<PAGE>
As filed with the Securities and Exchange Commission on September 28, 2000.
1933 Act Registration No. 333-16617
1940 Act Registration No. 811-07747
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
Form N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 5 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 5 [X]
(Check appropriate box or boxes)
--------------
Nuveen Multistate Trust I
(Exact name of Registrant as Specified in Charter)
333 West Wacker Drive, Chicago, Illinois 60606
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 917-7700
Gifford R. Zimmerman, Esq.--Vice President With a copy to:
and Secretary Thomas S. Harman
333 West Wacker Drive Morgan Lewis & Bockius LLP
Chicago, Illinois 60606 1800 M Street, N.W.
(Name and Address of Agent for Service) Washington, D.C. 20036
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing pursuant [_] on (date) pursuant to paragraph
to paragraph (b) (a)(1)
[_] on , pursuant to [_] 75 days after filing pursuant to
paragraph (b) paragraph (a)(2)
[_] on (date) pursuant to paragraph
(a)(2) of Rule 485.
If appropriate, check the following box:
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
CONTENTS
OF
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FILE NO. 333-16617
AND
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
FILE NO. 811-07747
This Registration Statement comprises the following papers and contents:
The Facing Sheet
Cross-Reference Sheet
Part A-The Combined Prospectus For:
Nuveen Arizona Municipal Bond Fund
Nuveen Colorado Municipal Bond Fund
Nuveen New Mexico Municipal Bond Fund
The Prospectus For:
Nuveen Florida Municipal Bond Fund
The Combined Prospectus For:
Nuveen Maryland Municipal Bond Fund
Nuveen Pennsylvania Municipal Bond Fund
Nuveen Virginia Municipal Bond Fund
Part B-The Statement of Additional Information
Copy of the Annual Report to Shareholders (the financial
statements from which are incorporated by reference into the
Statement of Additional Information)
Part C-Other Information
Signatures
Index to Exhibits
Exhibits
<PAGE>
NUVEEN
Investments
Municipal Bond
Funds
PROSPECTUS SEPTEMBER 28, 2000
Dependable, tax-free income to help you keep more of what you earn.
[PHOTO APPEARS HERE]
INVEST WELL
LOOK AHEAD
LEAVE YOUR MARK/SM/
Arizona
Colorado
New Mexico
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
<PAGE>
Table of Contents
Section 1 The Funds
This section provides you with an overview of the funds including investment
objectives, portfolio holdings and historical performance information.
Introduction 1
..............................................................
Nuveen Arizona Municipal Bond Fund 2
..............................................................
Nuveen Colorado Municipal Bond Fund 4
..............................................................
Nuveen New Mexico Municipal Bond Fund 6
..............................................................
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
Who Manages the Funds 8
..............................................................
What Securities We Invest In 9
..............................................................
How We Select Investments 10
..............................................................
What the Risks Are 11
..............................................................
How We Manage Risk 12
..............................................................
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into or out of your
account.
What Share Classes We Offer 13
..............................................................
How to Reduce Your Sales Charge 14
..............................................................
How to Buy Shares 15
..............................................................
Systematic Investing 15
..............................................................
Systematic Withdrawal 17
..............................................................
Special Services 17
..............................................................
How to Sell Shares 18
..............................................................
Section 4 General Information
This section summarizes the funds' distribution policies and other general fund
information.
Dividends, Distributions and Taxes 20
..............................................................
Distribution and Service Plans 21
..............................................................
Net Asset Value 22
..............................................................
Fund Service Providers 22
..............................................................
Section 5 Financial Highlights
This section provides the funds' financial performance
for the past five years. 23
..............................................................
Appendix Additional State Information 26
..............................................................
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment
Strategy
Risks
Fees, Charges
and Expenses
Shareholder
Instructions
Performance and
Current Portfolio
Information
<PAGE>
September 28, 2000
Section 1 The Funds
Nuveen Arizona Municipal Bond Fund
Nuveen Colorado Municipal Bond Fund
Nuveen New Mexico Municipal Bond Fund
Introduction
This prospectus is intended to provide important information to help you
evaluate whether one of the Nuveen Mutual Funds listed above may be right for
you. Please read it carefully before investing and keep it for future reference.
--------------------------------------------------------------------------------
NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
--------------------------------------------------------------------------------
Section 1 The Funds 1
<PAGE>
Nuveen Arizona Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent rating agencies.
The fund may buy non-rated municipal bonds if the fund's investment adviser
judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate risk and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal bond
will be unable to make interest and principal payments. In general, lower rated
bonds carry greater credit risk. The fund may bear additional risk because it
invests primarily in Arizona bonds. As with any mutual fund investment, loss of
money is a risk of investing.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income; or
. Set aside money systematically for retirement, estate planning or college
funding.
You should not invest in this fund if you seek to:
. Pursue long-term growth;
. Invest through an IRA or 401(k) plan; or
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five- and
ten-year periods ending December 31, 1999. This information is intended to help
you assess the variability of fund returns over the past ten years (and
consequently, the potential rewards and risks of a fund investment). Past
performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1990..... 5.5%
1991..... 12.3%
1992..... 10.2%
1993..... 13.0%
1994..... -5.6%
1995..... 19.0%
1996..... 3.1%
1997..... 9.6%
1998..... 6.0%
1999..... -5.2%
During the ten years ending December 31, 1999, the highest and lowest quarterly
returns were 7.58% and -5.84%, respectively for the quarters ending 3/31/95 and
3/31/94. The bar chart and highest/lowest quarterly returns do not reflect sales
charges, which would reduce returns, while the average annual return table does
include sales charges.
Average Annual Total Returns for
the Periods Ending December 31, 1999
Class 1 Year 5 Year 10 Year
----------------------------------------------------
Class A (Offer) -9.20% 5.28% 6.05%
Class B -9.55% 5.31% 6.02%
Class C -5.76% 5.62% 5.93%
Class R -5.04% 6.32% 6.58%
----------------------------------------------------
LB Market
Benchmark/2/ -2.06% 6.91% 6.89%
Lipper
Peer Group/3/ -4.29% 5.95% 6.10%
2 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A B C R/5/
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
................................................................................
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
................................................................................
Exchange Fees None None None None
................................................................................
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
................................................................................
</TABLE>
Annual Fund Operating Expenses/11/
Paid From Fund Assets
<TABLE>
<CAPTION>
Share Class A B C R
................................................................................
<S> <C> <C> <C> <C>
Management Fees .55% .55% .55% .55%
................................................................................
12b-1 Distribution and Service Fees .20% .95% .75% --%
................................................................................
Other Expenses .35% .35% .35% .36%
================================================================================
Total Annual Fund Operating
Expenses-Gross+ 1.10% 1.85% 1.65% .91%
</TABLE>
+ After Expense Reimbursements
Net expenses reflect a voluntary expense limitation by
the fund's investment adviser that may be modified or
discontinued without notice at the adviser's discretion.
........................................................
Expense Reimbursements (.04%) (.04%) (.05%) (.04%)
........................................................
Total Annual Fund
Operating Expenses-Net 1.06% 1.81% 1.60% .87%
........................................................
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time period indicated and then either
redeem or do not redeem your shares at the end of a period. The example assumes
that your investment has a 5% return each year and that the fund's gross
operating expenses remain the same. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 527 $ 583 $ 168 $ 93 $ 527 $ 188 $ 168 $ 93
............................................................................................
3 Years $ 755 $ 898 $ 520 $ 290 $ 755 $ 582 $ 520 $ 290
............................................................................................
5 Years $1,001 $1,114 $ 897 $ 504 $1,001 $1,001 $ 897 $ 504
............................................................................................
10 Years $1,704 $1,973 $1,955 $1,120 $1,704 $1,973 $1,955 $1,120
............................................................................................
</TABLE>
How the Fund Is Invested (as of 5/31/00)
Portfolio Statistics
Average Effective Maturity 18.11 years
...............................................
Average Duration 8.94
...............................................
Weighted Average Credit Quality AA
...............................................
Number of Issues 106
...............................................
Credit Quality
AAA/U.S. Guaranteed 55%
...............................................
AA 6%
...............................................
A 14%
...............................................
BBB 20%
...............................................
NR 5%
...............................................
Sector Diversification (Top 5)
[PIE CHART APPEARS HERE]
Tax Obligation--General 14%
U.S. Guaranteed 21%
Other 27%
Healthcare 14%
Tax Obligation--Limited 17%
Water and Sewer 7%
1. Class A total returns reflect actual performance for all periods; Class B,
C and R total returns reflect actual performance for periods since class
inception (see "Financial Highlights" for dates), and Class A performance
for periods prior to class inception, adjusted for the differences in fees
between the classes (see "What are the Costs of Investing?"). The Class A
year-to-date return on net asset value as of 6/30/00 was 4.21%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Arizona Municipal Debt Category. Returns assume reinvestment of
dividends and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced Class A sales charges apply to purchases of $50,000 or more. See
"How You Can Buy and Sell Shares."
7. As a percentage of the lesser of purchase price or redemption
proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 3
<PAGE>
Nuveen Colorado Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases
local, income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent rating agencies. The
fund may buy non-rated municipal bonds if the fund's investment adviser judges
them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate risk and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal bond
will be unable to make interest and principal payments. In general, lower rated
bonds carry greater credit risk. The fund may bear additional risk because it
invests primarily in Colorado bonds. The fund is non-diversified, and may invest
more of its assets in a single issuer than a diversified fund. Greater
concentration may increase risk. As with any mutual fund investment, loss of
money is a risk of investing.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income; or
. Set aside money systematically for retirement, estate planning or college
funding.
You should not invest in this fund if you seek to:
. Pursue long-term growth;
. Invest through an IRA or 401(k) plan; or
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five- and
ten-year periods ending December 31, 1999. This information is intended to help
you assess the variability of fund returns over the past ten years (and
consequently, the potential rewards and risks of a fund investment). Past
performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1990... 5.3%
1991...11.6%
1992... 9.2%
1993...12.9%
1994...-5.8%
1995...18.4%
1996... 4.3%
1997...11.9%
1998... 6.1%
1999...-6.7%
During the ten years ending December 31, 1999, the highest and lowest quarterly
returns were 6.45% and -5.94%, respectively for the quarters ending 3/31/95 and
3/31/94. The bar chart and highest/lowest quarterly returns do not reflect sales
charges, which would reduce returns, while the average annual return table does
include sales charges.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1999
------------------------------------
Class 1 Year 5 Year 10 Year
------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) -10.65% 5.56% 5.98%
Class B -10.94% 5.66% 5.98%
Class C -7.16% 5.98% 6.01%
Class R -6.60% 6.60% 6.50%
------------------------------------------------------
LB Market
Benchmark/2/ -2.06% 6.91% 6.89%
Lipper
Peer Group/3/ -4.59% 5.92% 6.25%
</TABLE>
4 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
Share Class A B C R/5/
-------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
-------------------------------------------------------------
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
-------------------------------------------------------------
Exchange Fees None None None None
-------------------------------------------------------------
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
-------------------------------------------------------------
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
----------------------------------------------------------------
Management Fees .55% .55% .55% .55%
----------------------------------------------------------------
12b-1 Distribution and
Service Fees .20% .95% .75% --%
----------------------------------------------------------------
Other Expenses .51% .54% .59% .56%
----------------------------------------------------------------
Total Annual Fund Operating
Expenses-Gross+ 1.26% 2.04% 1.89% 1.11%
----------------------------------------------------------------
+ After Expense Reimbursements
----------------------------------------------------------------
Expense Reimbursements (.01%) (.01%) (.01%) (.01%)
----------------------------------------------------------------
Total Annual Fund Operating
Expenses-Net 1.25% 2.03% 1.88% 1.10%
----------------------------------------------------------------
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time period indicated and then either
redeem or do not redeem your shares at the end of a period. The example assumes
that your investment has a 5% return each year and that the fund's gross
operating expenses remain the same. Your actual costs may be higher or lower.
Redemption No Redemption
Share Class A B C R A B C R
--------------------------------------------------------------------------------
1 Year $ 543 $ 601 $ 192 $ 113 $ 543 $ 207 $ 192 $ 113
--------------------------------------------------------------------------------
3 Years $ 803 $ 954 $ 594 $ 353 $ 803 $ 640 $ 594 $ 353
--------------------------------------------------------------------------------
5 Years $1,083 $1,211 $1,021 $ 612 $1,083 $1,098 $1,021 $ 612
--------------------------------------------------------------------------------
10 Years $1,879 $2,169 $2,212 $1,352 $1,879 $2,169 $2,212 $1,352
--------------------------------------------------------------------------------
How the Fund Is Invested (as of 5/31/00)
Portfolio Statistics
Average Effective Maturity 19.40 years
-------------------------------------------
Average Duration 9.37
-------------------------------------------
Weighted Average Credit Quality A+
-------------------------------------------
Number of Issues 46
-------------------------------------------
Credit Quality
AAA/U.S. Guaranteed 37%
-------------------------------------------
AA 17%
-------------------------------------------
A 7%
-------------------------------------------
BBB 15%
-------------------------------------------
NR 24%
-------------------------------------------
Sector Diversification (Top 5)
[PIE CHART APPEARS HERE]
U.S. Guaranteed 24%
Housing-Multifamily 17%
Other 29%
Housing-Single Family 9%
Healthcare 11%
Tax Obligation-Limited 10%
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception (see "Financial Highlights" for dates), and Class A performance
for periods prior to class inception, adjusted for the differences in fees
between the classes (see "What are the Costs of Investing?"). The Class
A year-to-date return on net asset value as of 6/30/00 was 2.87%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Colorado Debt Category. Returns assume reinvestment of dividends
and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced Class A sales charges apply to purchases of $50,000 or more. See
"How You Can Buy and Sell Shares."
7. As a percentage of the lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3% during
the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 5
<PAGE>
Nuveen New Mexico Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent rating agencies. The
fund may buy non-rated municipal bonds if the fund's investment adviser judges
them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate risk and credit
risk. Interest rate risk is the risk that interest rates will rise, causing bond
prices to fall. Credit risk is the risk that an issuer of a municipal bond will
be unable to make interest and principal payments. In general, lower rated bonds
carry greater credit risk. The fund may bear additional risk because it invests
primarily in New Mexico bonds. The fund is non-diversified, and may invest more
of its assets in a single issuer than a diversified fund. Greater concentration
may increase risk. As with any mutual fund investment, loss of money is a risk
of investing.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income; or
. Set aside money systematically for retirement, estate planning or college
funding.
You should not invest in this fund if you seek to:
. Pursue long-term growth;
. Invest through an IRA or 401(k) plan; or
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
seven years as well as annualized fund and index returns for the one- and five-
year and inception periods ending December 31, 1999. This information is
intended to help you assess the variability of fund returns over the past seven
years (and consequently, the potential rewards and risks of a fund investment).
Past performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1993... 13.9%
1994... -7.0%
1995... 17.8%
1996... 4.0%
1997... 10.2%
1998... 5.9%
1999... -4.9%
From inception in September 1992 to December 31, 1999, the highest and lowest
quarterly returns were 7.65% and -6.58%, respectively for the quarters ending
3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly returns do not
reflect sales charges, which would reduce returns, while the average annual
return table does include sales charges.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1999
------------------------------------
Class 1 Year 5 Year Inception
-------------------------------------------
<S> <C> <C> <C>
Class A (Offer) -8.92% 5.44% 4.81%
Class B -9.38% 5.47% 4.75%
Class C -5.53% 5.85% 4.97%
Class R -4.72% 6.52% 5.54%
-------------------------------------------
LB Market
Benchmark/2/ -2.06% 6.91% 5.89%
Lipper
Peer Group3 -3.83% 5.73% 5.06%
</TABLE>
6 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A B C R/5/
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
--------------------------------------------------------------
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
--------------------------------------------------------------
Exchange Fees None None None None
--------------------------------------------------------------
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
--------------------------------------------------------------
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
-----------------------------------------------------------
Management Fees .55% .55% .55% .55%
-----------------------------------------------------------
12b-1 Distribution and
Service Fees .20% .95% .75% -%
-----------------------------------------------------------
Other Expenses .44% .47% .46% .46%
-----------------------------------------------------------
Total Annual Fund Operating
Expenses-Gross+ 1.19% 1.97% 1.76% 1.01%
-----------------------------------------------------------
+ After Expense Reimbursements
-----------------------------------------------------------
Expense Reimbursements - (.01%) (.01%) (.01%)
-----------------------------------------------------------
Total Annual Fund Operating
Expenses-Net 1.19% 1.96% 1.75% 1.00%
------------------------------------------------------------
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time period indicated and then either
redeem or do not redeem your shares at the end of a period. The example assumes
that your investment has a 5% return each year and that the fund's gross
operating expenses remain the same. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 536 $ 594 $ 179 $ 103 $ 536 $ 200 $ 179 $ 103
-------------------------------------------------------------------------------
3 Years $ 782 $ 934 $ 554 $ 322 $ 782 $ 618 $ 554 $ 322
-------------------------------------------------------------------------------
5 Years $1,047 $1,175 $ 954 $ 558 $1,047 $1,062 $ 954 $ 558
-------------------------------------------------------------------------------
10 Years $1,803 $2,094 $2,073 $1,236 $1,803 $2,094 $2,073 $1,236
-------------------------------------------------------------------------------
</TABLE>
How the Fund Is Invested (as of 5/31/00)
Portfolio Statistics
Average Effective Maturity 21.36 years
Average Duration 9.02
Weighted Average Credit Quality AA
Number of Issues 51
Credit Quality
AAA/U.S. Guaranteed 55%
AA 8%
A 18%
BBB 15%
NR 4%
Sector Diversification (Top 5)
[PIE CHART APPEARS HERE]
Tax Obligation-Limited 24%
Other 28%
Education and Civic Organizations 12%
Housing-Single Family 19%
Utilities 9%
U.S. Guaranteed 8%
1. Class A total returns reflect actual performance for all periods; Class B, C
and R total returns reflect actual performance for periods since class
inception (see "Financial Highlights" for dates), and Class A performance
for periods prior to class inception, adjusted for the differences in
fees between the classes (see "What are the Costs of Investing?"). The
Class A year-to-date return on net asset value as of 6/30/00 was 3.36%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Other States Municipal Debt Category. Returns assume reinvestment
of dividends and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced Class A sales charges apply to purchases of $50,000 or more. See
"How You Can Buy and Sell Shares."
7. As a percentage of the lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3% during
the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 7
<PAGE>
Section 2 How We Manage Your Money
To help you understand how the funds' assets are managed, this section includes
a detailed discussion of the adviser's investment and risk management
strategies. For a more complete discussion of these matters, please consult the
Statement of Additional Information.
Who Manages the Funds
Nuveen Advisory Corp. ("Nuveen Advisory"), the funds' investment adviser,
together with its advisory affiliate, Nuveen Institutional Advisory Corp., offer
premier advisory and investment management services to a broad range of mutual
fund clients. In the Nuveen family, these advisers are commonly referred to as
Nuveen Investment Management or NIM. Nuveen Advisory is responsible for the
selection and on-going monitoring of the municipal bonds in the funds'
investment portfolio, managing the funds' business affairs and providing certain
clerical, bookkeeping and other administrative services. The NIM advisers are
located at 333 West Wacker Drive, Chicago, IL 60606.
The NIM advisers are wholly owned subsidiaries of Nuveen Investments ("Nuveen").
Founded in 1898, Nuveen has been synonymous with investments that withstand the
test of time. Today, we provide managed assets and structured investment
products and services to help financial advisors serve the wealth management
needs of individuals and families. Nuveen manages or oversees $71 billion in
assets.
Nuveen Advisory is responsible for execution of specific investment strategies
and day-to-day investment operations. Nuveen Advisory manages each fund using a
team of analysts and portfolio managers that focus on a specific group of funds.
Day-to-day operation of each fund and the execution of its specific investment
strategies is the responsibility of the designated portfolio manager described
below.
Michael S. Davern is the portfolio manager for the Arizona, Colorado, and New
Mexico Funds. Mr. Davern became a Vice President of Flagship Financial Inc. in
1991, and subsequently became a Vice President of Nuveen Advisory upon the
acquisition of Flagship Resources Inc. by The John Nuveen Company in January
1997. Mr. Davern currently manages investments for fifteen Nuveen-sponsored
investment companies, including the Kansas, Louisiana, Michigan, Missouri and
Wisconsin Funds.
For the most recent fiscal year, the funds paid the following management fees to
Nuveen Advisory as a percentage of net assets:
Nuveen Arizona Municipal Bond Fund .52%
--------------------------------------------
Nuveen Colorado Municipal Bond Fund .55%
--------------------------------------------
Nuveen New Mexico Municipal Bond Fund .55%
--------------------------------------------
8 Section 2 How We Manage Your Money
<PAGE>
What Securities We Invest In
Each fund's investment objective may not be changed without shareholder
approval. The following investment policies may be changed by the Board of
Trustees without shareholder approval unless otherwise noted in this prospectus
or the Statement of Additional Information.
Municipal Bonds
The funds invest primarily in municipal bonds that pay interest that is exempt
from regular federal, state and, in some cases, local income tax. Income from
these bonds may be subject to the federal alternative minimum tax.
States, local governments and municipalities issue municipal bonds to raise
money for various public purposes such as building public facilities,
refinancing outstanding obligations and financing general operating expenses.
These bonds include general obligation bonds, which are backed by the full faith
and credit of the issuer and may be repaid from any revenue source, and revenue
bonds, which may be repaid only from the revenue of a specific facility or
source.
The funds may purchase municipal bonds that represent lease obligations. These
carry special risks because the issuer of the bonds may not be obligated to
appropriate money annually to make payments under the lease. In order to reduce
this risk, the funds will only purchase these bonds where the issuer has a
strong incentive to continue making appropriations until maturity.
The funds may invest in inverse floating rate securities, sometimes referred to
as "inverse floaters." Inverse floaters have variable interest rates that move
in the opposite direction from movements in prevailing short-term interest rate
levels--rising when prevailing short-term interest rates fall, and vice versa.
In addition to paying fluctuating income levels, the prices of inverse floaters
can be more volatile than the prices of conventional fixed-rate bonds with
comparable maturities.
In evaluating municipal bonds of different credit qualities or maturities,
Nuveen Advisory takes into account the size of yield spreads. Yield spread is
the additional return the funds may earn by taking on additional credit risk or
interest rate risk. For example, yields on low quality bonds are higher than
yields on high quality bonds because investors must be compensated for incurring
the higher credit risk associated with low quality bonds. If yield spreads do
not provide adequate compensation for the additional risk associated with low
quality bonds, the funds will buy bonds of relatively higher quality. Similarly,
in evaluating bonds of different maturities, Nuveen Advisory evaluates the
comparative yield available on these bonds. If yield spreads on long-term bonds
do not compensate the funds adequately for the additional interest rate risk the
funds must assume, the funds will buy bonds of relatively shorter maturity. In
addition, municipal bonds in a particular industry may provide higher yields
relative to their risk compared to bonds in other industries. If that occurs, a
fund may buy relatively more bonds from issuers in that industry. In that case,
the fund's portfolio composition would change from time to time.
Section 2 How We Manage Your Money 9
<PAGE>
Quality Municipal Bonds
The funds purchase only quality municipal bonds that are either rated investment
grade (AAA/Aaa to BBB/Baa) by independent rating agencies at the time of
purchase or are non-rated but judged to be investment grade by the funds'
investment adviser. If suitable municipal bonds from a specific state are not
available at attractive prices and yields, a fund may invest in municipal bonds
of U.S. territories (such as Puerto Rico and Guam) which are exempt from regular
federal, state and local income taxes.
Portfolio Maturity
Each fund buys municipal bonds with different maturities in pursuit of its
investment objective, but maintains under normal market conditions an investment
portfolio with an overall weighted average portfolio maturity of 15 to 30 years.
Short-Term Investments
Under normal market conditions, each fund may invest up to 20% of net assets in
short-term, high quality municipal bonds. See "How We Manage Risk--Hedging and
Other Defensive Investment Strategies." The funds may invest in short-term, high
quality taxable securities if suitable short-term municipal bonds are not
available at reasonable prices and yields. If the funds invest in taxable
securities, they may not achieve their investment objective. For more
information on eligible short-term investments, see the Statement of Additional
Information.
Forwards and Delayed-Delivery Settlement
Each fund may enter into contracts to purchase securities for a specified price
at a future date later than the normal settlement date. If the delayed
settlement takes place less than 61 days after purchase, it is referred to as a
"delayed-delivery" transaction. Newly issued municipal bonds sold on a "when-
issued" basis represent a common form of delayed-delivery transaction. If
settlement takes place more than 60 days after purchase, the transaction is
called a "forward." These transactions involve an element of risk because the
value of the security to be purchased may decline before the settlement date.
Municipal "forwards" pay higher interest rates after settlement than standard
bonds, to compensate the buyer for bearing market risk but deferring income
during the settlement period, and can often be bought at attractive prices and
yields. If a fund knows that a portfolio bond will, or is likely to, be called
or mature on a specific future date, the fund may buy a forward settling on or
about that date to replace the called or maturing bond and "lock in" a currently
attractive interest rate.
How We Select Investments
Nuveen Advisory selects municipal bonds for the funds based upon its assessment
of a bond's relative value in terms of current yield, price, credit quality and
future prospects. Nuveen Advisory is supported by Nuveen's award-winning team of
specialized research analysts who review municipal securities available for
purchase, monitor the continued creditworthiness of each fund's municipal
investments, and analyze economic, political and demographic trends affecting
the municipal markets. We utilize these resources to identify municipal bonds
with favorable characteristics we
10 Section 2 How We Manage Your Money
<PAGE>
believe are not yet recognized by the market. We then select those higher-
yielding and undervalued municipal bonds that we believe represent the most
attractive values.
Portfolio Turnover
Each fund buys and sells portfolio securities in the normal course of its
investment activities. The proportion of a fund's investment portfolio that is
sold and replaced with new securities during a year is known as the fund's
portfolio turnover rate. The funds intend to keep portfolio turnover relatively
low in order to reduce trading costs and the realization of taxable capital
gains. Each fund, however, may make limited short-term trades to take advantage
of market opportunities or reduce market risk.
What the Risks Are
Risk is inherent in all investing. Investing in a mutual fund--even the most
conservative--involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part or all of your
investment. Therefore, before investing you should consider carefully the
following risks that you assume when you invest in these funds. Because of
these and other risks, you should consider an investment in any of these funds
to be a long-term investment.
Credit risk: Each fund is subject to credit risk. Credit risk is the risk that
an issuer of a municipal bond will be unable to meet its obligation to make
interest and principal payments due to changing financial or market conditions.
Interest rate risk: Because the funds invest in fixed-income securities, the
funds are subject to interest rate risk. Interest rate risk is the risk that
the value of a fund's portfolio will decline because of rising interest rates.
Interest rate risk is generally lower for shorter-term investments and higher
for longer-term investments.
Income risk: The risk that the income from a fund's portfolio will decline
because of falling market interest rates. This can result when the fund invests
the proceeds from new share sales, or from matured or called bonds, at market
interest rates that are below the portfolio's current earnings rate. Also, if a
fund invests in inverse floating rate securities, whose income payments vary
inversely with changes in short-term market rates, the fund's income may
decrease if short-term interest rates rise.
State concentration risk: Because the funds primarily purchase municipal bonds
from a specific state, each fund also bears investment risk from economic,
political or regulatory changes that could adversely affect municipal bond
issuers in that state and therefore the value of the fund's investment
portfolio. See "Appendix--Additional State Information." These risks may be
greater for the Colorado and New Mexico Funds, which as "non-diversified" funds
may concentrate their investments in municipal bonds of certain issuers to a
greater extent than the Arizona Fund, which is a diversified fund.
Inflation risk: The risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the value of the fund's assets can decline as can the value
of the fund's distributions.
Section 2 How We Manage Your Money 11
<PAGE>
How We Manage Risk
In pursuit of its investment objective, each fund assumes investment risk,
chiefly in the form of interest rate and credit risk. The funds limit this
investment risk generally by restricting the type and maturities of municipal
bonds they purchase, and by diversifying their investment portfolios
geographically within a state, as well as across different industry sectors.
Investment Limitations
The funds have adopted certain investment limitations (based on total assets)
that cannot be changed without shareholder approval and are designed to limit
your investment risk and maintain portfolio diversification. Each fund may not
have more than:
. 25% in any one industry such as electric utilities or health care.
. 10% in borrowings (33% if used to meet redemptions).
As a diversified fund, the Arizona Fund also may not have more than:
. 5% in securities of any one issuer (except U.S. government securities or for
25% of its assets).
Hedging and Other Defensive Investment Strategies
Each fund may invest up to 100% in cash equivalents and short-term investments
as a temporary defensive measure in response to adverse market conditions, or to
keep cash on hand fully invested. During these periods, the weighted average
maturity of a fund's investment portfolio may fall below the defined range
described under "Portfolio Maturity."
Each fund may also use various investment strategies designed to limit the risk
of bond price fluctuations and to preserve capital. These hedging strategies
include using financial futures contracts, options on financial futures, or
options based on either an index of long-term tax-free securities or on debt
securities whose prices, in Nuveen Advisory's opinion, correlate with the prices
of the funds' investments. The funds, however, have no present intent to use
these strategies.
12 Section 2 How We Manage Your Money
<PAGE>
Section 3 How You Can Buy and Sell Shares
We offer four classes of fund shares, each with a different combination of sales
charges, fees, eligibility requirements and other features. Your financial
advisor can help you determine which class is best for you. We offer a number of
features for your convenience. Please see the Statement of Additional
Information for further details.
What Share Classes We Offer
Class A Shares
You can buy Class A shares at the offering price, which is the net asset value
per share plus an up-front sales charge. You may qualify for a reduced sales
charge, or the sales charge may be waived, as described in "How to Reduce Your
Sales Charge." Class A shares are also subject to an annual service fee of .20%
that compensates your financial advisor for providing on-going service to you.
Nuveen retains the up-front sales charge and the service fee on accounts with
no authorized dealer of record. The up-front Class A sales charge for all funds
described in the prospectus is as follows:
<TABLE>
<CAPTION>
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
<S> <C> <C> <C>
Less than $50,000 4.20% 4.38% 3.70%
-------------------------------------------------------------------------------------------------------------
$50,000 but less than $100,000 4.00% 4.18% 3.50%
-------------------------------------------------------------------------------------------------------------
$100,000 but less than $250,000 3.50% 3.63% 3.00%
-------------------------------------------------------------------------------------------------------------
$250,000 but less than $500,000 2.50% 2.56% 2.00%
-------------------------------------------------------------------------------------------------------------
$500,000 but less than $1,000,000 2.00% 2.04% 1.50%
-------------------------------------------------------------------------------------------------------------
$1,000,000 and over --/1/ -- 1.00%/1/
-------------------------------------------------------------------------------------------------------------
</TABLE>
1. You can buy $1 million or more of Class A shares at net asset value without
an up-front sales charge. Nuveen pays authorized dealers of record on these
share purchases a sales commission of 1.00% of the first $2.5 million, plus .50%
of the next $2.5 million, plus .25% of the amount over $5.0 million. If you
redeem your shares within 18 months of purchase, you may have to pay a
Contingent Deferred Sales Charge (CDSC) of 1% of either your purchase price or
your redemption proceeds, whichever is lower. You do not have to pay this CDSC
if your financial advisor has made arrangements with Nuveen and agrees to waive
the commission.
Class B Shares
You can buy Class B shares at the offering price, which is the net asset value
per share without any up-front sales charge so that the full amount of your
purchase is invested in the fund. However, you will pay annual distribution and
service fees of .95% of average daily assets. The annual .20% service fee
compensates your financial advisor for providing on-going service to you. Nuveen
retains the service fee on accounts with no authorized dealer of record. The
annual .75% distribution fee compensates Nuveen for paying your financial
advisor a 4% up-front sales commission, which includes an advance of the first
year's service fee. If you sell your shares within six years of purchase, you
will normally have to pay a CDSC based on either your purchase price or what you
sell your shares for, whichever amount is lower, according to the following
schedule. You do
Section 3 How You Can Buy and Sell Shares 13
<PAGE>
not pay a CDSC on any Class B shares you purchase by reinvesting dividends.
Class B shares automatically convert to Class A shares eight years after you buy
them so that the distribution fees you pay over the life of your investment are
limited. You will continue to pay an annual service fee on any converted Class B
shares.
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6 Over 6
CDSC 5% 4% 4% 3% 2% 1% None
------------------------------------------------------------------------------
Class C Shares
You can buy Class C shares at the offering price, which is the net asset value
per share without any up-front sales charge so that the full amount of your
purchase is invested in the fund. However, you will pay annual distribution and
service fees of .75% of average daily assets. The annual .20% service fee
compensates your financial advisor for providing on-going service to you. Nuveen
retains the service fee on accounts with no authorized dealer of record. The
annual .55% distribution fee reimburses Nuveen for paying your financial advisor
an on-going sales commission. Nuveen advances the first year's service and
distribution fees. If you sell your shares within 12 months of purchase, you
will normally have to pay a 1% CDSC based on your purchase or sale price,
whichever is lower. You do not pay a CDSC on any Class C shares you purchase by
reinvesting dividends.
Class R Shares
You may purchase Class R shares only under limited circumstances, at the net
asset value on the day of purchase. In order to qualify, you must be eligible
under one of the programs described in "How to Reduce Your Sales Charge" (below)
or meet certain other purchase size criteria. Class R shares are not subject to
sales charges or on-going service or distribution fees. Class R shares have
lower on-going expenses than the other classes.
How to Reduce Your Sales Charge
We offer a number of ways to reduce or eliminate the up-front sales charge on
Class A shares or to qualify to purchase Class R shares.
<TABLE>
<CAPTION>
Class A Sales Charge Class A Sales Charge Class R Eligibility
Reductions Waivers
<S> <C> <C>
. Certain employees and
. Rights of accumulation . Nuveen Defined Portfolio directors of Nuveen or
or Exchange-Traded employees of authorized
. Letter of intent Fund reinvestment dealers
. Group purchase . Certain employees and . Bank trust departments
directors of Nuveen or
employees of authorized
dealers
. Bank trust departments
</TABLE>
In addition, Class A shares at net asset value and Class R shares may be
purchased through registered investment advisors, certified financial planners
and registered broker-dealers who charge asset-based or
14 Section 3 How You Can Buy and Sell Shares
<PAGE>
comprehensive "wrap" fees for their services. Please refer to the Statement of
Additional Information for detailed program descriptions and eligibility
requirements. Additional information is available from your financial advisor or
by calling (800) 257-8787. Your financial advisor can also help you prepare any
necessary application forms. You or your financial advisor must notify Nuveen at
the time of each purchase if you are eligible for any of these programs. The
funds may modify or discontinue these programs at any time.
How to Buy Shares
Fund shares may be purchased on any business day, which is any day the New York
Stock Exchange is open for business and normally ends at 4 p.m. New York time.
Generally, the Exchange is closed on weekends and national holidays. The share
price you pay will depend on when Nuveen receives your order. Orders received
before the close of trading on a business day will receive that day's closing
share price, otherwise you will receive the next business day's price.
Through a Financial Advisor
You may buy shares through your financial advisor, who can handle all the
details for you, including opening a new account. Financial advisors can also
help you review your financial needs and formulate long-term investment goals
and objectives. In addition, financial advisors generally can help you develop a
customized financial plan, select investments and monitor and review your
portfolio on an on-going basis to help assure your investments continue to meet
your needs as circumstances change. Financial advisors are paid for on-going
investment advice and services either from fund sales charges and fees or by
charging you a separate fee in lieu of a sales charge. If you do not have a
financial advisor, call (800) 257-8787 and Nuveen can refer you to one in your
area.
By Mail
You may open an account and buy shares by mail by completing the enclosed
application and mailing it along with your check to: Nuveen Investor Services,
P.O. Box 5186, Bowling Green Station, New York, NY 10274-5186. No third party
checks will be accepted.
Investment Minimums
The minimum initial investment is $3,000 ($50 through systematic investment plan
accounts) and may be lower for accounts opened through certain fee-based
programs. Subsequent investments must be in amounts of $50 or more. The funds
reserve the right to reject purchase orders and to waive or increase the minimum
investment requirements.
Systematic Investing
Systematic investing allows you to make regular investments through automatic
deductions from your bank account, directly from your paycheck or from
exchanging shares from another mutual fund account. The minimum automatic
deduction is $50 per month. There is no charge to participate in each fund's
systematic investment plan. You can stop the
Section 3 How You Can Buy and Sell Shares 15
<PAGE>
deductions at any time by notifying your fund in writing. To do this, simply
complete the appropriate section of the account application form or submit an
Account Update Form.
From Your Bank Account
You can make systematic investments of $50 or more per month by authorizing us
to draw preauthorized checks on your bank account.
From Your Paycheck
With your employer's consent, you can make systematic investments of $25 or more
per pay period (meeting the monthly minimum of $50) by authorizing your employer
to deduct monies from your paycheck.
Systematic Exchanging
You can make systematic investments by authorizing Nuveen to exchange shares
from one Nuveen mutual fund account into another identically registered Nuveen
account of the same share class.
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 4%, 5% or 6% annually on your
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
[CHART APPEARS HERE]
One of the benefits of systematic investing is dollar cost averaging. Because
you regularly invest a fixed amount of money over a period of years regardless
of the share price, you buy more shares when the price is low and fewer shares
when the price is high. As a result, the average share price you pay should be
less than the average share price of fund shares over the same period. To be
effective, dollar cost averaging requires that you invest over a long period of
time, and does not assure that you will profit.
16 Section 3 How You Can Buy and Sell Shares
<PAGE>
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to receive
payments monthly, quarterly, semi-annually or annually, and may choose to
receive a check, have the monies transferred directly into your bank account
(see "Special Services--Fund Direct" below), paid to a third party or sent
payable to you at an address other than your address of record. You must
complete the appropriate section of the account application or Account Update
Form to participate in each fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent
purchases of Class A, B or C shares because you may unnecessarily pay a sales
charge or CDSC on these purchases.
Special Services
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered account at any time
for the same class of another Nuveen mutual fund available in your state. Your
exchange must meet the minimum purchase requirements of the fund into which you
are exchanging. You may have to pay a sales charge when exchanging shares that
you purchased without a sales charge for shares that are sold with a sales
charge. Please consult the Statement of Additional Information for details.
The exchange privilege is not intended to allow you to use a fund for short-term
trading. Because excessive exchanges may interfere with portfolio management,
raise fund operating expenses or otherwise have an adverse effect on other
shareholders, each fund reserves the right to revise or suspend the exchange
privilege, limit the amount or number of exchanges, or reject any exchange.
The funds may change or cancel their exchange policy at any time upon 60 days'
notice. Because an exchange is treated for tax purposes as a purchase and sale,
and any gain may be subject to tax, you should consult your tax advisor about
the tax consequences of exchanging your shares.
Fund Direct/SM/
The Fund Direct Program allows you to link your fund account to your bank
account, transfer money electronically between these accounts, and perform a
variety of account transactions, including purchasing shares by telephone and
investing through a systematic investment plan. You also may have dividends,
distributions, redemption payments or systematic withdrawal plan payments sent
directly to your bank account. Your financial advisor can help you complete the
forms for these services, or you can call Nuveen at (800) 257-8787 for copies of
the necessary forms.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your redemption
proceeds up to one year later without incurring any additional charges. You may
only reinvest into the same share class you redeemed. If you paid a CDSC, we
will refund your CDSC and reinstate your holding period. You may use this
reinstatement privilege only once for any redemption.
Section 3 How You Can Buy and Sell Shares 17
<PAGE>
How to Sell Shares
You may sell (redeem) your shares on any business day. You will receive the
share price next determined after Nuveen has received your properly completed
redemption request. Your redemption request must be received before the close of
trading for you to receive that day's price. If you are selling shares purchased
recently with a check, you will not receive your redemption proceeds until your
check has cleared. This may take up to ten business days from your purchase
date. While the funds do not charge a redemption fee, you may be assessed a
CDSC, if applicable. When you redeem Class A, Class B, or Class C shares subject
to a CDSC, each fund will first redeem any shares that are not subject to a
CDSC, and then redeem the shares you have owned for the longest period of time,
unless you ask the fund to redeem your shares in a different order. No CDSC is
imposed on shares you buy through the reinvestment of dividends and capital
gains. The holding period is calculated on a monthly basis and begins on the
first day of the month in which you buy shares. When you redeem shares subject
to a CDSC, the CDSC is calculated on the lower of your purchase price or
redemption proceeds, deducted from your redemption proceeds, and paid to
Nuveen. The CDSC may be waived under certain special circumstances as described
in the Statement of Additional Information.
Through Your Financial Advisor
You may sell your shares through your financial advisor who can prepare the
necessary documentation. Your financial advisor may charge for this.
By Telephone
If you have authorized telephone redemption privileges, you can redeem your
shares by calling (800) 257-8787. Telephone redemptions are not available if
you own shares in certificate form and may not exceed $50,000. Checks will only
be issued to you as the shareholder of record and mailed to your address of
record. If you have established Fund Direct privileges, you may have redemption
proceeds transferred electronically to your bank account. We will normally mail
your check the next business day.
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to
confirm the identity of callers, it will not be liable for losses resulting from
following telephone instructions it reasonably believes to be genuine. Also you
should verify your trade confirmations immediately upon receipt.
By Mail
You can sell your shares at any time by sending a written request to the
appropriate fund, c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green
Station, New York, NY 10274-5186. Your request must include the following
information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person to whom you want your redemption proceeds paid (if
other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if other than the
address of record);
. Any certificates you have for the shares; and
. Any required signature guarantees.
18 Section 3 How You Can Buy and Sell Shares
<PAGE>
We will normally mail your check the next business day, but in no event more
than seven days after we receive your request. If you purchased your shares by
check, your redemption proceeds will not be mailed until your check has cleared.
Guaranteed signatures are required if you are redeeming more than $50,000, you
want the check payable to someone other than the shareholder of record or you
want the check sent to another address (or the address of record has been
changed within the last 60 days). Signature guarantees must be obtained from a
bank, brokerage firm or other financial intermediary that is a member of an
approved Medallion Guarantee Program or that a fund otherwise approves. A
notary public cannot provide a signature guarantee.
Redemptions In-Kind
The funds generally pay redemption proceeds in cash. Under unusual conditions
that make cash payment unwise and for the protection of existing shareholders,
the funds may pay all or a portion of your redemption proceeds in securities or
other fund assets. Although it is unlikely that your shares would be redeemed
in-kind, you would probably have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any capital gains from that sale.
