Obligation (Limited)...... 9%
Tax Obligation (General)...... 9%
As a percentage of total bond holdings as of May 31, 2000. Holdings are subject
to change.
FLORIDA
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed....................55%
AA............................10%
A.............................14%
BBB........................... 7%
NR............................14%
As a percentage of total bond holdings as of May 31, 2000. Holdings are subject
to change.
Q What was your strategy during this difficult market?
TOM Although the market environment we experienced over the past year could be
distracting, we remained focused on finding attractive opportunities for the
fund. In the first half of the period, that meant engaging in trades known as
swaps, whereby we sold bonds with lower interest rates and bought similar bonds
at higher prevailing rates. In addition to increasing the fund's income-
producing potential, these swaps helped enhance the fund's tax efficiency, as
some sales generated tax losses that can be used to offset realized capital
gains for up to eight years.
In the second half of the fiscal year, we focused on identifying
attractively priced high-yielding, non-rated and lower-quality investment grade
bonds for the fund. As interest rates and bond yields climbed, the difference in
yield -- the "spread" -- between higher- and lower-quality bonds widened fairly
dramatically. This is because lower-quality bonds must pay increasingly higher
yields to attract investors capable of and willing to analyze their associated
risks. Even with these purchases, the fund's overall credit quality remained
high, with nearly 55% of net assets in AAA/U.S. Guaranteed rated bonds as of May
31, 2000.
Using the resources and expertise of our research team, we identified a
number of attractive high-yielding opportunities within the hospital and
multifamily housing sectors. A good example is bonds issued by the City of
Atlantic Beach for the Fleet Landing Project, a retirement facility. The
research team analyzed the underlying credit quality of the project and the
dynamics of the retirement facility sector.
Q Are these strategies measures that investors could practically use on their
own with individual bonds?
TOM Probably not. The amount of research involved plus the transaction costs
would make it difficult to impossible for an individual to use these strategies.
As a large institutional investor, Nuveen has the ability to trade in large
blocks and even negotiate the terms of an entire issue of municipal bonds. Our
research capabilities allow us to purchase some very attractive bond issues
before they even make it to the retail market.
Q What is your outlook for Nuveen Flagship Florida Municipal Bond Fund?
TOM The bond market appears to be anticipating the end of Fed efforts to slow
the economy by raising interest rates. If that proves to be the case, the
interest-rate backdrop should become more favorable for bond prices.
We believe that today's market, characterized by wide spreads between high-
and low-quality bonds, plays to our research strengths. Drawing on Nuveen's
research team, we'll continue to look for opportunities to add lower-quality
bonds that offer adequate compensation, as measured by enough incremental yield,
to compensate for their added credit risk. If the spread between lower- and
higher-quality bonds returns to more historic norms -- which we believe will
happen if interest rates stabilize -- lower-quality bonds should outperform.
* The Lipper Peer Group return represents the average annualized total return
of the 64 funds in the Lipper Florida Municipal Debt category for the one-
year period ended May 31, 2000. The return assumes reinvestment of
dividends and does not reflect any applicable sales charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the 31% federal income tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
*** The Lehman Brothers Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds and does not reflect any initial or
ongoing expenses.
ANNUAL REPORT page 4
<PAGE>
NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND
Fund Spotlight as of May 31, 2000
<TABLE>
<CAPTION>
Quick Facts
<S> <C> <C> <C> <C>
A Shares B Shares C Shares R Shares
NAV $ 9.97 $ 9.96 $ 9.97 $ 9.96
--------------------------------------------------------------------------------------------------------------------------
Latest Monthly Dividend* $0.0455 $0.0390 $0.0410 $0.0470
--------------------------------------------------------------------------------------------------------------------------
Fund Symbol FLOTX N/A N/A NMFLX
--------------------------------------------------------------------------------------------------------------------------
CUSIP 67065L708 67065L658 67065L641 67065L872
--------------------------------------------------------------------------------------------------------------------------
Inception Date 6/90 2/97 9/95 2/97
--------------------------------------------------------------------------------------------------------------------------
*Paid June 1, 2000
Total Returns as of 5/31/00 (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC NAV NAV
1-Year -2.17% -6.26% -3.10% -6.80% -2.79% -2.07%
--------------------------------------------------------------------------------------------------------------------------
1-Year TER* 0.17% -4.02% -1.10% -4.80% -0.70% 0.36%
--------------------------------------------------------------------------------------------------------------------------
5-Year 4.13% 3.23% 3.41% 3.25% 3.57% 4.26%
--------------------------------------------------------------------------------------------------------------------------
5-Year TER* 6.53% 5.62% 5.50% 5.34% 5.71% 6.73%
--------------------------------------------------------------------------------------------------------------------------
Since Inception 6.32% 5.86% 5.83% 5.83% 5.73% 6.38%
--------------------------------------------------------------------------------------------------------------------------
Since Inception TER* 8.93% 8.46% 8.23% 8.23% 8.09% 9.03%
--------------------------------------------------------------------------------------------------------------------------
*Taxable Equivalent Return (based on a federal income tax rate of 31%).
Total Returns as of 3/31/00 (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC NAV NAV
1-Year -1.46% -5.62% -2.30% -6.03% -2.00% -1.16%
--------------------------------------------------------------------------------------------------------------------------
5-Year 5.03% 4.12% 4.31% 4.14% 4.46% 5.17%
--------------------------------------------------------------------------------------------------------------------------
Since Inception 6.54% 6.08% 6.05% 6.05% 5.96% 6.62%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
+Class A share returns are actual. Class B, C and R share returns are actual for
the period since class inception; returns prior to class inception are Class A
share returns adjusted for differences in sales charges and expenses, which are
primarily differences in distribution and service fees. Class A shares have a
4.2% maximum sales charge. Class B shares have a CDSC that begins at 5% for
redemptions during the first year after purchase and declines periodically to
0% over the following five years. Class C shares have a 1% CDSC for redemptions
within one year which is not reflected in the one-year total return.
<TABLE>
<CAPTION>
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC NAV NAV
<S> <C> <C> <C> <C> <C>
Distribution Rate* 5.48% 5.24% 4.70% 4.93% 5.66%
--------------------------------------------------------------------------------------------------------------------------
SEC 30-Day Yield 3.68% 3.53% 2.93% 3.13% 3.88%
--------------------------------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 5.33% 5.12% 4.25% 4.54% 5.62%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
*The distribution rate differs from yield and total return and therefore is not
intended to be a complete measure of performance. Distribution rate may
sometimes differ from yield because a fund may be paying out more or less than
it is earning and because it may not include the effect of amortization of bond
premiums to the extent such premiums arise after the bonds were purchased.
Index Comparision/./
[MOUNTAIN CHART APPEARS HERE]
Nuveen Flagship Nuveen Flagship
Florida Municipal Florida Municipal Lehman Brothers
Bond Fund (Offer) Bond Fund (NAV) Municipal Bond Index
6/1990 $ 9,580 $10,000 $10,000
5/1991 10,481 10,941 10,912
5/1992 11,575 12,082 11,984
5/1993 13,021 13,592 13,418
5/1994 13,284 13,866 13,749
5/1995 14,407 15,039 15,001
5/1996 14,861 15,512 15,687
5/1997 15,988 16,689 16,988
5/1998 17,377 18,138 18,582
5/1999 18,033 18,823 19,451
5/2000 19,284 18,416 19,284
Nuveen Flagship Florida Municipal Bond Fund (Offer) $17,643
Nuveen Flagship Florida Municipal Bond Fund (NAV) $18,416
Lehman Brothers Municipal Bond Index $19,284
.The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or ongoing
expenses. The Nuveen fund return depicted in the chart reflects the initial
maximum sales charge applicable to A shares (4.20%) and all ongoing fund
expenses.
Portfolio Statistics
Total Net Assets $341.8 million
-----------------------------------------
Average Effective
Maturity 19.79 years
-----------------------------------------
Average Duration 7.67
-----------------------------------------
Terms To Know
The following are a few terms used throughout this report.
Distribution Rate Most recent dividend per share (annualized) divided by the
appropriate price per share (e.g., net asset value for purchases to be made
without a load such as reinvestments from Nuveen Unit Trusts, or the maximum
public offering price).
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Typically the shorter the duration, the
less price and return variability you can expect in the fund's price per share
as interest rates change.
Federal Fund Rate The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of short-term interest rates.
Municipal Bond A bond issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio. This figure is computed by dividing the net
investment income per share earned during the specified one-month or 30-day
period by the maximum offering price per share on the last day of the period.
Taxable Equivalent Yield The yield an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
Taxable Equivalent Total Return The total return an investor would have to
realize on a fully taxable investment to equal the stated total return on a tax-
exempt investment.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
ANNUAL REPORT page 5
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Municipal Bond Fund
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 4.8%
$ 750 Clay County Development Authority, Industrial Development Revenue 7/02 at 102 AA- $ 766,380
Refunding Bonds (Cargill Incorporated Project), Series 1992,
6.400%, 3/01/11
5,500 Escambia County, Pollution Control Revenue Bonds (Champion International 8/04 at 102 Baa1 5,554,120
Project), Series 1994, 6.900%, 8/01/22 (Alternative Minimum Tax)
8,350 Escambia County, Pollution Control Revenue Bonds (Champion International 9/06 at 102 Baa1 7,932,918
Project), Series 1996, 6.400%, 9/01/30 (Alternative Minimum Tax)
600 City of Jacksonville, Industrial Development Revenue Refunding Bonds 3/02 at 102 AA- 611,808
(Cargill Incorporated Project), Series 1992, 6.400%, 3/01/11
1,500 Nassau County, Pollution Control Revenue Refunding Bonds (ITT Rayonier 7/03 at 102 Baa 1,416,480
Inc. Project), Series 1993, 6.200%, 7/01/15
------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 0.1%
300 Brevard County Educational Facilities Authority, Educational Facilities 11/02 at 102 BBB- 306,054
Refunding and Improvement Revenue Bonds, Series 1992, 6.875%, 11/01/22
------------------------------------------------------------------------------------------------------------------------------------
Healthcare - 7.6%
3,000 Jacksonville Health Facilities Authority, Hospital Facilities Refunding 11/01 at 102 AA+ 3,132,270
Revenue Bonds, Series 1991 (St. Luke's Hospital Association Project),
7.125%, 11/15/20
6,000 City of Lakeland, Hospital Revenue Refunding Bonds (Lakeland Regional 11/06 at 102 AAA 5,299,140
Medical Center Project), Series 1996, 5.250%, 11/15/25
2,320 Martin County Health Facilities Authority, Hospital Revenue Refunding 11/00 at 102 AAA 2,390,157
Bonds, Series 1990A (Martin Memorial Hospital), 7.125%, 11/15/04
2,500 Orange County Health Facilities Authority, Hospital Revenue Bonds, 11/01 at 102 AAA 2,612,275
Series 1991-A (Adventist Health System/Sunbelt, Inc.),
6.875%, 11/15/15
2,500 Orange County Health Facilities Authority, Hospital Revenue Bonds, 11/01 at 102 AAA 2,605,375
Series 1991-B, (Adventist Health System/Sunbelt, Inc.),
6.750%, 11/15/21
10,645 Orange County Health Facilities Authority, Hospital Revenue Bonds, 11/05 at 102 AAA 9,612,541
Series 1995 (Adventist Health System/Sunbelt, Inc.),
5.250%, 11/15/20
455 Orange County Health Facilities Authority, Hospital Revenue Bonds, No Opt. Call AAA 476,690
Series 1996C (Orlando Regional Healthcare System), 6.250%, 10/01/21
------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 18.3%
600 Housing Finance Authority of Broward County, Multifamily Housing Revenue 2/05 at 102 AAA 636,678
Refunding Bonds (Lakeside Apartments Project), Series 1995,
7.000%, 2/01/25
250 Housing Finance Authority of Broward County, Multifamily Housing Revenue 8/06 at 102 AAA 252,363
Refunding Bonds (Boardwalk Apartments Project), Series 1996,
6.200%, 8/01/16
910 Housing Finance Authority of Broward County, Multifamily Housing Revenue 10/08 at 102 N/R 869,805
Bonds (Stirling Apartments Project), Series 1998, 5.400%, 10/01/11
(Alternative Minimum Tax)
11,300 Housing Finance Authority of Broward County, Multifamily Housing Revenue 7/09 at 102 N/R 10,425,832
Bonds (The Pier Club Apartments Project), Series 1999, 7.000%, 7/01/34
2,700 Duval County Housing Finance Authority, Multifamily Housing Revenue 4/05 at 102 BBB+ 2,799,549
Refunding Bonds, Series 1995 (Greentree Place Project), 6.750%, 4/01/25
710 Florida Housing Finance Agency, General Mortgage Revenue Refunding Bonds, 6/02 at 103 AAA 722,113
1992 Series A, 6.400%, 6/01/24
Florida Housing Finance Agency, Housing Revenue Bonds (Antigua Club
Apartments Project), 1995 Series A1:
1,000 6.750%, 8/01/14 (Alternative Minimum Tax) 2/05 at 102 AAA 1,040,600
5,000 6.875%, 8/01/26 (Alternative Minimum Tax) 2/05 at 102 AAA 5,236,950
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 1,115 Florida Housing Finance Agency, Housing Revenue Bonds (Brittany of 2/05 at 102 AAA $ 1,167,840
Rosemont Apartments Project), 1995 Series C1, 6.875%, 8/01/26
(Alternative Minimum Tax)
Florida Housing Finance Agency, Housing Revenue Bonds (The Vineyards
Project), 1995 Series H:
1,260 6.400%, 11/01/15 11/05 at 102 BBB+ 1,271,000
1,660 6.500%, 11/01/25 11/05 at 102 BBB+ 1,649,675
2,000 Florida Housing Finance Agency, Multifamily Housing Revenue Refunding 8/06 at 102 AAA 2,018,900
Bonds, 1991 Series C, 6.200%, 8/01/16
3,500 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series H 10/06 at 102 AAA 3,488,730
(Villas of Capri Project), 6.100%, 4/01/17 (Alternative Minimum Tax)
1,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series N 9/06 at 102 AAA 1,005,620
(Leigh Meadows Apartments Project), 6.300%, 9/01/36
(Alternative Minimum Tax)
1,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series O 9/06 at 102 AAA 1,005,620
(Stoddert Arms Apartments Project), 6.300%, 9/01/36
(Alternative Minimum Tax)
1,435 Florida Housing Finance Agency, Multifamily Housing Revenue Bonds, 6/00 at 102 AAA 1,466,699
1989 Series I (GNMA Collateralized - Driftwood Terrace Apartments
Project), 7.650%, 12/20/31 (Alternative Minimum Tax)
2,500 Florida Housing Finance Agency, Housing Revenue Bonds, 1997 Series L 5/08 at 102 AAA 2,209,225
(Sarahs Place Apartments Project), 5.400%, 11/01/32
(Alternative Minimum Tax)
10,000 Florida Housing Finance Agency, Housing Revenue Bonds, Series 1998 T1 7/08 at 102 N/R 8,868,100
(Whistlers Cove Apartment Project), 6.500%, 1/01/39
(Alternative Minimum Tax) (Mandatory put 1/01/28)
1,670 Florida Housing Finance Corporation, Housing Revenue Refunding Bonds, 12/08 at 102 A+ 1,480,021
1998 Series O (Hunters Ridge at Deerwood Apartments), 5.250%, 12/01/18
1,000 Orange County Housing Finance Authority, Multifamily Housing Revenue 10/01 at 101 BBB+ 1,003,900
Bonds (Ashley Point Apartments Project), 1994 Series A,
7.100%, 10/01/24 (Alternative Minimum Tax)
750 Housing Finance Authority of Palm Beach County, Multifamily Housing 6/08 at 102 N/R 673,403
Revenue Bonds (Windsor Park Apartments Project), Series 1998,
5.900%, 6/01/38 (Alternative Minimum Tax)
13,100 Housing Finance Authority of Palm Beach County, Multifamily Housing 7/10 at 102 N/R 12,882,802
Revenue Bonds (Saddlebrook Apartments Project), Series 2000A,
7.450%, 7/01/40 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 7.5%
1,785 Housing Finance Authority of Broward County, Home Mortgage Revenue Bonds, No Opt. Call AAA 366,336
1985 Series A, 0.000%, 4/01/16
1,825 Housing Finance Authority of Clay County, Single Family Mortgage Revenue 3/05 at 102 Aaa 1,869,658
Bonds, Series 1995 (Multi-County Program), 6.550%, 3/01/28
(Alternative Minimum Tax)
1,960 Housing Finance Authority of Clay County, Single Family Mortgage Revenue 4/07 at 102 Aaa 1,773,682
Bonds, Series 1998 (Multi-County Program), 5.450%, 4/01/31
(Alternative Minimum Tax)
185 Housing Finance Authority of Dade County, Single Family Mortgage Revenue 9/00 at 102 Aaa 188,966
Bonds, 1990 Series B, 7.750%, 3/01/17 (Alternative Minimum Tax)
580 Housing Finance Authority of Dade County, Single Family Mortgage Revenue 3/01 at 102 Aaa 591,003
Bonds, Series B, 7.250%, 9/01/23 (Alternative Minimum Tax)
331 Housing Finance Authority of Dade County, Single Family Mortgage Revenue 12/01 at 102 AAA 337,928
Bonds, 1991 Series D, 6.950%, 12/15/12
30 Housing Finance Authority of Dade County, Single Family Mortgage Revenue 3/01 at 102 Aaa 30,701
Bonds, 1991 Series E, 7.000%, 3/01/24
1,000 Housing Finance Authority of Dade County, Single Family Mortgage Revenue 4/05 at 102 AAA 1,030,200
Bonds, Series 1995, 6.700%, 4/01/28 (Alternative Minimum Tax)
240 Duval County Housing Finance Authority, Single Family Mortgage Revenue 9/00 at 103 AAA 246,734
Bonds (GNMA Mortgage-Backed Securities Program), Series 1990A,
7.650%, 9/01/10
550 Duval County Housing Finance Authority, Single Family Mortgage Revenue 10/04 at 102 Aaa 563,074
Bonds (GNMA Mortgage-Backed Securities Program), Series 1994,
6.550%, 10/01/15 (Alternative Minimum Tax)
1,570 Escambia County Housing Finance Authority, Single Family Mortgage 4/01 at 102 Aaa 1,611,527
Revenue Bonds, Series 1991A (Multi-County Program),
7.400%, 10/01/23 (Alternative Minimum Tax)
</TABLE>
7
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Municipal Bond Fund (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 235 Escambia County Housing Finance Authority, Single Family Mortgage Revenue 4/02 at 102 Aaa $ 241,394
Bonds, Series 1992A (Multi-County Program), 6.900%, 4/01/20
(Alternative Minimum Tax)
565 Escambia County Housing Finance Authority, Single Family Mortgage Revenue 4/05 at 102 AAA 586,973
Bonds, Series 1995, (Multi-County Program), 6.950%, 10/01/27
(Alternative Minimum Tax)
1,040 Florida Housing Finance Agency, Single Family Mortgage Revenue Refunding 7/04 at 102 AAA 1,051,440
Bonds, Series A, 6.250%, 7/01/11
Florida Housing Finance Agency, Single Family Mortgage Revenue Refunding
Bonds, Series 1995A:
690 6.550%, 7/01/14 (Alternative Minimum Tax) 1/05 at 102 AAA 703,220
690 6.650%, 1/01/24 (Alternative Minimum Tax) 1/05 at 102 AAA 710,652
245 Leon County Housing Finance Authority, Single Family Mortgage Revenue 4/01 at 102 Aaa 249,209
Bonds, 1991 Series A (Multi-County Program), 7.300%, 4/01/21
(Alternative Minimum Tax)
1,765 Leon County Housing Finance Authority, Single Family Mortgage Revenue No Opt. Call AAA 1,877,325
Bonds, Series 1995B (Multi-County Program), 7.300%, 1/01/28
(Alternative Minimum Tax)
530 Housing Finance Authority of Manatee County, Single Family Mortgage 11/05 at 102 Aaa 570,768
Revenue Bonds, Series 1994, Subseries 3, 7.600%, 11/01/26
(Alternative Minimum Tax)
235 Orange County Housing Finance Authority, GNMA Collateralized Mortgage 7/00 at 103 AAA 242,428
Revenue Refunding Bonds, 1990 Series A, 7.600%, 1/01/24
1,995 Orange County Housing Finance Authority, Homeowner Revenue Bonds, 9/07 at 102 Aaa 1,745,505
1998 Series A-1, 5.200%, 9/01/23 (Alternative Minimum Tax)
9,125 Orange County Housing Finance Authority, Homeowner Revenue Bonds, 9/08 at 27 23/32 Aaa 1,322,851
1999 Series A-2, 0.000%, 3/01/31
2,300 Orange County Housing Finance Authority, Homeowner Revenue Bonds, 9/08 at 101 1/2 Aaa 2,127,270
1999 Series A-1, 5.600%, 9/01/24 (Alternative Minimum Tax)
665 Housing Finance Authority of Palm Beach County, Single Family Mortgage 9/00 at 103 Aaa 682,722
Revenue Bonds, 1990 Series B, 7.600%, 3/01/23
1,480 Pinellas County Housing Finance Authority, Single Family Mortgage Revenue 2/05 at 102 AAA 1,520,626
Bonds (Multi-County Program), Series 1995A, 6.650%, 8/01/21
(Alternative Minimum Tax)
2,000 Pinellas County Housing Finance Authority, Single Family Mortgage Revenue 3/07 at 102 Aaa 2,094,780
Bonds (Multi-County Program), Series 1998A, 6.850%, 3/01/29
(Alternative Minimum Tax)
1,160 Polk County Housing Finance Authority, Single Family Mortgage Revenue 3/01 at 102 Aaa 1,192,271
Refunding Bonds, Series 1991A, 7.150%, 9/01/23
------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 10.0%
10,000 City of Atlantic Beach, Health Care Facilities Revenue Refunding Bonds 10/09 at 101 A 9,341,300
(Fleet Landing Project), Series 1999, 6.000%, 10/01/29
2,735 Dade County Health Facilities Authority, Revenue and Revenue Refunding 8/00 at 102 A1 2,783,245
Bonds, Series 1990 (Catholic Health and Rehabilitation Services, Inc.
