<PAGE>
November 30, 1999 Semiannual Report
NUVEEN Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Municipal Bond Funds
[PHOTO APPEARS HERE]
Dependable, tax-free income to help you keep more of what you earn.
Arizona
Colorado
New Mexico
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
Contents
1 Dear Shareholder
3 Nuveen Flagship Arizona Municipal
Bond Fund
7 Nuveen Flagship Arizona Municipal
Bond Fund Spotlight
8 Nuveen Flagship Colorado Municipal
Bond Fund
12 Nuveen Flagship Colorado Municipal
Bond Fund Spotlight
13 Nuveen Flagship New Mexico Municipal
Bond Fund
17 Nuveen Flagship New Mexico Municipal
Bond Fund Spotlight
18 Portfolio of Investments
29 Statement of Net Assets
30 Statement of Operations
31 Statement of Changes in Net Assets
32 Notes to Financial Statements
37 Financial Highlights
40 Building a Better Portfolio
41 Fund Information
<PAGE>
DEAR
Shareholder
[Photo of Timothy R. Schwertfeger appears here]
Timothy R. Schwertfeger
Chairman of the Board
How did you gain your financial wisdom? While some of us study finance, the
financial markets, economics or related disciplines in formal programs, most of
us end up accumulating practical knowledge through the years, from friends,
family, colleagues and media.
At Nuveen, we believe a formal financial education should start early in life. A
study sponsored by the National Council on Economic Education shows that a
whopping 66% of high school students tested on basic money skills scored an "F."
Only 3% received an "A."
Because we believe strongly in education and are committed to children's
financial literacy, we have launched a community service program, Kid$ense, in
our hometown of Chicago.
The Kid$ense curriculum, which is available for grades kindergarten through
sixth, includes textbooks, teaching materials and teacher training. The lessons
introduce children to the concept of money and how it works in society; buying,
selling and trading; working, earning, saving and investing.
Nuveen's commitment to children's financial literacy goes beyond the 250
Chicago public schools who have benefited from the Kid$ense curriculum. We also
have a commitment to family wealth management, which is a positive philosophy
that addresses the role of wealth in our lives and our world.
At Nuveen, we are dedicated to helping you and your financial adviser
develop a family wealth management strategy unique to you and your goals and
values. In your next shareholder report, look for more information about
Nuveen's dedication to Family Wealth Management, or ask your financial adviser
about this approach to investing.
The Economic Environment. I want to briefly report on the economic environment
in which your Nuveen investment performed. Read on, as we've conducted an in-
depth interview with a representative from your fund's portfolio management
team, describing how the team of investment and research professionals directed
the portfolio during the semi-annual fiscal period ended November 30, 1999.
Until fairly recently, the U.S. economy has been characterized by robust
growth, generally low interest rates and unemployment levels that remain among
the lowest in three decades.
Concerns, however, about the continued pace of the economy's expansion have
begun to test the "new paradigm," which holds that improvements in productivity
enable us to have both economic growth and low inflation at the same time. With
investors and the various markets watching -- and reacting to -- every
announcement concerning economic statistics, volatility has increased,
especially in the equity markets.
We have entered a different economic environment from that of 12 months
ago. This shift has occurred in response to two factors:
. the Asian financial crisis of 1998 did not produce the U.S. economic
slowdown that was widely expected to keep economic growth from becoming
overly robust;
. evidence of accelerating prices contributed to the reemergence of the
specter of inflation, accompanied by predictions of higher interest
rates.
"We also have a commitment to family wealth management, which is a positive
philosophy that addresses the role of wealth in our lives and our world."
SEMIANNUAL REPORT page 1
<PAGE>
"Your financial adviser can serve as a valuable resource in helping you
determine if adjustments are needed in your current asset allocation plan."
In an effort to pre-empt this threat of inflation, the Federal Reserve
Board (the Fed) moved to raise interest rates by a quarter-point on three
separate occasions between June and November 1999. This brought the federal
funds rate, which represents the amount banks charge one another on overnight
loans and serves as a standard for short-term market rates, from 4.75% to
5.50%. These increases offset the three rate cuts enacted by the Fed a year
earlier.
At its November 1999 meeting, the Fed announced that it would shift to a
neutral stance following the latest interest rate increase, giving the markets
some respite during the Y2K transition. However, the Fed's indication that it
would continue to closely watch the pace of economic growth for any signs of
inflationary pressure left the door open for additional tightenings.
In January 2000, the annual rotation among members of the Fed's Open Market
Committee, the body that ultimately decides interest rate policy, will put
several members considered more "hawkish" on inflation fighting into voting
slots. This could tilt policy toward further rate increases in the new year.
Municipal bonds continued to serve investors well. At the end of November
1999, the ratio between long-term municipal yields and 30-year Treasury yields
stood at 97.14%, compared with the historical average of 89.6% over the period
1979-1999. For investors, this meant that quality long-term municipal bonds
offered yields comparable to those of long-term Treasury bonds -- even before
the tax advantages of municipals were taken into account. Of course, Treasuries
are backed by the full faith and credit of the U.S. government. Even so, on an
after-tax basis, municipal bonds continued to present an exceptionally
attractive investment option relative to Treasuries.
In the coming months, we expect to see a healthy supply of new municipal
bonds, although total volume is expected to drop from the near-record levels of
1998. This is due to the dramatic decrease in the refunding of existing bonds in
the wake of higher interest rates compared to early 1999.
Keeping the Balance. The increased volatility in the markets highlights the
importance of maintaining balance in your investment portfolio. With a properly
balanced portfolio of equities, bonds and cash, your assets may be better
positioned to weather the markets' ups and downs. A balanced portfolio can also
help you increase your opportunities for capital growth while reducing risk.
Your financial adviser can serve as a valuable resource in helping you determine
if adjustments are needed in your current asset allocation plan.
For more information on any Nuveen investment, including a prospectus,
contact your financial adviser. 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. As we enter a new millennium, we are committed to maintaining that
reputation and finding the best ways to serve your evolving investment needs.
Thank you for your continued confidence.
Sincerely,
/s/ Timothy Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
January 15, 2000
SEMIANNUAL REPORT page 2
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NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
Nuveen Flagship Arizona Municipal Bond Fund features portfolio management by
Nuveen Investment Advisory Services, 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 six-month period ended
November 30, 1999, we spoke with Portfolio Manager Mike Davern.
Q: In an effort to cool off any brewing inflationary pressures, the Federal
Reserve Board (the Fed) raised short-term interest rates by 25 basis points, or
0.25 percent, three times in the six-month reporting period we're discussing
today. The increases occurred in June, August and November. The Fed indicated
that the rate increases were a reversal of the rate cuts it made in 1998 when
global economic and market instability threatened to derail the U.S. economy.
How do bonds typically perform in such an environment?
MIKE: When interest rates are rising, it's virtually impossible for bonds to
produce the type of performance results we like to see, since bond prices move
inversely to yields. Let's look at the numbers. The 30-year U.S. Treasury bond
yield rose from 5.92% on June 1, 1999, to 6.28% on November 30, 1999, an
increase of 36 basis points. Municipal bonds had an even tougher time. The 30-
year municipal bond started the period yielding 5.33% and ended it at 6.00%, a
much more dramatic jump of 67 basis points.
Q: That's quite a discrepancy. Why have municipal bonds underperformed Treasury
bonds?
MIKE: Unlike the highly liquid Treasury bond market which brings in buyers and
sellers from all over the world, the municipal market's performance is highly
dependent upon local factors of supply and demand. Despite rising interest rates
and higher financing costs, the booming U.S. economy has encouraged local
municipalities to finance new projects, and thus, the supply of bonds was quite
plentiful. However, demand was not quite so robust, even though municipal bonds
are offering extremely attractive yields, especially when viewed on a taxable
equivalent basis. In fact, as of November 30, 1999, the ratio between long-term
municipal yields and 30-year Treasury yields stood at 97.14%, meaning that
municipal bonds presented an exceptionally attractive investment option relative
to Treasuries, which are backed by the full faith and credit of the U.S.
government.
Q: Have Y2K concerns caused any disruptions in the market?
MIKE: Actually, they haven't. If anything, it has been an extremely normal year
in terms of the timing of issuance.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Acvisers/SM/ -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. 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 be blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/SM/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS 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 Flagship Arizona Municipal Bond Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the six-month period ended November 30, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
SEMIANNUAL REPORT page 3
<PAGE>
"This environment allows us to use our excellent credit research staff to find
bonds which have the potential for extra yield without exposure to extra risk."
For example, we recently looked at one big municipal bond deal that was set
to close on December 31, 1999, and it was oversubscribed. If there were concerns
about year-end cash flow, then the issuer would have had trouble placing the
deal. So we can't sense any problems associated with the Y2K computer bug. With
all the effort put into fixing computer systems over the last two years it
really is not all that surprising.
Q: What other national trends did you notice?
MIKE: As you know, some of the bonds in our portfolios are insured. One trend
we're seeing now is in the bond insurance area: four major bond insurance
companies have stepped back a little bit, choosing not to insure some deals in
reaction to the bankruptcy of a hospital issuer in Philadelphia. This has caused
the insurers to reassess their risk exposure, certainly in the hospital market
as well as some other lower-rated credits.
Although that may sound like a negative, it actually created an opportunity
for us. So many of the bonds in our portfolio are insured with high credit
quality but relatively low yield that it's nice to get to choose from some
lower-rated credits. With the insurers stepping back, a portion of the new issue
supply is now coming to the market uninsured. This environment allows us to use
our excellent credit research staff to find bonds which have the potential for
extra yield without exposure to extra risk.
Q: Since you're looking closely at credit quality, how strong is Arizona's
economy?
MIKE: Thanks to a pro-business regulatory environment and a high quality of
life, Arizona remains one of the fastest growing states, driven by high
technology, manufacturing, tourism and trade.
Still, the state's dependence on natural resource industries has been a
negative. Although its role is diminishing, mining continues to play a role in
Arizona's economy. Copper accounts for 80% of Arizona's mining employment, and
falling copper prices have led to cutbacks.
Q: How did the fund perform for the period ended November 30, 1999?
MIKE: Nuveen Flagship Arizona Municipal Bond Fund generated a six-month total
return of -4.28%, underperforming the Lipper Arizona Municipal Bond Fund
category, which reported a total return of -3.49%. For the one-, five- and 10-
year periods ended November 30, 1999, the Nuveen fund reported average annual
total returns of -4.20%, 6.99% and 6.67%, respectively, compared to the Lipper
peer group average returns of -3.13%, 6.75% and 6.26% for the same periods.*
Total return equals a fund's income plus capital gains distributions, if
any, plus or minus changes in net asset value.
Nuveen Flagship Arizona Municipal Bond Fund's taxable equivalent total
return for the six months ended November 30, 1999, for investors in the 34.5%
combined federal and state income tax bracket, was -3.04%.** As of November 30,
1999, the fund's SEC 30-day yield was 4.64%. For investors in the combined 34.5%
federal and state income tax bracket, that is equivalent to a yield of 7.08% on
a taxable investment.
SEMIANNUAL REPORT page 4
<PAGE>
Q: Why did the fund underperform its benchmark?
MIKE: Our fund invests primarily in bonds with long-term maturities, which is
one of the ways the fund pursues its objective. In a bear market for bonds,
which has generally been the environment in 1999, long-term maturities will
typically underperform because these bonds are the most sensitive to changes in
interest rates. In a bull market, we would hope to outperform, as shown by our
longer-term performance numbers.
On the plus side, the rising interest rate environment provided the
opportunity to buy bonds with higher yields and better call protection, thus
strengthening the fund's dividend-paying capability.
Since bond prices fall in a rising interest rate environment, certain bonds
purchased earlier in the period fell in value. We sold some of these bonds,
taking a capital loss that, for tax purposes, can be used to offset capital
gains incurred earlier in the year, or be carried forward for up to eight years
to offset future gains. Tax losses can therefore be very valuable for the fund.
If the bonds purchased are also at a discount to par value (priced less than
100) the fund still maintains its ability to come back in price if the market
recovers.
Q: What variables do you look for when considering a purchase for the portfolio?
MIKE: There are at least five different variables that we examine: price,
coupon, call, sector and rating.
Price. In a bear market, owning a bond selling at a discount to par, or
say, 80 cents on the dollar, has its advantages. As time passes, the bond heads
toward maturity when it is repaid at $1. As a result, a discount bond isn't
going to drop as much in price in a bear market because the passage of time is
tugging the bond upward in price, and thus closer to maturity. We say that a
bond priced at a deep discount has good "convexity," suggesting that the bond's
ability to go up in price is greater than its ability to go down in price. In
contrast, a bond selling at a premium above par usually has less upside. Premium
bonds typically pay higher coupons, which means that the issuer will want to
"call" the bonds, or redeem them, if interest rates later fall. As a result,
such bonds have less upside price potential.
Call. We prefer to own bonds that can't be called for at least eight to 10
years and avoid, whenever possible, bonds subject to call risk in the next year
or so. Currently, only 1.3% of the Arizona portfolio is callable in the year
2000. That's particularly important if interest rates begin falling again. Bonds
with longer calls can generally be found in the primary or new issue market. One
such acquisition for the fund during the quarter was the purchase of the Mesa
Industrial Development Authority bonds for the Discovery Health System,
purchased at a $97.81 price per $100 face value.
Coupon. As far as a bond's coupon is concerned, we're looking for bonds
that provide good tax-exempt income while keeping the fund's credit quality
high. In today's market, we're looking for bonds that pay more than 6%, which is
the equivalent of 9.2% on a taxable equivalent basis for taxpayers in the
combined 34.5% federal and state income tax bracket.
"On the plus side, the rising interest rate environment provided the opportunity
to buy bonds with higher yields and better call protection, thus strengthening
the fund's dividend-paying capability."
SEMIANNUAL REPORT page 5
<PAGE>
"With tax-exempt yields at 6% or more and inflation hovering around 2.5%, we
believe that municipal bonds represent a very attractive option for investors
searching for yield."
* The Lipper Peer Group returns represent the average annualized total return
of the 39 funds in the Lipper Arizona Municipal Debt Category for the six-
month period ended November 30, 1999, and 39, 25 and five funds for the one-,
five-and 10-year periods, respectively. 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.
Sector. We try to purchase bonds in sectors where there is limited supply
such as transportation and water/sewer. We believe that anytime you can find
something that's relatively scarce, then you're finding something that has
value.
NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND
Top Five Sectors
Tax Obligation (General) 19%
- --------------------------------
Healthcare 19%
- --------------------------------
U.S. Guaranteed 18%
- --------------------------------
Tax Obligation (Limited) 14%
- --------------------------------
Utilities 6%
- --------------------------------
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
Rating. All of our purchases are in Standard & Poor's top four credit
rating categories, or if non-rated, judged by Nuveen research to have equivalent
credit quality. Over the past few years, the majority of purchases have been
insured. In the past six months, however, there's been some opportunity to buy
A, BAA and non-rated bonds. In fact, we've even bought uninsured bonds, paid an
insurance company to insure them and reaped an immediate paper profit.
Q: Can you give us an example?
MIKE: While not currently in the portfolio, we had purchased pollution control
bonds issued by Arizona Public Service Company, Navajo County, Arizona. They
were uninsured, and rated A- by Standard & Poor's. Insurance capacity became
available on this bond, and therefore we paid $16,750 to Municipal Bond
Insurance Association (MBIA), one of the four big municipal bond insurance
companies in the market, to insure these bonds, increasing their credit quality
up to a AAA rating. As a result, the bonds were immediately worth an extra
$40,000 in the secondary market due to the higher rating. This isn't as simple
to do as it appears. In fact, this is where the advantage of Nuveen's research
capabilities comes in handy.
NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND
[PIE CHART APPEARS HERE]
Bond Credit Quality
AAA/U.S. Guaranteed......62%
AA....................... 5%
A........................14%
BBB/NR...................19%
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
Q: What is your outlook for Nuveen Flagship Arizona Municipal Bond Fund?
MIKE: We will continue to focus on maintaining a stable dividend that is exempt
from federal and state income taxes. Using Nuveen research, we will continue to
look for attractively priced bonds offering higher yields. With tax-exempt
yields at 6% or more and inflation hovering around 2.5%, we believe that
municipal bonds represent a very attractive option for investors searching for
yield.
SEMIANNUAL REPORT page 6
<PAGE>
NUVEEN FLAGSHIP ARIZONA MUNICIPAL BOND FUND
Fund Spotlight as of November 30, 1999
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $10.51 $10.51 $10.51 $10.52
- -----------------------------------------------------------------------
Fund Symbol FAZTX N/A FAZCX NMARX
- -----------------------------------------------------------------------
CUSIP 67065L104 67065L203 67065L302 67065L401
- -----------------------------------------------------------------------
Inception Date 10/86 2/97 2/94 2/97
- -----------------------------------------------------------------------
</TABLE>
Total Returns (Annualized)/1/
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -4.20% -8.25% -4.83% -8.47% -4.71% -3.90%
- --------------------------------------------------------------------------
1-Year TER* -1.73% -5.88% -2.75% -6.39% -2.53% -1.32%
- --------------------------------------------------------------------------
5-Year 6.99% 6.07% 6.30% 6.14% 6.42% 7.14%
- --------------------------------------------------------------------------
10-Year 6.67% 6.21% 6.18% 6.18% 6.09% 6.74%
- --------------------------------------------------------------------------
</TABLE>
/1/ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum 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.
* Taxable Equivalent Return (based on a combined federal and state income tax
rate of 34.5%).
Tax-Free Yields
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 4.64% 4.45% 3.89% 4.09% 4.84%
- -------------------------------------------------------------------------
Taxable Equivalent Yield 7.08% 6.79% 5.94% 6.24% 7.39%
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)/./
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
12/1998 $.0445
1/1999 $.0445
2/1999 $.0445
3/1999 $.0445
4/1999 $.0445
5/1999 $.0445
6/1999 $.0445
7/1999 $.0445
8/1999 $.0430
9/1999 $.0430
10/1999 $.0430
11/1999 $.0430
</TABLE>
Portfolio Statistics
Total Net Assets $108.7 million
- ------------------------------------
Average Effective
Maturity 18.18 years
- ------------------------------------
Average Duration 9.16
- ------------------------------------
. The fund also paid shareholders capital gains and net ordinary income
distributions in December 1998 of $0.0539 per share.
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.
Terms To Know
The following are a few terms used throughout this report.
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.
Fed Easing When the Federal Reserve is following an easy money policy, it is
essentially increasing the money supply by decreasing the federal funds rate and
making money cheaper to borrow. The intention is to help the economy grow.
Fed Tightening When the Federal Reserve is following tight money policy, it is
essentially decreasing the money supply by increasing the fed funds rate and
making money more expensive to borrow. The intention is to slow the growth of
the economy and curtail inflation.
Federal Fund Rates 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.
Taxable Equivalent Yield The return an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
SEMIANNUAL REPORT page 7
<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 their
specific areas of expertise. We call them Premier Advisers/SM/ -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. 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 be blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/SM/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS 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 Flagship Colorado Municipal Bond Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the six-month period ended November 30, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
Nuveen Flagship Colorado Municipal Bond Fund features portfolio management by
Nuveen Investment Advisory Services, 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 six-month period ended
November 30, 1999, we spoke with Portfolio Manager Mike Davern.
Q] In an effort to cool off any brewing inflationary pressures, the Federal
Reserve Board (the Fed) raised short-term interest rates by 25 basis points, or
0.25 percent, three times in the six-month reporting period we're discussing
today. The increases occurred in June, August and November. The Fed indicated
that the rate increases were a reversal of the rate cuts it made in 1998 when
global economic and market instability threatened to derail the U.S. economy.
How do bonds typically perform in such an environment?
MIKE] When interest rates are rising, it's virtually impossible for bonds to
produce the type of performance results we like to see, since bond prices move
inversely to yields. Let's look at the numbers. The 30-year U.S. Treasury bond
yield rose from 5.92% on June 1, 1999, to 6.28% on November 30, 1999, an
increase of 36 basis points. Municipal bonds had an even tougher time. The 30-
year municipal bond started the period yielding 5.33% and ended it at 6.00%, a
much more dramatic jump of 67 basis points.
Q] That's quite a discrepancy. Why have municipal bonds underperformed Treasury
bonds?
MIKE] Unlike the highly liquid Treasury bond market -- which brings in buyers
and sellers from all over the world -- the municipal market's performance is
highly dependent upon local factors of supply and demand. Despite rising
interest rates and higher financing costs, the booming U.S. economy has
encouraged local municipalities to finance new projects, and thus, the supply of
bonds was quite plentiful. However, demand was not quite so robust, even though
municipal bonds are offering extremely attractive yields, especially when viewed
on a taxable equivalent basis. In fact, as of November 30, 1999, the ratio
between long-term municipal yields and 30-year Treasury yields stood at 97.14%,
meaning that municipal bonds presented an exceptionally attractive investment
option relative to Treasuries, which are backed by the full faith and credit of
the U.S. government.
SEMIANNUAL REPORT page 8
<PAGE>
Q] Are Y2K concerns causing any disruptions in the market?
MIKE] Actually, they aren't. If anything, it has been an extremely normal year
in terms of the timing of issuance.
For example, we recently looked at one big municipal bond deal that
was set to close on December 31, 1999, and it was oversubscribed. If there were
concerns about year-end cash flow, then the issuer would have had trouble
placing the deal. So we can't sense any problems associated with the Y2K
computer bug. With all the effort put into fixing computer systems over the last
two years, it really is not all that surprising.
Q] What other national trends did you notice?
MIKE] As you know, some of the bonds in our portfolios are insured. However, the
four major bond insurance companies have stepped back a little bit, choosing not
to insure some deals in reaction to the bankruptcy of a hospital issuer in
Philadelphia. This has caused the insurers to reassess their risk exposure,
certainly in the hospital market as well as some other lower-rated credits.
Although that may sound like a negative, it actually created an
opportunity for us. So many of the bonds in our portfolio are insured with high
credit quality but relatively low yield that it's nice to get to choose from
some lower-rated credits. With the insurers stepping back, a portion of the new
issue supply is now coming to the market uninsured. This environment allows us
to use our excellent credit research staff to find bonds which have the
potential for extra yield without exposure to extra risk.
Q] How did the fund perform for the period ended November 30, 1999?
MIKE] Nuveen Flagship Colorado Municipal Bond Fund generated a six-month total
return on net asset value of -5.58%, underperforming the Lipper Colorado
Municipal Bond Fund category, which reported a return of -3.65%. For the one-
five- and 10-year periods ending November 30, 1999, the Nuveen fund had an
average annualized total return of -5.52%, 7.30% and 6.65%, respectively,
compared to the Lipper averages of -3.52%, 6.63% and 6.41% for the same time
periods.*
Total return equals a fund's income plus capital gains distributions,
if any, plus or minus changes in net asset value.
Nuveen Flagship Colorado Municipal Bond Fund's six-month taxable
equivalent total return, for investors in the 34.5% combined federal and state
income tax bracket, was -4.35%.** As of November 30, 1999, the fund's SEC 30-day
yield was 4.92%. For investors in the combined 34.5% federal and state income
tax bracket, that is equivalent to a yield of 7.51% on a taxable investment.
Q] Why did the fund underperform its benchmark?
MIKE] Our fund includes bonds with long-term maturities, which is one of the
ways it pursues its objectives. In a bear market for bonds, which has generally
been the environment in 1999, long-term maturities will typically underperform
because these bonds are the most sensitive to changes in interest rates. In a
bull market, we would hope to outperform, as shown by our longer-term
performance numbers.
"This environment
allows us to use our
excellent credit
research staff
to find bonds
which have the
potential for
extra yield
without exposure
to extra risk."
SEMIANNUAL REPORT page 9
<PAGE>
"If the bonds purchased are also at a discount to par value (priced less than
100), the fund still maintains its ability to come back in price as the market
recovers."
On the plus side, the rising interest rate environment provided the
opportunity to buy bonds with higher yields and better call protection, thus
strengthening the fund's dividend-paying capability.
Since bond prices fall in a rising interest rate environment, certain
bonds purchased earlier in the period fell in value. We sold some of these
bonds, taking a capital loss that, for tax purposes, can be used to offset
capital gains, or be carried forward for up to eight years to offset future
gains. Tax losses can therefore be very valuable for the fund. If the bonds
purchased are also at a discount to par value (priced less than 100), the fund
still maintains its ability to come back in price if the market recovers.