An Important Note About Involuntary Redemption
From time to time, the funds may establish minimum account size requirements.
The funds reserve the right to liquidate your account upon 30 days' written
notice if the value of your account falls below an established minimum. The
funds have set a minimum balance of $100 unless you have an active Nuveen
Defined Portfolio reinvestment account. You will not be assessed a CDSC on an
involuntary redemption.
Section 3 How You Can Buy and Sell Shares 19
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the funds, this
section includes important details about how the funds make distributions to
shareholders. We discuss some other fund policies, as well.
Dividends, Distributions and Taxes
The funds pay tax-free dividends monthly and any taxable capital gains or other
taxable distributions once a year in December. The funds declare dividends
monthly to shareholders of record as of the ninth of each month, usually payable
the first business day of the following month.
Payment and Reinvestment Options
The funds automatically reinvest your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than your address of record or reinvested in shares of another
Nuveen mutual fund. For further information, contact your financial advisor or
call Nuveen at (800) 257-8787.
Taxes and Tax Reporting
Because the funds invest primarily in municipal bonds from a particular state,
the regular monthly dividends you, as a taxpayer in that state, receive will be
exempt from regular federal and state income tax. All or a portion of these
dividends, however, may be subject to the federal alternative minimum tax
(AMT).
Although the funds do not seek to realize taxable income or capital gains, the
funds may realize and distribute taxable income or capital gains from time to
time as a result of each fund's normal investment activities. Each fund will
distribute in December any taxable income or capital gains realized over the
preceding year. Net short-term capital gains are taxable at the same rate as
ordinary income. Net long-term capital gains are taxable as long-term capital
gains regardless of how long you have owned your investment. Taxable dividends
do not qualify for a dividends received deduction if you are a corporate
shareholder.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains that you were paid during the prior year. If
you hold your investment at the firm where you purchased your fund shares, you
will receive the statement from that firm. If you hold your shares directly with
the fund, Nuveen will send you the statement. The tax status of your dividends
is not affected by whether you reinvest your dividends or elect to receive them
in cash.
If you receive social security or railroad retirement benefits, you should
consult your tax advisor about how an investment in a fund may affect the
taxation of your benefits.
20 Section 4 General Information
<PAGE>
Please note that if you do not furnish us with your correct Social Security
number or employer identification number, federal law requires the fund to
withhold federal income tax from your distributions and redemption proceeds,
currently at a rate of 31%.
Please consult the Statement of Additional Information and your tax advisor for
more information about taxes.
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable dividend is
commonly known as "buying the dividend." The entire dividend may be taxable to
you even though a portion of the dividend effectively represents a return of
your purchase price. Similarly, if you sell or exchange fund shares shortly
before the record date for a tax-exempt dividend, a portion of the price you
receive may be treated as a taxable capital gain even though it reflects tax-
free income a fund has earned but not yet distributed.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to earn on a
taxable investment in order to equal a stated federal tax-free yield on a
municipal investment. To assist you to more easily compare municipal investments
like the funds with taxable alternative investments, the table below presents
the taxable equivalent yields for a range of hypothetical federal tax-free
yields and tax rates:
<TABLE>
<CAPTION>
Taxable Equivalent Of Tax-Free Yields
To Equal a Tax-Free Yield of:
................................................................................
4.00% 4.50% 5.00% 5.50% 6.00%
Tax Bracket: A Taxable Investment Would Need to Yield:
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
................................................................................
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
................................................................................
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
................................................................................
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
................................................................................
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
Statement of Additional Information or consult your tax advisor.
Distribution and Service Plans
Nuveen serves as the selling agent and distributor of the funds' shares. In this
capacity, Nuveen manages the offering of the funds' shares and is responsible
for all sales and promotional activities. In order to reimburse Nuveen for its
costs in connection with these activities, including compensation paid to
authorized dealers, each fund has adopted a distribution and service plan under
Rule 12b-1 under the Investment Company Act of 1940. (See "How to Choose a
Share Class" for a description of the distribution and service fees paid under
this plan.)
Nuveen receives the distribution fee for Class B and Class C shares primarily
for providing compensation to authorized dealers, including Nuveen, in
connection with the distribution of shares. Nuveen uses the
Section 4 General Information 21
<PAGE>
service fee for Class A, Class B, and Class C shares to compensate authorized
dealers, including Nuveen, for providing on-going account services to
shareholders. These services may include establishing and maintaining
shareholder accounts, answering shareholder inquiries, and providing other
personal services to shareholders. These fees also compensate Nuveen for other
expenses, including printing and distributing prospectuses to persons other than
shareholders, and preparing, printing, and distributing advertising and sales
literature and reports to shareholders used in connection with the sale of
shares. Because these fees are paid out of the funds' assets on an on-going
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges.
Nuveen periodically undertakes sales promotion programs with authorized dealers
and may pay them the full applicable sales charge as a commission. In addition,
Nuveen may provide support at its own expense to authorized dealers in
connection with sales meetings, seminars, prospecting seminars and other events
at which Nuveen presents its products and services. Under certain circumstances,
Nuveen also will share with authorized dealers up to half the costs of
advertising that features the products and services of both parties. The
Statement of Additional Information contains further information about these
programs.
Net Asset Value
The price you pay for your shares is based on each fund's net asset value per
share which is determined as of the close of trading (normally 4:00 p.m. New
York time) on each day the New York Stock Exchange is open for business. Net
asset value is calculated for each class of each fund by taking the market value
of the class' total assets, including interest or dividends accrued but not yet
collected, less all liabilities, and dividing by the total number of shares
outstanding. The result, rounded to the nearest cent, is the net asset value per
share. All valuations are subject to review by the funds' Board of Trustees or
its delegate.
In determining net asset value, expenses are accrued and applied daily and
securities and other assets for which market quotations are available are valued
at market value. The prices of municipal bonds are provided by a pricing service
and based on the mean between the bid and asked price. When price quotes are not
readily available (which is usually the case for municipal securities), the
pricing service establishes fair market value based on prices of comparable
municipal bonds.
Fund Service Providers
The custodian of the assets of the funds is The Chase Manhattan Bank, 4 New York
Plaza, New York, NY 10004-2413. Chase also provides certain accounting services
to the funds. The funds' transfer, shareholder services and dividend paying
agent, Chase Global Funds Services Company, P.O. Box 5186, New York, NY 10274-
5186, performs bookkeeping, data processing and administrative services for the
maintenance of shareholder accounts.
22 Section 4 General Information
<PAGE>
Section 5 Financial Highlights
The financial highlights table is intended to help you understand a fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor would have earned on an investment in a fund
(assuming reinvestment of all dividends and distributions). This information has
been audited by Arthur Andersen LLP, whose report, along with the funds'
financial statements, are included in the SAI and annual report, which is
available upon request.
Nuveen Arizona Municipal Bond Fund**
<TABLE>
<CAPTION>
Class
(Inception
Date) Investment Operations Less Distributions
-------------------------------- ----------------------------
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net Asset Investment Investment Investment Capital Asset Total
May 31, Value Income Gain (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(c) 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(c) 10.92 .19 .02 .21 (.19) -- (.19) 10.94 1.96
---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class
(Inception
Date) Ratios/Supplemental Data
----------------------------------------------
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ended Assets Net Net Turnover
May 31, (000) Assets(b) Assets(b) Rate
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (10/86)
2000 $69,512 1.06% 4.89% 41%
1999 86,452 .84 4.67 16
1998 85,922 .83 4.87 16
1997 82,567 .83 5.13 25
1996 80,094 .69 5.20 38
Class B (2/97)
2000 3,680 1.82 4.14 41
1999 4,180 1.58 3.95 16
1998 1,620 1.51 4.15 16
1997(c) 347 1.62* 4.43* 25
Class C (2/94)
2000 5,290 1.61 4.34 41
1999 6,426 1.39 4.12 16
1998 6,328 1.35 4.33 16
1997 3,189 1.38 4.58 25
1996 1,970 1.23 4.64 38
Class R (2/97)
2000 19,076 .87 5.09 41
1999 21,534 .64 4.87 16
1998 20,504 .63 5.07 16
1997(c) 19,031 .67* 5.38* 25
-------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Arizona.
(a) 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.
When custodian fee credits are applied, the Ratios of Expenses to Average
Net Assets for 2000 are 1.06%, 1.81%, 1.60% and .87% for classes A, B, C
and R respectively, and the Ratios of Net Investment Income to Average Net
Assets for 2000 are 4.90%, 4.15%, 4.35% and 5.10% for classes A, B, C and
R, respectively.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 23
<PAGE>
Nuveen Colorado Municipal Bond Fund**
<TABLE>
<CAPTION>
Class
(Inception
Date) Investment Operations Less Distributions
------------------------------ ---------------------------
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net Asset Investment Investment Investment Capital Asset Total
May 31, Value Income Gain (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 (.10) .40 (.50) (.03) (.53) 10.68 3.76
1998 10.15 .52 .66 1.18 (.52) -- (.52) 10.81 11.85
1997 9.79 .53 .35 .88 (.52) -- (.52) 10.15 9.22
1996 9.93 .54 (.13) .41 (.55) -- (.55) 9.79 4.14
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(c) 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(c) 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(c) 10.21 .15 (.06) .09 (.14) -- (.14) 10.16 .85
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ended Assets Net Net Turnover
May 31, (000) Assets(b) Assets(b) Rate
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (5/87)
2000 $ 32,448 1.26% 4.94% 54%
1999 39,189 .96 4.61 23
1998 37,285 1.00 4.84 19
1997 31,229 .74 5.31 27
1996 33,637 .55 5.41 70
Class B (2/97)
2000 4,533 2.04 4.19 54
1999 4,424 1.68 3.90 23
1998 1,661 1.75 4.06 19
1997(c) 444 1.53* 4.60* 27
Class C (2/97)
2000 3,113 1.89 4.38 54
1999 2,464 1.49 4.10 23
1998 875 1.55 4.25 19
1997(c) 103 1.31* 4.94* 27
Class R (2/97)
2000 1,342 1.11 5.16 54
1999 864 .76 4.81 23
1998 750 .80 5.03 19
1997(c) 413 .58* 5.60* 27
-----------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Colorado.
(a) 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.
When custodian fee credits are applied, the Ratios of Expenses to Average
Net Assets for 2000 are 1.25%, 2.03%, 1.88% and 1.10% for classes A, B, C
and R, respectively, and the Ratios of Net Investment Income to Average Net
Assets for 2000 are 4.95%, 4.20%, 4.39% and 5.17% for classes A, B, C and
R, respectively.
(c) From commencement of class operations as noted.
24 Section 5 Financial Highlights
<PAGE>
Nuveen New Mexico Municipal Bond Fund**
<TABLE>
<CAPTION>
Class
(Inception
Date) Investment Operations Less Distributions
-------------------------------- -----------------------------
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net Asset Investment Investment Investment Capital Asset Total
May 31, Value Income Gain (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 (.09) .40 (.49) -- (.49) 10.58 3.74
1998 10.16 .50 .51 1.01 (.50) -- (.50) 10.67 10.17
1997 9.81 .51 .35 .86 (.51) -- (.51) 10.16 8.90
1996 10.01 .51 (.19) .32 (.52) -- (.52) 9.81 3.18
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(c) 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(c) 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(c) 10.23 .14 (.07) .07 (.13) -- (.13) 10.17 .71
-------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class
(Inception
Date) Ratios/Supplemental Data
----------------------------------------------
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ended Assets Net Net Turnover
May 31, (000) Assets (b) Assets (b) Rate
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (9/92)
2000 $45,795 1.19% 4.73% 24%
1999 56,315 .91 4.58 14
1998 54,959 .79 4.79 13
1997 50,807 .77 5.07 43
1996 51,173 .68 5.10 57
Class B (2/97)
2000 2,717 1.97 3.98 24
1999 2,721 1.67 3.82 14
1998 1,408 1.53 4.03 13
1997(c) 657 1.54* 4.19* 43
Class C (2/97)
2000 2,321 1.76 4.18 24
1999 2,393 1.47 4.03 14
1998 1,487 1.31 4.23 13
1997(c) 155 1.34* 4.40* 43
Class R (2/97)
2000 434 1.01 4.91 24
1999 479 .71 4.78 14
1998 466 .58 5.01 13
1997(c) 362 .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 are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
When custodian fee credits are applied, the Ratios of Expenses to Average
Net Assets for 2000 are 1.19%, 1.96%, 1.75% and 1.00% for classes A, B, C
and R, respectively, and the Ratios of Net Investment Income to Average Net
Assets for 2000 are 4.74%, 3.98%, 4.18% and 4.91% for classes A, B, C and
R, respectively.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 25
<PAGE>
Appendix Additional State Information
Because the funds primarily purchase municipal bonds from a specific state, each
fund also bears investment risks from economic, political or regulatory changes
that could adversely affect municipal bond issuers in that state and therefore
the value of the fund's investment portfolio. The following discussion of
special state considerations was obtained from official offering statements of
these issuers and has not been independently verified by the funds. The
discussion includes general state tax information related to an investment in
each fund's shares. Because tax laws are complex and often change, you should
consult your tax advisor about the state tax consequences of a specific fund
investment. See the Statement of Additional Information for further information.
Arizona
Arizona's economy is primarily based on services, tourism and high technology
manufacturing. However, the military, agriculture, and mining of primary metals
still play a role in the State's economy. The State has experienced phenomenal
economic and population growth recently due to an influx of businesses
attracted by the State's high quality of life, educated workforce, and friendly
business environment. Over the past year, the State ranked second in the nation
in job growth with a 4.1% percent increase.
The statewide unemployment rate was 3.6% in July 2000, below the 4.0% national
average and also below the July 1999 statewide average of 4.1%. Per capita
income was $25,307 in 1999, which is 89% of the national average.
The Arizona Constitution restricts the legislature's power to raise revenue by
increasing property taxes. The State has also enacted limits on annual spending.
The State does not issue general obligation bonds but relies on capital outlays,
revenue bonds and other methods to finance projects. Each project is
individually rated for its creditworthiness.
Tax Treatment
The fund's regular monthly dividends will not be subject to the Arizona
individual income tax to the extent they are paid out of income earned on
Arizona municipal bonds or U.S. government securities. You will be subject to
Arizona personal income tax, however, to the extent the fund distributes any
taxable income or realized capital gains, or if you sell or exchange fund shares
and realize a capital gain on the transaction.
26 Appendix
<PAGE>
The treatment of corporate shareholders who pay Arizona corporate income tax is
similar to that described above. Corporate shareholders should refer to the
Statement of Additional Information for more detailed state tax information.
Colorado
Colorado's trade and services sectors represent nearly half of non-agricultural
employment in the State's economy and have expanded in the past years.
Manufacturing employment is comparatively small and continues to shrink due to
the concentration in defense production. The trade and services sectors, led by
a healthy tourist industry, helped pull the State out of a recession in the late
1980's which had been caused by contraction in the energy, high-technology and
construction industries. The State's economic activity continues to outpace
national growth levels. Colorado also continues to experience robust population
growth, at levels nearly double the national average. However, recent economic
releases indicate a reduced growth rate but still in excess of national growth
rates.
Colorado's unemployment rate was 2.7% in July 2000, well below the 4.0% national
average and down from the 3.0% statewide average in July 1999. Per capita income
grew 5.3% to $31,678 in 1999. Colorado has no outstanding general obligation
debt, but outstanding lease obligations are rated A1 by Moody's and A+ by
Standard & Poor's. These ratings reflect the State's credit quality only, and do
not indicate the creditworthiness of other tax-exempt securities in which the
fund may invest.
Tax Treatment
The fund's regular monthly dividends will not be subject to Colorado personal
income taxes to the extent they are paid out of income earned on Colorado
municipal bonds issued on or after May 1, 1980 or U.S. government securities.
You will be subject to Colorado personal income taxes, however, to the extent
the fund distributes any taxable income, or if you sell or exchange fund shares
and realize a capital gain on the transaction.
The treatment of corporate shareholders who pay Colorado corporate income tax is
similar to that described above. Corporate shareholders should refer to the
Statement of Additional Information for more detailed state tax information.
New Mexico
New Mexico's major industries include energy, tourism, services, crafts,
agribusiness, manufacturing and mining. The economy also benefits from the
employment and technology base supplied by federal government scientific
research facilities in Los Alamos, Albuquerque and White Sands. In addition,
crop and livestock remain a major part of the economy.
New Mexico's economy continues to expand and diversify away from its historic
reliance on federal employment and oil and gas production as a result of
increasing growth in the services and manufacturing sectors. However, this
transition has caused the State's job growth to fall below national growth
levels in recent years.
New Mexico's unemployment rate was 5.4% in July 2000, down from the 6.0%
statewide average in July 1999, but above the national average of
Appendix 27
<PAGE>
4.0% in July 2000. The State's per capita income rose approximately 4% during
1999 to $22,063.
As of August 31, 2000, Moody's rates the State's general obligation debt Aa1,
while Standard & Poor's rates it AA+. These ratings reflect the State's credit
quality only, and do not indicate the creditworthiness of other tax-exempt
securities in which the fund may invest.
Tax Treatment
The fund's regular monthly dividends will not be subject to the New Mexico
personal income tax to the extent they are paid out of income earned on New
Mexico municipal obligations or U.S. government securities. You will be subject
to New Mexico personal income tax, however, to the extent the fund distributes
any taxable income or realized capital gains, or if you sell or exchange fund
shares and realize a capital gain on the transaction.
The treatment of corporate shareholders who pay New Mexico corporate income tax
is similar to that described above. Corporate shareholders should refer to the
Statement of Additional Information for more detailed state tax
information.
28 Appendix
<PAGE>
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
Growth
International Growth Fund
Innovation Fund
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Dividend and Growth Fund
Income
Income Fund
Floating Rate Fund/2/
Tax-Free Income
National Municipal Bond Funds
High Yield
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
Arizona Louisiana North Carolina
California/2/ Maryland Ohio
Colorado Massachusetts/2/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky New York/2/
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
Several additional sources of information are available to you. The Statement of
Additional Information (SAI), incorporated by reference into this prospectus,
contains detailed information on fund policies and operation. Additional
information about the funds' investments is available in the funds' annual and
semi-annual report to shareholders. In the funds' annual reports, you will find
a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
Call Nuveen at (800) 257-8787 to request a free copy of any of these materials
or other fund information, or ask your financial advisor for copies.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission (SEC). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at (800) SEC-0330
for room hours and operation. You may also request fund information by writing
to the SEC's Public Reference Section, Washington, D.C. 20549.
The funds' Investment Company file number is 811-07747.
1. This is a continuously-offered closed-end interval fund. As such,
redemptions are only available during quarterly repurchase periods. See
fund prospectus for additional information.
2. Long-term and insured long-term portfolios.
N u v e e n
Investments
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
<PAGE>
NUVEEN Investments
Municipal Bond Funds
PROSPECTUS SEPTEMBER 28, 2000
Dependable, tax-free income to help you keep more of what you earn.
[PHOTO APPEARS HERE]
INVEST WELL
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LEAVE YOUR MARK
Florida
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
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Table of Contents
Section 1 The Fund
This section provides you with an overview of the fund including investment
objectives, portfolio holdings and historical performance information.
Introduction 1
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Nuveen Florida Municipal Bond Fund 2
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Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
Who Manages the Fund 4
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What Securities We Invest In 5
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How We Select Investments 7
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What the Risks Are 7
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How We Manage Risk 8
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Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into or out of your
account.
What Share Classes We Offer 9
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How to Reduce Your Sales Charge 10
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How to Buy Shares 11
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Systematic Investing 12
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Systematic Withdrawal 13
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Special Services 13
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How to Sell Shares 14
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Section 4 General Information
This section summarizes the fund's distribution policies and other general fund
information.
Dividends, Distributions and Taxes 16
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Distribution and Service Plans 17
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Net Asset Value 18
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Fund Service Providers 18
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Section 5 Financial Highlights
This section provides the fund's financial performance
for the past five years. 19
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Appendix Additional State Information 20
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We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment Strategy
Risks
Fees, Charges and Expenses
Shareholder Instructions
Performance and Current Portfolio Information
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September 28, 2000
Section 1 The Fund
Nuveen Florida Municipal Bond Fund
Introduction
This prospectus is intended to provide important information to help you
evaluate whether the Nuveen Mutual Fund listed above may be right for you.
Please read it carefully before investing and keep it for future reference.
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NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
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Section 1 The Fund 1
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Nuveen Florida Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent rating agencies. The
fund may buy non-rated municipal bonds if the fund's investment adviser judges
them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate risk and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal bond
will be unable to make interest and principal payments. In general, lower rated
bonds carry greater credit risk. The fund may bear additional risk because it
invests primarily in Florida bonds. As with any mutual fund investment, loss of
money is a risk of investing.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income; or
. Set aside money systematically for retirement, estate planning or college
funding.
You should not invest in this fund if you seek to:
. Pursue long-term growth;
. Invest through an IRA or 401(k) plan; or
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
nine years as well as annualized fund and index returns for the one- and five-
year and inception periods ending December 31, 1999. This information is
intended to help you assess the variability of fund returns over the past nine
years (and consequently, the potential rewards and risks of a fund investment).
Past performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1991 13.3
1992 8.7
1993 13.3
1994 -5.6
1995 16.4
1996 2.6
1997 8.5
1998 5.5
1999 -3.4
From inception in June 1990 to December 31, 1999, the highest and lowest
quarterly returns were 6.10% and -5.82%, respectively for the quarters ending
3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly returns do not
reflect sales charges, which would reduce returns, while the average annual
return table does include sales charges.
Average Annual Total Returns for
the Periods Ending December 31, 1999
------------------------------------
Class 1 Year 5 Year Inception
--------------------------------------------------------
Class A (Offer) -7.42% 4.80% 5.95%
Class B -7.92% 4.84% 5.92%
Class C -3.98% 5.14% 5.84%
Class R -3.25% 5.83% 6.49%
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LB Market
Benchmark/2/ -2.06% 6.91% 6.96%
Lipper
Peer Group/3/ -4.35% 5.89% 6.40%
2 Section 1 The Fund
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What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
Share Class A B C R/5/
................................................................................
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
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Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
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Exchange Fees None None None None
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Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
................................................................................
Annual Fund Operating Expenses/11/
Paid From Fund Assets
Share Class A B C R
..........................................................................
Management Fees .54% .54% .54% .54%
..........................................................................
12b-1 Distribution and Service Fees .20% .95% .75% --%
..........................................................................
Other Expenses .28% .30% .30% .29%
==========================================================================
Total Annual Fund Operating
Expenses-Gross+ 1.02% 1.79% 1.59% .83%
+ After Expense Reimbursements
.........................................................................
Expense Reimbursements (.01%) (.01%) (.01%) (.01%)
.........................................................................
Total Annual Fund
Operating Expenses-Net 1.01% 1.78% 1.58% .82%
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The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time period indicated and then either
redeem or do not redeem your shares at the end of a period. The example assumes
that your investment has a 5% return each year and that the fund's gross
operating expenses remain the same. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
....................................................................................................
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 520 $ 577 $ 162 $ 85 $ 520 $ 182 $ 162 $ 85
....................................................................................................
3 Years $ 731 $ 880 $ 502 $ 265 $ 731 $ 563 $ 502 $ 265
....................................................................................................
5 Years $ 960 $1,083 $ 866 $ 460 $ 960 $ 970 $ 866 $ 460
....................................................................................................
10 Years $1,615 $1,903 $1,889 $1,025 $1,615 $1,903 $1,889 $1,025
....................................................................................................
</TABLE>
How the Fund Is Invested (as of 5/31/00)
Portfolio Statistics
Average Effective Maturity 19.79 years
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Average Duration 7.67
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Weighted Average Credit Quality AA
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Number of Issues 169
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Credit Quality
AAA/U.S. Guaranteed 55%
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AA 10%
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A 14%
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BBB 7%
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NR 14%
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Sector Diversification (Top 5)
[PIE CHART APPEARS HERE]
Other 38%
Tax Obligation--Limited 9%
Long-Term Care 10%
U.S. Guaranteed 15%
Housing--Multifamily 19%
Tax Obligation--General 9%
1. Class A total returns reflect actual performance for all periods; Class B,
C and R total returns reflect actual performance for periods since class
inception (see "Financial Highlights" for dates), and Class A performance
for periods prior to class inception, adjusted for the differences in fees
between the classes (see "What are the Costs of Investing?"). The Class A
year-to-date return on net asset value as of 6/30/00 was 3.67%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Florida Municipal Debt category. Returns assume reinvestment of
dividends and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced Class A sales charges apply to purchases of $50,000 or more. See
"How You Can Buy and Sell Shares."
7. As a percentage of the lesser of purchase price or redemption
proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Fund 3
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Section 2 How We Manage Your Money
To help you understand how the fund's assets are managed, this section includes
a detailed discussion of the adviser's investment and risk management
strategies. For a more complete discussion of these matters, please consult the
Statement of Additional Information.
Who Manages the Fund
Nuveen Advisory Corp. ("Nuveen Advisory"), the fund's investment adviser,
together with its advisory affiliate, Nuveen Institutional Advisory Corp., offer
premier advisory and investment management services to a broad range of mutual
fund clients. In the Nuveen family, these advisers are commonly referred to as
Nuveen Investment Management or NIM. Nuveen Advisory is responsible for the
selection and on-going monitoring of the municipal bonds in the fund's
investment portfolio, managing the fund's business affairs and providing certain
clerical, bookkeeping and other administrative services. The NIM advisers are
located at 333 West Wacker Drive, Chicago, IL 60606.
The NIM advisers are wholly owned subsidiaries of Nuveen Investments ("Nuveen").
Founded in 1898, Nuveen has been synonymous with investments that withstand the
test of time. Today we provide managed assets and structured investment products
and services to help financial advisors serve the wealth management needs of
individuals and families. Nuveen manages or oversees $71 billion in assets.
Nuveen Advisory is responsible for execution of specific investment strategies
and day-to-day investment operations. Nuveen Advisory manages each fund using a
team of analysts and portfolio managers that focus on a specific group of funds.
Day-to-day operation of the fund and the execution of its specific investment
strategies is the responsibility of the designated portfolio manager described
below.
Thomas J. O'Shaughnessy has been the portfolio manager for the Florida Fund
since July 1998. Mr. O'Shaughnessy has been a portfolio manager for Nuveen
Advisory since 1991 and an Assistant Vice President since 1998. He currently
manages investments for thirteen Nuveen-sponsored investment companies,
including the Georgia, Kentucky, North Carolina, Pennsylvania, and Tennessee
Funds.
For the most recent fiscal year, the fund paid .54% in management fees to Nuveen
Advisory as a percentage of net assets.
4 Section 2 How We Manage Your Money
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What Securities We Invest In
The fund's investment objective may not be changed without shareholder approval.
The following investment policies may be changed by the Board of Trustees
without shareholder approval unless otherwise noted in this prospectus or the
Statement of Additional Information.
Municipal Bonds
The fund invests primarily in municipal bonds that pay interest that is exempt
from regular federal, state and, in some cases, local income tax. Income from
these bonds may be subject to the federal alternative minimum tax.
States, local governments and municipalities issue municipal bonds to raise
money for various public purposes such as building public facilities,
refinancing outstanding obligations and financing general operating expenses.
These bonds include general obligation bonds, which are backed by the full faith
and credit of the issuer and may be repaid from any revenue source, and revenue
bonds, which may be repaid only from the revenue of a specific facility or
source.
The fund may purchase municipal bonds that represent lease obligations. These
carry special risks because the issuer of the bonds may not be obligated to
appropriate money annually to make payments under the lease. In order to reduce
this risk, the fund will only purchase these bonds where the issuer has a
strong incentive to continue making appropriations until maturity.
The fund may invest in inverse floating rate securities, sometimes referred to
as "inverse floaters." Inverse floaters have variable interest rates that move
in the opposite direction from movements in prevailing short-term interest rate
levels--rising when prevailing short-term interest rates fall, and vice versa.
In addition to paying fluctuating income levels, the prices of inverse floaters
can be more volatile than the prices of conventional fixed-rate bonds with
comparable maturities.
In evaluating municipal bonds of different credit qualities or maturities,
Nuveen Advisory takes into account the size of yield spreads. Yield spread is
the additional return the fund may earn by taking on additional credit risk or
interest rate risk. For example, yields on low quality bonds are higher than
yields on high quality bonds because investors must be compensated for incurring
the higher credit risk associated with low quality bonds. If yield spreads do
not provide adequate compensation for the additional risk associated with low
quality bonds, the fund will buy bonds of relatively higher quality. Similarly,
in evaluating bonds of different maturities, Nuveen Advisory evaluates the
comparative yield available on these bonds. If yield spreads on long-term bonds
do not compensate the fund adequately for the additional interest rate risk the
fund must assume, the fund will buy bonds of relatively shorter maturity. In
addition, municipal bonds in a particular industry may provide higher yields
relative
Section 2 How We Manage Your Money 5
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to their risk compared to bonds in other industries. If that occurs,
the fund may buy relatively more bonds from issuers in that industry. In that
case, the fund's portfolio composition would change from time to time.
Quality Municipal Bonds
The fund purchases only quality municipal bonds that are either rated investment
grade (AAA/Aaa to BBB/Baa) by independent rating agencies at the time of
purchase or are non-rated but judged to be investment grade by the fund's
investment adviser. If suitable municipal bonds from a specific state are not
available at attractive prices and yields, the fund may invest in municipal
bonds of U.S. territories (such as Puerto Rico and Guam) which are exempt from
regular federal, state and local income taxes.
Portfolio Maturity
The fund buys municipal bonds with different maturities in pursuit of its
investment objective, but maintains under normal market conditions an
investment portfolio with an overall weighted average portfolio maturity of 15
to 30 years.
Short-Term Investments
Under normal market conditions, the fund may invest up to 20% of net assets in
short-term, high quality municipal bonds. See "How We Manage Risk--Hedging and
Other Defensive Investment Strategies." The fund may invest in short-term, high
quality taxable securities if suitable short-term municipal bonds are not
available at reasonable prices and yields. If the fund invests in taxable
securities, it may not achieve its investment objective. For more information on
eligible short-term investments, see the Statement of Additional Information.
Forwards and Delayed-Delivery Settlement
The fund may enter into contracts to purchase securities for a specified price
at a future date later than the normal settlement date. If the delayed
settlement takes place less than 61 days after purchase, it is referred to as a
"delayed-delivery" transaction. Newly issued municipal bonds sold on a "when-
issued" basis represent a common form of delayed-delivery transaction. If
settlement takes place more than 60 days after purchase, the transaction is
called a "forward." These transactions involve an element of risk because the
value of the security to be purchased may decline before the settlement date.
Municipal "forwards" pay higher interest rates after settlement than standard
bonds, to compensate the buyer for bearing market risk but deferring income
during the settlement period, and can often be bought at attractive prices and
yields. If the fund knows that a portfolio bond will, or is likely to, be called
or mature on a specific future date, the fund may buy a forward settling on or
about that date to replace the called or maturing bond and "lock in" a currently
attractive interest rate.
6 Section 2 How We Manage Your Money
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How We Select Investments
Nuveen Advisory selects municipal bonds for the fund based upon its assessment
of a bond's relative value in terms of current yield, price, credit quality and
future prospects. Nuveen Advisory is supported by Nuveen's award-winning team of
specialized research analysts who review municipal securities available for
purchase, monitor the continued creditworthiness of the fund's municipal
investments, and analyze economic, political and demographic trends affecting
the municipal markets. We utilize these resources to identify municipal bonds
with favorable characteristics we believe are not yet recognized by the market.
We then select those higher-yielding and undervalued municipal bonds that we
believe represent the most attractive values.
Portfolio Turnover
The fund buys and sells portfolio securities in the normal course of its
investment activities. The proportion of the fund's investment portfolio that
is sold and replaced with new securities during a year is known as the fund's
portfolio turnover rate. The fund intends to keep portfolio turnover relatively
low in order to reduce trading costs and the realization of taxable capital
gains. The fund, however, may make limited short-term trades to take advantage
of market opportunities or reduce market risk.
What the Risks Are
Risk is inherent in all investing. Investing in a mutual fund - even the most
conservative - involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part or all of your
investment. Therefore, before investing you should consider carefully the
following risks that you assume when you invest in the fund. Because of these
and other risks, you should consider an investment in the fund to be a long-term
investment.
Credit risk: The fund is subject to credit risk. Credit risk is the risk that an
issuer of a municipal bond will be unable to meet its obligation to make
interest and principal payments due to changing financial or market conditions.
Interest rate risk: Because the fund invests in fixed-income securities, the
fund is subject to interest rate risk. Interest rate risk is the risk that the
value of a fund's portfolio will decline because of rising interest rates.
Interest rate risk is generally lower for shorter-term investments and higher
for longer-term investments.
Income risk: The risk that the income from the fund's portfolio will decline
because of falling market interest rates. This can result when the fund invests
the proceeds from new share sales, or from matured or called bonds, at market
interest rates that are below the portfolio's current earnings rate. Also, if
the fund invests in inverse floating rate securities, whose income payments vary
inversely with changes in short-term market rates, the fund's income may
decrease if short-term interest rates rise.
State concentration risk: Because the fund primarily purchases municipal bonds
from Florida, the fund also bears investment risk from economic, political or
regulatory changes that could adversely affect municipal bond issuers in Florida
and therefore the value of the fund's investment portfolio. See "Appendix--
Additional State Information."
Section 2 How We Manage Your Money 7
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Inflation risk: The risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the value of the fund's assets can decline as can the value
of the fund's distributions.
How We Manage Risk
In pursuit of its investment objective, the fund assumes investment risk,
chiefly in the form of interest rate and credit risk. The fund limits this
investment risk generally by restricting the type and maturities of municipal
bonds it purchases, and by diversifying its investment portfolio geographically
within Florida, as well as across different industry sectors.
Investment Limitations
The fund has adopted certain investment limitations (based on total assets) that
cannot be changed without shareholder approval and are designed to limit your
investment risk and maintain portfolio diversification. As a diversified fund,
the fund may not have more than:
. 5% in securities of any one issuer (except U.S. government securities or
for 25% of the fund's assets).
. 25% in any one industry such as electric utilities or health care.
. 10% in borrowings (33% if used to meet redemptions).
Hedging and Other Defensive Investment Strategies
The fund may invest up to 100% in cash equivalents and short-term investments as
a temporary defensive measure in response to adverse market conditions, or to
keep cash on hand fully invested. During these periods, the weighted average
maturity of the fund's investment portfolio may fall below the defined range
described under "Portfolio Maturity."
The fund may also use various investment strategies designed to limit the risk
of bond price fluctuations and to preserve capital. These hedging strategies
include using financial futures contracts, options on financial futures, or
options based on either an index of long-term tax-free securities or on debt
securities whose prices, in Nuveen Advisory's opinion, correlate with the prices
of the fund's investments. The fund, however, has no present intent to use these
strategies.
8 Section 2 How We Manage Your Money
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Section 3 How You Can Buy and Sell Shares
We offer four classes of fund shares, each with a different combination of sales
charges, fees, eligibility requirements and other features. Your financial
advisor can help you determine which class is best for you. We offer a number of
features for your convenience. Please see the Statement of Additional
Information for further details.
What Share Classes We Offer
Class A Shares
You can buy Class A shares at the offering price, which is the net asset value
per share plus an up-front sales charge. You may qualify for a reduced sales
charge, or the sales charge may be waived, as described in "How to Reduce Your
Sales Charge." Class A shares are also subject to an annual service fee of .20%
that compensates your financial advisor for providing on-going service to you.
Nuveen retains the up-front sales charge and the service fee on accounts with
no authorized dealer of record. The up-front Class A sales charge for the fund
is as follows:
<TABLE>
<CAPTION>
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
<S> <C> <C> <C>
Less than $50,000 4.20% 4.38% 3.70%
...........................................................................................................
$50,000 but less than $100,000 4.00% 4.18% 3.50%
...........................................................................................................
$100,000 but less than $250,000 3.50% 3.63% 3.00%
...........................................................................................................
$250,000 but less than $500,000 2.50% 2.56% 2.00%
...........................................................................................................
$500,000 but less than $1,000,000 2.00% 2.04% 1.50%
...........................................................................................................
$1,000,000 and over --/1/ -- 1.00%/1/
...........................................................................................................
</TABLE>
1. You can buy $1 million or more of Class A shares at net asset value without
an up-front sales charge. Nuveen pays authorized dealers of record on these
share purchases a sales commission of 1.00% of the first $2.5 million, plus .50%
of the next $2.5 million, plus .25% of the amount over $5.0 million. If you
redeem your shares within 18 months of purchase, you may have to pay a
Contingent Deferred Sales Charge (CDSC) of 1% of either your purchase price or
your redemption proceeds, whichever is lower. You do not have to pay this CDSC
if your financial advisor has made arrangements with Nuveen and agrees to waive
the commission.
Class B Shares
You can buy Class B shares at the offering price, which is the net asset value
per share without any up-front sales charge so that the full amount of your
purchase is invested in the fund. However, you will pay annual distribution and
service fees of .95% of average daily assets. The annual .20% service fee
compensates your financial advisor for providing on-going service to you. Nuveen
retains the service fee on accounts with no authorized dealer of record. The
annual .75% distribution fee compensates Nuveen for paying your financial
advisor a 4% up-front sales commission, which includes an advance of the first
year's service fee. If you sell your shares within six years of purchase, you
will normally have to pay a CDSC based on either your purchase price or what you
sell your shares for, whichever amount is lower, according to the following
schedule. You do
Section 3 How You Can Buy and Sell Shares 9
<PAGE>
not pay a CDSC on any Class B shares you purchase by reinvesting dividends.
Class B shares automatically convert to Class A shares eight years after you buy
them so that the distribution fees you pay over the life of your investment are
limited. You will continue to pay an annual service fee on any converted Class
B shares.
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6 Over 6
CDSC 5% 4% 4% 3% 2% 1% None
..............................................................................
Class C Shares
You can buy Class C shares at the offering price, which is the net asset value
per share without any up-front sales charge so that the full amount of your
purchase is invested in the fund. However, you will pay annual distribution and
service fees of .75% of average daily assets. The annual .20% service fee
compensates your financial advisor for providing on-going service to you. Nuveen
retains the service fee on accounts with no authorized dealer of record. The
annual .55% distribution fee reimburses Nuveen for paying your financial advisor
an on-going sales commission. Nuveen advances the first year's service and
distribution fees. If you sell your shares within 12 months of purchase, you
will normally have to pay a 1% CDSC based on your purchase or sale price,
whichever is lower. You do not pay a CDSC on any Class C shares you purchase by
reinvesting dividends.
Class R Shares
You may purchase Class R shares only under limited circumstances, at the net
asset value on the day of purchase. In order to qualify, you must be eligible
under one of the programs described in "How to Reduce Your Sales Charge" (below)
or meet certain other purchase size criteria. Class R shares are not subject to
sales charges or on-going service or distribution fees. Class R shares have
lower on-going expenses than the other classes.
How to Reduce Your Sales Charge
We offer a number of ways to reduce or eliminate the up-front sales charge on
Class A shares or to qualify to purchase Class R shares.
Class A Sales Charge Reductions
. Rights of accumulation
. Letter of intent
. Group purchase
Class A Sales Charge Waivers
. Nuveen Defined Portfolio
or Exchange-Traded Fund reinvestment
. Certain employees and directors of Nuveen or employees of authorized dealers
. Bank trust departments
Class R Eligibility
. Certain employees and directors of Nuveen or employees of authorized dealers
. Bank trust departments
In addition, Class A shares at net asset value and Class R shares may be
purchased through registered investment advisors, certified financial planners
and registered broker-dealers who charge asset-based or
10 Section 3 How You Can Buy and Sell Shares
<PAGE>
comprehensive "wrap" fees for their services. Please refer to the Statement of
Additional Information for detailed program descriptions and eligibility
requirements. Additional information is available from your financial advisor or
by calling (800) 257-8787. Your financial advisor can also help you prepare any
necessary application forms. You or your financial advisor must notify Nuveen at
the time of each purchase if you are eligible for any of these programs. The
fund may modify or discontinue these programs at any time.
How to Buy Shares
Fund shares may be purchased on any business day, which is any day the New York
Stock Exchange is open for business and normally ends at 4 p.m. New York time.
Generally, the Exchange is closed on weekends and national holidays. The share
price you pay will depend on when Nuveen receives your order. Orders received
before the close of trading on a business day will receive that day's closing
share price, otherwise you will receive the next business day's price.
Through a Financial Advisor
You may buy shares through your financial advisor, who can handle all the
details for you, including opening a new account. Financial advisors can also
help you review your financial needs and formulate long-term investment goals
and objectives. In addition, financial advisors generally can help you develop a
customized financial plan, select investments and monitor and review your
portfolio on an ongoing basis to help assure your investments continue to meet
your needs as circumstances change. Financial advisors are paid for on-going
investment advice and services either from fund sales charges and fees or by
charging you a separate fee in lieu of a sales charge. If you do not have a
financial advisor, call (800) 257-8787 and Nuveen can refer you to one in your
area.
By Mail
You may open an account and buy shares by mail by completing the enclosed
application and mailing it along with your check to: Nuveen Investor Services,
P.O. Box 5186, Bowling Green Station, New York, NY 10274-5186. No third party
checks will be accepted.
Investment Minimums
The minimum initial investment is $3,000 ($50 through systematic investment plan
accounts) and may be lower for accounts opened through certain fee-based
programs. Subsequent investments must be in amounts of $50 or more. The fund
reserves the right to reject purchase orders and to waive or increase the
minimum investment requirements.
Section 3 How You Can Buy and Sell Shares 11
<PAGE>
Systematic Investing
Systematic investing allows you to make regular investments through automatic
deductions from your bank account, directly from your paycheck or from
exchanging shares from another mutual fund account. The minimum automatic
deduction is $50 per month. There is no charge to participate in the fund's
systematic investment plan. You can stop the deductions at any time by notifying
the fund in writing. To do this, simply complete the appropriate section of the
account application form or submit an Account Update Form.
From Your Bank Account
You can make systematic investments of $50 or more per month by authorizing us
to draw preauthorized checks on your bank account.
From Your Paycheck
With your employer's consent, you can make systematic investments of $25 or more
per pay period (meeting the monthly minimum of $50) by authorizing your employer
to deduct monies from your paycheck.