Project), 7.125%, 8/15/09
Escambia County Health Facilities Authority, Health Facilities Revenue
Bonds (Azalea Trace, Inc.), Series 1997:
1,000 6.000%, 1/01/15 1/07 at 102 N/R 869,470
1,595 6.100%, 1/01/19 1/07 at 102 N/R 1,353,884
Jacksonville Health Facilities Authority, Tax-Exempt Industrial
Development Revenue Bonds (National Benevolent Association -
Cypress Village Project), Series 1996A:
690 6.125%, 12/01/16 12/06 at 102 Baa2 609,049
1,000 6.250%, 12/01/26 12/06 at 102 Baa2 858,540
3,000 Orange County Health Facilities Authority, Tax-Exempt Mortgage Revenue 7/09 at 101 AAA 2,747,670
Bonds (South Central Nursing Homes, Inc. Project), Series 1999A,
5.500%, 7/01/32
1,550 Osceola County Industrial Development Authority, Revenue Bonds, 5/01 at 102 AAA 1,602,297
Series 1991 (The Evangelical Lutheran Good Samaritan Society Project),
6.750%, 5/01/16
8,000 Palm Beach County Health Facilities Authority, Retirement Community 11/06 at 102 A- 7,005,280
Revenue Bonds (Adult Communities Total Services, Inc. Obligated
Group), Series 1996, 5.625%, 11/15/20
4,000 Palm Beach County, Industrial Development Revenue Bonds, Series 1996 12/06 at 102 A+ 4,024,480
(Lourdes-Noreen McKeen Residence for Geriatric Care, Inc. Project),
6.625%, 12/01/26
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Long-Term Care (continued)
Sarasota County Health Facilities Authority, Health Facilities Revenue
Refunding Bonds, Series 1995 (Sunnyside Properties Project):
$ 300 5.500%, 5/15/01 No Opt. Call N/R $ 299,448
540 5.500%, 5/15/02 No Opt. Call N/R 536,981
570 5.500%, 5/15/03 No Opt. Call N/R 562,727
600 5.500%, 5/15/04 No Opt. Call N/R 586,488
170 5.500%, 5/15/05 No Opt. Call N/R 164,288
1,000 6.000%, 5/15/10 5/06 at 102 N/R 917,370
-----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 8.6%
Village of Bolingbrook, General Obligation Bonds, Series 1999C
Refunding:
2,540 0.000%, 1/01/29 1/09 at 33 7/8 AAA 404,749
7,750 0.000%, 1/01/31 1/09 at 30 5/16 AAA 1,086,008
7,750 0.000%, 1/01/33 1/09 at 27 3/32 AAA 949,065
1,325 0.000%, 1/01/34 1/09 at 25 21/32 AAA 152,123
State of Florida, Full Faith and Credit, Broward County Expressway
Authority, Series of 1984:
4,000 9.875%, 7/01/09 No Opt. Call AA+ 5,107,960
1,000 10.000%, 7/01/14 No Opt. Call AA+ 1,384,270
2,165 State of Florida, Full Faith and Credit, State Board of Education Public No Opt. Call AA+ 2,826,537
Education Capital Outlay Bonds, Series 1985, 9.125%, 6/01/14
3,000 State of Florida, Full Faith and Credit, State Board of Education Public 6/00 at 100 AA+ 2,578,500
Education Capital Outlay Bonds, Series 1989-A (Refunding Bonds),
5.000%, 6/01/24
State of Florida, Full Faith and Credit, State Board of Education Public
Education Capital Outlay Bonds, 1996 Series B:
2,220 4.750%, 6/01/21 6/07 at 101 AA+ 1,841,423
4,120 4.500%, 6/01/27 6/07 at 101 AA+ 3,163,830
5,000 State of Florida, Full Faith and Credit, State Board of Education Public 6/08 at 101 AAA 4,120,400
Education Capital Outlay Bonds, 1997 Series B, 4.750%, 6/01/23
3,000 State of Florida, Full Faith and Credit, State Board of Education Public 6/09 at 101 AAA 2,347,110
Education Capital Outlay Refunding Bonds, 1999 Series B, 4.500%, 6/01/24
Palm Beach County, General Obligation Bonds (Recreational and Cultural
Facilities Program), Series 1999A:
1,560 5.750%, 8/01/18 8/09 at 100 Aa1 1,550,297
1,970 5.750%, 8/01/19 8/09 at 100 Aa1 1,950,655
-----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 8.9%
Dade County, Special Obligation and Refunding Bonds, Series 1996B:
4,835 0.000%, 10/01/07 No Opt. Call AAA 3,242,061
3,585 5.000%, 10/01/35 10/06 at 102 AAA 3,021,438
190 Certificates of Participation, Series 1992, The School Board of Escambia 2/02 at 100 AAA 193,412
County, 6.375%, 2/01/12
1,500 Certificates of Participation, Series 1994, The Department of Corrections, 3/04 at 102 A+ 1,515,420
6.000%, 3/01/14
5,000 The County of Hernando (Criminal Justice Complex Financing Program), 1986 No Opt. Call AAA 6,024,550
Series, 7.650%, 7/01/16
250 City of Jacksonville, Excise Taxes Revenue Refunding Bonds, Series 1992, 10/02 at 102 AAA 260,498
6.500%, 10/01/13
1,010 Martin County, Special Assessment Bonds, Series 1995 (Tropical Farms Water 11/05 at 100 A2 1,015,838
and Sewer Special Assessment District), 5.900%, 11/01/11
1,000 Miami Beach Redevelopment Agency, Tax Increment Revenue Bonds, Series 1993 12/04 at 102 Baa1 935,030
(City Center/Historic Convention Village), 5.875%, 12/01/22 (Alternative
Minimum Tax)
1,750 Northern Palm Beach County, Improvement District Water Control and 8/09 at 101 N/R 1,566,128
Development Bonds, Unit of Development No. 9B, Series 1999, 6.000%,
8/01/29
5,550 Okaloosa County, Fourth Tourist Development Tax Revenue Bonds, Series 2000, 10/10 at 101 AAA 5,409,308
5.625%, 10/01/30
</TABLE>
9
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Municipal Bond Fund (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 1,000 The School Board of Palm Beach County, Certificates of 8/04 at 101 AAA $ 1,056,690
Participation, Series 1994A, 6.375%, 8/01/15
1,000 City of Palm Beach Gardens, Special Obligation Revenue Bonds, 7/00 at 101 AAA 1,021,900
Series 1990, 7.250%, 7/01/15
4,500 Puerto Rico Highway and Transportation Authority, Highway 7/16 at 100 A 4,118,085
Revenue Bonds, Series Y of 1996, 5.500%, 7/01/36
3,300 City of Tampa, Utilities Tax Improvement Bonds, Series 1996, No Opt. Call AAA 1,197,207
0.000%, 4/01/17
-----------------------------------------------------------------------------------------------------------------------------------
Transportation - 3.3%
1,000 Dade County, Aviation Facilities Revenue Bonds, 1992 Series B, 10/02 at 102 AAA 1,038,150
6.550%, 10/01/13 (Alternative Minimum Tax)
1,250 Greater Orlando Aviation Authority, Airport Facilities Revenue 10/07 at 101 AAA 1,113,600
Bonds of the City of Orlando, Series 1997, 5.250%, 10/01/23
(Alternative Minimum Tax)
1,000 Hillsborough County Aviation Authority, Tampa International 10/06 at 102 AAA 993,630
Airport Revenue Bonds, Series 1996B, 5.875%, 10/01/23
1,845 Palm Beach County, Airport System Revenue Refunding Bonds, No Opt. Call AAA 1,862,804
Series 1991, 7.500%, 10/01/00
Sanford Airport Authority, Industrial Development Revenue Bonds
(Central Florida Terminals Inc. Project), Series 1995A:
3,000 7.500%, 5/01/15 (Alternative Minimum Tax) 5/06 at 102 N/R 3,042,510
3,270 7.750%, 5/01/21 (Alternative Minimum Tax) 5/06 at 102 N/R 3,347,532
-----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 14.9%
1,925 City of Boynton Beach, Water and Sewer Utility Revenue Bonds, 11/00 at 102 AAA 1,985,176
Series 1990, 7.400%, 11/01/15 (Pre-refunded to 11/01/00)
1,500 Certificates of Participation, Series 1990A, The School Board 7/00 at 102 AAA 1,533,045
of Broward County, 7.125%, 7/01/10 (Pre-refunded to 7/01/00)
255 Dade County, Special Obligation Bonds (Courthouse Center 4/04 at 102 A3*** 269,303
Project), Series 1994, 6.300%, 4/01/14 (Pre-refunded to 4/01/04)
1,500 Dade County Health Facilities Authority, Hospital Revenue Bonds, No Opt. Call AAA 1,491,795
Series 1991A (Baptist Hospital of Miami Project), 5.750%, 5/01/21
300 Dade County Health Facilities Authority, Hospital Revenue 8/02 at 102 AAA 314,865
Refunding Bonds, Series 1992 (North Shore Medical Center Project),
6.500%, 8/15/15 (Pre-refunded to 8/15/02)
310 Certificates of Participation, Series 1992, The School Board of 2/02 at 100 AAA 317,198
Escambia County, 6.375%, 2/01/12 (Pre-refunded to 2/01/02)
300 State of Florida, Full Faith and Credit, Pollution Control 7/02 at 101 AA+*** 312,045
Bonds, Series Y, Division of Bond Finance of the Department of
General Services, 6.600%, 7/01/17 (Pre-refunded to 7/01/02)
335 State of Florida, Full Faith and Credit, State Board of 6/00 at 100 1/2 AAA 434,003
Education, Public Education Capital Outlay Bonds, Series 1985,
9.125%, 6/01/14
5,000 State of Florida, Full Faith and Credit, State Board of 6/01 at 101 AAA 5,146,850
Education, Public Education Capital Outlay Bonds, Series 1991-B,
6.700%, 6/01/22 (Pre-refunded to 6/01/01)
2,000 State Board of Education of Florida, Public Education Capital 6/02 at 101 AAA 2,082,280
Outlay Bonds, Series 1991-C, 6.625%, 6/01/17 (Pre-refunded to 6/01/02)
2,990 Hillsborough County, Environmentally Sensitive Land Acquisition 7/02 at 102 Aa3*** 3,118,989
and Protection Program Bonds, Series 1992, 6.250%, 7/01/08
(Pre-refunded to 7/01/02)
1,000 Hillsborough County Port District (Tampa Port Authority), 12/00 at 102 Baa1*** 1,037,120
Revenue Bonds, Series 1990, 8.250%, 6/01/09 (Pre-refunded to 12/01/00)
1,635 Hillsborough County, Refunding Utility Revenue Bonds, Series 8/01 at 102 BBB+*** 1,705,763
1991A, 7.000%, 8/01/14 (Pre-refunded to 8/01/01)
250 City of Hollywood, Water and Sewer Revenue Bonds, Series 1991, 10/01 at 102 AAA 261,328
6.875%, 10/01/21 (Pre-refunded to 10/01/01)
1,810 Jacksonville Electric Authority, Bulk Power Supply System 10/00 at 101 1/2 Aaa 1,851,232
Revenue Bonds (Scherer 4 Project, Issue One, Series 1991A),
7.000%, 10/01/12 (Pre-refunded to 10/01/00)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,500 Town of Lady Lake, Industrial Development Revenue Bonds (Sunbelt 7/00 at 102 N/R*** $1,535,940
Utilities, Inc. Project), Series 1990, 9.625%, 7/01/15 (Alternative
Minimum Tax) (Pre-refunded to 7/01/00)
1,000 Martin County Health Facilities Authority, Hospital Revenue Bonds, 11/00 at 102 AAA 1,030,830
Series 1990B (Martin Memorial Hospital South Project), 7.100%,
11/15/20 (Pre-refunded to 11/15/00)
1,050 City of Naples, Hospital Revenue Bonds (Naples Community Hospital, Inc. 10/00 at 102 AAA 1,079,673
Project), Series 1990, 7.200%, 10/01/19 (Pre-refunded to 10/01/00)
1,195 City of North Miami Health Facilities Authority, Health Facility 8/00 at 102 A+*** 1,224,361
Revenue Bonds (Villa Maria Nursing and Rehabilitation Center Project),
Series 1985B, Remarketed (Bon Secours Health System), 7.500%, 9/01/12
(Pre-refunded to 8/01/00)
3,400 North Springs Improvement District, Water and Sewer Revenue Bonds, 10/01 at 102 N/R*** 3,604,442
Series 1991, 8.000%, 10/01/16 (Pre-refunded to 10/01/01)
145 Orange County, Sales Tax Revenue Bonds, Series 1989, 6.125%, 1/01/19 No Opt. Call AAA 149,723
1,750 Orange County, Tourist Development Tax Revenue Bonds, Series 1990, 10/00 at 102 AAA 1,799,910
7.250%, 10/01/10 (Pre-refunded to 10/01/00)
235 Orange County, Water Utilities System Revenue Bonds, Series 1992, 4/02 at 102 AAA 244,717
6.250%, 10/01/17 (Pre-refunded to 4/01/02)
1,425 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series P, 7/01 at 102 AAA 1,490,664
7.000%, 7/01/21 (Pre-refunded to 7/01/01)
500 City of St. Petersburg Health Facilities Authority, Revenue Bonds, 12/01 at 102 AAA 522,610
Series 1985A (Allegany Health System Loan Program), 7.000%, 12/01/15
(Pre-refunded to 12/01/01)
2,000 City of St. Petersburg Health Facilities Authority, Allegany Health 12/03 at 100 AAA 2,084,320
System Revenue Bonds, Series 1991 (St. Anthony's Health Care Center,
Inc.), 6.750%, 12/01/21 (Pre-refunded to 12/01/03)
1,610 City of St. Petersburg Health Facilities Authority, Allegany Health 12/01 at 102 AAA 1,688,294
System Revenue Bonds, Series 1991 (St. Mary's Hospital, Inc.), 7.000%,
12/01/21 (Pre-refunded to 12/01/01)
2,500 The School Board of Seminole County, Certificates of Participation, 7/04 at 101 AAA 2,673,875
Series 1994B, 6.750%, 7/01/14 (Pre-refunded to 7/01/04)
5,000 Sunrise Lakes Phase 4 Recreation District, General Obligation and 8/05 at 102 BBB-*** 5,417,500
Revenue Bonds, Series 1995A, 6.750%, 8/01/24 (Pre-refunded to 8/01/05)
1,000 City of Tampa, Allegany Health System Revenue Bonds, Series 1991 12/01 at 102 AAA 1,041,800
(St. Joseph's Hospital, Inc.), 6.750%, 12/01/17 (Pre-refunded to
12/01/01)
2,000 City of Tampa, Allegany Health System Revenue Bonds, St. Joseph's 12/04 at 102 AAA 2,138,620
Hospital, Inc. Issue, Series 1994, 6.500%, 12/01/23 (Pre-refunded
to 12/01/04)
335 City of Tampa, Water and Sewer Systems Revenue Bonds, Series 1992, 10/02 at 101 AAA 345,810
6.000%, 10/01/17 (Pre-refunded to 10/01/02)
1,000 Turtle Run Community Development District (Coral Springs), Water 5/03 at 100 BBB+*** 1,033,730
Management Benefit Tax Refunding Bonds, Series 1993, 6.400%, 5/01/11
(Pre-refunded to 5/01/03)
-----------------------------------------------------------------------------------------------------------------------------------
Utilities - 7.8%
3,775 Broward County, Resource Recovery Revenue Bonds, Series 1984 (SES 6/00 at 103 A+ 3,895,083
Broward Company, L.P. South Project), 7.950%, 12/01/08
6,000 Citrus County, Pollution Control Refunding Revenue Bonds, Series 1992A 1/02 at 102 A+ 6,097,680
(Florida Power Corporation, Crystal River Power Plant Project), 6.625%,
1/01/27
2,500 Hillsborough County Industrial Development Authority, Pollution Control 8/01 at 103 AA 2,647,025
Revenue Bonds (Tampa Electric Company Project), Series 1991, 7.875%,
8/01/21
2,125 Lee County, Solid Waste System Revenue Bonds, Series 1991A, 7.000%, 10/01 at 102 AAA 2,208,810
10/01/11 (Alternative Minimum Tax)
1,000 Orlando Utilities Commission, Water and Electric Subordinated No Opt. Call Aa2 1,114,330
Revenue Bonds, Series 1989D, 6.750%, 10/01/17
1,250 Orlando Utilities Commission, Water and Electric Subordinated 10/02 at 102 Aa2 1,251,050
Revenue Bonds, Series 1992A, 6.000%, 10/01/20
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Florida Municipal Bond Fund (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Utilities (continued)
$ 4,000 Pinellas County, Pollution Control Refunding Revenue Bonds (Florida Power 6/01 at 102 A+ $ 4,161,600
Corporation Anclote and Bartow Power Plants Project), Series 1991,
7.200%, 12/01/14
3,000 St. Lucie County, Solid Waste Disposal Revenue Bonds (Florida Power and 2/01 at 102 AA- 3,093,690
Light Company Project), Series 1991, 7.150%, 2/01/23 (Alternative
Minimum Tax)
2,000 St. Lucie County, Solid Waste Disposal Revenue Bonds (Florida Power and 5/02 at 102 AA- 2,069,260
Light Company Project), Series 1992, 6.700%, 5/01/27 (Alternative
Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 6.3%
705 City of Callaway, Bay County, Wastewater System Revenue Bonds, Series 9/06 at 102 AAA 706,509
1996A, 6.000%, 9/01/26
City of Clearwater, Water and Sewer Revenue Refunding Bonds,
Series 1998:
2,155 0.000%, 12/01/12 12/08 at 85 7/16 AAA 1,027,375
1,000 0.000%, 12/01/13 12/08 at 80 13/14 AAA 445,790
1,000 0.000%, 12/01/18 12/08 at 62 1/8 AAA 314,870
7,500 Dade County, Water and Sewer System Revenue Bonds, Series 1997, 10/07 at 101 AAA 6,736,725
5.250%, 10/01/26
1,000 Town of Davie, Water and Sewer Improvement and Refunding Revenue Bonds, 10/02 at 102 AAA 1,020,950
Series 1992, 6.250%, 10/01/17
600 The City of Daytona Beach, Water and Sewer Revenue Bonds, Series 1992, 11/02 at 102 AAA 609,444
6.000%, 11/15/14
2,000 Escambia County Utilities Authority, Utility System Revenue Bonds, No Opt. Call AAA 843,920
Series 1992B, 0.000%, 1/01/15
5,750 Hillsborough County, Refunding Utility Revenue Bonds, Series 1991A, 8/01 at 102 AAA 5,958,955
6.500%, 8/01/16
375 City of Jacksonville, Water and Sewer Development Revenue Bonds, Series 6/02 at 102 A 389,220
1992 (Jacksonville Suburban Utilities Corporation Project), 6.750%,
6/01/22 (Alternative Minimum Tax)
250 Town of Jupiter, Water Revenue Bonds, Series 1992B, 6.250%, 10/01/18 10/01 at 102 AAA 259,350
Manatee County, Public Utilities Revenue Refunding and Improvement
Bonds, Series 1991C:
1,850 0.000%, 10/01/08 No Opt. Call AAA 1,168,997
2,800 0.000%, 10/01/09 No Opt. Call AAA 1,665,384
265 Orange County, Water Utilities System Revenue Bonds, Series 1992, 6.250%, 4/02 at 102 AAA 269,976
10/01/17
165 City of Tampa, Water and Sewer Systems Revenue Bonds, Series 1992, 10/02 at 101 AAA 166,574
6.000%, 10/01/17
-----------------------------------------------------------------------------------------------------------------------------------
$ 375,461 Total Investments (cost $337,470,261) - 98.1% 335,212,489
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.9% 6,551,486
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $341,763,975
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
12
<PAGE>
Statement of Net Assets
Nuveen Flagship Florida Municipal Bond Fund
May 31, 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Assets
<S> <C>
Investments in municipal securities, at market value $335,212,489
Receivables:
Interest 6,187,054
Investments sold 4,222,258
Shares sold 197,712
Other assets 11,504
-------------------------------------------------------------------------------
Total assets 345,831,017
-------------------------------------------------------------------------------
Liabilities
Cash overdraft 2,514,275
Payables:
Shares redeemed 796,873
Accrued expenses:
Management fees 156,320
12b-1 distribution and service fees 66,609
Other 84,164
Dividends payable 448,801
-------------------------------------------------------------------------------
Total liabilities 4,067,042
-------------------------------------------------------------------------------
Net assets $341,763,975
===============================================================================
Class A Shares
Net assets $250,177,854
Shares outstanding 25,088,022
Net asset value and redemption price per share $ 9.97
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 10.41
===============================================================================
Class B Shares
Net assets $ 17,475,900
Shares outstanding 1,753,823
Net asset value, offering and redemption price per share $ 9.96
===============================================================================
Class C Shares
Net assets $ 17,167,206
Shares outstanding 1,721,144
Net asset value, offering and redemption price per share $ 9.97
===============================================================================
Class R Shares
Net assets $ 56,943,015
Shares outstanding 5,714,372
Net asset value, offering and redemption price per share $ 9.96
===============================================================================
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
Statement of Operations
Nuveen Flagship Florida Municipal Bond Fund
Year Ended May 31, 2000
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
<S> <C>
Investment Income $ 23,087,716
------------------------------------------------------------------------------------------------------------
Expenses
Management fees 1,971,449
12b-1 service fees - Class A 548,684
12b-1 distribution and service fees - Class B 161,597
12b-1 distribution and service fees - Class C 127,789
Shareholders' servicing agent fees and expenses 409,273
Custodian's fees and expenses 325,361
Trustees' fees and expenses 9,774
Professional fees 43,925
Shareholders' reports - printing and mailing expenses 215,832
Federal and state registration fees 17,262
Other expenses 24,537
------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit 3,855,483
Custodian fee credit (33,465)
------------------------------------------------------------------------------------------------------------
Net expenses 3,822,018
------------------------------------------------------------------------------------------------------------
Net investment income 19,265,698
------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (2,184,113)
Net change in unrealized appreciation or depreciation of investments (26,098,616)
------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (28,282,729)
------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ (9,017,031)
============================================================================================================
</TABLE>
Statement of Changes in Net Assets
Nuveen Flagship Florida Municipal Bond Fund
<TABLE>
<CAPTION>
Year Ended Year Ended
5/31/00 5/31/99
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 19,265,698 $ 18,834,935
Net realized gain (loss) from investment transactions (2,184,113) 759,812
Net change in unrealized appreciation or depreciation of investments (26,098,616) (5,925,814)
------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (9,017,031) 13,668,933
------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
From undistributed net investment income:
Class A (14,690,289) (14,921,960)
Class B (776,137) (442,577)
Class C (818,455) (508,583)
Class R (3,229,875) (3,072,260)
From accumulated net realized gains from investment transactions:
Class A (235,458) (1,072,990)
Class B (16,056) (39,163)
Class C (15,568) (40,494)
Class R (50,141) (204,848)
------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (19,831,979) (20,302,875)
------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from sale of shares 76,566,543 77,448,397
Net proceeds from shares issued to shareholders due to reinvestment of
distributions 5,658,065 8,202,477
------------------------------------------------------------------------------------------------------------
82,224,608 85,650,874
Cost of shares redeemed (102,414,624) (49,952,837)
------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions (20,190,016) 35,698,037
------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (49,039,026) 29,064,095
Net assets at the beginning of year 390,803,001 361,738,906
------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 341,763,975 $390,803,001
============================================================================================================
Undistributed (Over-distribution of) net investment income at the end of year $ (235,144) $ 13,914
============================================================================================================
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Florida Municipal Bond Fund (the "Fund"),
among others. The Trust was organized as a Massachusetts business trust on
July 1, 1996.
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with
accounting principles generally accepted in the United States.
Securities Valuation
The prices of municipal bonds in the Fund's investment portfolio are provided by
a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 2000, there were no such outstanding purchase commitments in the Fund.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions are distributed to shareholders not less frequently
than annually. Furthermore, capital gains are distributed only to the extent
they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from accounting principles generally
accepted in the United States. 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 shareholders of the Fund. All monthly tax-exempt
income dividends paid during the fiscal year ended May 31, 2000, have been
designated Exempt Interest Dividends. Net realized capital gain and market
discount distributions are subject to federal taxation.
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without any up-front sales charge
but may be subject to a contingent deferred sales charge ("CDSC") if redeemed
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
15
<PAGE>
Notes to Financial Statements (continued)
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances or by specified classes of
shareholders.
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the fiscal year ended May 31, 2000.
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.