Q What variables do you look for when considering a purchase for the portfolio?
MIKE There are at least five different variables that we examine: price,
coupon, call, sector and rating.
Price. In a bear market, owning a bond selling at a discount to par,
or say, 80 cents on the dollar, has its advantages. As time passes, the bond
heads toward maturity when it is repaid at $1. As a result, a discount bond
isn't going to drop as much in price in a bear market because the passage of
time is tugging the bond upward in price, and thus closer to maturity. We say
that a bond priced at a deep discount has good "convexity," suggesting that the
bond's ability to go up in price is greater than its ability to go down in
price. In contrast, a bond selling at a premium above par usually has less
upside. Premium bonds typically pay higher coupons, which means that the issuer
will want to "call" the bonds, or redeem them, if interest rates later fall. As
a result, such bonds have less upside price potential.
Call. We prefer to own bonds that can't be called for at least eight
to 10 years, and avoid, whenever possible, bonds subject to call risk in the
near future. Currently, only 1.2% of the Colorado portfolio is callable in the
year 2000. That's particularly important if interest rates begin falling again.
Bonds with longer calls can generally be found in the primary or new issue
market.
Coupon. As far as a bond's coupon is concerned, we're looking for
bonds that provide good tax-exempt income while keeping the fund's credit
quality high. In today's market, we're looking for bonds that pay more than 6%,
which is the equivalent of 9.2% on a taxable equivalent basis for taxpayers in
the 34.5% combined income tax bracket.
Sector. We try to purchase bonds in sectors where there is limited
supply such as transportation and water/sewer. Anytime you can find something
that's relatively scarce, then you're finding something that has value.
Rating. Most of our purchases are in Standard & Poor's Corporation's
top four credit rating categories, or, if non-rated, judged by Nuveen research
to have equivalent credit quality. Over the past few years, the majority of
purchases have been insured bonds. In the past six months, however, there's been
some opportunity to buy A, BAA and non-rated bonds.
NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND
Top Five Sectors
U.S. Guaranteed 27%
- ----------------------------
Housing (Multifamily) 22%
- ----------------------------
Healthcare 16%
- ----------------------------
Long-Term Care 8%
- ----------------------------
Housing (Single Family) 5%
- ----------------------------
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
SEMIANNUAL REPORT page 10
<PAGE>
For example, we purchased 30-year bonds issued by the Thistle Community Housing
Project, a non-rated, multifamily affordable housing project for the cities of
Boulder and Longmont. Non-rated securities, like Thistle, are eligible for
purchase into the fund, but must first go through a rigorous examination by
Nuveen research to determine if the bonds meet Nuveen's strict criteria for
investment grade quality. Our reward: the bonds yielded a full percentage point
more than AAA-rated bonds at the time of purchase.
NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed... 40%
AA.................... 21%
A..................... 10%
BBB/NR................ 29%
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
Q What is your outlook for Nuveen Flagship Colorado Municipal Bond Fund?
MIKE We will continue to focus on maintaining a stable dividend that is exempt
from federal and state income taxes. Using Nuveen research, we will continue to
look for attractively priced bonds offering higher yields. In a high tax state
such as Colorado, we believe that municipal bonds represent a very attractive
option for investors searching for yield.
* The Lipper Peer Group returns represent the average annualized total return
of the 27 funds in the Lipper Colorado Municipal Debt Category for the six-
month and one-year periods ended November 30, 1999, and 18 and six funds
for the five and 10-year periods, respectively. 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.
SEMIANNUAL REPORT page 11
<PAGE>
NUVEEN FLAGSHIP COLORADO MUNICIPAL BOND FUND
Fund Spotlight as of November 30, 1999
Terms To Know
The following are a few terms used throughout this report.
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.
Fed Easing When the Federal Reserve is following an easy money policy, it is
essentially increasing the money supply by decreasing the federal funds rate and
making money cheaper to borrow. The intention is to help the economy grow.
Fed Tightening When the Federal Reserve is following tight money policy, it is
essentially decreasing the money supply by increasing the fed funds rate and
making money more expensive to borrow. The intention is to slow the growth of
the economy and curtail inflation.
Federal Fund Rates 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.
Taxable Equivalent Yield The return an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 9.84 $ 9.86 $ 9.84 $ 9.84
- ----------------------------------------------------------------------
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>
Total Returns (Annualized)/+/
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -5.52% -9.49% -6.21% -9.81% -5.98% -5.33%
- -----------------------------------------------------------------------------
1-Year TER* -3.08% -7.15% -4.17% -7.76% -3.83% -2.78%
- -----------------------------------------------------------------------------
5-Year 7.30% 6.39% 6.65% 6.49% 6.81% 7.42%
- -----------------------------------------------------------------------------
10-Year 6.65% 6.19% 6.18% 6.18% 6.22% 6.71%
- -----------------------------------------------------------------------------
</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.
* Taxable Equivalent Return (based on a combined federal and state income tax
rate of 34.5%).
Tax-Free Yields
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 4.92% 4.71% 4.16% 4.36% 5.11%
- -------------------------------------------------------------------------
Taxable Equivalent Yield 7.51% 7.19% 6.35% 6.66% 7.80%
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)/./
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Colorado
<S> <C>
12/1998 $.0425
1/1999 .0410
2/1999 .0410
3/1999 .0410
4/1999 .0410
5/1999 .0410
6/1999 .0410
7/1999 .0410
8/1999 .0410
9/1999 .0410
10/1999 .0420
11/1999 .0420
</TABLE>
Portfolio Statistics
Total Net Assets $43.5 million
- -------------------------------------
Average Effective
Maturity 21.81 years
- -------------------------------------
Average Duration 9.96
- -------------------------------------
. The fund also paid shareholders capital gains distributions in December 1998
of $0.0300 per share.
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.
SEMIANNUAL REPORT page 12
<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 Advisory Services, 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 six-month period ended
November 30, 1999, we spoke with Portfolio Manager Mike Davern.
Q] In an effort to cool off any brewing inflationary pressures, the Federal
Reserve Board (the Fed) raised short-term interest rates by 25 basis points, or
0.25 percent, three times in the six-month reporting period we're discussing
today. The increases occurred in June, August and November. The Fed indicated
that the rate increases were a reversal of the rate cuts it made in 1998 when
global economic and market instability threatened to derail the U.S. economy.
How do bonds typically perform in such an environment?
MIKE] When interest rates are rising, it's virtually impossible for bonds to
produce the type of performance results we like to see, since bond prices move
inversely to yields. Let's look at the numbers. The 30-year U.S. Treasury bond
yield rose from 5.92% on June 1, 1999, to 6.28% on November 30, 1999, an
increase of 36 basis points. Municipal bonds had an even tougher time. The 30-
year municipal bond started the period yielding 5.33% and ended it at 6.00%, a
much more dramatic jump of 67 basis points.
Q] That's quite a discrepancy. Why have municipal bonds underperformed Treasury
bonds?
MIKE] Unlike the highly liquid Treasury bond market -- which brings in buyers
and sellers from all over the world -- the municipal market's performance is
highly dependent upon local factors of supply and demand. Despite rising
interest rates and higher financing costs, the booming U.S. economy has
encouraged local municipalities to finance new projects, and thus, the supply of
bonds was quite plentiful. However, demand was not quite so robust, even though
municipal bonds are offering extremely attractive yields, especially when viewed
on a taxable equivalent basis. In fact, as of November 30, 1999, the ratio
between long-term municipal yields and 30-year Treasury yields stood at 97.14%,
meaning that municipal bonds presented an exceptionally attractive investment
option relative to Treasuries, which are backed by the full faith and credit of
the U.S. government.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers/sm/ -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. 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 be blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/sm/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS 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 Flagship New Mexico Municipal Bond Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the six-month period ended November 30, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
SEMIANNUAL REPORT page 13
<PAGE>
"This environment
allows us to use our
excellent credit
research staff
to find bonds
which have the
potential for
extra yield
without exposure
to extra risk."
Q] Have Y2K concerns caused any disruptions in the market?
MIKE] Actually, they haven't. If anything, it has been an extremely normal year
in terms of the timing of issuance.
For example, we recently looked at one big municipal bond deal that
was set to close on December 31, 1999, and it was oversubscribed. If there were
concerns about year-end cash flow, then the issuer would have had trouble
placing the deal. So we can't sense any problems associated with the Y2K
computer bug. With all the effort put into fixing computer systems over the last
two years, it really is not all that surprising.
Q] What other national trends did you notice?
MIKE] As you know, some of the bonds in our portfolios are insured. One trend
we're seeing now is in the bond insurance area: four major bond insurance
companies have stepped back a little bit, choosing not to insure some deals in
reaction to the bankruptcy of a hospital issuer in Philadelphia. This has caused
the insurers to reassess their risk exposure, certainly in the hospital market
as well as some other lower-rated credits.
Although that may sound like a negative, it actually created an opportunity
for us. So many of the bonds in our portfolio are insured with high credit
quality but relatively low yield that it's nice to get to choose from some
lower-rated credits. With the insurers stepping back, a portion of the new issue
supply is now coming to the market uninsured. This environment allows us to use
our excellent credit research staff to find bonds which have the potential for
extra yield without exposure to extra risk.
Q] How did the fund perform for the period ended November 30, 1999?
MIKE] Nuveen Flagship New Mexico Municipal Bond Fund generated a six-month total
return on net asset value of -4.36%, underperforming the Lipper Other States
Municipal Bond Fund category, which reported a return of -3.29%. For the one-
and five-year periods ended November 30, 1999, the Nuveen fund had an average
annualized total return of -4.12% and 7.20%, respectively, compared to the
Lipper peer group average total returns of -2.86 and 6.40% for the same time
periods.*
Total return equals a fund's income plus capital gains distributions, if
any, plus or minus changes in net asset value.
Nuveen Flagship New Mexico Municipal Bond Fund's six-month taxable
equivalent total return, for investors in the 36.5% combined federal and state
income tax bracket, was -3.04%.** As of November 30, 1999, the fund's SEC 30-day
yield was 4.74%. For investors in the combined 36.5% federal and state income
tax bracket, that is equivalent to a yield of 7.46% on a taxable investment.
SEMIANNUAL REPORT page 14
<PAGE>
Q Why did the fund underperform its benchmark?
MIKE Our fund invests primarily in bonds with long-term maturities, which is one
of the ways it pursues its objective. In a bear market for bonds, which has
generally been the environment in 1999, long-term maturities will typically
underperform because these bonds are the most sensitive to changes in interest
rates. In a bull market, we would hope to outperform, as shown by our longer-
term performance numbers.
On the plus side, the rising interest rate environment provided the
opportunity to buy bonds with higher yields and better call protection, thus
strengthening the fund's dividend-paying capability.
Since bond prices fall in a rising interest rate environment, certain
bonds purchased earlier in the period fell in value. We sold some of these
bonds, taking a capital loss that, for tax purposes, can be used to offset
capital gains, or be carried forward for up to eight years to offset future
gains. Tax losses can therefore be very valuable for the fund. If the bonds
purchased are also at a discount to par value (priced less than 100), the fund
still maintains its ability to come back in price if the market recovers.
Q What variables do you look for when considering a purchase for the portfolio?
MIKE There are at least five different variables that we examine: price, coupon,
call, sector and rating.
Price. In a bear market, owning a bond selling at a discount to par,
or say, 80 cents on the dollar, has its advantages. As time passes, the bond
heads toward maturity when it is repaid at $1. As a result, a discount bond
isn't going to drop as much in price in a bear market because the passage of
time is tugging the bond upward in price, and thus closer to maturity. We say
that a bond priced at a deep discount has good "convexity," suggesting that the
bond's ability to go up in price is greater than its ability to go down in
price. In contrast, a bond selling at a premium above par usually has less
upside. Premium bonds typically pay higher coupons, which means that the issuer
will want to "call" the bonds, or redeem them, if interest rates later fall. As
a result, such bonds have less upside price potential.
Call. We prefer to own bonds that can't be called for at least eight
to 10 years, and avoid, whenever possible, bonds subject to call risk in the
next year or so. Currently, only 2.8% of the New Mexico portfolio is callable in
the year 2000. That's particularly important if interest rates begin falling
again. Bonds with longer calls can generally be found in the primary or new
issue market.
Coupon. As far as a bond's coupon is concerned, we're looking for
bonds that provide good tax-exempt income while keeping the fund's credit
quality high. In today's market, we're looking for bonds that pay more than 6%,
which is the equivalent of 9.4% on a taxable equivalent basis for taxpayers in
the combined 36.5% federal and state income tax bracket.
"If the bonds
purchased are also
at a discount to
par value (priced
less than 100),
the fund still
maintains its ability
to come back
in price if the
market recovers."
SEMIANNUAL REPORT page 15
<PAGE>
Sector. We try to purchase bonds in sectors where there is limited
supply such as transportation and water/sewer. We believe that anytime you can
find something that's relatively scarce, then you're finding something that has
value.
Rating. All of our purchases are in Standard & Poor's top four credit
rating categories, or, if non-rated, judged by Nuveen research to have
equivalent credit quality. Over the past few years, the majority of purchases
have been insured bonds. In the past six months, however, there's been some
opportunity to buy A, BAA and non-rated bonds.
For instance, we purchased a non-rated Bernalillo County Multi-family
Housing bond for the El Centro Senior Apartments Project, netting the fund an
extra 0.55 percentage point in yield compared to insured paper issued at the
same time. In New Mexico, it is difficult to find bonds that offer extra yield
beyond AAA or AA paper.
Q What is your outlook for Nuveen Flagship New Mexico Municipal Bond Fund?
MIKE We will continue to focus on maintaining a stable dividend that is exempt
from federal and state income taxes. Using Nuveen research, we will continue to
look for attractively priced bonds offering higher yields. In a high tax state
such as New Mexico, we believe that municipal bonds represent a very attractive
option for investors searching for yield.
NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL BOND FUND
Top Five Sectors
Tax Obligation (Limited) 29%
-----------------------------------------
Education and Civic Organizations 15%
-----------------------------------------
Housing (Single Family) 14%
-----------------------------------------
Housing (Multifamily) 12%
-----------------------------------------
U.S. Guaranteed 8%
-----------------------------------------
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed.......... 56%
AA........................... 16%
A............................ 14%
BBB/NR....................... 14%
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
* The Lipper Peer Group returns represent the average annualized total return
of the 75 funds in the Lipper Other States Municipal Debt Fund category for
the six-month period ended November 30, 1999, and 75 and 47 funds for the
one- and five-year periods, respectively. 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.
SEMIANNUAL REPORT page 16
<PAGE>
NUVEEN FLAGSHIP NEW MEXICO MUNICIPAL BOND FUND
Fund Spotlight as of November 30, 1999
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 9.88 $ 9.88 $ 9.88 $ 9.90
- -----------------------------------------------------------------------------
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>
Total Returns (Annualized)+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -4.12% -8.12% -4.83% -8.49% -4.61% -3.98%
- ------------------------------------------------------------------------------------------------
1-Year TER* -1.51% -5.62% -2.65% -6.32% -2.30% -1.25%
- ------------------------------------------------------------------------------------------------
5-Year 7.20% 6.29% 6.51% 6.35% 6.73% 7.37%
- ------------------------------------------------------------------------------------------------
Since Inception 5.60% 4.98% 4.95% 4.95% 5.16% 5.72%
</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.
* Taxable Equivalent Return (based on a combined federal and state income tax
rate of 36.5%).
Tax-Free Yields
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 4.74% 4.54% 3.99% 4.19% 4.94%
- -----------------------------------------------------------------------------------
Taxable Equivalent Yield 7.46% 7.15% 6.28% 6.60% 7.78%
- -----------------------------------------------------------------------------------
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Month Amount
<S> <C>
12/1998 $.0410
1/1999 .0395
2/1999 .0395
3/1999 .0395
4/1999 .0395
5/1999 .0395
6/1999 .0395
7/1999 .0395
8/1999 .0405
9/1999 .0405
10/1999 .0405
11/1999 .0405
</TABLE>
Portfolio Statistics
<TABLE>
<CAPTION>
Total Net Assets $55.8 million
<S> <C>
- -------------------------------
Average Effective
Maturity 20.92 years
- -------------------------------
Average Duration 8.96
- -------------------------------
</TABLE>
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Terms To Know
The following are a few terms used throughout this report.
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.
Fed Easing When the Federal Reserve is following an easy money policy, it is
essentially increasing the money supply by decreasing the federal funds rate and
making money cheaper to borrow. The intention is to help the economy grow.
Fed Tightening When the Federal Reserve is following tight money policy, it is
essentially decreasing the money supply by increasing the fed funds rate and
making money more expensive to borrow. The intention is to slow the growth of
the economy and curtail inflation.
Federal Fund Rates 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.
Taxable Equivalent Yield The return an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
SEMIANNUAL REPORT page 17
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Arizona Municipal Bond Fund
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Consumer Cyclicals - 0.9%
$1,000,000 Mesa Industrial Development Authority, Industrial Revenue Bonds No Opt. Call N/R $1,029,710
(TRW Vehicle Safety System Inc. Project), Series 1992, 7.250%,
10/15/04 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples - 0.2%
250,000 Casa Grande Industrial Development Authority, Pollution Control 12/02 at 103 A1 261,738
Revenue Bonds (Frito-Lay Inc./PepsiCo), Series 1984, 6.650%,
12/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 6.2%
570,000 Arizona Educational Loan Marketing Corporation, 1992 Educational 3/02 at 101 Aa2 594,710
Loan Revenue Bonds, Series B, 7.000%, 3/01/05 (Alternative
Minimum Tax)
100,000 Arizona Educational Loan Marketing Corporation, Educational Loan 9/02 at 101 Aa 105,003
Revenue Bonds, 6.375%, 9/01/05 (Alternative Minimum Tax)
1,500,000 Student Loan Acquisition Authority of Arizona, Student Loan 5/04 at 102 Aa 1,584,405
Revenue Bonds, Series 1994B, Subordinated Fixed Rate Bonds, 6.600%,
5/01/10 (Alternative Minimum Tax)
1,500,000 Student Loan Acquisition Authority of Arizona, Student Loan 11/09 at 102 Aaa 1,464,675
Revenue Refunding Bonds, Senior Series 1999A-1, 5.900%, 5/01/24
2,500,000 The Industrial Development Authority of the City of Glendale, 5/08 at 101 BBB+ 2,212,150
Arizona, Revenue Bonds, Midwestern University, Series 1998A,
5.375%, 5/15/28
115,000 The Industrial Development Authority of the City of Glendale, 5/06 at 102 AAA 116,632
Arizona, Revenue Bonds, Midwestern University, Series 1996A,
6.000%, 5/15/16
300,000 Arizona Board of Regents, University of Arizona, System Revenue 6/02 at 102 AA 316,200
Refunding Bonds, Series 1992, 6.250%, 6/01/11
335,000 Community College District of Yavapai County, Arizona, Revenue 7/03 at 101 BBB+ 338,534
Bonds, Series 1993, 6.000%, 7/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 18.4%
4,000,000 Arizona Health Facilities Authority, Hospital Revenue Bonds 11/09 at 100 A2 3,913,120
(Phoenix Children's Hospital), Series 1999A, 6.125%, 11/15/22
1,000,000 Arizona Health Facilities Authority, Revenue Bonds (Catholic 7/10 at 101 BBB+ 998,250
Healthcare West), 1999 Series A, 6.625%, 7/01/20 (WI)
4,500,000 The Industrial Development Authority of the County of Maricopa 7/08 at 101 BBB+ 3,784,005
(Arizona), Health Facility Revenue Bonds (Catholic Healthcare
West Project), 1998 Series A, 5.000%, 7/01/16
2,775,000 The Industrial Development Authority of the County of Maricopa No Opt. Call AAA 3,188,531
(Arizona), Samaritan Health Services Hospital System Revenue
Refunding Bonds, Series 1990A, 7.000%, 12/01/16
375,000 The Industrial Development Authority of the County of Maricopa 12/00 at 102 AAA 393,233
(Arizona), Hospital Refunding Revenue Bonds (John C. Lincoln
Hospital and Health Center), Series 1990, 7.500%, 12/01/13
600,000 The Industrial Development Authority of the County of Maricopa 9/05 at 101 AAA 578,016
(Arizona), Baptist Hospital System Revenue Refunding Bonds,
Series 1995, 5.500%, 9/01/16
2,895,000 The Industrial Development Authority of the City of Mesa, 1/10 at 101 AAA 2,740,610
Arizona, Revenue Bonds (Discovery Health System), Series 1999A,
5.625%, 1/01/29
The Industrial Development Authority of the City of Phoenix, Arizona,
Hospital Revenue Bonds (John C. Lincoln Hospital and Health Center),
Series 1994:
500,000 6.000%, 12/01/10 12/03 at 102 BBB+ 487,255
500,000 6.000%, 12/01/14 12/03 at 102 BBB+ 475,120
1,500,000 The Industrial Development Authority of the City of Scottsdale, No Opt. Call AAA 1,532,310
Arizona (Scottsdale Memorial Hospitals), 5.500%, 9/01/12
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$ 1,000,000 The Industrial Development Authority of the City of Scottsdale, Arizona, 9/07 at 102 AAA $1,017,510
Hospital Revenue Refunding Bonds (Scottsdale Memorial Hospitals),
Series 1997A, 6.125%, 9/01/17
1,055,000 The Industrial Development Authority of the City of Winslow, Arizona, 6/08 at 101 N/R 876,990
Hospital Revenue Bonds (Winslow Memorial Hospital Project), Series
1998, 5.500%, 6/01/22
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 5.2%
2,900,000 The Industrial Development Authority of the County of Maricopa 10/09 at 102 N/R 2,695,927
(Arizona), Multifamily Housing Revenue Bonds (Arborwood
Apartments Project), Subordinate Series 1999B, 6.700%, 10/01/29
1,000,000 The Industrial Development Authority of the County of Maricopa 7/09 at 102 Aaa 975,360
(Arizona), Multifamily Housing Revenue Bonds (Whispering Palms
Apartments Project), Series 1999A, 5.900%, 7/01/29
295,000 Phoenix Housing Finance Corporation (Arizona), Mortgage Revenue 7/02 at 101 AAA 302,826
Refunding Bonds, Series 1992A (FHA-Insured Mortgage Loans -
Section 8 Assisted Projects), 6.500%, 7/01/24
The Industrial Development Authority of the City of Phoenix, Arizona,
Mortgage Revenue Refunding Bonds, Series 1992 (FHA-Insured Mortgage
Loan - Chris Ridge Village Project):
200,000 6.750%, 11/01/12 11/02 at 101 AAA 207,096
425,000 6.800%, 11/01/25 11/02 at 101 AAA 440,066
500,000 The Industrial Development Authority of the City of Phoenix, Arizona, 2/03 at 102 Aaa 480,385
Multifamily Housing Revenue Refunding Bonds, Series 1993 (GNMA
Collateralized Meadow Glen Apartment Project), 5.800%, 8/20/28
500,000 The Industrial Development Authority of the City of Tempe, Arizona, 6/03 at 102 AAA 509,295
Multifamily Mortgage Refunding Bonds, Series 1993A (FHA-Insured
Mortgage Loan -Quadrangles Village Apartments), 6.250%, 6/01/26
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 4.0%
1,500,000 The Industrial Development Authority of the County of Maricopa 6/08 at 108 Aaa 1,540,545
(Arizona), Single Family Mortgage Revenue Refunding Bonds (Mortgage-Backed
Securities Program), Series 1998B, 0.000%, 12/01/30
(Alternative Minimum Tax)
410,000 The Industrial Development Authority of the City of Phoenix, Arizona, 6/05 at 102 AAA 412,833
Statewide Single Family Mortgage Revenue Bonds, Series 1995, 6.150%,
12/01/08 (Alternative Minimum Tax)
1,400,000 The Industrial Development Authority of the City of Phoenix, 4/08 at 101 1/2 AAA 1,274,014
Arizona, Statewide Single Family Mortgage Revenue Bonds, 1998
Series C, 5.300%, 4/01/20 (Alternative Minimum Tax)
340,000 The Industrial Development Authority of the County of Pima (Arizona), 8/05 at 102 A 345,906
Single Family Mortgage Revenue Refunding Bonds, Series 1995A, 6.500%,
2/01/17
800,000 The Industrial Development Authority of the County of Pima (Arizona), 5/07 at 102 AAA 810,736
Single Family Mortgage Revenue Bonds, Series 1997A, 6.250%, 11/01/30
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 1.6%
1,625,000 The Industrial Development Authority of the County of Cochise, Tax 12/04 at 102 AAA 1,709,923
Exempt Mortgage Revenue Refunding Bonds, Series 1994A (GNMA
Collateralized - Sierra Vista Care Center), 6.750%, 11/20/19
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 18.5%
800,000 City of Chandler, Arizona, General Obligation Refunding Bonds, Series 7/01 at 101 AAA 837,576
1991, 7.000%, 7/01/12
Sierra Vista Unified School District No. 68 of Cochise County, Arizona,
General Obligation Refunding Bonds, Series 1992:
250,000 7.500%, 7/01/09 No Opt. Call AAA 294,513
300,000 7.500%, 7/01/10 No Opt. Call AAA 357,096
675,000 Peoria Unified School District No. 11 of Maricopa County, Arizona, No Opt. Call AAA 485,393
Refunding Bonds, Second Series of 1992, 0.000%, 7/01/06
480,000 Peoria Unified School District No. 11 of Maricopa County, Arizona, 7/01 at 101 AAA 497,885
School Improvement and Refunding Bonds, Series 1992, 6.400%, 7/01/10
6,000,000 Kyrene Elementary School District No. 28 of Maricopa County, Arizona, No Opt. Call AAA 3,302,160
Refunding Bonds, Series 1993C, 0.000%, 1/01/11
</TABLE>
19
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Arizona Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 50,000 Kyrene Elementary School District No. 28 of Maricopa County, Arizona, 7/02 at 100 AAA $ 51,190
School Improvement Bonds, Project of 1990 Series E, 6.000%, 7/01/12
Glendale Elementary School District No. 40 of Maricopa County, Arizona,
School Improvement and Refunding Bonds, Series 1995:
500,000 6.200%, 7/01/09 7/05 at 101 AAA 533,250
2,500,000 6.250%, 7/01/10 7/05 at 101 AAA 2,673,300
1,750,000 6.300%, 7/01/11 7/05 at 101 AAA 1,868,038
500,000 Gilbert Unified School District No. 41 of Maricopa County, Arizona, 7/08 at 100 AAA 522,405
School Improvement Bonds, Project of 1993 Series D, 6.250%, 7/01/15
515,000 Alhambra Elementary School District No. 68 of Maricopa County, Arizona, 7/04 at 102 AAA 564,049
School Improvement and Refunding Bonds, Series 1994A, 6.750%, 7/01/14
310,000 Chandler Unified School District No. 80 of Chandler County, Arizona, No Opt. Call AAA 337,339
School Improvement and Refunding Bonds, Series 1994, 6.250%, 7/01/11
1,275,000 Maricopa County Arizona School District No. 98, Fountain Hills No Opt. Call AAA 916,853
Unit Refunding Bonds, 0.000%, 7/01/06
4,750,000 City of Mesa, Arizona, General Obligation Bonds, Series 1999, 7/09 at 100 AAA 4,386,008
5.000%, 7/01/17 (WI)
1,000,000 Tucson Unified School District No. 1 of Pima County, Arizona, No Opt. Call AAA 1,193,030
Refunding Bonds, Series 1992, 7.500%, 7/01/10
500,000 Tanque Verde Unified School District No. 13 of Pima County, Arizona, 7/04 at 102 AAA 546,275
School Improvement and Refunding Bonds, Series 1994, 6.700%, 7/01/10
315,000 Scottsdale Mountain Community Facilities District, Arizona, General 7/03 at 102 A 317,117
Obligation Bonds, Series 1993A, 6.200%, 7/01/17
225,000 City of Tempe, Arizona, General Obligation Bonds, Series 1992B, 7/02 at 101 AA+ 235,737
6.000%, 7/01/08
180,000 Tempe Union High School District No. 213 of Maricopa County, Arizona, 7/04 at 101 AAA 186,514
School Improvement and Refunding Bonds, Series 1994, 6.000%, 7/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 13.3%
250,000 State of Arizona Refunding Certificates of Participation, Series 9/02 at 102 AAA 262,945
1992B, 6.250%, 9/01/10
225,000 Arizona Municipal Financing Program Certificates of Participation, No Opt. Call AAA 254,243
Series 11, 8.000%, 8/01/17
965,000 City of Bullhead, Bullhead Parkway Improvement District 1/03 at 103 Baa2 980,749
Improvement Bonds, 6.100%, 1/01/13
280,000 Eloy Municipal Property Corporation, Municipal Facilities Revenue 7/02 at 101 BBB 293,376
Bonds, Series 1992, 7.000%, 7/01/11
385,000 City of Flagstaff, Arizona, Junior Lien Street and Highway User No Opt. Call AAA 410,422
Revenue Bonds, Series 1992, 5.900%, 7/01/10
300,000 Hospital District No. One, Maricopa County, Arizona, Hospital 6/04 at 101 AAA 317,106
Facilities Refunding Bonds, Series B, 6.250%, 6/01/10
1,000,000 Hospital District No. One, Maricopa County, General Obligation 6/06 at 101 A 1,011,370
Bonds, Series 1996, 6.500%, 6/01/17
City of Peoria Improvement District No. 8801 (North Valley Power Center),
Improvement Bonds:
425,000 7.300%, 1/01/12 1/03 at 101 BBB 451,214
460,000 7.300%, 1/01/13 1/03 at 101 BBB 488,373
300,000 City of Phoenix, Arizona, Junior Lien Street and Highway User 7/02 at 102 A+ 316,506
Revenue Refunding Bonds, Series 1992, 6.250%, 7/01/11
Pinal County, Arizona, Certificates of Participation, Series 1994:
300,000 6.375%, 6/01/06 6/02 at 101 AA 316,404
200,000 6.500%, 6/01/09 6/02 at 101 AA 211,522
8,450,000 Puerto Rico Highway and Transportation Authority, Highway Revenue 7/16 at 100 A 7,112,027
Bonds, Series Y of 1996, 5.000%, 7/01/36
1,200,000 Puerto Rico Highway and Transportation Authority, Transportation 7/08 at 101 A 1,005,600
Revenue Bonds, Series A, 5.000%, 7/01/38
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 850,000 City of Tucson, Arizona, Certificates of Participation, Series 7/04 at 100 AA $ 898,399
1994, 6.375%, 7/01/09
175,000 Business Development Finance Corporation, Tucson (Arizona), Local 7/02 at 102 AAA 183,643
Development Lease Revenue Refunding Bonds, Series 1992, 6.250%,
7/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 1.0%
500,000 City of Phoenix, Arizona, Airport Revenue Bonds, Series 1994D, 7/04 at 102 AAA 529,105
6.400%, 7/01/12 (Alternative Minimum Tax)
500,000 Tucson, Arizona, Airport Authority Inc. Revenue Bonds, Series 6/00 at 102 AAA 516,070
1990B, 7.125%, 6/01/15 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 17.1%
300,000 Arizona Health Facilities Authority, Hospital System Revenue 9/03 at 100 AAA 317,952
Refunding Bonds (Phoenix Baptist Hospital and Medical Center, Inc.