Systematic Exchanging
You can make systematic investments by authorizing Nuveen to exchange shares
from one Nuveen mutual fund account into another identically registered Nuveen
account of the same share class.
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 4%, 5% or 6% annually on your
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
[CHART APPEARS HERE]
One of the benefits of systematic investing is dollar cost averaging. Because
you regularly invest a fixed amount of money over a period of years regardless
of the share price, you buy more shares when the price is low and fewer shares
when the price is high. As a result, the average share price you pay should be
less than the average share price of fund shares over the same period. To be
effective, dollar cost averaging requires that you invest over a long period of
time, and does not assure that you will profit.
12 Section 3 How You Can Buy and Sell Shares
<PAGE>
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to receive
payments monthly, quarterly, semi-annually or annually, and may choose to
receive a check, have the monies transferred directly into your bank account
(see "Special Services--Fund Direct" below), paid to a third party or sent
payable to you at an address other than your address of record. You must
complete the appropriate section of the account application or Account Update
Form to participate in the fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent
purchases of Class A, B or C shares because you may unnecessarily pay a sales
charge or CDSC on these purchases.
Special Services
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered account at any time
for the same class of another Nuveen mutual fund available in your state. Your
exchange must meet the minimum purchase requirements of the fund into which you
are exchanging. You may have to pay a sales charge when exchanging shares that
you purchased without a sales charge for shares that are sold with a sales
charge. Please consult the Statement of Additional Information for details.
The exchange privilege is not intended to allow you to use the fund for short-
term trading. Because excessive exchanges may interfere with portfolio
management, raise fund operating expenses or otherwise have an adverse effect on
other shareholders, the fund reserves the right to revise or suspend the
exchange privilege, limit the amount or number of exchanges, or reject any
exchange.
The fund may change or cancel its exchange policy at any time upon 60 days'
notice. Because an exchange is treated for tax purposes as a purchase and sale,
and any gain may be subject to tax, you should consult your tax advisor about
the tax consequences of exchanging your shares.
Fund Direct(SM)
The Fund Direct Program allows you to link your fund account to your bank
account, transfer money electronically between these accounts, and perform a
variety of account transactions, including purchasing shares by telephone and
investing through a systematic investment plan. You also may have dividends,
distributions, redemption payments or systematic withdrawal plan payments sent
directly to your bank account. Your financial advisor can help you complete the
forms for these services, or you can call Nuveen at (800) 257-8787 for copies of
the necessary forms.
Section 3 How You Can Buy and Sell Shares 13
<PAGE>
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your redemption
proceeds up to one year later without incurring any additional charges. You may
only reinvest into the same share class you redeemed. If you paid a CDSC, we
will refund your CDSC and reinstate your holding period. You may use this
reinstatement privilege only once for any redemption.
How to Sell Shares
You may sell (redeem) your shares on any business day. You will receive the
share price next determined after Nuveen has received your properly completed
redemption request. Your redemption request must be received before the close of
trading for you to receive that day's price. If you are selling shares purchased
recently with a check, you will not receive your redemption proceeds until your
check has cleared. This may take up to ten business days from your purchase
date. While the fund does not charge a redemption fee, you may be assessed a
CDSC, if applicable. When you redeem Class A, Class B, or Class C shares subject
to a CDSC, the fund will first redeem any shares that are not subject to a
CDSC, and then redeem the shares you have owned for the longest period of time,
unless you ask the fund to redeem your shares in a different order. No CDSC is
imposed on shares you buy through the reinvestment of dividends and capital
gains. The holding period is calculated on a monthly basis and begins on the
first day of the month in which you buy shares. When you redeem shares subject
to a CDSC, the CDSC is calculated on the lower of your purchase price or
redemption proceeds, deducted from your redemption proceeds, and paid to
Nuveen. The CDSC may be waived under certain special circumstances as described
in the Statement of Additional Information.
Through Your Financial Advisor
You may sell your shares through your financial advisor who can prepare the
necessary documentation. Your financial advisor may charge for this.
By Telephone
If you have authorized telephone redemption privileges, you can redeem your
shares by calling (800) 257-8787. Telephone redemptions are not available if
you own shares in certificate form and may not exceed $50,000. Checks will only
be issued to you as the shareholder of record and mailed to your address of
record. If you have established Fund Direct privileges, you may have redemption
proceeds transferred electronically to your bank account. We will normally mail
your check the next business day.
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to
confirm the identity of callers, it will not be liable for losses resulting
from following telephone instructions it reasonably believes to be genuine.
Also you should verify your trade confirmations immediately upon receipt.
By Mail
You can sell your shares at any time by sending a written request to the fund,
c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New York,
NY 10274-5186. Your request must include the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person to whom you want your redemption proceeds paid
(if other than to the shareholder of record);
14 Section 3 How You Can Buy and Sell Shares
<PAGE>
. The address where you want your redemption proceeds sent (if other than the
address of record) ;
. Any certificates you have for the shares; and
. Any required signature guarantees.
We will normally mail your check the next business day, but in no event more
than seven days after we receive your request. If you purchased your shares by
check, your redemption proceeds will not be mailed until your check has cleared.
Guaranteed signatures are required if you are redeeming more than $50,000, you
want the check payable to someone other than the shareholder of record or you
want the check sent to another address (or the address of record has been
changed within the last 60 days). Signature guarantees must be obtained from a
bank, brokerage firm or other financial intermediary that is a member of an
approved Medallion Guarantee Program or that a fund otherwise approves. A
notary public cannot provide a signature guarantee.
Redemptions In-Kind
The fund generally pays redemption proceeds in cash. Under unusual conditions
that make cash payment unwise and for the protection of existing shareholders,
the fund may pay all or a portion of your redemption proceeds in securities or
other fund assets. Although it is unlikely that your shares would be redeemed
in-kind, you would probably have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any capital gains from that sale.
An Important Note About Involuntary Redemption
From time to time, the fund may establish minimum account size requirements. The
fund reserves the right to liquidate your account up on 30 days' written notice
if the value of your account falls below an established minimum. The fund has
set a minimum balance of $100 unless you have an active Nuveen Defined Portfolio
reinvestment account. You will not be assessed a CDSC on an involuntary
redemption.
Section 3 How You Can Buy and Sell Shares 15
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the fund, this
section includes important details about how the fund makes distributions to
shareholders. We discuss some other fund policies, as well.
Dividends, Distributions and Taxes
The fund pays tax-free dividends monthly and any taxable capital gains or other
taxable distributions once a year in December. The fund declares dividends
monthly to shareholders of record as of the ninth of each month, usually payable
the first business day of the following month.
Payment and Reinvestment Options
The fund automatically reinvests your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than your address of record or reinvested in shares of another
Nuveen mutual fund. For further information, contact your financial advisor or
call Nuveen at (800) 257-8787.
Taxes and Tax Reporting
Because the fund invests primarily in municipal bonds from Florida, the regular
monthly dividends you, as a taxpayer in that state, receive will be exempt from
regular federal income tax and the Florida intangible personal property tax. All
or a portion of these dividends, however, may be subject to the federal
alternative minimum tax (AMT).
Although the fund does not seek to realize taxable income or capital gains, the
fund may realize and distribute taxable income or capital gains from time to
time as a result of the fund's normal investment activities. The fund will
distribute in December any taxable income or capital gains realized over the
preceding year. Net short-term capital gains are taxable at the same rate as
ordinary income. Net long-term capital gains are taxable as long-term capital
gains regardless of how long you have owned your investment. Taxable dividends
do not qualify for a dividends received deduction if you are a corporate
shareholder.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains, that you were paid during the prior year. If
you hold your investment at the firm where you purchased your fund shares, you
will receive the statement from that firm. If you hold your shares directly with
the fund, Nuveen will send you the statement. The tax status of your dividends
is not affected by whether you reinvest your dividends or elect to receive them
in cash.
16 Section 4 General Information
<PAGE>
If you receive social security or railroad retirement benefits, you should
consult your tax advisor about how an investment in the fund may affect the
taxation of your benefits.
Please note that if you do not furnish us with your correct Social Security
number or employer identification number, federal law requires the fund to
withhold federal income tax from your distributions and redemption proceeds,
currently at a rate of 31%.
Please consult the Statement of Additional Information and your tax advisor for
more information about taxes.
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable dividend is
commonly known as "buying the dividend." The entire dividend may be taxable to
you even though a portion of the dividend effectively represents a return of
your purchase price. Similarly, if you sell or exchange fund shares shortly
before the record date for a tax-exempt dividend, a portion of the price you
receive may be treated as a taxable capital gain even though it reflects tax-
free income a fund has earned but not yet distributed.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to earn on a
taxable investment in order to equal a stated federal tax-free yield on a
municipal investment. To assist you to more easily compare municipal investments
like the fund with taxable alternative investments, the table below presents the
taxable equivalent yields for a range of hypothetical federal tax-free yields
and tax rates:
Taxable Equivalent Of Tax-Free Yields
<TABLE>
<CAPTION>
To Equal a Tax-Free Yield of:
--------------------------------------------------------------------------------
4.00% 4.50% 5.00% 5.50% 6.00%
Tax Bracket: A Taxable Investment Would Need to Yield:
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
--------------------------------------------------------------------------------
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
--------------------------------------------------------------------------------
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
--------------------------------------------------------------------------------
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
--------------------------------------------------------------------------------
</TABLE>
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
Statement of Additional Information or consult your tax advisor.
Distribution and Service Plans
Nuveen serves as the selling agent and distributor of the fund's shares. In this
capacity, Nuveen manages the offering of the fund's shares and is responsible
for all sales and promotional activities. In order to reimburse Nuveen for its
costs in connection with these activities, including compensation paid to
authorized dealers, the fund has adopted a distribution and service plan under
Rule 12b-1 under the Investment Company Act of 1940. (See "How to Choose a Share
Class" for a description of the distribution and service fees paid under this
plan.)
Nuveen receives the distribution fee for Class B and Class C shares primarily
for providing compensation to authorized dealers, including
Section 4 General Information 17
<PAGE>
Nuveen, in connection with the distribution of shares. Nuveen uses the service
fee for Class A, Class B, and Class C shares to compensate authorized dealers,
including Nuveen, for providing on-going account services to shareholders. These
services may include establishing and maintaining shareholder accounts,
answering shareholder inquiries, and providing other personal services to
shareholders. These fees also compensate Nuveen for other expenses, including
printing and distributing prospectuses to persons other than shareholders, and
preparing, printing, and distributing advertising and sales literature and
reports to shareholders used in connection with the sale of shares. Because
these fees are paid out of the fund's assets on an on-going basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
Nuveen periodically undertakes sales promotion programs with authorized dealers
and may pay them the full applicable sales charge as a commission. In addition,
Nuveen may provide support at its own expense to authorized dealers in
connection with sales meetings, seminars, prospecting seminars and other events
at which Nuveen presents its products and services. Under certain circumstances,
Nuveen also will share with authorized dealers up to half the costs of
advertising that features the products and services of both parties. The
Statement of Additional Information contains further information about these
programs.
Net Asset Value
The price you pay for your shares is based on the fund's net asset value per
share which is determined as of the close of trading (normally 4:00 p.m. New
York time) on each day the New York Stock Exchange is open for business. Net
asset value is calculated for each class of the fund by taking the market value
of the class' total assets, including interest or dividends accrued but not yet
collected, less all liabilities, and dividing by the total number of shares
outstanding. The result, rounded to the nearest cent, is the net asset value per
share. All valuations are subject to review by the funds' Board of Trustees or
its delegate.
In determining net asset value, expenses are accrued and applied daily and
securities and other assets for which market quotations are available are
valued at market value. The prices of municipal bonds are provided by a pricing
service and based on the mean between the bid and asked price. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on prices of comparable
municipal bonds.
Fund Service Providers
The custodian of the assets of the fund is The Chase Manhattan Bank, 4 New York
Plaza, New York, NY 10004-2413. Chase also provides certain accounting services
to the fund. The fund's transfer, shareholder services and dividend paying
agent, Chase Global Funds Services Company, P.O. Box 5186, New York, NY 10274-
5186, performs bookkeeping, data processing and administrative services for the
maintenance of shareholder accounts.
18 Section 4 General Information
<PAGE>
Section 5 Financial Highlights
The financial highlights table is intended to help you understand the fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor would have earned on an investment in the
fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Arthur Andersen LLP, whose report, along with
the fund's financial statements, are included in the SAI and annual report,
which is available upon request.
Nuveen Florida Municipal Bond Fund**
<TABLE>
<CAPTION>
Class
(Inception
Date)
Investment Operations Less Distributions
---------------------------------------------- --------------------------------------
Net
Realized
and
Year Beginning Net Unrealized Net
Ended Net Asset Investment Investment Investment Capital
May 31, Value Income Gain (Loss) Total Income Gains Total
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (6/90)
2000 $ 10.76 $ .54 $ (.77) $ (.23) $ (.55) $ (.01) $ (.56)
1999 10.94 .55 (.14) .41 (.55) (.04) (.59)
1998 10.60 .56 .34 .90 (.55) (.01) (.56)
1997 10.39 .56 .21 .77 (.56) - (.56)
1996 10.63 .57 (.24) .33 (.57) - (.57)
Class B (2/97)
2000 10.77 .46 (.79) (.33) (.47) (.01) (.48)
1999 10.95 .47 (.14) .33 (.47) (.04) (.51)
1998 10.61 .48 .35 .83 (.48) (.01) (.49)
1997(c) 10.59 .16 .02 .18 (.16) - (.16)
Class C (9/95)
2000 10.77 .48 (.78) (.30) (.49) (.01) (.50)
1999 10.95 .49 (.14) .35 (.49) (.04) (.53)
1998 10.60 .50 .36 .86 (.50) (.01) (.51)
1997 10.39 .50 .21 .71 (.50) - (.50)
1996(c) 10.65 .35 (.26) .09 (.35) - (.35)
Class R (2/97)
2000 10.76 .56 (.78) (.22) (.57) (.01) (.58)
1999 10.94 .57 (.14) .43 (.57) (.04) (.61)
1998 10.60 .58 .35 .93 (.58) (.01) (.59)
1997(c) 10.59 .19 .01 .20 (.19) - (.19)
------------------------------------------------------------------------------------------------------------------------------
Class
(Inception
Date)
Ratios/Supplemental Data
-------------------------------------------------------------
Ratio of Net
Ratio of Investment
Ending Ending Expenses Income
Year Net Net to Average to Average Portfolio
Ended Asset Total Assets Net Net Turnover
May 31, Value Return(a) (000) Assets(b) Assets(b) Rate
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (6/90)
2000 $ 9.97 (2.17)% $ 250,178 1.02% 5.27% 18%
1999 10.76 3.78 297,505 .84 5.00 19
1998 10.94 8.67 292,399 .84 5.13 14
1997 10.60 7.59 296,970 .82 5.34 54
1996 10.39 3.14 318,456 .83 5.36 94
Class B (2/97)
2000 9.96 (3.10) 17,476 1.79 4.52 18
1999 10.77 3.05 15,768 1.59 4.25 19
1998 10.95 7.89 5,266 1.59 4.35 14
1997(c) 10.61 1.70 785 1.58* 4.52* 54
Class C (9/95)
2000 9.97 (2.79) 17,167 1.59 4.72 18
1999 10.77 3.22 16,034 1.39 4.45 19
1998 10.95 8.20 7,646 1.39 4.58 14
1997 10.60 7.00 5,130 1.35 4.75 54
1996(c) 10.39 1.30* 1,175 1.38* 4.59* 94
Class R (2/97)
2000 9.96 (2.07) 56,943 .83 5.47 18
1999 10.76 4.01 61,496 .64 5.20 19
1998 10.94 8.91 56,428 .64 5.33 14
1997(c) 10.60 1.93 54,247 .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.
(b) After expense reimbursement from the investment adviser, where
applicable. When custodian fee credits are applied, the Ratios of
Expenses to Average Net Assets for 2000 are 1.01%, 1.78%, 1.58%, and
.82% for classes A, B, C and R, respectively, and the Ratios of Net
Investment Income to Average Net Assets for 2000 are 5.28%, 4.53%,
4.73% and 5.48% for classes A, B, C and R, respectively.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 19
<PAGE>
Appendix Additional State Information
Because the fund primarily purchases municipal bonds from Florida, the fund also
bears investment risks from economic, political or regulatory changes that
could adversely affect municipal bond issuers in that state and therefore the
value of the fund's investment portfolio. The following discussion of special
state considerations was obtained from official offering statements of these
issuers and has not been independently verified by the fund. The discussion
includes general state tax information related to an investment in fund shares.
Because tax laws are complex and often change, you should consult your tax
advisor about the state tax consequences of a specific fund investment. See the
Statement of Additional Information for further information.
Florida
Florida is one of the nation's fastest growing states. Employment and personal
income growth have outpaced the nation since 1991 and recent economic reports
indicate that the State continues to experience job growth, albeit at a more
moderate pace. Florida has a diverse economy with recent growth in the
insurance, banking, healthcare, construction and trade sectors, which has helped
lessen the State's dependence on the agricultural and tourism industries.
Florida's unemployment rate of 3.7% in July 2000 mirrored the statewide rate in
July 1999 and was slightly lower than the 4.0% national average for July 2000.
Florida's 1999 per capita income of $28,023 is on par with national averages and
slightly above regional levels. Because the State's significant senior
population relies more on fixed income than on wages, income levels in the State
are generally more stable over different phases of economic cycles.
Florida's "intangibles tax," which is levied on securities and other intangible
items of monetary value, was reduced during 1999. State officials have
discussed abolishing the intangibles tax, but no legislation is currently
pending.
As of August 31, 2000, Florida's general obligation debt carried ratings of AA+
by Standard & Poor's, Aa2 by Moody's, and AA by Fitch. These ratings reflect
the State's credit quality only, and do not indicate the creditworthiness of
other tax-exempt securities in which the fund may invest.
Tax Treatment
Shares of the fund generally will not be subject to the Florida intangible
personal property tax if the fund intends to hold only Florida municipal bonds
and U.S. Government securities. If the fund holds other taxable securities, then
your shares in the fund may be subject to the Florida intangible personal
property tax, except that the portion of your shares attributable to the fund's
investments in U.S. Government securities will not be subject to the tax.
Shareholders should refer to the Statement of Additional Information for more
detailed information.
20 Appendix
<PAGE>
While dividends paid by the fund to individuals who are residents of Florida are
not subject to personal income taxation in Florida, if you are subject to income
tax in a state other than Florida, the dividends that result from Florida
municipal bonds may be subject to income tax in that state.
Corporate shareholders of the fund may be subject to the Florida corporate
income tax. Corporate shareholders should refer to the Statement of Additional
Information for more detailed state tax information.
Appendix 21
<PAGE>
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
Growth
International Growth Fund
Innovation Fund
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Income
Income Fund
Floating Rate Fund/1/
Tax-Free Income
National Municipal Bond Funds
High Yield
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
Arizona
California/2/
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts/2/
Michigan
Missouri
New Jersey
New Mexico
New York/2/
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
Several additional sources of information are available to you. The Statement of
Additional Information (SAI), incorporated by reference into this prospectus,
contains detailed information on fund policies and operation. Additional
information about the fund's investments is available in the fund's annual and
semi-annual report to shareholders. In the fund's annual reports, you will find
a discussion of the market conditions and investment strategies that
significantly affected the fund's performance during their last fiscal year.
Call Nuveen at (800) 257-8787 to request a free copy of any of these materials
or other fund information, or ask your financial advisor for copies.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission (SEC). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at (800) SEC-0330
for room hours and operation. You may also request fund information by writing
to the SEC's Public Reference Section, Washington, D.C. 20549.
The fund's Investment Company file number is 811-07747.
1. This is a continuously-offered closed-end interval fund. As such, redemptions
are only available during quarterly repurchase periods. See fund prospectus
for additional information.
2. Long-term and insured long-term portfolios.
NUVEEN
Investments
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
<PAGE>
NUVEEN Investments
Municipal Bond Funds
PROSPECTUS SEPTEMBER 28, 2000
Dependable, tax-free income to help you keep more of what you earn.
[PHOTO APPEARS HERE]
INVEST WELL
LOOK AHEAD
LEAVE YOUR MARK
Maryland
Pennsylvania
Virginia
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
<PAGE>
Table of Contents
Section 1 The Funds
This section provides you with an overview of the funds including investment
objectives, portfolio holdings and historical performance information.
Introduction 1
................................................................
Nuveen Maryland Municipal Bond Fund 2
................................................................
Nuveen Pennsylvania Municipal Bond Fund 4
................................................................
Nuveen Virginia Municipal Bond Fund 6
................................................................
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
Who Manages the Funds 8
................................................................
What Securities We Invest In 9
................................................................
How We Select Investments 11
................................................................
What the Risks Are 11
................................................................
How We Manage Risk 12
................................................................
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into or out of your
account.
What Share Classes We Offer 13
................................................................
How to Reduce Your Sales Charge 14
................................................................
How to Buy Shares 15
................................................................
Systematic Investing 15
................................................................
Systematic Withdrawal 16
................................................................
Special Services 17
................................................................
How to Sell Shares 18
................................................................
Section 4 General Information
This section summarizes the funds' distribution policies and other general fund
information.
Dividends, Distributions and Taxes 20
................................................................
Distribution and Service Plans 21
................................................................
Net Asset Value 22
................................................................
Fund Service Providers 22
................................................................
Section 5 Financial Highlights
This section provides the funds' financial performance
for the past five years. 23
................................................................
Appendix Additional State Information 26
................................................................
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment Strategy
Risks
Fees, Charges
and Expenses
Shareholder
Instructions
Performance and
Current Portfolio
Information
<PAGE>
September 28, 2000
Section 1 The Funds
Nuveen Maryland Municipal Bond Fund
Nuveen Pennsylvania Municipal Bond Fund
Nuveen Virginia Municipal Bond Fund
Introduction
This prospectus is intended to provide important information to help you
evaluate whether one of the Nuveen Mutual Funds listed above may be right for
you. Please read it carefully before investing and keep it for future reference.
--------------------------------------------------------------------------------
NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
--------------------------------------------------------------------------------
Section 1 The Funds 1
<PAGE>
Nuveen Maryland Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent rating agencies.
The fund may buy non-rated municipal bonds if the fund's investment adviser
judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate risk and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal bond
will be unable to make interest and principal payments. In general, lower rated
bonds carry greater credit risk. The fund may bear additional risk because it
invests primarily in Maryland bonds. The fund is non-diversified, and may
invest more of its assets in a single issuer than a diversified fund. Greater
concentration may increase risk. As with any mutual fund investment, loss of
money is a risk of investing.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income; or
. Set aside money systematically for retirement, estate planning or college
funding.
You should not invest in this fund if you seek to:
. Pursue long-term growth;
. Invest through an IRA or 401(k) plan; or
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
seven years as well as annualized fund and index returns for the one- and five-
year and since inception periods ending December 31, 1999. This information is
intended to help you assess the variability of fund returns over the past seven
years (and consequently, the potential rewards and risks of a fund investment).
Past performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
Class R Annual Returns
1993 12.4
1994 -6.1
1995 17.2
1996 3.8
1997 7.7
1998 5.9
1999 -5.1
From beginning of operations in February 1992 to December 31, 1999, the highest
and lowest quarterly returns were 7.40% and -5.70%, respectively for the
quarters ending 3/31/95 and 3/31/94. The bar chart and highest/lowest quarterly
returns do not reflect sales charges, which would reduce returns, while the
average annual return table does include sales charges.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1999
------------------------------------
Class 1 Year 5 Year Inception
----------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) -9.09% 4.58% 4.48%
Class B -9.33% 4.59% 4.35%
Class C -5.52% 4.86% 4.39%
Class R -4.80% 5.73% 5.33%
----------------------------------------------------------------
LB Market
Benchmark/2/ -2.06% 6.91% 6.30%
Lipper
Peer Group/3/ -3.78% 5.77% 5.39%
</TABLE>
2 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A B C R/5/
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
----------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
----------------------------------------------------------------------------
Exchange Fees None None None None
----------------------------------------------------------------------------
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
----------------------------------------------------------------------------
</TABLE>
Annual Fund Operating Expenses/11/
Paid From Fund Assets
<TABLE>
<CAPTION>
Share Class A B C R
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .55% .55% .55% .55%
--------------------------------------------------------------------------
12b-1 Distribution and Service Fees .20% .95% .75% --%
--------------------------------------------------------------------------
Other Expenses .38% .37% .38% .37%
==========================================================================
Total Annual Fund Operating
Expenses--Gross+ 1.13% 1.87% 1.68% .92%
</TABLE>
+After Expense Reimbursements
Net expenses reflect a voluntary expense limitation by the fund's investment
adviser that may be modified or discontinued without notice at the adviser's
discretion.
<TABLE>
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expense Reimbursements (.02%) (.02%) (.02%) (.02%)
-----------------------------------------------------------------------
Total Annual Fund Operating
Expenses--Net 1.11% 1.85% 1.66% .90%
-----------------------------------------------------------------------
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time period indicated and then either
redeem or do not redeem your shares at the end of a period. The example assumes
that your investment has a 5% return each year and that the fund's gross
operating expenses remain the same. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 530 $ 584 $ 171 $ 94 $ 530 $ 190 $ 171 $ 94
---------------------------------------------------------------------------
3 Years $ 764 $ 904 $ 530 $ 293 $ 764 $ 588 $ 530 $ 293
---------------------------------------------------------------------------
5 Years $1,016 $1,124 $ 913 $ 509 $1,016 $1,011 $ 913 $ 509
---------------------------------------------------------------------------
10 Years $1,737 $1,997 $1,987 $1,131 $1,737 $1,997 $1,987 $1,131
---------------------------------------------------------------------------
</TABLE>
How the Fund Is Invested (as of 5/31/00)
Portfolio Statistics
Average Effective Maturity 20.93 years
---------------------------------------------
Average Duration 9.23
---------------------------------------------
Weighted Average Credit Quality AA
---------------------------------------------
Number of Issues 62
---------------------------------------------
Credit Quality
AAA/U.S. Guaranteed 54%
---------------------------------------------
AA 17%
---------------------------------------------
A 8%
---------------------------------------------
BBB 17%
---------------------------------------------
NR 4%
---------------------------------------------
Sector Diversification (Top 5)
[PIE CHART APPEARS HERE]
Tax Obligation--Limited 14%
Housing--Multifamily 24%
Education and Civic Organizations 11%
Other 24%
Housing--Single Family 9%
Healthcare 18%
1. Class R total returns reflect actual performance for all periods; Class A, B
and C total returns reflect actual performance for periods since class
inception (see "Financial Highlights" for dates), and Class R performance for
periods prior to class inception, adjusted for the differences in fees
between the classes (see "What are the Costs of Investing?"). The Class R
year-to-date return on net asset value as of 6/30/00 was 3.97%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Maryland Municipal Debt Category. Returns assume reinvestment
of dividends and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced Class A sales charges apply to purchases of $50,000 or more. See
"How You Can Buy and Sell Shares."
7. As a percentage of the lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 3
<PAGE>
Nuveen Pennsylvania Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases
local, income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent rating agencies. The
fund may buy non-rated municipal bonds if the fund's investment adviser judges
them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate risk and credit
risk. Interest rate risk is the risk that interest rates will rise, causing bond
prices to fall. Credit risk is the risk that an issuer of a municipal bond will
be unable to make interest and principal payments. In general, lower rated bonds
carry greater credit risk. The fund may bear additional risk because it invests
primarily in Pennsylvania bonds. The fund is non-diversified, and may invest
more of its assets in a single issuer than a diversified fund. Greater
concentration may increase risk. As with any mutual fund investment, loss of
money is a risk of investing.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income; or
. Set aside money systematically for retirement, estate planning or college
funding.
You should not invest in this fund if you seek to:
. Pursue long-term growth;
. Invest through an IRA or 401(k) plan; or
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five- and
10-year periods ending December 31, 1999. This information is intended to help
you assess the variability of fund returns over the past ten years (and
consequently, the potential rewards and risks of a fund investment). Past
performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1990 5.1
1991 11.8
1992 9.8
1993 11.1
1994 -4.2
1995 15.3
1996 3.8
1997 10.0
1998 5.5
1999 -5.5
During the ten years ending December 31, 1999, the highest and lowest quarterly
returns were 5.63% and -4.45%, respectively for the quarters ending 3/31/95 and
3/31/94. The bar chart and highest/lowest quarterly returns do not reflect sales
charges, which would reduce returns, while the average annual return table does
include sales charges.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1999
------------------------------------
Class 1 Year 5 Year 10 Year
-----------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) -9.50% 4.67% 5.61%
Class B -9.78% 4.75% 5.60%
Class C -6.00% 5.00% 5.49%
Class R -5.21% 5.71% 6.13%
-----------------------------------------------------------
LB Market
Benchmark/2/ -2.06% 6.91% 6.89%
Lipper
Peer Group/3/ -3.98% 5.74% 6.30%
</TABLE>
4 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
Share Class A B C R/5/
--------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 4.20%/6/ None None None
--------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
--------------------------------------------------------------------------
Exchange Fees None None None None
--------------------------------------------------------------------------
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
--------------------------------------------------------------------------
Annual Fund Operating Expenses/11/
Paid From Fund Assets
<TABLE>
<CAPTION>
Share Class A B C R
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .55% .55% .55% .55%
-------------------------------------------------------------------
12b-1 Distribution and Service Fees .20% .95% .75% --%
-------------------------------------------------------------------
Other Expenses .37% .39% .36% .39%
-------------------------------------------------------------------
Total Annual Fund Operating
Expenses-Gross+ 1.12% 1.89% 1.66% .94%
</TABLE>
+ After Expense Reimbursements
Net expenses reflect a voluntary expense limitation by the fund's
investment adviser that may be modified or discontinued without
notice at the adviser's discretion.
<TABLE>
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expense Reimbursements (.03%) (.03%) (.03%) (.03%)
-----------------------------------------------------------------------
Total Annual Fund Operating
Expenses-Net 1.09% 1.86% 1.63% .91%
-----------------------------------------------------------------------
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time period indicated and then either
redeem or do not redeem your shares at the end of a period. The example assumes
that your investment has a 5% return each year and that the fund's gross
operating expenses remain the same. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 529 $ 586 $ 169 $ 96 $ 529 $ 192 $ 169 $ 96
----------------------------------------------------------------------------------------------------
3 Years $ 761 $ 910 $ 523 $ 300 $ 761 $ 594 $ 523 $ 300
----------------------------------------------------------------------------------------------------
5 Years $1,011 $1,134 $ 902 $ 520 $1,011 $1,021 $ 902 $ 520
----------------------------------------------------------------------------------------------------
10 Years $1,726 $2,011 $1,965 $1,155 $1,726 $2,011 $1,965 $1,155
----------------------------------------------------------------------------------------------------
</TABLE>
How the Fund Is Invested (as of 5/31/00)
Portfolio Statistics
Average Effective Maturity 20.63 years
--------------------------------------------------
Average Duration 9.47
--------------------------------------------------
Weighted Average Credit Quality A+
--------------------------------------------------
Number of Issues 87
--------------------------------------------------
Credit Quality
AAA/U.S. Guaranteed 43%
--------------------------------------------------
AA 9%
--------------------------------------------------
A 9%
--------------------------------------------------
BBB 33%
--------------------------------------------------
NR 4%
--------------------------------------------------
Other 2%
--------------------------------------------------
Sector Diversification (Top 5)
[PIE CHART APPEARS HERE]
Education and Civic Organizations 22%
Housing--Single Family 12%
U.S. Guaranteed 11%
Healthcare 13%
Other 34%
Long-Term Care 8%
1. Class A total returns reflect actual performance for all periods; Class B,
C and R total returns reflect actual performance for periods since class
inception (see "Financial Highlights" for dates), and Class A performance
for periods prior to class inception, adjusted for the differences in fees
between the classes (see "What are the Costs of Investing?"). The Class A
year-to-date return on net asset value as of 6/30/00 was 3.12%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanged index comprised of a board range of
investment-grade municipal bonds.
3. Peer Group returns reflect the performance of the Lipper Pennsylvania
Municipal Debt Index, a managed index that represents the average
annualized returns of the 30 largest funds in the Lipper Pennsylvania
Municipal Debt category. Returns assume reinvestment of dividends and do
not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced Class A sales charges apply to purchases of $50,000 or more. See
"How You Can Buy and Sell Shares."
7. As a percentage of the lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 5
<PAGE>
Nuveen Virginia Municipal Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide you with as high a level of
current interest income exempt from regular federal, state and, in some cases,
local income taxes as is consistent with preservation of capital.
How the Fund Pursues Its Objective
The fund purchases only quality municipal bonds that are rated investment grade
(AAA/Aaa to BBB/Baa) at the time of purchase by independent rating agencies.
The fund may buy non-rated municipal bonds if the fund's investment adviser
judges them to be investment grade.
The fund's investment adviser uses a value-oriented strategy and looks for
higher-yielding and undervalued municipal bonds that offer the potential for
above-average total return.
The fund seeks to limit risk by buying investment grade quality bonds in a
variety of industry sectors.
What are the Risks of Investing in the Fund?
The principal risks of investing in the fund are interest rate risk and credit
risk. Interest rate risk is the risk that interest rates will rise, causing
bond prices to fall. Credit risk is the risk that an issuer of a municipal bond
will be unable to make interest and principal payments. In general, lower rated
bonds carry greater credit risk. The fund may bear additional risk because it
invests primarily in Virginia bonds. The fund is non-diversified, and may
invest more of its assets in a single issuer than a diversified fund. Greater
concentration may increase risk. As with any mutual fund investment, loss of
money is a risk of investing.
Is This Fund Right For You?
The fund may be a suitable investment for you if you seek to:
. Earn regular monthly tax-free dividends;
. Preserve investment capital over time;
. Reduce taxes on investment income; or
. Set aside money systematically for retirement, estate planning or college
funding.
You should not invest in this fund if you seek to:
. Pursue long-term growth
. Invest through an IRA or 401(k) plan; or
. Avoid fluctuations in share price.
How the Fund Has Performed
The chart and table below illustrate annual fund returns for each of the past
ten years as well as annualized fund and index returns for the one-, five- and
ten-year periods ending December 31, 1999. This information is intended to help
you assess the variability of fund returns over the past ten years (and
consequently, the potential rewards and risks of a fund investment). Past
performance is not necessarily an indication of future performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1990 6.5
1991 11.8
1992 9.3
1993 12.4
1994 -5.5
1995 16.3
1996 4.0
1997 9.4
1998 6.1
1999 -4.2
During the ten years ending December 31, 1999, the highest and lowest quarterly
returns were 6.58% and -5.14%, respectively for the quarters ending 3/31/95 and
3/31/94. The bar chart and highest/lowest quarterly returns do not reflect sales
charges, which would reduce returns, while the average annual return table does
include sales charges.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1999
------------------------------------
Class 1 Year 5 Year 10 Year
-------------------------------------------------------------
<S> <C> <C> <C>
Class A (Offer) -8.23% 5.20% 5.94%
Class B -8.57% 5.22% 5.91%
Class C -4.71% 5.53% 5.80%
Class R -3.98% 6.22% 6.45%
-------------------------------------------------------------
LB Market
Benchmark/2/ -2.06% 6.91% 6.89%
Lipper
Peer Group/3/ -3.82% 6.17% 5.92%
</TABLE>
6 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/4/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A B C R/5/
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.20%/6/ None None None
-------------------------------------------------------------------------------
Maximum Sales Charge Imposed on
Reinvested Dividends None None None None
-------------------------------------------------------------------------------
Exchange Fees None None None None
-------------------------------------------------------------------------------
Deferred Sales Charge/7/ None/8/ 5%/9/ 1%/10/ None
-------------------------------------------------------------------------------
</TABLE>
Annual Fund Operating Expenses/11/
Paid From Fund Assets
<TABLE>
<CAPTION>
Share Class A B C R
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .54% .54% .54% .54%
-------------------------------------------------------------------------------
12b-1 Distribution and Service Fees .20% .95% .75% --%
-------------------------------------------------------------------------------
Other Expenses .26% .26% .26% .26%
-------------------------------------------------------------------------------
Total Annual Fund Operating Expenses--Gross+ 1.00% 1.75% 1.55% .80%
+After Expense Reimbursements
---------------------------------------------------------------------------
Expense Reimbursements (.01%) -- (.01%) (.01%)
---------------------------------------------------------------------------
Total Annual Fund Operating
Expenses--Net .99% 1.75% 1.54% .79%
---------------------------------------------------------------------------
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time period indicated and then either
redeem or do not redeem your shares at the end of a period. The example assumes
that your investment has a 5% return each year and that the fund's gross
operating expenses remain the same. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 518 $ 573 $ 158 $ 82 $ 518 $ 178 $ 158 $ 82
--------------------------------------------------------------------------------
3 Years $ 725 $ 868 $ 490 $255 $ 725 $ 551 $ 490 $255
--------------------------------------------------------------------------------
5 Years $ 949 $1,063 $ 845 $444 $ 949 $ 949 $ 845 $444
--------------------------------------------------------------------------------
10 Years $1,593 $1,864 $1,845 $990 $1,593 $1,864 $1,845 $990
--------------------------------------------------------------------------------
</TABLE>
How the Fund Is Invested (as of 5/31/00)
Portfolio Statistics
<TABLE>
<S> <C>
Average Effective Maturity 18.86 years
---------------------------------------------
Average Duration 8.30
---------------------------------------------
Weighted Average Credit Quality AA-
---------------------------------------------
Number of Issues 136
---------------------------------------------
</TABLE>
Credit Quality
<TABLE>
<S> <C>
AAA/U.S. Guaranteed 39%
---------------------------------------------
AA 23%
---------------------------------------------
A 18%
---------------------------------------------
BBB 13%
---------------------------------------------
NR 6%
---------------------------------------------
Other 1%
---------------------------------------------
</TABLE>
Sector Diversification (Top 5)
[PIE CHART APPEARS HERE]
Tax Obligation--Limited 12%
Water and Sewer 10%
U.S. Guaranteed 14%
Healthcare 9%
Education and Civic Organization 11%
Other 44%
1. Class A total returns reflect actual performance for all periods; Class B,
C and R total returns reflect actual performance for periods since class
inception (see "Financial Highlights" for dates), and Class A performance
for periods prior to class inception, adjusted for the differences in fees
between the classes (see "What are the Costs of Investing?"). The Class A
year-to-date return on net asset value as of 6/30/00 was 4.23%.
2. Market Benchmark returns reflect the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index comprised of a broad range of
investment-grade municipal bonds.
3. Peer Group returns represent the average annualized returns of the funds in
the Lipper Virginia Municipal Debt Category. Returns assume reinvestment of
dividends and do not reflect any applicable sales charges.
4. As a percent of offering price unless otherwise noted. Authorized dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
5. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
6. Reduced Class A sales charges apply to purchases of $50,000 or more. See
"How You Can Buy and Sell Shares."
7. As a percentage of the lesser of purchase price or redemption proceeds.
8. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
9. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3% during
the fourth, 2% during the fifth and 1% during the sixth year.
10. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
11. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
Section 1 The Funds 7
<PAGE>
Section 2 How We Manage Your Money
To help you understand how the funds' assets are managed, this section includes
a detailed discussion of the adviser's investment and risk management
strategies. For a more complete discussion of these matters, please consult the
Statement of Additional Information.
Who Manages the Funds
Nuveen Advisory Corp. ("Nuveen Advisory"), the funds' investment adviser,
together with its advisory affiliate, Nuveen Institutional Advisory Corp., offer
premier advisory and investment management services to a broad range of mutual
fund clients. In the Nuveen family, these advisers are commonly referred to as
Nuveen Investment Management or NIM. Nuveen Advisory is responsible for the
selection and on-going monitoring of the municipal bonds in the funds'
investment portfolio, managing the funds' business affairs and providing certain
clerical, bookkeeping and other administrative services. The NIM advisers are
located at 333 West Wacker Drive, Chicago, IL 60606.
The NIM advisers are wholly owned subsidiaries of Nuveen Investments ("Nuveen").
Founded in 1898, Nuveen has been synonymous with investments that withstand the
test of time. Today we provide managed assets and structured investment products
and services to help financial advisors serve the wealth management needs of
individuals and families. Nuveen manages or oversees $71 billion in assets.
Nuveen Advisory is responsible for execution of specific investment strategies
and day-to-day investment operations. Nuveen Advisory manages each fund using a
team of analysts and portfolio managers that focus on a specific group of funds.
Day-to-day operation of each fund and the execution of its specific investment
strategies is the responsibility of the designated portfolio manager described
below.
Paul Brennan has been the portfolio manager for the Maryland and Virginia Funds
since August 1999 and previously was a portfolio manager for Flagship Financial
(since 1991). Mr. Brennan has been a portfolio manager for Nuveen Advisory since
1997. Mr. Brennan is currently an Assistant Vice President of Nuveen Advisory.
He currently manages investments for fifteen Nuveen-sponsored investment
companies, including the Connecticut, New York, and New York Insured Funds.
Thomas J. O'Shaughnessy has been the portfolio manager for the Pennsylvania Fund
since July 1998. Mr. O'Shaughnessy has been a portfolio manager for Nuveen
Advisory since 1991 and an Assistant Vice President since 1998. He currently
manages investments for thirteen Nuveen-sponsored investment companies,
including the Florida, Georgia, Kentucky, North Carolina, and Tennessee Funds.
8 Section 2 How We Manage Your Money
<PAGE>
For the most recent fiscal year, the funds paid the following management fees to
Nuveen Advisory as a percentage of net assets:
Nuveen Maryland Municipal Bond Fund .54%
...................................................
Nuveen Pennsylvania Municipal Bond Fund .53%
...................................................
Nuveen Virginia Municipal Bond Fund .54%
...................................................
What Securities We Invest In
Each fund's investment objective may not be changed without shareholder
approval. The following investment policies may be changed by the Board of
Trustees without shareholder approval unless otherwise noted in this prospectus
or the Statement of Additional Information.
Municipal Bonds
The funds invest primarily in municipal bonds that pay interest that is exempt
from regular federal, state and, in some cases, local income tax. Income from
these bonds may be subject to the federal alternative minimum tax.
States, local governments and municipalities issue municipal bonds to raise
money for various public purposes such as building public facilities,
refinancing outstanding obligations and financing general operating expenses.