Custodian Fee Credit
The Fund has an agreement with the custodian bank whereby the custodian fees and
expenses are reduced by credits earned on the Fund's cash on deposit with the
bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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>
Year Ended Year Ended
5/31/00 5/31/99
--------------------------- -------------------------
Shares Amount Shares Amount
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 5,472,990 $ 56,132,319 4,391,925 $ 48,059,545
Class B 606,071 6,204,693 1,052,216 11,537,205
Class C 742,489 7,562,351 889,995 9,754,281
Class R 658,885 6,667,180 740,527 8,097,366
Shares issued to shareholders due
to reinvestment of distributions:
Class A 326,276 3,348,209 550,411 6,036,519
Class B 16,498 168,646 9,759 107,077
Class C 18,606 190,224 14,513 159,110
Class R 190,394 1,950,986 173,280 1,899,771
-------------------------------------------------------------------------------------------------------
8,032,209 82,224,608 7,822,626 85,650,874
-------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (8,353,990) (85,005,388) (4,017,386) (43,978,264)
Class B (333,318) (3,404,697) (78,240) (856,729)
Class C (529,326) (5,386,171) (113,554) (1,243,022)
Class R (851,984) (8,618,368) (354,310) (3,874,822)
-------------------------------------------------------------------------------------------------------
(10,068,618) (102,414,624) (4,563,490) (49,952,837)
-------------------------------------------------------------------------------------------------------
Net increase (decrease) (2,036,409) $ (20,190,016) 3,259,136 $ 35,698,037
-------------------------------------------------------------------------------------------------------
</TABLE>
3. Distributions to Shareholders
The Fund declared dividend distributions from its tax-exempt net investment
income which were paid on July 3, 2000, to shareholders of record on
June 9, 2000, as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
Dividend per share:
<S> <C>
Class A $.0455
Class B .0390
Class C .0410
Class R .0470
-----------------------------------------------------------------------
</TABLE>
16
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities during the fiscal year ended May 31, 2000, aggregated $64,761,520 and
$88,139,987, respectively. There were no purchases or sales (including
maturities) of investments in short-term municipal securities during the fiscal
year ended May 31, 2000.
At May 31, 2000, the identified cost of investments owned for federal income tax
purposes was $338,457,495.
At May 31, 2000, the Fund had an unused capital loss carryforward of $1,267,282
available for federal income tax purposes to be applied against future capital
gains, if any. If not applied, the carryforward will expire in the year 2008.
5. Unrealized Appreciation (Depreciation)
At May 31, 2000, net unrealized depreciation of investments for federal income
tax purposes aggregated $3,245,006 of which $8,136,248 related to appreciated
securities and $11,381,254 related to depreciated securities.
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, the Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of the Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
-------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
-------------------------------------------------------------------------------
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 2000, John Nuveen & Co., Incorporated (the
"Distributor"), a wholly owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares of approximately $240,500, all 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.
During the fiscal year ended May 31, 2000, the Distributor compensated
authorized dealers directly with approximately $337,700 in commission advances
at the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees collected on Class B
Shares, and all 12b-1 service and distribution fees collected on Class C Shares
during the first year following a purchase are retained by the Distributor.
During the fiscal year ended May 31, 2000, the Distributor retained
approximately $189,800 in such 12b-1 fees. The remaining 12b-1 fees charged to
the Fund were paid to compensate authorized dealers for providing services to
shareholders relating to their investments. The Distributor also collected and
retained approximately $114,200 of CDSC on share redemptions during the fiscal
year ended May 31, 2000.
7. Composition of Net Assets
At May 31, 2000, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
-------------------------------------------------------------------------------
Capital paid-in $346,511,407
Undistributed (Over-distribution of) net investment income (235,144)
Accumulated net realized gain (loss) from investment transactions (2,254,516)
Net unrealized appreciation (depreciation) of investments (2,257,772)
-------------------------------------------------------------------------------
Net assets $341,763,975
-------------------------------------------------------------------------------
17
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------ ---------------------------
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 (Loss) Total Income Gains Total Value Return (a)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/90)**
2000 $10.76 $.54 $(.77) $(.23) $(.55) $(.01) $(.56) $ 9.97 (2.17)%
1999 10.94 .55 (.14) .41 (.55) (.04) (.59) 10.76 3.78
1998 10.60 .56 .34 .90 (.55) (.01) (.56) 10.94 8.67
1997 10.39 .56 .21 .77 (.56) -- (.56) 10.60 7.59
1996 10.63 .57 (.24) .33 (.57) -- (.57) 10.39 3.14
Class B (2/97)
2000 10.77 .46 (.79) (.33) (.47) (.01) (.48) 9.96 (3.10)
1999 10.95 .47 (.14) .33 (.47) (.04) (.51) 10.77 3.05
1998 10.61 .48 .35 .83 (.48) (.01) (.49) 10.95 7.89
1997 (d) 10.59 .16 .02 .18 (.16) -- (.16) 10.61 1.70
Class C (9/95)**
2000 10.77 .48 (.78) (.30) (.49) (.01) (.50) 9.97 (2.79)
1999 10.95 .49 (.14) .35 (.49) (.04) (.53) 10.77 3.22
1998 10.60 .50 .36 .86 (.50) (.01) (.51) 10.95 8.20
1997 10.39 .50 .21 .71 (.50) -- (.50) 10.60 7.00
1996 (d) 10.65 .35 (.26) .09 (.35) -- (.35) 10.39 1.30*
Class R (2/97)
2000 10.76 .56 (.78) (.22) (.57) (.01) (.58) 9.96 (2.07)
1999 10.94 .57 (.14) .43 (.57) (.04) (.61) 10.76 4.01
1998 10.60 .58 .35 .93 (.58) (.01) (.59) 10.94 8.91
1997 (d) 10.59 .19 .01 .20 (.19) -- (.19) 10.60 1.93
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
------------------- ------------------- -------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Assets Net Net Net Net Net Net Turnover
(000) Assets Assets Assets Assets Assets Assets Rate
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (6/90)**
2000 $250,178 1.02% 5.27% 1.02% 5.27% 1.01% 5.28% 18%
1999 297,505 .84 5.00 .84 5.00 .84 5.00 19
1998 292,399 .84 5.13 .84 5.13 .84 5.13 14
1997 296,970 .96 5.20 .82 5.34 .82 5.34 54
1996 318,456 1.02 5.17 .83 5.36 .83 5.36 94
Class B (2/97)
2000 17,476 1.79 4.52 1.79 4.52 1.78 4.53 18
1999 15,768 1.59 4.25 1.59 4.25 1.59 4.25 19
1998 5,266 1.59 4.35 1.59 4.35 1.59 4.35 14
1997 (d) 785 1.58* 4.52* 1.58* 4.52* 1.58* 4.52* 54
Class C (9/95)**
2000 17,167 1.59 4.72 1.59 4.72 1.58 4.73 18
1999 16,034 1.39 4.45 1.39 4.45 1.39 4.45 19
1998 7,646 1.39 4.58 1.39 4.58 1.39 4.58 14
1997 5,130 1.46 4.64 1.35 4.75 1.35 4.75 54
1996 (d) 1,175 1.55* 4.42* 1.38* 4.59* 1.38* 4.59* 94
Class R (2/97)
2000 56,943 .83 5.47 .83 5.47 .82 5.48 18
1999 61,496 .64 5.20 .64 5.20 .64 5.20 19
1998 56,428 .64 5.33 .64 5.33 .64 5.33 14
1997 (d) 54,247 .64* 5.55* .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) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
18
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust I:
We have audited the accompanying statement of net assets, including the
portfolio of investments, of Nuveen Flagship Florida Municipal Bond Fund (the
"Fund") (one of the portfolios constituting the Nuveen Flagship Multistate Trust
I (a Massachusetts business trust)), as of May 31, 2000, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years then ended and the financial highlights for
each of the three years then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for the Fund for the years ended
May 31, 1997 and prior were audited by other auditors whose report dated July
11, 1997, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of May 31, 2000, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Flagship Florida Municipal Bond Fund of the Nuveen Flagship Multistate Trust I
as of May 31, 2000, and the results of its operations for the year then ended,
and the changes in its net assets for each of the two years then ended and the
financial highlights for each of the three years then ended, in conformity with
accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 18, 2000
19
<PAGE>
Notes
-----
20
<PAGE>
Fund Information
Board of Trustees Transfer Agent and
Robert P. Bremner Shareholder Services
Lawrence H. Brown Chase Global Funds Services Company
Anne E. Impellizzeri 73 Tremont Street
Peter R. Sawers Boston, MA 02108
William J. Schneider (800) 257-8787
Timothy R. Schwertfeger
Judith M. Stockdale Legal Counsel
Morgan, Lewis &
Fund Manager Bockius LLP
Nuveen Advisory Corp. Washington, D.C.
333 West Wacker Drive
Chicago, IL 60606 Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
21
<PAGE>
Serving
Investors
For Generations
A 100-Year Tradition of Quality Investments
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
Since 1898, John Nuveen & Co. Incorporated has been synonymous with investments
that withstand the test of time. In fact, more than 1.3 million investors have
trusted Nuveen to help them build and sustain the wealth of a lifetime.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. We can help
you build a better, well-diversified portfolio.
Call Your Financial Advisor Today
To find out how Nuveen Mutual Funds might round out your investment portfolio,
contact your financial advisor today. Or call Nuveen at (800) 257-8787 for more
information. Ask your advisor or call for a prospectus, which details risks,
fees and expenses. Please read the prospectus carefully before you invest.
NUVEEN
Investments
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
www.nuveen.com
<PAGE>
N U V E E N
Investments
Municipal Bond Funds
ANNUAL REPORT MAY 31, 2000
Dependable, tax-free income to help you keep more of what you earn.
[PHOTOS APPEAR HERE]
INVEST WELL
LOOK AHEAD
LEAVE YOUR MARK
Maryland Municipal Bond Fund
Pennsylvania Municipal Bond Fund
Virginia Municipal Bond Fund
<PAGE>
Contents
1 Dear Shareholder
3 Nuveen Maryland Municipal Bond Fund
7 Nuveen Flagship Pennsylvania Municipal Bond Fund
10 Nuveen Flagship Virginia Municipal Bond Fund
14 Portfolio of Investments
28 Statement of Net Assets
29 Statement of Operations
30 Statement of Changes in Net Assets
32 Notes to Financial Statements
37 Financial Highlights
40 Report of Independent Public Accountants
41 Fund Information
Must be preceded by or accompanied by a prospectus.
<PAGE>
DEAR
Shareholder,
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
As personal wealth continues to grow at an ever-increasing rate, people are
realizing the power of their investments to do good and to make a difference in
their families and communities now and for generations to come.
Setting financial goals is an important first step toward building wealth. At
Nuveen Investments, we believe those goals should not be considered ends in
themselves. Rather, you and your financial advisor's focus should be on
realizing your life's dreams --the things that matter most to you and how you
can make them happen -- or make them better.
Through a well-crafted financial plan, you have the chance to shape future
generations -- to broaden your sphere of influence -- to leave your legacy.
As you develop that plan, you'll want to consider the different ways your
success can benefit others. You may find that you want to create a new set of
goals to achieve this. Working with your financial advisor, you have the ability
to make those dreams a reality -- for yourself and future generations.
Family Wealth Management Too often, family wealth management is thought of in
one dimension -- as the stewardship of your household's financial resources. At
Nuveen Investments, we think of family wealth management as the map to help you
reach your financial, and your life's, destinations. It's a multi-faceted
strategy to plan for not just your needs, but the needs of future generations.
We are dedicated to helping you and your financial advisor develop a family
wealth management strategy unique to you and your goals and values.
A Trusted Resource As you face some of the most important, lasting decisions you
and your family will make, you'll want to draw upon the support, counsel and
objectivity of a trusted advisor. That's because your financial advisor has the
expertise and access to other professionals who can help you make informed
choices -- choices that affect not only your loved ones today, but those your
legacy will touch in the future.
Your financial advisor can provide sound financial insight, an integrated
approach to your investments and can serve as a knowledgeable friend with your
family's best interests at heart.
ANNUAL REPORT page 1
<PAGE>
In addition, we believe the potential presence of inflation and price
swings in the markets reinforce the importance of working with an advisor,
staying focused on the long term and adhering to your financial plan. With a
sound plan in place, you may be better positioned to weather the markets' ups
and downs.
In fact, you may be reading this report at the suggestion of your financial
advisor. We've prepared the following interview to let you know what the
investment and research management teams have done during your fund's fiscal
period.
For more information on any Nuveen investment, including a prospectus,
contact your financial advisor. Or call Nuveen at (800) 621-7227 or visit our
Internet site at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. We are committed to maintaining that reputation and working with
financial advisors to provide investment solutions that help individuals achieve
their dreams of a lifetime. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 17, 2000
ANNUAL REPORT page 2
<PAGE>
NEVEEN MARYLAND MUNICIPAL FUND
From the Portfolio Manager's Perspective
--------------------------------------------------------------------------------
For nearly a year, the Federal Reserve Board (the Fed) has continued on a track
to raise interest rates in an attempt to stymie inflation. These "tightening"
measures put pressure on nearly all bonds, including municipal securities. Paul
Brennan, portfolio manager of Nuveen Maryland Municipal Bond Fund, discusses the
economic environment in which the fund participated, as well as the fund's
performance and key investment strategies.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within its specific
areas of expertise. Nuveen has chosen them for their rigorously disciplined
investment approaches and their consistent long-term performance. Drawing on
decades of experience and specialized knowledge, these skilled asset managers
have earned reputations for excellence in their fields of expertise, whether it
is blue-chip growth stocks, large-cap value stocks, bonds or international
securities. Nuveen's income-oriented funds feature portfolio management by
Nuveen Investment Management ( NIM). NIM follows a disciplined, research-driven
investment approach to uncover income securities that combine exceptional
relative value with above-average return potential. Drawing on 300 combined
years of investment experience, the Nuveen team of portfolio managers and
research analysts offers:
. A commitment to exhaustive research
. An active, value-oriented investment style
. The unmatched presence of trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen Municipal Bond Funds.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the fiscal year ended May 31, 2000. The views expressed reflect those of
the portfolio management team and are subject to change at any time, based on
market and other conditions.
Q| How would you describe the overall fixed-income investing environment during
-
the past 12 months?
PAUL| Rising interest rates translated into a difficult bond market environment.
----
The Fed raised interest rates six times during the past 12 months, lifting the
federal funds rate -- the rate banks charge each other for overnight loans -- to
6.50%, the highest it's been in almost 10 years.
These moves were intended to curb the strong U.S. economy and stifle any
inflationary pressures that might be brewing as a result. Bond yields rose in
response, and their prices -- which generally move in the opposite direction of
their yields -- declined.
Supply and demand also played a role in determining municipal bond returns
during the past 12 months.
On a positive note, the supply of municipal bonds dwindled as rising rates
extinguished opportunities for issuers to refinance or refund older, more
expensive debt. In addition, the strength of national and local economies
translated into higher revenues and tax collections for man municipalities,
thereby reducing their debt financing needs. These developments translated into
a 40% reduction of the supply of municipals in the first quarter of 2000,
compared to the same quarter a year earlier.
Demand, on the other hand, was spotty. Lured by the red-hot returns of
technology and other stocks, investors generally avoided fixed-income
investments throughout most of 1999. In early 2000, however, the demand for
municipals became strong again when technology stocks experienced a downturn and
municipal bond yields (measured by the Bond Buyer 20) touched 6%.
Q| O.K., that gives us a good idea of what happened on the national front. What
-
was Maryland's market like during the fiscal period?
PAUL| New bond issuance in Maryland declined 33% year-to-date (through May 31,
----
2000) compared to the same period in 1999. Nationally, the decline was 24%.
Maryland's economy continued to perform well. Employment growth, which has
been aided by the state's well-educated workforce, continued to outperform
national averages. At May 31, 2000, the state's unemployment rate was 3.2%,
compared to the 4.1% national average.
ANNUAL REPORT page 3
<PAGE>
Economic growth has also been bolstered by the growing presence of high-
tech firms in the Washington, D.C., suburbs in Maryland.
Q| The Nuveen Maryland Municipal Bond Fund struggled along with the rest of the
-
municipal bond market, reporting a total return on net asset value of -3.71% for
the fiscal year ended May 31, 2000. Comparatively, the Lehman Brothers Municipal
Bond Index had a total return of-0.86%.* What contributed to the fund's under
performance?
PAUL| We maintained a longer-than-average duration compared with the Lehman
----
index. (The Lehman Municipal Index reported duration of 7.46, versus the fund's
9.23 duration.) In the rising interest rate environment we experienced during
the period, this longer duration hurt our total return. However, bonds with
longer durations typically offer higher yields. We, in maintaining a longer
duration, were attempting to meet the fund's objective to generate a competitive
dividend. We also feel that in the long-term, longer duration can reward
shareholders.
Another factor contributing to the underperformance was the high credit
quality of our fund's portfolio -- with 71% of the bonds rated AAA/U.S.
Guaranteed and AA. In 1997 and 1998, investors weren't rewarded for assuming
greater risk by delving deeper into lower-rated issues. This past fiscal year
was another story, however, with the yield gap between high-rated and lower-
rated bonds having widened.
Another point I'd like to mention is that the Lipper Maryland Municipal
Bond Fund category average, which unlike the Lehman index only includes
municipal funds that are Maryland-specific, reported a total return more in line
with our fund's, -2.47%.** Our underperformance against this benchmark is due in
part to the fund's duration, which was longer than the Lipper Peer Group average
of 7.6.
Shareholders should also know that the fund's one-year taxable equivalent
total return, for investors in a 34.5% combined federal and state income tax
bracket, was -1.22%.*** As of May 31, 2000, the fund's SEC 30-day yield was
4.40%. For investors in the combined 34.5% federal and state income tax bracket,
that is equivalent to a yield of 6.72% on a taxable investment.****
With our research capabilities and our relationships with dealers in the
state, we have been able to find issues we feel are diamonds in the rough. For
instance, we added to the portfolio Anne Arundel County bonds issued to finance
infrastructure improvements on a parcel of land for a shopping mall development.
Underwritten by a regional dealer and distributed primarily to
institutional investors such as Nuveen, the bonds were not rated and required
rigorous review by our research team.
Our team liked the bonds for a couple of reasons. One, they were not being
paid by the revenues of the mall, but actually by the property taxes on the
land. The project is under fast-track construction, and is located halfway
between Baltimore and Washington D.C., a site we believe will be attractive to
shoppers from several nearby states.
Q| What other opportunities did you find?
-
PAUL| Another purchase we're excited about was the issuance by Maryland Health
----
and Higher Educational Facilities Authority on behalf of lower-rated (but
investment grade) University of Maryland Medical System.
MARYLAND
Top Five Sectors
---------------------------------------------
Housing (Multifamily) 24%
---------------------------------------------
Healthcare 18%
---------------------------------------------
Tax Obligation (Limited) 14%
---------------------------------------------
Education and Civic Organizations 11%
---------------------------------------------
Housing (Single Family) 9%
---------------------------------------------
As a percentage of total bond holdings as of May 31, 2000. Holdings are subject
to change.
MARYLAND
Bond Credit Quality
------------------------------------------------
[PIE CHART APPEARS HERE]
AAA/US.
Guaranteed.... 54%
AA............ 17%
A............. 8%
BBB........... 17%
NR............ 4%
As a percentage of total bond holdings as of May 31, 2000. Holdings are subject
to change.
* The Lehman Brothers Municipal Bond Index is comprised of a broad range of
investment-grade national municipal bonds and does not reflect any initial
or ongoing expenses.
** The Lipper Peer Group returns represent the average annualized total return
of the 37 funds in the Lipper Maryland Municipal Debt Funds category for
the one-year period ended May 31, 2000. The return assume reinvestment of
dividends and do not reflect any applicable sales charges.
*** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state income tax rate) plus capital
gains distributions, if any, plus or minus changes in net asset value.
**** Taxable equivalent yield is the yield an investor would have to realize on
a fully taxable investment to equal the stated yield on a tax-exempt
investment.
Returns reflect a voluntary expense limitation by the fund's investment advisor
which may be modified or discontinued at any time without notice.
ANNUAL REPORT page 4
<PAGE>
We feel Nuveen has an advantage over many other institutional buyers when
it comes to lower-rated issues such as this one. For instance, Nuveen was given
access to the System's senior management, allowing us to thoroughly review this
complex transaction that offered relatively attractive yields and ensured that
Nuveen received a generous bond allocation from this healthcare provider.
The bonds were issued to finance expansion of the hospital facilities, a
hospital that has garnered a high amount of state support, both politically and
financially.
Because supply has been so scarce in Maryland, we looked to alternatives in
the Virgin Islands and Puerto Rico, since both offer our shareholders the same
tax-exempt status as Maryland-issued bonds. Nuveen's research capabilities
helped us identify and purchase lower-rated (but investment grade) bonds issued
by the Virgin Islands Public Finance authority.
"With our research capabilities and our relationships with dealers in the
state, we have been able to find issues we feel are diamonds in the rough."
Q| It sounds like you were actively seeking lower- and non-rated issuances. Was
-
that the case?
PAUL| We did try to leverage our research capabilities and relationships with
----
the regional dealers to get a piece of deals that others might overlook. But
that wasn't our only strategy during the year.
Another fundamental strategy was to continue to diversify the fund's
portfolio holdings. We were successful in adding new issuers to the mix, and by
doing so improved call features and added higher-yielding bonds.
Q| What is your outlook for the Maryland market and the fund?
-
PAUL| We expect developments in the aerospace sector to provide opportunity
----
for growth in the Maryland economy. Also, slowing federal cutbacks and increased
government expenditures on defense and health sciences research may bolster
economic growth in the near term.
As for the fund, we plan to continue on the road we're on. I don't
anticipate moving any longer on duration, but we will continue to look for those
promising offerings that may be non-rated or low-rated.
We'll also try to capitalize on the higher interest rates and the lower
bond prices to improve the fund's tax efficiency. As interest rates rise, prices
on some of the fund's holdings are bound to fall. By selling certain bonds at a
loss, we can create tax-loss carryforwards that can be used to offset current
and/or future realized capital gains. An additional benefit of these
transactions is that we can use the proceeds from the sale of bonds to finance
purchases of new bonds with higher income streams.
ANNUAL REPORT page 5
<PAGE>
NUVEEN MARYLAND MUNICIPAL BOND FUND
Fund Spotlight as of May 31, 2000
Terms To Know
The following are a few terms used throughout this report.
Distribution Rate Most recent dividend per share (annualized) divided by the
appropriate price per share (e.g., net asset value for purchases to be made
without a load such as reinvestments from Nuveen Unit Trusts, or the maximum
public offering price).
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Typically the shorter the duration, the
less price and return variability you can expect in the fund's price per share
as interest rates change.
Federal Fund Rate The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of short-term interest rates.
Municipal Bond A bond issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. the interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio. This figure is computed by dividing the net
investment income per share earned during the specified one-month or 30-day
period by the maximum offering price per share on the last day of the period.
Taxable Equivalent Yield The yield an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
Taxable Equivalent Total Return The total return an investor would have to
realize on a fully taxable investment to equal the stated total return on a
tax-exempt investment.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Quick Facts
A Shares B Shares C Shares R Shares
NAV $9.55 $9.56 $9.56 $9.58
--------------------------------------------------------------------------------
Latest Monthly Dividend* $0.0395 $0.0335 $0.0350 $0.0410
--------------------------------------------------------------------------------
Fund Symbol N/A N/A N/A NMMDX
--------------------------------------------------------------------------------
CUSIP 67065L831 67065L823 67065L815 67065L799
--------------------------------------------------------------------------------
Inception Date 9/94 3/97 9/94 12/91
--------------------------------------------------------------------------------
* Paid June 1, 2000
Total Returns as of 5/31/00 (Annualized)/1/
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
1-Year -3.71% -7.77% -4.44% -8.10% -4.16% -3.43%
--------------------------------------------------------------------------------
1-Year TER* -1.22% -5.38% -2.36% -6.01% -1.97% -0.85%
--------------------------------------------------------------------------------
5-Year 3.58% 2.69% 2.87% 2.71% 2.99% 3.84%
--------------------------------------------------------------------------------
5-Year TER* 6.13% 5.22% 5.01% 4.85% 5.19% 6.49%
--------------------------------------------------------------------------------
Since Inception 5.00% 4.45% 4.30% 4.30% 4.33% 5.26%
--------------------------------------------------------------------------------
Since Inception TER* 7.57% 7.01% 6.49% 6.49% 6.55% 7.94%
--------------------------------------------------------------------------------
* Taxable Equivalent Return (based on a combined federal and state income tax
rate of 34.5%).