and Medical Environments, Inc.), Series 1992, 6.250%, 9/01/11
200,000 Arizona Municipal Financing Program Certificates of No Opt. Call AAA 236,740
Participation, Series 20, 7.700%, 8/01/10
300,000 Arizona Board of Regents, Arizona State University System Revenue 7/02 at 101 Aaa 321,651
Bonds, Series 1989, 7.000%, 7/01/15 (Pre-refunded to 7/01/02)
Sedona-Oak Creek Joint Unified School District No. 9 of Coconino and
Yavapai Counties, Arizona, School Improvement Bonds, Project of 1992
Series A:
250,000 6.700%, 7/01/06 (Pre-refunded to 7/01/01) 7/01 at 101 A-*** 261,645
250,000 6.750%, 7/01/07 (Pre-refunded to 7/01/01) 7/01 at 101 A-*** 261,835
385,000 The Industrial Development Authority of the City of Glendale, 5/06 at 102 AAA 416,166
Arizona, Revenue Bonds, Midwestern University, Series 1996A, 6.000%,
5/15/16 (Pre-refunded to 5/15/06)
345,000 Maricopa County, Arizona, Hospital Revenue Bonds, Series 1980 No Opt. Call AAA 406,624
(St. Luke's Hospital Medical Center), 8.750%, 2/01/10
16,300,000 The Industrial Development Authority of the County of Maricopa No Opt. Call AAA 6,306,307
(Arizona), Single Family Mortgage Revenue Bonds, Series 1984, 0.000%,
2/01/16
270,000 Peoria Unified School District No. 11 of Maricopa County, Arizona, 7/01 at 101 AAA 281,475
School Improvement and Refunding Bonds, Series 1992, 6.400%, 7/01/10
(Pre-refunded to 7/01/01)
265,000 Kyrene Elementary School District No. 28 of Maricopa County, Arizona, 7/02 at 100 AAA 275,475
School Improvement Bonds, Project of 1990 Series E, 6.000%, 7/01/12
(Pre-refunded to 7/01/02)
500,000 City of Phoenix, Arizona, Senior Lien Street and Highway User 7/02 at 102 AA*** 531,910
Revenue Bonds, Series 1992, 6.250%, 7/01/11
460,000 Pima County, Arizona, Sewer Revenue Refunding Bonds, Series 1991, 7/01 at 101 AAA 481,993
6.750%, 7/01/15 (Pre-refunded to 7/01/01)
1,925,000 Tatum Ranch Community Facilities District (Arizona), General 7/02 at 102 N/R*** 2,070,395
Obligation Bonds, Series 1991A, 6.875%, 7/01/16 (Pre-refunded
to 7/01/02)
420,000 Tempe Union High School District No. 213 of Maricopa County, Arizona, 7/04 at 101 AAA 447,720
School Improvement and Refunding Bonds, Series 1994, 6.000%, 7/01/12
(Pre-refunded to 7/01/04)
11,570,000 Tucson and Pima County Industrial Development Authorities, Single No Opt. Call AAA 4,906,837
Family Mortgage Revenue Bonds, Series 1983A, 0.000%, 12/01/14
500,000 City of Tucson, Arizona, General Obligation Bonds, Series 1984-G, 7/04 at 101 AAA 538,120
6.250%, 7/01/18 (Pre-refunded to 7/01/04)
75,000 Business Development Finance Corporation of Tucson (Arizona), 7/02 at 102 AAA 79,760
Local Development Lease Revenue Refunding Bonds, Series 1992, 6.250%,
7/01/12 (Pre-refunded to 7/01/02)
390,000 City of Tucson, Arizona, Water System Revenue Bonds, Series 7/06 at 101 AAA 419,110
1994-A, 6.000%, 7/01/21 (Pre-refunded to 7/01/06)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 6.2%
500,000 Central Arizona Water Conservation District (Central Arizona No Opt. Call AA- 515,930
Project), Contract Revenue Refunding Bonds, Series A of 1993,
5.500%, 11/01/10
5,000 Central Arizona Water Conservation District (Central Arizona Project), 5/01 at 102 AA- 5,224
Contract Revenue Bonds, Series B of 1991, 6.500%, 11/01/11
</TABLE>
21
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Arizona Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities (continued)
$2,000,000 Coconino County Pollution Control Corporation, Pollution 10/06 at 102 BBB $ 1,924,500
Control Revenue Bonds (Nevada Power Company Project),
Series 1996, 6.375%, 10/01/36 (Alternative Minimum Tax)
500,000 The Industrial Development Authority of the County of 2/00 at 101 A+ 506,750
Mojave (Arizona), Industrial Development Revenue Bonds
(Citizens Utilities Company Project), Series 1991B, 7.150%, 2/01/26
(Alternative Minimum Tax)
500,000 The Industrial Development Authority of the County of 11/03 at 101 A1 515,690
Mojave (Arizona), Industrial Development Revenue Bonds (Citizen
Utilities Company Projects), 1994 Series, 6.600%, 5/01/29
(Alternative Minimum Tax)
210,000 The Industrial Development Authority of the County of 1/02 at 103 AAA 225,588
Pima (Arizona), Industrial Development Lease Obligation Refunding
Revenue Bonds, 1988 Series A (Irvington Project), 7.250%, 7/15/10
2,000,000 Puerto Rico Electric Power Authority, Power Revenue 7/08 at 101 1/2 BBB+ 1,659,400
Refunding Bonds, Series EE, 4.750%, 7/01/24
500,000 Salt River Project Agricultural Improvement and Power No Opt. Call AA 525,960
District (Arizona), Electric System Revenue Refunding Bonds,
Series 1993A, 5.750%, 1/01/10
1,000,000 The Industrial Development Authority of the County of 6/07 at 101 A1 903,870
Yavapai (Arizona), Industrial Development Revenue Bonds, 1998
Series (Citizens Utilities Company Project), 5.450%, 6/01/33
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 4.7%
1,750,000 City of Chandler, Arizona, Water and Sewer Revenue 7/01 at 101 AAA 1,828,593
Refunding Bonds, Series 1991, 6.750%, 7/01/06
City of Cottonwood, Arizona, Sewer Revenue Refunding Bonds, Series 1992:
500,000 6.900%, 7/01/03 7/02 at 101 BBB- 526,005
100,000 7.000%, 7/01/06 7/02 at 101 BBB- 105,272
100,000 7.000%, 7/01/07 7/02 at 101 BBB- 105,272
610,000 The Industrial Development Authority of the County of 12/07 at 102 AAA 560,175
Maricopa, Water System Improvement Revenue Bonds (Chaparral City
Water Company Project), Series 1997A, 5.400%, 12/01/22
(Alternative Minimum Tax)
540,000 Pima County, Arizona, Sewer Revenue Refunding Bonds, 7/01 at 101 AAA 563,317
Series 1991, 6.750%, 7/01/15
800,000 Sedona, Arizona, Sewer Revenue Refunding Bonds, Series 7/04 at 101 BBB+ 850,733
1992, 7.000%, 7/01/12
500,000 City of Tucson (Arizona), Water System Revenue Bonds, 7/01 at 102 A+ 526,261
Series 1991, 6.700%, 7/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
$127,225,000 Total Investments - (cost $104,582,893) - 97.3% 105,788,676
============-----------------------------------------------------------------------------------------------------------------------
Short-Term Investments - 3.3%
1,500,000 Maricopa County Pollution Control Corporation, Pollution Control Revenue A-1+ 1,500,000
Refunding Bonds (Arizona Public Service Company - Palo Verde Project),
1994 Series A, Variable Rate Demand Bonds, 3.600%, 5/01/29+
2,100,000 Maricopa County Pollution Control Corporation, Pollution Control Revenue A-1+ 2,100,000
Refunding Bonds (Arizona Public Service Company - Palo Verde Project),
1994 Series E, Variable Rate Demand Bonds, 3.700%, 5/01/29+
- -----------------------------------------------------------------------------------------------------------------------------------
$3,600,000 Total Short-Term Investments - (cost $3,600,000) 3,600,000
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.6)% (641,505)
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $108,747,171
====================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
+ Security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified market index.
See accompanying notes to financial statements.
22
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Colorado Municipal Bond Fund
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer Staples - 4.5%
$2,000,000 City of Fort Collins, Colorado, Pollution Control Refunding 9/06 at 101 A+ $1,946,700
Revenue Bonds (Anheuser-Busch Project), Series 1996, 6.000%, 9/01/31
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 4.9%
300,000 Colorado Student Obligation Bond Authority, Student Loan 9/00 at 100 A 307,071
Revenue Bonds, 1991 Series A3, 7.250%, 9/01/05 (Alternative
Minimum Tax)
240,000 Colorado Student Obligation Bond Authority, Student Loan 9/02 at 102 A 255,605
Revenue Bonds, 1992 Series C, 7.150%, 9/01/06 (Alternative Minimum Tax)
1,500,000 Hyland Hills Park and Recreation District, Adams County, 12/06 at 101 N/R 1,547,490
Colorado, Special Revenue Refunding and Improvement Bonds,
Series 1996A, 6.750%, 12/15/15
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 15.3%
500,000 Colorado Health Facilities Authority, Revenue Bonds (Catholic 12/07 at 101 AA- 437,075
Health Initiatives), Series 1997A, 5.125%, 12/01/22
750,000 Colorado Health Facilities Authority, Hospital Revenue Bonds 9/08 at 100 Baa1 621,518
(Parkview Medical Center, Inc. Project), Series 1998, 5.300%, 9/01/25
2,500,000 Colorado Health Facilities Authority, Revenue Bonds 9/09 at 101 N/R 2,177,700
(Steamboat Springs Health Care Association Project),
Series 1999, 5.700%, 9/15/23
1,000,000 Colorado Health Facilities Authority, Hospital Revenue Bonds 5/09 at 101 AAA 970,930
(Poudre Valley Health Care, Inc.), Series 1999A, 5.750%, 5/15/19
Board of Trustees for the Gunnison Valley Hospital (Gunnison
County, Colorado), Hospital Revenue Bonds, Series 1998:
275,000 5.350%, 7/01/11 7/08 at 101 N/R 249,620
1,250,000 5.625%, 7/01/23 7/08 at 101 N/R 1,040,938
250,000 County of Pueblo, Colorado, Insured Hospital Refunding 9/01 at 101 AAA 263,143
Revenue Bonds (Parkview Episcopal Medical Center, Inc. Project),
Series 1991A, 7.000%, 9/01/09
1,050,000 University of Colorado Hospital Authority, Hospital Revenue 11/09 at 101 Aaa 893,823
Bonds, Series 1999A, 5.000%, 11/15/29
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 21.6%
1,265,000 Boulder County, Colorado, Multifamily Housing Refunding and 6/09 at 100 N/R 1,180,258
Improvement Revenue Bonds (Thistle Community Housing Project),
Series 1999, 6.375%, 6/01/29
1,500,000 Colorado Housing and Finance Authority, Multifamily Housing 10/06 at 102 AA+ 1,515,045
Insured Mortgage Revenue Bonds, 1996 Series C3, 6.250%, 10/01/38
1,150,000 Colorado Housing and Finance Authority, Multifamily Housing 4/07 at 101 1/2 AA+ 1,091,707
Insured Mortgage Revenue Bonds, 1997 Series B2, 5.900%,
10/01/38 (Alternative Minimum Tax)
460,000 Colorado Housing and Finance Authority, Multifamily Housing 4/05 at 102 AA+ 474,734
Insured Mortgage Revenue Bonds, 1995 Series A, 6.650%, 10/01/28
(Alternative Minimum Tax)
1,265,000 Colorado Housing and Finance Authority, Multifamily Housing 10/07 at 102 AA+ 1,175,172
Insured Mortgage Revenue Bonds, 1997 Series C2, 5.750%, 10/01/39
(Alternative Minimum Tax)
1,215,000 Colorado Housing and Finance Authority, Multifamily Housing 10/08 at 101 AA+ 1,100,705
Insured Mortgage Revenue Bonds, 1998 Series B2, 5.450%, 10/01/28
(Alternative Minimum Tax)
1,000,000 City and County of Denver, Colorado, Multifamily Housing 5/07 at 102 AAA 934,360
Revenue Bonds (FHA-Insured Mortgage Loan - The Buuerger Brothers
and Denver Fire Clay Lofts Project), Series 1997A, 5.700%,
11/01/28 (Alternative Minimum Tax)
1,000,000 City and County of Denver, Colorado, Multifamily Housing 7/08 at 102 AAA 891,100
Mortgage Revenue Bonds (FHA-Insured Mortgage Loan Garden Court
Community), Series 1998, 5.300%, 7/01/28
</TABLE>
23
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Colorado Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 1,000,000 City of Lakewood, Colorado, Multifamily Housing Mortgage Revenue 10/05 at 102 AAA $1,037,530
Bonds (FHA-Insured Mortgage Loan - The Heights by Marston Lake
Project), Series 1995, 6.650%, 10/01/25 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 5.2%
1,000,000 Colorado Housing and Finance Authority, Single Family Program 10/09 at 105 Aa2 1,073,960
Bonds, 1999 Series C-3 Senior Bonds, 6.750%, 10/01/21
150,000 Colorado Housing and Finance Authority, Single Family Program 8/01 at 102 AA+ 153,563
Bonds, 1991 Issue C-2 Senior Bonds, (Federally Insured or
Guaranteed Mortgage Loans), 7.375%, 8/01/23 (Alternative
Minimum Tax)
850,000 Colorado Housing and Finance Authority, Single Family Housing No Opt. Call Aa1 546,006
Revenue Refunding Bonds, 1991 Series A, 0.000%, 11/01/06
95,000 City of Commerce, Colorado, Single Family Mortgage Revenue 3/02 at 101 Aaa 96,627
Refunding Bonds, 1992 Series A, 6.875%, 3/01/12
95,000 Pueblo County, Colorado, Single Family Mortgage Revenue Bonds 6/02 at 102 AA- 98,486
(GNMA and FNMA Mortgage Backed Securities Program), Series 1994A,
6.850%, 12/01/25
265,000 Pueblo County, Colorado, Single Family Mortgage Revenue Refunding Bonds 11/04 at 102 AAA 275,539
(GNMA and FNMA Mortgage-Backed Securities Program), Series 1994A,
7.050%, 11/01/27
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 7.8%
1,000,000 Colorado Health Facilities Authority, First Mortgage Revenue Bonds 1/07 at 101 N/R 1,014,630
(Christian Living Campus - Johnson Center Nursing Facility Refunding
Project), Series 1997A, 7.050%, 1/01/19
2,500,000 Colorado Health Facilities Authority, Health Facilities Revenue Bonds 9/09 at 102 Baa2 2,361,750
(National Benevolent Association - Village at Skyline Project), Series
1999A, 6.375%, 9/01/29
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 3.4%
450,000 Cherry Creek Vista Park and Recreation District, Colorado, 10/02 at 100 N/R 466,835
General Obligation Refunding and Improvement Bonds, Series 1992B,
6.875%, 10/01/11
500,000 El Paso School District No. RJ-1, El Paso and Elbert Counties, 12/04 at 100 AA- 539,290
Colorado, General Obligation Bonds, Series 1995, 6.800%, 12/01/14
250,000 Pitkin County, Colorado, General Obligation Bonds, Open Space 12/04 at 102 A2 273,205
Refunding and Improvement Bonds, Series 1994, 6.875%, 12/01/24
190,000 Valley Metropolitan District, Jefferson County, Colorado, General 12/00 at 101 Baa2 196,433
Obligation Refunding Bonds, Series 1992, 7.000%, 12/15/06
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 5.1%
175,000 Jefferson County, Colorado, Refunding Certificates of Participation, 12/02 at 102 AAA 188,008
6.650%, 12/01/08
1,500,000 Puerto Rico Highway and Transportation Authority, Transportation 7/08 at 101 A 1,257,000
Revenue Bonds, Series A, 5.000%, 7/01/38
750,000 City of Woodland Park, Colorado, Limited Sales Tax Refunding 12/03 at 101 AA 789,338
Bonds, Series 1994B, 6.400%, 12/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 3.5%
500,000 City and County of Denver, Colorado, Special Facilities Airport 10/02 at 102 Baa3 499,610
Revenue Bonds (United Air Lines Project), Series 1992A, 6.875%,
10/01/32 (Alternative Minimum Tax)
1,000,000 Eagle County Air Terminal Corporation, Airport Terminal Project Revenue 5/06 at 101 N/R 1,034,420
Bonds, Series 1996, 7.500%, 5/01/21 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 25.8%
4,300,000 E-470 Public Highway Authority, Capital Improvement Trust Fund 8/05 at 95 29/32 Aaa 3,106,664
Highway Revenue Bonds, Arapahoe County, Colorado, 0.000%, 8/31/06
(Pre-refunded to 8/31/05)
6,500,000 Arapahoe County, Colorado, Single Family Mortgage Revenue Bonds, No Opt. Call AAA 3,642,145
Series 1984A, 0.000%, 9/01/10
300,000 Colorado Health Facilities Authority, Revenue Bonds (Rose Medical 8/01 at 102 AAA 318,885
Center), Series 1991, 7.000%, 8/15/21 (Pre-refunded to 8/15/01)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 500,000 Colorado Housing Finance Authority, Single Family Revenue No Opt. Call Aaa $ 213,875
Bonds, 1985 Series A, 0.000%, 9/01/14
3,500,000 Colorado Health Facilities Authority, Retirement Facilities No Opt. Call AAA 735,735
Revenue Bonds (Liberty Heights), Series 1991B, 0.000%, 7/15/24
900,000 City of Colorado Springs, Colorado, Utilities System No Opt. Call AAA 999,279
Revenue Bonds, Series 1978B, 6.600%, 11/15/18
250,000 City and County of Denver, Colorado, Industrial Development 3/01 at 102 AAA 264,653
Revenue Bonds (University of Denver Project), Series 1991, 7.500%,
3/01/16 (Pre-refunded to 3/01/01)
500,000 School District No. 38 In the County of El Paso and State of Colorado, 12/01 at 101 AAA 529,570
General Obligation Bonds, Collateralized Project Fixed Rate
Certificates of Participation (Colorado Association of School Boards
Lease Purchase Finance Program), Series 1992A, 6.900%, 12/01/13
(Pre-refunded to 12/01/01)
3,000,000 El Paso County, Colorado, Single Family Mortgage Revenue No Opt. Call AAA 1,191,240
Bonds, 1984 Series A, 0.000%, 9/01/15
250,000 Fountain Valley Authority (Colorado), Water Treatment 6/01 at 100 AA*** 259,160
Refunding Revenue Bonds, Series 1991, 6.800%, 12/01/19
(Pre-refunded to 6/01/01)
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 0.3%
120,000 Colorado Water Resources and Power Development Authority, 11/02 at 100 AAA 126,282
Small Water Resources Revenue Bonds, 1992 Series A, 6.700%, 11/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
$52,860,000 Total Investments - (cost $42,554,802) - 97.4% 42,364,412
===========------------------------------------------------------------------------------------------------------------------------
Short-Term Investments - 3.4%
$ 1,500,000 Moffat County Pollution Control (Pacificorp Projects), VMIG-1 1,500,000
=========== Variable Rate Demand Bonds, 3.650%, 5/01/13+
-------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.8)% (358,284)
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $43,506,128
===================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
/+/ Security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified market index.