These bonds include general obligation bonds, which are backed by the full faith
and credit of the issuer and may be repaid from any revenue source, and revenue
bonds, which may be repaid only from the revenue of a specific facility or
source.
The funds may purchase municipal bonds that represent lease obligations. These
carry special risks because the issuer of the bonds may not be obligated to
appropriate money annually to make payments under the lease. In order to reduce
this risk, the funds will only purchase these bonds where the issuer has a
strong incentive to continue making appropriations until maturity.
The funds may invest in inverse floating rate securities, sometimes referred to
as "inverse floaters." Inverse floaters have variable interest rates that move
in the opposite direction from movements in prevailing short-term interest rate
levels -- rising when prevailing short-term interest rates fall, and vice versa.
In addition to paying fluctuating income levels, the prices of inverse floaters
can be more volatile than the prices of conventional fixed-rate bonds with
comparable maturities.
In evaluating municipal bonds of different credit qualities or maturities,
Nuveen Advisory takes into account the size of yield spreads. Yield spread is
the additional return the funds may earn by taking on additional credit risk or
interest rate risk. For example, yields on low quality bonds are higher than
yields on high quality bonds because investors must be compensated for incurring
the higher credit risk associated with low quality bonds. If yield spreads do
not provide adequate compensation for the additional risk associated with low
quality bonds, the funds will buy bonds of relatively higher quality. Similarly,
in evaluating bonds of different maturities, Nuveen Advisory evaluates the
comparative yield available on
Section 2 How We Manage Your Money 9
<PAGE>
these bonds. If yield spreads on long-term bonds do not compensate the funds
adequately for the additional interest rate risk the funds must assume, the
funds will buy bonds of relatively shorter maturity. In addition, municipal
bonds in a particular industry may provide higher yields relative to their risk
compared to bonds in other industries. If that occurs, a fund may buy relatively
more bonds from issuers in that industry. In that case, the fund's portfolio
composition would change from time to time.
Quality Municipal Bonds
The funds purchase only quality municipal bonds that are either rated investment
grade (AAA/Aaa to BBB/Baa) by independent rating agencies at the time of
purchase or are non-rated but judged to be investment grade by the funds'
investment adviser. If suitable municipal bonds from a specific state are not
available at attractive prices and yields, a fund may invest in municipal bonds
of U.S. territories (such as Puerto Rico and Guam) which are exempt from regular
federal, state and local income taxes.
Portfolio Maturity
Each fund buys municipal bonds with different maturities in pursuit of its
investment objective, but maintains under normal market conditions an investment
portfolio with an overall weighted average portfolio maturity of 15 to 30 years.
Short-Term Investments
Under normal market conditions, each fund may invest up to 20% of net assets in
short-term, high quality municipal bonds. See "How We Manage Risk -- Hedging and
Other Defensive Investment Strategies." The funds may invest in short-term, high
quality taxable securities if suitable short-term municipal bonds are not
available at reasonable prices and yields. If the funds invest in taxable
securities, they may not achieve their investment objective. For more
information on eligible short-term investments, see the Statement of Additional
Information.
Forwards and Delayed-Delivery Settlement
Each fund may enter into contracts to purchase securities for a specified price
at a future date later than the normal settlement date. If the delayed
settlement takes place less than 61 days after purchase, it is referred to as a
"delayed-delivery" transaction. Newly issued municipal bonds sold on a
"when-issued" basis represent a common form of delayed-delivery transaction. If
settlement takes place more than 60 days after purchase, the transaction is
called a "forward." These transactions involve an element of risk because the
value of the security to be purchased may decline before the settlement date.
Municipal "forwards" pay higher interest rates after settlement than standard
bonds, to compensate the buyer for bearing market risk but deferring income
during the settlement period, and can often be bought at attractive prices and
yields. If a fund knows that a portfolio bond will, or is likely to, be called
or mature on a specific future date, the fund may buy a forward settling on or
about that date to replace the called or maturing bond and "lock in" a currently
attractive interest rate.
10 Section 2 How We Manage Your Money
<PAGE>
How We Select Investments
Nuveen Advisory selects municipal bonds for the funds based upon its assessment
of a bond's relative value in terms of current yield, price, credit quality and
future prospects. Nuveen Advisory is supported by Nuveen's award-winning team of
specialized research analysts who review municipal securities available for
purchase, monitor the continued creditworthiness of each fund's municipal
investments, and analyze economic, political and demographic trends affecting
the municipal markets. We utilize these resources to identify municipal bonds
with favorable characteristics we believe are not yet recognized by the market.
We then select those higher-yielding and undervalued municipal bonds that we
believe represent the most attractive values.
Portfolio Turnover
Each fund buys and sells portfolio securities in the normal course of its
investment activities. The proportion of a fund's investment portfolio that is
sold and replaced with new securities during a year is known as the fund's
portfolio turnover rate. The funds intend to keep portfolio turnover relatively
low in order to reduce trading costs and the realization of taxable capital
gains. Each fund, however, may make limited short-term trades to take advantage
of market opportunities or reduce market risk.
What the Risks Are
Risk is inherent in all investing. Investing in a mutual fund -- even the most
conservative -- involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part or all of your
investment. Therefore, before investing you should consider carefully the
following risks that you assume when you invest in these funds. Because of these
and other risks, you should consider an investment in any of these funds to be a
long-term investment.
Credit risk: Each fund is subject to credit risk. Credit risk is the risk that
an issuer of a municipal bond will be unable to meet its obligation to make
interest and principal payments due to changing financial or market conditions.
Interest rate risk: Because the funds invest in fixed-income securities, the
funds are subject to interest rate risk. Interest rate risk is the risk that the
value of a fund's portfolio will decline because of rising interest rates.
Interest rate risk is generally lower for shorter-term investments and higher
for longer-term investments.
Income risk: The risk that the income from a fund's portfolio will decline
because of falling market interest rates. This can result when the fund invests
the proceeds from new share sales, or from matured or called bonds, at market
interest rates that are below the portfolio's current earnings rate. Also, if a
fund invests in inverse floating rate securities,
Section 2 How We Manage Your Money 11
<PAGE>
whose income payments vary inversely with changes in short-term market rates,
the fund's income may decrease if short-term interest rates rise.
State concentration risk: Because the funds primarily purchase municipal bonds
from a specific state, each fund also bears investment risk from economic,
political or regulatory changes that could adversely affect municipal bond
issuers in that state and therefore the value of the fund's investment
portfolio. See "Appendix -- Additional State Information." These risks may be
greater for the funds, because they are "non-diversified" funds which authorizes
them to concentrate their investments in municipal bonds of certain issuers to a
greater extent than diversified funds.
Inflation risk: The risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the value of each fund's assets can decline as can the
value of the fund's distributions.
How We Manage Risk
In pursuit of its investment objective, each fund assumes investment risk,
chiefly in the form of interest rate and credit risk. The funds limit this
investment risk generally by restricting the type and maturities of municipal
bonds they purchase, and by diversifying their investment portfolios
geographically within a state, as well as across different industry sectors.
Investment Limitations
The funds have adopted certain investment limitations (based on total assets)
that cannot be changed without shareholder approval and are designed to limit
your investment risk and maintain portfolio diversification. Each fund may not
have more than:
. 25% in any one industry such as electric utilities or health care.
. 10% in borrowings (33% if used to meet redemptions).
Hedging and Other Defensive Investment Strategies
Each fund may invest up to 100% in cash equivalents and short-term investments
as a temporary defensive measure in response to adverse market conditions, or
to keep cash on hand fully invested. During these periods, the weighted average
maturity of a fund's investment portfolio may fall below the defined range
described under "Portfolio Maturity."
Each fund may also use various investment strategies designed to limit the risk
of bond price fluctuations and to preserve capital. These hedging strategies
include using financial futures contracts, options on financial futures, or
options based on either an index of long-term tax-free securities or on debt
securities whose prices, in Nuveen Advisory's opinion, correlate with the prices
of the funds' investments. The funds, however, have no present intent to use
these strategies.
12 Section 2 How We Manage Your Money
<PAGE>
Section 3 How You Can Buy and Sell Shares
We offer four classes of fund shares, each with a different combination of sales
charges, fees, eligibility requirements and other features. Your financial
advisor can help you determine which class is best for you. We offer a number of
features for your convenience. Please see the Statement of Additional
Information for further details.
What Share Classes We Offer
Class A Shares
You can buy Class A shares at the offering price, which is the net asset value
per share plus an up-front sales charge. You may qualify for a reduced sales
charge, or the sales charge may be waived, as described in "How to Reduce Your
Sales Charge." Class A shares are also subject to an annual service fee of .20%
that compensates your financial advisor for providing on-going service to you.
Nuveen retains the up-front sales charge and the service fee on accounts with no
authorized dealer of record. The up-front Class A sales charge for all funds
described in the prospectus is as follows:
<TABLE>
<CAPTION>
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
<S> <C> <C> <C>
Less than $50,000 4.20% 4.38% 3.70%
.......................................................................................................
$50,000 but less than $100,000 4.00% 4.18% 3.50%
.......................................................................................................
$100,000 but less than $250,000 3.50% 3.63% 3.00%
.......................................................................................................
$250,000 but less than $500,000 2.50% 2.56% 2.00%
.......................................................................................................
$500,000 but less than $1,000,000 2.00% 2.04% 1.50%
.......................................................................................................
$1,000,000 and over --/1/ -- 1.00%/1/
.......................................................................................................
</TABLE>
1. You can buy $1 million or more of Class A shares at net asset value without
an up-front sales charge. Nuveen pays authorized dealers of record on these
share purchases a sales commission of 1.00% of the first $2.5 million, plus .50%
of the next $2.5 million, plus .25% of the amount over $5.0 million. If you
redeem your shares within 18 months of purchase, you may have to pay a
Contingent Deferred Sales Charge (CDSC) of 1% of either your purchase price or
your redemption proceeds, whichever is lower. You do not have to pay this CDSC
if your financial advisor has made arrangements with Nuveen and agrees to waive
the commission.
Class B Shares
You can buy Class B shares at the offering price, which is the net asset value
per share without any up-front sales charge so that the full amount of your
purchase is invested in the fund. However, you will pay annual distribution and
service fees of .95% of average daily assets. The annual .20% service fee
compensates your financial advisor for providing on-going service to you. Nuveen
retains the service fee on accounts with no authorized dealer of record. The
annual .75% distribution fee compensates Nuveen for paying your financial
advisor a 4% up-front sales commission, which includes an advance of the first
year's service fee. If you sell your shares within six years of purchase, you
will normally have to pay a CDSC based on either your purchase price or what you
sell your shares for, whichever amount is lower, according to the following
schedule. You do
Section 3 How You Can Buy and Sell Shares 13
<PAGE>
not pay a CDSC on any Class B shares you purchase by reinvesting dividends.
Class B shares automatically convert to Class A shares eight years after you buy
them so that the distribution fees you pay over the life of your investment are
limited. You will continue to pay an annual service fee on any converted Class B
shares.
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6 Over 6
CDSC 5% 4% 4% 3% 2% 1% None
Class C Shares
You can buy Class C shares at the offering price, which is the net asset value
per share without any up-front sales charge so that the full amount of your
purchase is invested in the fund. However, you will pay annual distribution and
service fees of .75% of average daily assets. The annual .20% service fee
compensates your financial advisor for providing on-going service to you. Nuveen
retains the service fee on accounts with no authorized dealer of record. The
annual .55% distribution fee reimburses Nuveen for paying your financial advisor
an on-going sales commission. Nuveen advances the first year's service and
distribution fees. If you sell your shares within 12 months of purchase, you
will normally have to pay a 1% CDSC based on your purchase or sale price,
whichever is lower. You do not pay a CDSC on any Class C shares you purchase by
reinvesting dividends.
Class R Shares
You may purchase Class R shares only under limited circumstances, at the net
asset value on the day of purchase. In order to qualify, you must be eligible
under one of the programs described in "How to Reduce Your Sales Charge" (below)
or meet certain other purchase size criteria. Class R shares are not subject to
sales charges or on-going service or distribution fees. Class R shares have
lower on-going expenses than the other classes.
How to Reduce Your Sales Charge
We offer a number of ways to reduce or eliminate the up-front sales charge on
Class A shares or to qualify to purchase Class R shares.
Class A Sales Charge Class A Sales Charge Class R Eligibility
Reductions Waivers
.Certain employees and
.Rights of accumulation .Nuveen Defined Portfolio directors of Nuveen or
or Exchange-Traded employees of authorized
.Letter of intent Fund reinvestment dealers
.Group purchase .Certain employees and .Bank trust departments
directors of Nuveen or
employees of authorized
dealers
.Bank trust departments
In addition, Class A shares at net asset value and Class R shares may be
purchased through registered investment advisors, certified financial planners
and registered broker-dealers who charge asset-based or
14 Section 3 How You Can Buy and Sell Shares
<PAGE>
comprehensive "wrap" fees for their services. Please refer to the Statement of
Additional Information for detailed program descriptions and eligibility
requirements. Additional information is available from your financial advisor or
by calling (800) 257-8787. Your financial advisor can also help you prepare any
necessary application forms. You or your financial advisor must notify Nuveen at
the time of each purchase if you are eligible for any of these programs. The
funds may modify or discontinue these programs at any time.
How to Buy Shares
Fund shares may be purchased on any business day, which is any day the New York
Stock Exchange is open for business and normally ends at 4 p.m. New York time.
Generally, the Exchange is closed on weekends and national holidays. The share
price you pay will depend on when Nuveen receives your order. Orders received
before the close of trading on a business day will receive that day's closing
share price, otherwise you will receive the next business day's price.
Through a Financial Advisor
You may buy shares through your financial advisor, who can handle all the
details for you, including opening a new account. Financial advisors can also
help you review your financial needs and formulate long-term investment goals
and objectives. In addition, financial advisors generally can help you develop a
customized financial plan, select investments and monitor and review your
portfolio on an ongoing basis to help assure your investments continue to meet
your needs as circumstances change. Financial advisors are paid for on-going
investment advice and services either from fund sales charges and fees or by
charging you a separate fee in lieu of a sales charge. If you do not have a
financial advisor, call (800) 257-8787 and Nuveen can refer you to one in your
area.
By Mail
You may open an account and buy shares by mail by completing the enclosed
application and mailing it along with your check to: Nuveen Investor Services,
P.O. Box 5186, Bowling Green Station, New York, NY 10274-5186. No third party
checks will be accepted.
Investment Minimums
The minimum initial investment is $3,000 ($50 through systematic investment plan
accounts) and may be lower for accounts opened through certain fee-based
programs. Subsequent investments must be in amounts of $50 or more. The funds
reserve the right to reject purchase orders and to waive or increase the minimum
investment requirements.
Systematic Investing
Systematic investing allows you to make regular investments through automatic
deductions from your bank account, directly from your paycheck or from
exchanging shares from another mutual fund account. The minimum automatic
deduction is $50 per month. There is no charge to participate in each fund's
systematic investment plan. You can stop the deductions at any time by notifying
your fund in writing. To do this,
Section 3 How You Can Buy and Sell Shares 15
<PAGE>
simply complete the appropriate section of the account application form or
submit an Account Update Form.
From Your Bank Account
You can make systematic investments of $50 or more per month by authorizing us
to draw preauthorized checks on your bank account.
From Your Paycheck
With your employer's consent, you can make systematic investments of $25 or more
per pay period (meeting the monthly minimum of $50) by authorizing your employer
to deduct monies from your paycheck.
Systematic Exchanging
You can make systematic investments by authorizing Nuveen to exchange shares
from one Nuveen mutual fund account into another identically registered Nuveen
account of the same share class.
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 4%, 5% or 6% annually on your
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
[GRAPH APPEAR HERE]
One of the benefits of systematic investing is dollar cost averaging. Because
you regularly invest a fixed amount of money over a period of years regardless
of the share price, you buy more shares when the price is low and fewer shares
when the price is high. As a result, the average share price you pay should be
less than the average share price of fund shares over the same period. To be
effective, dollar cost averaging requires that you invest over a long period of
time, and does not assure that you will profit.
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to receive
payments monthly, quarterly, semi-annually or annually, and may choose to
receive a check, have the monies transferred directly into your bank account
(see "Special Services--Fund Direct" below), paid to a third party or sent
payable to you at an address other than your
16 Section 3 How You Can Buy and Sell Shares
<PAGE>
address of record. You must complete the appropriate section of the account
application or Account Update Form to participate in each fund's systematic
withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent
purchases of Class A, B or C shares because you may unnecessarily pay a sales
charge or CDSC on these purchases.
Special Services
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered account at any time
for the same class of another Nuveen mutual fund available in your state. Your
exchange must meet the minimum purchase requirements of the fund into which you
are exchanging. You may have to pay a sales charge when exchanging shares that
you purchased without a sales charge for shares that are sold with a sales
charge. Please consult the Statement of Additional Information for details.
The exchange privilege is not intended to allow you to use a fund for short-term
trading. Because excessive exchanges may interfere with portfolio management,
raise fund operating expenses or otherwise have an adverse effect on other
shareholders, each fund reserves the right to revise or suspend the exchange
privilege, limit the amount or number of exchanges, or reject any exchange.
The funds may change or cancel their exchange policy at any time upon 60 days'
notice. Because an exchange is treated for tax purposes as a purchase and sale,
and any gain may be subject to tax, you should consult your tax advisor about
the tax consequences of exchanging your shares.
Fund Direct/SM/
The Fund Direct Program allows you to link your fund account to your bank
account, transfer money electronically between these accounts, and perform a
variety of account transactions, including purchasing shares by telephone and
investing through a systematic investment plan. You also may have dividends,
distributions, redemption payments or systematic withdrawal plan payments sent
directly to your bank account. Your financial advisor can help you complete the
forms for these services, or you can call Nuveen at (800) 257-8787 for copies of
the necessary forms.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your redemption
proceeds up to one year later without incurring any additional charges. You may
only reinvest into the same share class you redeemed. If you paid a CDSC, we
will refund your CDSC and reinstate your holding period. You may use this
reinstatement privilege only once for any redemption.
Section 3 How You Can Buy and Sell Shares 17
<PAGE>
How to Sell Shares
You may sell (redeem) your shares on any business day. You will receive the
share price next determined after Nuveen has received your properly completed
redemption request. Your redemption request must be received before the close of
trading for you to receive that day's price. If you are selling shares purchased
recently with a check, you will not receive your redemption proceeds until your
check has cleared. This may take up to ten business days from your purchase
date. While the funds do not charge a redemption fee, you may be assessed a
CDSC, if applicable. When you redeem Class A, Class B, or Class C shares subject
to a CDSC, each fund will first redeem any shares that are not subject to a
CDSC, and then redeem the shares you have owned for the longest period of time,
unless you ask the fund to redeem your shares in a different order. No CDSC is
imposed on shares you buy through the reinvestment of dividends and capital
gains. The holding period is calculated on a monthly basis and begins on the
first day of the month in which you buy shares. When you redeem shares subject
to a CDSC, the CDSC is calculated on the lower of your purchase price or
redemption proceeds, deducted from your redemption proceeds, and paid to
Nuveen. The CDSC may be waived under certain special circumstances as described
in the Statement of Additional Information.
Through Your Financial Advisor
You may sell your shares through your financial advisor who can prepare the
necessary documentation. Your financial advisor may charge for this.
By Telephone
If you have authorized telephone redemption privileges, you can redeem your
shares by calling (800) 257-8787. Telephone redemptions are not available if
you own shares in certificate form and may not exceed $50,000. Checks will only
be issued to you as the shareholder of record and mailed to your address of
record. If you have established Fund Direct privileges, you may have redemption
proceeds transferred electronically to your bank account. We will normally mail
your check the next business day.
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to
confirm the identity of callers it will not be liable for losses resulting from
following telephone instructions it reasonably believes to be genuine. Also you
should verify your trade confirmation immediately upon receipt.
By Mail
You can sell your shares at any time by sending a written request to the
appropriate fund, c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green
Station, New York, NY 10274-5186. Your request must include the following
information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person to whom you want your redemption proceeds paid (if
other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if other than the
address of record);
. Any certificates you have for the shares; and
. Any required signature guarantees.
18 Section 3 How You Can Buy and Sell Shares
<PAGE>
We will normally mail your check the next business day, but in no event more
than seven days after we receive your request. If you purchased your shares by
check, your redemption proceeds will not be mailed until your check has cleared.
Guaranteed signatures are required if you are redeeming more than $50,000, you
want the check payable to someone other than the shareholder of record or you
want the check sent to another address (or the address of record has been
changed within the last 60 days). Signature guarantees must be obtained from a
bank, brokerage firm or other financial intermediary that is a member of an
approved Medallion Guarantee Program or that a fund otherwise approves. A notary
public cannot provide a signature guarantee.
Redemptions In-Kind
The funds generally pay redemption proceeds in cash. Under unusual conditions
that make cash payment unwise and for the protection of existing shareholders,
the fund may pay all or a portion of your redemption proceeds in securities or
other fund assets. Although it is unlikely that your shares would be redeemed
in-kind, you would probably have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any capital gains from that sale.
An important Note About Involuntary Redemption
From time to time, the funds may establish minimum account size requirements.
The funds reserve the right to liquidate your account upon 30 days' written
notice if the value of your account falls below an established minimum. The
funds have set a minimum balance of $100 unless you have an active Nuveen
Defined Portfolio reinvestment account. You will not be assessed a CDSC on an
involuntary redemption.
Section 3 How You Can Buy and Sell Shares 19
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the funds, this
section includes important details about how the funds make distributions to
shareholders. We discuss some other fund policies, as well.
Dividends, Distributions and Taxes
The funds pay tax-free dividends monthly and any taxable capital gains or other
taxable distributions once a year in December. The funds declare dividends
monthly to shareholders of record as of the ninth of each month, usually payable
the first business day of the following month.
Payment and Reinvestment Options
The funds automatically reinvest your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than your address of record or reinvested in shares of another
Nuveen mutual fund. For further information, contact your financial advisor or
call Nuveen at (800) 257-8787.
Taxes and Tax Reporting
Because the funds invest primarily in municipal bonds from a particular state,
the regular monthly dividends you, as a taxpayer in that state, receive will be
exempt from regular federal and state income tax. All or a portion of these
dividends, however, may be subject to the federal alternative minimum tax (AMT).
Although the funds do not seek to realize taxable income or capital gains, the
funds may realize and distribute taxable income or capital gains from time to
time as a result of each fund's normal investment activities. Each fund will
distribute in December any taxable income or capital gains realized over the
preceding year. Net short-term capital gains are taxable at the same rate as
ordinary income. Net long-term capital gains are taxable as long-term capital
gains regardless of how long you have owned your investment. Taxable dividends
do not qualify for a dividends received deduction if you are a corporate
shareholder.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains, that you were paid during the prior year.
If you hold your investment at the firm where you purchased your fund shares,
you will receive the statement from that firm. If you hold your shares directly
with the fund, Nuveen will send you the statement. The tax status of your
dividends is not affected by whether you reinvest your dividends or elect to
receive them in cash.
If you receive social security or railroad retirement benefits, you should
consult your tax advisor about how an investment in a fund may affect the
taxation of your benefits.
20 Section 4 General Information
<PAGE>
Please note that if you do not furnish us with your correct Social Security
number or employer identification number, federal law requires the fund to
withhold federal income tax from your distributions and redemption proceeds,
currently at a rate of 31%.
Please consult the Statement of Additional Information and your tax advisor for
more information about taxes.
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable dividend is
commonly known as "buying the dividend." The entire dividend may be taxable to
you even though a portion of the dividend effectively represents a return of
your purchase price. Similarly, if you sell or exchange fund shares shortly
before the record date for a tax-exempt dividend, a portion of the price you
receive may be treated as a taxable capital gain even though it reflects tax-
free income a fund has earned but not yet distributed.
Taxable Equivalent Yields
The taxable equivalent yield is the current yield you would need to earn on a
taxable investment in order to equal a stated federal tax-free yield on a
municipal investment. To assist you to more easily compare municipal investments
like the funds with taxable alternative investments, the table below presents
the taxable equivalent yields for a range of hypothetical federal tax-free
yields and tax rates:
Taxable Equivalent Of Tax-Free Yields
To Equal a Tax-Free Yield of:
.............................................................
4.00% 4.50% 5.00% 5.50% 6.00%
Tax Bracket: A Taxable Investment Would Need to Yield:
.............................................................
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
.............................................................
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
.............................................................
36.0% 6.25% 7.03% 7.81% 8.59% 9.37%
.............................................................
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
.............................................................
The yields and tax rates shown above are hypothetical and do not predict your
actual returns or effective tax rate. For more detailed information, see the
Statement of Additional Information or consult your tax advisor.
Distribution and Service Plans
Nuveen serves as the selling agent and distributor of the funds' shares. In this
capacity, Nuveen manages the offering of the funds' shares and is responsible
for all sales and promotional activities. In order to reimburse Nuveen for its
costs in connection with these activities, including compensation paid to
authorized dealers, each fund has adopted a distribution and service plan under
Rule 12b-1 under the Investment Company Act of 1940. (See "How to Choose a Share
Class" for a description of the distribution and service fees paid under this
plan.)
Nuveen receives the distribution fee for Class B and Class C shares primarily
for providing compensation to authorized dealers, including Nuveen, in
connection with the distribution of shares. Nuveen uses the
Section 4 General Information 21
<PAGE>
service fee for Class A, Class B, and Class C shares to compensate authorized
dealers, including Nuveen, for providing on-going account services to
shareholders. These services may include establishing and maintaining
shareholder accounts, answering shareholder inquiries, and providing other
personal services to shareholders. These fees also compensate Nuveen for other
expenses, including printing and distributing prospectuses to persons other than
shareholders, and preparing, printing, and distributing advertising and sales
literature and reports to shareholders used in connection with the sale of
shares. Because these fees are paid out of the funds' assets on an on-going
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges.
Nuveen periodically undertakes sales promotion programs with authorized dealers
and may pay them the full applicable sales charge as a commission. In addition,
Nuveen may provide support at its own expense to authorized dealers in
connection with sales meetings, seminars, prospecting seminars and other events
at which Nuveen presents its products and services. Under certain circumstances,
Nuveen also will share with authorized dealers up to half the costs of
advertising that features the products and services of both parties. The
Statement of Additional Information contains further information about these
programs.
Net Asset Value
The price you pay for your shares is based on each fund's net asset value per
share which is determined as of the close of trading (normally 4:00 p.m. New
York time) on each day the New York Stock Exchange is open for business. Net
asset value is calculated for each class of each fund by taking the market value
of the class' total assets, including interest or dividends accrued but not yet
collected, less all liabilities, and dividing by the total number of shares
outstanding. The result, rounded to the nearest cent, is the net asset value per
share. All valuations are subject to review by the funds' Board of Trustees or
its delegate.
In determining net asset value, expenses are accrued and applied daily and
securities and other assets for which market quotations are available are valued
at market value. The prices of municipal bonds are provided by a pricing service
and based on the mean between the bid and asked price. When price quotes are not
readily available (which is usually the case for municipal securities), the
pricing service establishes fair market value based on prices of comparable
municipal bonds.
Fund Service Providers
The custodian of the assets of the funds is The Chase Manhattan Bank, 4 New York
Plaza, New York, NY 10004-2413. Chase also provides certain accounting services
to the funds. The funds' transfer, shareholder services and dividend paying
agent, Chase Global Funds Services Company, P.O. Box 5186, New York, NY 10274-
5186, performs bookkeeping, data processing and administrative services for the
maintenance of shareholder accounts.
22 Section 4 General Information
<PAGE>
Section 5 Financial Highlights
The financial highlights table is intended to help you understand a fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor would have earned on an investment in a fund
(assuming reinvestment of all dividends and distributions). This information has
been audited by Arthur Andersen LLP, whose report, along with the funds'
financial statements, are included in the SAI and annual report, which is
available upon request.
Nuveen Maryland Municipal Bond Fund
<TABLE>
<CAPTION>
Class
(Inception
Date)
Investment Operations Less Distributions
-------------------------------- ----------------------------
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net Asset Investment Investment Investment Capital Asset Total
May 31, Value Income Gain (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(c) 10.25 .16 .01 .17 (.17) -- (.17) 10.25 1.63
1997(d) 10.43 .46 (.15) .31 (.49) -- (.49) 10.25 3.06
1996(d) 9.60 .48 .85 1.33 (.50) -- (.50) 10.43 14.07
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(e) 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(c) 10.24 .15 -- .15 (.15) -- (.15) 10.24 1.43
1997(d) 10.42 .39 (.16) .23 (.41) -- (.41) 10.24 2.28
1996(d) 9.59 .41 .84 1.25 (.42) -- (.42) 10.42 13.24
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(c) 10.26 .17 -- .17 (.17) -- (.17) 10.26 1.68
1997(d) 10.44 .47 (.14) .33 (.51) -- (.51) 10.26 3.29
1996(d) 9.61 .51 .84 1.35 (.52) -- (.52) 10.44 14.33
-------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class
(Inception
Date)
Ratios/Supplemental Data
---------------------------------------------
Ratio of Net
Ratio of Investment
Ending Expenses Income
Year Net to Average to Average Portfolio
Ended Assets Net Net Turnover
May 31, (000) Assets(b) Assets(b) Rate
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (9/94)
2000 $22,694 1.12% 4.79% 19%
1999 22,093 .95 4.63 29
1998 17,427 .94 4.62 7
1997(c) 12,977 .95* 4.90* 3
1997(d) 11,788 1.00 4.79 4
1996(d) 6,860 1.00 4.74 17
Class B (3/97)
2000 4,694 1.87 4.04 19
1999 4,732 1.71 3.90 29
1998 2,332 1.69 3.85 7
1997(e) 150 1.70* 4.00* 3
Class C (9/94)
2000 5,290 1.68 4.25 19
1999 4,089 1.51 4.10 29
1998 2,606 1.49 4.07 7
1997(c) 2,103 1.50* 4.35* 3
1997(d) 1,985 1.75 4.05 4
1996(d) 1,438 1.75 4.04 17
Class R (12/91)
2000 38,840 .92 4.99 19
1999 44,411 .75 4.83 29
1998 44,599 .74 4.82 7
1997(c) 43,306 .75* 5.10* 3
1997(d) 43,738 .75 5.06 4
1996(d) 47,389 .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.
When custodian fee credits are applied, the Ratios of Expenses to Average
Net Assets for 2000 are 1.11%, 1.85%, 1.66% and .90% for classes A, B, C
and R respectively, and the Ratios of Net Investment Income to Average Net
Assets for 2000 are 4.81%, 4.05%, 4.27% and 5.00% for classes A, B, C and
R, respectively.
(c) For the four months ended May 31.
(d) For year ended January 31.
(e) From commencement of class operations as noted.
Section 5 Financial Highlights 23
<PAGE>
Nuveen Pennsylvania Municipal Bond Fund**
<TABLE>
<CAPTION>
Class
(Inception
Date)
Investment Operations Less Distributions
------------------------------------ -----------------------------
Net Realized
Year Beginning Net and Unrealized Net Ending
Ended Net Asset Investment Investment Investment Capital Net Asset
May 31, Value Income Gain (Loss) Total Income Gains Total Value
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (10/86)
2000 $10.45 $.50 $(1.03) $(.53) $(.51) $(.03) $(.54) $ 9.38
1999 10.68 .53 (.17) .36 (.53) (.06) (.59) 10.45
1998 10.25 .56 .45 1.01 (.56) (.02) (.58) 10.68
1997 10.00 .57 .25 .82 (.57) -- (.57) 10.25
1996 10.21 .59 (.20) .39 (.60) -- (.60) 10.00
Class B (2/97)
2000 10.47 .42 (1.03) (.61) (.43) (.03) (.46) 9.40
1999 10.70 .45 (.17) .28 (.45) (.06) (.51) 10.47
1998 10.27 .48 .45 .93 (.48) (.02) (.50) 10.70
1997(c) 10.21 .16 .06 .22 (.16) -- (.16) 10.27
Class C (2/94)
2000 10.44 .44 (1.03) (.59) (.45) (.03) (.48) 9.37
1999 10.68 .47 (.17) .30 (.48) (.06) (.54) 10.44
1998 10.25 .50 .45 .95 (.50) (.02) (.52) 10.68
1997 9.99 .51 .26 .77 (.51) -- (.51) 10.25
1996 10.21 .53 (.21) .32 (.54) -- (.54) 9.99
Class R (2/97)
2000 10.44 .51 (1.01) (.50) (.53) (.03) (.56) 9.38
1999 10.68 .55 (.17) .38 (.56) (.06) (.62) 10.44
1998 10.25 .58 .45 1.03 (.58) (.02) (.60) 10.68
1997(c) 10.21 .20 .03 .23 (.19) -- (.19) 10.25
---------------------------------------------------------------------------------------------------------
<CAPTION>
Class
(Inception
Date)
Ratios/Supplemental Data
-----------------------------------------------------------------
Ratio of Net
Ratio of Investment
Year Expenses to Income to Portfolio
Ended Total Ending Net Average Net Average Net Turnover
May 31, Return(a) Assets (000) Assets(b) Assets(b) Rate
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (10/86)
2000 (5.21)% $55,564 1.10% 5.06% 16%
1999 3.42 70,865 .69 5.00 18
1998 10.05 65,826 .61 5.28 20
1997 8.37 55,667 .70 5.61 46
1996 3.83 44,392 .79 5.76 65
Class B (2/97)
2000 (5.91) 7,809 1.87 4.32 16
1999 2.66 7,966 1.45 4.25 18
1998 9.23 2,640 1.34 4.50 20
1997(c) 2.18 229 1.35* 4.84* 46
Class C (2/94)
2000 (5.73) 9,672 1.64 4.52 16
1999 2.80 13,167 1.25 4.45 18
1998 9.50 8,912 1.16 4.73 20
1997 7.88 6,320 1.25 5.06 46
1996 3.16 4,442 1.68 4.85 65
Class R (2/97)
2000 (4.93) 51,788 .91 5.26 16
1999 3.55 61,044 .49 5.20 18
1998 10.30 61,180 .41 5.48 20
1997(c) 2.31 57,383 .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.
When custodian fee credits are applied, the Ratios of Expenses to Average
Net Assets for 2000 are 1.09%, 1.86%, 1.63% and .91% for classes A, B, C
and R, respectively, and the Ratios of Net Investment Income to Average Net
Assets for 2000 are 5.07%, 4.32%, 4.52% and 5.27% for classes A, B, C and
R, respectively.
(c) From commencement of class operations as noted.
24 Section 5 Financial Highlights
<PAGE>
Nuveen Virginia Municipal Bond Fund**
<TABLE>
<CAPTION>
Class
(Inception
Date)
Investment Operations Less Distributions
------------------------------------ -----------------------------
Net Realized
Year Beginning Net and Unrealized Net Ending
Ended Net Asset Investment Investment Investment Capital Net Asset
May 31, Value Income Gain (Loss) Total Income Gains Total Value
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (3/86)
2000 $ 10.93 $.53 $(.83) $(.30) $(.52) $(.01) $(.53) $10.10
1999 11.06 .53 (.10) .43 (.53) (.03) (.56) 10.93
1998 10.66 .56 .41 .97 (.56) (.01) (.57) 11.06
1997 10.40 .58 .25 .83 (.57) -- (.57) 10.66
1996 10.56 .57 (.15) .42 (.58) -- (.58) 10.40
Class B (2/97)
2000 10.93 .45 (.82) (.37) (.45) (.01) (.46) 10.10
1999 11.06 .45 (.10) .35 (.45) (.03) (.48) 10.93
1998 10.66 .48 .41 .89 (.48) (.01) (.49) 11.06
1997(c) 10.62 .16 .04 .20 (.16) -- (.16) 10.66
Class C (10/93)
2000 10.92 .47 (.81) (.34) (.47) (.01) (.48) 10.10
1999 11.06 .47 (.11) .36 (.47) (.03) (.50) 10.92
1998 10.65 .50 .42 .92 (.50) (.01) (.51) 11.06
1997 10.39 .52 .26 .78 (.52) -- (.52) 10.65
1996 10.56 .51 (.16) .35 (.52) -- (.52) 10.39
Class R (2/97)
2000 10.93 .55 (.82) (.27) (.55) (.01) (.56) 10.10
1999 11.06 .56 (.10) .46 (.56) (.03) (.59) 10.93
1998 10.66 .59 .41 1.00 (.59) (.01) (.60) 11.06
1997(c) 10.62 .20 .04 .24 (.20) -- (.20) 10.66
---------------------------------------------------------------------------------------------------------
<CAPTION>
Class
(Inception
Date)
Ratios/Supplemental Data
----------------------------------------------------------------
Ratio of Net
Ratio of Investment
Year Expenses to Income to Portfolio
Ended Total Ending Net Average Net Average Net Turnover
May 31, Return(a) Assets (000) Assets(b) Assets(b) Rate
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (3/86)
2000 (2.72)% $125,522 1.00% 5.07% 22%
1999 3.95 138,941 .86 4.81 15
1998 9.30 133,966 .74 5.15 3
1997 8.20 122,252 .74 5.45 23
1996 4.03 117,677 .83 5.41 17
Class B (2/97)
2000 (3.44) 10,713 1.75 4.32 22
1999 3.20 10,419 1.61 4.05 15
1998 8.53 3,894 1.51 4.33 3
1997(c) 1.94 381 1.47* 4.68* 23
Class C (10/93)
2000 (3.16) 14,263 1.55 4.53 22
1999 3.30 17,679 1.41 4.26 15
1998 8.81 15,660 1.29 4.59 3
1997 7.61 11,700 1.29 4.89 23
1996 3.37 10,978 1.38 4.84 17
Class R (2/97)
2000 (2.49) 50,403 .80 5.27 22
1999 4.18 56,728 .66 5.01 15
1998 9.54 58,734 .54 5.35 3
1997(c) 2.26 57,002 .52* 5.69* 23
---------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Virginia.
(a) 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.
When custodian fee credits are applied, the Ratios of Expenses to Average
Net Assets for 2000 are .99%, 1.75%, 1.54% and .79% for classes A, B, C and
R, respectively, and the Ratios of Net Investment Income to Average Net
Assets for 2000 are 5.08%, 4.33%, 4.53% and 5.28% for classes A, B, C and
R, respectively.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 25
<PAGE>
Appendix Additional State Information
Because the funds primarily purchase municipal bonds from a specific state, each
fund also bears investment risks from economic, political or regulatory changes
that could adversely affect municipal bond issuers in that state and therefore
the value of the fund's investment portfolio. The following discussion of
special state considerations was obtained from official offering statements of
these issuers and has not been independently verified by the funds. The
discussion includes general state tax information related to an investment in
each fund's shares. Because tax laws are complex and often change, you should
consult your tax advisor about the state tax consequences of a specific fund
investment. See the Statement of Additional Information for further information.
Maryland
Maryland has benefited from the expansion in the national economy. The State's
once sluggish economy has shown improvement. Services, wholesale and retail
trade, and government account for most of the State's employment. Unlike in most
states, government employment surpasses manufacturing employment in Maryland. In
addition, high technology, especially in the medical and biomedical research
sectors, continues to play an important role in the State's economy.
The State's unemployment rate fell to 3.2% in July 2000 from 3.9% in July 1999,
and remains well below the national average of 4.0% in July 2000. Per capita
income, which was $32,166 in 1999, continues to exceed national averages and
Maryland remains one of the wealthiest states in the nation.
During its spring 1998 term, the Maryland legislature voted to accelerate the
income tax reduction it passed in 1997; as a result, income taxes were reduced
by 5% in 1998, more than the 2% reduction originally planned for 1998. Tax
reductions continued during 1999, which led to approximately $292 million in tax
savings for State residents.
Maryland's general obligation debt, which is constitutionally limited to a
maximum term of 15 years, carried triple-A ratings from Moody's, Standard &
Poor's, and Fitch as of August 31, 2000. These ratings reflect the State's
credit quality only, and do not indicate the creditworthiness of other tax-
exempt securities in which the fund may invest.
Tax Treatment
The fund's regular monthly dividends will not be subject to Maryland personal
income taxes to the extent they are paid out of income earned on Maryland
municipal bonds or U.S. government securities. You will be subject to Maryland
personal income tax, however, to the extent the fund distributes any taxable
income, or if you sell or exchange fund shares and realize a capital gain on the
transaction.
26 Appendix
<PAGE>
The treatment of corporate shareholders who pay Maryland corporate income tax is
similar to that described above. Corporate shareholders should refer to the
Statement of Additional Information for more detailed state tax information.
Pennsylvania
Pennsylvania's economy has improved, but growth rates remain below national
averages. Continued losses in the manufacturing and healthcare sectors and
sluggish population and labor force growth have contributed to the below average
indicators. Although growth has been slow, the Commonwealth's economy remains
diverse.
Pennsylvania's unemployment rate was 4.0% in July 2000, which mirrored the
national average for July 2000 and was lower than the Commonwealth's 4.3% rate
in July 1999. Pennsylvania's 1999 per capita income was $28,676, which is
slightly above the national average.
As of August 31, 2000, Pennsylvania's general obligation debt carried ratings of
AA by Standard & Poor's, Aa3 by Moody's, and AA by Fitch. These ratings reflect
the Commonwealth's credit quality only, and do not indicate the creditworthiness
of other tax-exempt securities in which the fund may invest.
Tax Treatment
The fund's regular monthly dividends will not be subject to the Pennsylvania
personal income tax (and, for Philadelphia residents, the Philadelphia School
District income tax) to the extent those dividends result from interest earned
on Pennsylvania municipal bonds or U.S. government securities. You could be
subject to Pennsylvania personal income tax (and, for Philadelphia residents,
the Philadelphia School District income tax), however, to the extent the fund
distributes any taxable income or realized capital gains, or if you sell or
exchange fund shares and realize a capital gain on the transaction.
The treatment of corporate shareholders who pay Pennsylvania corporate income
tax is similar to that described above. Corporate shareholders should refer to
the Statement of Additional Information for more detailed state tax information.
Virginia
Like the U.S. economy, the Virginia economy is broad-based and comprised of
several distinct regions. The Commonwealth's economy nearly mirrors the U.S.
economy with the services, trade, government, and manufacturing sectors
supplying a significant portion of employment. Recent employment losses in the
federal government, manufacturing, and mining sectors have been offset by
employment growth in other sectors, including high technology. The federal
government remains an important employer and has a greater impact on the
Commonwealth than it has on most other states.