Total Returns as of 3/31/00 (Annualized)/1/
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC NAV NAV
1-Year -2.96% -7.00% -3.70% -7.39% -3.51% -2.68%
--------------------------------------------------------------------------------
5-Year 4.53% 3.63% 3.82% 3.65% 3.89% 4.80%
--------------------------------------------------------------------------------
Since Inception 5.25% 4.69% 4.54% 4.54% 4.57% 5.51%
--------------------------------------------------------------------------------
+ Class R share returns are actual. Class A, B and C shares returns are actual
for the period since class inception; returns prior to class inception are
Class R shares 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. Class C shares have a 1%
CDSC for redemptions within one year which is not reflected in the one-year
total return.
Tax-Free Yields as of 5/31/00
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC
Distribution Rate* 4.96% 4.75% 4.21% 4.39% 5.14%
--------------------------------------------------------------------------------
SEC 30-Day Yield 4.40% 4.21% 3.65% 3.85% 4.60%
--------------------------------------------------------------------------------
Taxable Equivalent Yield 6.72% 6.43% 5.57% 5.88% 7.02%
--------------------------------------------------------------------------------
* The distribution rate differs from yield and total return and therefore is not
intended to be a complete measure of performance. Distribution rate may
sometimes differ from yield because a fund may be paying out more or less than
it is earning and because it may not include the effect of amortization of
bond premiums to the extent such premiums arise after the bonds were
purchased.
Index Comparison[_]
[MOUNTAIN CHART APPEARS HERE]
Nuveen Maryland Nuveen Maryland Lehman Brothers
Municipal Bond Municipal Bond Municipal Bond
Fund (Offer) Fund (NAV) Index
2/1992 $ 9,580 $10,000 $10,000
5/1992 9,738 10,165 10,212
5/1993 10,895 11,373 11,433
5/1994 11,021 11,504 11,715
5/1995 12,012 12,538 12,782
5/1996 12,464 13,010 13,367
5/1997 13,294 13,877 14,475
5/1998 14,352 14,981 15,834
5/1999 14,874 15,526 16,574
5/2000 14,323 14,951 16,432
Nuveen Maryland Municipal Bond Fund (Offer) $14,323
Nuveen Maryland Municipal Bond Fund (NAV) $14,951
Lehman Brothers Municipal Bond Index $16,432
[_] The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Municipal Bond Index is comprised of a
broad range of investment-grade municipal bonds, and does not reflect any
initial or ongoing expenses. The Nuveen fund return depicted in the chart
reflects the initial maximum sales charge applicable to A shares (4.20%)
and all ongoing fund expenses. For periods prior to inception of Class A
Shares, performance reflects Class R Shares performance adjusted for
differences in expenses, which are primarily differences in distribution
and service fees.
Portfolio Statistics
Total Net Assets $71.5 million
-----------------------------------------------------
Average Effective Maturity 20.93 years
-----------------------------------------------------
Average Duration 9.23
-----------------------------------------------------
ANNUAL REPORT page 6
<PAGE>
NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
Nuveen Flagship Pennsylvania Municipal Bond Fund features portfolio management
by Nuveen Investment Management, a team of portfolio managers and research
analysts committed to a disciplined, research-oriented investment strategy. To
help you understand the fund's performance for the fiscal year ended May 31,
2000, we spoke with Portfolio Manager Tom O'Shaughnessy.
Q| Can you begin our discussion by addressing the reasons why municipal bonds,
-
like most fixed-income securities, performed poorly during the past 12 months?
TOM| Sure. In an effort to rein in the economy and the stock market, the Federal
---
Reserve (the Fed) made six short-term interest rate increases during the past 12
months. The most recent was a half-percentage-point increase in May, the largest
rate hike in five years. That boosted short-term interest rates to their highest
levels since 1991.
One of the basic tenets of bond investing is that when interest rates rise,
bond yields generally follow suit and bond prices, which move in the opposite
direction, decline. The 25-year municipal bond as measured by the Bond Buyer 25,
for example, started the period yielding 5.46% and ended it at 6.27%, a jump of
81 basis points. Amid this rising interest rate environment, demand for most
fixed-income securities -- including municipals -- was weak.
The effects of reduced demand were offset somewhat by a dramatic decrease
in supply as municipal issuers, flush with cash from increased tax collections
and revenues, reduced their borrowings. For the first five months of 2000, total
issuance of debt in the state was down nearly 75% compared to the same period a
year earlier. Pennsylvania's decline was much more severe than the national
municipal market, which saw a 24% drop during the first five months of 2000.
While the strength of the economy curtailed bond returns by prompting
higher interest rates, it actually helped many Pennsylvania municipal issuers.
The fiscal recovery in Philadelphia, for example, prompted Fitch and Moody's,
two of the leading municipal credit rating agencies, to upgrade the city's
credit ratings. Furthermore, economic conditions remained strong throughout much
of the state, mirroring trends that boosted the nation as a whole.
With that said, Pennsylvania's economy showed some signs of slowing down.
Employment growth in the service sector started to wane, and the slowdown in the
Asian economy led to significant losses in the manufacturing sector.
Q| How did Nuveen Flagship Pennsylvania Municipal Bond Fund perform during the
-
fiscal year ended May 31, 2000?
TOM| The fund generated a 12-month total return on net asset value of -5.21%,
---
compared to the -3.69% total return posted by the Lipper Pennsylvania Municipal
Debt Peer Group.* The fund's one-year taxable equivalent total return, for
investors in a 33% combined federal and state income tax bracket, was -2.76%.**
"While the strength of the economy curtailed bond returns by prompting
higher interest rates, it actually helped many Pennsylvania municipal
issuers."
* The Lipper Peer Group return represents the average annualized total
return of the 60 funds in the Lipper Pennsylvania Municipal Debt Category
for the one-year period ended May 31, 2000. The return assumes
reinvestment of dividends and does not reflect any applicable sales
charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state income tax rate) plus capital
gains distributions, if any, plus or minus changes in net asset value.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the fiscal year ended May 31, 2000. The views expressed reflect those of
the portfolio management team and are subject to change at any time, based on
market and other conditions.
Returns reflect a voluntary expense limitation by the fund's investment advisor
which may be modified or discontinued at any time without notice.
ANNUAL REPORT page 7
<PAGE>
Q| How did the fund perform against the Lehman Brothers Municipal Bond Index?
-
TOM| The fund underperformed the broader Lehman index, which had a 12-month
---
average total return of -0.86% for the period ended May 31, 2000.*** However, we
feel Lipper's Pennsylvania-specific benchmark gives investors a truer
comparative picture. We give shareholders both so they can compare the fund to
other Pennsylvania funds as well as to a national benchmark.
Q| What was your strategy during this difficult period?
-
TOM| Although the market environment we experienced over the past year could be
---
distracting, we remained focused on finding attractive opportunities for the
fund. In the first half of the period, that meant engaging in trades known as
swaps, whereby we sold bonds with lower interest rates and bought similar bonds
at higher prevailing rates. In addition to increasing the fund's income-
producing potential, these swaps help enhance the fund's tax efficiency, as some
sales generated tax losses that can offset any realized capital gains for up to
eight years.
In the second half of the year, we focused on identifying attractively
priced high-yielding, non-rated and lower-quality investment-grade bonds for the
fund. As interest rates and bond yields climbed, the difference in yield -- the
"spread" -- between higher- and lower-quality bonds widened fairly dramatically.
This is because lower-quality bonds needed to pay increasingly higher yields to
attract investors capable and willing to analyze them.
Using the resources and expertise our of research team, we identified a
number of attractive high-yielding opportunities within the hospital and
multifamily housing sectors. Even with these purchases, the fund's overall
credit quality remained high, with 52% of the portfolio in AA-rated and AAA-
rated bonds as of May 31, 2000.
Q| What is your outlook for Nuveen Flagship Pennsylvania Municipal Bond Fund?
-
TOM| The bond market appears to be anticipating the end of Fed efforts to slow
---
the economy by raising interest rates. If that proves to be the case, the
interest-rate backdrop should become more favorable for bonds.
We believe that today's market, characterized by wide spreads between
high- and low-quality bonds, plays to our research strengths. Drawing on
Nuveen's research team, we'll continue to look for opportunities to add lower-
quality bonds that offer adequate compensation, as measured by enough
incremental yield, to compensate for their added credit risk. If the spread
between lower- and higher-quality bonds returns to more historic norms -- which
we believe will happen if interest rates stabilize -- lower-quality bonds should
outperform.
PENNSYLVANIA
----------------------------------------
Top Five Sectors
----------------------------------------
Education and Civic Organizations 22%
----------------------------------------
Healthcare 13%
----------------------------------------
Housing (Single Family) 12%
----------------------------------------
U.S. Guaranteed 11%
----------------------------------------
Long-Term Care 8%
----------------------------------------
As a percentage of total bond holdings as of May 31, 2000. Holdings are subject
to change.
PENNSYLVANIA
-----------------------------------------
Bond Credit Quality
-----------------------------------------
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed..... 43%
AA............. 9%
A.............. 9%
BBB............ 33%
NR............. 4%
Other.......... 2%
As a percentage of total bond holdings as of May 31, 2000. Holdings are subject
to change.
*** The Lehman Brother Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds and does not reflect any initial or ongoing
expenses
ANNUAL REPORT page 8
<PAGE>
NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND
Fund Spotlight as of May 31, 2000
Quick Facts
A Shares B Shares C Shares R Shares
NAV $9.38 $9.40 $9.37 $9.38
--------------------------------------------------------------------------------
Latest Monthly Dividend* $0.0420 $0.0360 $0.0375 $0.0435
--------------------------------------------------------------------------------
Fund Symbol FPNTX N/A N/A NBPAX
--------------------------------------------------------------------------------
CUSIP 67065L740 67065L732 67065L724 67065L716
--------------------------------------------------------------------------------
Inception Date 10/86 2/97 2/94 2/97
--------------------------------------------------------------------------------
*Paid June 1, 2000
Total Returns as of 5/31/00 (Annualized)/1/
A Shares B Shares C Shares R Shares
NAV Offer c/o CDSC w/CDSC NAV NAV
1-Year -5.21% -9.20% -5.91% -9.51% -5.73% -4.93%
--------------------------------------------------------------------------------
1-Year TER* -2.76% -6.86% -3.84% -7.43% -3.55% -2.39%
--------------------------------------------------------------------------------
5-Year 3.95% 3.06% 3.29% 3.12% 3.38% 4.10%
--------------------------------------------------------------------------------
5-Year TER* 6.66% 5.74% 5.64% 5.49% 5.81% 6.88%
--------------------------------------------------------------------------------
10-Year 6.05% 5.60% 5.58% 5.58% 5.47% 6.13%
--------------------------------------------------------------------------------
10-Year TER* 8.99% 8.52% 8.28% 8.28% 8.13% 9.10%
--------------------------------------------------------------------------------
*Taxable Equivalent Return (based on a combined federal and state income tax
rate of 33.0%).
Total Returns as of 3/31/00 (Annualized)/1/
A Shares B Shares C Shares R Shares
NAV Offer c/o CDSC w/CDSC NAV NAV
1-Year -3.77% -7.79% -4.49% -8.13% -4.29% -3.48%
-------------------------------------------------------------------------------
5-Year 4.92% 4.02% 4.25% 4.09% 4.34% 5.06%
--------------------------------------------------------------------------------
10-Year 6.34% 5.88% 5.87% 5.87% 5.75% 6.41%
--------------------------------------------------------------------------------
+ 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 42% 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. Class C shares have a 1%
CDSC for redemptions within one year which is not reflected in the one-year
total return.
Tax-Free Yields as of 5/31/00
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC
Distribution Rate* 5.37% 5.15% 4.60% 4.80% 5.57%
--------------------------------------------------------------------------------
SEC 30-Day Yield 3.61% 3.46% 2.86% 3.07% 3.81%
--------------------------------------------------------------------------------
Taxable Equivalent Yield 5.39% 5.16% 4.27% 4.58% 5.69%
--------------------------------------------------------------------------------
* The distribution rate differs from yield and total return and therefore is not
intended to be a complete measure of performance. Distribution rate may some-
times differ from yield because a fund may be paying out more or less than it
is earning and because it may not include the effect of amortization of bond
premiums to the extent such premiums arise after the bonds were purchased.
Portfolio Statistics
Total Net Assets $124.8 million
------------------------------------
Average Effective
Maturity 20.63 years
------------------------------------
Average Duration 9.47
------------------------------------
Index Comparison
[MOUNTAIN CHART APPEARS HERE]
Nuveen FlagShip Nuveen FlagShip Lehman Brothers
Pennsylvania Municipal Pennsylvania Municipal Municipal Bond
Bond Fund (Offer) Bond Fund (NAV) Index
5/1990 $ 9,580 $ 10,000 $10,000
5/1991 10,467 10,926 11,008
5/1992 11,512 12,017 12,089
5/1993 12,821 13,383 13,536
5/1994 13,167 13,744 13,870
5/1995 14,206 14,829 15,133
5/1996 14,751 15,397 15,825
5/1997 15,986 16,687 17,137
5/1998 17,597 18,368 18,746
5/1999 18,199 18,987 19,622
5/2000 17,252 18,008 19,453
Nuveen Flagship Pennsylvania Municipal Bond Fund (Offer) $17,252
Nuveen Flagship Pennsylvania Municipal Bond Fund (NAV) $18,008
Lehman Brothers Municipal Bond Index $19,453
The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or ongoing
expenses. The Nuveen fund return depicted in the chart reflects the initial
maximum sales charge applicable to A shares (4.20%) and all ongoing fund
expenses.
Terms To Know
The following are a few terms used throughout this report.
Distribution Rate Most recent dividend per share (annualized) divided by the
appropriate price per share (e.g., net asset value for purchases to be made
without a load such as reinvestments from Nuveen Unit Trusts, or the maximum
public offering price).
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Typically the shorter the duration, the
less price and return variability you can expect in the fund's price per share
as interest rates change.
Federal Fund Rate The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of short-term interest rates.
Municipal Bond A bond issued by a state, city or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio. This figure is computed by dividing the net
investment income per share earned during the specified one-month or 30-day
period by the maximum offering price per share on the last day of the period.
Taxable Equivalent Yield The yield an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
Taxable Equivalent Total Return The total return an investor would have to
realize on a fully taxable investment to equal the stated total return on a
tax-exempt investment.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
ANNUAL REPORT page 9
<PAGE>
NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
--------------------------------------------------------------------------------
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within its specific
areas of expertise. Nuveen has chosen them for their rigorously disciplined
investment approaches and their consistent long-term performance. Drawing on
decades of experience and specialized knowledge, these skilled asset managers
have earned reputations for excellence in their fields of expertise, whether it
is blue-chip growth stocks, large-cap value stocks, bonds or international
securities. Nuveen's income-oriented funds feature portfolio management by
Nuveen Investment Management ( NIM). NIM follows a disciplined, research-driven
investment approach to uncover income securities that combine exceptional
relative value with above-average return potential. Drawing on 300 combined
years of investment experience, the Nuveen team of portfolio managers and
research analysts offers:
. A commitment to exhaustive research
. An active, value-oriented investment style
. The unmatched presence of trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen Municipal Bond Funds.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the fiscal year ended May 31, 2000. The views expressed reflect those of
the portfolio management team and are subject to change at any time, based on
market and other conditions.
For nearly a year, the Federal Reserve Board (the Fed) has continued on a track
to raise interest rates in an attempt to stymie inflation. These "tightening"
measures put pressure on nearly all bonds, including municipal securities. Paul
Brennan, portfolio manager of Nuveen Flagship Virginia Municipal Bond Fund,
discusses the economic environment in which the fund participated, as well as
the fund's performance and key investment strategies.
Q How would you describe the overall fixed-income investing environment during
the past 12 months?
PAUL Rising interest rates translated into a difficult bond market environment.
The Fed raised interest rates six times during the past 12 months, lifting the
federal funds rate -- the rate banks charge each other for overnight loans -- to
6.50%, the highest it's been in almost 10 years.
These moves were intended to curb the strong U.S. economy and stifle any
inflationary pressures that might be brewing as a result. Bond yields rose in
response, and their prices -- which generally move in the opposite direction of
their yields -- declined.
Supply and demand also played a role in determining municipal bond returns
during the past 12 months.
On a positive note, the supply of municipal bonds dwindled as rising rates
extinguished opportunities for issuers to refinance or refund older, more
expensive debt. In addition, the strength of national and local economies
translated into higher revenues and tax collections for man municipalities,
thereby reducing their debt financing needs. These developments translated into
a 40% reduction of the supply of municipals in the first quarter of 2000,
compared to the same quarter a year earlier.
Demand, on the other hand, was spotty. Lured by the red-hot returns of
technology and other stocks, investors generally avoided fixed-income
investments throughout most of 1999. In early 2000, however, the demand for
municipals became strong again when technology stocks experienced a downturn and
municipal bond yields (measured by the Bond Buyer 20) touched 6%.
Q O.K., that gives us a good idea of what happened on the national front. What
was Virginia's market like during the fiscal period?
PAUL New bond issuance in Virginia declined 15% year-to-date (through May 31,
2000) compared to the same period in 1999. While we don't like to see a drop in
new issuance, the Virginia new issue market was healthier than the national
average, which was down 24%.
ANNUAL REPORT page 10
<PAGE>
Virginia's economy continued to perform well. The commonwealth's per capita
income exceeded the national average and its unemployment rate was just 2.7%
versus the country's 4.1% average (as of May 31, 2000).
We attribute the strength of Virginia's economy to increases in defense
spending and growth of the high-tech sector. The commonwealth's textiles and
apparel sector has weakened, however, hurt by low-cost foreign competitors.
Economic growth has also been bolstered by the growing presence of high-
tech firms in the Washington D.C., suburbs in Virginia.
Q The Nuveen Flagship Virginia Municipal Bond Fund struggled along with the rest
of the municipal bond market, reporting a total return on net asset value of
-2.72% for the fiscal year ended May 31, 2000. Comparatively, the Lehman
Brothers Municipal Bond Index had a total return of -0.86%.* What contributed to
the fund's underperformance?
PAUL We maintained a longer-than-average duration compared with the Lehman
index. (The Lehman's Municipal Index reported duration of 7.46, versus the
fund's 8.30 duration.) In the rising interest rate environment we experienced
during the period, this longer duration hurt our total return. However, bonds
with longer durations typically offer higher yields. In maintaining a longer
duration, we were attempting to meet the fund's objective to generate a
competitive dividend. We also feel that in the long-term, longer duration can
reward shareholders.
Another point I'd like to mention is that the Lipper Virginia Municipal
Bond Fund category average, which unlike the Lehman index only includes
municipal bond funds that are Virginia-specific, reported a total return more in
line with our fund's, -2.63%.** Our slight underperformance against this
benchmark is due in part to our fund's duration, which is longer than the Lipper
peer group average of 7.7.
Shareholders should also know that the fund's one-year taxable equivalent
total return, for investors in a 35% combined federal and state income tax
bracket, was -0.08%.*** As of May 31, 2000, the fund's SEC 30-day yield was
4.73%. For investors in the combined 35% federal and state income tax bracket,
that is equivalent to a yield of 7.28% on a taxable investment.****
With our research capabilities and our relationships with dealers in the
state, we have been able to find issues we feel are diamonds in the rough. For
instance, we added to the portfolio bonds issued by Danville Industrial
Development Authority for the Collegiate Housing Foundation Project at Averett
College.
These non-rated bonds financed a student dormitory on the campus of Averett
College in Danville. Our research team worked with the developer, borrower and
underwriter to ensure the bonds met Nuveen's high credit criteria. The bonds
offered attractive yields as well as excellent call protection and added
portfolio diversification.
Q What other opportunities did you find?
PAUL We purchased A-rated bonds issued by the Greater Richmond Convention Center
to finance the center's expansion. We found these bonds interesting as they
aren't to be paid by revenues of the convention center but rather by a tri-
county excise tax.
We often look to alternative issuances in the Virgin Islands and Puerto
Rico, since both offer our shareholders the same tax-exempt status as Virginia-
issued bonds.
VIRGINIA
----------------------------------------
Top Five Sectors
----------------------------------------
U.S. Guaranteed 14%
----------------------------------------
Tax Obligation (Limited) 12%
----------------------------------------
Education and Civil Organizations 11%
----------------------------------------
Water and Sewer 10%
----------------------------------------
Healthcare 9%
----------------------------------------
As a percentage of total bond holdings as of May 31, 2000. Holdings are subject
to change.
VIRGINIA
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed... 39%
AA........... 23%
A............ 18%
BBB.......... 13%
NR........... 6%
Other........ 1%
As a percentage of total bond holdings as of May 31, 2000. Holdings are subject
to change.
* The Lehman Brothers Municipal Bond index is comprised of a broad range of
investment-grade national municipal bonds and does not reflect any initial
or ongoing expenses.
** The Lipper Peer Group returns represent the average annualized total
return of the 37 funds in the Lipper Virginia Municipal Debt Funds category
for the one-year period ended May 31, 2000. The returns assume reinvestment
of dividends and do not reflect any applicable sales charges.
*** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state income tax rate) plus capital
gains distributions, if any, plus or minus changes in net asset value.
**** Taxable equivalent yield is the yield an investor would have to realize on
a fully taxable investment to equal the stated yield on a tax-exempt
investment.
ANNUAL REPORT page 11
<PAGE>
Nuveen's research capabilities also helped us identify and purchase lower-rated
bonds issued by the Virgin Islands Public Finance Authority with an attractive
yield.
"Our active management discipline allowed us to capitalize on last year's
dramatic rise in interest rates to improve the fund's tax efficiency."
Q Sounds like you looked at several lower-rated (but still investment-grade) and
unique issuances, as well as outside Virginia for opportunities to try to
improve the yield and total return potential and call protection for the
portfolio. What other strategies did you and your team employ during the period?
PAUL Our active management discipline allowed us to capitalize on last year's
dramatic rise in interest rates to improve the fund's tax efficiency.
As rates rose, prices on some of the fund's holdings fell below their
respective purchase prices. (Bond prices and interest rates move in opposite
directions.) When we sold several of those holdings, tax losses were realized.
These tax losses can be used to offset future realized gains for up to eight
years, enabling us to offer our shareholders more tax efficient returns on
investment.
An additional benefit of these transactions is that we can use the proceeds
from the sale of bonds to finance purchases of new bonds with potentially higher
income streams.
Q What is your outlook for the Virginia market and the fund?
PAUL We expect Virginia to continue to benefit from increased Federal spending.
Also, in the near-term, we expect high-tech manufacturing and defense-related
industries to experience strong employment growth.
As for the fund, we plan to continue on the road we're on. I don't
anticipate moving any longer on duration, but we will continue to look for those
promising offerings that may be unrated or carry lower, investment-grade
ratings.