See accompanying notes to financial statements.
25
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New Mexico Municipal Bond Fund
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Basic Materials - 1.8%
$ 1,000,000 Lordsburg, New Mexico, Pollution Control Revenue Refunding Bonds 4/03 at 102 A2 $1,013,350
(Phelps Dodge Corporation Project), Series 1993, 6.500%, 4/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 14.3%
1,600,000 New Mexico Educational Assistance Foundation, Student Loan Revenue 4/02 at 102 AAA 1,694,256
Bonds, Series 1992A, 6.850%, 4/01/05 (Alternative Minimum Tax)
390,000 New Mexico Educational Assistance Foundation, Student Loan Revenue 12/02 at 101 Aaa 403,143
Bonds, Senior 1992 Series One-A, 6.550%, 12/01/05 (Alternative
Minimum Tax)
140,000 New Mexico Educational Assistance Foundation, Student Loan Revenue 12/02 at 101 A 143,671
Bonds, 1992 Series One, Subordinate 1992 Series One B, 6.850%,
12/01/05 (Alternative Minimum Tax)
750,000 New Mexico Educational Assistance Foundation, Student Loan Purchase No Opt. Call Aaa 781,935
Bonds, Senior 1995 Series IV-A1, 6.500%, 3/01/04 (Alternative
Minimum Tax)
435,000 Puerto Rico Industrial, Medical, Educational and Environmental No Opt. Call BBB- 440,594
Pollution Control Facilities Financing Authority, Higher
Education Revenue Refunding Bonds, 1993 Series A (Catholic
University of Puerto Rico Project), 5.600%, 12/01/07
City of Santa Fe, New Mexico, Educational Facilities Revenue
Improvement and Refunding Revenue Bonds (College of Santa Fe Project),
Series 1997:
500,000 6.000%, 10/01/13 10/07 at 100 BBB- 505,710
500,000 5.875%, 10/01/21 10/07 at 100 BBB- 474,075
500,000 City of Santa Fe, New Mexico, Educational Facilities Improvement 10/07 at 100 BBB- 442,560
Revenue Bonds (College of Santa Fe Project), Series 1998A, 5.500%,
10/01/28
3,000,000 Regents of the University of New Mexico, System Revenue Refunding No Opt. Call AA 3,077,670
Bonds, Series 1992A, 6.000%, 6/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 5.4%
450,000 City of Albuquerque, New Mexico, Hospital System Revenue Bonds, 1992 8/02 at 102 AAA 477,671
Series A (Presbyterian Healthcare Services), 6.375%, 8/01/07
3,000,000 New Mexico Hospital Equipment Loan Council, Hospital Revenue Bonds, 6/08 at 101 Baa1 2,543,130
Series 1998 (Memorial Medical Center Inc. Project), 5.500%, 6/01/28
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 11.6%
2,000,000 Bernalillo County, New Mexico, Multifamily Housing Refunding and 6/09 at 101 N/R 1,867,300
Improvement Revenue Bonds, Series 1999 (El Centro Senior Housing
Complex), 5.850%, 6/15/29
1,000,000 Las Cruces Housing Development Corporation, Multifamily Mortgage 4/02 at 102 A 1,019,170
Revenue Refunding Bonds, Series 1993A, 6.400%, 10/01/19
500,000 New Mexico Mortgage Finance Authority, Multifamily Housing Revenue 7/07 at 102 AAA 482,150
Bonds (Rio Volcan II Apartments Project), Series 1997, 5.650%,
7/01/18 (Alternative Minimum Tax)
2,340,000 Santa Fe Civic Housing Authority, Inc., Multifamily Housing Revenue 8/08 at 100 AAA 2,140,047
Bonds (The Tuscany at St. Francis Project), Tax-Exempt Series 1998A,
5.500%, 8/01/30 (Alternative Minimum Tax)
1,000,000 Villa Hermosa Affordable Housing Corporation (New Mexico), Multifamily 5/07 at 102 AAA 970,890
Revenue Bonds (Villa Hermose Apartments Project), Series 1997, 5.900%,
5/20/27 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 13.5%
1,920,000 New Mexico Mortgage Finance Authority, Single Family Mortgage Program 7/06 at 102 AAA 1,949,146
Bonds, 1996 Series D1, 6.250%, 7/01/22
1,420,000 New Mexico Mortgage Finance Authority, Single Family Mortgage Program 7/07 at 102 AAA 1,427,029
Bonds, 1996 Series G-2, 6.200%, 7/01/28 (Alternative Minimum Tax)
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 1,245,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/05 at 102 AAA $1,273,884
Program Bonds, 1995 Series A, Class D, 6.650%, 7/01/26
(Alternative Minimum Tax)
50,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/02 at 102 Aa1 50,632
Purchase Refunding Senior Bonds, 1992 Series A-1, 6.850%, 7/01/10
535,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/02 at 102 Aa1 548,857
Purchase Refunding Senior Bonds, 1992 Series A-2, 6.900%, 7/01/24
1,475,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/07 at 102 AAA 1,367,989
Program Bonds, 1997 Series F-2 Bonds, 5.700%, 7/01/29
(Alternative Minimum Tax)
1,000,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 7/08 at 102 AAA 903,790
Program Bonds, 1998 Series E-2, 5.200%, 7/01/18
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 4.3%
1,500,000 City of Albuquerque, New Mexico, Revenue Refunding Bonds (The 6/03 at 102 AAA 1,529,220
Evangelical Lutheran Good Samaritan Society Project),
Series 1993, 5.900%, 6/01/13
500,000 Las Cruces, New Mexico, Health Facilities Revenue Refunding Bonds 12/02 at 102 AAA 517,330
(The Evangelical Lutheran Good Samaritan Society Project),
Series 1992, 6.450%, 12/01/17
350,000 City of Socorro, New Mexico, Health Facilities Refunding Revenue 5/04 at 102 AAA 366,461
Bonds (The Evangelical Lutheran Good Samaritan Society Project),
Series 1994, 6.000%, 5/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 2.2%
Grants/Cibola County School District 1, Cibola County, New Mexico, General
Obligation School Building Bonds, Series 1994:
480,000 6.250%, 5/01/08 5/04 at 100 Baa2 497,160
510,000 6.250%, 5/01/09 5/04 at 100 Baa2 527,218
200,000 Torrance County, New Mexico, General Obligation Bonds, Series 7/00 at 100 N/R 200,646
1993, 5.500%, 7/01/04
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 28.3%
1,880,000 City of Albuquerque, New Mexico, Gross Receipts/Lodgers Tax No Opt. Call AAA 998,130
Refunding and Improvement Revenue Bonds, Series 1991B, 0.000%, 7/01/11
300,000 City of Albuquerque, New Mexico, Gross Receipts/Lodgers Tax 7/09 at 100 AA 260,124
Refunding Revenue Bonds, Series 1999B, 5.000%, 7/01/25
1,000,000 Bernalillo County, New Mexico, Gross Receipts Tax Refunding No Opt. Call AA 922,530
Revenue Bonds, Series 1998, 5.200%, 4/01/21
2,000,000 Bernalillo County, New Mexico, Gross Receipts Tax Revenue Bonds, 10/09 at 100 AA 1,799,760
Series 1999, 5.250%, 10/01/26
1,050,000 Dona Ana County, New Mexico, Gross Receipts Tax Refunding and 6/03 at 102 AA 1,115,489
Improvement Revenue Bonds, Series 1993, 6.000%, 6/01/19
1,500,000 Dona Ana County, New Mexico, Water System/Gross Receipts Tax 5/09 at 100 Aaa 1,456,455
Revenue Bonds, Series 1999, 5.750%, 5/01/29
250,000 Las Cruces, New Mexico, Gross Receipts Tax Revenue Refunding 12/02 at 101 A 262,123
Bonds, Series 1992, 6.250%, 12/01/05
1,000,000 New Mexico State Highway Commission, Senior Subordinate Lien Tax 6/09 at 100 AA+ 1,055,320
Revenue Highway Bonds, Series 1999, 6.000%, 6/15/11 (WI)
Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds,
Series Y of 1996:
3,550,000 5.500%, 7/01/36 7/16 at 100 A 3,276,189
750,000 5.000%, 7/01/36 7/16 at 100 A 631,245
4,000,000 Santa Fe County, New Mexico, Correctional System Revenue Bonds, No Opt. Call AAA 4,038,240
Series 1997, 6.000%, 2/01/27
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 1.9%
1,000,000 City of Albuquerque, New Mexico, Airport Revenue Bonds, Series 7/00 at 105 AAA 1,061,680
1995A, 6.600%, 7/01/16 (Alternative Minimum Tax)
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship New Mexico Municipal Bond Fund (continued)
November 30, 1999
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - 7.5%
$ 2,370,000 City of Albuquerque, New Mexico, Gross Receipts/Lodgers Tax No Opt. Call AAA $ 1,262,546
Refunding and Improvement Revenue Bonds, Series 1991B, 0.000%,
7/01/11
250,000 City of Albuquerque, New Mexico, Joint Water and Sewer System 7/00 at 100 AAA 252,995
Revenue Bonds, Series 1990A, 6.000%, 7/01/15
(Pre-refunded to 7/01/00)
90,000 Las Cruces, New Mexico, Joint Utility Refunding and 7/02 at 102 A1*** 95,744
Improvement Revenue Bonds, Series 1992, 6.250%, 7/01/12
1,000,000 Rio Grande Natural Gas Association (Dona Ana County, New 7/03 at 100 A3*** 1,049,330
Mexico), Natural Gas System Refunding and Improvement
Revenue Bonds, Series 1993, 6.125%, 7/01/13
(Pre-refunded to 7/01/03)
375,000 Sandoval County, New Mexico, Gross Receipts Tax Revenue 11/02 at 102 Baa1*** 405,859
Refunding Bonds, Series 1992, 6.900%, 11/01/12
(Pre-refunded to 11/01/02)
130,000 Sandoval County, New Mexico, Gross Receipts Tax Revenue 12/02 at 102 Baa1*** 139,521
Refunding Bonds, Series 1992A, 6.500%, 12/01/06
(Pre-refunded to 12/01/02)
500,000 County of Sandoval, New Mexico, Gross Receipts Tax Revenue 11/05 at 101 N/R*** 566,020
Bonds, Subordinate Series 1994, 7.150%, 11/01/10
(Pre-refunded to 11/01/05)
327,000 Santa Fe County, New Mexico, Office and Training Facilities No Opt. Call Aaa 410,712
Project Revenue Bonds, Series 1990, 9.000%, 7/01/07
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 5.3%
875,000 City of Farmington, New Mexico, Pollution Control Revenue 12/02 at 102 AAA 894,282
Refunding Bonds, 1992 Series A (Public Service Company
of New Mexico, San Juan and Four Corners Projects),
6.375%, 12/15/22
1,000,000 City of Las Cruces, New Mexico, South Central Solid Waste 6/05 at 100 A3 1,000,230
Authority, Environmental Services Gross Receipts Tax/Project
Revenue Bonds, Series 1995, 6.000%, 6/01/16
1,000,000 Incorporated County of Los Alamos, New Mexico, Utility System 7/04 at 102 AAA 1,038,150
Revenue Bonds, Series 1994A, 6.000%, 7/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 1.2%
1,000,000 City of Albuquerque, New Mexico, Joint Water and Sewer System No Opt. Call AAA 676,940
Revenue Bonds, Series 1990A, 0.000%, 7/01/07
- -----------------------------------------------------------------------------------------------------------------------------------
$57,487,000 Total Investments - (cost $54,608,830) - 97.3% 54,306,298
- -----------------------------------------------------------------------------------------------------------------------------------
Short-Term Investments - 0.9%
$ 500,000 Farmington Pollution Control Revenue Bonds
(Arizona Public Service Co. - Four Corners Project), A-1+ 500,000
Variable Rate Demand Bonds, 3.600%, 5/01/24/+/
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.8% 1,008,620
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $55,814,918
===================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
/+/ Security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified market index.
See accompanying notes to financial statements.
28
<PAGE>
Statement of Net Assets (Unaudited)
November 30, 1999
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $105,788,676 $42,364,412 $54,306,298
Temporary investments in short-term municipal securities, at amortized cost,
which approximates market value (note 1) 3,600,000 1,500,000 500,000
Cash 3,377,106 -- 468,829
Receivables:
Interest 1,736,173 565,114 1,108,412
Investments sold 5,000 20,000 545,000
Shares sold 60,064 89,675 74,864
Other assets 123,012 97,601 99,720
- -----------------------------------------------------------------------------------------------------------------------
Total assets 114,690,031 44,636,802 57,103,123
- -----------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 915,907 --
Payables:
Investments purchased 5,427,549 -- 1,044,107
Shares redeemed 240,392 95,987 103,028
Accrued expenses:
Management fees (note 6) 49,182 19,882 25,342
12b-1 distribution and service fees (notes 1 and 6) 19,554 10,620 11,906
Other 18,132 14,782 14,493
Dividends payable 188,051 73,496 89,329
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 5,942,860 1,130,674 1,288,205
- -----------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $108,747,171 $43,506,128 $55,814,918
=======================================================================================================================
Class A Shares (note 1)
Net assets $ 78,416,819 $35,498,964 $50,224,526
Shares outstanding 7,457,761 3,606,164 5,083,313
Net asset value and redemption price per share $ 10.51 $ 9.84 $ 9.88
Offering price per share (net asset value per share plus maximum
sales charge of 4.20% of offering price) $ 10.97 $ 10.27 $ 10.31
=======================================================================================================================
Class B Shares (note 1)
Net assets $ 4,191,486 $ 4,567,689 $ 2,821,931
Shares outstanding 398,942 463,284 285,757
Net asset value, offering and redemption price per share $ 10.51 $ 9.86 $ 9.88
=======================================================================================================================
Class C Shares (note 1)
Net assets $ 5,853,019 $ 2,609,007 $ 2,421,239
Shares outstanding 556,741 265,218 245,106
Net asset value, offering and redemption price per share $ 10.51 $ 9.84 $ 9.88
=======================================================================================================================
Class R Shares (note 1)
Net assets $ 20,285,847 $ 830,468 $ 347,222
Shares outstanding 1,929,218 84,396 35,067
Net asset value, offering and redemption price per share $ 10.52 $ 9.84 $ 9.90
=======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended November 30, 1999
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $ 3,274,164 $ 1,348,688 $ 1,684,270
- ----------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 311,021 125,004 161,031
12b-1 service fees - Class A (notes 1 and 6) 81,919 37,473 53,026
12b-1 distribution and service fees - Class B (notes 1 and 6) 19,598 21,561 12,619
12b-1 distribution and service fees - Class C (notes 1 and 6) 23,751 9,366 9,056
Shareholders' servicing agent fees and expenses 44,020 13,663 16,362
Custodian's fees and expenses 40,435 28,840 27,328
Trustees' fees and expenses (note 6) 2,322 604 1,170
Professional fees 2,560 1,985 3,555
Shareholders' reports - printing and mailing expenses 18,966 4,517 16,864
Federal and state registration fees 7,467 4,414 3,599
Other expenses 4,356 742 2,263
- ----------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 556,415 248,169 306,873
Custodian fee credit (note 1) (7,927) (4,537) (4,578)
Expense reimbursement (note 6) (38,747) -- --
- ----------------------------------------------------------------------------------------------------------------
Net expenses 509,741 243,632 302,295
- ----------------------------------------------------------------------------------------------------------------
Net investment income 2,764,423 1,105,056 1,381,975
- ----------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (notes 1 and 4) (410,003) (582,541) (370,821)
Net change in unrealized appreciation or depreciation of investments (7,362,454) (3,171,119) (3,663,192)
- ----------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (7,772,457) (3,753,660) (4,034,013)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $(5,008,034) $(2,648,604) $(2,652,038)
================================================================================================================
</TABLE>
See accompanying notes to financial statements.
30
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
------------------------------- ------------------------------ ------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended Six Months Ended Year Ended
11/30/99 5/31/99 11/30/99 5/31/99 11/30/99 5/31/99
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 2,764,423 $ 5,538,036 $ 1,105,056 $ 2,047,712 $ 1,381,975 $ 2,776,968
Net realized gain (loss) from
investment transactions
(notes 1 and 4) (410,003) 935,923 (582,541) 511,179 (370,821) 514,535
Net change in unrealized
appreciation or depreciation
of investments (7,362,454) (1,936,011) (3,171,119) (996,714) (3,663,192) (1,120,839)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations (5,008,034) 4,537,948 (2,648,604) 1,562,177 (2,652,038) 2,170,664
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
(note 1)
From undistributed net
investment income:
Class A (1,991,328) (4,101,755) (910,730) (1,812,447) (1,267,363) (2,560,974)
Class B (84,619) (114,786) (93,047) (122,188) (52,607) (79,582)
Class C (136,224) (278,780) (53,211) (66,954) (50,850) (81,442)
Class R (520,901) (1,045,871) (23,608) (42,768) (11,611) (22,648)
From accumulated net realized
gains from investment
transactions:
Class A -- (412,344) -- (108,785) -- --
Class B -- (13,676) -- (8,851) -- --
Class C -- (32,343) -- (4,777) -- --
Class R -- (101,198) -- (2,536) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (2,733,072) (6,100,753) (1,080,596) (2,169,306) (1,382,431) (2,744,646)
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of
shares 6,114,918 18,304,296 6,223,736 12,388,138 2,783,622 8,678,647
Net proceeds from shares
issued to shareholders
due to reinvestment of
distributions 1,158,732 2,660,537 418,500 854,120 501,132 1,006,025
- ----------------------------------------------------------------------------------------------------------------------------------
7,273,650 20,964,833 6,642,236 13,242,258 3,284,754 9,684,672
Cost of shares redeemed (9,376,720) (15,184,364) (6,348,996) (6,264,853) (5,343,295) (5,522,676)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from Fund share
transactions (2,103,070) 5,780,469 293,240 6,977,405 (2,058,541) 4,161,996
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets (9,844,176) 4,217,664 (3,435,960) 6,370,276 (6,093,010) 3,588,014
Net assets at the beginning of
period 118,591,347 114,373,683 46,942,088 40,571,812 61,907,928 58,319,914
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $108,747,171 $118,591,347 $43,506,128 $46,942,088 $55,814,918 $61,907,928
==================================================================================================================================
Balance of undistributed net
investment income at the end
of period $ 34,145 $ 2,794 $ 25,109 $ 649 $ 36,347 $ 36,803
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Arizona Municipal Bond Fund ("Arizona"), the
Nuveen Flagship Colorado Municipal Bond Fund ("Colorado") and the Nuveen
Flagship New Mexico Municipal Bond Fund ("New Mexico") (collectively, the
"Funds"), among others. The Trust was organized as a Massachusetts business
trust on July 1, 1996.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
November 30, 1999, Arizona and New Mexico had outstanding when-issued purchase
commitments of $5,427,549 and $1,044,107, respectively. There were no such
outstanding purchase commitments in Colorado.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, the Funds intend to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain such
tax-exempt status when distributed to shareholders of the Funds. 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 six months ended November 30, 1999.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
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 generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
<TABLE>
<CAPTION>
2. Fund Shares
Transactions in Fund shares were as follows:
Arizona
---------------------------------------------------
Six Months Ended Year Ended
11/30/99 5/31/99
-------------------------- ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 381,038 $ 4,112,951 1,012,200 $ 11,573,874
Class B 51,254 554,311 263,892 3,014,513
Class C 79,075 852,328 128,946 1,472,159
Class R 55,436 595,328 196,220 2,243,750
Shares issued to shareholders due to reinvestment of distributions:
Class A 68,026 736,944 151,919 1,743,724
Class B 2,510 27,177 3,175 36,412
Class C 5,515 59,728 12,655 145,186
Class R 30,913 334,883 64,055 735,215
- -------------------------------------------------------------------------------------------------------------------------
673,767 7,273,650 1,833,062 20,964,833
- -------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (676,813) (7,263,767) (1,018,708) (11,664,214)
Class B (26,772) (290,027) (37,352) (424,518)
Class C (99,289) (1,053,852) (125,596) (1,433,816)
Class R (71,707) (769,074) (145,051) (1,661,816)
- -------------------------------------------------------------------------------------------------------------------------
(874,581) (9,376,720) (1,326,707) (15,184,364)
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (200,814) $(2,103,070) 506,355 $ 5,780,469
=========================================================================================================================
</TABLE>
33
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
<TABLE>
<CAPTION>
Colorado
------------------------------------------------
Six Months Ended Year Ended
11/30/99 5/31/99
---------------------- ----------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 332,682 $ 3,424,120 671,535 $ 7,279,788
Class B 77,813 791,528 267,870 2,914,260
Class C 47,913 484,415 181,898 1,970,240
Class R 150,246 1,523,673 20,587 223,850
Shares issued to shareholders due to reinvestment of distributions:
Class A 31,938 327,137 65,037 707,625
Class B 5,531 56,779 7,439 81,081
Class C 1,468 15,039 2,392 26,018
Class R 1,908 19,545 3,619 39,396
- -----------------------------------------------------------------------------------------------------------------------
649,499 6,642,236 1,220,377 13,242,258
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (428,233) (4,348,656) (516,805) (5,592,710)
Class B (33,740) (337,125) (15,048) (162,708)
Class C (15,104) (155,754) (34,394) (371,975)
Class R (148,623) (1,507,461) (12,716) (137,460)
- -----------------------------------------------------------------------------------------------------------------------
(625,700) (6,348,996) (578,963) (6,264,853)
- -----------------------------------------------------------------------------------------------------------------------
Net increase 23,799 $ 293,240 641,414 $ 6,977,405
=======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
New Mexico
------------------------------------------------
Six Months Ended Year Ended
11/30/99 5/31/99
---------------------- ----------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 195,836 $ 2,003,696 564,095 $ 6,050,839
Class B 54,981 557,985 139,498 1,495,072
Class C 19,277 199,212 105,480 1,131,654
Class R 2,301 22,729 101 1,082
Shares issued to shareholders due to reinvestment of distributions:
Class A 43,872 447,651 85,290 915,668
Class B 2,591 26,383 3,639 39,054
Class C 1,854 18,960 3,293 35,364
Class R 796 8,138 1,481 15,939
- -----------------------------------------------------------------------------------------------------------------------
321,508 3,284,754 902,877 9,684,672
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (479,519) (4,884,511) (476,600) (5,099,274)
Class B (29,158) (303,635) (17,756) (189,721)
Class C (2,309) (24,314) (21,822) (233,573)
Class R (13,176) (130,835) (10) (108)
- -----------------------------------------------------------------------------------------------------------------------
(524,162) (5,343,295) (516,188) (5,522,676)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (202,654) $(2,058,541) 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 December 20, 1999, to shareholders of record on
December 9, 1999, as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ----------------------------------------------------
Dividend per share:
<S> <C> <C> <C>
Class A $.0430 $.0420 $.0405
Class B .0365 .0355 .0340
Class C .0380 .0370 .0360
Class R .0450 .0435 .0420
====================================================
</TABLE>
34
<PAGE>
The Funds also declared taxable distributions which include capital gains and/or
market discount, which were paid on December 7, 1999, to shareholders of record
on December 2, 1999, as follows:
Arizona Colorado New Mexico
- ---------------------------------------------------------------------
Taxable distributions per share: $.0694 $.0262 $.0044
=====================================================================
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the six months ended November
30, 1999, were as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- -------------------------------------------------------------------------------
Purchases:
<S> <C> <C> <C>
Long-term municipal securities $ 34,403,473 $11,089,962 $ 6,364,920
Short-term municipal securities 5,600,000 3,700,000 1,400,000
Sales:
Long-term municipal securities 38,472,565 11,108,296 9,174,943
Short-term municipal securities 2,000,000 2,200,000 900,000
===============================================================================
At November 30, 1999, the identified cost of investments owned for federal
income tax purposes were as follows:
Arizona Colorado New Mexico
- -------------------------------------------------------------------------------
$108,182,893 $44,054,802 $55,112,114
===============================================================================
</TABLE>
At May 31, 1999, the Funds' last fiscal year end, New Mexico had unused capital
loss carryforwards available for federal income tax purposes to be applied
against future capital gains, if any. If not applied, the carryforwards will
expire as follows:
<TABLE>
<CAPTION>
New Mexico
- ----------------------------------------------------------------------
Expiration Year:
<S> <C>
2003 $296,633
2004 290,586
- ----------------------------------------------------------------------
Total $587,219
======================================================================
</TABLE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at November 30, 1999, were as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- -------------------------------------------------------------------------------
Gross unrealized:
<S> <C> <C> <C>
appreciation $ 3,840,872 $ 1,437,571 $ 1,123,992
depreciation (2,635,089) (1,627,961) (1,429,808)
- -------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) $ 1,205,783 $ (190,390) $ (305,816)
===============================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of each Fund:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
- -------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
=========================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
35
<PAGE>
Notes to Financial Statements (continued)
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1999, John Nuveen & Co. Incorporated
(the "Distributor"), a wholly owned subsidiary of The John Nuveen Company,
collected sales charges on purchases of Class A Shares, the majority of which
were paid out as concessions to authorized dealers as follows:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales charges collected $46,216 $21,968 $30,688
Paid to authorized dealers 43,846 21,968 26,574
==============================================================================
</TABLE>
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the six months ended November 30, 1999, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
Arizona Colorado New Mexico
- ------------------------------------------------------------------------------
Commission advances $27,312 $36,698 $22,143
==============================================================================
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 six months ended November
30, 1999, the Distributor retained such 12b-1 fees as follows:
Arizona Colorado New Mexico
- ------------------------------------------------------------------------------
12b-1 fees retained $21,687 $23,972 $14,200
==============================================================================
The remaining 12b-1 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
six months ended November 30, 1999, as follows:
Arizona Colorado New Mexico
- ------------------------------------------------------------------------------
CDSC retained $ 12,166 $ 6,766 $ 8,849
==============================================================================
7. Composition of Net Assets
At November 30, 1999, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Arizona Colorado New Mexico
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $107,200,170 $44,138,325 $57,042,427
Balance of undistributed net
investment income 34,145 25,109 36,347
Accumulated net realized gain (loss)
from investment transactions 307,073 (466,916) (961,324)
Net unrealized appreciation
(depreciation) of investments 1,205,783 (190,390) (302,532)
- -------------------------------------------------------------------------------
Net assets $108,747,171 $43,506,128 $55,814,918
===============================================================================
</TABLE>
36
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
-------------------------------------------- ---------------------------------------------------------
ARIZONA** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Assets 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 (e) $11.25 $.26 $(.74) $(.48) $(.26) $ -- $(.26) $10.51 (4.28)%
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
1995 10.43 .58 .42 1.00 (.58) -- (.58) 10.85 10.03
Class B (2/97)
2000 (e) 11.24 .22 (.73) (.51) (.22) -- (.22) 10.51 (4.56)
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 (e) 11.24 .23 (.73) (.50) (.23) -- (.23) 10.51 (4.46)
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
1995 10.43 .52 .41 .93 (.52) -- (.52) 10.84 9.32
Class R (2/97)
2000 (e) 11.25 .28 (.74) (.46) (.27) -- (.27) 10.52 (4.08)
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
</TABLE>
<TABLE>
<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
Year Ended 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 (e) $78,417 .96%* 4.81%* .89%* 4.88%* .88%* 4.90%* 31%
1999 86,452 .93 4.58 .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
1995 80,406 1.20 5.21 .82 5.59 .82 5.59 27
Class B (2/97)
2000 (e) 4,191 1.71* 4.07* 1.64* 4.13* 1.63* 4.15* 31
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 (e) 5,853 1.51* 4.26* 1.44* 4.33* 1.42* 4.35* 31
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
1995 1,621 1.75 4.62 1.36 5.01 1.36 5.01 27
Class R (2/97)
2000 (e) 20,286 .76* 5.01* .69* 5.08* .68* 5.10* 31
1999 21,534 .73 4.77 .63 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
(note 6).