Virginia's unemployment rate was a low 2.5% in July 2000, well below the
national average of 4.0% and down slightly from the Commonwealth's July 1999
rate of 2.7%. Virginia's 1999 per capita income was $29,484, which is above the
national average.
Appendix 27
<PAGE>
As of August 31, 2000, Moody's, Standard & Poor's, and Fitch each rated the
Commonwealth AAA. These ratings reflect the Commonwealth's credit quality only,
and do not indicate the creditworthiness of other tax-exempt securities in which
the fund may invest.
Tax Treatment
The fund's regular monthly dividends will not be subject to Virginia personal
income taxes to the extent they are paid out of income earned on Virginia
municipal bonds or U.S. government securities. You will be subject to Virginia
personal income tax, however, to the extent the fund distributes any taxable
income, or if you sell or exchange fund shares and realize a capital gain on the
transaction.
The treatment of corporate shareholders who pay Virginia corporate income tax is
similar to that described above. Corporate shareholders should refer to the
Statement of Additional Information for more detailed state tax information.
28 Appendix
<PAGE>
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
Growth
International Growth Fund
Innovation Fund
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Income
Income Fund
Floating Rate Fund/1/
Tax-Free Income
National Municipal Bond Funds
High Yield
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
Arizona
California/2/
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts/2/
Michigan
Missouri
New Jersey
New Mexico
New York/2/
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
Several additional sources of information are available to you. The Statement of
Additional Information (SAI), incorporated by reference into this prospectus,
contains detailed information on fund policies and operation. Additional
information about the funds' investments is available in the funds' annual and
semi-annual report to shareholders. In the funds' annual reports, you will find
a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
Call Nuveen at (800) 257-8787 to request a free copy of any of these materials
or other fund information, or ask your financial advisor for copies.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission (SEC). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at (800) SEC-0330
for room hours and operation. You may also request fund information by writing
to the SEC's Public Reference Section, Washington, D.C. 20549.
The funds' Investment Company file number is 811-07747.
1. This is a continuously-offered closed-end interval fund. As such, redemptions
are only available during quarterly repurchase periods. See Fund prospectus
for additional information.
2. Long-term and insured long-term portfolios.
NUVEEN
Investments
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
<PAGE>
September 28, 2000
NUVEEN MULTISTATE TRUST I
Nuveen Arizona Municipal Bond Fund
Nuveen Colorado Municipal Bond Fund
Nuveen Florida Municipal Bond Fund
Nuveen Maryland Municipal Bond Fund
Nuveen New Mexico Municipal Bond Fund
Nuveen Pennsylvania Municipal Bond Fund
Nuveen Virginia Municipal Bond Fund
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus. This Statement
of Additional Information should be read in conjunction with the Prospectuses
of Nuveen Multistate Trust I dated September 28, 2000. The Prospectuses may be
obtained without charge from certain securities representatives, banks, and
other financial institutions that have entered into sales agreements with
Nuveen Investments, or from the Funds, by mailing a written request to the
Funds, c/o Nuveen Investments, 333 West Wacker Drive, Chicago, Illinois 60606
or by calling (800) 257-8787.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Policies and Investment Portfolio............................... S-2
Management................................................................. S-13
Investment Adviser and Investment Management Agreement..................... S-24
Portfolio Transactions..................................................... S-25
Net Asset Value............................................................ S-26
Tax Matters................................................................ S-26
Performance Information.................................................... S-35
Additional Information on the Purchase and Redemption of Fund Shares....... S-44
Distribution and Service Plan.............................................. S-53
Independent Public Accountants and Custodian............................... S-55
Financial Statements....................................................... S-55
Appendix A--Ratings of Investments......................................... A-1
Appendix B--Description of Hedging Techniques.............................. B-1
</TABLE>
The audited financial statements for each Fund's most recent fiscal year
appear in the Fund's Annual Report; each is included herein by reference.
<PAGE>
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
Investment Policies
The investment objective and certain fundamental investment policies of each
Fund are described in the Prospectus. Each Fund, as a fundamental policy, may
not, without the approval of the holders of a majority of the shares of that
Fund:
(1) Invest in securities other than Municipal Obligations and short-term
securities, as described in the Prospectus. Municipal Obligations are
municipal bonds that pay interest that is exempt from regular federal,
state and, in some cases, local income taxes.
(2) Invest more than 5% of its total assets in securities of any one
issuer, except this limitation shall not apply to securities of the United
States Government, and to the investment of 25% of such Fund's assets. This
limitation shall apply only to the Arizona Municipal Bond Fund and the
Florida Municipal Bond Fund.
(3) Borrow money, except from banks for temporary or emergency purposes
and not for investment purposes and then only in an amount not exceeding
(a) 10% of the value of its total assets at the time of borrowing or (b)
one-third of the value of the Fund's total assets including the amount
borrowed, in order to meet redemption requests which might otherwise
require the untimely disposition of securities. While any such borrowings
exceed 5% of such Fund's total assets, no additional purchases of
investment securities will be made by such Fund. If due to market
fluctuations or other reasons, the value of the Fund's assets falls below
300% of its borrowings, the Fund will reduce its borrowings within 3
business days. To do this, the Fund may have to sell a portion of its
investments at a time when it may be disadvantageous to do so.
(4) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (2) above, it may pledge securities
having a market value at the time of pledge not exceeding 10% of the value
of the Fund's total assets.
(5) Issue senior securities as defined in the Investment Company Act of
1940, except to the extent such issuance might be involved with respect to
borrowings described under item (3) above or with respect to transactions
involving futures contracts or the writing of options within the limits
described in the Prospectus and this Statement of Additional Information.
(6) Underwrite any issue of securities, except to the extent that the
purchase or sale of Municipal Obligations in accordance with its investment
objective, policies and limitations, may be deemed to be an underwriting.
(7) Purchase or sell real estate, but this shall not prevent any Fund
from investing in Municipal Obligations secured by real estate or interests
therein or foreclosing upon and selling such security.
(8) Purchase or sell commodities or commodities contracts or oil, gas or
other mineral exploration or development programs, except for transactions
involving futures contracts within the limits described in the Prospectus
and this Statement of Additional Information.
(9) Make loans, other than by entering into repurchase agreements and
through the purchase of Municipal Obligations or temporary investments in
accordance with its investment objective, policies and limitations.
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(10) Make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance of
transactions.
(11) Write or purchase put or call options, except to the extent that the
purchase of a stand-by commitment may be considered the purchase of a put,
and except for transactions involving options within the limits described
in the Prospectus and this Statement of Additional Information.
(12) Invest more than 25% of its total assets in securities of issuers in
any one industry; provided, however, that such limitations shall not be
applicable to Municipal Obligations issued by governments or political
subdivisions of governments, and obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
(13) Purchase or retain the securities of any issuer other than the
securities of the Fund if, to the Fund's knowledge, those trustees of the
Trust, or those officers and directors of Nuveen Advisory Corp. ("Nuveen
Advisory"), who individually own beneficially more than 1/2 of 1% of the
outstanding securities of such issuer, together own beneficially more than
5% of such outstanding securities.
In addition, each Fund, as a non-fundamental policy, may not invest more than
15% of its net assets in "illiquid" securities, including repurchase agreements
maturing in more than seven days.
For the purpose of applying the limitations set forth in paragraph (2) above,
an issuer shall be deemed the sole issuer of a security when its assets and
revenues are separate from other governmental entities and its securities are
backed only by its assets and revenues. Similarly, in the case of a non-
governmental user, such as an industrial corporation or a privately owned or
operated hospital, if the security is backed only by the assets and revenues of
the non-governmental user, then such non-governmental user would be deemed to
be the sole issuer. Where a security is also backed by the enforceable
obligation of a superior or unrelated governmental entity or other entity
(other than a bond insurer), it shall also be included in the computation of
securities owned that are issued by such governmental or other entity.
Where a security is guaranteed by a governmental entity or some other
facility, such as a bank guarantee or letter of credit, such a guarantee or
letter of credit would be considered a separate security and would be treated
as an issue of such government, other entity or bank. Where a security is
insured by bond insurance, it shall not be considered a security issued or
guaranteed by the insurer; instead the issuer of such security will be
determined in accordance with the principles set forth above. The foregoing
restrictions do not limit the percentage of the Fund's assets that may be
invested in securities insured by any single insurer.
The foregoing restrictions and limitations, as well as a Fund's policies as
to ratings of portfolio investments, will apply only at the time of purchase of
securities, and the percentage limitations will not be considered violated
unless an excess or deficiency occurs or exists immediately after and as a
result of an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment
objective of each Fund, cannot be changed without approval by holders of a
"majority of the Fund's outstanding voting shares." As defined in the
Investment Company Act of 1940, this means the vote of (i) 67% or more of the
Fund's shares present at a meeting, if the holders of more than 50% of the
Fund's shares are present or represented by proxy, or (ii) more than 50% of the
Fund's shares, whichever is less.
The Nuveen Multistate Trust I (formerly Nuveen Flagship Multistate Trust I)
(the "Trust") is an open-end management series investment company organized as
a Massachusetts business trust on July 1, 1996. Each Fund is an open-end
management investment company organized as a series of the Trust. The Trust is
an open-end management series company under SEC Rule 18f-2. Each Fund is a
separate series issuing its own shares. The Trust currently has seven series:
Nuveen Arizona Municipal Bond Fund (formerly Nuveen Flagship Arizona
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Municipal Bond Fund and prior to that, Flagship Arizona Double Tax Exempt Fund,
a series of the Flagship Tax Exempt Funds Trust); the Nuveen Colorado Municipal
Bond Fund (formerly Nuveen Flagship Colorado Municipal Bond Fund and prior to
that, Flagship Colorado Double Tax Exempt Fund, a series of the Flagship Tax
Exempt Funds Trust); the Nuveen Florida Municipal Bond Fund (formerly Nuveen
Flagship Florida Municipal Bond Fund and prior to that, Flagship Florida Double
Tax Exempt Fund, a series of the Flagship Tax Exempt Funds Trust); the Nuveen
Maryland Municipal Bond Fund (formerly Nuveen Maryland Tax-Free Value Fund, a
series of the Nuveen Multistate Tax-Free Trust); the Nuveen New Mexico
Municipal Bond Fund (formerly Nuveen Flagship New Mexico Municipal Bond Fund
and prior to that, the Flagship New Mexico Double Tax Exempt Fund, a series of
the Flagship Tax Exempt Funds Trust); the Nuveen Pennsylvania Municipal Bond
Fund (formerly Nuveen Flagship Pennsylvania Municipal Bond Fund and prior to
that, Flagship Pennsylvania Triple Tax Exempt Fund, a series of the Flagship
Tax Exempt Funds Trust); and the Nuveen Virginia Municipal Bond Fund (formerly
Nuveen Flagship Virginia Municipal Bond Fund and prior to that, Flagship
Virginia Double Tax Exempt Fund, a series of the Flagship Tax Exempt Funds
Trust). Certain matters under the Investment Company Act of 1940 which must be
submitted to a vote of the holders of the outstanding voting securities of a
series company shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding voting securities of
each Fund affected by such matter.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of a trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Trust and requires that
notice of this disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the Trustees. The Declaration of Trust
further provides for indemnification out of the assets and property of the
Trust for all loss and expense of any shareholder personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself were unable to meet its
obligations. The Trust believes the likelihood of these circumstances is
remote.
Portfolio Securities
As described in the Prospectus, each Fund invests substantially all of its
assets (at least 80%) in a portfolio of Municipal Obligations free from regular
federal, state and, in some cases, local income tax in each Fund's respective
state, which generally will be Municipal Obligations issued within the Fund's
respective state. In general, Municipal Obligations include debt obligations
issued by states, cities and local authorities to obtain funds for various
public purposes, including construction of a wide range of public facilities
such as airports, bridges, highways, hospitals, housing, mass transportation,
schools, streets and water and sewer works. Industrial development bonds and
pollution control bonds that are issued by or on behalf of public authorities
to finance various privately-rated facilities are included within the term
Municipal Obligations if the interest paid thereon is exempt from federal
income tax.
The investment assets of each Fund will consist of (1) Municipal Obligations
which are rated at the time of purchase within the four highest grades (Baa or
BBB or better) by Moody's Investors Service, Inc. ("Moody's"), by Standard and
Poor's Corporation ("S&P") or by Fitch, Inc. ("Fitch"), (2) unrated Municipal
Obligations which, in the opinion of Nuveen Advisory, have credit
characteristics equivalent to bonds rated within the four highest grades by
Moody's, S&P or Fitch, and (3) temporary investments as described below, the
income from which may be subject to state income tax or to both federal and
state income taxes. See Appendix A for more information about ratings by
Moody's, S&P, and Fitch.
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As described in the Prospectus, each Fund may invest in Municipal Obligations
that constitute participations in a lease obligation or installment purchase
contract obligation (hereafter collectively called "lease obligations") of a
municipal authority or entity. Although lease obligations do not constitute
general obligations of the municipality for which the municipality's taxing
power is pledged, a lease obligation is ordinarily backed by the municipality's
covenant to budget for, appropriate and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Although nonappropriation lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. A Fund will seek to minimize the special
risks associated with such securities by only investing in those
nonappropriation leases where Nuveen Advisory has determined that the issuer
has a strong incentive to continue making appropriations and timely payment
until the security's maturity. Some lease obligations may be illiquid under
certain circumstances. Lease obligations normally provide a premium interest
rate which along with regular amortization of the principal may make them
attractive for a portion of the assets of the Funds.
Obligations of issuers of Municipal Obligations are subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
the laws enacted in the future by Congress, state legislatures or referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation or other
conditions, the power or ability of any issuer to pay, when due, the principal
of and interest on its Municipal Obligations may be materially affected.
Investments in Inverse Floating Rate Securities
The Funds may invest in inverse floating rate municipal securities or
"inverse floaters", whose rates vary inversely to interest rates on a specified
index or on another instrument. Such securities involve special risks as
compared to conventional fixed-rate bonds. Should short-term interest rates
rise, a fund's investment in inverse floaters likely would adversely affect the
fund's earnings and distributions to shareholders. Also, because changes in the
interest rate on the other security or index inversely affect the rate of
interest received on an inverse floater, and because inverse floaters
essentially represent a leveraged investment in a long-term bond, the value of
an inverse floater is generally more volatile than that of a conventional
fixed-rate bond having similar credit quality, redemption provisions, and
maturity. Although volatile in value, inverse floaters typically offer the
potential for yields substantially exceeding the yields available on fixed-rate
bonds with comparable credit quality, coupon, call provisions and maturity. The
markets for such securities may be less developed and have less liquidity than
the markets for conventional securities. Each Fund, as a non-fundamental policy
that may be changed by the Board of Trustees, will not invest more than 15% of
its total assets in inverse floaters.
Portfolio Trading and Turnover
The Funds will make changes in their investment portfolio from time to time
in order to take advantage of opportunities in the municipal market and to
limit exposure to market risk. The Funds may also engage to a limited extent in
short-term trading consistent with their investment objective. Securities may
be sold in anticipation of market decline or purchased in anticipation of
market rise and later sold. In addition, a security may be sold and another of
comparable quality purchased at approximately the same time to take advantage
of what Nuveen Advisory believes to be a temporary disparity in the normal
yield relationship between the two securities. Each Fund may make changes in
its investment portfolio in order to limit its exposure to changing market
conditions. Changes in a Fund's investments are known as "portfolio turnover."
While it is impossible to predict future portfolio turnover rates, the annual
portfolio turnover rate for each Fund is generally not expected to exceed 75%.
However, each Fund reserves the right to make changes in its investments
whenever it
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deems such action advisable and, therefore, a Fund's annual portfolio turnover
rate may exceed 75% in particular years depending upon market conditions.
The portfolio turnover rates for the 1999 and 2000 fiscal years were:
<TABLE>
<CAPTION>
Fiscal
Year
1999 2000
---- ----
<S> <C> <C>
Nuveen Arizona Municipal Bond Fund ............................. 16% 41%
Nuveen Colorado Municipal Bond Fund ............................ 23% 54%
Nuveen Florida Municipal Bond Fund ............................. 19% 18%
Nuveen Maryland Municipal Bond Fund ............................ 29% 19%
Nuveen New Mexico Municipal Bond Fund .......................... 14% 24%
Nuveen Pennsylvania Municipal Bond Fund ........................ 18% 16%
Nuveen Virginia Municipal Bond Fund ............................ 15% 22%
</TABLE>
When-Issued Securities or Delayed-Delivery Securities
Each Fund may purchase and sell Municipal Obligations on a when-issued or
delayed-delivery basis. When-issued and delayed-delivery transactions arise
when securities are purchased or sold with payment and delivery beyond the
regular settlement date. (When-issued transactions normally settle within 15-45
days.) On such transactions the payment obligation and the interest rate are
fixed at the time the buyer enters into the commitment. The commitment to
purchase securities on a when-issued or delayed-delivery basis may involve an
element of risk because the value of the securities is subject to market
fluctuation, no interest accrues to the purchaser prior to settlement of the
transaction, and at the time of delivery the market value may be less than
cost. At the time a Fund makes the commitment to purchase a Municipal
Obligation on a when-issued or delayed-delivery basis, it will record the
transaction and reflect the amount due and the value of the security in
determining its net asset value. Likewise, at the time a Fund makes the
commitment to sell a Municipal Obligation on a delayed-delivery basis, it will
record the transaction and include the proceeds to be received in determining
its net asset value; accordingly, any fluctuations in the value of the
Municipal Obligation sold pursuant to a delayed-delivery commitment are ignored
in calculating net asset value so long as the commitment remains in effect. The
Funds will maintain designated readily marketable assets at least equal in
value to commitments to purchase when-issued or delayed-delivery securities,
such assets to be segregated by the Custodian specifically for the settlement
of such commitments. The Funds will only make commitments to purchase Municipal
Obligations on a when-issued or delayed-delivery basis with the intention of
actually acquiring the securities, but the Funds reserve the right to sell
these securities before the settlement date if it is deemed advisable. If a
when-issued security is sold before delivery any gain or loss would not be tax-
exempt. The Funds commonly engage in when-issued transactions in order to
purchase or sell newly-issued Municipal Obligations, and may engage in delayed-
delivery transactions in order to manage its operations more effectively.
Each Fund also may buy when-issued and delayed-delivery securities that
settle more than 60 days after purchase. These transactions are called
"forwards." Municipal "forwards" pay higher interest after settlement than
standard bonds, to compensate the buyer for bearing market risk and deferring
income during the settlement period, and can often be bought at attractive
prices and yields. If a Fund knows that a portfolio bond will, or is likely to,
be called or mature on a specific future date, the Fund may buy forwards
settling on or about that date to replace the called or maturing bond and "lock
in" a currently attractive interest rate.
Special Considerations Relating to Municipal Obligations of Designated States
As described in the Prospectus, except for investments in temporary
investments, each Fund will invest substantially all of its assets (at least
80%) in municipal bonds that are exempt from federal and state tax in that
state ("Municipal Obligations"), generally Municipal Obligations issued in its
respective state. Each Fund is therefore more susceptible to political,
economic or regulatory factors adversely affecting issuers of Municipal
Obligations in its state. Brief summaries of these factors are contained in the
Prospectus. Set forth below is additional information that bears upon the risk
of investing in Municipal Obligations issued by public
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authorities in the states of currently offered Funds. This information was
obtained from official statements of issuers located in the respective states
as well as from other publicly available official documents and statements. The
Funds have not independently verified any of the information contained in such
statements and documents. The information below is intended only as a general
summary, and is not intended as a discussion of any specific factor that may
affect any particular obligation or issuer.
Factors Pertaining to Arizona
Arizona's economy is primarily based on services, tourism and high technology
manufacturing. However, the military, agriculture, and mining of primary metals
still play a role. The State has experienced phenomenal economic and population
growth recently due to an influx of businesses attracted by the State's high
quality of life, educated workforce, and friendly business environment. Major
employers include Motorola, Wal-Mart, Allied Signal, American Express and Banc
One. In 1999, the State ranked second in the nation in job growth with an
approximate 4.1% increase in total employment. The Arizona Constitution
restricts the legislature's power to raise revenues by increasing property
taxes.
The State's strong growth is projected to moderate in the near term as
population growth slows. Even though the growth rate is slowing, the State's
economy is expected to continue to expand.
The statewide unemployment rate was 3.6% in July 2000, below the national
average of 4.0% in July 2000 and also below the July 1999 statewide average of
4.1%. In recent years, the State's unemployment rate has remained slightly
below the national average. The change in relative unemployment is due to the
significant population growth that the State has experienced. Per capita income
was $25,307 in 1999, which is 89% of the national average.
The Arizona Constitition restricts the legislature's power to raise revenues
by increasing property taxes. The State has also enacted limits on annual
spending. The State does not issue general obligation bonds but relies on
capital outlays, revenue bonds and other methods to finance projects. Each
project is individually rated for its creditworthiness.
Factors Pertaining to Colorado
Colorado's trade and services sectors represent nearly half of non-
agricultural employment in the State's economy and have expanded in the past
years. Manufacturing employment is comparatively small and continues to shrink
due to the concentration in defense production. The trade and services sectors,
led by a healthy tourist industry, helped pull the State out of a recession in
the late 1980's which had been caused by contraction in the energy, high
technology and construction industries. The State's economic activity continues
to outpace national growth levels. For example, population growth has been
robust, registering at levels nearly double the national average. While recent
reports project slowing economic growth in the near term, the rate of growth
for the Colorado economy is expected to remain higher than national growth
rates.
Colorado's unemployment rate remains low at 2.7% in July 2000, well below the
national average of 4.0% in July 2000 and below the 3.0% statewide rate in July
1999. Per capita income grew 5.3% to $31,678 in 1999.
In 1992, Colorado voters approved the Taxpayer's Bill of Rights (TABOR) which
limits the revenue growth of state and local governments. The State of Colorado
refunded $563.2 million and $679.6 million to State residents during fiscal
years 1998 and 1999, respectively. The TABOR surplus for the current fiscal
year, which will end on June 30, 2000, is $673.4 million. From fiscal year
1999-00 through fiscal year 2004-05, the State's legislative economists expect
State revenues to exceed the TABOR limit by nearly $6.0 billion or an average
of $995.3 million per year. Consequently, State officials are currently
examining methods of adopting a number of temporary and permanent tax
reductions to cut, or possibly avoid future refunds to State taxpayers.
Colorado does not issue general obligation debt, but outstanding lease
obligations are rated A1 by Moody's and A+ by Standard & Poor's. These ratings
reflect the State's credit quality only, and do not indicate the
creditworthiness of other tax-exempt securities in which the Fund may invest.
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Factors Pertaining to Florida
Florida is one of the nation's fastest growing states. Employment and
personal income growth have outpaced the nation since 1991 and recent economic
reports indicate that the State continues to experience job growth, albeit at a
more moderate pace. Population growth, which reached 30% from 1980 to 1990, has
slowed but remains relatively high. Florida has a diverse economy with recent
growth in the insurance, banking, healthcare, construction and trade sectors
helping to lessen the State's dependence on the agriculture and tourism
industries.
Florida's unemployment rate of 3.7% in July 2000 was slightly lower than the
national average of 4.0% and equal to its unemployment rate in July 1999.
Florida's 1999 per capita income of $28,023 is on par with national averages
and slightly above regional levels. Because the State's significant senior
population relies more on fixed incomes than on wages, income levels in the
State are generally more stable over different phases of economic cycles.
Florida's "intangibles tax," which taxes securities and other intangible
items of monetary value, was reduced during 1999. Plans are currently being
considered that may abolish the intangibles tax in coming years. The effects of
the reduction or possible repeal of the intangibles tax on the State's
financial position cannot be determined.
As of August 31, 2000, Florida's general obligation debt carried ratings of
AA+ by Standard & Poor's, Aa2 by Moody's, and AA by Fitch. These ratings
reflect the State's credit quality only, and do not indicate the
creditworthiness of other tax-exempt securities in which the Fund may invest.
Factors Pertaining to Maryland
Maryland has benefited from the expansion in the national economy. The
State's once sluggish economy has shown improvement, Services, wholesale and
retail trade, and government account for most of the State's employment. Unlike
in most states, government employment surpasses manufacturing employment in
Maryland. In addition, high technology, especially in the medical and
biomedical research sectors, continues to play an important role in the State's
economy.
The State's unemployment rate, which fell to 3.2% in July 2000, down from
3.9% in July 1999, remains well below the national average, which was 4.0% in
July 2000. Per capita income, which was $32,166 in 1999, continues to exceed
national averages. Maryland remains among the wealthiest states in the nation.
During its spring 1998 term, the Maryland legislature voted to accelerate the
income tax reduction it passed in 1997; as a result, income taxes were reduced
by 5% in 1998, more than the 2% reduction originally planned for that year. Tax
reductions continued during 1999, translating into approximately $292 million
in tax savings for Maryland residents. Additional reductions are expected to be
phased in through 2002, which are expected to generate $2.4 billion in total
tax savings for State residents.
Maryland's general obligation debt, which is constitutionally limited to a
maximum term of 15 years, carried triple-A ratings from Moody's, Standard &
Poor's, and Fitch as of August 31, 2000. These ratings reflect the State's
credit quality only, and do not indicate the creditworthiness of other tax-
exempt securities in which the Fund may invest.
Factors Pertaining to New Mexico
New Mexico's major industries include energy, tourism, services, crafts,
agribusiness, manufacturing and mining. The economy also benefits from the
employment and technology base supplied by federal government scientific
research facilities at Los Alamos, Albuquerque and White Sands. In addition,
crop and livestock production remain a major part of the economy.
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New Mexico's economy continues to expand and diversify away from its historic
reliance on federal employment and oil and gas production as a result of
increasing growth in the services and manufacturing sectors. However, this
transition has caused the State's job growth to fall below national levels in
recent years.
The Statewide unemployment rate was 5.4% in July 2000, down from the 6.0%
State average in July 1999, but surpassing the national average of 4.0% in July
2000. The economy is dealing with declines in the manufacturing sector. Per
capita income rose approximately 4% during 1999 to $22,063.
As of August 31, 2000, Moody's rates the State's general obligation debt Aa1,
while Standard & Poor's rates it AA+. These ratings reflect the State's credit
quality only, and do not indicate the creditworthiness of other tax-exempt
securities in which the Fund may invest.
Factors Pertaining to Pennsylvania
Pennsylvania's economy has improved, but growth rates remain below the
national average. Continued losses in the manufacturing and healthcare sectors
and sluggish population and labor force growth have contributed to the below
average indicators. Although growth has been slow, the Commonwealth's economy
remains diverse. Employment losses in the manufacturing sector have helped
reduce the Commonwealth's reliance on that economically-sensitive sector. A
portion of the jobs lost have been replaced by new industries such as
biotechnology, software and business services.
Pennsylvania's unemployment rate was 4.0% in July 2000, which mirrored the
national average and was lower than the Commonwealth's 4.3% rate in July 1999.
Pennsylvania's 1999 per capita income was $28,676, which is slightly above the
national average.
As of August 31, 2000, Pennsylvania's general obligation debt carried ratings
of AA by Standard & Poor's, Aa3 by Moody's, and AA by Fitch. These ratings
reflect the Commonwealth's credit quality only, and do not indicate the
creditworthiness of other tax-exempt securities in which the Fund may invest.
Factors Pertaining to Virginia
Like the U.S. economy, the Virginia economy is broad-based and comprised of
several distinct regions. The Commonwealth's economy nearly mirrors the U.S.
economy with the services, trade, government, and manufacturing sectors
supplying a significant portion of employment. Recent employment losses in the
federal government, manufacturing, and mining sectors have been offset by
employment growth in other sectors, including high technology. The federal
government remains an important employer and has a greater impact on the
Commonwealth than it has on most other states.
There are approximately 10,000 tobacco farmers in the Commonwealth of
Virginia, as well as an estimated 9,000 Virginia residents employed in the
tobacco industry. Recent judgements against U.S. tobacco companies may have
adverse financial effects on Phillip Morris, one of Virginia's largest
employers. Future adverse judgements against Phillip Morris and other U.S.
tobacco companies may lead to layoffs, which could have a noticeable effect on
Virginia's labor markets.
Virginia's unemployment rate was 2.5% in July 2000, well below the national
average of 4.0% in July 2000 and down slightly from the Commonwealth's July
1999 rate of 2.7%. Per capita income was $29,404 in 1999, which is above the
U.S. average.
As of August 31, 2000, Moody's, Standard & Poor's, and Fitch each rated the
Commonwealth AAA. These ratings reflect the Commonwealth's credit quality only,
and do not indicate the creditworthiness of other tax-exempt securities in
which the Fund may invest.
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Hedging and Other Defensive Actions
Each Fund may periodically engage in hedging transactions. Hedging is a term
used for various methods of seeking to preserve portfolio capital value of
offsetting price changes in one investment through making another investment
whose price should tend to move in the opposite direction. It may be desirable
and possible in various market environments to partially hedge the portfolio
against fluctuations in market value due to interest rate fluctuations by
investment in financial futures and index futures as well as related put and
call options on such instruments. Both parties entering into an index or
financial futures contract are required to post an initial deposit of 1% to 5%
of the total contract price. Typically, option holders enter into offsetting
closing transactions to enable settlement in cash rather than take delivery of
the position in the future of the underlying security. Each Fund will only sell
covered futures contracts, which means that the Fund segregates assets equal to
the amount of the obligations.
These transactions present certain risks. In particular, the imperfect
correlation between price movements in the futures contract and price movements
in the securities being hedged creates the possibility that losses on the hedge
by a Fund may be greater than gains in the value of the securities in such
series, portfolio. In addition, futures and options markets may not be liquid
in all circumstances. As a result, in volatile markets, a Fund may not be able
to close out the transaction without incurring losses substantially greater
than the initial deposit. Finally, the potential daily deposit requirements in
futures contracts create an ongoing greater potential financial risk than do
options transactions, where the exposure is limited to the cost of the initial
premium. Losses due to hedging transactions will reduce yield. Net gains, if
any, from hedging and other portfolio transactions will be distributed as
taxable distributions to shareholders.
No Fund will make any investment (whether an initial premium or deposit or a
subsequent deposit) other than as necessary to close a prior investment if,
immediately after such investment, the sum of the amount of its premiums and
deposits would exceed 5% of such series' net assets. Each series will invest in
these instruments only in markets believed by the investment adviser to be
active and sufficiently liquid. For further information regarding these
investment strategies and risks presented thereby, see Appendix B to this
Statement of Additional Information.
Each Fund reserves the right for liquidity or defensive purposes (such as
thinness in the market for municipal securities or an expected substantial
decline in value of long-term obligations), to temporarily invest up to 20% of
its assets in obligations issued or guaranteed by the U.S. Government and its
agencies or instrumentalities, including up to 5% in adequately collateralized
repurchase agreements relating thereto. Interest on each instrument is taxable
for Federal income tax purposes and would reduce the amount of tax-free
interest payable to shareholders.
Short-Term Securities
The Prospectus discusses briefly the ability of the Funds to invest a portion
of their assets in federally tax-exempt or taxable short-term securities
("temporary investments"). Temporary investments will not exceed 20% of a
Fund's assets except when made for defensive purposes. The Funds will invest
only in taxable temporary investments that are either U.S. Government
securities or are rated within the highest grade by Moody's, S&P, or Fitch and
mature within one year from the date of purchase or carry a variable or
floating rate of interest. See Appendix A for more information about ratings by
Moody's, S&P, and Fitch.
The Funds may invest in the following federally tax-exempt temporary
investments:
Bond Anticipation Notes (BANs) are usually general obligations of state
and local governmental issuers which are sold to obtain interim financing
for projects that will eventually be funded through the sale of long-term
debt obligations or bonds. The ability of an issuer to meet its obligations
on its BANs is
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primarily dependent on the issuer's access to the long-term municipal bond
market and the likelihood that the proceeds of such bond sales will be used
to pay the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments
to finance the current operations of such governments. Repayment is
generally to be derived from specific future tax revenues. Tax anticipation
notes are usually general obligations of the issuer. A weakness in an
issuer's capacity to raise taxes due to, among other things, a decline in
its tax base or a rise in delinquencies, could adversely affect the
issuer's ability to meet its obligations on outstanding TANs.
Revenue Anticipation Notes (RANs) are issued by governments or
governmental bodies with the expectation that future revenues from a
designated source will be used to repay the notes. In general, they also
constitute general obligations of the issuer. A decline in the receipt of
projected revenues, such as anticipated revenues from another level of
government, could adversely affect an issuer's ability to meet its
obligations on outstanding RANs. In addition, the possibility that the
revenues would, when received, be used to meet other obligations could
affect the ability of the issuer to pay the principal and interest on RANs.
Construction Loan Notes are issued to provide construction financing for
specific projects. Frequently, these notes are redeemed with funds obtained
from the Federal Housing Administration.
Bank Notes are notes issued by local government bodies and agencies as
those described above to commercial banks as evidence of borrowings. The
purposes for which the notes are issued are varied but they are frequently
issued to meet short-term working capital or capital-project needs. These
notes may have risks similar to the risks associated with TANs and RANs.
Tax-Exempt Commercial Paper (Municipal Paper) represents very short-term
unsecured, negotiable promissory notes, issued by states, municipalities
and their agencies. Payment of principal and interest on issues of
municipal paper may be made from various sources, to the extent the funds
are available therefrom. Maturities of municipal paper generally will be
shorter than the maturities of TANs, BANs or RANs. There is a limited
secondary market for issues of municipal paper.
Certain Municipal Obligations may carry variable or floating rates of
interest whereby the rate of interest is not fixed, but varies with changes in
specified market rates or indices, such as a bank prime rate or a tax-exempt
money market index.
While these various types of notes as a group represent the major portion of
the tax-exempt note market, other types of notes are occasionally available in
the marketplace and each Fund may invest in such other types of notes to the
extent permitted under its investment objective, policies and limitations. Such
notes may be issued for different purposes and may be secured differently from
those mentioned above.
The Funds may also invest in the following taxable temporary investments:
U.S. Government Direct Obligations are issued by the United States
Treasury and include bills, notes and bonds.
--Treasury bills are issued with maturities of up to one year. They are
issued in bearer form, are sold on a discount basis and are payable at
par value at maturity.
--Treasury notes are longer-term interest bearing obligations with
original maturities of one to seven years.
--Treasury bonds are longer-term interest-bearing obligations with
original maturities from five to thirty years.
S-11
<PAGE>
U.S. Government Agencies Securities--Certain federal agencies have been
established as instrumentalities of the United States Government to supervise
and finance certain types of activities. These agencies include, but are not
limited to, the Bank for Cooperatives, Federal Land Banks, Federal Intermediate
Credit Banks, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Export-Import Bank of the United
States, and Tennessee Valley Authority. Issues of these agencies, while not
direct obligations of the United States Government, are either backed by the
full faith and credit of the United States or are guaranteed by the Treasury or
supported by the issuing agencies' right to borrow from the Treasury. There can
be no assurance that the United States Government itself will pay interest and
principal on securities as to which it is not legally so obligated.
Certificates of Deposit (CDs)--A certificate of deposit is a negotiable
interest bearing instrument with a specific maturity. CDs are issued by banks
in exchange for the deposit of funds and normally can be traded in the
secondary market, prior to maturity. The Fund will only invest in U.S. dollar
denominated CDs issued by U.S. banks with assets of $1 billion or more.
Commercial Paper--Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations. Maturities on these issues
vary from a few days to nine months. Commercial paper may be purchased from
U.S. corporations.
Other Corporate Obligations--The Funds may purchase notes, bonds and
debentures issued by corporations if at the time of purchase there is less than
one year remaining until maturity or if they carry a variable or floating rate
of interest.
Repurchase Agreements--A repurchase agreement is a contractual agreement
whereby the seller of securities (U.S. Government or Municipal Obligations)
agrees to repurchase the same security at a specified price on a future date
agreed upon by the parties. The agreed upon repurchase price determines the
yield during a Fund's holding period. Repurchase agreements are considered to
be loans collateralized by the underlying security that is the subject of the
repurchase contract. The Funds will only enter into repurchase agreements with
dealers, domestic banks or recognized financial institutions that in the
opinion of Nuveen Advisory present minimal credit risk. The risk to the Funds
is limited to the ability of the issuer to pay the agreed-upon repurchase price
on the delivery date; however, although the value of the underlying collateral
at the time the transaction is entered into always equals or exceeds the
agreed-upon repurchase price, if the value of the collateral declines there is
a risk of loss of both principal and interest. In the event of default, the
collateral may be sold but a Fund might incur a loss if the value of the
collateral declines, and might incur disposition costs or experience delays in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization upon the collateral by a Fund may be delayed or limited. Nuveen
Advisory will monitor the value of collateral at the time the transaction is
entered into and at all times subsequent during the term of the repurchase
agreement in an effort to determine that the value always equals or exceeds the
agreed upon price. In the event the value of the collateral declined below the
repurchase price, Nuveen Advisory will demand additional collateral from the
issuer to increase the value of the collateral to at least that of the
repurchase price. Each of the Funds will not invest more than 10% of its assets
in repurchase agreements maturing in more than seven days.
S-12
<PAGE>
MANAGEMENT
The management of the Trust, including general supervision of the duties
performed for the Funds under the Investment Management Agreement, is the
responsibility of its Board of Trustees. The Trust currently has seven
trustees, one of whom is an "interested person" (as the term "interested
person" is defined in the Investment Company Act of 1940) and six of whom are
"disinterested persons." The names and business addresses of the trustees and
officers of the Trust and their principal occupations and other affiliations
during the past five years are set forth below, with those trustees who are
"interested persons" of the Trust indicated by an asterisk.
<TABLE>
------------------------------------------------------------------------------------
<CAPTION>
Date of Positions and Principal Occupations
Name and Address Birth Offices with Fund During Past Five Years
------------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. Schwertfeger* 3/28/49 Chairman of the Board Chairman since July 1,
333 West Wacker Drive and President 1996 of The John Nuveen
Chicago, IL 60606 Trustee Company, Nuveen
Investments, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp., prior
thereto Executive Vice
President and Director
of The John Nuveen
Company and Nuveen
Investments; Director of
Nuveen Advisory Corp.
(since 1992) and Nuveen
Institutional Advisory
Corp.; Chairman and
Director (since January
1997) of Nuveen Asset
Management, Inc.;
Director (since 1996) of
Institutional Capital
Corporation; Chairman
and Director of
Rittenhouse Financial
Services Inc. (since
1999); Chief Executive
Officer (since September
1999) of Nuveen Senior
Loan Asset Management
Inc.
------------------------------------------------------------------------------------
Robert P. Bremner 8/22/40 Trustee Private Investor and
3725 Huntington Street, N.W. Management Consultant.
Washington, D.C. 20015
------------------------------------------------------------------------------------
Lawrence H. Brown 7/29/34 Trustee Retired (August 1989) as
201 Michigan Avenue Senior Vice President of
Highwood, IL 60040 The Northern Trust
Company
------------------------------------------------------------------------------------
Anne E. Impellizzeri 1/26/33 Trustee President and Chief
3 West 29th Street Executive Officer of
New York, NY 10001 Blanton-Peale Institutes
of Religion and Health
(since December 1990).
------------------------------------------------------------------------------------
Peter R. Sawers 4/3/33 Trustee Adjunct Professor of
22 The Landmark Business and Economics,
Northfield, IL 60093 University of Dubuque,
Iowa; Adjunct Professor,
Lake Forest Graduate
School of Management,
Lake Forest, Illinois.
------------------------------------------------------------------------------------
William J. Schneider 9/24/44 Trustee Senior Partner and Chief
4000 Miller-Valentine Ct. Operating Officer,
P.O. Box 744 Miller-Valentine
Dayton, OH 45401 Partners; Vice
President, Miller-
Valentine Group, a
development and contract
company; Member
Community Advisory
Board, National City
Bank, Dayton, Ohio.
</TABLE>
--------------------------------------------------------------------------------
S-13
<PAGE>
<TABLE>
--------------------------------------------------------------------------------------
<CAPTION>
Date of Positions and Principal Occupations
Name and Address Birth Offices with Fund During Past Five Years
--------------------------------------------------------------------------------------
<C> <C> <C> <S>
Judith M. Stockdale 12/29/47 Trustee Executive Director,
35 E. Wacker Drive Gaylord and Dorothy
Suite 2600 Donnelley Foundation
Chicago, IL 60601 (since 1994); prior
thereto, Executive
Director, Great Lakes
Protection Fund (from
1990 to 1994).
--------------------------------------------------------------------------------
Alan G. Berkshire 12/28/60 Vice President and Senior Vice President
333 West Wacker Drive Assistant Secretary and General Counsel
Chicago, IL 60606 (since September 1997)
and Secretary (since May
1998) of The John Nuveen
Company, Nuveen
Investments, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp., Senior
Vice President and
Secretary (since
September 1999) of
Nuveen Senior Loan Asset
Management Inc.; prior
thereto, Partner in the
law firm of Kirkland &
Ellis.
--------------------------------------------------------------------------------
Peter H. D'Arrigo 11/28/67 Vice President and Vice President of Nuveen
333 West Wacker Drive Treasurer Investments (since
Chicago, IL 60606 January 1999), prior
thereto, Assistant Vice
President (from January
1997); formerly,
Associate of Nuveen
Investments; Vice
President and Treasurer
(since September 1999)
of Nuveen Senior Loan
Asset Management Inc.;
Chartered Financial
Analyst.
--------------------------------------------------------------------------------
Michael S. Davern 6/26/57 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 January 1997); prior
thereto, Vice President
and Portfolio Manager of
Flagship Financial.
--------------------------------------------------------------------------------------
Lorna C. Ferguson 10/24/45 Vice President Vice President of Nuveen
333 West Wacker Drive Investments; Vice
Chicago, IL 60606 President (since January
1998) of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory
Corp.
--------------------------------------------------------------------------------------
William M. Fitzgerald 3/2/64 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 December 1995);
Assistant Vice President
of Nuveen Advisory Corp.
(from September 1992 to
December 1995), prior
thereto, Assistant
Portfolio Manager of
Nuveen Advisory Corp.;
Chartered Financial
Analyst.
--------------------------------------------------------------------------------------
Stephen D. Foy 5/31/54 Vice President and Controller Vice President of Nuveen
333 West Wacker Drive Investments and (since
Chicago, IL 60606 May 1998) The John
Nuveen Company, Vice
President (since
September 1999) of
Nuveen Senior Loan Asset
Management Inc.;
Certified Public
Accountant.