ANNUAL REPORT page 12
<PAGE>
NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND
Fund Spotlight as of May 31, 2000
Quick Facts
A Shares B Shares C Shares R Shares
NAV $ 10.10 $ 10.10 $ 10.10 $ 10.10
-------------------------------------------------------------------------------
Latest Monthly Dividend* $0.0440 $0.0380 $0.0395 $0.0460
-------------------------------------------------------------------------------
Fund Symbol FVATX N/A N/A NMVAX
-------------------------------------------------------------------------------
CUSIP 67065L690 67065L682 67065L674 67065L666
-------------------------------------------------------------------------------
Inception Date 3/86 2/97 10/93 2/97
-------------------------------------------------------------------------------
*Paid June 1, 2000
Total Returns as of 5/31/00 (Annualized)*
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC NAV NAV
1-Year -2.72% -6.81% -3.44% -7.13% -3.16% -2.49%
-------------------------------------------------------------------------------
1-Year TER* -0.08% -4.28% -1.19% -4.89% -0.80% 0.28%
-------------------------------------------------------------------------------
5-Year 4.47% 3.58% 3.77% 3.61% 3.90% 4.62%
-------------------------------------------------------------------------------
5-Year TER* 7.32% 6.41% 6.25% 6.10% 6.45% 7.56%
-------------------------------------------------------------------------------
10-Year 6.40% 5.94% 5.91% 5.91% 5.82% 6.48%
-------------------------------------------------------------------------------
10-Year TER* 9.50% 9.03% 8.75% 8.75% 8.61% 9.62%
-------------------------------------------------------------------------------
* Taxable Equivalent Return (based on a combined federal and state income tax
rate of 35%).
Total Returns as of 3/31/00 (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer w/o CDS w/CDSC NAV NAV
1-Year -1.85% -5.93% -2.49% -6.23% -2.29% -1.53%
-------------------------------------------------------------------------------
5-Year 5.38% 4.48% 4.68% 4.51% 4.81% 5.53%
-------------------------------------------------------------------------------
10-Year 6.69% 6.24% 6.20% 6.20% 6.11% 6.77%
-------------------------------------------------------------------------------
+ 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. Class C shares have a 1%
CDSC for redemptions within one year which is not reflected in the one-year
total return.
Tax-Free Yields as of 5/31/00
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC NAV NAV
Distribution Rate* 5.23% 5.01% 4.51% 4.69% 5.47%
-------------------------------------------------------------------------------
SEC 30-Day Yield 4.73% 4.53% 3.98% 4.18% 4.92%
-------------------------------------------------------------------------------
Taxable Equivalent Yield 7.28% 6.97% 6.12% 6.43% 7.57%
-------------------------------------------------------------------------------
* The distribution rate differs from yield and total return and therefore is not
intended to be a complete measure of performance. Distribution rate may
sometimes differ from yield because a fund may be paying out more or less than
it is earning and because it may not include the effect of amortization of
bond premiums to the extent such premiums arise after the bonds were
purchased.
Index Comparison/[_]/
[MOUNTAIN CHART APPEARS HERE]
Nuveen Flagship Nuveen Flagship Lehman Brothers
Virginia Municipal Virginia Municipal Municipal
Bond Fund (Offer) Bond Fund (NAV) Bond Index
5/1990 $ 9,550 $10,000 $10,000
5/1991 10,509 10,970 11,008
5/1992 11,493 11,997 12,089
5/1993 12,915 13,481 13,536
5/1994 13,253 13,834 13,870
5/1995 14,312 14,939 15,133
5/1996 14,889 15,541 15,825
5/1997 16,112 16,819 17,137
5/1998 17,611 18,383 18,746
5/1999 18,307 19,110 19,622
5/2000 17,806 18,586 19,453
- Nuveen Flagship Virginia Municipal Bond Fund (Offer) $17,806
-- Nuveen Flagship Virginia Municipal Bond Fund (NAV) $18,586
--- Lehman Brothers Municipal Bond Index $19,453
/[_]/ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Municipal Bond Index is comprised of a
broad range of investment-grade municipal bonds, and does not reflect any
initial or ongoing expenses. The Nuveen fund return depicted in the chart
reflects the initial maximum sales charge applicable to A shares (4.20%)
and all ongoing fund expenses.
Portfolio Statistics
Total Net Assets $200.9 million
-------------------------------------------------
Average Effective Maturity 18.86 years
-------------------------------------------------
Average Duration 8.30
-------------------------------------------------
Terms To Know
The following are a few terms used throughout this report.
Distribution Rate Most recent dividend per share (annualized) divided by the
appropriate price per share (e.g., net asset value for purchases to be made
without a load such as reinvestments from Nuveen Unit Trusts, or the maximum
public offering price).
Duration A mathematical measure of the price sensitivity of a bond fund's
portfolio to changes in interest rates. Typically the shorter the duration, the
less price and return variability you can expect in the fund's price per share
as interest rates change.
Federal Fund Rate The interest rate charged by banks to lend to other banks
needing overnight loans; this figure is the most sensitive indicator of the
direction of short-term interest rates.
Municipal Bond A bond issued by a state, city, or other municipality to finance
public works such as the construction of roads or schools. The interest is
usually free from federal income tax and may be free from state and local taxes
as well.
SEC Yield A standardized measure of the current net market yields on a mutual
fund's investment portfolio. This figure is computed by dividing the net
investment income per share earned during the specified one-month or 30-day
period by the maximum offering price per share on the last day of the period.
Taxable Equivalent Yield The yield an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
Taxable Equivalent Total Return The total return an investor would have to
realize on a fully taxable investment to equal the stated total return on a
tax-exempt investment.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
ANNUAL REPORT page 13
<PAGE>
Portfolio of Investments
Nuveen Maryland Municipal Bond Fund
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
----------------------------------------------------------------------------------------------------------------------------------
Basic Materials - 2.2%
<S> <C> <C> <C> <C>
$ 1,500 Mayor and City Council of Baltimore (Maryland), Port Facilities 4/02 at 103 AA- $ 1,562,760
Revenue Bonds (Consolidation Coal Sales Company Project),
Series 1984B, 6.500%, 10/01/11
----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 10.5%
1,000 Maryland Economic Development Corporation, Student Housing Revenue 6/09 at 102 Baa3 933,010
Bonds (Collegiate Housing Foundation - Salisbury Project),
Series 1999A, 6.000%, 6/01/19
1,250 Maryland Economic Development Corporation, Student Housing Revenue 6/09 at 102 Baa3 1,126,525
Bonds (Collegiate Housing Foundation - University Courtyard
Project), Series 1999A, 5.750%, 6/01/19
1,500 Maryland Health and Higher Educational Facilities Authority, Revenue 10/09 at 101 A 1,240,545
Bonds, Loyola College Issue, Series 1999, 5.000%, 10/01/39
Maryland Health and Higher Educational Facilities Authority,
Educational Facilities Mortgage Revenue Bonds, Green Acres
School Issue, Series 1998:
665 5.300%, 7/01/18 7/06 at 102 BBB- 564,618
1,425 5.300%, 7/01/28 7/06 at 102 BBB- 1,152,155
1,000 Maryland Health and Higher Educational Facilities Authority, 7/08 at 102 AA 903,680
Refunding Revenue Bonds, The Johns Hopkins University Issue,
Series 1998, 5.125%, 7/01/20
1,500 Morgan State University, Maryland, Academic Fees and Auxiliary No Opt. Call AAA 1,557,420
Facilities Fees, Revenue Refunding Bonds, 1993 Series, 6.100%,
7/01/20
----------------------------------------------------------------------------------------------------------------------------------
Healthcare - 18.1%
2,165 City of Gaithersburg, Maryland, Nursing Home Revenue Refunding No Opt. Call AAA 2,346,838
Bonds (Shady Grove Adventist Nursing and Rehabilitation Center
Project), Series 1992A, 6.500%, 9/01/12
1,760 Maryland Economic Development Corporation (Health and Mental Hygiene 4/11 at 102 N/R 1,567,562
Providers Facilities Acquisition Program), Revenue Bonds, Series
1996A, 7.625%, 4/01/21
2,000 Maryland Health and Higher Educational Facilities Authority, Kaiser 6/09 at 101 A 1,780,340
Permanente Revenue Bonds, 1998 Series A, 5.375%, 7/01/15
750 Maryland Health and Higher Educational Facilities Authority, Revenue 7/10 at 101 Baa1 737,618
Bonds, University of Maryland Medical System Issue, Series 2000,
6.750%, 7/01/30
1,000 Maryland Health and Higher Educational Facilities Authority, Refunding 7/03 at 102 AAA 931,210
Revenue Bonds, Francis Scott Key Medical Center Issue, Series 1993,
5.000%, 7/01/13
1,000 Maryland Health and Higher Educational Facilities Authority, Project 7/03 at 102 Baa1 859,000
and Refunding Revenue Bonds, Doctors Community Hospital Issue,
Series 1993, 5.750%, 7/01/13
2,000 Maryland Health and Higher Educational Facilities Authority, Revenue 1/08 at 101 Aaa 1,710,020
Bonds, Upper Chesapeake Hospitals Issue, Series 1998A, 5.125%, 1/01/38
Prince Georges County, Maryland, Project and Refunding Revenue Bonds
(Dimensions Health Corporation Issue), Series 1994:
155 4.750%, 7/01/03 No Opt. Call Baa1 140,720
295 4.850%, 7/01/04 No Opt. Call Baa1 261,199
2,000 5.375%, 7/01/14 7/04 at 102 Baa1 1,570,840
1,000 Puerto Rico Industrial, Tourist, Educational, Medical and 1/05 at 102 AAA 1,026,750
Environmental Control Facilities Financing Authority, Hospital
Revenue Bonds, 1995 Series A (Hospital Auxilio Mutuo Obligated
Group Project), 6.250%, 7/01/16
</TABLE>
____
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily - 23.3%
$ 1,500 Baltimore County, Maryland, Mortgage Revenue Refunding Bonds (GNMA 10/08 at 102 AAA $ 1,286,940
Collateralized - Cross Creek Apartments Project), Series 1998A,
5.250%, 10/20/33
1,000 Baltimore County, Maryland, Mortgage Revenue Refunding Bonds, Series 12/02 at 102 AAA 1,022,700
1992 (GNMA Collateralized - Tindeco Wharf Apartments Project),
6.700%, 12/20/28
1,000 Howard County, Maryland, Mortgage Revenue Refunding Bonds, Series 7/02 at 102 AAA 1,024,160
1992 (Howard Hills Townhouses Project-FHA Insured Mortgage Loan),
6.400%, 7/01/24
2,000 Howard County, Maryland, Multifamily Housing Revenue Refunding Bonds, 7/02 at 104 Baa2 2,103,800
Series 1994, (Chase Glen Project), 7.000%, 7/01/24 (Mandatory put
7/01/04)
Community Development Administration, Department of Housing and Community
Development, State of Maryland, Multifamily Housing Revenue Bonds
(Insured Mortgage Loans), 1992 Series D:
700 6.700%, 5/15/27 5/02 at 102 Aa 721,462
500 6.750%, 5/15/33 5/02 at 102 Aa 516,025
1,000 Community Development Administration, Maryland Department of Housing 1/09 at 101 Aa2 852,630
and Community Development, Housing Revenue Bonds, 1999 Series A,
5.350%, 7/01/32 (Alternative Minimum Tax)
1,000 Community Development Administration, Maryland Department of Housing 1/10 at 100 Aa2 999,930
and Community Development, Housing Revenue Bonds, Series 1999B,
6.250%, 7/01/32 (Alternative Minimum Tax)
1,000 Community Development Administration, Maryland Department of Housing 10/08 at 101 1/2 Aaa 873,300
and Community Development, Multifamily Development Revenue Bonds
(Auburn Manor Project), Series 1998 A, 5.300%, 10/01/28 (Alternative
Minimum Tax)
1,000 Housing Opportunities Commission of Montgomery County (Montgomery County, 7/05 at 102 Aa2 972,670
Maryland), Multifamily Housing Revenue Bonds, 1995 Series A, 6.000%,
7/01/20
3,420 Housing Opportunities Commission of Montgomery County (Montgomery County, 7/08 at 101 Aaa 2,959,907
Maryland), Multifamily Housing Development Revenue Bonds, 1998 Series A,
5.250%, 7/01/29
1,550 Prince Georges County Housing Authority (New Keystone Apartments - FHA 1/02 at 102 AAA 1,588,347
Insured), 6.800%, 7/01/25
860 Housing Authority of Prince Georges County (Maryland), Mortgage Revenue 11/00 at 100 AAA 832,411
Refunding Bonds, Collateralized Foxglenn Apartments Project), Series
1998A, 5.450%, 11/20/14
1,000 Housing Authority of Prince Georges County (Maryland), Mortgage Revenue Bonds, 9/09 at 102 AAA 960,780
Series 1999 (GNMA Collateralized - University Landing at Langley Apartments
Project), 6.100%, 3/20/41 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 9.2%
1,000 Maryland Department of Housing and Community Development, Community 9/09 at 100 Aa2 973,250
Development Administration Infrastructure Financing Bonds (MBIA Insured),
2000 Series B, 6.150%, 9/01/32 (Alternative Minimum Tax)
1,500 Community Development Administration, Maryland Department of Housing 3/08 at 101 1/2 Aa2 1,322,025
and Community Development, Residential Revenue Bonds, 1998 Series B,
5.300%, 9/01/23 (Alternative Minimum Tax)
1,580 Housing Opportunities Commission of Montgomery County (Montgomery County, 7/04 at 102 Aa2 1,623,892
Maryland), Single Family Mortgage Revenue Bonds, 1994 Series A, 6.600%,
7/01/14
2,885 Housing Authority of Prince Georges County (Maryland), FHLMC/FNMA/GNMA 8/07 at 102 AAA 2,644,651
Collateralized, Single Family Mortgage Revenue Bonds, Series 1997,
5.750%, 8/01/26 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 1.3%
500 Carroll County, Maryland, Revenue Bonds, EMA Obligated Group Issue (Fairhaven 1/09 at 101 AA 469,800
and Copper Ridge), 1999A Refunding, 5.500%, 1/01/19
500 Carroll County, Maryland, Revenue Bonds, EMA Obligated Group Issue (Fairhaven 1/09 at 101 AA 466,615
and Copper Ridge), Refunding Revenue Bonds, Series 1999A, 5.625%, 1/01/25
</TABLE>
_____
15
<PAGE>
Portfolio of Investments
Nuveen Maryland Municipal Bond Fund (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General - 1.4%
$ 1,000 Montgomery County, Maryland, Consolidated Public Improvement Bonds, 1/10 at 101 AAA $ 998,250
General Obligation Bonds, Series 2000A, 5.750%, 1/01/19
-----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 13.9%
1,250 Anne Arundel County, Maryland, Special Obligation Bonds (Arundel Mills 7/09 at 102 N/R 1,221,375
Project), Series 1999, 7.100%, 7/01/29
1,000 Mayor and City Council of Baltimore (Maryland), Certificates of 10/07 at 102 AAA 911,660
Participation (Emergency Telecommunications Facilities),
Series 1997A, 5.000%, 10/01/17
2,000 Mayor and City Council of Baltimore (City of Baltimore, Maryland), 9/08 at 102 AAA 1,774,340
Convention Center Refunding Revenue Bonds, Series 1998, 5.000%, 9/01/19
1,110 Maryland Department of Housing and Community Development, Community 6/10 at 101 Aaa 1,088,533
Development Administration, Infrastructure Financing Bonds
(MBIA Insured), 2000 Series A, 5.875%, 6/01/30
1,760 Maryland Stadium Authority, Convention Center Expansion Lease Revenue 12/04 at 102 AAA 1,790,483
Bonds, Series 1994, 5,875%, 12/15/12
1,000 Puerto Rico Highway and Transportation Authority, Transportation 7/10 at 101 AAA 1,007,690
Revenue Bonds, Series B, 5.750%, 7/01/16 (WI)
1,250 Virgin Islands Public Finance Authority, Revenue Bonds (Virgin Islands 10/10 at 101 BBB- 1,249,100
Gross Receipts Taxes Loan Note), Series 1999A, 6.500%, 10/01/24
1,000 Washington Suburban Sanitary District (Montgomery and Prince Georges 6/07 at 100 Aa1 910,670
Counties, Maryland), General Construction Bonds of 1997, 5.125%, 6/01/19
-----------------------------------------------------------------------------------------------------------------------------------
Transportation - 3.9%
1,000 Maryland Transportation Authority, Transportation Facilities Projects, 7/02 at 100 A+ 1,002,760
Revenue Bonds, Series 1992, 5.750%, 7/01/15
1,000 Puerto Rico Ports Authority, Special Facilities Revenue Bonds, 1996 6/06 at 102 Baa2 949,650
Series A (American Airlines, Inc. Project) 6.250%, 6/01/26
(Alternative Minimum Tax)
900 Washington Metropolitan Area Transit Authority (District of Columbia), 1/04 at 102 AAA 857,331
Gross Revenue Transit Refunding Bonds, Series 1993, 5.250%, 7/01/14
-----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 5.5%
600 City of Baltimore, Maryland (Mayor and City Council of Baltimore), 10/02 at 100 AAA 620,868
General Obligation Consolidated Public Improvement Bonds of 1992-
Series A, 6.500%, 10/15/12 (Pre-refunded to 10/15/02)
700 The Maryland National Capital Park and Planning Commission (Prince 7/02 at 102 AA*** 729,057
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 Maryland Health and Higher Educational Facilities Authority, Revenue 7/00 at 102 AAA 510,965
Bonds, Sinai Hospital of Baltimore Issue, Series 1990, 7.000%,
7/01/19 (Pre-refunded to 7/01/00)
500 Maryland Health and Higher Educational Facilities Authority, Revenue 7/00 at 102 AAA 510,865
Bonds, Francis Scott Key Medical Center Issue, Series 1990, 6.750%,
7/01/23 (Pre-refunded to 7/01/00)
1,005 Maryland Health and Higher Educational Facilities Authority, Doctors 7/00 at 102 AAA 1,028,396
Community Hospital Issue, Series 1990, 8.750%, 7/01/00
(Pre-refunded to 7/01/00)
500 Commonwealth of Puerto Rico, Public Improvement Bonds of 1992 7/02 at 101 1/2 AAA 526,395
(General Obligation Bonds), 6.600%, 7/01/13 (Pre-refunded to
7/01/02)
------------------------------------------------------------------------------------------------------------------------------------
Utilities - 3.5%
1,000 Montgomery County, Maryland, Solid Waste System Revenue Bonds (1993 6/03 at 102 AAA 1,004,290
Series A), 5.875%, 6/01/13 (Alternative Minimum Tax)
1,500 Prince Georges County, Maryland, Pollution Control Revenue Refunding 1/03 at 102 A1 1,519,875
Bonds (Potomac Electric Project), 1993 Series, 6.375%, 1/15/23
</TABLE>
_____
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer - 5.6%
$ 1,000 City of Baltimore, Maryland (Mayor and City Council of Baltimore), No Opt. Call AAA $ 875,140
Project and Refunding Revenue Bonds (Water Projects), Series
1994-A, 5,000% 7/01/24
2,000 City of Baltimore, Maryland (Mayor and City Council of Baltimore), 7/08 at 101 AAA 1,717,880
Project and Refunding Revenue Bonds (Water Projects), Series
1998-A, 5,000% 7/01/28
1,500 City of Baltimore, Maryland (Mayor and City Council of Baltimore), 7/06 at 101 AAA 1,402,590
Project and Refunding Revenue Bonds (Water Projects), Series
1996-A, 5,000% 7/01/26
------------------------------------------------------------------------------------------------------------------------------------
$74,535 Total Investments (cost $73,913,766) - 98.4% 70,396,268
------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.6% 1,120,314
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $71,516,582
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis.
See accompanying notes to financial statements.