(c) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(d) From commencement of class operations as noted.
(e) For the six months ended November 30, 1999.
37
<PAGE>
Financial Highlights (Unaudited) (continued)
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
-------------------------------------------- ---------------------------------------------------------
COLORADO* * Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Assets 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 (e) $10.68 $.25 $(.84) $(.59) $(.25) $ -- $(.25) $ 9.84 (5.58)%
1999 10.81 .50 (.10) .40 (.50) (.03) (.53) 10.68 3.76
1998 10.15 .52 .66 1.18 (.52) -- (.52) 10.81 11.85
1997 9.79 .53 .35 .88 (.52) -- (.52) 10.15 9.22
1996 9.93 .54 (.13) .41 (.55) -- (.55) 9.79 4.14
1995 9.62 .57 .30 .87 (.56) -- (.56) 9.93 9.54
Class B (2/97)
2000 (e) 10.70 .21 (.84) (.63) (.21) -- (.21) 9.86 (5.93)
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 (e) 10.67 .22 (.83) (.61) (.22) -- (.22) 9.84 (5.77)
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 (e) 10.69 .26 (.85) (.59) (.26) -- (.26) 9.84 (5.58)
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
</TABLE>
<TABLE>
<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 (e) $35,499 .99%* 4.93%* .99%* 4.93%* .97%* 4.95%* 25%
1999 39,189 1.03 4.55 .96 4.62 .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
1995 34,982 1.27 5.22 .50 5.99 .50 5.99 38
Class B (2/97)
2000 (e) 4,568 1.74* 4.19* 1.74* 4.19* 1.72* 4.21* 25
1999 4,424 1.79 3.80 1.68 3.91 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 (e) 2,609 1.54* 4.39* 1.54* 4.39* 1.52* 4.41* 25
1999 2,464 1.58 4.01 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 (e) 830 .79* 5.10* .79* 5.10* .77* 5.12* 25
1999 864 .83 4.74 .75 4.82 .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
(note 6).
(c) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(d) From commencement of class operations as noted.
(e) For the six months ended November 30, 1999.
38
<PAGE>
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------- ------------------------------
NEW MEXICO* * Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (Loss) Total Income Gains Total Value Return (a)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/92)
2000 (e) $10.58 $ .24 $(.70) $(.46) $(.24) $ -- $(.24) $ 9.88 (4.36)%
1999 10.67 .49 (.09) .40 (.49) -- (.49) 10.58 3.74
1998 10.16 .50 .51 1.01 (.50) -- (.50) 10.67 10.17
1997 9.81 .51 .35 .86 (.51) -- (.51) 10.16 8.90
1996 10.01 .51 (.19) .32 (.52) -- (.52) 9.81 3.18
1995 9.68 .52 .33 .85 (.52) -- (.52) 10.01 9.25
Class B (2/97)
2000 (e) 10.57 .20 (.69) (.49) (.20) -- (.20) 9.88 (4.64)
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 (e) 10.58 .21 (.70) (.49) (.21) -- (.21) 9.88 (4.62)
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 (e) 10.60 .25 (.70) (.45) (.25) -- (.25) 9.90 (4.25)
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
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
-------------------- -------------------- ---------------------
Ratio Ratio
of Net of Net Ratio
Ratio of Invest- Invest- of Net
Expenses ment Ratio of ment Ratio of Invest-
to Income Expenses Income Expenses ment
Ending Average to to to to Income
Net to 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 (e) $50,225 .99%* 4.74%* .99%* 4.74%* .97%* 4.76%* 11%
1999 56,315 .97 4.51 .90 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
1995 52,150 1.17 4.98 .67 5.48 .67 5.48 38
Class B (2/97)
2000 (e) 2,822 1.74* 4.00* 1.74* 4.00* 1.72* 4.02* 11
1999 2,721 1.72 3.78 1.67 3.83 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 (e) 2,421 1.54* 4.20* 1.54* 4.20* 1.52* 4.21* 11
1999 2,393 1.52 3.97 1.46 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 (e) 347 .79* 4.93* .79* 4.93* .77* 4.95* 11
1999 479 .77 4.71 .70 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
(note 6).
(c) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(d) From commencement of class operations as noted.
(e) For the six months ended November 30, 1999.
39
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
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(1)
Tax-Free Income
National Funds
High Yield
Long-Term
Insured Long Term
Intermediate-Term
Limited-Term
State 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
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you
and your financial adviser a wide range of quality investments that can help
you build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier AdvisersSM including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
quality municipal bonds. The fund shares are listed and traded on the New York
and American stock exchanges. Exchange-traded funds provide the investment
convenience, price visibility and liquidity of common stocks.
MuniPreferred/R/
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
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.
40
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and Shareholder Services
Chase Global Fund Services Company
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Morgan, Lewis & Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
41
<PAGE>
SERVING
Investors for Generations
[Photo of John Nuveen, Sr. appears here]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive performance over time -- with moderated risk. We emphasize quality
securities carefully chosen through in-depth research, and we follow those
securities closely over time to ensure that they continue to meet our exacting
standards.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
<PAGE>
November 30, 1999 Semiannual Report
NUVEEN
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Municipal Bond Funds
[PHOTO APPEARS HERE]
Dependable, tax-free
income to help
you keep more
of what you earn.
Florida
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
Contents
1 Dear Shareholder
3 Nuveen Flagship Florida Municipal Bond Fund
5 Nuveen Flagship Florida Municipal
Bond Fund Spotlight
6 Portfolio of Investments
14 Statement of Net Assets
15 Statement of Operations
15 Statement of Changes in Net Assets
16 Notes to Financial Statements
19 Financial Highlights
20 Building a Better Portfolio
21 Fund Information
<PAGE>
DEAR
Shareholder
[Photo of Timothy R. Schwertfeger appears here]
Timothy R. Schwertfeger
Chairman of the Board
How did you gain your financial wisdom? While some of us study finance, the
financial markets, economics or related disciplines in formal programs, most of
us end up accumulating practical knowledge through the years, from friends,
family, colleagues and media.
At Nuveen, we believe a formal financial education should start early in life. A
study sponsored by the National Council on Economic Education shows that a
whopping 66% of high school students tested on basic money skills scored an "F."
Only 3% received an "A."
Because we believe strongly in education and are committed to children's
financial literacy, we have launched a community service program, Kid$ense, in
our hometown of Chicago.
The Kid$ense curriculum, which is available for grades kindergarten through
sixth, includes textbooks, teaching materials and teacher training. The lessons
introduce children to the concept of money and how it works in society; buying,
selling and trading; working, earning, saving and investing.
Nuveen's commitment to children's financial literacy goes beyond the 250
Chicago public schools who have benefited from the Kid$ense curriculum. We also
have a commitment to family wealth management, which is a positive philosophy
that addresses the role of wealth in our lives and our world.
At Nuveen, we are dedicated to helping you and your financial adviser
develop a family wealth management strategy unique to you and your goals and
values. In your next shareholder report, look for more information about
Nuveen's dedication to Family Wealth Management, or ask your financial adviser
about this approach to investing.
The Economic Environment. I want to briefly report on the economic environment
in which your Nuveen investment performed. Read on, as we've conducted an in-
depth interview with a representative from your fund's portfolio management
team, describing how the team of investment and research professionals directed
the portfolio during the semi-annual fiscal period ended November 30, 1999.
Until fairly recently, the U.S. economy has been characterized by robust
growth, generally low interest rates and unemployment levels that remain among
the lowest in three decades.
Concerns, however, about the continued pace of the economy's expansion have
begun to test the "new paradigm," which holds that improvements in productivity
enable us to have both economic growth and low inflation at the same time. With
investors and the various markets watching -- and reacting to -- every
announcement concerning economic statistics, volatility has increased,
especially in the equity markets.
We have entered a different economic environment from that of 12 months
ago. This shift has occurred in response to two factors:
. the Asian financial crisis of 1998 did not produce the U.S. economic
slowdown that was widely expected to keep economic growth from becoming
overly robust;
. evidence of accelerating prices contributed to the reemergence of the
specter of inflation, accompanied by predictions of higher interest
rates.
"We also have a
commitment to
family wealth
management,
which is a
positive philosophy
that addresses
the role of wealth
in our lives
and our world."
SEMIANNUAL REPORT page 1
<PAGE>
"Your financial
adviser can serve
as a valuable
resource in helping
you determine if
adjustments are
needed in your
current asset
allocation plan."
In an effort to pre-empt this threat of inflation, the Federal Reserve
Board (the Fed) moved to raise interest rates by a quarter-point on three
separate occasions between June and November 1999. This brought the federal
funds rate, which represents the amount banks charge one another on overnight
loans and serves as a standard for short-term market rates, from 4.75% to 5.50%.
These increases offset the three rate cuts enacted by the Fed a year earlier.
At its November 1999 meeting, the Fed announced that it would shift to a
neutral stance following the latest interest rate increase, giving the markets
some respite during the Y2K transition. However, the Fed's indication that it
would continue to closely watch the pace of economic growth for any signs of
inflationary pressure left the door open for additional tightenings.
In January 2000, the annual rotation among members of the Fed's Open Market
Committee, the body that ultimately decides interest rate policy, will put
several members considered more "hawkish" on inflation fighting into voting
slots. This could tilt policy toward further rate increases in the new year.
Municipal bonds continued to serve investors well. At the end of November
1999, the ratio between long-term municipal yields and 30-year Treasury yields
stood at 97.14%, compared with the historical average of 89.6% over the period
1979-1999. For investors, this meant that quality long-term municipal bonds
offered yields comparable to those of long-term Treasury bonds -- even before
the tax advantages of municipals were taken into account. Of course, Treasuries
are backed by the full faith and credit of the U.S. government. Even so, on an
after-tax basis, municipal bonds continued to present an exceptionally
attractive investment option relative to Treasuries.
In the coming months, we expect to see a healthy supply of new municipal
bonds, although total volume is expected to drop from the near-record levels of
1998. This is due to the dramatic decrease in the refunding of existing bonds in
the wake of higher interest rates compared to early 1999.
Keeping the Balance. The increased volatility in the markets highlights the
importance of maintaining balance in your investment portfolio. With a properly
balanced portfolio of equities, bonds and cash, your assets may be better
positioned to weather the markets' ups and downs. A balanced portfolio can also
help you increase your opportunities for capital growth while reducing risk.
Your financial adviser can serve as a valuable resource in helping you determine
if adjustments are needed in your current asset allocation plan.
For more information on any Nuveen investment, including a prospectus,
contact your financial adviser. 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. As we enter a new millennium, we are committed to maintaining that
reputation and finding the best ways to serve your evolving investment needs.
Thank you for your continued confidence.
Sincerely,
/s/ Timothy Schwertfeger
- -----------------------
Timothy R. Schwertfeger
Chairman of the Board
January 15, 2000
SEMIANNUAL REPORT page 2
<PAGE>
NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
Portfolio Manager Tom O'Shaughnessy discusses fund performance, the municipal
market and key investment strategies for the Florida fund for the six-month
period ended November 30, 1999.
Q] How did Florida's economy and municipal market fare?
TOM] Strong employment trends and healthy income gains helped make Florida one
of the country's fastest growing economies. In November 1999, the state's
unemployment rate was 3.9%, down from 4.2% a year ago and lower than the 4.1%
national average. While the state has lost some manufacturing jobs, including
those from the aerospace sector, many of those losses have been more than offset
by growth in service and trade industries.
The state's ongoing economic strength translated into strong tax
collections and municipal revenues, and helped bolster the overall
creditworthiness of the Florida municipal market. That was virtually the only
silver lining in what proved to be a very stormy environment for municipal
bonds. Continued signs of better-than-expected economic growth prompted the
Federal Reserve to raise short-term interest rates by a total of 0.75% over the
period from June through November, 1999. As bond yields rose in response, their
prices slumped and all but the shortest-maturity bond funds suffered losses.
Q] How did Nuveen Flagship Florida Municipal Bond Fund perform during the period
ended November 30, 1999?
TOM] Nuveen Flagship Florida Municipal Bond Fund generated a six-month total
return on net asset value of -3.06%, compared to the -3.45% total return posted
by the Lipper Florida Municipal Debt Peer Group.* For the one- and five-year
periods ending November 30, 1999, the Nuveen fund had an average annual return
of -2.68% and 6.50%, respectively, compared to the Lipper peer group average
annual total returns of -3.36% and 6.71% for the same time periods.*
Total return equals a fund's income and capital gain distributions, if any,
plus or minus changes in net asset value. The fund's six-month taxable
equivalent total return, for investors in a 31% federal income tax bracket, was
- -1.91%.**
As of November 30, 1999, the fund's SEC 30-day yield was 4.93%. For
investors in the 31% federal income tax bracket, that is equivalent to a yield
of 7.14% on a taxable investment.
Q] What was your strategy amid this difficult market environment?
TOM] We took advantage of the rising interest rate environment to engage in what
are known as "swaps." We sold bonds with lower interest rates, replacing them
with similar--in terms of credit quality, maturity and structure--bonds with
higher prevailing interest rates. These swaps generated two benefits for the
fund.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers/SM/ -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. 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 be blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/SM/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS 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 Flagship Florida Municipal Bond
Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the six-month period ended November 30, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
SEMIANNUAL REPORT page 3
<PAGE>
First, they helped increase the fund's income-producing potential. Second, the
swaps helped enhance the fund's tax efficiency. Many of the bonds we sold were
done so at prices below their purchase price, generating tax losses that can be
used to offset capital gains. A tax loss can be used for this purpose anytime
over an eight-year period, so we consider swaps to be a valuable tool for the
fund.
We identified other attractive opportunities throughout the period because
as interest rates rose, yield "spreads" widened. The spread is the difference in
yields between higher-rated and lower-rated securities. The higher yields on
lower-rated and non-rated securities made them more attractive than their
higher-rated counterparts on a risk-adjusted basis. Using the expertise of
Nuveen Research, we considered only those bonds that we felt offered adequate
compensation for the level of risk we assumed.
On some occasions, we were able to improve the fund's call protection as we
purchased newly issued bonds. Issuers generally have the right to call or redeem
their bonds after a given date prior to maturity, which they tend to do more
often when interest rates are falling and there's a financial incentive to
refinance. Call protection helps to protect the fund's income stream by allowing
us the luxury of hanging onto higher-yielding bonds if interest rates fall.
Since interest rates were on the rise during the past six months, few
individual investors were seeking out call protection. As a result, call
protection was available fairly cheaply and, in many cases, at virtually no
cost. By improving the call protection of the fund, the dividend income that
shareholders receive may be more stable and less sensitive to interest rate
changes in the future.
NUVEEN FLAGSHIP FLORDIA MUNICIPAL BOND FUND
Top Five Sectors
<TABLE>
<CAPTION>
<S> <C>
U.S. Guaranteed 15%
- ----------------------------------
Housing (Multifamily) 14%
- ----------------------------------
Healthcare 10%
- ----------------------------------
Tax Obligation (Limited) 10%
- ----------------------------------
Long-Term Care 10%
- ----------------------------------
</TABLE>
As a percentage of total bond holdings as to November 30, 1999. Holdings are
subject to change.
Q] What is your outlook for Nuveen Flagship Florida Municipal Bond Fund?
TOM] As long as the yield spread remains wide and the economy remains sound, we
believe that the lower- and non-rated segments of the market will continue to
offer good value and help to maintain the fund's income potential. In addition,
we will continue to engage in tax swapping when we're presented with attractive
opportunities to do so.
To the extent that investors seek out value in the bond market, municipals
could benefit. As of November 30, 1999, municipal bonds traded at 97.14% of U.S.
Treasury bonds. Though it is important to note that Treasury bonds are backed by
the full faith and credit of the U.S. government, municipals are priced quite
attractively to their Treasury counterparts.
NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed... 60%
AA.................... 10%
A..................... 13%
BBB/NR................ 17%
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
"Call protection
helps to protect
the fund's
income stream by
allowing us the
luxury of hanging
onto higher-yielding
bonds if interest
rates fall."
* The Lipper Peer Group returns represent the average annualized total return
of the 64 funds in the Lipper Florida Municipal Debt Category for the six-
month and one-year periods ended November 30, 1999 and 44 funds for the
five-year period. 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.
SEMIANNUAL REPORT page 4
<PAGE>
NUVEEN FLAGSHIP FLORIDA MUNICIPAL BOND FUND
Fund Spotlight as of November 30, 1999
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $10.16 $10.17 $10.17 $10.16
- ----------------------------------------------------------------------
Fund Symbol FLOTX N/A FLCTX NMFLX
- ----------------------------------------------------------------------
CUSIP 67065L708 67065L658 67065L641 67065L872
- ----------------------------------------------------------------------
Inception Date 6/90 2/97 9/95 2/97
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Returns (Annualized)/+/
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -2.68% -6.73% -3.38% -7.06% -3.12% -2.46%
- ------------------------------------------------------------------------------
1-Year TER* -0.39% -4.54% -1.43% -5.11% -1.09% -0.07%
- ------------------------------------------------------------------------------
5-Year 6.50% 5.60% 5.83% 5.67% 5.95% 6.63%
- ------------------------------------------------------------------------------
Since Inception 6.56% 6.08% 6.05% 6.05% 5.99% 6.63%
- ------------------------------------------------------------------------------
</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.
* Taxable Equivalent Return (based on a federal income tax rate of 31%).
Tax-Free Yields
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 4.93% 4.72% 4.18% 4.38% 5.13%
- --------------------------------------------------------------------------
Taxable Equivalent Yield 7.14% 6.84% 6.06% 6.35% 7.43%
- --------------------------------------------------------------------------
</TABLE>
Portfolio Statistics
Total Net Assets $365.4 million
Average Effective
Maturity 19.44 years
Average Duration 7.72
Monthly Tax-Free Dividends (Class A Shares)/./
[BAR CHART APPEARS HERE]
Month Amount
12/1998 $.0460
1/1999 .0455
2/1999 .0455
3/1999 .0455
4/1999 .0455
5/1999 .0455
6/1999 .0455
7/1999 .0455
8/1999 .0455
9/1999 .0455
10/1999 .0455
11/1999 .0455
. The Fund also paid shareholders capital gains and net ordinary income
distributions in December 1998 of $0.0404 per share.
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.
Terms To Know
The following are a few terms used throughout this report.
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.
Fed Easing When the Federal Reserve is following an easy money policy, it is
essentially increasing the money supply by decreasing the federal funds rate and
making money cheaper to borrow. The intention is to help the economy grow.
Fed Tightening When the Federal Reserve is following tight money policy, it is
essentially decreasing the money supply by increasing the fed funds rate and
making money more expensive to borrow. The intention is to slow the growth of
the economy and curtail inflation.
Federal Fund Rates 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.
Taxable Equivalent Yield The return an investor would have to realize on a
fully taxable investment to equal the stated yield on a tax-exempt investment.