--------------------------------------------------------------------------------------
J. Thomas Futrell 7/5/55 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.;
Chicago, IL 60606 Chartered Financial
Analyst.
</TABLE>
--------------------------------------------------------------------------------
S-14
<PAGE>
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Date of Positions and Principal Occupations
Name and Address Birth Offices with Fund During Past Five Years
-------------------------------------------------------------------------------
<C> <C> <C> <S>
Richard A. Huber 3/26/63 Vice President Vice President of Nuveen
333 West Wacker Drive Institutional Advisory
Chicago, IL 60606 Corp. (since March 1998)
and Nuveen Advisory Corp.
(since January 1997);
prior thereto, Vice
President and Portfolio
Manager of Flagship
Financial, Inc.
-------------------------------------------------------------------------------
Steven J. Krupa 8/21/57 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
-------------------------------------------------------------------------------
Larry W. Martin 7/27/51 Vice President and Vice President, Assistant
333 West Wacker Drive Assistant Secretary Secretary and Assistant
Chicago, IL 60606 General Counsel of Nuveen
Investments; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp.; Vice
President and Assistant
Secretary of Nuveen
Institutional Advisory
Corp.; Assistant Secretary
of The John Nuveen Company
and (since January 1997)
Nuveen Asset Management
Inc.; Vice President and
Assistant Secretary (since
September 1999) of Nuveen
Senior Loan Asset
Management Inc.
-------------------------------------------------------------------------------
Edward F. Neild, IV 7/7/65 Vice President Vice President (since
333 West Wacker Drive September 1996),
Chicago, IL 60606 previously Assistant Vice
President (since December
1993) of Nuveen Advisory
Corp., Portfolio Manager
prior thereto; Vice
President (since September
1996), previously
Assistant Vice President
(since May 1995) of Nuveen
Institutional Advisory
Corp., Portfolio Manager
prior thereto; Chartered
Financial Analyst.
-------------------------------------------------------------------------------
Stephen S. Peterson 9/20/57 Vice President Vice President (since
333 West Wacker Drive September 1997),
Chicago, IL 60606 previously Assistant Vice
President (since September
1996), Portfolio Manager
prior thereto of Nuveen
Advisory Corp.; Chartered
Financial Analyst.
-------------------------------------------------------------------------------
Thomas C. Spalding, Jr. 7/31/51 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory
Corp.; Chartered Financial
Analyst.
-------------------------------------------------------------------------------
Gifford R. Zimmerman 9/9/56 Vice President and Vice President, Assistant
333 West Wacker Drive Secretary Secretary and Associate
Chicago, IL 60606 General Counsel formerly
Assistant General Counsel
of Nuveen Investments;
Vice President and
Assistant Secretary of
Nuveen Advisory Corp. and
Nuveen Institutional
Advisory Corp.; Vice
President and Assistant
Secretary of The John
Nuveen Company (since May
1994); Vice President and
Assistant Secretary (since
September 1999) of Nuveen
Senior Loan Asset
Management Inc.; Chartered
Financial Analyst.
</TABLE>
--------------------------------------------------------------------------------
S-15
<PAGE>
Timothy R. Schwertfeger and Peter R. Sawers serve as members of the Executive
Committee of the Board of Trustees. The Executive Committee, which meets
between regular meetings of the Board of Trustees, is authorized to exercise
all of the powers of the Board of Trustees.
The trustees of the Trust are also directors or trustees, as the case may be,
of 37 Nuveen open-end funds and 54 Nuveen closed-end funds advised by Nuveen
Advisory Corp. Mr. Schwertfeger is a director or trustee, as the case may be,
of 13 Nuveen open-end funds and closed-end funds advised by Nuveen
Institutional Advisory Corp. and two funds advised by Nuveen Senior Loan Asset
Management. None of the independent trustees has ever been a director, officer,
or employee of, or a consultant to, Nuveen Advisory, Nuveen or their
affiliates.
Each trustee who is not affiliated with Nuveen or Nuveen Advisory receives a
fee. The Trust requires no employees other than its officers, all of whom are
compensated by Nuveen.
The following table sets forth compensation paid by the Trust to each of the
trustees of the Trust and the total compensation paid to each trustee during
the fiscal year ended May 31, 2000. The Trust has no retirement or pension
plans. The officers and trustees affiliated with Nuveen serve without any
compensation from the Trust.
<TABLE>
<CAPTION>
Deferred Total Compensation
Aggregate Compensation from Trust and
Compensation Payable from Fund Complex
Name of Trustee from the Trust(1) the Trust(2) Paid to Trustees(3)
--------------- ----------------- ------------ -------------------
<S> <C> <C> <C>
Robert P. Bremner..... $3,158 $ 188 $71,000
Lawrence H. Brown..... $3,513 $ -- $75,500
Anne E. Impellizzeri.. $2,113 $1,251 $71,000
Peter R. Sawers....... $2,113 $1,252 $71,750
William J. Schneider.. $2,052 $1,226 $69,000
Judith M. Stockdale... $3,036 $ 315 $71,000
</TABLE>
--------
(1) The compensation paid (but not including amounts deferred) to the
independent trustees for the fiscal year ended May 31, 2000 for services to
the Trust.
(2) Pursuant to a deferred compensation agreement with the Trust, deferred
amounts are treated as though an equivalent dollar amount has been invested
in shares of one or more eligible Nuveen Funds. The amounts provided are
the total deferred fees (including the return from the assumed investment
in the eligible Nuveen Funds) payable from the Trust.
(3) Based on the compensation paid (including any amounts deferred) to the
independent trustees for the fiscal year ended May 31, 2000 for services to
the open-end and closed-end funds advised by NAC.
Each trustee who is not affiliated with NAC receives a $60,000 annual
retainer for serving as a director or trustee of all funds for which NAC serves
as investment adviser or manager and a $1,000 fee per day plus expenses for
attendance at all meetings held on a day on which a regularly scheduled Board
meeting is held, a $1,000 fee per day plus expenses for attendance in person or
a $500 fee per day plus expenses for attendance by telephone at a meeting held
on a day which no regular Board meeting is held and a $500 fee per day plus
expenses for attendance in person or by telephone at a meeting of the Executive
Committee held solely to declare dividends. The annual retainer, fees and
expenses are allocated among the funds for which NAC serves as investment
adviser or manager on the basis of relative net asset sizes. The Trust requires
no employees other than its officers, all of whom are compensated by NAC or
Nuveen.
The John Nuveen Company (JNC) maintains charitable contributions programs to
encourage the active support and involvement of individuals in the civic
activities of their community. These programs include a matching contributions
program and a direct contributions program. The independent trustees of the
funds
S-16
<PAGE>
managed by NAC are eligible to participate in the charitable contributions
program of JNC. Under the matching program, JNC will match the personal
contributions of a trustee to Section 501(c)(3) organizations up to an
aggregate maximum amount of $10,000 during any calendar year. Under its direct
(non-matching) program, JNC makes contributions to qualifying Section 501(c)(3)
organizations, as approved by the Corporate Contributions Committee of JNC. The
independent trustees are also eligible to submit proposals to the committee
requesting that contributions be made under this program to Section 501(c)(3)
organizations identified by the trustee, in an aggregate amount not to exceed
$5,000 during any calendar year. Any contribution made by JNC under the direct
program is made solely at the discretion of the Corporate Contributions
Committee.
The officers and trustees of each Fund, in the aggregate, own less than 1% of
the shares of the Fund.
The following table sets forth the percentage ownership of each person, who,
as of September 18, 2000, owns of record, or is known by Registrant to own of
record or beneficially 5% or more of any class of a Fund's shares.
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Arizona Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 17.09%
Class A Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97E76
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Arizona Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 33.72
Class B Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97ND2
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Arizona Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 26.94
Class C Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97GX6
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Banc of America 9.20
747-04209-15
Attn: Mutual Funds 4th Floor
600 Montgomery Street
San Francisco, CA 94111
Donaldson Lufkin Jenrette 5.97
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
</TABLE>
S-17
<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
---------------------- ------------------------- ------------
<S> <C> <C>
NFSC FEBO W82-808946 5.08%
Gordon F. Huff
201 W. Quartz Rock Rd.
Phoenix, AZ 85027
Nuveen Arizona Municipal
Bond Fund Horace M. Wade 7.03
Class R Shares............ and Christine M. Wade Trust
Wade Liv Trust U-A DTD 04-13-98
6231 Montewbella Rd. Apt. 124
Tucson, AZ 85704
Nuveen Colorado Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 21.49
Class A Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97IX9
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Colorado Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 9.72
Class B Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97NC0
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
U S Bancorp Investments 6.36
FBO 180124921
100 South Fifth Street Suite 1400
Minneapolis, MN 55402-1217
Chester Shellhammer TTEE 6.07
Trust Date 08-27-91
8554 Hwy. 550
Durango, CO 81301-7833
Dean Witter 5.13
for the benefit of
Equanimity LLLP
P.O. Box 250, Church Street
New York, NY 10008-0250
Nuveen Colorado Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 23.81
Class C Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97ND9
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
</TABLE>
S-18
<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
---------------------- ------------------------- ------------
<S> <C> <C>
PaineWebber for the benefit of 8.09%
Laverne L. Swalm
189 Ivanhoe
Denver, CO 80220-5839
PaineWebber for the benefit of 7.30
W. Gregory Mesch
Prinsengracht 417-A
1016 HM Amsterdam
PaineWebber for the benefit of 6.85
Robert D. Bliss and Elnora D.
Irrev Trust No 1 DTD 6-29-99
P.O. Box 816
Greeley, CO 80632-0816
Edmond J. Mueller 6.82
Neoma A. Mueller
Mueller Family Trust
5035 McIntyre St.
Golden, CO 80403-1739
Salomon Smith Barney Inc. 5.93
00124018279
333 West 37th St.--3rd Floor
New York, NY 10001
Nuveen Colorado
Municipal Bond Fund Bruce A. Grossfield & Judith D. Ludwig TR 42.59
Class R Shares........ Bruce A. Grossfield LIV Trust
31 Spring Street
Noank, CT 06340
Raymond Munyon 24.17
Lisa Ann Munyon & Renee L. Miller TRS
Munyon Family Irrevocable Trust
7650 Kline Dr.
Arvada, CO 80005-3776
Joseph N. Emmons 9.12
2428 Virgo Dr.
Colorado Spgs, CO 80906-1048
Harold M. Gott 8.24
P.O. Box. 1929
Montrose, CO 81402-1929
James E. Maly 6.52
Carole P. Maly
Maly Family Trust
3370 W. Woodmen Road
Colorado Spgs, CO 80919-4507
</TABLE>
S-19
<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Florida Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 39.57%
Class A Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97E80
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Florida Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 36.75
Class B Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97ND3
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Florida Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 62.45
Class C Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97GX3
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Maryland Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 6.84
Class A Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97E83
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Maryland Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 27.12
Class B Shares............ for the sole benefit of its customers
Attn: Fund Admn. / 97NB4
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Maryland Municipal
Bond Fund Dean Witter for the benefit of 12.45
Class C Shares............ Julia F. Carver Rev. Living Trust
P.O. Box 250
Church Street Station
New York, NY 10008-0250
Dean Witter for the benefit of 10.75
August Bert Carver Rev. Living Trust
P.O. Box 250
Church Street Station
New York, NY 10008-0250
</TABLE>
S-20
<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
---------------------- ------------------------- ------------
<S> <C> <C>
Jessie L. & John L. Daniels 10.65%
& Diane D. Cole & Lynne D. Mella TRS
Jessie L. Daniels Trust
U/A 12/21/92
9039 Rouen Ln.
Potomac, MD 20854-3135
Merrill Lynch, Pierce, Fenner & Smith 10.26
for the benefit of its customers
Attn: Fund Admn. / 97GX7
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Maryland Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 6.62
Class R Shares............ for the sole benefit of its customers
Attn: Fund Admn. / 979D5
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen New Mexico Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 27.10
Class A Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97AF5
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen New Mexico Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 12.88
Class B Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97NC7
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
NFSC FEBO HDM-229172 7.56
Dorothy Tiramani Rev. Trust
6100 Cortaderia St. NE Apt. 4013
Albuquerque, NM 87111-8012
Nuveen New Mexico Municipal
Bond Fund Raymond James & Assoc., Inc. 22.35
Class C Shares............ for Elite Acct. 50094911 FAO
Ann M. Gebhart TTEE
UA DTD 9-27-88 AM
1421 Pinnacle View Dr. NE
Albuquerque, NM 87112-6558
</TABLE>
S-21
<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
---------------------- ------------------------- ------------
<S> <C> <C>
Anthony G. Hillerman 16.85%
Marie E. Hillerman CO-TTEES
UA DTD 02-22-90
Anthony G. and Marie E. Hillerman
Rev TR Hillerman, RV TR
1632 Francisca Rd.
Albuquerque, NM 87107-7118
Raymond James & Assoc. Inc. 7.81
for Elite Acct. 50152500
Sole Separate Property
11108 Double Eagle NE
Albuquerque, NM 87111-6561
Nuveen New Mexico Municipal
Bond Fund Mary Swickard 61.76
Class R Shares............ 84 Barcelona Ave.
Los Alamos, NM 87544-3428
William V. Mason 13.91
and Jean C. Mason
200 Oak Street, N.E.
Albuquerque, NM 87106
Herschel W. Rogers 8.55
Rosemary E. Rogers Trs
H.W. & R.E. Rogers Rev. Trust
4509 Acapulco Dr.
Albuquerque, NM 87111-2813
George R. Havens 6.27
and Patricia M. Havens
22 Granite Cir.
Roswell, NM 88201
Nuveen Pennsylvania
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 28.59
Class A Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97E74
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Pennsylvania
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 36.40
Class B Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97ND6
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Pennsylvania
Municipal Bond Fund Merrill Lynch, Pierce, Fenner & Smith 67.34
Class C Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97GX4
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
</TABLE>
S-22
<PAGE>
<TABLE>
<CAPTION>
Percentage
Name of Fund and Class Name and Address of Owner of Ownership
---------------------- ------------------------- ------------
<S> <C> <C>
Nuveen Virginia Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 25.98%
Class A Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97E81
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Virginia Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 27.68
Class B Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97ND7
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Virginia Municipal
Bond Fund Merrill Lynch, Pierce, Fenner & Smith 52.52
Class C Shares............ for the sole benefit of its customers
Attn: Fund Admin. / 97GX2
4800 Deer Lake Dr. E. Fl 3
Jacksonville, FL 32246-6484
Nuveen Virginia Municipal
Bond Fund Charles Schwab & Co., Inc. 7.55
Class R Shares............ for the benefit of their customers
4500 Cherry Creek Dr. S
Denver, CO 80018
</TABLE>
S-23
<PAGE>
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Advisory Corp. acts as investment adviser for and manages the
investment and reinvestment of the assets of each of the Funds. Nuveen Advisory
also administers the Trust's business affairs, provides office facilities and
equipment and certain clerical, bookkeeping and administrative services, and
permits any of its officers or employees to serve without compensation as
trustees or officers of the Trust if elected to such positions. See "Fund
Service Providers" in the Prospectus.
Pursuant to an investment management agreement between Nuveen Advisory and
the Trust, each of the Funds has agreed to pay an annual management fee at the
rates set forth below:
<TABLE>
<CAPTION>
Average Daily Net 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>
For the last three fiscal years, the Funds paid net management fees to Nuveen
Advisory as follows:
<TABLE>
<CAPTION>
Management Fees Net of Fee Waivers and Expense
Expense Reimbursement Paid Reimbursements from
to Nuveen Nuveen Advisory for the
Advisory for the Year Ended Year Ended
----------------------------- -----------------------
5/31/98 5/31/99 5/31/00 5/31/98 5/31/99 5/31/00
--------- --------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Nuveen Arizona Municipal
Bond Fund............... 493,414 540,464 556,256 108,424 113,607 38,747
Nuveen Colorado Municipal
Bond Fund............... 195,474 213,775 241,911 3,777 33,939 --
Nuveen Florida Municipal
Bond Fund............... 1,936,305 2,027,580 1,971,449 -- -- --
Nuveen Maryland Municipal
Bond Fund............... 313,921 347,750 397,068 36,658 47,257 4,922
Nuveen New Mexico
Municipal Bond Fund..... 217,776 299,800 307,075 79,556 36,645 --
Nuveen Pennsylvania
Municipal Bond Fund..... 268,015 446,415 734,164 440,918 361,812 30,869
Nuveen Virginia Municipal
Bond Fund............... 786,826 1,123,893 1,161,710 316,199 71,949 --
</TABLE>
In addition to the management fee of Nuveen Advisory, each Fund pays all
other costs and expenses of its operations and a portion of the Trust's general
administrative expenses allocated in proportion to the net assets of each Fund.
Nuveen Advisory is a wholly owned subsidiary of Nuveen Investments
("Nuveen"), the Funds' principal underwriter. Nuveen is sponsor of the Nuveen
Defined Portfolios, registered unit investment trusts, is the principal
underwriter for the Nuveen Mutual Funds, and has served as a co-managing
underwriter for the shares of the Nuveen Exchange-Traded Funds. Over 1.3
million individuals have invested to date in Nuveen's funds and trusts. Founded
in 1898, Nuveen brings over a century of expertise to the municipal bond
market. Overall, Nuveen and its affiliates manage or oversee more than $70
billion in assets in a variety of products. Nuveen is a subsidiary of The John
Nuveen Company which, in turn, is approximately 77% owned by The St. Paul
Companies, Inc. ("St. Paul"). St. Paul is located in St. Paul, Minnesota and is
principally engaged in providing property-liability insurance through
subsidiaries. Effective January 1, 1997, The John Nuveen Company acquired
Flagship Resources Inc., and as part of that acquisition, Flagship Financial,
the adviser to the Flagship Funds, was merged with Nuveen Advisory.
S-24
<PAGE>
Nuveen Advisory's portfolio managers call upon the resources of Nuveen's
Research Department. The Nuveen Research Department reviews more than $100
billion in municipal bonds every year.
The Funds, the other Nuveen funds, Nuveen Advisory, and other related
entities have adopted a code of ethics which essentially prohibits all Nuveen
fund management personnel, including Nuveen fund portfolio managers, from
engaging in personal investments which compete or interfere with, or attempt to
take advantage of, a Fund's anticipated or actual portfolio transactions, and
is designed to assure that the interests of Fund shareholders are placed before
the interests of Nuveen personnel in connection with personal investment
transactions.
PORTFOLIO TRANSACTIONS
Nuveen Advisory is responsible for decisions to buy and sell securities for
the Funds and for the placement of the Funds' securities business, the
negotiation of the prices to be paid for principal trades and the allocation of
its transactions among various dealer firms. Portfolio securities will normally
be purchased directly from an underwriter or in the over-the-counter market
from the principal dealers in such securities, unless it appears that a better
price or execution may be obtained elsewhere. Portfolio securities will not be
purchased from Nuveen or its affiliates except in compliance with the
Investment Company Act of 1940.
The Funds expect that substantially all portfolio transactions will be
effected on a principal (as opposed to an agency) basis and, accordingly, do
not expect to pay any brokerage commissions. Purchases from underwriters will
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers will include the spread between the bid and asked price.
Given the best price and execution obtainable, it will be the practice of the
Funds to select dealers which, in addition, furnish research information
(primarily credit analyses of issuers and general economic reports) and
statistical and other services to Nuveen Advisory. It is not possible to place
a dollar value on information and statistical and other services received from
dealers. Since it is only supplementary to Nuveen Advisory's own research
efforts, the receipt of research information is not expected to reduce
significantly Nuveen Advisory's expenses. While Nuveen Advisory will be
primarily responsible for the placement of the business of the Funds, the
policies and practices of Nuveen Advisory in this regard must be consistent
with the foregoing and will, at all times, be subject to review by the Board of
Trustees.
Nuveen Advisory reserves the right to, and does, manage other investment
accounts and investment companies for other clients, which may have investment
objectives similar to the Funds. Subject to applicable laws and regulations,
Nuveen Advisory will attempt to allocate equitably portfolio transactions among
the Funds and the portfolios of its other clients purchasing or selling
securities whenever decisions are made to purchase or sell securities by a Fund
and one or more of such other clients simultaneously. In making such
allocations the main factors to be considered will be the respective investment
objectives of the Fund and such other clients, the relative size of portfolio
holdings of the same or comparable securities, the availability of cash for
investment by the Fund and such other clients, the size of investment
commitments generally held by the Fund and such other clients and opinions of
the persons responsible for recommending investments to the Fund and such other
clients. While this procedure could have a detrimental effect on the price or
amount of the securities available to the Funds from time to time, it is the
opinion of the Board of Trustees that the benefits available from Nuveen
Advisory's organization will outweigh any disadvantage that may arise from
exposure to simultaneous transactions.
Under the Investment Company Act of 1940, the Funds may not purchase
portfolio securities from any underwriting syndicate of which Nuveen is a
member except under certain limited conditions set forth in Rule 10f-3. The
Rule sets forth requirements relating to, among other things, the terms of an
issue of Municipal Obligations purchased by a Fund, the amount of Municipal
Obligations which may be purchased in any one
S-25
<PAGE>
issue and the assets of a Fund which may be invested in a particular issue. In
addition, purchases of securities made pursuant to the terms of the Rule must
be approved at least quarterly by the Board of Trustees, including a majority
of the trustees who are not interested persons of the Trust.
NET ASSET VALUE
As stated in the Prospectus, the net asset value of the shares of the Funds
will be determined separately for each class of the Fund's shares by The Chase
Manhattan Bank, the Funds' custodian, as of the close of trading (normally 4:00
p.m. Eastern Time) on each day on which the New York Stock Exchange (the
"Exchange") is normally open for trading. The Exchange is not open for trading
on New Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of a class of shares of a Fund will be computed by dividing the
market value of the Fund's assets attributable to the class, less the
liabilities attributable to the class, by the number of shares of the class
outstanding.
In determining net asset value for the Funds, the Funds' custodian utilizes
the valuations of portfolio securities furnished by a pricing service approved
by the trustees. Securities for which quotations are not readily available
(which constitute a majority of the securities held by the Funds) are valued at
fair value as determined by the pricing service using methods which include
consideration of the following: yields or prices of municipal bonds of
comparable quality, type of issue, coupon, maturity and rating; indications as
to value from dealers; and general market conditions. The pricing service may
employ electronic data processing techniques and/or a matrix system to
determine valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Trust under the general supervision of the
Board of Trustees.
TAX MATTERS
Federal Income Tax Matters
The following discussion of federal income tax matters is based upon the
advice of Morgan, Lewis & Bockius LLP, counsel to the Trust.
Each Fund intends to qualify under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code") for tax treatment as a regulated investment
company. In order to qualify as a regulated investment company, a Fund must
satisfy certain requirements relating to the source of its income,
diversification of its assets, and distributions of its income to shareholders.
First, a Fund must derive at least 90% of its annual gross income (including
tax-exempt interest) from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities, foreign currencies or other income (including but not limited to
gains from options and futures) derived with respect to its business of
investing in such stock or securities (the "90% gross income test"). Second, a
Fund must diversify its holdings so that, at the close of each quarter of its
taxable year, (i) at least 50% of the value of its total assets is comprised of
cash, cash items, United States Government securities, securities of other
regulated investment companies and other securities limited in respect of any
one issuer to an amount not greater in value than 5% of the value of a Fund's
total assets and to not more than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of the total assets is
invested in the securities of any one issuer (other than United States
Government securities and securities of other regulated investment companies)
or two or more issuers controlled by a Fund and engaged in the same, similar or
related trades or businesses.
As a regulated investment company, a Fund will not be subject to federal
income tax on its distributions in any taxable year for which it distributes at
least 90% of the sum of (i) its "investment company taxable income"
S-26
<PAGE>
(which includes dividends, taxable interest, taxable original issue discount
and market discount income, income from securities lending, net short-term
capital gain in excess of long-term capital loss, and any other taxable income
other than "net capital gain" (as defined below) and is reduced by deductible
expenses) and (ii) its net tax-exempt interest (the excess of its gross tax-
exempt interest income over certain disallowed deductions). A Fund may retain
for investment its net capital gain (which consists of the excess of its net
long-term capital gain over its net short-term capital loss). However, if a
Fund retains any net capital gain or any investment company taxable income, it
will be subject to tax at regular corporate rates on the amount retained. If a
Fund retains any capital gain, such Fund may designate the retained amount as
undistributed capital gains in a notice to its shareholders who, if subject to
federal income tax on long-term capital gains, (i) will be required to include
in income for federal income tax purposes, as long-term capital gain, their
shares of such undistributed amount, and (ii) will be entitled to credit their
proportionate shares of the tax paid by such Fund against their federal income
tax liabilities, if any, and to claim refunds to the extent the credit exceeds
such liabilities. For federal income tax purposes, the tax basis of shares
owned by a shareholder of the Fund will be increased by an amount equal under
current law to the difference between the amount of the includible gain and the
tax deemed paid by the shareholder in respect of such shares. Each Fund intends
to distribute at least annually to its shareholders all or substantially all of
its net tax-exempt interest and any investment company taxable income and net
capital gain.
Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain, i.e., the excess of
net long-term capital gain over net short-term capital loss for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or part of any net capital loss, any
net long-term capital loss or any net foreign currency loss incurred after
October 31 as if they had been incurred in the succeeding year.
Each Fund also intends to satisfy conditions (including requirements as to
the proportion of its assets invested in Municipal Obligations) that will
enable it to designate distributions from the interest income generated by
investments in Municipal Obligations, which is exempt from regular federal
income tax when received by such Fund, as exempt-interest dividends.
Shareholders receiving exempt-interest dividends will not be subject to regular
federal income tax on the amount of such dividends. Insurance proceeds received
by a Fund under any insurance policies in respect of scheduled interest
payments on defaulted Municipal Obligations will generally be excludable from
federal gross income under Section 103(a) of the Code. In the case of non-
appropriation by a political subdivision, however, there can be no assurance
that payments made by the insurer representing interest on "non-appropriation"
lease obligations will be excludable from gross income for federal income tax
purposes.
Distributions by a Fund of net interest received from certain taxable
temporary investments (such as certificates of deposit, commercial paper and
obligations of the U.S. Government, its agencies and instrumentalities) and net
short-term capital gains realized by a Fund, if any, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
If a Fund purchases a Municipal Obligation at a market discount, any gain
realized by the Fund upon sale or redemption of the Municipal Obligation will
be treated as taxable interest income to the extent such gain does not exceed
the market discount, and any gain realized in excess of the market discount
will be treated as capital gains. Any net long-term capital gains realized by a
Fund and distributed to shareholders in cash or additional shares, will be
taxable to shareholders as long-term capital gains regardless of the length of
time investors have owned shares of a Fund. Distributions by a Fund that do not
constitute ordinary income dividends, exempt-interest dividends, or capital
gain dividends will be treated as a return of capital to the extent of (and in
reduction of) the shareholder's tax basis in his or her shares. Any excess will
be treated as gain from the sale of his or her shares, as discussed below.
If a Fund has both tax-exempt and taxable income, it will use the "average
annual" method for determining the designated percentage that is taxable income
and designate the use of such method within 60
S-27
<PAGE>
days after the end of the Fund's taxable year. Under this method, one
designated percentage is applied uniformly to all distributions made during the
Fund's taxable year. The percentage of income designated as tax-exempt for any
particular distribution may be substantially different from the percentage of
the Fund's income that was tax-exempt during the period covered by the
distribution.
If a Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to a Fund, defer a Fund's losses, cause
adjustments in the holding periods of a Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
Because the taxable portion of a Fund's investment income consists primarily
of interest, none of its dividends, whether or not treated as exempt-interest
dividends, is expected to qualify under the Code for the dividends received
deductions for corporations.
Prior to purchasing shares in a Fund, the impact of dividends or
distributions which are expected to be or have been declared, but not paid,
should be carefully considered. Any dividend or distribution declared shortly
after a purchase of such shares prior to the record date will have the effect
of reducing the per share net asset value by the per share amount of the
dividend or distribution.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by a Fund (and received by
the shareholders) on December 31.
The redemption or exchange of the shares of a Fund normally will result in
capital gain or loss to the shareholders. Generally, a shareholder's gain or
loss will be long-term gain or loss if the shares have been held for more than
one year. Present law taxes both long- and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, net capital gains (i.e., the excess of net long-term
capital gain over net short-term capital loss) will be taxed at a maximum
marginal rate of 20%, while short-term capital gains and other ordinary income
will be taxed at a maximum marginal rate of 39.6%. Because of the limitations
on itemized deductions and the deduction for personal exemptions applicable to
higher income taxpayers, the effective tax rate may be higher in certain
circumstances.
All or a portion of a sales charge paid in purchasing shares of a Fund cannot
be taken into account for purposes of determining gain or loss on the
redemption or exchange of such shares within 90 days after their purchase to
the extent shares of a Fund or another fund are subsequently acquired without
payment of a sales charge pursuant to the reinvestment or exchange privilege.
Any disregarded portion of such charge will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. Moreover, losses
recognized by a shareholder on the redemption or exchange of shares of a Fund
held for six months or less are disallowed to the extent of any distribution of
exempt-interest dividends received with respect to such shares and, if not
disallowed, such losses are treated as long-term capital losses to the extent
of any distributions of long-term capital gains made with respect to such
shares. In addition, no loss will be allowed on the redemption or exchange of
shares of a Fund if the shareholder purchases other shares of such Fund
(whether through reinvestment of distributions or otherwise) or the shareholder
acquires or enters into a contract or option to acquire securities that are
substantially identical to shares of a Fund within a period of 61 days
beginning 30 days before and ending 30 days after such redemption or exchange.
If disallowed, the loss will be reflected in an adjustment to the basis of the
shares acquired.
It may not be advantageous from a tax perspective for shareholders to redeem
or exchange shares after tax-exempt income has accrued but before the record
date for the exempt-interest dividend representing the
S-28
<PAGE>
distribution of such income. Because such accrued tax-exempt income is included
in the net asset value per share (which equals the redemption or exchange
value), such a redemption could result in treatment of the portion of the sales
or redemption proceeds equal to the accrued tax-exempt interest as taxable gain
(to the extent the redemption or exchange price exceeds the shareholder's tax
basis in the shares disposed of) rather than tax-exempt interest.
In order to avoid a 4% federal excise tax, a Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and the excess of realized capital gains over
realized capital losses for the prior year that was not distributed during such
year and on which such Fund paid no federal income tax. For purposes of the
excise tax, a regulated investment company may reduce its capital gain net
income (but not below its net capital gain) by the amount of any net ordinary
loss for the calendar year. The Funds intend to make timely distributions in
compliance with these requirements and consequently it is anticipated that they
generally will not be required to pay the excise tax.
If in any year a Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year (other than interest
income from Municipal Obligations), and distributions to its shareholders would
be taxable to shareholders as ordinary dividend income for federal income tax
purposes to the extent of the Fund's available earnings and profits.
Because the Funds may invest in private activity bonds, the interest on which
is not federally tax-exempt to persons who are "substantial users" of the
facilities financed by such bonds or "related persons" of such "substantial
users," the Funds may not be an appropriate investment for shareholders who are
considered either a "substantial user" or a "related person" within the meaning
of the Code. For additional information, investors should consult their tax
advisers before investing in a Fund.
Federal tax law imposes an alternative minimum tax with respect to both
corporations and individuals. Interest on certain Municipal Obligations, such
as bonds issued to make loans for housing purposes or to private entities (but
not for certain tax-exempt organizations such as universities and non-profit
hospitals), is included as an item of tax preference in determining the amount
of a taxpayer's alternative minimum taxable income. To the extent that a Fund
receives income from Municipal Obligations subject to the alternative minimum
tax, a portion of the dividends paid by it, although otherwise exempt from
federal income tax, will be taxable to shareholders to the extent that their
tax liability is determined under the alternative minimum tax regime. The Funds
will annually supply shareholders with a report indicating the percentage of
Fund income attributable to Municipal Obligations subject to the federal
alternative minimum tax.
In addition, the alternative minimum taxable income for corporations is
increased by 75% of the difference between an alternative measure of income
("adjusted current earnings") and the amount otherwise determined to be the
alternative minimum taxable income. Interest on all Municipal Obligations, and
therefore all distributions by the Funds that would otherwise be tax-exempt, is
included in calculating a corporation's adjusted current earnings.
Tax-exempt income, including exempt-interest dividends paid by a Fund, will
be added to the taxable income of individuals receiving social security or
railroad retirement benefits in determining whether a portion of that benefit
will be subject to federal income tax.
The Code provides that interest on indebtedness incurred or continued to
purchase or carry shares of any Fund is not deductible. Under rules used by the
IRS for determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of shares of a Fund may
be considered
S-29
<PAGE>
to have been made with borrowed funds even though such funds are not directly
traceable to the purchase of shares.
The Funds are required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares
who have not furnished to the Funds their correct taxpayer identification
number (in the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The
Code and Treasury Regulations are subject to change by legislative or
administrative action, and any such change may be retroactive with respect to
Fund transactions. Shareholders are advised to consult their own tax advisors
for more detailed information concerning the federal taxation of the Funds and
the income tax consequences to their shareholders.
State Tax Matters
The discussion of tax treatment is based on the assumptions that the Funds
will qualify under Subchapter M of the Code as regulated investment companies
and as qualified investment funds under applicable state law, that they will
satisfy the conditions which will cause distributions to qualify as exempt-
interest dividends to shareholders when distributed as intended, and that each
Fund will distribute all interest and dividends it receives to its
shareholders. Unless otherwise noted, shareholders in each Fund will not be
subject to state income taxation on distributions that are attributable to
interest earned on the municipal obligations issued by that state or its
subdivisions, or on obligations of the United States. Shareholders generally
will be required to include capital gain distributions in their income for
state tax purposes. The tax discussion summarizes general state tax laws which
are currently in effect and are subject to change by legislative or
administrative action; any such changes may be retroactive with respect to the
applicable Fund's transactions. Investors should consult a tax advisor for more
detailed information about state taxes to which they may be subject.
Maryland
The following is a general, abbreviated summary of certain provisions of the
applicable Maryland tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Maryland
Fund. This summary does not address the taxation of other shareholders. These
provisions are subject to change by legislative or administrative action, and
any such change may be retroactive with respect to Maryland Fund transactions.
The following is based on the assumptions that the Maryland Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Maryland Fund distributions to qualify
as exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Maryland Fund's shareholders.
The Maryland Fund will be subject to the Maryland corporate income tax only
if it has a sufficient nexus with Maryland. If it is subject to the Maryland
corporate income tax, it does not expect to pay a material amount of such tax.
Distributions by the Maryland Fund that are attributable to interest on or
gain from the sale or exchange of any obligation of Maryland or its political
subdivisions ("Maryland Obligations") or any obligations of the United States,
its territories, possessions, or instrumentalities that are exempt from state
taxation under federal law ("Federal Obligations") will not be subject to the
Maryland individual income tax or the Maryland
S-30
<PAGE>
corporate income tax. All remaining distributions to shareholders will be
subject to the Maryland individual and corporate income taxes, and in the case
of individuals, will be subject to local taxes as well.
Gain on the sale, exchange, or other disposition of shares of the Maryland
Fund will be subject to the Maryland individual and corporate income taxes, and
in the case of individuals, will be subject to local taxes as well.
Shares of the Maryland Fund may be subject to the Maryland estate tax if
owned by a Maryland decedent at the time of death.
Shareholders are advised to consult with their own tax advisors for more
detailed information concerning Maryland state and local tax matters.
Arizona
The following is a general, abbreviated summary of certain provisions of the
applicable Arizona tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Arizona Fund.
This summary does not address the taxation of other shareholders nor does it
discuss any local taxes that may be applicable. These provisions are subject to
change by legislative or administrative action, and any such change may be
retroactive with respect to Arizona Fund transactions.
The following is based on the assumptions that the Arizona Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
be registered as a diversified management company under (S)5 of the Federal
Investment Company Act of 1940, that it will satisfy the conditions which will
cause Arizona Fund distributions to qualify as exempt-interest dividends to
shareholders, and that it will distribute all interest and dividends it
receives to the Arizona Fund's shareholders.
The Arizona Fund is not subject to the Arizona corporate income tax.
Distributions by the Arizona Fund that are attributable to interest on any
obligation of Arizona and its political subdivisions or to interest on
obligations of the United States, its territories, possessions or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the Arizona individual and corporate income taxes. All
remaining distributions, including distributions attributable to capital gains,
will be subject to the Arizona individual and corporate income taxes.
Gain on the sale, exchange, or other disposition of shares of the Arizona
Fund will be subject to the Arizona individual and corporate income taxes.
Shares of the Arizona Fund may be subject to the Arizona estate tax if owned
by an Arizona decedent at the time of death.
Shareholders are advised to consult with their own tax advisors for more
detailed information concerning Arizona state and local tax matters.
Colorado
The following is a general, abbreviated summary of certain provisions of the
applicable Colorado tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Colorado
Fund. This summary does not address the taxation of other shareholders nor does
it discuss any local taxes that may be applicable. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to Colorado Fund transactions.
The following is based on the assumptions that the Colorado Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Colorado Fund
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<PAGE>
distributions to qualify as exempt-interest dividends to shareholders, and that
it will distribute all interest and dividends it receives to the Colorado
Fund's shareholders.
The Colorado Fund will be subject to the Colorado corporate income tax only
if it has a sufficient nexus with Colorado. If it is subject to the Colorado
corporate income tax, it does not expect to pay a material amount of such tax.
Distributions by the Colorado Fund that are attributable to interest earned
on any obligation of Colorado and its political subdivisions issued on or after
May 1, 1980 and certain such obligations issued before May 1, 1980 or to
interest on obligations of the United States, its territories, possessions or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the Colorado individual or corporate income tax. All other
distributions, including distributions attributable to capital gains, will be
subject to the Colorado individual and corporate income taxes.
Gain on the sale, exchange, or other disposition of shares of the Colorado
Fund will be subject to the Colorado individual and corporate income taxes.
Shares of the Colorado Fund may be subject to the Colorado estate tax if
owned by an Colorado decedent at the time of death.
Shareholders are advised to consult with their own tax advisors for more
detailed information concerning Colorado state and local tax matters.
Florida
The following is a general, abbreviated summary of certain provisions of the
applicable Florida tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Florida Fund.
This summary does not address the taxation of other shareholders nor does it
discuss any local taxes that may be applicable. These provisions are subject to
change by legislative or administrative action, and any such change may be
retroactive with respect to Florida Fund transactions.
The following is based on the assumptions that the Florida Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause distributions of the Florida Fund to
qualify as exempt-interest dividends to shareholders, and that it will
distribute all interest and dividends it receives to the Florida Fund's
shareholders.
The Florida Fund will be subject to the Florida corporate income tax only if
it has a sufficient nexus with Florida. If the Florida Fund is subject to the
Florida corporate income tax, it does not expect to pay a material amount of
such tax. The Florida Fund will not be subject to the Florida intangible
personal property tax.
Shares of the Florida Fund will not be subject to the Florida intangible
personal property tax if on January 1 of the taxable year, at least 90 percent
of the Fund's assets consist of tax-exempt obligations of Florida and its
political subdivisions ("Florida Obligations") or of the United States, its
territories, possessions or instrumentalities that are exempt from state
taxation under federal law ("Federal Obligations"). If more than 10 percent of
the Fund's assets consist of any other types of assets on that date, then the
entire value of the Fund's shares (except for the portion of the value of the
shares attributable to Federal Obligations) will be subject to the Florida
intangible personal property tax.
All distributions by the Florida Fund to corporate shareholders either
organized or doing business in Florida, regardless of source, will be subject
to the Florida corporate income tax. Gain on the sale, exchange, or other
dispositions of shares of the Florida Fund will be subject to the Florida
corporate income tax.
S-32
<PAGE>
Shares of the Florida Fund may be subject to the Florida estate tax if owned
by a Florida decedent at the time of death.
Shareholders are advised to consult with their own tax advisors for more
detailed information concerning Florida state and local tax matters.
New Mexico
The following is a general, abbreviated summary of certain provisions of the
applicable New Mexico tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the New Mexico
Fund. This summary does not address the taxation of other shareholders nor does
it discuss any local taxes that may be applicable. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to New Mexico Fund transactions.
The following is based on the assumptions that the New Mexico Fund will
qualify under Subchapter M of the Code as a regulated investment company, that
it will satisfy the conditions which will cause New Mexico Fund distributions
to qualify as exempt-interest dividends to shareholders, and that it will
distribute all interest and dividends it receives to the New Mexico Fund's
shareholders.
The New Mexico Fund will be subject to the New Mexico corporate franchise tax
and the New Mexico corporate income tax only if it has a sufficient nexus with
New Mexico. If the New Mexico Fund is subject to such taxes, it does not expect
to pay a material amount of either tax.
Distributions by the New Mexico Fund that are attributable to interest on any
obligation of New Mexico and its political subdivisions or to interest on
obligations of the United States, its territories, possessions or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the New Mexico personal income tax or the New Mexico
corporate income tax. All other distributions, including distributions
attributable to capital gains, will be subject to the New Mexico personal and
corporate income taxes.
Gain on the sale, exchange, or other disposition of shares of the New Mexico
Fund will be subject to the New Mexico personal and corporate income taxes.
Shares of the New Mexico Fund may be subject to the New Mexico estate tax if
owned by a New Mexico decedent at the time of death.
Shareholders are advised to consult with their own tax advisors for more
detailed information concerning New Mexico and local tax matters.
Pennsylvania
The following is a general, abbreviated summary of certain provisions of the
applicable Pennsylvania tax law as presently in effect as it directly governs
the taxation of resident individual and corporate shareholders of the
Pennsylvania Fund. This summary does not address the taxation of other
shareholders. These provisions are subject to change by legislative or
administrative action, and any such change may be retroactive with respect to
Pennsylvania Fund transactions.
The following is based on the assumptions that the Pennsylvania Fund will
qualify under Subchapter M of the Code and under the Investment Company Act of
1940 as a regulated investment company, that it will satisfy the conditions
which will cause Pennsylvania Fund distributions to qualify as exempt-interest
dividends to shareholders, and that it will distribute all interest and
dividends it receives to the Pennsylvania Fund's shareholders.
The Pennsylvania Fund will not be subject to the Pennsylvania corporate net
income tax. The Pennsylvania Fund will not be subject to the Pennsylvania
franchise tax.