_____
17
<PAGE>
Portfolio of Investments
Nuveen Flagship Pennsylvania Municipal Bond Fund
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Goods - 2.1%
$ 3,000 Delaware County Industrial Development Authority, Refunding 1/08 at 102 BB- $ 2,582,940
Revenue Bonds, Series A 1997 (Resource Recovery Facility),
6.200%, 7/01/19
------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 21.8%
3,000 Allegheny County Higher Education Building Authority, College 2/06 at 102 Baa3 2,912,010
Revenue Bonds, Series A of 1996 (Robert Morris College),
6.250%, 2/15/26
Allegheny County Higher Education Building Authority, College
Revenue Refunding Bonds, Series A of 1998 (Robert Morris
College):
1,190 5.500%, 5/01/15 No Opt. Call Baa3 1,103,606
1,500 6.000%, 5/01/28 No Opt. Call Baa3 1,417,665
Chester County Health and Education Facilities Authority,
College Revenue Bonds, Series of 1998 (Immaculata College):
1,300 5.600%, 10/15/18 10/08 at 102 BBB- 1,162,278
2,300 5.625%, 10/15/27 10/08 at 102 BBB- 1,985,130
4,515 Delaware County Authority, College Revenue Refunding Bonds 10/08 at 100 BBB- 3,665,277
(Neumann College), Series 1998A, 5.375%, 10/01/26
Delaware County Authority, School Revenue Bonds, Series of 1998
(The Haverford School Project):
1,000 5.000%, 3/15/19 3/04 at 100 A- 832,470
2,000 5.125%, 3/15/24 3/04 at 100 A- 1,647,160
New Wilmington Municipal Authority (Lawrence County), College
Revenue Bonds, Series 1998 (Westminster College):
1,275 5.300%, 3/01/18 3/08 at 100 Baa1 1,086,683
935 5.350%, 3/01/28 3/08 at 100 Baa1 765,896
750 Northeastern Pennsylvania Hospital and Education Authority, College 2/05 at 100 AAA 795,150
Revenue, Guaranteed, Luzerne County Community College,
6.625%, 8/15/15
Pennsylvania Higher Educational Facilities Authority, Geneva College
Revenue Bonds, Series of 1998:
4,150 5.375%, 4/01/15 4/08 at 102 BBB 3,685,906
1,800 5.375%, 4/01/23 4/08 at 102 BBB- 1,500,012
3,000 Pennsylvania Higher Educational Facilities Authority, Drexel 5/09 at 100 A- 2,878,800
University Revenue Bonds, Series 1999, 6.000%, 5/01/29
1,250 Pennsylvania Higher Educational Facilities Authority, Thomas 7/09 100 AAA 1,099,338
at Jefferson University Revenue Bonds, Series 1999, 5.000%,
7/01/19
600 The General Municipal Authority of the City of Wilkes-Barre, 12/00 at 100 N/R 646,362
College Misericordia Revenue Bonds, Refunding Series A of
1992, 7.750%, 12/01/12
------------------------------------------------------------------------------------------------------------------------------------
Energy - 2.9%
3,500 Pennsylvania Economic Development Financing Authority ((Sun Company, 12/04 at 102 BBB 3,632,160
Inc. (R&M) Project)), Series 1994A, 7.600%, 12/01/24
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Healthcare - 12.4%
1,525 Allegheny County Hospital Development Authority, Hospital Revenue No Opt. Call N/R 1,354,658
Bonds, Series Q (Allegheny Valley Hospital, Sublessee),
7.000%, 8/01/15
Columbia County Hospital Authority, Health Care Revenue Bonds
(The Bloomsburg Hospital Obligated Group Project), Series of
1999:
3,735 5.850%, 6/01/24 6/09 at 100 BBB- 2,982,285
1,000 5.900%, 6/01/29 6/09 at 100 BBB- 784,300
1,585 The City of Jeannette Health Services Authority, Hospital Revenue 11/06 at 102 BBB+ 1,377,270
Bonds (Jeannette District Memorial Hospital), Series A of 1996,
6.000%, 11/01/18
</TABLE>
_____
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Market
Amount (000) Description Provisions* Ratings** Value
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Healthcare (continued)
$ 2,000 Monroeville Hospital Authority, Hospital Revenue Refunding, Forbes 10/05 at 102 N/R $ 1,700,000
Health System, 6.250%, 10/01/15
1,985 Philadelphia Pennsylvania Hospitals and Higher Education Facilities 11/02 at 102 BBB 1,731,297
Authority, Hospital Revenue Refunding, Chestnut Hill Hospital,
6.500%, 11/15/22
2,500 Philadelphia Hospitals and Higher Education Facilities Authority, 7/07 at 102 BBB+ 2,086,875
Hospital Revenue Refunding, Jeanes Hospital Project, 5.875%,
7/01/17
City of Pottsville Hospital Authority, Hospital Revenue Bonds (The
Pottsville Hospital and Warne Clinic), Series of 1998:
1,265 5.250%, 7/01/10 No Opt. Call BBB 1,088,001
2,250 5.625%, 7/01/24 7/08 at 100 BBB 1,765,215
230 Health Care Facilities Authority of Sayre, Series 1991A Revenue 3/01 at 102 AAA 237,818
Bonds, Guthrie Healthcare System 7.100% 3/01/17
350 Washington County Hospital Authority, Hospital Revenue Bonds, 4/02 at 102 A2 360,707
Series 1992 (Monongahela Valley Hospital, Inc. Project),
6,750%, 12/01/08
------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 1.5%
500 Redevelopment Authority of the County of Bucks, Mortgage Revenue 2/02 at 100 AAA 506,310
Refunding Bonds (Warminister Heights Section 8 Assisted -
FHA-Insured Project), 1992 Series A, 6.875%, 8/01/23
1,525 Redevelopment Authority of the City of Philadelphia, Multifamily 2/08 at 100 Aa2 360,707
Housing Refunding Revenue Bonds, Series 1998 (FHA-Insured
Mortgage Loan - Woodstock Mutual Homes, Inc. Project),
5.450%, 2/01/23
------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 12.0%
1,450 Allegheny County Residential Finance Authority, Single Family No Opt. Call Aaa 199,317
Mortgage Revenue Bonds, 1994 Series Y, 0.000%, 5/01/27
(Alternative Minimum Tax)
15 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 4/01 at 102 AA+ 15,242
Bonds, Series 30, 7.300%, 10/01/17
520 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 10/01 at 102 AA+ 536,500
Bonds, Series 1991-32, 7.150%, 4/01/15
2,500 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 4/06 at 102 AA+ 2,549,800
Bonds, Series 1996-50A, 6.000%, 10/01/13
2,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 4/06 at 102 AA+ 2,002,820
Bonds, Series 1996-51, 6.375%, 4/01/28 (Alternative Minimum Tax)
3,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 10/07 at 101 AA+ 2,689,770
Bonds, Series 1997-61A, 5.500%, 4/01/29 (Alternative Minimum Tax)
2,600 Urban Redevelopment Authority of Pittsburgh, Home Improvement Loan 8/05 at 102 A 2,570,802
Bonds, 1995 Series A, 6.375%, 8/01/18 (Alternative Minimum Tax)
995 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue Bonds, 4/06 at 102 AAA 996,721
Series D, 6.250%, 10/01/17
765 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue Bonds, 4/07 at 102 AAA 764,916
1997 Series A, 6.200%, 10/01/21 (Alternative Minimum Tax)
1,715 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue Bonds, 4/09 at 100 AAA 1,590,577
1999 Series C, 5.600%, 4/01/20 (Alternative Minimum Tax)
1,055 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue Bonds, 4/04 at 102 AAA 1,075,003
1994 Series A, 6.625%, 4/01/22 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 7.4%
2,895 Allegheny County Residential Finance Authority, Mortgage Revenue 10/05 at 100 AAA 2,939,844
Bonds (FHA-Insured Mortgage - Ladies Grand Army of the Republic
Health Facility Project), 1995 Series G, 6.350%, 10/01/36
2,000 Armstrong County Hospital Authority, Health Center Revenue Refunding 12/01 at 100 AAA 2,046,060
Bonds, Series 1991 (Canterbury Place Project), 6.500%, 12/01/21
</TABLE>
_________
19
<PAGE>
Portfolio of Investments
Nuveen Flagship Pennsylvania Municipal Bond Fund (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Care (continued)
$ 1,000 Butler County Industrial Development Authority, Health Center Revenue 6/03 at 102 A $ 924,680
Refunding Bonds, Series 1993, Pittsburgh Lifetime Care Community
(Sherwood Oaks Project), 5.750%, 6/01/16
Chester County Health and Educational Facilities Authority, Mortgage
Revenue Refunding Bonds (Tel Hai Obligated Group Project), Series
of 1998:
1,000 5.400%, 6/01/18 12/08 at 100 BBB 799,850
1,100 5.500%, 6/01/25 12/08 at 100 BBB 849,673
2,000 Montgomery County Higher Education and Health Authority, Mortgage 1/06 at 101 BBB 1,728,280
Revenue Bonds, Series 1996 (Waverly Heights Project), 6.375%, 1/01/26
----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 7.4%
Chichester School District, Delaware County, General Obligation Bonds,
Series of 1999:
3,125 0.000%, 3/01/26 No Opt. Call AAA 622,344
3,125 0.000%, 3/01/27 No Opt. Call AAA 583,781
3,125 0.000%, 3/01/28 No Opt. Call AAA 547,406
3,125 0.000%, 3/01/29 No Opt. Call AAA 513,375
Girard School District (Erie County), General Obligation Bonds,
Series of 1999B:
1,645 0.000%, 11/15/26 No Opt. Call AAA 314,721
1,645 0.000%, 11/15/28 No Opt. Call AAA 273,928
2,000 Mckeesport Area School District (Allegheny County), General 10/06 at 100 AAA 2,081,400
Obligation Bonds, Series of 1996A, 6.000%, 10/01/25
4,875 Mckeesport Area School District (Allegheny County), General No Opt. Call AAA 1,077,619
Obligation Bonds, Series of 1997D, 0.000%, 10/01/24
2,195 Montour School District (Allegheny County), General Obligation Bonds, No Opt. Call AAA 974,273
Series B of 1993, 0.000%, 1/01/14
520 City of Philadelphia, Pennsylvania, General Obligation Bonds, Series 3/09 at 101 AAA 438,537
1998, 5.000%, 3/15/28
2,000 Township of Tredyffrin, Chester County, General Obligation Bonds, 11/06 at 100 Aa1 1,814,660
Series of 1996, 5.250%, 11/15/21
----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 3.3%
1,390 Pennsylvania Intergovernmental Cooperative Authority (City of No Opt. Call AAA 1,504,411
Philadelphia Funding Program), Series of 1994, 7.000%, 6/15/05
3,000 Public Auditorium Authority of Pittsburgh and Allegheny County, Hotel 8/09 at 101 AAA 2,554,200
Room Excise Tax Revenue Bonds, Series of 1999, 5.125%, 2/01/35
----------------------------------------------------------------------------------------------------------------------------------
Transportation - 6.6%
50 Pennsylvania Turnpike Commission, Turnpike Revenue Bonds, Series O of 12/02 at 102 AAA 47,967
1992, 5.500%, 12/01/17
3,500 Philadelphia, Pennsylvania, Airport Revenue Bonds, Philadelphia 6/07 at 102 AAA 3,105,305
Airport System, Series 1997B, 5.400%, 6/15/27 (Alternative Minimum
Tax)
2,530 The Philadelphia Parking Authority, Parking Revenue Bonds, Series of 2/09 at 101 AAA 2,146,098
1999, 5.000%, 2/01/27
3,000 Public Parking Authority of Pittsburgh, Parking System Revenue Bonds, 6/10 at 100 AAA 2,982,870
Series 2000, 6.000%, 12/01/24
----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 11.1%
200 Allegheny County Hospital Development Authority, Hospital Revenue 10/01 at 100 BBB+*** 205,462
Bonds, Series 1991A (St. Margaret Memorial Hospital), 7.125, 10/01/21
(Pre-refunded to 10/01/01)
200 Butler County Hospital Authority, Hospital Revenue Bonds, Series 6/01 at 102 AAA 208,304
1991A (North Hills Passavant Hospital), 7.000%, 6/01/22 (Pre-
refunded to 6/01/01)
2,850 Deer Lakes School District (Allegheny County), General Obligation 1/04 at 100 AAA 2,966,651
Bonds, Series of 1995, 6.350%, 1/15/14 (Pre-refunded to 1/15/04)
1,320 Delaware County Authority, Health Facilities Revenue Bonds, Series of 12/06 at 102 Aaa 1,303,566
1996 (Mercy Health Corporation of Southeastern Pennsylvania Obligated
Group), 6.000%, 12/15/26
</TABLE>
______
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provision* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 2,000 Pennsylvania Economic Development Financing Authority (MacMillan 12/05 at 102 A*** $ 2,240,380
Bloedel Limited Partnership), 7.600%, 12/01/20 (Alternative
Minimum Tax) (Pre-refunded to 12/01/05)
1,500 Pennsylvania Intergovernmental Cooperation Authority, Special Tax 6/05 at 100 AAA 1,623,465
Revenue Bonds (City of Philadelphia Funding Program), Series of
1994, 7.000%, 6/15/14 (Pre-refunded to 6/15/05)
250 Philadelphia Authority for Industrial Development, Revenue Bonds, 5/02 at 102 N/R*** 261,695
Series of 1992 (National Board of Medical Examiners Project),
6.750%, 5/01/12 (Pre-funded to 5/01/02)
650 City of Philadelphia, Pennsylvania, Gas Works Revenue Bonds, Twelfth No Opt. Call AAA 727,285
Series B, 7.000%, 5/15/20
450 City of Philadelphia, Pennsylvania, Gas Works Revenue Bonds, 7/03 at 102 BBB*** 472,347
Fourteenth Series, 6.375%, 7/01/26 (Pre-refunded to 7/01/03)
2,000 Philadelphia Hospitals and Higher Education Facilities Authority, No Opt. Call BBB+*** 2,084,420
Hospital Revenue Refunding, Pennsylvania Hospital, 6.250%, 7/01/06
500 St. Mary Hospital Authority, Hospital Revenue Bonds, Series 1992A 7/02 at 102 AAA 523,915
(Franciscan Health System/St. Mary Hospital of Langhorne, Inc.),
6.500%, 7/01/12 (Pre-refunded to 7/01/02)
935 The Municipal Authority of the Borough of West View (Allegheny No Opt. Call AAA 1,203,055
County), Special Obligation Bond Series of 1985A, 9.500%, 11/15/14
------------------------------------------------------------------------------------------------------------------------------------
Utilities - 5.5%
765 Greater Lebanon Refuse Authority, Lebanon County, Solid Waste Revenue 11/02 at 100 A- 778,189
Bonds, Series of 1992, 7.000%, 11/15/04
1,500 Lawrence County Industrial Development Authority, Pollution Control 9/01 at 102 Baa2 1,540,380
Revenue Refunding, Pennsylvania Power Company -- New Castle Project,
Series A, 7.150%, 3/01/17
550 Lehigh County Industrial Development Authority, Pollution Control 8/05 at 102 AAA 550,099
Revenue Refunding Bonds, 1995 Series A (Pennsylvania Power and
Light Company Project), 6.150%, 8/10/29
1,000 Northampton County Industrial Development Authority, Pollution 7/05 at 102 AAA 1,004,780
Control Revenue Refunding Bonds, 1995 Series A (Metropolitan
Edison Company Project), 6.100%, 7/15/21
City of Philadelphia, Gas Works Revenue Bonds, Fourteenth Series:
2,000 6.375%, 7/01/14 7/03 at 102 AAA 2,077,920
950 6.375%, 7/01/26 7/03 at 102 BBB 936,870
------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 4.2%
2,000 Allegheny County Sanitary Authority, Sewer Revenue Bonds, Series of 12/07 at 102 AAA 1,829,860
1997, 5.375%, 12/01/24
950 Luzerne County Industrial Development Authority, Exempt Facilities 12/02 at 102 A 996,910
Revenue Bonds, 1992 Series B (Pennsylvania Gas and Water Company
Project), 7.125%, 12/01/22 (Alternative Minimum Tax)
1,500 Luzerne County Industrial Development Authority, Exempt Facilities 12/04 at 102 AAA 1,603,140
Revenue Refunding Bonds, 1994 Series A (Pennsylvania Gas and
Water Company Project), 7.000%, 12/01/17 (Alternative Minimum Tax)
795 South Wayne County Water and Sewer Authority, Pennsylvania, Sewer 4/02 at 102 N/R 828,570
Revenue Bonds, 8.200%, 4/15/13 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
$ 149,830 Total Investments (cost $128,867,146) - 98.2% 122,585,044
===============---------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.8% 2,248,845
---------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $124,833,889
=====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
____
21
<PAGE>
Portfolio of Investments
Nuveen Flagship Virginia Municipal Bond Fund
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 6.1%
$ 2,500 Industrial Development Authority of the County of Bedford, 2/08 at 102 Baa2 $ 2,112,500
Industrial Development Refunding Revenue Bonds (Nekoosa
Packaging Corporation), Series 1998, 5.600%, 12/01/25
(Alternative Minimum Tax)
2,000 Industrial Development Authority of the County of Bedford, 12/09 at 101 Baa2 1,865,980
Industrial Development Refunding Revenue Bonds (Nekoosa
Packaging Corporation), Series 1999, 6.300%, 12/01/25
(Alternative Minimum Tax)
2,000 Industrial Development Authority of Covington, Alleghany 9/04 at 102 A3 2,061,540
County, Pollution Control Facilities Refunding Revenue
Bonds (Westvaco Corporation Project), Series 1994,
6.650%, 9/01/18
3,545 Industrial Development Authority of the Isle of Wight 4/04 at 102 A3 3,489,982
County, Solid Waste Disposal Facilities Revenue Bonds
(Union Camp Corporation Project), Series 1994, 6.550%,
4/01/24 (Alternative Minimum Tax)
3,000 Industrial Development Authority of the Isle of Wight 5/07 at 102 BBB+ 2,787,270
County, Solid Waste Disposal Facilities Revenue Bonds
(Union Camp Corporation Project), Series 1997, 6.100%,
5/01/27 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Capital Goods - 1.8%
2,250 Industrial Development Authority of the County of Charles No Opt. Call BBB 1,906,313
City, Solid Waste Disposal Facility Revenue Refunding
Bonds (USA Waste of Virginia, Inc. Project), Series
1999, 4.875%, 2/01/09 (Alternative Minimum Tax)
2,000 Industrial Development Authority of the County of Henrico, No Opt. Call BB- 1,639,480
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 - 0.2%
500 Industrial Development Authority of the County of James City, 4/07 at 101 A+ 485,185
Sewage and Solid Waste Disposal Facilities Revenue Bonds,
Series 1997 (Anheuser Busch Project), 6.000%, 4/01/32
(Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 11.3%
2,000 Industrial Development Authority of the City of Alexandria, 1/09 at 101 A1 1,951,220
Educational Facilities Revenue Bonds (Episcopal High School),
Series 1999, 5.875%, 1/01/29
Industrial Development Authority of Danville, Student Housing
Revenue Bonds (Collegiate Housing Foundation - Averett
College Project), Series 1999A:
680 6.875%, 6/01/20 6/09 at 102 N/R 649,298
1,910 7.000%, 6/01/30 6/09 at 102 N/R 1,816,677
500 Medical College of Hampton Roads, General Revenue Refunding 11/01 at 102 A- 520,605
Bonds, Series 1991A, 6.875%, 11/15/16
Industrial Development Authority of Loudoun County,
University Facilities Revenue Refunding Bonds (The George
Washington University), Series of 1992:
500 6.250%, 5/15/12 5/02 at 102 A1 511,460
2,225 6.250%, 5/15/22 5/02 at 102 A1 2,223,598
1,000 City of Portsmouth, Virginia, Golf Course System Revenue 5/07 at 102 AA 836,510
Bonds, Series 1998, 5.000%, 5/01/23
2,000 Prince William County Park Authority, Park Facilities Revenue 10/09 at 101 A3 1,917,400
Refunding and Improvement Bonds, Series 1999, 6.000%,
10/15/28
1,250 Industrial Development Authority of Rockingham County, 10/03 at 102 Baa3 1,163,300
Educational Facilities Revenue Bonds (Bridgewater
College), Series 1993, 6.000%, 10/01/23
</TABLE>
_______
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations (continued)
Staunton Industrial Development Authority, Educational Facilities
Revenue Bonds (Mary Baldwin College):
$ 350 5.900%, 11/01/03 No Opt. Call N/R $ 346,906
370 6.000%, 11/01/04 No Opt. Call N/R 366,385
750 Virginia College Building Authority, Educational Facilities Revenue 1/02 at 102 AAA 780,270
Refunding (Washington and Lee University Project), 6.400%, 1/01/12
800 Virginia College Building Authority, Educational Facilities Revenue Bonds 5/02 at 102 A 838,472
(Randolph-Macon College Project), Series of 1992, 6.625%, 5/01/13
2,000 Virginia College Building Authority, Educational Facilities Revenue 10/02 at 102 BBB+ 2,049,200
Refunding Bonds (Roanoke College Project), 6.625%, 10/15/12
3,250 Virginia College Building Authority, Educational Facilities Revenue 4/03 at 102 A+ 3,226,763
Refunding Bonds (Hampton University Project), Series of 1993,
5.750%, 4/01/14
2,000 Virginia College Building Authority, Educational Facilities Revenue No Opt. Call AAA 1,802,460
Bonds (The Washington and Lee University Project), Series 1998,
5.250%, 1/01/31
420 Virginia College Building Authority, Educational Facilities Revenue 1/04 at 102 AA 421,268
Bonds (The Washington and Lee University Project), Series 1994,
5.750%, 1/01/14
1,250 Virginia College Building Authority, Educational Facilities Revenue and 7/08 at 101 AA 1,057,775
Refunding Bonds (Marymount University Project), Series 1998,
5.125%, 7/01/28
Industrial Development Authority of the City of Winchester, Educational
Facilities First Mortgage Revenue Bonds (Shenandoah University
Project), Series 1994:
180 6.700%, 10/01/14 10/04 at 102 AA 188,030
95 6.750%, 10/01/19 10/04 at 102 AA 99,917
------------------------------------------------------------------------------------------------------------------------------------
Healthcare - 9.1%
1,125 Industrial Development Authority of Albemarle County, Health Services 10/02 at 102 N/R 1,177,493
Revenue Bonds (The University of Virginia Health Services Foundation),
Series 1992, 6.500%, 10/01/22
2,060 Industrial Development Authority of Albemarle County, Hospital Refunding 10/03 at 102 A2 2,059,815
Revenue Bonds (Martha Jefferson Hospital), Series 1993, 5.875%,
10/01/13
2,000 Industrial Development Authority of the City of Fredericksburg, Hospital 6/07 at 102 AAA 1,767,440
Facilities Revenue Refunding Bonds (MediCorp Health System Obligated
Group), Series 1996, 5.250%, 6/15/23
1,110 Industrial Development Authority of the County of Giles, Exempt Facility 12/05 at 102 BBB 972,305
Revenue Bonds, Hoechst Celanese Project, Series 1995, 5.950%,
12/01/25 (Alternative Minimum Tax)
500 Industrial Development Authority of the City of Hampton, Hospital Revenue 11/04 at 102 Aa2 519,990
and Refunding Bonds (Sentara Hampton General Hospital), Series 1994A,
6.500%, 11/01/12
3,250 Industrial Development Authority of the County of Hanover, Hospital No Opt. Call AAA 3,434,698
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 Industrial Development Authority of the County of Hanover, Hospital 8/05 at 102 AAA 1,837,920
Revenue Bonds, Series 1995 (Bon Secours Health System Projects)
(Guaranteed by Bon Secours Health System Obligated Group),
Revenue Bonds, 5.500%, 8/15/25
1,250 Industrial Development Authority of Henry County, Hospital Revenue Bonds 1/07 at 101 A+ 1,201,062
(Memorial Hospital of Martinsville and Henry County), Series 1997,
6.000%, 1/01/27
Industrial Development Authority of the City of Lynchburg, Healthcare
Facilities Revenue and Refunding Bonds (Centra Health), Series 1998:
1,000 5.200%, 1/01/23 1/08 at 101 A+ 840,780
3,000 5.200%, 1/01/28 1/08 at 101 A+ 2,476,800
1,900 Medical College of Virginia Hospitals Authority, General Revenue Bonds, 7/08 at 102 AAA 1,639,472
Series 1998, 5.125%, 7/01/23
400 Richmond Industrial Development Authority, Medical Facility Revenue Bonds, 8/00 at 100 AA- 400,632
Richmond Metropolitan Blood Service, 7.125%, 2/01/11
</TABLE>
_____
23
<PAGE>
Portfolio of Investments
Nuveen Flagship Virginia Municipal Bond Fund (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily - 6.4%
$ 1,000 Industrial Development Authority of Arlington County, Multifamily 5/10 at 100 Aaa $ 980,430
Housing Revenue Bonds (Patrick Henry Apartments Project), Series 2000,
6.050%, 11/01/32 (Alternative Minimum Tax) (Mandatory put 11/01/20)
1,200 Fairfax County Redevelopment and Housing Authority, FHA-Insured 9/06 at 102 AAA 1,172,244
Mortgage for the Elderly, Revenue Refunding Bonds, Series 1996 (Little
River Glen), 6.100%, 9/01/26