SEMIANNUAL REPORT page 5
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Florida Municipal Bond Fund
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 4.6%
$ 750,000 Clay County Development Authority, Industrial Development Revenue 7/02 at 102 AA- $ 786,660
Refunding Bonds (Cargill Incorporated Project), Series 1992,
6.400%, 3/01/11
5,500,000 Escambia County, Florida, Pollution Control Revenue Bonds (Champion 8/04 at 102 Baa1 5,743,650
International Project), Series 1994, 6.900%, 8/01/22 (Alternative
Minimum Tax)
8,350,000 Escambia County, Florida, Pollution Control Revenue Bonds (Champion 9/06 at 102 Baa1 8,200,285
International Project), Series 1996, 6.400%, 9/01/30 (Alternative
Minimum Tax)
600,000 City of Jacksonville, Florida, Industrial Development Revenue Refunding 3/02 at 102 AA- 617,490
Bonds (Cargill Incorporated Project, Series 1992, 6.400%, 3/01/11
1,500,000 Nassau County, Florida, Pollution Control Revenue Refunding Bonds 7/03 at 102 Baa 1,470,585
(ITT Rayonier Inc. Project), Series 1993, 6.200%, 7/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 0.8%
300,000 Brevard County Educational Facilities Authority (Florida), Educational 11/02 at 102 BBB- 307,140
Facilities Refunding and Improvement Revenue Bonds, Series 1992,
6.875%, 11/01/22
3,000,000 Volusia County Educational Facilities Authority (Florida), Educational 6/09 at 101 Aaa 2,727,000
Facilities Revenue Bonds (Stetson University Inc., Project),
Series 1999, 5.250%, 6/01/29
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 10.3%
3,000,000 Jacksonville Health Facilities Authority, Florida, Hospital Facilities 11/01 at 102 AA+ 3,181,800
Refunding Revenue Bonds, Series 1991 (St. Luke's Hospital Association
Project), 7.125%, 11/15/20
6,000,000 City of Lakeland, Florida, Hospital Revenue Refunding Bonds (Lakeland 11/06 at 102 AAA 5,407,860
Regional Medical Center Project), Series 1996, 5.250%, 11/15/25
2,100,000 Hospital Board of Directors of Lee County, Florida, Hospital Revenue 4/07 at 102 AAA 2,082,108
Bonds (Lee Memorial Health System), Fixed Rate Hospital Revenue
Bonds, 1997 Series A, 5.625%, 4/01/16
2,320,000 Martin County Health Facilities Authority (Florida), Hospital Revenue 11/00 at 102 AAA 2,429,713
Refunding Bonds, Series 1990A (Martin Memorial Hospital), 7.125%,
11/15/04
North Broward Hospital District (Florida), Refunding and Improvement
Revenue Bonds, Series 1997:
1,000,000 5.250%, 1/15/17 1/07 at 101 AAA 940,210
3,000,000 5.375%, 1/15/24 1/07 at 101 AAA 2,793,000
2,500,000 Orange County Health Facilities Authority, Florida, Hospital Revenue 11/01 at 102 AAA 2,652,050
Bonds, Series 1991-A (Adventist Health System/Sunbelt, Inc.),
6.875%, 11/15/15
2,500,000 Orange County Health Facilities Authority, Florida, Hospital Revenue 11/01 at 102 AAA 2,646,250
Bonds, Series 1991-B, (Adventist Health System/Sunbelt, Inc.),
6.750%, 11/15/21
10,645,000 Orange County Health Facilities Authority, Florida, Hospital Revenue 11/05 at 102 AAA 9,705,366
Bonds, Series 1995 (Adventist Health System/Sunbelt, Inc.),
5.250%, 11/15/20
5,455,000 Orange County Health Facilities Authority, Florida, Hospital Revenue No Opt. Call AAA 5,794,792
Bonds (Orlando Regional Healthcare System), Series 1996C,
6.250%, 10/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 14.4%
600,000 Housing Finance Authority of Broward County, Florida, Multifamily 2/05 at 102 AAA 644,250
Housing Revenue Refunding Bonds (Lakeside Apartments Project),
Series 1995, 7.000%, 2/01/25
250,000 Housing Finance Authority of Broward County, Florida, Multifamily 8/06 at 102 AAA 255,348
Housing Revenue Refunding Bonds (Boardwalk Apartments Project),
Series 1996, 6.200%, 8/01/16
940,000 Housing Finance Authority of Broward County, Florida, Multifamily 10/08 at 102 N/R 923,813
Housing Revenue Bonds (Stirling Apartments Project), Series 1998,
5.400%, 10/01/11 (Alternative Minimum Tax)
11,300,000 Housing Finance Authority of Broward County, Florida, Multifamily 7/09 at 102 N/R 10,737,599
Housing Revenue Bonds (The Pier Club Apartments Project),
Series 1999, 7.000%, 7/01/34
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 2,700,000 Duval County Housing Finance Authority, Florida, Multifamily 4/05 at 102 BBB+ 2,829,141
Housing Revenue Refunding Bonds, Series 1995 (Greentree Place
Project), 6.750%, 4/01/25
710,000 Florida Housing Finance Agency, General Mortgage Revenue Refunding 6/02 at 103 AAA 729,490
Bonds, 1992 Series A, 6.400%, 6/01/24
Florida Housing Finance Agency, Housing Revenue Bonds (Antigua Club
Apartments Project), 1995 Series A1:
1,000,000 6.750%, 8/01/14 (Alternative Minimum Tax) 2/05 at 102 AAA 1,051,390
5,000,000 6.875%, 8/01/26 (Alternative Minimum Tax) 2/05 at 102 AAA 5,263,200
1,115,000 Florida Housing Finance Agency, Housing Revenue Bonds (Brittany of 2/05 at 102 AAA 1,173,694
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:
1,260,000 6.400%, 11/01/15 11/05 at 102 BBB+ 1,286,548
1,660,000 6.500%, 11/01/25 11/05 at 102 BBB+ 1,694,843
2,000,000 Florida Housing Finance Agency, Multifamily Housing Revenue Refunding 8/06 at 102 AAA 2,042,780
Bonds, 1991 Series C, 6.200%, 8/01/16
3,500,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series H 10/06 at 102 AAA 3,540,110
(Villas of Capri Project), 6.100%, 4/01/17 (Alternative Minimum Tax)
1,000,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series N 9/06 at 102 AAA 1,014,650
(Leigh Meadows Apartments Project), 6.300%, 9/01/36 (Alternative
Minimum Tax)
1,000,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series O 9/06 at 102 AAA 1,014,650
(Stoddert Arms Apartments Project), 6.300%, 9/01/36 (Alternative
Minimum Tax)
700,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1996 Series T 12/06 at 102 AAA 690,830
(The Landings at Sea Front Apartments Project), 6.050%, 12/01/36
(Alternative Minimum Tax)
1,440,000 Florida Housing Finance Agency, Multifamily Housing Revenue Bonds, 12/99 at 103 AAA 1,485,202
1989 Series I (GNMA Collateralized-Driftwood Terrace Apartments
Project), 7.650%, 12/20/31 (Alternative Minimum Tax)
2,500,000 Florida Housing Finance Agency, Housing Revenue Bonds, 1997 Series L 5/08 at 102 AAA 2,217,325
(Sarah's Place Apartments Project), 5.400%, 11/01/32 (Alternative
Minimum Tax)
10,000,000 Florida Housing Finance Agency, Housing Revenue Bonds, Series 1998 T1 7/08 at 102 N/R 9,148,400
(Whistler's Cove Apartment Project), 6.500%, 1/01/39 (Alternative
Minimum Tax (Mandatory put 1/01/28)
1,670,000 Florida Housing Finance Agency, Housing Revenue Refunding Bonds, 12/08 at 102 A+ 1,511,584
1998 Series O (Hunters Ridge at Deerwood Apartments), 5.250%,
12/01/18
1,000,000 Orange County Housing Finance Authority (Florida), Multifamily 10/01 at 101 BBB+ 1,009,790
Housing Revenue Bonds (Ashley Point Apartments Project), 1994
Series A, 7.100%, 10/01/24 (Alternative Minimum Tax)
1,925,000 Osceola County Housing Finance Authority, Multifamily Housing Revenue 6/07 at 100 AAA 1,823,187
Bonds (Tierra Vista Apartments Project), Series 1997A, 5.800%,
12/01/29 (Alternative Minimum Tax)
750,000 Housing Finance Authority of Palm Beach County, Florida, Multifamily 6/08 at 102 N/R 705,720
Housing Revenue Bonds (Windsor Park Apartments Project), Series 1998,
5.900%, 6/01/38 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 8.3%
2,350,000 Housing Finance Authority of Broward County, Florida, Home Mortgage No Opt. Call AAA 458,650
Revenue Bonds, 1985 Series A, 0.000%, 4/01/16
1,120,000 Housing Finance Authority of Broward County, Florida, GNMA 3/00 at 102 AA 1,144,864
Collateralized Home Mortgage Revenue Bonds, 1990 Series A, 7.900%,
3/01/23 (Alternative Minimum Tax)
1,825,000 Housing Finance Authority of Clay County, Florida, Single Family 3/05 at 102 Aaa 1,865,898
Mortgage Revenue Bonds, Series 1995 (Multi-County Program), 6.550%,
3/01/28 (Alternative Minimum Tax)
2,000,000 Housing Finance Authority of Clay County, Florida, Single Family 4/07 at 102 Aaa 1,811,400
Mortgage Revenue Bonds, Series 1998 (Multi-County Program), 5.450%,
4/01/31 (Alternative Minimum Tax)
185,000 Housing Finance Authority of Dade County (Florida), Single Family 9/00 at 102 Aaa 190,197
Mortgage Revenue Bonds, 1990 Series B, 7.750%, 3/01/17 (Alternative
Minimum Tax)
625,000 Housing Finance Authority of Dade County (Florida), Single Family 3/01 at 102 Aaa 642,869
Mortgage Revenue Bonds, Series B, 7.250% 9/01/23 (Alternative
Minimum Tax)
</TABLE>
7
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Florida Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 461,000 Housing Finance Authority of Dade County (Florida), Single Family 12/01 at 102 AAA $ 474,996
Mortgage Revenue Refunding Bonds, 1991 Series D, 6.950%, 12/15/12
35,000 Housing Finance Authority of Dade County (Florida), Single Family 3/01 at 102 Aaa 35,840
Mortgage Revenue Bonds, 1991 Series E, 7.000%, 3/01/24
1,000,000 Housing Finance Authority of Dade County (Florida), Single Family 4/05 at 102 AAA 1,022,920
Mortgage Revenue Bonds, Series 1995, 6.700%, 4/01/28 (Alternative
Minimum Tax)
255,000 Duval County Housing Finance Authority, Single Family Mortgage 6/00 at 102 Aaa 261,378
Revenue Bonds (GNMA Mortgage Backed Securities Program),
Series 1990B, 7.500%, 6/01/15
Duval County Housing Finance Authority, Single Family Mortgage
Revenue Bonds (GNMA Mortgage Backed Securities Program), Series 1990A:
260,000 7.650%, 9/01/10 9/00 at 103 AAA 269,594
125,000 7.850%, 12/01/22 (Alternative Minimum Tax) 6/00 at 102 Aaa 128,198
575,000 Duval County Housing Finance Authority, Single Family Mortgage Revenue 10/04 at 102 Aaa 587,294
Bonds (GNMA Mortgage-Backed Securities Program), Series 1994,
6.550%, 10/01/15 (Alternative Minimum Tax)
1,570,000 Escambia County Housing Finance Authority (Florida), Single Family 4/01 at 102 Aaa 1,615,828
Mortgage Revenue Bonds, Series 1991A (Multi-County Program),
7.400%, 10/01/23 (Alternative Minimum Tax)
250,000 Escambia County Housing Finance Authority (Florida), Single Family 4/02 at 102 Aaa 255,870
Mortgage Revenue Bonds, Series 1992A (Multi-County Program),
6.900%, 4/01/20 (Alternative Minimum Tax)
565,000 Escambia County Housing Finance Authority (Florida), Single Family 4/05 at 102 AAA 584,905
Mortgage Revenue Bonds (Multi-County Program), Series 1995,
6.950%, 10/01/27 (Alternative Minimum Tax)
1,105,000 Florida Housing Finance Agency, Single Family Mortgage Revenue 7/04 at 102 AAA 1,129,409
Refunding Bonds Series A, 6.250%, 7/01/11
Florida Housing Finance Agency, Single Family Mortgage Revenue
Refunding Bonds, Series 1995A:
705,000 6.550%, 7/01/14 (Alternative Minimum Tax) 1/05 at 102 AAA 723,795
705,000 6.650%, 1/01/24 (Alternative Minimum Tax) 1/05 at 102 AAA 728,216
970,000 Housing Finance Authority of Lee County, Florida, Single Family 3/08 at 105 Aaa 1,006,394
Mortgage Revenue Bonds, Series 1998A, Subseries 1,2,3,4, 6.300%,
3/01/29 (Alternative Minimum Tax)
265,000 Housing Finance Authority of Leon County (Florida), Single Family 4/01 at 102 Aaa 272,030
Mortgage Revenue Bonds, 1991 Series A, (Multi-County Program),
7.300%, 4/01/21 (Alternative Minimum Tax)
1,780,000 Housing Finance Authority of Leon County (Florida), Single Family No Opt. Call AAA 1,928,292
Mortgage Revenue Bonds (Multi-County Program), Series 1995B, 7.300%,
1/01/28 (Alternative Minimum Tax)
550,000 Housing Finance Authority of Manatee County, Florida, Single Family 11/05 at 102 Aaa 592,993
Mortgage Revenue Bonds, Series 1994-Sub Series 3, 7.600%,
11/01/26 (Alternative Minimum Tax)
255,000 Orange County Housing Finance Authority, GNMA Collateralized Mortgage 7/00 at 103 AAA 265,985
Revenue Refunding Bonds, 1990 Series A, 7.600%, 1/01/24
2,000,000 Orange County Housing Finance Authority, Homeowner Revenue Bonds, 9/07 at 102 Aaa 1,745,260
1998 Series A-1, 5.200%, 9/01/23 (Alternative Minimum Tax)
9,125,000 Orange County Housing Finance Authority, Homeowner Revenue Bonds, 9/08 at 101 1/2 Aaa 1,345,390
1999 Series A-2, 0.000%, 3/01/31
2,300,000 Orange County Housing Finance Authority, Homeowner Revenue Bonds, 9/08 at 101 1/2 Aaa 2,131,755
1999 Series A-1, 5.600%, 9/01/24 (Alternative Minimum Tax)
720,000 Housing Finance Authority of Palm Beach County, Florida, Single 9/00 at 103 Aaa 746,316
Family Mortgage Revenue Bonds, 1990 Series B, 7.600%, 3/01/23
1,595,000 Pinellas County Housing Finance Authority, Single Family Mortgage 2/05 at 102 AAA 1,644,971
Revenue Bonds (Multi-County Program), Series 1995A, 6.650%,
8/01/21 (Alternative Minimum Tax)
2,345,000 Pinellas County Housing Finance Authority, Single Family Mortgage 3/07 at 102 Aaa 2,423,464
Revenue Bonds, Series 1998A (Multi-County Program), 6.850%,
3/01/29 (Alternative Minimum Tax)
1,050,000 Pinellas County Housing Finance Authority, Single Family Mortgage 3/07 at 102 Aaa 994,844
Revenue Bonds (Multi-County Program), Series 1997C, 5.800%,
3/01/29 (Alternative Minimum Tax)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family (continued)
$ 1,160,000 Polk County Housing Finance Authority, Single Family Mortgage 3/01 at 102 Aaa $1,200,936
Revenue Refunding Bonds, Series 1991A, 7.150%, 9/01/23
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 9.8%
10,000,000 City of Atlantic Beach, Florida, Health Care Facilities Revenue 10/09 at 101 A 9,643,100
Refunding Bonds (Fleet Landing Project), Series 1999, 6.000%,
10/01/29 (WI)
2,735,000 Dade County Health Facilities Authority, Revenue and Revenue Refunding 8/00 at 102 A1 2,823,176
Bonds, Series 1990 (Catholic Health and Rehabilitation Services, Inc.
Project), 7.125%, 8/15/09
Escambia County Health Facilities Authority (Florida), Health Facilities
Revenue Bonds (Azalea Trace, Inc.), Series 1997:
1,000,000 6.000%, 1/01/15 1/07 at 102 N/R 933,660
1,595,000 6.100%, 1/01/19 1/07 at 102 N/R 1,495,089
Jacksonville Health Facilities Authority (Florida), Tax Exempt
Industrial Development Revenue Bonds (National Benevolent
Association - Cypress Village Florida Project), Series 1996A:
690,000 6.125%, 12/01/16 12/06 at 102 Baa2 662,241
1,000,000 6.250%, 12/01/26 12/06 at 102 Baa2 945,350
3,000,000 Orange County Health Facilities Authority, Tax-Exempt Mortgage 7/09 at 101 AAA 2,786,250
Revenue Bonds (South Central Nursing Homes, Inc. Project), Series
1999A, 5.500%, 7/01/32
1,550,000 Osceola County Industrial Development Authority (Osceola County, 5/01 at 102 AAA 1,625,346
Florida), Revenue Bonds, Series 1991 (The Evangelical Lutheran
Good Samaritan Society Project), 6.750%, 5/01/16
8,000,000 Palm Beach County Health Facilities Authority, Retirement Community 11/06 at 102 A- 7,363,120
Revenue Bonds (Adult Communities Total Services, Inc. Obligated
Group), Series 1996, 5.625%, 11/15/20
4,000,000 Palm Beach County, Florida, Industrial Development Revenue Bonds, 12/06 at 102 A+ 4,084,160
Series 1996 (Lourdes-Noreen McKeen Residence for Geriatric Care, Inc.