S-33
<PAGE>
Distributions from the Pennsylvania Fund that are attributable to interest on
any obligation of Pennsylvania or its political subdivisions or to interest on
obligations of the United States, its territories, possessions, or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the Pennsylvania personal income tax, the Pennsylvania
corporate net income tax, or to the Philadelphia School District income tax
(for Philadelphia residents). Distributions by the Pennsylvania Fund that are
attributable to interest on the obligations of states other than Pennsylvania
will not be subject to the Pennsylvania corporate net income tax unless they
are subject to federal income tax. Most other distributions, including those
attributable to capital gains, will be subject to the Pennsylvania personal and
corporate income taxes. Similarly, such other distributions would be subject to
the Philadelphia School District income tax (for Philadelphia residents) except
for distributions attributable to capital gains in respect to obligations held
by the Pennsylvania Fund.
Gain on the sale, exchange, or other disposition of shares of the
Pennsylvania Fund will be subject to the Pennsylvania personal and corporate
income taxes, but such gain will not be subject to the Philadelphia School
District income tax (for Philadelphia residents) if the shares are held in
excess of six months.
Shares of the Pennsylvania Fund may be subject to the Pennsylvania
inheritance tax and the Pennsylvania estate tax if held by a Pennsylvania
decedent at the time of death.
Shareholders are advised to consult with their own tax advisors for more
detailed information concerning Pennsylvania and local tax matters.
Virginia
The following is a general, abbreviated summary of certain provisions of the
applicable Virginia tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the Virginia
Fund. This summary does not address the taxation of other shareholders. These
provisions are subject to change by legislative or administrative action, and
any such change may be retroactive with respect to Virginia Fund transactions.
The following is based on the assumptions that the Virginia Fund will qualify
under Subchapter M of the Code as a regulated investment company, that it will
satisfy the conditions which will cause Virginia Fund distributions to qualify
as exempt-interest dividends to shareholders, and that it will distribute all
interest and dividends it receives to the Virginia Fund's shareholders.
The Virginia Fund will be subject to the Virginia corporate income tax only
if it has a sufficient nexus with Virginia. If it is subject to the Virginia
corporate income tax, it does not expect to pay a material amount of such tax.
Distributions by the Virginia Fund that are attributable to income derived
from or on the sale and exchange of, obligations of Virginia and its political
subdivisions and instrumentalities ("Virginia Obligations") or to income
derived from or on the sale and exchange of, obligations of the United States
and its territories, possessions or instrumentalities that are exempt from
state taxation under federal law ("Federal Obligations") will not be subject to
the Virginia personal income tax or the Virginia corporate income tax. All
remaining distributions will be subject to the Virginia personal and corporate
income taxes, and may be subject to local income taxes.
Gain on the sale, exchange, or other disposition of shares of the Virginia
Fund will be subject to the Virginia personal and corporate income taxes.
If a shareholder receives a distribution consisting in part of taxable
income, then the entire distribution will be taxed unless the shareholder
substantiates the portion which is exempt from taxation.
S-34
<PAGE>
Shares of the Virginia Fund may be subject to the Virginia estate tax if
owned by a Virginia decedent at the time of death.
Shareholders are advised to consult with their own tax advisors for more
detailed information concerning Virginia state and local tax matters.
PERFORMANCE INFORMATION
The historical investment performance of the Funds may be shown in the form
of "yield," "taxable equivalent yield," "average annual total return,"
"cumulative total return" and "taxable equivalent total return" figures, each
of which will be calculated separately for each class of shares.
In accordance with a standardized method prescribed by rules of the
Securities and Exchange Commission ("SEC"), yield is computed by dividing the
net investment income per share earned during the specified one month or 30-day
period by the maximum offering price per share on the last day of the period,
according to the following formula:
Yield=2[(a-b +1)/6/ -1]
cd
In the above formula, a = dividends and interest earned during the period; b
= expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the maximum offering price per share on the last day
of the period. In the case of Class A shares, the maximum offering price
includes the current maximum front-end sales charge of 4.20%.
In computing yield, the Funds follow certain standardized accounting
practices specified by SEC rules. These practices are not necessarily
consistent with those that the Funds use to prepare their annual and interim
financial statements in conformity with generally accepted accounting
principles. Thus, yield may not equal the income paid to shareholders or the
income reported in a Fund's financial statements.
Taxable equivalent yield is computed by dividing that portion of the yield
which is tax-exempt by the remainder of (1 minus the stated combined federal
and state income tax rate, taking into account the deductibility of state taxes
for federal income tax purposes) and adding the product to that portion, if
any, of the yield that is not tax exempt.
S-35
<PAGE>
The taxable equivalent yields quoted below are based upon (1) the stated
combined federal and state income tax rates and (2) the yields for the 30-day
period quoted in the left-hand column.
<TABLE>
<CAPTION>
As of May 31, 2000
------------------------------------------
Combined Federal Taxable
Yield and State Tax Rate* Equivalent Yield
----- ------------------- ----------------
<S> <C> <C> <C>
Nuveen Arizona Municipal Bond
Fund
Class A Shares............. 3.69% 42.5% 6.42%
Class B Shares ............ 3.10% 42.5% 5.39%
Class C Shares............. 3.30% 42.5% 5.74%
Class R Shares............. 4.04% 42.5% 7.03%
Nuveen Colorado Municipal
Bond Fund
Class A Shares............. 2.27% 42.5% 3.95%
Class B Shares ............ 1.62% 42.5% 2.82%
Class C Shares............. 1.81% 42.5% 3.15%
Class R Shares............. 2.33% 42.5% 4.05%
Nuveen Florida Municipal Bond
Fund
Class A Shares............. 3.53% 39.6% 5.84%
Class B Shares ............ 2.93% 39.6% 4.85%
Class C Shares............. 3.13% 39.6% 5.18%
Class R Shares............. 3.88% 39.6% 6.42%
Nuveen Maryland Municipal
Bond Fund
Class A Shares............. 4.21% 42.5% 7.32%
Class B Shares ............ 3.65% 42.5% 6.35%
Class C Shares............. 3.85% 42.5% 6.70%
Class R Shares............. 4.60% 42.5% 8.00%
Nuveen New Mexico Municipal
Bond Fund
Class A Shares............. 2.87% 44.5% 5.17%
Class B Shares ............ 2.25% 44.5% 4.05%
Class C Shares............. 2.44% 44.5% 4.40%
Class R Shares............. 3.19% 44.5% 5.75%
Nuveen Pennsylvania Municipal
Bond Fund
Class A Shares............. 3.46% 41.5% 5.91%
Class B Shares ............ 2.86% 41.5% 4.89%
Class C Shares............. 3.07% 41.5% 5.25%
Class R Shares............. 3.81% 41.5% 6.51%
Nuveen Virginia Municipal
Bond Fund
Class A Shares............. 4.53% 43.0% 7.95%
Class B Shares ............ 3.98% 43.0% 6.98%
Class C Shares............. 4.18% 43.0% 7.33%
Class R Shares............. 4.92% 43.0% 8.63%
</TABLE>
--------
* The combined tax rates used in these tables represent the highest or one
of the highest combined tax rates applicable to state taxpayers, rounded
to the nearest .5%; these rates do not reflect the current federal tax
limitations on itemized deductions and personal exemptions, which may
raise the effective tax rate and taxable equivalent yield for taxpayers
above certain income levels.
S-36
<PAGE>
For additional information concerning taxable equivalent yields, see the
Taxable Equivalent Yields tables in the Prospectus.
The Funds may from time to time in their advertising and sales materials
report a quotation of their current distribution rate. The distribution rate
represents a measure of dividends distributed for a specified period.
Distribution rate is computed by taking the most recent monthly tax-free income
dividend per share, multiplying it by 12 to annualize it, and dividing by the
appropriate price per share (e.g., net asset value for purchases to be made
without a load such as reinvestments from Nuveen Defined Portfolios, or the
maximum public offering price). The distribution rate differs from yield and
total return and therefore is not intended to be a complete measure of
performance. Distribution rate may sometimes differ from yield because a Fund
may be paying out more than it is earning and because it may not include the
effect of amortization of bond premiums to the extent such premiums arise after
the bonds were purchased.
The distribution rates as of the date quoted, based on the maximum public
offering price then in effect for the Funds, and assuming the imposition of the
maximum sales charge for Class A Shares of 4.20%, were as follows:
<TABLE>
<CAPTION>
May 31, 2000
-----------------------------
Distribution Rates
-----------------------------
Class
Class A B Class C Class R
------- ----- ------- -------
<S> <C> <C> <C> <C>
Nuveen Arizona Municipal Bond Fund.......... 4.83% 4.28% 4.52% 5.27%
Nuveen Colorado Municipal Bond Fund......... 5.08% 4.54% 4.74% 5.49%
Nuveen Florida Municipal Bond Fund ......... 5.24% 4.70% 4.93% 5.66%
Nuveen Maryland Municipal Bond Fund......... 4.75% 4.21% 4.39% 5.14%
Nuveen New Mexico Municipal Bond Fund....... 4.82% 4.22% 4.48% 5.21%
Nuveen Pennsylvania Municipal Bond Fund..... 5.15% 4.60% 4.80% 5.57%
Nuveen Virginia Municipal Bond Fund......... 5.01% 4.51% 4.69% 5.47%
</TABLE>
Average annual total return quotation is computed in accordance with a
standardized method prescribed by SEC rules. The average annual total return
for a specific period is found by taking a hypothetical, $1,000 investment
("initial investment") in Fund shares on the first day of the period, reducing
the amount to reflect the maximum sales charge, and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted
from the result, which is then expressed as a percentage. The calculation
assumes that all income and capital gains distributions have been reinvested in
Fund shares at net asset value on the reinvestment dates during the period.
Total returns for the oldest class of each fund reflect actual performance
for all periods. For other classes, total returns reflect actual performance
for periods since class inception, and the oldest class's performance for
periods prior to inception, adjusted for the differences in sales charges and
fees between the classes.
S-37
<PAGE>
The inception dates for each class of the Funds' shares are as follows:
<TABLE>
<CAPTION>
Inception Dates
------------------
<S> <C>
Arizona Municipal Bond Fund
Class A Shares............................................. October 29, 1986
Class B Shares............................................. February 1, 1997
Class C Shares............................................. February 7, 1994
Class R Shares............................................. February 1, 1997
Colorado Municipal Bond Fund
Class A Shares............................................. May 4, 1987
Class B Shares............................................. February 1, 1997
Class C Shares............................................. February 1, 1997
Class R Shares............................................. February 1, 1997
Florida Municipal Bond Fund
Class A Shares............................................. June 15, 1990
Class B Shares............................................. February 1, 1997
Class C Shares............................................. September 14, 1995
Class R Shares............................................. February 1, 1997
Maryland Municipal Bond Fund
Class A Shares............................................. September 6, 1994
Class B Shares............................................. February 1, 1997
Class C Shares............................................. September 6, 1994
Class R Shares............................................. July 26, 1991
New Mexico Municipal Bond Fund
Class A Shares............................................. September 16, 1992
Class B Shares............................................. February 1, 1997
Class C Shares............................................. February 1, 1997
Class R Shares............................................. February 1, 1997
Pennsylvania Municipal Bond Fund
Class A Shares............................................. October 29, 1986
Class B Shares............................................. February 1, 1997
Class C Shares............................................. February 2, 1994
Class R Shares............................................. February 1, 1997
Virginia Municipal Bond Fund
Class A Shares............................................. March 27, 1986
Class B Shares............................................. February 1, 1997
Class C Shares............................................. October 4, 1993
Class R Shares............................................. February 1, 1997
</TABLE>
S-38
<PAGE>
The annual total return figures for the Funds, including the effect of the
maximum sales charge for Class A shares, and applicable CDSC for Class B
Shares, for the one-year, five-year, and ten-year periods (as applicable) ended
May 31, 2000 and for the period from inception through May 31, 2000,
respectively, using the performance of the oldest class for periods prior to
the inception of the newer classes, as described above, were as follows:
<TABLE>
<CAPTION>
Annual Total Return
---------------------------------------
From
One Year Five Years Ten Years Inception
Ended Ended Ended through
May 31, May 31, May 31, May 31,
2000 2000 2000 2000
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Arizona Municipal Bond
Fund
Class A Shares................ -7.77% 3.35% 6.08% 6.31%
Class B Shares................ -8.12% 3.36% 6.04% 6.31%
Class C Shares................ -4.28% 3.69% 5.95% 6.06%
Class R Shares................ -3.53% 4.40% 6.62% 6.71%
Nuveen Colorado Municipal Bond
Fund
Class A Shares................ -10.13% 3.47% 5.93% 5.85%
Class B Shares................ -10.43% 3.54% 5.90% 5.84%
Class C Shares................ -6.73% 3.85% 5.94% 5.77%
Class R Shares................ -6.08% 4.51% 6.46% 6.26%
Nuveen Florida Municipal Bond
Fund
Class A Shares................ -6.26% 3.23% N/A 5.86%
Class B Shares................ -6.80% 3.25% N/A 5.83%
Class C Shares................ -2.79% 3.57% N/A 5.73%
Class R Shares................ -2.07% 4.26% N/A 6.38%
Nuveen Maryland Municipal Bond
Fund
Class A Shares................ -7.77% 2.69% N/A 4.45%
Class B Shares................ -8.10% 2.71% N/A 4.30%
Class C Shares................ -4.16% 2.99% N/A 4.33%
Class R Shares................ -3.43% 3.84% N/A 5.26%
Nuveen New Mexico Municipal Bond
Fund
Class A Shares................ -8.09% 3.36% N/A 4.68%
Class B Shares................ -8.41% 3.38% N/A 4.60%
Class C Shares................ -4.71% 3.75% N/A 4.81%
Class R Shares................ -3.89% 4.43% N/A 5.39%
Nuveen Pennsylvania Municipal
Bond Fund
Class A Shares................ -9.20% 3.06% 5.60% 5.80%
Class B Shares................ -9.51% 3.12% 5.58% 5.80%
Class C Shares................ -5.73% 3.38% 5.47% 5.56%
Class R Shares................ -4.93% 4.10% 6.13% 6.20%
</TABLE>
S-39
<PAGE>
<TABLE>
<CAPTION>
Annual Total Return
---------------------------------------
From
One Year Five Years Ten Years Inception
Ended Ended Ended through
May 31, May 31, May 31, May 31,
2000 2000 2000 2000
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Virginia Municipal Bond
Fund
Class A Shares............... -6.81% 3.58% 5.94% 6.31%
Class B Shares............... -7.13% 3.61% 5.91% 6.31%
Class C Shares............... -3.16% 3.90% 5.82% 6.05%
Class R Shares............... -2.49% 4.62% 6.48% 6.69%
</TABLE>
Calculation of cumulative total return is not subject to a prescribed
formula. Cumulative total return for a specific period is calculated by first
taking a hypothetical initial investment in Fund shares on the first day of the
period, deducting (in some cases) the maximum sales charge, and computing the
"redeemable value" of that investment at the end of the period. The cumulative
total return percentage is then determined by subtracting the initial
investment from the redeemable value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains distributions by the Fund have been
reinvested at net asset value on the reinvestment dates during the period.
Cumulative total return may also be shown as the increased dollar value of the
hypothetical investment over the period.
S-40
<PAGE>
The cumulative total return figures for the Funds, including the effect of
the maximum sales charge for the Class A Shares, and applicable CDSC for Class
B Shares, for the one-year, five-year and ten-year periods (as applicable)
ended May 31, 2000, and for the period since inception through May 31, 2000,
respectively, using the performance of the oldest class for periods prior to
the inception of the newer classes, as described above, were as follows:
<TABLE>
<CAPTION>
Cumulative Total Return
---------------------------------------
From
One Year Ten Years Inception
Ended Five Years Ended Through
May 31, Ended May May 31, May 31,
2000 31, 2000 2000 2000
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Arizona Municipal Bond
Fund
Class A Shares................ -7.77% 17.90% 80.52% 129.65%
Class B Shares................ -8.12% 17.98% 79.76% 129.58%
Class C Shares................ -4.28% 19.86% 78.29% 122.43%
Class R Shares................ -3.53% 24.00% 89.76% 141.54%
Nuveen Colorado Municipal Bond
Fund
Class A Shares................ -10.13% 18.59% 77.93% 109.44%
Class B Shares................ -10.43% 19.02% 77.47% 109.24%
Class C Shares................ -6.73% 20.77% 78.01% 107.34%
Class R Shares................ -6.08% 24.68% 86.97% 120.13%
Nuveen Florida Municipal Bond
Fund
Class A Shares................ -6.26% 17.25% N/A 76.30%
Class B Shares................ -6.80% 17.32% N/A 75.88%
Class C Shares................ -2.79% 19.14% N/A 74.27%
Class R Shares................ -2.07% 23.18% N/A 85.17%
Nuveen Maryland Municipal Bond
Fund
Class A Shares................ -7.77% 14.21% N/A 43.23%
Class B Shares................ -8.10% 14.28% N/A 41.58%
Class C Shares................ -4.16% 15.89% N/A 41.93%
Class R Shares................ -3.43% 20.75% N/A 52.63%
Nuveen New Mexico Municipal Bond
Fund
Class A Shares................ -8.09% 17.96% N/A 42.35%
Class B Shares................ -8.41% 18.08% N/A 41.41%
Class C Shares................ -4.71% 20.22% N/A 43.58%
Class R Shares................ -3.89% 24.22% N/A 49.82%
Nuveen Pennsylvania Municipal
Bond Fund
Class A Shares ............... -9.20% 16.27% 72.45% 115.21%
Class B Shares................ -9.51% 16.63% 72.14% 115.14%
Class C Shares................ -5.73% 18.10% 70.37% 108.52%
Class R Shares................ -4.93% 22.27% 81.28% 126.35%
</TABLE>
S-41
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return
---------------------------------------
From
One Year Ten Years Inception
Ended Five Years Ended Through
May 31, Ended May May 31, May 31,
2000 31, 2000 2000 2000
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Nuveen Virginia Municipal Bond
Fund
Class A Shares .............. -6.81% 19.24% 78.08% 138.15%
Class B Shares............... -7.13% 19.38% 77.60% 137.97%
Class C Shares............... -3.16% 21.09% 76.07% 129.96%
Class R Shares............... -2.49% 25.35% 87.35% 150.45%
</TABLE>
Calculation of taxable equivalent total return is also not subject to a
prescribed formula. The taxable equivalent total return of a tax-exempt fund
represents the pre-tax total return a hypothetical taxable fixed-income
investment paying the same after-tax income as the tax-exempt fund (based on an
assumed income tax rate) and otherwise experiencing the same investment
performance as the tax-exempt fund would have provided. This figure can
facilitate the comparison of otherwise comparable taxable and tax-exempt funds.
Taxable equivalent total return for a specific period is calculated by first
taking a hypothetical initial investment in Fund shares on the first day of the
period, computing the total return for each calendar year in the period in the
manner described above, and increasing the total return for each such calendar
year by the amount of additional income that a taxable fund would need to have
generated to equal the income on an after-tax basis, at a specified income tax
rate (usually the highest marginal federal tax rate), calculated as described
above under the discussion of "taxable equivalent yield." The resulting amount
for the calendar year is then divided by the initial investment amount to
arrive at a "taxable equivalent total return factor" for the calendar year. The
taxable equivalent total return factors for all the calendar years are then
multiplied together and the result is then annualized by taking its Nth root (N
representing the number of years in the period) and subtracting 1, which
provides a taxable equivalent total return expressed as a percentage.
Using a 42.50% combined marginal federal and state tax rate for 2000, the
annual taxable equivalent total return for the Maryland Municipal Bond Fund's
Class R Shares for the five-year period ended May 31, 2000 was 7.56%.
Class A Shares of the Funds are sold at net asset value plus a current
maximum sales charge of 4.20% of the offering price. This current maximum sales
charge will typically be used for purposes of calculating performance figures.
Yield, returns and net asset value of each class of shares of the Funds will
fluctuate. Factors affecting the performance of the Funds include general
market conditions, operating expenses and investment management. Any additional
fees charged by a securities representative or other financial services firm
would reduce returns described in this section. Shares of the Funds are
redeemable at net asset value, which may be more or less than original cost.
In reports or other communications to shareholders or in advertising and
sales literature, the Funds may also compare their performance with that of:
(1) the Consumer Price Index or various unmanaged bond indexes such as the
Lehman Brothers Municipal Bond Index and the Salomon Brothers High Grade
Corporate Bond Index and (2) other fixed income or municipal bond mutual funds
or mutual fund indexes as reported by Lipper Analytical Services, Inc.
("Lipper"), Morningstar, Inc. ("Morningstar"), Wiesenberger Investment
Companies Service ("Wiesenberger") and CDA Investment Technologies, Inc.
("CDA") or similar independent services which monitor the performance of mutual
funds, or other industry or financial publications such as Barron's, Changing
Times, Forbes and Money Magazine. Performance comparisons by these indexes,
services or publications may rank mutual funds over different periods of time
by means of aggregate, average, year-by-year,
S-42
<PAGE>
or other types of total return and performance figures. Any given performance
quotation or performance comparison should not be considered as representative
of the performance of the Funds for any future period.
Each Fund may from time to time in its advertising and sales materials
compare its current yield or total return with the yield or total return on
taxable investments such as corporate or U.S. Government bonds, bank
certificates of deposit (CDs) or money market funds. These taxable investments
have investment characteristics that differ from those of the Funds. U.S.
Government bonds, for example, are long-term investments backed by the full
faith and credit of the U.S. Government, and bank CDs are generally short-term,
FDIC-insured investments, which pay fixed principal and interest but are
subject to fluctuating rollover rates. Money market funds are short-term
investments with stable net asset values, fluctuating yields and special
features enhancing liquidity.
There are differences and similarities between the investments which the
Funds may purchase and the investments measured by the indexes and reporting
services which are described herein. The Consumer Price Index is generally
considered to be a measure of inflation. The CDA Mutual Fund-Municipal Bond
Index is a weighted performance average of other mutual funds with a federally
tax-exempt income objective. The Salomon Brothers High Grade Corporate Bond
Index is an unmanaged index that generally represents the performance of high
grade long-term taxable bonds during various market conditions. The Lehman
Brothers Municipal Bond Index is an unmanaged index that generally represents
the performance of high grade intermediate and long-term municipal bonds during
various market conditions. Lipper calculates municipal bond fund averages based
on average maturity and credit quality. Morningstar rates mutual funds by
overall risk-adjusted performance, investment objectives, and assets. Lipper,
Morningstar, Wiesenberger and CDA are widely recognized mutual fund reporting
services whose performance calculations are based upon changes in net asset
value with all dividends reinvested and which do not include the effect of any
sales charges. The market prices and yields of taxable and tax-exempt bonds
will fluctuate. The Funds primarily invest in investment grade Municipal
Obligations in pursuing their objective of as high a level of current interest
income which is exempt from federal and state income tax as is consistent, in
the view of the Funds' management, with preservation of capital.
The Funds may also compare their taxable equivalent total return performance
to the total return performance of taxable income funds such as treasury
securities funds, corporate bond funds (either investment grade or high yield),
or Ginnie Mae funds. These types of funds, because of the character of their
underlying securities, differ from municipal bond funds in several respects.
The susceptibility of the price of treasury bonds to credit risk is far less
than that of municipal bonds, but the price of treasury bonds tends to be
slightly more susceptible to change resulting from changes in market interest
rates. The susceptibility of the price of investment grade corporate bonds and
municipal bonds to market interest rate changes and general credit changes is
similar. High yield bonds are subject to a greater degree of price volatility
than municipal bonds resulting from changes in market interest rates and are
particularly susceptible to volatility from credit changes. Ginnie Mae bonds
are generally subject to less price volatility than municipal bonds from credit
concerns, due primarily to the fact that the timely payment of monthly
installments of principal and interest are backed by the full faith and credit
of the U.S. Government, but Ginnie Mae bonds of equivalent coupon and maturity
are generally more susceptible to price volatility resulting from market
interest rate changes. In addition, the volatility of Ginnie Mae bonds due to
changes in market interest rates may differ from municipal bonds of comparable
coupon and maturity because bonds of the sensitivity of Ginnie Mae prepayment
experience to change in interest rates.
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ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION OF FUND SHARES
As described in the Prospectus, the Funds provide you with alternative ways
of purchasing Fund shares based upon your individual investment needs and
preferences.
Each class of shares of a Fund represents an interest in the same portfolio
of investments. Each class of shares is identical in all respects except that
each class bears its own class expenses, including distribution and
administration expenses, and each class has exclusive voting rights with
respect to any distribution or service plan applicable to its shares. As a
result of the differences in the expenses borne by each class of shares, net
income per share, dividends per share and net asset value per share will vary
among a Fund's classes of shares.
Shareholders of each class will share expenses proportionately for services
that are received equally by all shareholders. A particular class of shares
will bear only those expenses that are directly attributable to that class,
where the type or amount of services received by a class varies from one class
to another. For example, class-specific expenses generally will include
distribution and service fees.
The minimum initial investment is $3,000 per fund share class ($50 if you
establish a systematic investment plan), and may be lower for accounts opened
through fee-based programs for which the program Sponsor has established a
single master account with the fund's transfer agent and performs all sub-
accounting services related to that account.
Class A Shares may be purchased at a public offering price equal to the
applicable net asset value per share plus an up-front sales charge imposed at
the time of purchase as set forth in the Prospectus. Shareholders may qualify
for a reduced sales charge, or the sales charge may be waived in its entirety,
as described below. Class A Shares are also subject to an annual service fee of
.20%. See "Distribution and Service Plan." Set forth below is an example of the
method of computing the offering price of the Class A shares of a Fund. The
example assumes a purchase on May 31, 2000 of Class A shares from the Nuveen
Arizona Municipal Bond Fund aggregating less than $50,000 subject to the
schedule of sales charges set forth in the Prospectus at a price based upon the
net asset value of the Class A shares.
<TABLE>
<S> <C>
Net Asset Value per share......................................... $10.24
Per Share Sales Charge--4.20% of public offering price (4.39% of
net asset value per share)....................................... .45
------
Per Share Offering Price to the Public............................ $10.69
</TABLE>
The Funds receive the entire net asset value of all Class A Shares that are
sold. Nuveen retains the full applicable sales charge from which it pays the
uniform reallowances shown in the Prospectus to Authorized Dealers.
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Reduction or Elimination of Up-Front Sales Charge on Class A Shares and Class R
Shares Purchase Eligibility
Rights of Accumulation. You may qualify for a reduced sales charge on a
purchase of Class A Shares of any Fund if the amount of your purchase, when
added to the value that day of all of your prior purchases of shares of any
Fund or of another Nuveen Mutual Fund, or Nuveen exchange-traded fund, or units
of a Nuveen Defined Portfolio, on which an up-front sales charge or ongoing
distribution fee is imposed, or is normally imposed, falls within the amounts
stated in the Class A Sales Charges and Commissions table in "How You Can Buy
and Sell Shares" in the Prospectus. You or your financial advisor must notify
Nuveen or the Fund's transfer agent of any cumulative discount whenever you
plan to purchase Class A Shares of a Fund that you wish to qualify for a
reduced sales charge.
Letter of Intent. You may qualify for a reduced sales charge on a purchase of
Class A Shares of any Fund if you plan to purchase Class A Shares of Nuveen
Mutual Funds over the next 13 months and the total amount of your purchases
would, if purchased at one time, qualify you for one of the reduced sales
charges shown in the Class A Sales Charges and Commissions table in "How You
Can Buy and Sell Shares" in the Prospectus. In order to take advantage of this
option, you must complete the applicable section of the Application Form or
sign and deliver either to an Authorized Dealer or to the Fund's transfer agent
a written Letter of Intent in a form acceptable to Nuveen. A Letter of Intent
states that you intend, but are not obligated, to purchase over the next 13
months a stated total amount of Class A Shares that would qualify you for a
reduced sales charge shown above. You may count shares of a Nuveen Mutual Fund
that you already own on which you paid an up-front sales charge or an ongoing
distribution fee and any Class B or C Shares of a Nuveen Mutual Fund that you
purchase over the next 13 months towards completion of your investment program,
but you will receive a reduced sales charge only on new Class A Shares you
purchase with a sales charge over the 13 months. You cannot count towards
completion of your investment program Class A Shares that you purchase without
a sales charge through investment of distributions from a Nuveen Mutual Fund,
Nuveen Exchange-Traded Fund or a Nuveen Defined Portfolio, or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of
Class A Shares of a Fund following execution of the Letter of Intent will be at
least 5% of the total amount of your intended purchases. You further agree that
shares representing 5% of the total amount of your intended purchases will be
held in escrow pending completion of these purchases. All dividends and capital
gains distributions on Class A Shares held in escrow will be credited to your
account. If total purchases, less redemptions, prior to the expiration of the
13 month period equal or exceed the amount specified in your Letter of Intent,
the Class A Shares held in escrow will be transferred to your account. If the
total purchases, less redemptions, exceed the amount specified in your Letter
of Intent and thereby qualify for a lower sales charge than the sales charge
specified in your Letter of Intent, you will receive this lower sales charge
retroactively, and the difference between it and the higher sales charge paid
will be used to purchase additional Class A Shares on your behalf. If the total
purchases, less redemptions, are less than the amount specified, you must pay
Nuveen an amount equal to the difference between the amounts paid for these
purchases and the amounts which would have been paid if the higher sales charge
had been applied. If you do not pay the additional amount within 20 days after
written request by Nuveen or your financial advisor, Nuveen will redeem an
appropriate number of your escrowed Class A Shares to meet the required
payment. By establishing a Letter of Intent, you irrevocably appoint Nuveen as
attorney to give instructions to redeem any or all of your escrowed shares,
with full power of substitution in the premises.
You or your financial advisor must notify Nuveen or the Fund's transfer agent
whenever you make a purchase of Fund shares that you wish to be covered under
the Letter of Intent option.
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<PAGE>
Reinvestment of Nuveen Defined Portfolio Distributions. You may purchase
Class A Shares without an up-front sales charge by reinvestment of
distributions from any of the various Defined Portfolios sponsored by Nuveen.
There is no initial or subsequent minimum investment requirement for such
reinvestment purchases.
Group Purchase Programs. If you are a member of a qualified group, you may
purchase Class A Shares of any Fund or of another Nuveen Mutual Fund at the
reduced sales charge applicable to the group's purchases taken as a whole. A
"qualified group" is one which has previously been in existence, has a purpose
other than investment, has ten or more participating members, has agreed to
include Fund sales publications in mailings to members and has agreed to comply
with certain administrative requirements relating to its group purchases.
Under any group purchase program, the minimum initial investment in Class A
shares of any particular Fund or portfolio for each participant is $50,
provided that a group invests at least $3,000 and, the minimum monthly
investment in Class A shares of any particular Fund or portfolio by each
participant is $50. No certificates will be issued for any participant's
account. All dividends and other distributions by a Fund will be reinvested in
additional Class A Shares of the same Fund. No participant may utilize a
systematic withdrawal program.
To establish a group purchase program, both the group itself and each
participant must fill out the appropriate application materials, which the
group administrator may obtain from the group's financial advisor, by calling
Nuveen toll-free (800) 257-8787.
Reinvestment of Redemption Proceeds from Unaffiliated Funds Subject to Merger
or Closure. You may also purchase Class A Shares at net asset value without a
sales charge if the purchase takes place through a broker-dealer and represents
the reinvestment of the proceeds of the redemption of shares of one or more
registered investment companies not affiliated with Nuveen that are subject to
merger or closure. You must provide appropriate documentation that the
redemption occurred not more than one year prior to the reinvestment of the
proceeds in Class A Shares, and that you either paid an up-front sales charge
or were subject to a contingent deferred sales charge in respect of the
redemption of such shares of such other investment company.
Special Sales Charge Waivers. Class A Shares of a Fund may be purchased at
net asset value without a sales charge, and may be purchased by the following
categories of investors:
. investors purchasing $1,000,000 or more, Nuveen may pay Authorized
Dealers on Class A sales of $1.0 million and above up to an additional
0.25% of the purchase amounts;
. officers, trustees and former trustees of the Nuveen and former Flagship
Funds;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
S-46
<PAGE>
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services; and
. any eligible employer-sponsored qualified defined contribution retirement
plan. Eligible plans are those with at least 25 employees and that either
(a) make an initial purchase of one or more Nuveen Mutual Funds
aggregating $500,000 or more or (b) execute a Letter of Intent to
purchase in the aggregate $500,000 or more of fund shares. Nuveen will
pay Authorized Dealers a sales commission on these purchases equal to 1%
of the first $2.5 million, plus 0.50% of the next $2.5 million, plus
0.25% of any amount purchased over $5.0 million. For this category of
investors a contingent deferred sales charge of 1% will be assessed on
redemptions within 18 months of purchase, unless waived. Municipal bond
funds are not a suitable investment for individuals investing in
retirement plans.
Also, investors will be able to buy Class A shares at net asset value by
using the proceeds of sales of Nuveen Exchange-Traded Fund shares or the
termination/maturity proceeds from Nuveen Defined Portfolios. You must provide
Nuveen appropriate documentation that the fund sale or Defined Portfolio
termination/maturity occurred not more than one year prior to reinvestment. In
addition, investors also may buy Class A shares at net asset value without a
sales charge by directing their monthly dividends from Nuveen Exchange-Traded
Funds.
Holders of Class C Shares acquired on or before January 31, 1997 can convert
those shares to Class A Shares of the same fund at the shareholder's
affirmative request six years after the date of purchase. Holders of Class C
Shares must submit their request to the transfer agent no later than the last
business day of the 71st month following the month in which they purchased
their shares. Holders of Class C Shares purchased after that date will not have
the option to convert those shares to Class A Shares.
Class B Shares will automatically convert to Class A Shares eight years after
purchase. The purpose of the conversion is to limit the distribution fees you
pay over the life of your investment. All conversions will be done at net asset
value without the imposition of any sales load, fee, or other charge, so that
the value of each shareholder's account immediately before conversion will be
the same as the value of the account immediately after conversion. Class B
Shares acquired through reinvestment of distributions will convert into Class A
Shares based on the date of the initial purchase to which such shares relate.
For this purpose, Class B Shares acquired through reinvestment of distributions
will be attributed to particular purchases of Class B Shares in accordance with
such procedures as the Board of Trustees may determine from time to time. Class
B Shares that are converted to Class A Shares will remain subject to an annual
service fee that is identical in amount for both Class B Shares and Class A
Shares. Since net asset value per share of the Class B Shares and the Class A
Shares may differ at the time of conversion, a shareholder may receive more or
fewer Class A Shares than the number of Class B Shares converted. Any
conversion of Class B Shares into Class A Shares will be subject to the
continuing availability of an opinion of counsel or a private letter ruling
from the Internal Revenue Service to the effect that the conversion of shares
would not constitute a taxable event under federal income tax law. Conversion
of Class B Shares into Class A Shares might be suspended if such an opinion or
ruling were no longer available.
Any Class A Shares purchased pursuant to a special sales charge waiver must
be acquired for investment purposes and on the condition that they will not be
transferred or resold except through redemption by the Funds. You or your
financial advisor must notify Nuveen or the Fund's transfer agent whenever you
make a purchase of Class A Shares of any Fund that you wish to be covered under
these special sales charge waivers.
Class A Shares of any Fund may be issued at net asset value without a sales
charge in connection with the acquisition by a Fund of another investment
company. All purchases under the special sales charge waivers will be subject
to minimum purchase requirements as established by the Funds.
S-47
<PAGE>
In determining the amount of your purchases of Class A Shares of any Fund
that may qualify for a reduced sales charge, the following purchases may be
combined: (1) all purchases by a trustee or other fiduciary for a single trust,
estate or fiduciary account; (2) all purchases by individuals and their
immediate family members (i.e., their spouses, parents, children, grandparents,
grandchildren, parents-in-law, sons- and daughters-in-law, siblings, a
sibling's spouse, and a spouse's siblings); or (3) all purchases made through a
group purchase program as described above.
Class R Share Purchase Eligibility. Class R Shares are available for
purchases of $10 million or more and for purchases using dividends and capital
gains distributions on Class R Shares. Class R Shares also are available for
the following categories of investors:
. officers, trustees and former trustees of the Nuveen and former Flagship
Funds and their immediate family members or trustees/directors of any
fund, sponsored by Nuveen, any parent company of Nuveen and subsidiaries
thereof and their immediate family members;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. officers, directors or bona fide employees of any investment advisory
partner of Nuveen that provides sub-advisory services for a Nuveen
product, or their immediate family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates, or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
. clients of investment advisors, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services.
Any shares purchased by investors falling within any of the first five
categories listed above must be acquired for investment purposes and on the
condition that they will not be transferred or resold except through redemption
by the fund.
In addition, purchasers of Nuveen Defined Portfolios may reinvest their
distributions from such Defined Portfolios in Class R Shares, if, before
September 6, 1994, such purchasers had elected to reinvest distributions in
Nuveen Fund shares (before June 13, 1995 for Nuveen Municipal Bond Fund
shares). Shareholders may exchange their Class R Shares of any Nuveen Fund into
Class R Shares of any other Nuveen Fund.
The reduced sales charge programs may be modified or discontinued by the
Funds at any time.
If you are eligible to purchase either Class R Shares or Class A Shares
without a sales charge at net asset value, you should be aware of the
differences between these two classes of shares. Class A Shares are subject to
an annual service fee to compensate Authorized Dealers for providing you with
ongoing account services. Class R Shares are not subject to a distribution or
service fee and, consequently, holders of Class R Shares may not receive the
sale types or levels of services from Authorized Dealers. In choosing between
Class A Shares and
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<PAGE>
Class R Shares, you should weigh the benefits of the services to be provided by
Authorized Dealers against the annual service fee imposed upon the Class A
Shares.
For more information about the purchase of Class A Shares or reduced sales
charge programs, or to obtain the required application forms, call Nuveen toll-
free at (800) 257-8787.
Reduction or Elimination of Contingent Deferred Sales Charge
Class A Shares are normally redeemed at net asset value, without any
Contingent Deferred Sales Charge ("CDSC"). However, in the case of Class A
Shares purchased at net asset value on or after July 1, 1996 because the
purchase amount exceeded $1 million, where the Authorized Dealer did not waive
the sales commission, a CDSC of 1% is imposed on any redemption within 18
months of purchase. In the case of Class B Shares redeemed within six years of
purchase, a CDSC is imposed, beginning at 5% for redemptions within the first
year, declining to 4% for redemptions within years two and three, and declining
by 1% each year thereafter until disappearing after the sixth year. Class C
Shares are redeemed at net asset value, without any CDSC, except that a CDSC of
1% is imposed upon redemption of Class C Shares that are redeemed within 12
months of purchase.
In determining whether a CDSC is payable, a Fund will first redeem shares not
subject to any charge, and then will redeem shares held for the longest period,
unless the shareholder specifies another order. No CDSC is charged on shares
purchased as a result of automatic reinvestment of dividends or capital gains
paid. In addition, no CDSC will be charged on exchanges of shares into another
Nuveen Mutual Fund or Nuveen money market fund. The holding period is
calculated on a monthly basis and begins the first day of the month in which
the order for investment is received. The CDSC is calculated based on the lower
of the redeemed shares' cost or net asset value at the time of the redemption
and is deducted from the redemption proceeds. Nuveen receives the amount of any
CDSC shareholders pay. If shares subject to a CDSC are exchanged for shares of
a Nuveen money market fund, the CDSC would be imposed on the subsequent
redemption of those money market shares, and the period during which the
shareholder holds the money market fund shares would be counted in determining
the remaining duration of the CDSC. The Fund may elect not to so count the
period during which the shareholder held the money market fund shares, in which
event the amount of any applicable CDSC would be reduced in accordance with
applicable rules by the amount of any 12b-1 plan payments to which those money
market funds shares may be subject.
The CDSC may be waived or reduced under the following seven special
circumstances: 1) redemptions within one year following the death or
disability, as defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended, of a shareholder; 2) in whole or in part for redemptions of
shares by shareholders with accounts in excess of specified breakpoints that
correspond to the breakpoints under which the up-front sales charge on Class A
Shares is reduced pursuant to Rule 22d-1 under the Act; 3) redemptions of
shares purchased under circumstances or by a category of investors for which
Class A Shares could be purchased at net asset value without a sales charge; 4)
in connection with the exercise of a reinstatement privilege whereby the
proceeds of a redemption of a Fund's shares subject to a sales charge are
reinvested in shares of certain Funds within a specified number of days; 5) in
connection with the exercise of a Fund's right to redeem all shares in an
account that does not maintain a certain minimum balance or that the applicable
board has determined may have material adverse consequences to the shareholders
of such Fund; 6) involuntary redemptions caused by operation of law; 7)
redemptions in connection with a payment of account of plan fees; 8)
redemptions made pursuant to a Fund's systematic withdrawal plan, up to 1%
monthly, 3% quarterly, 6% semiannually or 12% annually of an account's net
asset value depending on the frequency of the plan as designated by the
shareholder; and 9) redemptions of Class B or Class C shares if the proceeds
are transferred to an account managed by another Nuveen Adviser and the adviser
refunds the advance service and distribution fees to Nuveen. If a Fund waives
or reduces the CDSC, such waiver or reduction would be uniformly applied to all
Fund shares in the particular
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category. In waiving or reducing a CDSC, the Funds will comply with the
requirements of Rule 22d-1 of the Investment Company Act of 1940, as amended.
Shareholder Programs
Exchange Privilege
You may exchange shares of a class of the Fund for shares of the same class
of any other Nuveen Mutual Fund with reciprocal exchange privileges, at net
asset value without a sales charge, by sending a written request to the Fund,
c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New York,
NY 10274-5186. Similarly, Class A, Class B, Class C and Class R Shares of other
Nuveen Mutual Funds may be exchanged for the same class of shares of the Fund
at net asset value without a sales charge. Exchanges of shares from any Nuveen
money market fund will be made into Class A Shares, Class B Shares, Class C
Shares or Class R Shares (if eligible) of the Fund at the public offering
price. If, however, a sales charge has previously been paid on the investment
represented by the exchanged shares (i.e., the shares to be exchanged were
originally issued in exchange for shares on which a sales charge was paid), the
exchange of shares from a Nuveen money market fund will be made into shares of
the Fund at net asset value. All shares may be exchanged for shares of any
Nuveen Money Market Fund.
If you exchange shares subject to a CDSC, no CDSC will be charged at the time
of the exchange. However, if you subsequently redeem the shares acquired
through the exchange, the redemption may be subject to a CDSC, depending on
when you purchased your original shares and the CDSC schedule of the fund from
which you exchanged your shares.