3,665 Economic Development Authority of Henrico County, Beth Sholom Assisted 7/09 at 102 AAA 3,513,232
Living Revenue Bonds, GNMA Mortgage-Backed Securities Financing,
Series 1999A, 6.000%, 7/20/39
1,000 Lynchburg Redevelopment and Housing Authority, Vistas Revenue Bonds - 4/10 at 102 AAA 975,440
GNMA Mortgage- Backed Securities Financing, Series 2000A, 6.200%,
1/20/40 (Alternative Minimum Tax)
2,000 Newport News Redevelopment and Housing Authority, Mortgage Revenue 1/02 at 102 AAA 2,023,460
Refunding, West Apartments, Series A, 6.550%, 7/01/24
480 Suffolk Redevelopment and Housing Authority, Multifamily Housing 7/02 at 104 Baa2 500,467
Revenue Refunding Bonds, Series 1994 (Chase Heritage at Dulles Project),
7.000%, 7/01/24 (Mandatory put 7/01/04)
3,000 City of Virginia Beach Development Authority, Multifamily Housing 10/14 at 102 N/R 2,879,250
Revenue Bonds (Residential Rental Hamptons Project), Series 1999,
7.500%, 10/01/39
700 Virginia State Housing Development Authority, Multifamily Housing 5/01 at 102 AA+ 720,062
Bonds, Series 1991F, 7.000%, 5/01/04
-----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 7.8%
80 Puerto Rico Housing Finance Corporation, Single Family Mortgage Revenue 9/00 at 102 AAA 81,882
Bonds, Portfolio 1, Series B, 7.650%, 10/15/22
Virginia State Housing Development Authority, Commonwealth Mortgage
Bonds, 1992 Series A:
3,000 7.100%, 1/01/17 1/02 at 102 AA+ 3,078,600
1,000 7.100%, 1/01/22 1/02 at 102 AA+ 1,022,980
3,170 7.150%, 1/01/33 1/02 at 102 AA+ 3,237,711
1,000 Virginia State Housing Development Authority, Commonwealth Mortgage 7/05 at 102 AA+ 1,002,760
Bonds, Series C1, 6.300%, 7/01/25 (Alternative Minimum Tax)
2,000 Virginia State Housing Development Authority, Commonwealth Mortgage 7/05 at 102 AA+ 1,977,220
Bonds, Series C3, 6.125%, 7/01/22 (Alternative Minimum Tax)
6,000 Virginia State Housing Development Authority, Commonwealth Mortgage 1/08 at 102 AA+ 5,312,460
Bonds, 1996 Series G-, Subseries G-1, 5.300%, 1/01/22 (Alternative
Minimum Tax)
----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 2.3%
715 Industrial Development Authority of Albemarle County, Mortgage Revenue 1/01 at 103 N/R 743,335
Refunding Bonds, Series 1986A (H.C.M.F.XV-FHA-Insured Project),
8.900%, 7/15/26
1,000 Health Center Commission for the County of Chesterfield, Mortgage 12/06 at 102 AAA 969,180
Bonds (GNMA Revenue Collateralized - Lucy Corr Nursing Home Project),
Series 1996, 5.875%, 12/01/21
500 Fairfax County Redevelopment and Housing Authority, Multifamily 12/06 at 103 AAA 482,150
Housing Revenue Refunding Bonds (FHA-Insured Mortgage Loan - Paul
Spring Retirement Center), Series 1996 A, 6.000%, 12/15/28
500 Front Royal and Warren County Industrial Development Authority, Revenue 7/00 at 106 A 531,555
Bonds (Heritage Hall XIII), Series 1986, 9.450%, 7/15/24
1,190 Industrial Development Authority of the County of Henrico, Nursing 7/03 at 102 AAA 1,160,631
Facility Insured - Mortgage Refunding Revenue Bonds (Cambridge Manor
Nursing Home), Series 1993, 5.875%, 7/01/19
1,000 Northern Virginia Health Center Commission, Nursing Home Mortgage 7/08 at 102 AAA 832,600
Revenue Refunding Bonds (Birmingham Green Project), Series 1998,
5.000%, 7/01/28
------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 4.1%
1,685 The City of Hampton, Virginia, Public Improvement Bonds of 2000 2/10 at 102 AA 1,701,024
(General Obligation Bonds), 6.000%, 2/01/20
1,500 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 5.375%, 7/07 at 100 A 1,365,600
7/01/25
2,575 Commonwealth of Puerto Rico, Public Improvement Bonds of 1994, 6.450%, 7/04 at 102 AAA 2,767,018
7/01/17
2,505 City of Richmond, Virginia, General Obligation Public Improvement Bonds, 7/03 at 102 AA 2,347,786
Series 1993B, 5.500%, 7/15/23
</TABLE>
_______
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax Obligation/Limited - 11.6%
$ 2,000 Industrial Development Authority of Brunswick County, Correctional 7/06 at 102 AAA $1,921,780
Facility Lease Revenue Bonds, Series 1996, 5.500%, 7/01/17
860 Fairfax County Economic Development Authority, Parking Revenue Bonds 9/09 at 102 AA 867,964
(Vienna II Metrorail Station Project), 1999 First Series, 6.000%,
9/01/18
1,000 Greater Richmond Convention Center Authority, Hotel Tax Revenue Bonds 6/10 at 101 A- 1,003,350
(Convention Center Expansion Project), Series 2000, 6.125%, 6/15/20
2,000 Hampton Roads Regional Jail Authority, Regional Jail Facility Revenue 7/06 at 102 AAA 1,869,740
Bonds, Series 1996A, 5.500%, 7/01/24
2,000 Industrial Development Authority of the County of Henrico, Public 8/05 at 102 AA 2,196,080
Facility Lease Revenue Bonds (Henrico County Regional Jail Project),
Series 1994, 7.000%, 8/01/13
750 Loudoun County, Virginia, Certificates of Participation, Series E, No Opt. Call AAA 831,848
7.200%, 10/01/10
1,000 Middlesex County Industrial Development Authority, Lease Revenue Bonds, 8/09 at 102 AAA 1,002,240
School Facilities Project, Series 1999, 6.000%, 8/01/24
675 Norfolk Redevelopment and Housing Authority, Educational Facility 11/09 at 102 AA+ 642,128
Revenue Bonds (State Board for Community Colleges - Tidewater
Community College Downtown Campus), Series of 1999, 5.500%, 11/01/19
1,500 Peninsula Airport Commission, Airport Improvement, 7.300%, 7/15/21 7/01 at 102 AA 1,563,195
(Alternative Minimum Tax)
Prince William County Industrial Development Authority, Lease Revenue,
ATCC Project:
2,000 6.000%, 2/01/14 2/06 at 102 A2 1,938,240
1,000 6.000%, 2/01/18 2/06 at 102 A2 943,810
2,250 Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds, 7/16 at 100 A 2,059,043
Series Y of 1996, 5.500%, 7/01/36
Puerto Rico Highway and Transportation Authority, Transportation Revenue
Bonds, Series B:
1,500 5.750%, 7/01/16 (WI) 7/10 at 101 AAA 1,511,535
1,000 5.750%, 7/01/19 (WI) 7/10 at 101 AAA 994,790
2,000 Virgin Islands Public Finance Authority, Revenue Bonds (Virgin Islands 10/10 at 101 BBB- 1,998,560
Gross Receipts Taxes Loan Note), Series 1999A, 6.500%, 10/01/24
1,000 Commonwealth Transportation Board, Transportation Revenue Refunding 5/07 at 101 Aa1 902,320
Bonds, Series 1997C (U.S. Route 58 Corridor Development Program),
5.125%, 5/15/19
1,000 Virginia Public School Authority, School Financing Bonds, Series 1994 A, 8/04 at 102 Aa1 1,039,010
6.200%, 8/01/13
------------------------------------------------------------------------------------------------------------------------------------
Transportation - 8.5%
1,000 Capital Region Airport Commission, Richmond (Virginia), International 7/05 at 102 AAA 948,530
Airport Projects, Airport Revenue Bonds, Series 1995A, 5.625%, 7/01/25
750 Charlottesville-Albemarle Airport Authority, Airport Revenue Refunding 12/05 at 102 BBB 732,533
Bonds, Series 1995, 6.125%, 12/01/13 (Alternative Minimum Tax)
1,250 City of Chesapeake, Virginia, Chesapeake Expressway Toll Road Revenue 7/09 at 101 Baa2 1,160,150
Bonds, Series 1999A, 5.625%, 7/15/19
Loudoun County Industrial Development Authority, Air Cargo Facility
Revenue, Washington Dulles Air Cargo:
3,000 7.000%, 1/01/09 (Alternative Minimum Tax) 1/01 at 102 N/R 3,009,900
600 6.500%, 1/01/09 (Alternative Minimum Tax) 1/06 at 102 N/R 585,924
1,000 Metropolitan Washington D.C. Airports Authority, Airport System Revenue 10/04 at 102 AAA 963,380
Bonds, Series 1994A, 5.750%, 10/01/20 (Alternative Minimum Tax)
900 Metropolitan Washington D.C. Apartments Authority, General Airport 10/07 at 101 AA- 817,092
Revenue, 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 0.000%, 8/15/16 8/08 at 64 13/16 BBB- 1,531,750
5,500 5.500%, 8/15/28 8/08 at 102 BBB- 4,363,590
</TABLE>
______
25
<PAGE>
Portfolio of Investments
Nuveen Flagship Virginia Municipal Bond Fund (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation (continued)
$ 2,250 Puerto Rico Ports Authority, Special Facilities Revenue Bonds, 1996 6/06 at 102 Baa2 $2,136,713
Series A (American Airlines, Inc. Project), 6.250%, 6/01/26
(Alternative Minimum Tax)
1,000 Virginia Port Authority, Port Facilities Revenue Bonds, Series 1997, 7/07 at 101 AAA 915,900
5.500%, 7/01/24 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 14.4%
1,000 Town of Abingdon, Virginia, General Obligation Capital Improvement 8/02 at 102 A2*** 1,045,040
Bonds, Series 1992, 6.250%, 8/01/12 (Pre-refunded to 8/01/02)
1,000 Blacksburg-Virginia Polytechnic Institute Sanitation Authority, Sewer 11/02 at 102 A*** 1,045,470
System Revenue Bonds, Series of 1992, 6.250%, 11/01/12 (Pre-refunded
to 11/01/02)
750 Chesapeake Bay Bridge and Tunnel District, General Resolution Revenue 7/01 at 102 AAA 777,630
Bonds, Refunding Series 1991, 6.375%, 7/01/22 (Pre-refunded to
7/01/01)
1,000 Industrial Development Authority of Covington-Alleghany County, 4/02 at 102 N/R*** 1,044,430
Hospital Facility Revenue Bonds (Alleghany Regional Hospital), Series
1992, 6.625%, 4/01/12 (Pre-refunded to 4/01/02)
730 City of Danville, Virginia, General Improvement Bonds of Fiscal Year 5/02 at 102 A3*** 763,456
1991-1992, 6.500%, 5/01/12 (Pre-refunded to 5/01/02)
1,325 Fairfax County Redevelopment and Housing Authority, Revenue Bonds, 6/02 at 102 N/R*** 1,414,623
1992 Issue A (FCRHA Office Building), 7.500%, 6/15/18 (Pre-refunded to
6/15/02)
150 Fairfax County Water Authority, Water Refunding Revenue Bonds, Series 4/07 at 102 AAA 158,795
1992, 6.000%, 4/01/22 (Pre-refunded to 4/01/07)
995 Henrico County, Virginia, Water and Sewer System Refunding Revenue 5/02 at 100 Aa2*** 1,017,994
Bonds, Series 1992, 6.250%, 5/01/13 (Pre-refunded to 5/01/02)
250 Martinsville Industrial Development Authority, Hospital Facility 1/01 at 100 A2*** 253,135
Revenue, Memorial Hospital Martinsville and Henry, 7.000%, 1/01/11
(Pre-refunded to 1/01/01)
2,000 Peninsula Ports Authority, Health Care Facilities Revenue Refunding 8/06 at 100 BBB+*** 2,165,200
(Mary Immaculate Project), 7.000%, 8/01/17 (Pre-refunded to 8/01/06)
2,080 Peninsula Ports Authority of Virginia, Health System Revenue and 7/02 at 102 Aa2*** 2,182,877
Refunding Bonds (Riverside Health System Project), Series 1992-A,
6.625%, 7/01/18 (Pre-refunded to 7/01/02)
2,250 Industrial Development Authority of the County of Prince William, 10/05 at 102 Aaa 2,466,158
Hospital Facility Revenue Bonds (Potomac Hospital Corporation of
Prince William), Series 1995, 6.850%, 10/01/25 (Pre-refunded to
10/01/05)
2,500 Prince William County Park Authority, Revenue Bonds, Series 1994, 10/04 at 102 BBB+*** 2,700,625
6.875%, 10/15/16 (Pre-refunded to 10/15/04)
1,000 Prince William County Service Authority, Water and Sewer System 7/01 at 100 AAA 1,013,900
Revenue Bonds, Series 1991, 6.000%, 7/01/29 (Pre-refunded to 7/01/01)
1,500 Richmond Redevelopment and Housing Authority, Project Revenue Bonds 3/05 at 102 AAA 1,624,080
(1994 Old Manchester Project), Series 1994, 6.800%, 3/01/15
(Pre-refunded to 3/01/05)
2,260 City of Virginia Beach Development Authority, Hospital Revenue Bonds 11/01 at 102 AA*** 2,347,982
(Sentara Bayside Hospital), Series 1991, 6.300%, 11/01/21
(Pre-refunded to 11/01/01)
Virginia College Building Authority, Educational Facilities Revenue,
Marymount University Project:
1,000 7.000%, 7/01/12 (Pre-refunded to 7/01/02) 7/02 at 102 N/R*** 1,055,560
1,400 7.000%, 7/01/22 (Pre-refunded to 7/01/02) 7/02 at 102 N/R*** 1,477,784
580 Virginia College Building Authority, Educational Facilities Revenue 1/04 at 102 AAA 601,762
Bonds (The Washington and Lee University Project), Series of 1994,
5.750%, 1/01/14 (Pre-refunded to 1/01/04)
1,000 Virginia Resources Authority, Water and Sewer System Revenue Bonds, 10/07 at 100 AA*** 1,020,690
1995 Series A (Sussex County Project), 5.600%, 10/01/25 (Pre-refunded
to 10/01/07)
Industrial Development Authority of the City of Winchester,
Educational Facilities First Mortgage Revenue Bonds (Shenandoah
University Project), Series 1994:
1,620 6.700%, 10/01/14 (Pre-refunded to 10/01/04) 10/04 at 102 AA*** 1,741,937
680 6.750%, 10/01/19 (Pre-refunded to 10/01/04) 10/04 at 102 AA*** 732,489
</TABLE>
____
26
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities - 5.7%
$ 2,110 Halifax County Industrial Development Authority (Old 12/02 at 102 A+ $ 2,136,016
Dominion Electric Cooperative), 6.500%, 12/01/12
(Alternative Minimum Tax)
2,500 Mecklenburg County Industrial Development Authority, 5/01 at 102 Aa3 2,536,350
Exempt Facility, Mecklenburg Cogeneration Project,
Series 1991A, 7.350%, 5/01/08 (Alternative Minimum Tax)
1,500 City of Richmond, Virginia, Public Utility Revenue 1/08 at 101 AAA 1,306,635
and Refunding Bonds, Series 1998A, 5.125%, 1/15/28
1,000 Industrial Development Authority of Russell County, 11/00 at 102 Baa1 1,026,330
Pollution Control Revenue Bonds (Appalachian Power
Company Project), Series G, 7.700%, 11/01/07
1,500 Southeastern Public Service Authority of Virginia, 7/03 at 102 A- 1,442,130
Senior Revenue Bonds, Series 1993 (Regional Solid
Waste System), 6.000%, 7/01/13 (Alternative Minimum
Tax)
1,000 Virginia State Resource Authority, Solid Waste Disposal 11/02 at 102 AA 1,048,260
System Revenue, Series B, 6.750%, 11/01/12
1,960 Virginia Resources Authority, Solid Waste Disposal System 4/05 at 102 AA 1,883,972
Revenue Bonds, (County of Prince William, Virginia -
Refunding), 1995 Series A, 5.500%, 4/01/15
---------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 10.0%
1,000 Fairfax County Water Authority, Water Refunding Revenue No Opt. Call AAA 882,430
Bonds, Series 1997, 5.000%, 4/01/21
2,045 Fairfax County Water Authority, Water Refunding Revenue 4/07 at 102 AAA 2,053,834
Bonds, Series 1992, 6.000%, 4/01/22
1,000 Frederick-Winchester Service Authority, Regional Sewer 10/03 at 102 AAA 1,000,140
System Refunding Revenue Bonds, Series 1993, 5.750%,
10/01/15
1,505 Henrico County, Virginia, Water and Sewer System 5/02 at 100 Aa2 1,529,411
Refunding Revenue Bonds, Series 1992, 6.250%, 5/01/13
1,500 Leesburg, Virginia, Utility System Revenue Refunding, 7/07 at 102 AAA 1,331,415
5.125%, 7/01/22
1,000 Loudoun County Sanitation Authority, Water and Sewer 1/03 at 102 AAA 1,023,590
System Revenue Bonds, Refunding Series 1992, 6.250%,
1/01/16
1,000 Loudoun County Sanitation Authority, Water and Sewer 1/07 at 102 AAA 871,680
System Revenue Bonds, Refunding Series 1996, 5.125%,
1/01/26
4,000 Prince William County Service Authority, Water and Sewer 7/08 at 101 AAA 3,238,720
System Refunding Revenue Bonds, Series 1997, 4.750%,
7/01/29
1,000 County of Spotsylvania, Virginia, Water and Sewer System 6/07 at 102 AAA 916,410
Revenue Bonds, Series of 1997, 5.400%, 6/01/27
3,500 Upper Occoquan Sewage Authority, Regional Sewerage System 1/04 at 102 AAA 3,044,612
Revenue Refunding Bonds, Series of 1993, 5.000%, 7/01/21
750 City of Virginia Beach, Virginia, Storm Water Utility 9/10 at 101 Aa3 754,770
Revenue Bonds, Series 2000, 6.000%, 9/01/20
1,000 Virginia Resources Authority, Sewer System Revenue Bonds, 10/05 at 102 AA 981,400
1995 Series A (Hopewell Regional Wastewater Treatment
Facility Project), 6.000%, 10/01/25 (Alternative Minimum
Tax)
1,000 Virginia Resources Authority, Clean Water State Revolving 10/10 at 100 AAA 967,830
Fund Revenue Bonds, Series 1999, 5.625%, 10/01/22
1,500 Virginia Resources Authority, Water System Refunding Revenue 4/02 at 100 AA 1,505,250
Bonds, 1992 Series A, 6.125%, 4/01/19
---------------------------------------------------------------------------------------------------------------------------------
$209,610 Total Investments (cost $202,000,749) - 99.3% 199,407,145
==============-------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.7% 1,494,714
----------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $200,901,859
============================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of
independent public accountants): Dates (month and year)
and prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities which ensures the timely payment of principal
and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis.
See accompanying notes to financial statements.
___
27
<PAGE>
Statement of Net Assets
May 31, 2000
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value $ 70,396,268 $ 122,585,044 $ 199,407,145
Cash 591,264 416,961 639,890
Receivables:
Interest 1,545,805 2,283,863 3,834,489
Investments sold 360,000 -- --
Shares sold 80,920 37,133 382,194
Other assets 1,761 2,594 4,841
---------------------------------------------------------------------------------------------------------------------------------
Total assets 72,976,018 125,325,595 204,268,559
---------------------------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 1,000,514 -- 2,488,484
Shares redeemed 186,057 79,142 279,754
Accrued expenses:
Management fees 33,248 58,184 92,436
12b-1 distribution and service fees 10,380 21,684 38,718
Other 44,555 69,797 79,186
Dividends payable 184,682 262,899 388,122
---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,459,436 491,706 3,366,700
---------------------------------------------------------------------------------------------------------------------------------
Net assets $ 71,516,582 $ 124,833,889 $ 200,901,859
=================================================================================================================================
Class A Shares
Net assets $ 22,693,543 $ 55,564,294 $ 125,522,138
Shares outstanding 2,375,463 5,921,425 12,422,058
Net asset value and redemption price per share $ 9.55 $ 9.38 $ 10.10
Offering price per share (net asset value per share plus maximum
sales charge of 4.20% of offering price) $ 9.97 $ 9.79 $ 10.54
=================================================================================================================================
Class B Shares
Net assets $ 4,693,623 $ 7,809,365 $ 10,712,983
Shares outstanding 490,719 830,577 1,061,067
Net asset value, offering and redemption price per share $ 9.56 $ 9.40 $ 10.10
=================================================================================================================================
Class C Shares
Net assets $ 5,289,503 $ 9,672,488 $ 14,263,349
Shares outstanding 553,574 1,032,063 1,412,864
Net asset value, offering and redemption price per share $ 9.56 $ 9.37 $ 10.10
=================================================================================================================================
Class R Shares
Net assets $ 38,839,913 $ 51,787,742 $ 50,403,389
Shares outstanding 4,055,754 5,522,232 4,992,500
Net asset value, offering and redemption price per share $ 9.58 $ 9.38 $ 10.10
=================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
____
28
<PAGE>
Statement of Operations
Year Ended May 31, 2000
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income $ 4,322,378 $ 8,605,785 $ 12,951,484
--------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees 401,990 765,033 1,161,710
12b-1 service fees - Class A 44,551 127,092 265,779
12b-1 distribution and service fees - Class B 45,557 79,623 104,589
12b-1 distribution and service fees - Class C 39,364 88,264 121,995
Shareholders' servicing agent fees and expenses 138,509 289,437 314,712
Custodian's fees and expenses 51,981 126,062 75,067
Trustees' fees and expenses 2,842 4,905 6,773
Professional fees 17,536 15,000 19,717
Shareholders' reports - printing and mailing expenses 45,780 75,768 107,246
Federal and state registration fees 15,280 11,010 7,791
Other expenses 2,940 7,926 14,979
--------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 806,330 1,590,120 2,200,358
Custodian fee credit (9,385) (8,774) (14,658)
Expense reimbursement (4,922) (30,869) --
--------------------------------------------------------------------------------------------------------------------------
Net expenses 792,023 1,550,477 2,185,700
--------------------------------------------------------------------------------------------------------------------------
Net investment income 3,530,355 7,055,308 10,765,784
--------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (133,210) (2,184,740) (1,199,801)
Net change in unrealized appreciation or depreciation of investments (6,186,321) (12,873,456) (15,783,991)
--------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (6,319,531) (15,058,196) (16,983,792)
--------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $(2,789,176) $ (8,002,888) $ (6,218,008)
==========================================================================================================================
</TABLE>
See accompanying notes to financial statements.
____
29
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Maryland
--------------------------------
Year Ended Year Ended
5/31/00 5/31/99
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 3,530,355 $ 3,372,749
Net realized gain (loss) from investment transactions (133,210) 571,636
Net change in unrealized appreciation or depreciation of investments (6,186,321) (1,379,409)
----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (2,789,176) 2,564,976
----------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
From undistributed net investment income:
Class A (1,114,109) (887,278)
Class B (202,001) (136,626)
Class C (230,911) (133,784)
Class R (2,110,443) (2,124,331)
From accumulated net realized gains from investment transactions:
Class A (72,058) --
Class B (14,450) --
Class C (19,350) --
Class R (129,495) --
----------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (3,892,817) (3,282,019)
----------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from sale of shares 10,391,474 12,748,209
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 2,443,251 2,071,522
----------------------------------------------------------------------------------------------------------------
12,834,725 14,819,731
Cost of shares redeemed (9,960,427) (5,741,563)
----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions 2,874,298 9,078,168
----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (3,807,695) 8,361,125
Net assets at the beginning of year 75,324,277 66,963,152
----------------------------------------------------------------------------------------------------------------
Net assets at the end of year $71,516,582 $75,324,277
================================================================================================================
Undistributed (Over-distribution of) net investment income at
the end of year $ (18,322) $ 108,787
================================================================================================================
</TABLE>
See accompanying notes to financial statements.