Project), 6.625%, 12/01/26
Sarasota County Health Facilities Authority, Health Facilities Revenue
Refunding Bonds, Series 1995 (Sunnyside Properties Project):
585,000 5.500%, 5/15/01 No Opt. Call N/R 589,317
540,000 5.500%, 5/15/02 No Opt. Call N/R 545,378
570,000 5.500%, 5/15/03 No Opt. Call N/R 575,603
600,000 5.500%, 5/15/04 No Opt. Call N/R 604,008
170,000 5.500%, 5/15/05 No Opt. Call N/R 169,924
1,000,000 6.000%, 5/15/10 5/06 at 102 N/R 951,100
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 8.2%
Village of Bolingbrook, Illinois, General Obligation Bonds,
Series 1999C Refunding:
2,540,000 0.000%, 1/01/29 1/09 at 33 7/8 AAA 399,669
7,750,000 0.000%, 1/01/31 1/09 at 30 5/16 AAA 1,070,663
7,750,000 0.000%, 1/01/33 1/09 at 27 3/32 AAA 939,610
1,325,000 0.000%, 1/01/34 1/09 at 25 21/32 AAA 150,719
4,000,000 State of Florida, Full Faith and Credit, Broward County Expressway No Opt. Call AA+ 5,246,440
Authority, Series of 1984, 9.875%, 7/01/09
1,000,000 State of Florida, Full Faith and Credit, Broward County Expressway No Opt. Call AA+ 1,413,490
Authority, Series of 1984 (General Obligation Bonds), 10.000%, 7/01/14
2,165,000 State of Florida, Full Faith and Credit, State Board of Education, No Opt. Call AA+ 2,885,988
Public Education Capital Outlay Bonds, Series 1985, 9.125%, 6/01/14
3,000,000 State of Florida, Full Faith and Credit, State Board of Education, 6/00 at 100 AA+ 2,626,140
Public Education Capital Outlay Refunding Bonds, Series 1989-A,
5.000%, 6/01/24
State of Florida, Full Faith and Credit, State Board of Education,
Public Education Capital Outlay Bonds, 1996 Series B:
2,220,000 4.750%, 6/01/21 6/07 at 101 AA+ 1,881,295
4,120,000 4.500%, 6/01/27 6/07 at 101 AA+ 3,244,047
5,000,000 State of Florida, Full Faith and Credit, State Board of Education, 6/08 at 101 AAA 4,209,600
Public Education Capital Outlay Bonds, 1997 Series B, 4.750%, 6/01/23
3,000,000 State of Florida, Full Faith and Credit, State Board of Education, 6/09 at 101 AAA 2,408,190
Public Education Capital Outlay Refunding Bonds, 1999 Series B,
4.500%, 6/01/24
</TABLE>
9
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Florida Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
Palm Beach County, Florida, General Obligation Bonds (Recreational
and Cultural Facilities Program), Series 1999A:
$ 1,560,000 5.750%, 8/01/18 8/09 at 100 Aa1 $ 1,566,178
1,970,000 5.750%, 8/01/19 8/09 at 100 Aa1 1,971,990
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 10.3%
School Board of Brevard County, Florida, Certificates of
Participation, Series 1996A:
500,000 5.400%, 7/01/11 No Opt. Call AAA 507,075
500,000 5.400%, 7/01/12 No Opt. Call AAA 503,380
3,100,000 5.500%, 7/01/21 7/05 at 102 AAA 2,955,013
Dade County, Florida, Special Obligation and Refunding Bonds,
Series 1996B:
4,835,000 0.000%, 10/01/07 No Opt. Call AAA 3,262,175
3,585,000 5.000%, 10/01/35 10/06 at 102 AAA 3,080,447
190,000 Certificates of Participation, Series 1992, The School Board of 2/02 at 100 AAA 195,795
Escambia County, Florida, 6.375%, 2/01/12
1,500,000 Certificates of Participation, Series 1994, The Department of 3/04 at 102 A+ 1,532,325
Corrections (State of Florida), 6.000%, 3/01/14
3,105,000 City of Gulf Breeze (Florida), Local Government Loan Program, 12/99 at 102 AAA 3,175,763
Floating Rate Demand Revenue Bonds, Boca Raton Projects,
Series 1985E, 7.750%, 12/01/15
1,000,000 City of Gulf Breeze (Florida), Local Government Loan Program, No Opt. Call AAA 1,040,610
Floating Rate Demand Revenue Bonds, Series 1985B Remarketed 9/1/95,
5.900%, 12/01/15 (Mandatory put 12/01/11)
5,000,000 The County of Hernando, Florida (Criminal Justice Complex Financing No Opt. Call AAA 6,100,750
Program), 1986 Series, 7.650%, 7/01/16
250,000 City of Jacksonville, Florida, Excise Taxes Revenue Refunding Bonds, 10/02 at 102 AAA 266,010
Series 1992, 6.500%, 10/01/13
1,010,000 Martin County, Florida, Special Assessment Bonds, Series 1995 11/05 at 100 A2 1,030,887
(Tropical Farms Water and Sewer Special Assessment District),
5.900%, 11/01/11
1,000,000 Miami Beach Redevelopment Agency (Florida), Tax Increment Revenue 12/04 at 102 Baa1 942,380
Bonds, Series 1993 (City Center/Historic Convention Village),
5.875%, 12/01/22 (Alternative Minimum Tax)
1,750,000 Northern Palm Beach County Improvement District, Water Control and 8/09 at 101 N/R 1,608,583
Development Bonds, Unit of Development No. 9B, Series 1999,
6.000%, 8/01/29
4,115,000 School Board of Orange County, Florida, Master Lease Program, 8/07 at 101 Aaa 3,848,924
Certificates of Participation, Series 1997A, 5.375%, 8/01/22
1,000,000 School Board of Palm Beach County, Florida, Certificates of 8/04 at 101 AAA 1,082,490
Participation, Series 1994A, 6.375%, 8/01/15
1,000,000 City of Palm Beach Gardens, Florida, Special Obligation Revenue 1/00 at 102 AAA 1,022,370
Bonds, Series 1990, 7.250%, 7/01/15
4,500,000 Puerto Rico Highway and Transportation Authority, Highway Revenue 7/16 at 100 A 4,152,915
Bonds, Series Y of 1996, 5.500%, 7/01/36
3,300,000 City of Tampa, Florida, Utilities Tax Improvement Bonds, Series 1996, No Opt. Call AAA 1,201,266
0.000%, 4/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 3.2%
1,000,000 Dade County, Florida, Aviation Facilities Revenue Bonds, 1992 10/02 at 102 AAA 1,061,230
Series B, 6.550%, 10/01/13 (Alternative Minimum Tax)
1,250,000 Greater Orlando Aviation Authority, Airport Facilities Revenue Bonds 10/07 at 101 AAA 1,135,500
of the City of Orlando, Florida, Series 1997, 5.250%, 10/01/23
(Alternative Minimum Tax)
1,000,000 Hillsborough County Aviation Authority, Florida, Tampa International 10/06 at 102 AAA 1,000,590
Airport Revenue Bonds, Series 1996B, 5.875%, 10/01/23
1,845,000 Palm Beach County, Florida, Airport System Revenue Refunding Bonds, No Opt. Call AAA 1,895,369
Series 1991, 7.500%, 10/01/00
Sanford Airport Authority (Florida), Industrial Development Revenue
Bonds (Central Florida Terminals Inc. Project), Series 1995A:
3,000,000 7.500%, 5/01/15 (Alternative Minimum Tax) 5/06 at 102 N/R 3,034,530
3,270,000 7.750%, 5/01/21 (Alternative Minimum Tax) 5/06 at 102 N/R 3,410,054
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed - 14.8%
$1,925,000 City of Boynton Beach, Florida, Water and Sewer Utility Revenue 11/00 at 102 AAA $2,022,116
Bonds, Series 1990, 7.400%, 11/01/15 (Pre-refunded to 11/01/00)
1,500,000 Certificates of Participation, Series 1990A, The School Board of 7/00 at 102 AAA 1,557,015
Broward County, Florida, 7.125%, 7/01/10 (Pre-refunded to 7/01/00)
255,000 Dade County, Florida, Special Obligation Bonds (Courthouse Center 4/04 at 102 A3*** 275,352
Project), Series 1994, 6.300%, 4/01/14 (Pre-refunded to 4/01/04)
1,500,000 Dade County Health Facilities Authority (Florida), Hospital No Opt. Call AAA 1,504,140
Revenue Bonds, Series 1991A (Baptist Hospital of Miami Project),
5.750%, 5/01/21
300,000 Dade County Health Facilities Authority (Florida), Hospital 8/02 at 102 AAA 321,267
Revenue Refunding Bonds, Series 1992 (North Shore Medical Center
Project), 6.500%, 8/15/15 (Pre-refunded to 8/15/02)
310,000 Certificates of Participation, Series 1992, The School Board of 2/02 at 100 AAA 322,825
Escambia County, Florida, 6.375%, 2/01/12 (Pre-refunded to 2/01/02)
300,000 State of Florida, Full Faith and Credit, Pollution Control Bonds, 7/02 at 101 AA+*** 318,444
Series Y, Division of Bond Finance of the Department of General
Services, 6.600%, 7/01/17 (Pre-refunded to 7/01/02)
335,000 State of Florida, Full Faith and Credit, State Board of Education, No Opt. Call AAA 445,399
Public Education Capital Outlay Bonds, Series 1985, 9.125%, 6/01/14
5,000,000 State of Florida, Full Faith and Credit, State Board of Education, 6/01 at 101 AAA 5,226,800
Public Education Capital Outlay Bonds, Series 1991-B, 6.700%,
6/01/22 (Pre-refunded to 6/01/01)
2,000,000 State of Florida, Full Faith and Credit, State Board of Education, 6/02 at 101 Aaa 2,124,020
Public Education Capital Outlay Bonds, Series 1991-C, 6.625%,
6/01/17 (Pre-refunded to 6/01/02)
2,990,000 Hillsborough County (Florida), Environmentally Sensitive Land 7/02 at 102 Aa3*** 3,177,503
Acquisition and Protection Program Bonds, Series 1992, 6.250%,
7/01/08 (Pre-refunded to 7/01/02)
1,000,000 Hillsborough County Port District, Florida (Tampa Port Authority), 12/00 at 102 Baa1*** 1,060,320
Revenue Bonds, Series 1990, 8.250%, 6/01/09 (Pre-refunded to
12/01/00)
250,000 Hillsborough County, Florida, Capital Improvement Non-Ad Valorem 1/00 at 102 A*** 255,505
Revenue Bonds (Museum of Science and Industry Project), Series
1992, 6.400%, 1/01/12 (Pre-refunded to 1/01/00)
1,635,000 Hillsborough County, Florida, Refunding Utility Revenue Bonds, 8/01 at 102 BBB+*** 1,734,751
Series 1991A, 7.000%, 8/01/14 (Pre-refunded to 8/01/01)
250,000 City of Hollywood, Florida, Water and Sewer Revenue Bonds, 10/01 at 102 AAA 266,220
Series 1991, 6.875%, 10/01/21 (Pre-refunded to 10/01/01)
1,810,000 Jacksonville Electric Authority (Jacksonville, Florida), Bulk 10/00 at 101 1/2 Aaa 1,881,875
Power Supply System Revenue Bonds (Scherer 4 Project, Issue
One, Series 1991A), 7.000%, 10/01/12 (Pre-refunded to 10/01/00)
1,500,000 Town of Lady Lake, Florida, Industrial Development Revenue Bonds 7/00 at 102 N/R*** 1,577,325
(Sunbelt Utilities, Inc. Project), Series 1990, 9.625%, 7/01/15
(Alternative Minimum Tax) (Pre-refunded to 7/01/00)
1,000,000 Martin County Health Facilities Authority (Florida), Hospital Revenue 11/00 at 102 AAA 1,048,810
Bonds, Series 1990B (Martin Memorial Hospital South Project),
7.100%, 11/15/20 (Pre-refunded to 11/15/00)
1,050,000 City of Naples, Florida, Hospital Revenue Bonds (Naples Community 10/00 at 102 AAA 1,098,237
Hospital, Inc. Project), Series 1990, 7.200%, 10/01/19
(Pre-refunded to 10/01/00)
1,195,000 City of North Miami Health Facilities Authority, Health Facility 8/00 at 102 A+*** 1,245,799
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)
3,400,000 North Springs Improvement District (Florida), Water and Sewer 10/01 at 102 N/R*** 3,687,776
Revenue Bonds, Series 1991, 8.000%, 10/01/16 (Pre-refunded to
10/01/01)
145,000 Orange County, Florida, Sales Tax Revenue Bonds, Series 1989, 6.125%, 1/00 at 102 AAA 148,167
1/01/19 (Pre-refunded to 1/01/00)
1,750,000 Orange County, Florida, Tourist Development Tax Revenue Bonds, 10/00 at 102 AAA 1,831,375
Series 1990, 7.250%, 10/01/10 (Pre-refunded to 10/01/00)
235,000 Orange County, Florida, Water Utilities System Revenue Bonds, 4/02 at 102 AAA 248,968
Series 1992, 6.250%, 10/01/17 (Pre-refunded to 4/01/02)
1,750,000 Palm Beach County, Florida, Criminal Justice Facilities Revenue 6/00 at 102 AAA 1,813,280
Bonds, Series 1990, 7.250%, 6/01/11 (Pre-refunded to 6/01/00)
</TABLE>
11
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Florida Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,425,000 Puerto Rico Electric Power Authority, Power Revenue 7/01 at 102 Aaa $1,515,288
Bonds, Series P, 7.000%, 7/01/21 (Pre-refunded to 7/01/01)
500,000 City of St. Petersburg Health Facilities Authority (Florida), 12/01 at 102 AAA 533,780
Revenue Bonds, Series 1985 A (Allegany Health System Loan Program),
7.000%, 12/01/15 (Pre-refunded to 12/01/01)
2,000,000 City of St. Petersburg Health Facilities Authority (Florida), 12/03 at 100 AAA 2,161,260
Allegany Health System Revenue Bonds, Series 1991 (St. Anthony's
Health Care Center, Inc.), 6.750%, 12/01/21 (Pre-refunded to 12/01/03)
1,610,000 City of St. Petersburg Health Facilities Authority (Florida), 12/01 at 102 AAA 1,723,586
Allegany Health System Revenue Bonds, Series 1991 (St. Mary's
Hospital, Inc.), 7.000%, 12/01/21 (Pre-refunded to 12/01/01)
2,500,000 School Board of Seminole County, Florida, Certificates of 7/04 at 101 AAA 2,741,750
Participation, Series 1994B, 6.750%, 7/01/14 (Pre-refunded to 7/01/04)
5,000,000 Sunrise Lakes Phase 4 Recreation District (Florida), General Obligation 8/05 at 102 BBB-*** 5,556,250
and Revenue Bonds, Series 1995A, 6.750%, 8/01/24
(Pre-refunded to 8/01/05)
1,000,000 City of Tampa (Florida), Allegany Health System Revenue Bonds, Series 12/01 at 102 AAA 1,060,630
1991 (St. Joseph's Hospital, Inc.), 6.750%, 12/01/17
(Pre-refunded to 12/01/01)
2,000,000 City of Tampa (Florida), Allegany Health System Revenue Bonds, Series 12/04 at 102 AAA 2,193,840
1994 (St. Joseph's Hospital, Inc. Issue), 6.500%, 12/01/23
(Pre-refunded to 12/01/04)
335,000 City of Tampa, Florida, Water and Sewer System Revenue Bonds, Series 10/02 at 101 AAA 352,403
1992, 6.000%, 10/01/17 (Pre-refunded to 10/01/02)
1,000,000 Turtle Run Community Development District (Coral Springs, Florida), 5/03 at 100 BBB+*** 1,056,470
Water Management Benefit Tax Refunding Bonds, Series 1993, 6.400%,
5/01/11 (Pre-refunded to 5/01/03)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 8.2%
3,775,000 Broward County, Florida, Resource Recovery Revenue Bonds, Series 1984 12/99 at 103 A+ 3,897,235
(SES Broward Company, L.P. - South Project), 7.950%, 12/01/08
6,000,000 Citrus County, Florida, Pollution Control Refunding Revenue Bonds, 1/02 at 102 A+ 6,166,440
Series 1992A (Florida Power Corporation - Crystal River Power Plant
Project), 6.625%, 1/01/27
2,500,000 Hillsborough County Industrial Development Authority (Florida), 8/01 at 103 AA 2,694,550
Pollution Control Revenue Bonds (Tampa Electric Company Project),
Series 1991, 7.875%, 8/01/21
1,000,000 City of Lakeland, Florida, Energy System Refunding Revenue Bonds, No Opt. Call AAA 1,076,370
Series 1999C, 6.050%, 10/01/12
2,125,000 Lee County, Florida, Solid Waste System Revenue Bonds, Series 1991A, 10/01 at 102 AAA 2,243,830
7.000%, 10/01/11 (Alternative Minimum Tax)
2,000,000 Martin County, Florida, Pollution Control Revenue Refunding Bonds 7/00 at 102 AAA 2,071,100
(Florida Power and Light Company Project), Series 1990,
7.300%, 7/01/20
1,000,000 Orlando Utilities Commission, Water and Electric Subordinated No Opt. Call Aa2 1,120,110
Revenue Bonds, Series 1989D, 6.750%, 10/01/17
1,250,000 Orlando Utilities Commission, Water and Electric Subordinated 10/02 at 102 Aa2 1,259,513
Revenue Bonds, Series 1992A, 6.000%, 10/01/20
4,000,000 Pinellas County, Florida, Pollution Control Refunding Revenue 6/01 at 102 A+ 4,229,720
Bonds (Florida Power Corporation - Anclote and Bartow Power
Plants Project), Series 1991, 7.200%, 12/01/14
3,000,000 St. Lucie County, Florida, Solid Waste Disposal Revenue Bonds 2/01 at 102 AA- 3,136,110
(Florida Power and Light Company Project), Series 1991, 7.150%,
2/01/23 (Alternative Minimum Tax)
2,000,000 St. Lucie County, Florida, Solid Waste Disposal Revenue Bonds 5/02 at 102 AA- 2,082,860
(Florida Power and Light Company Project), Series 1992, 6.700%,
5/01/27 (Alternative Minimum Tax)
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer - 6.8%
$ 1,000,000 City of Callaway, Bay County, Florida, Wastewater System Revenue 9/06 at 102 AAA $1,012,440
Bonds, Series 1996A, 6.000%, 9/01/26
City of Clearwater, Florida, Water and Sewer Revenue Refunding
Bonds, Series 1998:
2,155,000 0.000%, 12/01/12 12/08 at 85 7/16 AAA 1,052,890
1,000,000 0.000%, 12/01/13 12/08 at 80 15/16 AAA 456,140
1,000,000 0.000%, 12/01/18 12/08 at 62 1/8 AAA 322,480
Dade County, Florida, Water and Sewer System Revenue Bonds,
Series 1997:
3,000,000 5.250%, 10/01/21 10/07 at 101 AAA 2,774,190
7,500,000 5.250%, 10/01/26 10/07 at 101 AAA 6,841,950
1,000,000 Town of Davie, Florida, Water and Sewer Improvement and Refunding 10/02 at 102 AAA 1,025,200
Revenue Bonds, Series 1992, 6.250%, 10/01/17
600,000 City of Daytona Beach, Florida, Water and Sewer Revenue Bonds, Series 11/02 at 102 AAA 623,244
1992, 6.000%, 11/15/14
2,000,000 Escambia County Utilities Authority (Florida), Utility System Revenue No Opt. Call AAA 844,800
Bonds, Series 1992B, 0.000%, 1/01/15
5,750,000 Hillsborough County, Florida, Refunding Utility Revenue Bonds, Series 8/01 at 102 AAA 6,037,845
1991A, 6.500%, 8/01/16
375,000 City of Jacksonville, Florida, Water and Sewer Development Revenue Bonds, 6/02 at 102 A 391,579
Series 1992 (Jacksonville Suburban Utilities Corporation Project),
6.750%, 6/01/22 (Alternative Minimum Tax)
250,000 Town of Jupiter, Florida, Water Revenue Bonds, Series 1992B, 6.250%, 10/01 at 102 AAA 263,513
10/01/18
Manatee County, Florida, Public Utilities Revenue Refunding and
Improvement Bonds, Series 1991 C:
1,850,000 0.000%, 10/01/08 No Opt. Call AAA 1,178,913
2,800,000 0.000%, 10/01/09 No Opt. Call AAA 1,684,251
265,000 Orange County, Florida, Water Utilities System Revenue Bonds, Series 4/02 at 102 AAA 271,061
1992, 6.250%, 10/01/17
165,000 City of Tampa, Florida, Water and Sewer System Revenue Bonds, Series 10/02 at 101 AAA 167,434
1992, 6.000%, 10/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
$399,526,000 Total Investments - (cost $360,498,326) - 99.7% 364,381,840
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.3% 1,061,891
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $365,443,731
====================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
13
<PAGE>
Statement of Net Assets (Unaudited)
Nuveen Flagship Florida Municipal Bond Fund
November 30, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Assets
<S> <C>
Investments in municipal securities, at market value (note 1) $ 364,381,840
Cash 4,378,006
Receivables:
Interest 6,660,724
Investments sold 316,115
Shares sold 521,771
Other assets 416,672
- -------------------------------------------------------------------------------
Total assets 376,675,128
- -------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 9,806,767
Shares redeemed 713,406
Accrued expenses:
Management fees (note 6) 162,161
12b-1 distribution and service fees (notes 1 and 6) 68,974
Other 18,683
Dividends payable 461,406
- -------------------------------------------------------------------------------
Total liabilities 11,231,397
- -------------------------------------------------------------------------------
Net assets (note 7) $ 365,443,731
===============================================================================
Class A Shares (note 1)
Net assets $ 271,245,930
Shares outstanding 26,685,253
Net asset value and redemption price per share $ 10.16
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 10.61
===============================================================================
Class B Shares (note 1)
Net assets $ 18,545,926
Shares outstanding 1,824,020
Net asset value, offering and redemption price per share $ 10.17
===============================================================================
Class C Shares (note 1)
Net assets $ 17,885,708
Shares outstanding 1,759,022
Net asset value, offering and redemption price per share $ 10.17
===============================================================================
Class R Shares (note 1)
Net assets $ 57,766,167
Shares outstanding 5,687,108
Net asset value, offering and redemption price per share $ 10.16
===============================================================================
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
Statement of Operations (Unaudited)
Nuveen Flagship Florida Municipal Bond Fund
Six Months Ended November 30, 1999
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
Investment Income (note 1) $ 11,739,582
- --------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 1,018,283
12b-1 service fees - Class A (notes 1 and 6) 286,820
12b-1 distribution and service fees - Class B (notes 1 and 6) 78,861
12b-1 distribution and service fees - Class C (notes 1 and 6) 60,200
Shareholders' servicing agent fees and expenses 81,279
Custodian's fees and expenses 49,026
Trustees' fees and expenses (note 6) 5,267
Professional fees 9,292
Shareholders' reports - printing and mailing expenses 42,570
Federal and state registration fees 5,659
Other expenses 7,405
- --------------------------------------------------------------------------------------------
Total expenses before custodian fee credit 1,644,662
Custodian fee credit (note 1) (396)
- --------------------------------------------------------------------------------------------
Net expenses 1,644,266
- --------------------------------------------------------------------------------------------
Net investment income 10,095,316
- --------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (notes 1 and 4) (2,063,543)
Net change in unrealized appreciation or depreciation of investments (19,957,329)
- --------------------------------------------------------------------------------------------
Net gain (loss) from investments (22,020,872)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $(11,925,556)
============================================================================================
</TABLE>
Statement of Changes in Net Assets (Unaudited)
Nuveen Flagship Florida Municipal Bond Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
11/30/99 5/31/99
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 10,095,316 $ 18,834,935
Net realized gain (loss) from investment transactions (notes 1 and 4) (2,063,543) 759,812
Net change in unrealized appreciation or depreciation of investments (19,957,329) (5,925,814)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (11,925,556) 13,668,933
- -----------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (7,545,793) (14,921,960)
Class B (368,678) (442,577)
Class C (374,506) (508,583)
Class R (1,631,388) (3,072,260)
From accumulated net realized gains from investment transactions:
Class A -- (1,072,990)
Class B -- (39,163)
Class C -- (40,494)
Class R -- (204,848)
- -----------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (9,920,365) (20,302,875)
- -----------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 41,556,814 77,448,397
Net proceeds from shares issued to shareholders due to reinvestment of
distributions 2,830,241 8,202,477
- -----------------------------------------------------------------------------------------------------------
44,387,055 85,650,874
Cost of shares redeemed (47,900,404) (49,952,837)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions (3,513,349) 35,698,037
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (25,359,270) 29,064,095
Net assets at the beginning of period 390,803,001 361,738,906
- -----------------------------------------------------------------------------------------------------------
Net assets at the end of period $365,443,731 $390,803,001
===========================================================================================================
Balance of undistributed net investment income at the end of period $ 188,865 $ 13,914
===========================================================================================================
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Florida Municipal Bond Fund (the "Fund"),
among others. The Trust was organized as a Massachusetts business trust on July
1, 1996.
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
The prices of municipal bonds in the Fund's investment portfolio are provided by
a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
November 30, 1999, the Fund had an outstanding when-issued purchase commitment
of $9,806,767.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions are distributed to shareholders not less frequently
than annually. Furthermore, capital gains are distributed only to the extent
they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
The Fund intends to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its tax-
exempt net investment income, in addition to any significant amounts of net
realized capital gains and/or market discount from investment transactions. The
Fund currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal income taxes, to retain such tax-exempt
status when distributed to shareholders of the Fund. Net realized capital gain
and market discount distributions are subject to federal taxation.
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of $1
million or more are sold at net asset value without any up-front sales charge
but may be subject to a 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
shareholders.
16
<PAGE>
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the six months ended November 30, 1999.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Custodian Fee Credit
The Fund has an agreement with the custodian bank whereby the custodian fees and
expenses are reduced by credits earned on each Fund's cash on deposit with the
bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
11/30/99 5/31/99
-------------------- ----------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 3,002,612 $ 31,213,137 4,391,925 $ 48,059,545
Class B 474,751 4,912,452 1,052,216 11,537,205
Class C 394,628 4,065,994 889,995 9,754,281
Class R 131,456 1,365,231 740,527 8,097,366
Shares issued to shareholders due
to reinvestment of distributions:
Class A 164,151 1,714,936 550,411 6,036,519
Class B 6,910 72,102 9,759 107,077
Class C 7,558 78,921 14,513 159,110
Class R 92,372 964,282 173,280 1,899,771
- -----------------------------------------------------------------------------------------------------
4,274,438 44,387,055 7,822,626 85,650,874
- -----------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (4,124,256) (42,613,599) (4,017,386) (43,978,264)
Class B (122,213) (1,282,222) (78,240) (856,729)
Class C (132,539) (1,377,013) (113,554) (1,243,022)
Class R (253,797) (2,627,570) (354,310) (3,874,822)
- -----------------------------------------------------------------------------------------------------
(4,632,805) (47,900,404) (4,563,490) (49,952,837)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) (358,367) $ (3,513,349) 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 December 20, 1999, to shareholders of record on
December 9, 1999, as follows:
<TABLE>
<CAPTION>
- --------------------------------------------
Dividend per share:
<S> <C>
Class A $.0455
Class B .0390
Class C .0410
Class R .0470
============================================
</TABLE>
The Fund also declared a capital gain distribution of $.0088 per share which was
paid on December 7, 1999, to shareholders of record on December 2, 1999.
17
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities during the six months ended November 30, 1999, aggregated $39,789,546
and $39,917,278, respectively. There were no purchases or sales (including
maturities) of investments in short-term municipal securities during the six
months ended November 30, 1999.
At November 30, 1999, the identified cost of investments owned for federal
income tax purposes was $360,527,356.
5. Unrealized Appreciation (Depreciation)
At November 30, 1999, net unrealized appreciation of investments for federal
income tax purposes aggregated $3,814,416 of which $11,477,835 related to
appreciated securities and $7,663,419 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 six months ended November 30, 1999, John Nuveen & Co., Incorporated
(the "Distributor"), a wholly owned subsidiary of The John Nuveen Company,
collected sales charges on purchases of Class A Shares of approximately
$133,553, of which approximately $117,690 were paid out as concessions to
authorized dealers. The Distributor also received 12b-1 service fees on Class A
Shares, substantially all of which were paid to compensate authorized dealers
for providing services to shareholders relating to their investments.
During the six months ended November 30, 1999, the Distributor compensated
authorized dealers directly with approximately $222,903 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 six months ended November 30, 1999, the Distributor retained
approximately $96,693 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 $28,032 of CDSC on share redemptions during the six
months ended November 30, 1999.
7. Composition of Net Assets
At November 30, 1999, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
<S> <C>
Capital paid-in $363,188,075
Balance of undistributed net investment income 188,865
Accumulated net realized gain (loss) from
investment transactions (1,816,723)
Net unrealized appreciation of investments 3,883,514
- ------------------------------------------------------------------------
Net assets $365,443,731
========================================================================
</TABLE>
18
<PAGE>
Financial Highlights (Unaudited)
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 (e) $10.76 $.28 $(.61) $(.33) $(.27) $ -- $(.27) $10.16 (3.06)%
1999 10.94 .55 (.14) .41 (.55) (.04) (.59) 10.76 3.78
1998 10.60 .56 .34 .90 (.55) (.01) (.56) 10.94 8.67
1997 10.39 .56 .21 .77 (.56) -- (.56) 10.60 7.59
1996 10.63 .57 (.24) .33 (.57) -- (.57) 10.39 3.14
1995 10.38 .58 .26 .84 (.59) -- (.59) 10.63 8.43
Class B (2/97)
2000 (e) 10.77 .24 (.61) (.37) (.23) -- (.23) 10.17 (3.42)
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 (e) 10.77 .25 (.61) (.36) (.24) -- (.24) 10.17 (3.32)
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 (e) 10.76 .29 (.61) (.32) (.28) -- (.28) 10.16 (2.95)
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
====================================================================================================================================
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 (6/90)**
2000 (e) $271,246 .84%* 5.33%* .84%* 5.33%* .84%* 5.33%* 10%
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
1995 341,374 1.04 5.40 .73 5.71 .73 5.71 53
Class B (2/97)
2000 (e) 18,546 1.59* 4.60* 1.59* 4.60* 1.59* 4.60* 10
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 (e) 17,886 1.39* 4.79* 1.39* 4.79* 1.39* 4.79* 10
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 (e) 57,766 .64* 5.54* .64* 5.54* .64* 5.54* 10
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
(note 6).
(c) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(d) From commencement of class operations as noted.
(e) For the six months ended November 30, 1999.
19
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family
of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
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(1)
Tax-Free Income
National Funds
High Yield
Long-Term
Insured Long Term
Intermediate-Term
Limited-Term
State 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
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers/SM/ including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
quality municipal bonds. The fund shares are listed and traded on the New York
and American stock exchanges. Exchange-traded funds provide the investment
convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
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.