The shares to be purchased must be offered in your state of residence and you
must have held the shares you are exchanging for at least 15 days. The total
value of exchanged shares must at least equal the minimum investment
requirement of the Nuveen Mutual Fund being purchased. For federal income tax
purposes, any exchange constitutes a sale and purchase of shares and may result
in capital gain or loss. Before making any exchange, you should obtain the
Prospectus for the Nuveen Mutual Fund you are purchasing and read it carefully.
If the registration of the account for the Fund you are purchasing is not
exactly the same as that of the fund account from which the exchange is made,
written instructions from all holders of the account from which the exchange is
being made must be received, with signatures guaranteed by a member of an
approved Medallion Guarantee Program or in such other manner as may be
acceptable to the Fund. You may also exchange shares by telephone if you
authorize telephone exchanges by checking the applicable box on the Application
Form or by calling Nuveen Investor Services toll-free 800-257-8787 to obtain an
authorization form. The exchange privilege may be modified or discontinued by
the Fund at any time.
The exchange privilege is not intended to permit the Fund to be used as a
vehicle for short-term trading. Excessive exchange activity may interfere with
portfolio management, raise expenses, and otherwise have an adverse effect on
all shareholders. In order to limit excessive exchange activity and in other
circumstances where Fund management believes doing so would be in the best
interest of the Fund, the Fund reserves the right to revise or terminate the
exchange privilege, or limit the amount or number of exchanges or reject any
exchange. Shareholders would be notified of any such action to the extent
required by law.
Reinstatement Privilege
If you redeemed Class A, Class B or Class C Shares of the Fund or any other
Nuveen Mutual Fund that were subject to a sales charge or a CDSC, you have up
to one year to reinvest all or part of the full amount of the redemption in the
same class of shares of the Fund at net asset value. This reinstatement
privilege can be exercised only once for any redemption, and reinvestment will
be made at the net asset value next calculated after reinstatement of the
appropriate class of Fund shares. If you reinstate shares that were subject to
a CDSC,
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your holding period as of the redemption date also will be reinstated for
purposes of calculating a CDSC and the CDSC paid at redemption will be
refunded. The federal income tax consequences of any capital gain realized on a
redemption will not be affected by reinstatement, but a capital loss may be
disallowed in whole or in part depending on the timing, the amount of the
reinvestment and the fund from which the redemption occurred.
General Matters
The Funds may encourage registered representatives and their firms to help
apportion their assets among bonds, stocks and cash, and may seek to
participate in programs that recommend a portion of their assets be invested in
tax-free, fixed income securities.
In addition to the types of compensation to dealers to promote sales of fund
shares that are described in the prospectus, Nuveen may from time to time make
additional reallowances only to certain authorized dealers who sell or are
expected to sell certain minimum amounts of shares of the Nuveen Mutual Funds
during specified time periods. Promotional support may include providing sales
literature to and holding informational or educational programs for the benefit
of such Authorized Dealers' representatives, seminars for the public, and
advertising and sales campaigns. Nuveen may reimburse a participating
Authorized Dealer for up to one-half of specified media costs incurred in the
placement of advertisements which jointly feature the Authorized Dealer and
Nuveen Funds and Nuveen Defined Portfolios.
Such reimbursement will be based on the number of Nuveen Fund shares sold,
the dollar amounts of such sales, or a combination of the foregoing, during the
prior calendar year according to an established schedule. Any such support or
reimbursement would be provided by Nuveen out of its own assets, and not out of
the assets of the Funds, and will not change the price an investor pays for
shares or the amounts that a Fund will receive from such a sale.
To help advisors and investors better understand and most efficiently use the
Funds to reach their investment goals, the Funds may advertise and create
specific investment programs and systems. For example, this may include
information on how to use the Funds to accumulate assets for future education
needs or periodic payments such as insurance premiums. The Funds may produce
software, electronic information sites, or additional sales literature to
promote the advantages of using the Funds to meet these and other specific
investor needs.
Exchanges of shares of a Fund for shares of a Nuveen money market fund may be
made on days when both funds calculate a net asset value and make shares
available for public purchase. Shares of the Nuveen money market funds may be
purchased on days on which the Federal Reserve Bank of Boston is normally open
for business. In addition to the holidays observed by the Fund, the Nuveen
money market funds observe and will not make fund shares available for purchase
on the following holidays: Martin Luther King's Birthday, Columbus Day and
Veterans Day.
In addition, you may exchange Class R Shares of any Fund for Class A Shares
of the same Fund without a sales charge if the current net asset value of those
Class R Shares is at least $3,000 or you already own Class A Shares of that
Fund.
Each Fund may suspend the right of redemption, or delay payment to redeeming
shareholders for more than seven days, when the New York Stock Exchange is
closed (not including customary weekend and holiday closings); when trading in
the markets a Fund normally uses is restricted, or the SEC determines that an
emergency exists so that trading of a Fund's portfolio securities or
determination of a Fund's net asset value is not reasonably practical; or the
SEC by order permits the suspension of the right of redemption or the delay in
payment to redeeming shareholders for more than seven days.
S-51
<PAGE>
The Funds have reserved the right to redeem in kind (that is, to pay
redemption requests in cash and portfolio securities, or wholly in portfolio
securities), although the Funds have no present intention to redeem in kind.
The Funds voluntarily have committed to pay in cash all requests for redemption
by any shareholder, limited as to each shareholder during any ninety-day period
to the lesser of $250,000 or 1% of the net asset value of a Fund at the
beginning of the ninety-day period.
Shares will be registered in the name of the investor or the investor's
financial advisor. A change in registration or transfer of shares held in the
name of a financial advisor may only be made by an order in good form from the
financial advisor acting on the investor's behalf. Share certificates will only
be issued upon written request to the Funds' transfer agent. No share
certificates will be issued for fractional shares.
A fee of 1% of the current market value of any shares represented by a
certificate will be charged if the certificate is lost, stolen, or destroyed.
The fee is paid to Seaboard Surety Company for insurance of the lost, stolen,
or destroyed certificate.
For more information on the procedure for purchasing shares of a Fund and on
the special purchase programs available thereunder, see "How to Buy Shares" in
the Prospectus.
Nuveen serves as the principal underwriter of the shares of the Funds
pursuant to a "best efforts" arrangement as provided by a distribution
agreement with the Nuveen Flagship Multistate Trust I, dated February 1, 1997
and last renewed on July 31, 2000 ("Distribution Agreement"). Pursuant to the
Distribution Agreement, the Trust appointed Nuveen to be its agent for the
distribution of the Funds' shares on a continuous offering basis. Nuveen sells
shares to or through brokers, dealers, banks or other qualified financial
intermediaries (collectively referred to as "Dealers"), or others, in a manner
consistent with the then effective registration statement of the Trust.
Pursuant to the Distribution Agreement, Nuveen, at its own expense, finances
certain activities incident to the sale and distribution of the Funds' shares,
including printing and distributing of prospectuses and statements of
additional information to other than existing shareholders, the printing and
distributing of sales literature, advertising and payment of compensation and
giving of concessions to Dealers. Nuveen receives for its services the excess,
if any, of the sales price of the Funds' shares less the net asset value of
those shares, and reallows a majority or all of such amounts to the Dealers who
sold the shares; Nuveen may act as such a Dealer. Nuveen also receives
compensation pursuant to a distribution plan adopted by the Trust pursuant to
Rule 12b-1 and described herein under "Distribution and Service Plan." Nuveen
receives any CDSCs imposed on redemptions of shares.
The following table sets forth the aggregate amount of underwriting
commissions with respect to the sale of Fund shares and the amount thereof
retained by Nuveen for each of the Funds for the last three fiscal years. All
figures are to the nearest thousand.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
May 31, 1998 May 31, 1999 May 31, 2000
------------------------ ------------------------ ------------------------
Amount of Amount Amount of Amount Amount of Amount
Underwriting Retained By Underwriting Retained By Underwriting Retained By
Commissions Nuveen Commissions Nuveen Commissions Nuveen
Fund ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Nuveen Arizona Municipal
Bond Fund.............. 266 38 278 24 72 6
Nuveen Colorado
Municipal Bond Fund.... 120 19 187 27 40 --
Nuveen Florida Municipal
Bond Fund.............. 488 69 730 90 241 --
Nuveen Maryland
Municipal Bond Fund.... 157 25 122 19 35 5
Nuveen New Mexico
Municipal Bond Fund.... 145 20 154 21 46 7
Nuveen Pennsylvania
Municipal Bond Fund.... 242 34 224 19 88 --
Nuveen Virginia
Municipal Bond Fund.... 474 67 419 52 132 --
</TABLE>
--------
S-52
<PAGE>
DISTRIBUTION AND SERVICE PLAN
The Funds have adopted a plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, which provides that Class B Shares and Class C
Shares will be subject to an annual distribution fee, and that Class A Shares,
Class B Shares and Class C Shares will be subject to an annual service fee.
Class R Shares will not be subject to either distribution or service fees.
The distribution fee applicable to Class B and Class C Shares under each
Fund's Plan will be payable to reimburse Nuveen for services and expenses
incurred in connection with the distribution of Class B and Class C Shares,
respectively. These expenses include payments to Authorized Dealers, including
Nuveen, who are brokers of record with respect to the Class B and Class C
Shares, as well as, without limitation, expenses of printing and distributing
prospectuses to persons other than shareholders of the Fund, expenses of
preparing, printing and distributing advertising and sales literature and
reports to shareholders used in connection with the sale of Class B and Class C
Shares, certain other expenses associated with the distribution of Class B and
Class C Shares, and any distribution-related expenses that may be authorized
from time to time by the Board of Trustees.
The service fee applicable to Class A Shares, Class B Shares and Class C
Shares under each Fund's Plan will be payable to Authorized Dealers in
connection with the provision of ongoing account services to shareholders.
These services may include establishing and maintaining shareholder accounts,
answering shareholder inquiries and providing other personal services to
shareholders.
Each Fund may spend up to .20 of 1% per year of the average daily net assets
of Class A Shares as a service fee under the Plan applicable to Class A Shares.
Each Fund may spend up to .75 of 1% per year of the average daily net assets of
Class B Shares as a distribution fee and up to .20 of 1% per year of the
average daily net assets of Class B Shares as a service fee under the Plan
applicable to Class B Shares. Each Fund may spend up to .55 of 1% per year of
the average daily net assets of Class C Shares as a distribution fee and up to
.20 of 1% per year of the average daily net assets of Class C Shares as a
service fee under the Plan applicable to Class C Shares.
S-53
<PAGE>
For the fiscal year ended May 31, 2000, 100% of service fees and distribution
fees were paid out as compensation to Authorized Dealers. The service fee for
the Class A, Class B and Class C Shares was .20% and the distribution fee for
the Class B Shares was .75% and for the Class C Shares was .55%.
<TABLE>
<CAPTION>
Compensation Paid to
Authorized Dealers
During the Year
Ended May 31, 2000
--------------------
<S> <C>
Nuveen Arizona Municipal Bond Fund
Class A.................................................. $ 155,408
Class B.................................................. $ 38,284
Class C.................................................. $ 45,127
Nuveen Colorado Municipal Bond Fund
Class A.................................................. $ 71,339
Class B.................................................. $ 43,440
Class C.................................................. $ 20,463
Nuveen Florida Municipal Bond Fund
Class A.................................................. $ 548,684
Class B.................................................. $ 161,597
Class C.................................................. $ 127,789
Nuveen Maryland Municipal Bond Fund
Class A.................................................. $ 44,551
Class B.................................................. $ 45,557
Class C.................................................. $ 39,364
Nuveen New Mexico Municipal Bond Fund
Class A.................................................. $ 100,684
Class B.................................................. $ 25,536
Class C.................................................. $ 17,775
Nuveen Pennsylvania Municipal Bond Fund
Class A.................................................. $ 127,092
Class B.................................................. $ 79,623
Class C.................................................. $ 88,264
Nuveen Virginia Municipal Bond Fund
Class A.................................................. $ 265,779
Class B.................................................. $ 104,589
Class C.................................................. $ 121,995
</TABLE>
Under each Fund's Plan, the Fund will report quarterly to the Board of
Trustees for its review all amounts expended per class of shares under the
Plan. The Plan may be terminated at any time with respect to any class of
shares, without the payment of any penalty, by a vote of a majority of the
trustees who are not "interested persons" and who have no direct or indirect
financial interest in the Plan or by vote of a majority of the outstanding
voting securities of such class. The Plan may be renewed from year to year if
approved by a vote of the Board of Trustees and a vote of the non-interested
trustees who have no direct or indirect financial interest in the Plan cast in
person at a meeting called for the purpose of voting on the Plan. The Plan may
be continued only if the trustees who vote to approve such continuance
conclude, in the exercise of reasonable business judgment and in light of their
fiduciary duties under applicable law, that there is a reasonable likelihood
that the Plan will benefit the Fund and its shareholders. The Plan may not be
amended to increase materially the cost which a class of shares may bear under
the Plan without the approval of the shareholders of the affected class,
S-54
<PAGE>
and any other material amendments of the Plan must be approved by the non-
interested trustees by a vote cast in person at a meeting called for the
purpose of considering such amendments. During the continuance of the Plan, the
selection and nomination of the non-interested trustees of the Trust will be
committed to the discretion of the non-interested trustees then in office.
INDEPENDENT PUBLIC ACCOUNTANTS AND CUSTODIAN
Arthur Andersen LLP, independent public accountants, 33 West Monroe Street,
Chicago, Illinois, 60603 has been selected as auditors for the Trust. In
addition to audit services, the auditors provide consultation and assistance on
accounting, internal control, tax and related matters. The financial statements
incorporated by reference elsewhere in this Statement of Additional Information
and the information for prior periods set forth under "Financial Highlights" in
the Prospectus have been audited by the auditors as indicated in their reports
with respect thereto, and are included in reliance upon the authority of those
firms in giving their reports.
The custodian of the Funds' assets is The Chase Manhattan Bank, 4 New York
Plaza, New York, New York 10004. The custodian performs custodial, fund
accounting, and portfolio accounting services.
The Funds' transfer, shareholder services, and dividend paying agent is Chase
Global Funds Services Company, 73 Tremont Street, Boston, Massachusetts 02108.
FINANCIAL STATEMENTS
The audited financial statements for each Fund's most recent fiscal year
appear in the Fund's Annual Report. Each Fund's Annual Report accompanies this
Statement of Additional Information.
S-55
<PAGE>
APPENDIX A
Ratings of Investments
The four highest ratings of Moody's for Municipal Obligations are Aaa, Aa, A
and Baa. Municipal Obligations rated Aaa are judged to be of the "best
quality." The rating of Aa is assigned to Municipal Obligations which are of
"high quality by all standards," but as to which margins of protection or other
elements make long-term risks appear somewhat greater than in Aaa rated
Municipal Obligations. The Aaa and Aa rated Municipal Obligations comprise what
are generally known as "high grade bonds." Municipal Obligations that are rated
A by Moody's possess many favorable investment attributes and are considered
upper medium grade obligations. Factors giving security to principal and
interest of A rated Municipal Obligations are considered adequate, but elements
may be present, which suggest a susceptibility to impairment sometime in the
future. Municipal Obligations rated Baa by Moody's are considered medium grade
obligations (i.e., they are neither highly protected nor poorly secured). Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well. Moody's bond rating symbols may contain numerical
modifiers of a generic rating classification. The modifier 1 indicates that the
bond ranks at the high end of its category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its general rating category.
The four highest ratings of S&P for Municipal Obligations are AAA, AA, A and
BBB. Municipal Obligations rated AAA have a strong capacity to pay principal
and interest. The rating of AA indicates that capacity to pay principal and
interest is very strong and such bonds differ from AAA issues only in small
degree. The category of A describes bonds which have a strong capacity to pay
principal and interest, although such bonds are somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions. The
BBB rating is the lowest "investment grade" security rating by S&P. Municipal
Obligations rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas such bonds normally exhibit adequate protection
parameters, adverse economic conditions are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category than for
bonds in the A category.
The four highest ratings of Fitch for Municipal Obligations are AAA, AA, A
and BBB. Municipal Obligations rated AAA are considered to be investment grade
and of the highest credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events. Municipal Obligations rated AA are considered
to be investment grade and of very high quality. The obligor's ability to pay
interest and repay principal is very strong, although not quite as strong as
bonds rated "AAA." Because Municipal Obligations rated in the "AAA" and "AA"
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F-1+." Municipal
Obligations rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Municipal
Obligations rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
The "Other Corporate Obligations" category of temporary investments are
corporate (as opposed to municipal) debt obligations rated AAA by S&P or Aaa by
Moody's. Corporate debt obligations rated AAA by S&P have an extremely strong
capacity to pay principal and interest. The Moody's corporate debt rating of
Aaa is comparable to that set forth above for Municipal Obligations.
A-1
<PAGE>
Subsequent to its purchase by a Fund, an issue may cease to be rated or its
rating may be reduced below the minimum required for purchase by such Fund.
Neither event requires the elimination of such obligation from a Fund's
portfolio, but Nuveen Advisory will consider such an event in its determination
of whether the Fund should continue to hold such obligation.
A-2
<PAGE>
APPENDIX B
DESCRIPTION OF HEDGING TECHNIQUES
Set forth below is additional information regarding the various Fund's
defensive hedging techniques and use of repurchase agreements.
Futures and Index Transactions
Financial Futures. A financial future is an agreement between two parties to
buy and sell a security for a set price on a future date. They have been
designed by boards of trade which have been designated "contracts markets" by
the Commodity Futures Trading Commission ("CFTC").
The purchase of financial futures is for the purpose of hedging a Fund's
existing or anticipated holdings of long-term debt securities. When a Fund
purchases a financial future, it deposits in cash or securities an "initial
margin" of between 1% and 5% of the contract amount. Thereafter, the Fund's
account is either credited or debited on a daily basis in correlation with the
fluctuation in price of the underlying future or other requirements imposed by
the exchange in order to maintain an orderly market. The Fund must make
additional payments to cover debits to its account and has the right to
withdraw credits in excess of the liquidity, the Fund may close out its
position at any time prior to expiration of the financial future by taking an
opposite position. At closing a final determination of debits and credits is
made, additional cash is paid by or to the Fund to settle the final
determination and the Fund realizes a loss or gain depending on whether on a
net basis it made or received such payments.
The sale of financial futures is for the purpose of hedging a Fund's existing
or anticipated holdings of long-term debt securities. For example, if a Fund
owns long-term bonds and interest rates were expected to increase, it might
sell financial futures. If interest rates did increase, the value of long-term
bonds in the Fund's portfolio would decline, but the value of the Fund's
financial futures would be expected to increase at approximately the same rate
thereby keeping the net asset value of the Fund from declining as much as it
otherwise would have.
Among the risks associated with the use of financial futures by the Funds as
a hedging device, perhaps the most significant is the imperfect correlation
between movements in the price of the financial futures and movements in the
price of the debt securities which are the subject of the hedge.
Thus, if the price of the financial future moves less or more than the price
of the securities which are the subject of the hedge, the hedge will not be
fully effective. To compensate for this imperfect correlation, the Fund may
enter into financial futures in a greater dollar amount than the dollar amount
of the securities being hedged if the historical volatility of the prices of
such securities has been greater than the historical volatility of the
financial futures. Conversely, the Fund may enter into fewer financial futures
if the historical volatility of the price of the securities being hedged is
less than the historical volatility of the financial futures.
The market prices of financial futures may also be affected by factors other
than interest rates. One of these factors is the possibility that rapid changes
in the volume of closing transactions, whether due to volatile markets or
movements by speculators, would temporarily distort the normal relationship
between the markets in the financial future and the chosen debt securities. In
these circumstances as well as in periods of rapid and large price movements.
The Fund might find it difficult or impossible to close out a particular
transaction.
Options on Financial Futures. The Funds may also purchase put or call options
on financial futures which are traded on a U.S. Exchange or board of trade and
enter into closing transactions with respect to such options to terminate an
existing position. Currently, options can be purchased with respect to
financial futures on U.S. Treasury Bonds on The Chicago Board of Trade. The
purchase of put options on financial futures is analogous to the purchase of
put options by a Fund on its portfolio securities to hedge against the risk of
rising interest rates. As with options on debt securities, the holder of an
option may terminate his position by selling an option of the same Fund. There
is no guarantee that such closing transactions can be effected.
B-1
<PAGE>
Index Contracts
Index Futures. A tax-exempt bond index which assigns relative values to the
tax-exempt bonds included in the index is traded on the Chicago Board of Trade.
The index fluctuates with changes in the market values of all tax-exempt bonds
included rather than a single bond. An index future is a bilateral agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash--rather than any security--equal to specified dollar amount times the
difference between the index value at the close of the last trading day of the
contract and the price at which the index future was originally written. Thus,
an index future is similar to traditional financial futures except that
settlement is made in cash.
Index Options. The Funds may also purchase put or call options on U.S.
Government or tax-exempt bond index futures and enter into closing transactions
with respect to such options to terminate an existing position. Options on
index futures are similar to options on debt instruments except that an option
on an index future gives the purchaser the right, in return for the premium
paid, to assume a position in an index contract rather than an underlying
security at a specified exercise price at any time during the period of the
option. Upon exercise of the option, the delivery of the futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance of the writer's futures margin account
which represents the amount by which the market price of the index futures
contract, at exercise, is less than the exercise price of the option on the
index future.
Bond index futures and options transactions would be subject to risks similar
to transactions in financial futures and options thereon as described above. No
series will enter into transactions in index or financial futures or related
options unless and until, in the Adviser's opinion, the market for such
instruments has developed sufficiently.
Repurchase Agreements
A Fund may invest temporarily up to 5% of its assets in repurchase
agreements, which are agreements pursuant to which securities are acquired by
the Fund from a third party with the understanding that they will be
repurchased by the seller at a fixed price on an agreed date. These agreements
may be made with respect to any of the portfolio securities in which the Fund
is authorized to invest. Repurchase agreements may be characterized as loans
secured by the underlying securities. The Fund may enter into repurchase
agreements with (i) member banks of the Federal Reserve System having total
assets in excess of $500 million and (ii) securities dealers, provided that
such banks or dealers meet the creditworthiness standards established by the
Fund's board of trustees ("Qualified Institutions"). The Adviser will monitor
the continued creditworthiness of Qualified Institutions, subject to the
oversight of the Fund's board of trustees.
The use of repurchase agreements involves certain risks. For example, if the
seller of securities under a repurchase agreement defaults on its obligation to
repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, the
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the securities
underlying the repurchase agreement will be held by the custodian at all times
in an amount at least equal to the repurchase price, including accrued
interest. If the seller fails to repurchase the securities, the Fund may suffer
a loss to the extent proceeds from the sale of the underlying securities are
less than the repurchase price.
The resale price reflects the purchase price plus an agreed upon market rate
of interest which is unrelated to the coupon rate or date of maturity of the
purchased security. The collateral is marked to market daily. Such agreements
permit the Fund to keep all its assets earning interest while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature.
B-2
<PAGE>
VAI-MS1 9-00
<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 APPEARS HERE]
INVEST WELL
LOOK AHEAD
LEAVE YOUR MARK(SM)
Arizona Municipal Bond Fund
Colorado Municipal Bond Fund
New Mexico Municipal Bond Fund
<PAGE>
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
<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 ARIZONA MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
--------------------------------------------------------------------------------
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
<PAGE>
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%
-----------------------------------------
Tax Obligation (Limited) 17%
-----------------------------------------
Tax Obligation (General) 14%
-----------------------------------------
Healthcare 14%
-----------------------------------------
Water and Sewer 7%
-----------------------------------------
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
<PAGE>
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
---------------------------------------------------------------------------
Latest Monthly Dividend* $0.0430 $0.0365 $0.0385 $0.0450
---------------------------------------------------------------------------
Fund Symbol FAZTX N/A N/A N/A
---------------------------------------------------------------------------
CUSIP 67065L104 67065L203 67065L302 67065L401
---------------------------------------------------------------------------
Inception Date 10/86 2/97 2/94 2/97
---------------------------------------------------------------------------
*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%
---------------------------------------------------------------------------
1-Year TER* -1.26% -5.38% -2.38% -6.02% -2.07% -0.92%
---------------------------------------------------------------------------
5-Year 4.25% 3.35% 3.53% 3.36% 3.69% 4.40%
---------------------------------------------------------------------------
5-Year TER* 6.92% 6.00% 5.83% 5.68% 6.07% 7.15%
---------------------------------------------------------------------------
10-Year 6.54% 6.08% 6.04% 6.04% 5.95% 6.62%
---------------------------------------------------------------------------
10-Year TER* 9.53% 9.07% 8.78% 8.78% 8.64% 9.65%
---------------------------------------------------------------------------
*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%
---------------------------------------------------------------------------
5-Year 5.32% 4.42% 4.62% 4.45% 4.77% 5.46%
---------------------------------------------------------------------------
10-Year 6.87% 6.41% 6.37% 6.37% 6.29% 6.94%
---------------------------------------------------------------------------
+ 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%
---------------------------------------------------------------------------
SEC 30-Day Yield 3.85% 3.69% 3.10% 3.30% 4.04%
---------------------------------------------------------------------------
Taxable Equivalent Yield 5.88% 5.63% 4.73% 5.04% 6.17%
---------------------------------------------------------------------------
* 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
----------------------------------------------
Average Effective Maturity 18.11 years
----------------------------------------------
Average Duration 8.94
----------------------------------------------
[] 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
<PAGE>
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
<PAGE>
PART C--OTHER INFORMATION
Item 22: Financial Statements.
Financial statements:
Included in the Prospectus:
Financial Highlights
Accompanying the Statement of Additional Information are the Funds' most
recent Annual Reports:
Portfolio of Investments
Statement of Net Assets
Statement of Operations
Statement of Changes in Net Assets.
Report of Independent Public Accountants
Item 23: Exhibits.
<TABLE>
<C> <S> <C>
a.1 Declaration of Trust of Registrant. Filed as Exhibit 1(a) to
Registrant's Registration Statement on Form N-1A (File No.
333-16617) and incorporated herein by reference thereto.
a.2 Amendment to Declaration of Trust of Registrant dated Septem-
ber 15, 2000.
a.3 Amended Establishment and Designation of Series of Shares of
Beneficial Interest dated September 15, 2000.
a.4 Certificate for the Establishment and Designation of Classes
dated July 10, 1996. Filed as Exhibit 1(c) to Registrant's
Registration Statement on Form N-1A (File No. 333-16617) and
incorporated herein by reference thereto.
a.5 Incumbency Certificate. Filed as Exhibit 1(d) to Post-Effec-
tive Amendment No. 1 to Registrant's Registration Statement on
Form N-1A (File No. 333-16617) and incorporated herein by ref-
erence thereto.
b. By-Laws of Registrant. Filed as Exhibit 2 to Registrant's Reg-
istration Statement on Form N-1A (File No. 333-16617) and in-
corporated herein by reference thereto.
b.1 Amendment to By-Laws. Filed as Exhibit b.1 to Post-Effective
Amendment No. 4 to Registrant's Registration Statement on Form
N-1A (File No. 333-16617) and incorporated herein by reference
thereto.
c. Specimen certificates of Shares of each Fund. Filed as Exhibit
4 to Registrant's Registration Statement on Form N-1A (File
No. 333-16617) and incorporated herein by reference thereto.
d. Investment Management Agreement between Registrant and Nuveen
Advisory Corp. Filed as Exhibit 5 to Post-Effective Amendment
No. 1 to Registrant's Registration Statement on Form N-1A
(File No. 333-16617) and incorporated herein by reference
thereto.
d.1 Renewal of Investment Management Agreement dated June 1, 2000.
e. Distribution Agreement between Registrant and John Nuveen &
Co. Incorporated. Filed as Exhibit 6 to Post-Effective Amend-
ment No. 1 to Registrant's Registration Statement on Form N-1A
(File No. 333-16617) and incorporated herein by reference
thereto.
e.1 Renewal of Distribution Agreement dated July 31, 2000.
f. Not applicable.
g. Custodian Agreement between Registrant and Chase Manhattan
Bank. Filed as Exhibit 8 to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No.
333-16617) and incorporated herein by reference thereto.
h. Transfer Agency Agreement between Registrant and Chase Global
Funds Services Company. Filed as Exhibit h to Post-Effective
Amendment No. 3 to Registrant's Registration Statement on Form
N-1A (File No. 333-16617) and incorporated by reference there-
to.
i. Opinion of Morgan, Lewis, and Bockius LLP.
j. Consent of Arthur Andersen LLP, Independent Public Accoun-
tants.
k. Not applicable.
l. Not applicable.
m. Amended Plan of Distribution and Service Pursuant to Rule 12b-
1 for the Class A Shares, Class B Shares and Class C Shares of
each Fund. Filed as Exhibit m to Post-Effective Amendment No.
4 to Registrant's Registration Statement on Form N-1A (File
No. 333-16617) and incorporated herein by reference thereto.
</TABLE>
C-1
<PAGE>
<TABLE>
<C> <S> <C>
o. Multi-Class Plan Adopted Pursuant to Rule 18f-3. Filed as Ex-
hibit 18 to Registrant's Registration Statement on Form N-1A
(File No. 333-16617) and incorporated herein by reference
thereto.
99(a). Original Powers of Attorney for all of Registrant's trustees,
authorizing among others, Gifford R. Zimmerman and Alan G.
Berkshire to execute the Registration Statement on his or her
behalf.
99(b). Certified copy of Resolution of Board of Trustees authorizing
the signing of the names of trustees and officers on the Reg-
istrant's Registration Statement pursuant to power of attor-
ney.
99(c). Code of Ethics and Reporting Requirements.
</TABLE>
Item 24: Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 25: Indemnification
Section 4 of Article XII of Registrant's Amended and Restated Declaration of
Trust provides as follows:
Subject to the exceptions and limitations contained in this Section 4, every
person who is, or has been, a Trustee, officer, employee or agent of the Trust,
including persons who serve at the request of the Trust as directors, trustees,
officers, employees or agents of another organization in which the Trust has an
interest as a shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person"), shall be indemnified by the Trust to the fullest extent
permitted by law against liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his being or
having been such a Trustee, director, officer, employee or agent and against
amounts paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the proceeding
was brought that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination
that such Covered Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the settlement
or other disposition or a reasonable determination, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that he
did not engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in
office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Covered Person may now or hereafter be entitled,
shall continue as to a person who has ceased to be such a Covered Person and
shall inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it
is ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any
such advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
C-2
<PAGE>
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee,
anyone who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the word
"liability" and "expenses" shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
----------------
The trustees and officers of the Registrant are covered by an Investment Trust
Errors and Omission policy in the aggregate amount of $20,000,000 (with a
maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involved willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she reasonably believed to be in the best interest of Registrant
or where he or she shall have had reasonable cause to believe this conduct was
unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, trustees or controlling persons of the
Registrant pursuant to the Declaration of Trust of the Registrant or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer or trustee or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, trustee or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
Item 26: Business and Other Connections of Investment Adviser
Nuveen Advisory Corp. serves as investment adviser to the following open-end
management type investment companies: Nuveen Multistate Trust I, Nuveen
Multistate Trust II, Nuveen Multistate Trust III, Nuveen Multistate Trust IV,
Nuveen Municipal Trust, Nuveen Taxable Funds Inc., Nuveen Municipal Money
Market Fund, Inc., and Nuveen Money Market Trust. It also serves as investment
adviser to the following closed-end management type investment companies:
Nuveen Municipal Value Fund, Inc., Nuveen California Municipal Value Fund,
Inc., Nuveen New York Municipal Value Fund, Inc., Nuveen Municipal Income Fund,
Inc., Nuveen Premium Income Municipal Fund, Inc., Nuveen Performance Plus
Municipal Fund, Inc., Nuveen California Performance Plus Municipal Fund, Inc.,
Nuveen New York Performance Plus Municipal Fund, Inc., Nuveen Municipal
Advantage Fund, Inc., Nuveen Municipal Market Opportunity Fund, Inc., Nuveen
California Municipal Market Opportunity Fund, Inc., Nuveen Investment Quality
Municipal Fund, Inc., Nuveen California Investment Quality Municipal Fund,
Inc., Nuveen New York Investment Quality Municipal Fund, Inc., Nuveen Insured
Quality Municipal Fund, Inc., Nuveen Florida Investment Quality Municipal Fund,
Nuveen New Jersey Investment Quality Municipal Fund, Inc., Nuveen Pennsylvania
Investment Quality Municipal Fund, Nuveen Select Quality Municipal Fund, Inc.,
Nuveen California Select Quality Municipal Fund, Inc., Nuveen New York Select
Quality Municipal Fund, Inc., Nuveen Quality Income Municipal Fund, Inc.,
Nuveen Insured Municipal Opportunity Fund, Inc., Nuveen Florida Quality Income
Municipal Fund, Nuveen Michigan Quality Income Municipal Fund, Inc., Nuveen
Ohio Quality Income Municipal Fund, Inc., Nuveen Texas Quality Income Municipal
Fund, Nuveen California Quality Income Municipal Fund, Inc., Nuveen New York
Quality Income Municipal Fund, Inc., Nuveen Premier Municipal Income Fund,
Inc., Nuveen Premier Insured Municipal Income Fund, Inc. Nuveen Premium Income
Municipal Fund 2, Inc., Nuveen Insured California Premium Income Municipal
Fund, Inc., Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen
Select Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund,
Inc., Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan
Premium Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal
Fund, Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured
California Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium
Income Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen
Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income
Municipal Fund, Nuveen Connecticut Premium Income Municipal Fund, Nuveen
Georgia Premium Income Municipal Fund, Nuveen Missouri Premium Income Municipal
Fund, Nuveen North Carolina Premium Income Municipal Fund, Nuveen California
Premium Income Municipal Fund, Nuveen Insured Premium Income Municipal Fund 2,
Nuveen Dividend Advantage Municipal Fund, Nuveen California Dividend Advantage
Municipal Fund and Nuveen New York Dividend Advantage Municipal Fund. Nuveen
Advisory Corp. has no other clients or business at the present time. The
principal business address for all of these investment companies is 333 West
Wacker Drive, Chicago, Illinois 60606.
C-3
<PAGE>
For a description of other business, profession, vocation or employment of a
substantial nature in which any director or officer, other than John P.
Amboain, of the investment adviser has engaged during the last two years for
his account or in the capacity of director, officer, employee, partner or
trustee, see the descriptions under "Management" in the Statement of Additional
Information.
John P. Amboian is President, formerly Executive Vice President and Chief
Financial Officer, and Director of Nuveen Advisory Corp., the investment
adviser. Mr. Amboian has, during the last two years, been President, formerly
Executive Vice President and Chief Financial Officer of Nuveen Investments, the
John Nuveen Company and Nuveen Institutional Advisory Corp.; Executive Vice
President of Rittenhouse Financial Services, Inc. and President and Chief
Operating Officer of Nuveen Senior Loan Asset Management Inc. (since September
1999).
Item 27: Principal Underwriters
(a) John Nuveen & Co., Incorporated ("Nuveen") acts as principal underwriter to
the following open-end management type investment companies: Nuveen Multistate
Trust I, Nuveen Multistate Trust II, Nuveen Multistate Trust III, Nuveen
Multistate Trust IV, Nuveen Municipal Trust, Nuveen Municipal Money Market Fund
Inc., Nuveen Taxable Funds Inc., Nuveen Money Market Trust, Nuveen Investment
Trust, Nuveen Investment Trust II, and Nuveen Investment Trust III. Nuveen also
acts as depositor and principal underwriter of the Nuveen Tax-Free Unit Trust
and the Nuveen Unit Trust, registered unit investment trusts. Nuveen has also
served or is serving as co-managing underwriter to the following closed-end
management type investment companies: Nuveen Municipal Value Fund, Inc., Nuveen
California Municipal Value Fund, Inc., Nuveen New York Municipal Value Fund,
Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income Municipal Fund,
Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen California
Performance Plus Municipal Fund, Inc., Nuveen New York Performance Plus
Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen Municipal
Market Opportunity Fund, Inc., Nuveen California Municipal Market Opportunity
Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen California
Investment Quality Municipal Fund, Inc., Nuveen New York Investment Quality
Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc., Nuveen
Florida Investment Quality Municipal Fund, Nuveen New Jersey Investment Quality
Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal Fund,
Nuveen Select Quality Municipal Fund, Inc., Nuveen California Select Quality
Municipal Fund, Inc., Nuveen New York Select Quality Municipal Fund, Inc.,
Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured Municipal
Opportunity Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen
Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income
Municipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen
California Quality Income Municipal Fund, Inc., Nuveen New York Quality Income
Municipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen
Premier Insured Municipal Income Fund, Inc., Nuveen Premium Income Municipal
Fund 2, Inc., Nuveen Insured California Premium Income Municipal Fund, Inc.,
Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen Select
Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc.,
Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium
Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund,
Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California
Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income
Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen
Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income
Municipal Fund, Nuveen Connecticut Premium Income Municipal Fund, Nuveen
Georgia Premium Income Municipal Fund, Nuveen Missouri Premium Income Municipal
Fund, Nuveen North Carolina Premium Income Municipal Fund, Nuveen California
Premium Income Municipal Fund, Nuveen Insured Premium Income Municipal Fund 2,
Nuveen Select Tax-Free Income Portfolio, Nuveen Select Tax-Free Income
Portfolio 2, Nuveen Insured California Select Tax-Free Income Portfolio, Nuveen
Insured New York Select Tax-Free Income Portfolio, Nuveen Select Tax-Free
Income Portfolio 3, Nuveen Dividend Advantage Municipal Fund, Nuveen California
Dividend Advantage Municipal Fund and Nuveen New York Dividend Advantage
Municipal Fund.
C-4
<PAGE>
(b)
<TABLE>
<CAPTION>
Name and
Principal
Business Positions and Offices Positions and Offices
Address with Underwriter with Registrant
-------------------------------------------------------------------------------
<S> <C> <C>
Timothy R. Chairman of the Board, Chairman of the Board
Schwertfeger Chief Executive Officer and Director and Director
333 West
Wacker Drive
Chicago, IL
60606
John P. President None
Amboian
333 West
Wacker Drive
Chicago, IL
60606
William Executive Vice President None
Adams IV
333 West
Wacker Drive
Chicago, IL
60606
Alan G. Senior Vice President and Secretary Vice President and
Berkshire Assistant Secretary
333 West
Wacker Drive
Chicago, IL
60606
Robert K. Vice President None
Burke
333 West
Wacker Drive
Chicago, IL
60606
Peter H. Vice President and Treasurer Vice President and Treasurer
D'Arrigo
333 West
Wacker Drive
Chicago, IL
60606
Stephen D. Vice President Vice President and
Foy Controller
333 West
Wacker Drive
Chicago, IL
60606
Benjamin T. Vice President None
Fulton
333 West
Wacker Drive
Chicago, IL
60606
Richard D. Executive Vice President None
Hughes
Two Radnor
Corporate
Center
Radnor, PA
19087
Anna R. Vice President None
Kucinskis
333 West
Wacker Drive
Chicago, IL
60606
Robert B. Vice President None
Kuppenheimer
19900 MacAr-
thur Blvd.
Irvine, CA
92612
Larry W. Vice President and Vice President and
Martin Assistant Secretary Assistant Secretary
333 West
Wacker Drive
Chicago, IL
60606
Thomas C. Vice President None
Muntz
333 West
Wacker Drive
Chicago, IL
60606
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
Positions and
Name and Principal Positions and Offices Offices
Business Address with Underwriter with Registrant
-----------------------------------------------------------------------------------
<S> <C> <C>
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
Allen J. Williamson Group President None
333 West Wacker Drive
Chicago, IL 60606
Margaret E. Wilson Vice President and None
333 West Wacker Drive Corporate Controller
Chicago, IL 60606
Gifford R. Zimmerman Vice President Vice President and
333 West Wacker Drive and Assistant Secretary Secretary
Chicago, IL 60606
</TABLE>
(c) Not applicable.
Item 28: Location of Accounts and Records
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606,
maintains the Declaration of Trust, By-Laws, minutes of trustees and
shareholder meetings and contracts of the Registrant and all advisory material
of the investment adviser.
The Chase Manhattan Bank, 4 New York Plaza, 770 Broadway, New York, New York
10004 maintains all general and subsidiary ledgers, journals, trial balances,
records of all portfolio purchases and sales, and all other required records
not maintained by Nuveen Advisory Corp. or Chase Global Funds Services Company.
Chase Global Funds Services Company, 73 Tremont Street, Boston, Massachusetts,
maintains all the required records in its capacity as transfer, dividend
paying, and shareholder service agent for the Funds.
Item 29: Management Services
Not applicable.
Item 30: Undertakings
Not applicable.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that this Registration Statement
meets all the requirements for effectiveness under paragraph (b) of Rule 485
under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 5 to Registration Statement No. 333-16617 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
and State of Illinois, on the 28th day of September, 2000.
NUVEEN MULTISTATE TRUST I
/s/ Gifford R. Zimmerman
------------------------------------------
Gifford R. Zimmerman, Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <C> <S>
/s/ Stephen D. Foy
-------------------------------
Stephen D. Foy Vice President and September 28, 2000
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman of the Board
and Trustee (Principal
Executive Officer)
Robert P. Bremner Trustee
Lawrence H. Brown Trustee
Anne E. Impellizzeri Trustee /s/ Gifford R.
Peter R. Sawers Trustee Zimmerman
</TABLE>
By_____________________________
Gifford R. Zimmerman
William J. Schneider Trustee Attorney-in-Fact
Judith M. Stockdale Trustee
September 28, 2000
An original power of attorney authorizing, among others, Gifford R. Zimmerman
and Alan G. Berkshire to execute this Registration Statement, and Amendments
thereto, for each of the Trustees of the Registrant, has been executed and is
filed as an exhibit to this Registration Statement.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Exhibit Page
------- ------- ------------
<C> <S> <C>
a.2 Amendment to Declaration of Trust of Registrant dated
September 15, 2000.
a.3 Amended Establishment and Designation of Shares dated
September 15, 2000.
d.1 Renewal of Investment Management Agreement dated June
1, 2000.
e.1 Renewal of Distribution Agreement dated July 31,
2000.
i. Opinion of Morgan Lewis & Bockius LLP.
j. Consent of Arthur Andersen LLP, Independent Public
Accountants.
99(a). Powers of Attorney.
99(b). Certified copy of Resolution of Board of Trustees au-
thorizing the signing of the names of trustees and
officers on the Registrant's Registration Statement
pursuant to power of attorney.
99(c). Code of Ethics and Reporting Requirements.
</TABLE>