____
30
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania Virginia
--------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended
5/31/00 5/31/99 5/31/00 5/31/99
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 7,055,308 $ 7,397,713 $ 10,765,784 $ 10,539,789
Net realized gain (loss) from investment transactions (2,184,740) 395,831 (1,199,801) 944,358
Net change in unrealized appreciation or depreciation
of investments (12,873,456) (2,967,385) (15,783,991) (3,060,934)
--------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (8,002,888) 4,826,159 (6,218,008) 8,423,213
--------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
From undistributed net investment income:
Class A (3,311,810) (3,437,714) (6,735,183) (6,603,088)
Class B (371,439) (227,324) (475,209) (288,055)
Class C (548,538) (503,249) (736,607) (739,016)
Class R (3,003,937) (3,234,496) (2,815,774) (2,930,514)
From accumulated net realized gains from investment
transactions:
Class A (174,845) (380,650) (102,910) (354,974)
Class B (22,402) (30,257) (8,890) (18,678)
Class C (32,580) (63,063) (12,805) (44,664)
Class R (143,869) (342,018) (40,585) (150,604)
--------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (7,609,420) (8,218,771) (10,927,963) (11,129,593)
--------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from sale of shares 17,365,908 26,410,992 29,799,556 33,800,119
Net proceeds from shares issued to shareholders due
to reinvestment of distributions 3,450,856 3,885,514 4,791,847 5,206,747
--------------------------------------------------------------------------------------------------------------------------------
20,816,764 30,296,506 34,591,403 39,006,866
Cost of shares redeemed (33,412,958) (12,419,924) (40,310,618) (24,787,027)
--------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund
share transactions (12,596,194) 17,876,582 (5,719,215) 14,219,839
--------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (28,208,502) 14,483,970 (22,865,186) 11,513,459
Net assets at the beginning of year 153,042,391 138,558,421 223,767,045 212,253,586
--------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $124,833,889 $153,042,391 $200,901,859 $223,767,045
================================================================================================================================
Undistributed (Over-distribution of) net investment
income at the end of year $ (179,299) $ 1,117 $ 6,276 $ 3,265
================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
____
31
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Maryland Municipal Bond Fund ("Maryland"), the Nuveen
Flagship Pennsylvania Municipal Bond Fund ("Pennsylvania") and the Nuveen
Flagship Virginia Municipal Bond Fund ("Virginia") (collectively, the "Funds"),
among others. The Trust was organized as a Massachusetts business trust on July
1, 1996.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
accounting principles generally accepted in the United States.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 2000, Maryland and Virginia had outstanding when-issued purchase commitments
of $1,000,514 and $2,488,484, respectively. There were no such outstanding
purchase commitments in Pennsylvania.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from accounting principles generally
accepted in the United States. 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 shareholders of the Funds. All
monthly tax-exempt income dividends paid during the fiscal year ended May 31,
2000, have been designated Exempt Interest Dividends. Net realized capital gain
and market discount distributions are subject to federal taxation.
____
32
<PAGE>
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances, or by specified classes
of investors.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the fiscal year ended May 31, 2000.
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.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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>
Maryland
-------------------------------------------------------------
Year Ended Year Ended
5/31/00 5/31/99
----------------------------- -----------------------------
Shares Amount Shares Amount
--------------------------------------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 506,598 $ 5,002,271 577,632 $ 6,112,774
Class B 156,732 1,560,919 235,116 2,495,746
Class C 271,137 2,702,363 187,416 1,988,761
Class R 113,972 1,125,921 203,056 2,150,928
Shares issued to shareholders due to reinvestment of distributions:
Class A 80,276 790,157 57,622 611,952
Class B 9,876 97,310 5,480 58,201
Class C 14,320 140,701 8,572 91,026
Class R 143,307 1,415,083 123,134 1,310,343
-----------------------------------------------------------------------------------------------------------------------------------
1,296,218 12,834,725 1,398,028 14,819,731
-----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (323,400) (3,169,490) (173,380) (1,842,288)
Class B (127,991) (1,253,676) (9,376) (99,303)
Class C (122,845) (1,202,027) (51,865) (546,993)
Class R (438,214) (4,335,234) (305,927) (3,252,979)
------------------------------------------------------------------------------------------------------------------------------------
(1,012,450) (9,960,427) (540,548) (5,741,563)
------------------------------------------------------------------------------------------------------------------------------------
Net increase 283,768 $ 2,874,298 857,480 $ 9,078,168
====================================================================================================================================
</TABLE>
____
33
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
Pennsylvania
----------------------------------------------------------------
Year Ended Year Ended
5/31/00 5/31/99
----------------------------- --------------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,013,516 $ 9,991,369 1,042,066 $ 11,085,436
Class B 290,039 2,862,196 556,149 5,925,032
Class C 220,924 2,196,164 466,677 4,965,788
Class R 238,691 2,316,179 417,495 4,434,736
Shares issued to shareholders due to reinvestment of distributions:
Class A 123,938 1,213,955 127,403 1,358,196
Class B 11,535 112,807 6,887 73,512
Class C 14,780 144,545 14,586 155,250
Class R 202,211 1,979,549 215,836 2,298,556
-----------------------------------------------------------------------------------------------------------------------------------
2,115,634 20,816,764 2,847,099 30,296,506
-----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,996,832) (19,336,504) (549,431) (5,838,055)
Class B (231,806) (2,229,751) (48,814) (522,051)
Class C (465,132) (4,470,414) (54,534) (578,008)
Class R (763,147) (7,376,289) (516,487) (5,481,810)
-----------------------------------------------------------------------------------------------------------------------------------
(3,456,917) (33,412,958) (1,169,266) (12,419,924)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (1,341,283) $(12,596,194) 1,677,833 $ 17,876,582
===================================================================================================================================
<CAPTION>
Virginia
----------------------------------------------------------------
Year Ended Year Ended
5/31/00 5/31/99
----------------------------- --------------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 2,164,715 $ 22,431,378 1,781,027 $ 19,736,719
Class B 306,597 3,203,383 605,747 6,716,554
Class C 206,567 2,151,419 421,265 4,668,341
Class R 193,907 2,013,376 241,908 2,678,505
Shares issued to shareholders due to reinvestment of distributions:
Class A 253,150 2,629,496 261,217 2,903,901
Class B 21,372 221,411 14,259 158,363
Class C 20,704 215,113 23,019 255,663
Class R 166,257 1,725,827 169,963 1,888,820
-----------------------------------------------------------------------------------------------------------------------------------
3,333,269 34,591,403 3,518,405 39,006,866
-----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,703,468) (27,830,084) (1,444,306) (16,020,885)
Class B (220,588) (2,251,777) (18,515) (205,614)
Class C (432,644) (4,444,870) (242,411) (2,672,615)
Class R (558,722) (5,783,887) (531,239) (5,887,913)
-----------------------------------------------------------------------------------------------------------------------------------
(3,915,422) (40,310,618) (2,236,471) (24,787,027)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (582,153) $ (5,719,215) 1,281,934 $ 14,219,839
===================================================================================================================================
</TABLE>
3. Distributions to Shareholders.
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on July 3, 2000, to shareholders of record on June 9,
2000, as follows:
Maryland Pennsylvania Virginia
--------------------------------------------------------------------------------
Dividend per share:
Class A $.0395 $ .0420 $ .0440
Class B .0335 .0360 .0380
Class C .0350 .0375 .0395
Class R .0410 .0435 .0460
================================================================================
____
34
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the fiscal year ended May 31,
2000, were as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Long-term municipal securities $17,270,624 $22,233,432 $46,189,385
Short-term municipal securities 4,465,000 800,000 4,000,000
Sales and maturities:
Long-term municipal securities 13,381,963 37,173,753 50,493,775
Short-term municipal securities 4,465,000 800,000 4,000,000
====================================================================================
</TABLE>
At May 31, 2000, the identified cost of investments owned for federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
------------------------------------------------------------------------------------
<S> <C> <C> <C>
$74,324,713 $130,327,647 $202,000,749
====================================================================================
</TABLE>
At May 31, 2000, 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>
Pennsylvania Virginia
------------------------------------------------------------------------------------
<S> <C> <C>
Expiration year:
2008 $ 724,240 $ 1,222,230
====================================================================================
</TABLE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at May 31, 2000, were as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $ 691,433 $ 2,199,573 $ 4,121,108
depreciation (4,619,878) (9,942,176) (6,714,712)
-----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) $(3,928,445) $(7,742,603) $(2,593,604)
=========================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of each Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
----------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
==================================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
____
35
<PAGE>
Notes to Financial Statements (continued)
During the fiscal year ended May 31, 2000, John Nuveen & Co. Incorporated (the
"Distributor"), a wholly owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares, the majority of which were paid
out as concessions to authorized dealers as follows:
Maryland Pennsylvania Virginia
--------------------------------------------------------------------------------
Sales charges collected $ 35,061 $ 88,449 $ 131,811
Paid to authorized dealers 29,822 88,449 131,811
================================================================================
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the fiscal year ended May 31, 2000, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
Maryland Pennsylvania Virginia
--------------------------------------------------------------------------------
Commission advances $ 94,231 $ 157,829 $ 149,382
================================================================================
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 collected on Class B Shares, and all 12b-1 service and
distribution fees collected on Class C Shares during the first year following a
purchase are retained by the Distributor. During the fiscal year ended May 31,
2000, the Distributor retained such 12b-1 fees as follows:
Maryland Pennsylvania Virginia
--------------------------------------------------------------------------------
12b-1 fees retained $ 54,809 $ 88,286 $ 109,130
================================================================================
The remaining 12b-1 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
fiscal year ended May 31, 2000, as follows:
Maryland Pennsylvania Virginia
--------------------------------------------------------------------------------
CDSC retained $ 36,224 $ 66,068 $ 76,665
================================================================================
7. Composition of Net Assets
At May 31, 2000, 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 $ 75,443,765 $ 133,482,021 $ 204,711,417
Undistributed (Over-distribution of) net investment income (18,322) (179,299) 6,276
Accumulated net realized gain (loss) from investment transactions (391,363) (2,186,731) (1,222,230)
Net unrealized appreciation (depreciation) of investments (3,517,498) (6,282,102) (2,593,604)
----------------------------------------------------------------------------------------------------------------------------
Net assets $ 71,516,582 $ 124,833,889 $ 200,901,859
============================================================================================================================
</TABLE>
____
36
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period:
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 (Loss) Total Income Gains Total Value Return (a)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 $ 10.46 $ .47 $ (.86) $ (.39) $ (.49) $ (.03) $ (.52) $ 9.55 (3.71)%
1999 10.56 .49 (.11) .38 (.48) -- (.48) 10.46 3.65
1998 10.25 .48 .32 .80 (.49) -- (.49) 10.56 7.95
1997 (d) 10.25 .16 .01 .17 (.17) -- (.17) 10.25 1.63
1997 (e) 10.43 .46 (.15) .31 (.49) -- (.49) 10.25 3.06
1996 (e) 9.60 .48 .85 1.33 (.50) -- (.50) 10.43 14.07
Class B (3/97)
2000 10.47 .40 (.86) (.46) (.42) (.03) (.45) 9.56 (4.44)
1999 10.56 .41 (.10) .31 (.40) -- (.40) 10.47 2.95
1998 10.25 .41 .31 .72 (.41) -- (.41) 10.56 7.16
1997 (f) 10.29 .10 (.04) .06 (.10) -- (.10) 10.25 .83
Class C (9/94)
2000 10.46 .42 (.86) (.44) (.43) (.03) (.46) 9.56 (4.16)
1999 10.56 .43 (.11) .32 (.42) -- (.42) 10.46 3.07
1998 10.24 .43 .32 .75 (.43) -- (.43) 10.56 7.44
1997 (d) 10.24 .15 -- .15 (.15) -- (.15) 10.24 1.43
1997 (e) 10.42 .39 (.16) .23 (.41) -- (.41) 10.24 2.28
1996 (e) 9.59 .41 .84 1.25 (.42) -- (.42) 10.42 13.24
Class R (12/91)
2000 10.48 .49 (.85) (.36) (.51) (.03) (.54) 9.58 (3.43)
1999 10.58 .51 (.11) .40 (.50) -- (.50) 10.48 3.82
1998 10.26 .51 .32 .83 (.51) -- (.51) 10.58 8.23
1997 (d) 10.26 .17 -- .17 (.17) -- (.17) 10.26 1.68
1997 (e) 10.44 .47 (.14) .33 (.51) -- (.51) 10.26 3.29
1996 (e) 9.61 .51 .84 1.35 (.52) -- (.52) 10.44 14.33
====================================================================================================================================
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
----------------- ----------------- -----------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
May 31, (000) Assets Assets Assets Assets Assets Assets Rate
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 $ 22,694 1.13% 4.79% 1.12% 4.79% 1.11% 4.81% 19%
1999 22,093 1.02 4.57 .95 4.63 .95 4.64 29
1998 17,427 1.00 4.56 .94 4.62 .94 4.62 7
1997 (d) 12,977 1.02* 4.83* .95* 4.90* .95* 4.90* 3
1997 (e) 11,788 1.12 4.67 1.00 4.79 1.00 4.79 4
1996 (e) 6,860 1.33 4.41 1.00 4.74 1.00 4.74 17
Class B (3/97)
2000 4,694 1.87 4.04 1.87 4.04 1.85 4.05 19
1999 4,732 1.77 3.84 1.71 3.90 1.71 3.90 29
1998 2,332 1.75 3.79 1.69 3.85 1.69 3.85 7
1997 (f) 150 1.76* 3.94* 1.70* 4.00* 1.70* 4.00* 3
Class C (9/94)
2000 5,290 1.68 4.25 1.68 4.25 1.66 4.27 19
1999 4,089 1.57 4.03 1.51 4.10 1.50 4.10 29
1998 2,606 1.55 4.01 1.49 4.07 1.49 4.07 7
1997 (d) 2,103 1.57* 4.28* 1.50* 4.35* 1.50* 4.35* 3
1997 (e) 1,985 1.87 3.93 1.75 4.05 1.75 4.05 4
1996 (e) 1,438 2.06 3.73 1.75 4.04 1.75 4.04 17
Class R (12/91)
2000 38,840 .92 4.98 .92 4.99 .90 5.00 19
1999 44,411 .82 4.77 .75 4.83 .75 4.83 29
1998 44,599 .80 4.76 .74 4.82 .74 4.82 7
1997 (d) 43,306 .82* 5.03* .75* 5.10* .75* 5.10* 3
1997 (e) 43,738 .87 4.94 .75 5.06 .75 5.06 4
1996 (e) 47,389 1.04 4.78 .75 5.07 .75 5.07 17
==================================================================================================
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) For the four months ended May 31.
(e) For the year ended January 31.
(f) From commencement of class operations as noted.
____
37
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
--------------------- ------------------
PENNSYLVANIA** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending Ending
Net Invest- ment Invest- Net Net
Year Ended Asset ment Gain ment Capital Asset Total Assets
May 31, Value Income (Loss) Total Income Gains Total Value Return(a) (OOO)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/86)
2000 $ 10.45 $ .50 $ (1.03) $ (.53) $ (.51) $ (.03) $ (.54) $ 9.38 (5.21)% $ 55,564
1999 10.68 .53 (.17) .36 (.53) (.06) (.59) 10.45 3.42 70,865
1998 10.25 .56 .45 1.01 (.56) (.02) (.58) 10.68 10.05 65,826
1997 10.00 .57 .25 .82 (.57) -- (.57) 10.25 8.37 55,667
1996 10.21 .59 (.20) .39 (.60) -- (.60) 10.00 3.83 44,392
Class B (2/97)
2000 10.47 .42 (1.03) (.61) (.43) (.03) (.46) 9.40 (5.91) 7,809
1999 10.70 .45 (.17) .28 (.45) (.06) (.51) 10.47 2.66 7,966
1998 10.27 .48 .45 .93 (.48) (.02) (.50) 10.70 9.23 2,640
1997 (d) 10.21 .16 .06 .22 (.16) -- (.16) 10.27 2.18 229
Class C (2/94)
2000 10.44 .44 (1.03) (.59) (.45) (.03) (.48) 9.37 (5.73) 9,672
1999 10.68 .47 (.17) .30 (.48) (.06) (.54) 10.44 2.80 13,167
1998 10.25 .50 .45 .95 (.50) (.02) (.52) 10.68 9.50 8,912
1997 9.99 .51 .26 .77 (.51) -- (.51) 10.25 7.88 6,320
1996 10.21 .53 (.21) .32 (.54) -- (.54) 9.99 3.16 4,442
Class R (2/97)
2000 10.44 .51 (1.01) (.50) (.53) (.03) (.56) 9.38 (4.93) 51,788
1999 10.68 .55 (.17) .38 (.56) (.06) (.62) 10.44 3.55 61,044
1998 10.25 .58 .45 1.03 (.58) (.02) (.60) 10.68 10.30 61,180
1997 (d) 10.21 .20 .03 .23 (.19) -- (.19) 10.25 2.31 57,383
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
------------- ----------------- -----------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Expenses
to to to to to to
Average Average Average Average Average Average Portfolio
Year Ended Net Net Net Net Net Net Turnover
May 31, Assets Assets Assets Assets Assets Assets Rate
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (10/86)
2000 1.12% 5.04% 1.10% 5.06% 1.09% 5.07% 16%
1999 .94 4.75 .69 5.00 .69 5.00 18
1998 .95 4.94 .61 5.28 .61 5.28 20
1997 1.09 5.22 .70 5.61 .70 5.61 46
1996 1.13 5.42 .79 5.76 .79 5.76 65
Class B (2/97)
2000 1.89 4.30 1.87 4.32 1.86 4.32 16
1999 1.69 4.02 1.45 4.25 1.45 4.26 18
1998 1.70 4.14 1.34 4.50 1.34 4.50 20
1997 (d) 1.72* 4.47* 1.35* 4.84* 1.35* 4.84* 46
Class C (2/94)
2000 1.66 4.49 1.64 4.52 1.63 4.52 16
1999 1.49 4.21 1.25 4.45 1.24 4.46 18
1998 1.50 4.39 1.16 4.73 1.16 4.73 20
1997 1.63 4.68 1.25 5.06 1.25 5.06 46
1996 1.34 5.19 1.68 4.85 1.68 4.85 65
Class R (2/97)
2000 .94 5.24 .91 5.26 .91 5.27 16
1999 .74 4.95 .49 5.20 .49 5.20 18
1998 .75 5.14 .41 5.48 .41 5.48 20
1997 (d) .77* 5.45* .39* 5.83* .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) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
____
38
<PAGE>
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
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 (Loss) Total Income Gains Total Value Return (a)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (3/86)
2000 $ 10.93 $ .53 $ (.83) $ (.30) $ (.52) $ (.01) $ (.53) 10.10 (2.72)
1999 11.06 .53 (.10) .43 (.53) (.03) (.56) 10.93 3.95
1998 10.66 .56 .41 .97 (.56) (.01) (.57) 11.06 9.30
1997 10.40 .58 .25 .83 (.57) -- (.57) 10.66 8.20
1996 10.56 .57 (.15) .42 (.58) -- (.58) 10.40 4.03
Class B (2/97)
2000 10.93 .45 (.82) (.37) (.45) (.01) (.46) 10.10 (3.44)
1999 11.06 .45 (.10) .35 (.45) (.03) (.48) 10.93 3.20
1998 10.66 .48 .41 .89 (.48) (.01) (.49) 11.06 8.53
1997 (d) 10.62 .16 .04 .20 (.16) -- (.16) 10.66 1.94
Class C (10/93)
2000 10.92 .47 (.81) (.34) (.47) (.01) (.48) 10.10 (3.16)
1999 11.06 .47 (.11) .36 (.47) (.03) (.50) 10.92 3.30
1998 10.65 .50 .42 .92 (.50) (.01) (.51) 11.06 8.81
1997 10.39 .52 .26 .78 (.52) -- (.52) 10.65 7.61
1996 10.56 .51 (.16) .35 (.52) -- (.52) 10.39 3.37
Class R (2/97)
2000 10.93 .55 (.82) (.27) (.55) (.01) (.56) 10.10 (2.49)
1999 11.06 .56 (.10) .46 (.56) (.03) (.59) 10.93 4.18
1998 10.66 .59 .41 1.00 (.59) (.01) (.60) 11.06 9.54
1997 (d) 10.62 .20 .04 .24 (.20) -- (.20) 10.66 2.26
===============================================================================================================================
<CAPTION>
Ratios/Supplemental Data
-----------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
------------------ ------------------ -------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
May 31, (000) Assets Assets Assets Assets Assets Assets Rate
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (3/86)
2000 $125,522 1.00% 5.07% 1.00% 5.07% .99% 5.08% 22%
1999 138,941 .89 4.78 .86 4.81 .86 4.81 15
1998 133,966 .90 4.99 .74 5.15 .74 5.15 3
1997 122,252 1.00 5.19 .74 5.45 .74 5.45 23
1996 117,677 1.06 5.18 .83 5.41 .83 5.41 17
Class B (2/97)
2000 10,713 1.75 4.32 1.75 4.32 1.75 4.33 22
1999 10,419 1.64 4.02 1.61 4.05 1.61 4.06 15
1998 3,894 1.64 4.20 1.51 4.33 1.51 4.33 3
1997 (d) 381 1.66* 4.49* 1.47* 4.68* 1.47* 4.68* 23
Class C (10/93)
2000 14,263 1.55 4.53 1.55 4.53 1.54 4.53 22
1999 17,679 1.44 4.23 1.41 4.26 1.41 4.26 15
1998 15,660 1.44 4.44 1.29 4.59 1.29 4.59 3
1997 11,700 1.55 4.63 1.29 4.89 1.29 4.89 23
1996 10,978 1.60 4.62 1.38 4.84 1.38 4.84 17
Class R (2/97)
2000 50,403 .80 5.27 .80 5.27 .79 5.28 22
1999 56,728 .69 4.98 .66 5.01 .66 5.02 15
1998 58,734 .70 5.19 .54 5.35 .54 5.35 3
1997 (d) 57,002 .71* 5.50* .52* 5.69* .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) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where
applicable.
(c) After custodian fee credit and expense reimbursement, where
applicable.
(d) From commencement of class operations as noted.
_____
39
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust I:
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Maryland Municipal Bond Fund (Maryland),
Nuveen Flagship Pennsylvania Municipal Bond Fund (Pennsylvania), and Nuveen
Flagship Virginia Municipal Bond Fund (Virginia) (collectively, the "Funds")
(three of the portfolios constituting the Nuveen Flagship Multistate Trust I (a
Massachusetts business trust)), as of May 31, 2000, and the related statements
of operations for the year then ended, the statements of changes in net assets
for each of the two years then ended and the financial highlights for each of
the three years then ended. We have also audited the financial highlights of
Maryland for the two years ended January 31, 1997. These financial statements
and financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for
Pennsylvania and Virginia for the two years ended May 31, 1997 were audited by
other auditors whose report dated July 11, 1997, expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of May 31, 2000, by correspondence with the custodian and brokers. As
to securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Maryland Municipal Bond Fund, Nuveen Flagship Pennsylvania Municipal Bond Fund,
and Nuveen Flagship Virginia Municipal Bond Fund of the Nuveen Flagship
Multistate Trust I as of May 31, 2000, and the results of their operations for
the year then ended, the changes in their net assets for each of the two years
then ended and the financial highlights for each of the three years then ended,
and the financial highlights of Maryland for the two years ended January 31,
1997, in conformity with accounting principles generally accepted in the United
States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 18, 2000
___
40
<PAGE>
Fund Information
Board of Trustees Transfer Agent and
Shareholder Services
Robert P. Bremner
Lawrence H. Brown Chase Global Funds Services Company
Anne E. Impellizzeri 73 Tremont Street
Peter R. Sawers Boston, MA 02108
William J. Schneider
Timothy R. Schwertfeger (800) 257-8787
Judith M. Stockdale
Legal Counsel
Fund Manager
Morgan, Lewis &
Nuveen Advisory Corp. Bockius LLP
333 West Wacker Drive Washington, D.C.
Chicago, IL 60606
Independent Public
Accountants
Arthur Andersen LLP
Chicago, IL
___
41
<PAGE>
Serving
Investors
For Generations
[PHOTO OF JOHN NUVEEN, SR., APPEARS HERE]
John Nuveen, Sr.
A 100-Year Tradition of Quality Investments
Since 1898, John Nuveen & Co. Incorporated has been synonymous with investments
that withstand the test of time. In fact, more than 1.3 million investors have
trusted Nuveen to help them build and sustain the wealth of a lifetime.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. We can help
you build a better, well-diversified portfolio.
Call Your Financial Advisor Today
To find out how Nuveen Mutual Funds might round out your investment portfolio,
contact your financial advisor today. Or call Nuveen at (800) 257-8787 for more
information. Ask your advisor or call for a prospectus, which details risks,
fees and expenses. Please read the prospectus carefully before you invest.
NUVEEN
Investments
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
www.nuveen.com