20
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
Chase Global Fund Services Company
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
21
<PAGE>
SERVING
Investors for Generations
[Photo of John Nuveen, Sr. appears here]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive performance over time -- with moderated risk. We emphasize quality
securities carefully chosen through in-depth research, and we follow those
securities closely over time to ensure that they continue to meet our exacting
standards.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
NUVEEN
John Nuveen & co. Incorporated
333 West Wacker Drive
Chigago, IL 60606-1286
www.nuveen.com
<PAGE>
November 30, 1999 Semiannual Report
NUVEEN
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Municipal Bond Funds
Dependable, tax-free
income to help
you keep more
of what you earn.
[PHOTO APPEARS HERE]
Maryland
Pennsylvania
Virginia
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
<TABLE>
<CAPTION>
Contents
<C> <S>
1 Dear Shareholder
3 Nuveen Maryland Municipal Bond Fund
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 Building a Better Portfolio
41 Fund Information
</TABLE>
<PAGE>
DEAR
Shareholder
[Photo of Timothy R. Schwertfeger appears here]
Timothy R. Schwertfeger
Chairman of the Board
How did you gain your financial wisdom? While some of us study finance, the
financial markets, economics or related disciplines in formal programs, most of
us end up accumulating practical knowledge through the years, from friends,
family, colleagues and media.
At Nuveen, we believe a formal financial education should start early in life. A
study sponsored by the National Council on Economic Education shows that a
whopping 66% of high school students tested on basic money skills scored an "F."
Only 3% received an "A."
Because we believe strongly in education and are committed to children's
financial literacy, we have launched a community service program, Kid$ense, in
our hometown of Chicago.
The Kid$ense curriculum, which is available for grades kindergarten through
sixth, includes textbooks, teaching materials and teacher training. The lessons
introduce children to the concept of money and how it works in society; buying,
selling and trading; working, earning, saving and investing.
Nuveen's commitment to children's financial literacy goes beyond the 250
Chicago public schools who have benefited from the Kid$ense curriculum. We also
have a commitment to family wealth management, which is a positive philosophy
that addresses the role of wealth in our lives and our world.
At Nuveen, we are dedicated to helping you and your financial adviser
develop a family wealth management strategy unique to you and your goals and
values. In your next shareholder report, look for more information about
Nuveen's dedication to Family Wealth Management, or ask your financial adviser
about this new approach to investing.
The Economic Environment. I want to briefly report on the economic environment
in which your Nuveen investment performed. Read on, as we've conducted an in-
depth interview with a representative from your fund's portfolio management
team, describing how the team of investment and research professionals directed
the portfolio during the semi-annual fiscal period ended November 30, 1999.
Until fairly recently, the U.S. economy has been characterized by robust
growth, generally low interest rates and unemployment levels that remain among
the lowest in three decades.
Concerns, however, about the continued pace of the economy's expansion have
begun to test the "new paradigm," which holds that improvements in productivity
enable us to have both economic growth and low inflation at the same time. With
investors and the various markets watching -- and reacting to -- every
announcement concerning economic statistics, volatility has increased,
especially in the equity markets.
We have entered a different economic environment from that of 12 months
ago. This shift has occurred in response to two factors:
. the Asian financial crisis of 1998 did not produce the U.S. economic
slowdown that was widely expected to keep economic growth from becoming
overly robust;
. evidence of accelerating prices contributed to the reemergence of the
specter of inflation, accompanied by predictions of higher interest
rates.
"We also have a commitment to family wealth management, which is a positive
philosophy that addresses the role of wealth in our lives and our world."
SEMIANNUAL REPORT page 1
<PAGE>
"Your financial
adviser can serve
as a valuable
resource in helping
you determine if
adjustments are
needed in your
current asset
allocation plan."
In an effort to pre-empt this threat of inflation, the Federal Reserve
Board (the Fed) moved to raise interest rates by a quarter-point on three
separate occasions between June and November 1999. This brought the federal
funds rate, which represents the amount banks charge one another on overnight
loans and serves as a standard for short-term market rates, from 4.75% to 5.50%.
These increases offset the three rate cuts enacted by the Fed a year earlier.
At its November 1999 meeting, the Fed announced that it would shift to a
neutral stance following the latest interest rate increase, giving the markets
some respite during the Y2K transition. However, the Fed's indication that it
would continue to closely watch the pace of economic growth for any signs of
inflationary pressure left the door open for additional tightenings.
In January 2000, the annual rotation among members of the Fed's Open Market
Committee, the body that ultimately decides interest rate policy, will put
several members considered more "hawkish" on inflation fighting into voting
slots. This could tilt policy toward further rate increases in the new year.
Municipal bonds continued to serve investors well. At the end of November
1999, the ratio between long-term municipal yields and 30-year Treasury yields
stood at 97.14%, compared with the historical average of 89.6% over the period
1979-1999. For investors, this meant that quality long-term municipal bonds
offered yields comparable to those of long-term Treasury bonds -- even before
the tax advantages of municipals were taken into account. Of course, Treasuries
are backed by the full faith and credit of the U.S. government. Even so, on an
after-tax basis, municipal bonds continued to present an exceptionally
attractive investment option relative to Treasuries.
In the coming months, we expect to see a healthy supply of new municipal
bonds, although total volume is expected to drop from the near-record levels of
1998. This is due to the dramatic decrease in the refunding of existing bonds in
the wake of higher interest rates compared to early 1999.
Keeping the Balance. The increased volatility in the markets highlights the
importance of maintaining balance in your investment portfolio. With a properly
balanced portfolio of equities, bonds and cash, your assets may be better
positioned to weather the markets' ups and downs. A balanced portfolio can also
help you increase your opportunities for capital growth while reducing risk.
Your financial adviser can serve as a valuable resource in helping you determine
if adjustments are needed in your current asset allocation plan.
For more information on any Nuveen investment, including a prospectus,
contact your financial adviser. 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. As we enter a new millennium, we are committed to maintaining that
reputation and finding the best ways to serve your evolving investment needs.
Thank you for your continued confidence.
Sincerely,
/s/Timothy Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
January 15, 2000
SEMIANNUAL REPORT page 2
<PAGE>
NUVEEN MARYLAND MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
- -------------------------------------------------------------------------------
Portfolio Manager Paul Brennan discusses fund performance, the municipal market
and key investment strategies for the Maryland fund for the six-month period
ended November 30, 1999.
Q How did the Maryland economy and the state's municipal market fare?
PAUL Maryland's economy is in about as good a shape as it has been in the last
20 years. As evidence of that economic strength, the state posted a job growth
rate that surpassed the nation as a whole throughout much of 1999. In addition,
unemployment continued to decline, dropping to 3.4% in November, down from 4.2%
a year ago and well below the national unemployment rate of 4.1%. The strength
of the job market was accompanied by good income growth. Furthermore, recent
economic growth appears more stable than it was in the mid-1980s when the state
last experienced significant growth. The state also continued to enjoy growth in
the high-tech sector, thanks to its proximity to national laboratories and major
research institutions.
As a result of the state's economic strength, tax collections and municipal
revenues in Maryland were strong, bolstering the overall creditworthiness of the
state's municipal market. But economic strength in Maryland and across the U.S.
had a serious downside. It continually fanned inflation fears and prompted the
Federal Reserve to raise interest rates in a "preemptive" strike against
potential inflation. As interest rates rose, municipal bond prices slumped.
Rising interest rates caused all but the shortest-maturity securities and funds
to post significant losses.
Q How did Nuveen Maryland Municipal Bond Fund perform during the period ended
November 30, 1999?
PAUL Nuveen Maryland Municipal Bond Fund generated a six-month total return on
net asset value of -4.30%, compared to the -3.09% six-month total return posted
by the Lipper Maryland Municipal Debt Peer group.* Total return equals a fund's
income and capital gain distributions, if any, plus or minus changes in net
asset value. For the one- and five-year periods, ended November 30, 1999, the
Nuveen fund reported average annual total returns of -4.10% and 6.30%,
respectively, compared to the Lipper peer group average returns of -2.89%, and
6.51% for the same time periods.*
The fund's six-month taxable equivalent total return, for investors in the
34.5% combined federal and state income tax bracket, was -3.07%.**
As of November 30, 1999, the fund's SEC 30-day yield was 4.86%. For
investors in the combined 34.5% federal and state income tax bracket, that is
equivalent to a yield of 7.42% on a taxable investment.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers/sm/--a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. 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 be blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/sm/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS 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 Maryland Municipal Bond Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the six-month period ended November 30, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
SEMIANNUAL REPORT page 3
<PAGE>
"Call protection lets us hang on to high-yielding bonds if interest rates fall,
helping to protect the fund's income stream."
Q What was your strategy in response to the difficult market environment?
PAUL Rising interest rates, while posing difficulties for the municipal market,
presented us with some attractive opportunities to lock in higher yields,
improve the fund's tax efficiency and enhance its protection against calls.
When interest rates rise, as they did during the period, the yield
"spread," or difference between yields of the highest-rated securities and
lower-quality and non-rated bonds, generally widens. As the period wore on,
lower-rated securities offered increasingly more yield and became more
attractive on a risk-adjusted basis. So we capitalized on wider spreads by
purchasing high-yielding lower- and non-rated (but still investment grade)
issues. Using the expertise of Nuveen research, we considered only those bonds
that we felt offered adequate compensation for the level of risk we assumed.
For example, we added Baa3-rated bonds issued by the Maryland Economic
Development Corporation on behalf of the Collegiate Housing Foundation to
finance the construction of a student dormitory on the campus of Salisbury State
University. Maturing in 2019, the securities yielded 6.05% when we purchased
them in June. We believe our team's previous experience with this relatively new
type of financing makes us particularly qualified to analyze, negotiate and
price these bonds correctly. We also added bonds issued by Anne Arundel County
to finance necessary infrastructure improvements on a parcel of land for a
shopping mall development. The non-rated bonds yielded 7.10% when we bought them
in November.
Rising interest rates significantly slowed Maryland municipal bond activity
- --both new issuance and refundings. Given that Maryland issuance is tight under
normal circumstances, the further reduction in supply prompted us to look beyond
the state's borders for attractive, high-yielding opportunities that were free
from both federal and state taxes. For instance, we bought bonds issued by the
Virgin Islands, which carried a 6.50% coupon and were rated BBB-. As a territory
of the United States, the Virgin Islands can issue bonds that are tax-exempt in
all 50 states.
To improve the fund's tax efficiency, we sold some bonds at a loss and
subsequently bought newly issued similar securities, whose yield reflected
higher prevailing interest rates. Tax losses, which were created by these
"swaps," are beneficial for the fund because they can be used to offset capital
gains anytime over an eight-year period. The higher yield of the new bonds
should strengthen the fund's long-term dividend paying capability.
As we purchased newly issued bonds, we concentrated on finding those with
good call protection. Issuers generally have the right to call or redeem their
bonds after a given date prior to maturity, which they tend to do more often
when interest rates are falling and there's a financial incentive for
refinancing. Call protection lets us hang on to high-yielding bonds if interest
rates fall, helping to protect the fund's income stream.
Since interest rates were on the rise during the past six months, few
individual investors were seeking call protection. As a result, call protection
was available fairly cheap and, in many cases, at virtually no cost. By
improving the call protection of the fund, the dividend income that shareholders
receive may be more stable and less sensitive to changes in interest rates in
the future.
NUVEEN MARYLAND MUNICIPAL BOND FUND
Top Five Sectors
Housing (Multifamily) 24%
- -------------------------------------------------
Healthcare 19%
- -------------------------------------------------
Tax Obligation (Limited) 11%
- -------------------------------------------------
Education and Civic Organizations 11%
- -------------------------------------------------
Housing (Single Family) 9%
- -------------------------------------------------
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
SEMIANNUAL REPORT page 4
<PAGE>
Q What is your outlook for Nuveen Maryland Municipal Bond Fund?
PAUL We will continue to utilize Nuveen research and our institutional status
to seek out lower investment grade and non-rated opportunities as a strategy for
improving the yield of the fund and to enhance its total return potential. In
addition, we'll continue to make tax swaps as long as the market rewards us for
doing so. Finally, we'll continue to seek out opportunities to buy new bonds
with good call protection if they are selling at an attractive price.
Higher interest rates have made it advantageous for us to lock in
attractive yields by extending the portfolio's duration -- a measure of its
interest-rate sensitivity. Should interest rates stabilize or begin to reverse
course and decline, the portfolio's longer duration would be beneficial.
NUVEEN MARYLAND MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed....55%
AA.....................20%
A.......................8%
BBB/NR.................17%
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
"Finally, we'll
continue to seek
out opportunities
to buy new bonds
with good call
protection if they
are selling at an
attractive price."
* The Lipper Peer Group returns represent the average annualized total return
of the 38 funds in the Lipper Maryland Municipal Debt Category for the six-
month period ended November 30, 1999, 37 funds for the one-year period, 30
funds for the five-year period, and 7 funds for the 10-year period. 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.
SEMIANNUAL REPORT page 5
<PAGE>
NUVEEN MARYLAND MUNICIPAL BOND FUND
Fund Spotlight as of November 30, 1999
Terms To Know
The following are a few terms used throughout this report.
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.
Fed Easing When the Federal Reserve is following an easy money policy, it is
essentially increasing the money supply by decreasing the federal funds rate and
making money cheaper to borrow. The intention is to help the economy grow.
Fed Tightening When the Federal Reserve is following tight money policy, it is
essentially decreasing the money supply by increasing the fed funds rate and
making money more expensive to borrow. The intention is to slow the growth of
the economy and curtail inflation.
Federal Fund Rates 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.
Taxable Equivalent Yield The return an investor would have to realize on a fully
taxable investment to equal the stated yield on a tax-exempt investment.
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $9.77 $9.78 $9.77 $9.79
- -----------------------------------------------------------------------------------
Fund Symbol NMDAX N/A NMDCX NMMDX
- -----------------------------------------------------------------------------------
CUSIP 67065L831 67065L823 67065L815 67065L799
- -----------------------------------------------------------------------------------
Inception Date 9/94 3/97 9/94 12/91
- -----------------------------------------------------------------------------------
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -4.10% -8.15% -4.76% -8.43% -4.57% -3.93%
- ----------------------------------------------------------------------------------------------
1-Year TER* -1.66% -5.80% -2.73% -6.40% -2.42% -1.40%
- ----------------------------------------------------------------------------------------------
5-Year 6.30% 5.39% 5.57% 5.41% 5.66% 6.55%
- ----------------------------------------------------------------------------------------------
Since Inception 5.24% 4.66% 4.52% 4.52% 4.56% 5.49%
- ----------------------------------------------------------------------------------------------
</TABLE>
+ Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years. Class C shares
have a 1% CDSC for redemptions within one year which is not reflected in the
one-year total return.
* Taxable Equivalent Return (based on a combined federal and state income tax
rate of 34.5%).
<TABLE>
<CAPTION>
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 4.86% 4.65% 4.11% 4.31% 5.06%
- ---------------------------------------------------------------------------
Taxable Equivalent Yield 7.42% 7.10% 6.27% 6.58% 7.73%
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
12/1998 .0400
1/1999 .0405
2/1999 .0405
3/1999 .0405
4/1999 .0405
5/1999 .0405
6/1999 .0405
7/1999 .0405
8/1999 .0405
9/1999 .0405
10/1999 .0405
11/1999 .0405
Portfolio Statistics
Total Net Assets $73.7 million
- ------------------------------------
Average Effective
Maturity 21.29 years
- ------------------------------------
Average Duration 9.14
- ------------------------------------
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.
SEMIANNUAL REPORT page 6
<PAGE>
NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
- --------------------------------------------------------------------------------
Portfolio Manager Tom O'Shaughnessy discusses fund performance, the municipal
market and key investment strategies for the Pennsylvania fund for the six-month
period ended November 30, 1999.
Q How did Pennsylvania's economy and municipal market fare?
TOM Pennsylvania continues to enjoy healthy, diversified economic growth. The
state's unemployment rate remained low, at 4.2% as of November 1999.
The state's ongoing economic strength translated into strong tax
collections and municipal revenues and helped bolster the overall
creditworthiness of the Pennsylvania municipal market. That was virtually the
only silver lining in what proved to be a very stormy environment for municipal
bonds. Continued signs of better-than-expected economic growth prompted the
Federal Reserve to raise short-term interest rates by a total of 0.75% over the
period from June through November, 1999. As bond yields rose in response, their
prices slumped and all but the shortest-maturity bond funds suffered losses.
Q How did Nuveen Flagship Pennsylvania Municipal Bond Fund perform during the
period ended November 30, 1999?
TOM Nuveen Flagship Pennsylvania Municipal Bond Fund generated a six-month
total return on net asset value of -4.68%, compared to the -3.78% total return
posted by the Lipper Pennsylvania Municipal Debt Peer Group.* For the one-,
five-, and ten-year periods ending November 30, 1999, the Nuveen fund had an
average annual return of -4.16%, 6.36% and 6.27%, respectively, compared to
the Lipper peer group average annual total returns of -3.51%, 6.49%, 6.39% for
the same time periods.*
Total return equals a fund's income and capital gain distributions, if any,
plus or minus changes in net asset value.
The fund's six-month taxable equivalent total return, for investors in
a 33% combined federal and state income tax bracket, was -3.47%.** As of
November 30, 1999, the fund's SEC 30-day yield was 5.11%. For investors in a
combined 33% federal and state income tax bracket, that is equivalent to a yield
of 7.63% on a taxable investment.
Q What was your strategy amid this difficult market environment?
TOM We took advantage of the rising interest rate environment to engage in what
are known as "swaps." We sold bonds with lower interest rates, replacing them
with similar -- in terms of credit quality, maturity, structure -- bonds with
higher prevailing interest rates. These swaps generated two benefits for the
fund. First, they helped increase the fund's income-producing potential. Second,
the swaps helped enhance the fund's tax efficiency. Many of the bonds we sold
were done so at prices below their purchase price, generating tax losses that
can be used to offset capital gains.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers/sm/ -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. 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 be blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/sm/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS 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 Flagship Pennsylvania Municipal Bond Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the six-month period ended November 30, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
SEMIANNUAL REPORT page 7
<PAGE>
"Call protection helps to protect the fund's income stream by allowing us the
luxury of hanging onto higher-yielding bonds if interest rates fall."
A tax loss can be used for this purpose anytime over an eight-year period, so we
consider swaps to be a valuable tool for the fund.
NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND
Top Five Sectors
Education and Civic Organizations 20%
- ----------------------------------------
Housing (Single Family) 14%
- ----------------------------------------
Healthcare 12%
- ----------------------------------------
U.S. Guaranteed 11%
- ----------------------------------------
Tax Obligation (General) 9%
- ----------------------------------------
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
We identified other attractive opportunities throughout the period because
as interest rates rose, yield "spreads" widened. The spread is the difference in
yields between higher-rated and lower-rated securities. The higher yields on
lower-rated and non-rated securities made them more attractive than their
higher-rated counterparts on a risk-adjusted basis. Using the expertise of
Nuveen research, we considered only those bonds that we felt offered adequate
compensation for the level of risk we assumed.
On some occasions, we were able to improve the fund's call protection as we
purchased newly issued bonds. Issuers generally have the right to call or redeem
their bonds after a given date prior to maturity, which they tend to do more
often when interest rates are falling and there's a financial incentive to
refinance. Call protection helps to protect the fund's income stream by allowing
us the luxury of hanging onto higher-yielding bonds if interest rates fall.
Since interest rates were on the rise during the past six months, few
individual investors were seeking out call protection. As a result, call
protection was available fairly cheaply and, in many cases, at virtually no
cost. By improving the call protection of the fund, the dividend income that
shareholders receive may be more stable and less sensitive to interest rate
changes in the future.
Q What is your outlook for Nuveen Flagship Pennsylvania Municipal
Bond Fund?
TOM We will continue to seek out opportunities among lower-rated and non-rated
issues. As long as the yield spread remains wide and the economy remains sound,
we believe that these segments of the market will continue to offer good value
and help to maintain the fund's income potential. In addition, we will continue
to engage in tax swapping when we're presented with attractive opportunities to
do so.
To the extent that investors seek out value in the bond market, municipals
could benefit. As of November 30, 1999, municipal bonds traded at 97.14% of U.S.
Treasury bonds. Though it is important to note that Treasury bonds are backed by
the full faith and credit of the U.S. government, municipals are priced quite
attractively to their Treasury counterparts.
NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed. 50%
AA.................. 8%
A................... 10%
BBB/NR.............. 30%
Other............... 2%
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
* The Lipper Peer Group returns represent the average annualized total return
of the 60 funds in the Lipper Pennsylvania Municipal Debt Category for the
six-month and one-year periods ended November 30, 1999, 50 funds for the
five-year period, and 12 funds for the 10-year period. 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.
SEMIANNUAL REPORT page 8
<PAGE>
NUVEEN FLAGSHIP PENNSYLVANIA MUNICIPAL BOND FUND
Fund Spotlight as of November 30, 1999
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $9.71 $9.73 $9.70 $9.71
- --------------------------------------------------------------------------------
Fund Symbol FPNTX N/A FPMBX NBPAX
- --------------------------------------------------------------------------------
CUSIP 67065L740 67065L732 67065L724 67065L716
- --------------------------------------------------------------------------------
Inception Date 10/86 2/97 2/94 2/97
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -4.16% -8.19% -4.87% -8.49% -4.66% -3.95%
- --------------------------------------------------------------------------------
1-Year TER* -1.73% -5.86% -2.81% -6.44% -2.49% -1.41%
- --------------------------------------------------------------------------------
5-Year 6.36% 5.46% 5.70% 5.54% 5.78% 6.49%
- --------------------------------------------------------------------------------
10-Year 6.27% 5.82% 5.81% 5.81% 5.69% 6.34%
- --------------------------------------------------------------------------------
</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.
* Taxable Equivalent Return (based on a combined federal and state income tax
rate of 33.0%).
<TABLE>
<CAPTION>
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 5.11% 4.90% 4.36% 4.56% 5.32%
- --------------------------------------------------------------------------------
Taxable Equivalent Yield 7.63% 7.31% 6.51% 6.81% 7.94%
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)[.]
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Month Dividends
- -------------------------------------------------
<S> <C>
12/1998 $.0450
1/1999 .0430
2/1999 .0430
3/1999 .0430
4/1999 .0430
5/1999 .0430
6/1999 .0430
7/1999 .0430
8/1999 .0420
9/1999 .0420
10/1999 .0420
11/1999 .0420
</TABLE>
<TABLE>
<CAPTION>
Portfolio Statistics
<S> <C>
Total Net Assets $144.9 million
- -------------------------------------------------
Average Effective Maturity 20.93 years
- -------------------------------------------------
Average Duration 9.59
- -------------------------------------------------
</TABLE>
[.] The Fund also paid shareholders capital gains and net ordinary income
distributions in December 1998 of $0.0593 per share.
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.
Terms To Know
The following are a few terms used throughout this report.
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.
Fed Easing When the Federal Reserve is following an easy money policy, it is
essentially increasing the money supply by decreasing the federal funds rate and
making money cheaper to borrow. The intention is to help the economy grow.
Fed Tightening When the Federal Reserve is following tight money policy, it is
essentially decreasing the money supply by increasing the fed funds rate and
making money more expensive to borrow. The intention is to slow the growth of
the economy and curtail inflation.
Federal Fund Rates 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.
Taxable Equivalent Yield The return an investor would have to realize on a
fully taxable investment to equal the stated yield on a tax-exempt investment.
SEMIANNUAL 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 their
specific areas of expertise. We call them Premier Advisers/sm/--a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. 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 be blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/sm/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS 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 Flagship Virginia Municipal Bond Fund.
Portfolio Manager Paul Brennan discusses fund performance, the municipal market
and key investment strategies for the Virginia fund for the six-month period
ended November 30, 1999.
Q How strong is Virginia's economy?
PAUL Both employment and income growth in Virginia have outpaced the nation as
a whole as the state continues its successful transition away from its
traditional reliance on the federal government. In particular, Virginia
witnessed strong growth in the high-tech sector. It also has been aided by its
proactive pursuit of high-tech companies, with Motorola, America Online and
Oracle all maintaining a presence in the state. In November, the state's
unemployment rate was 2.8%, down from 2.9% a year ago and well below the
national rate of 4.1%. Personal income growth remained slightly above the
national average.
As a result of the state's economic strength, tax collections and municipal
revenues in Virginia were strong, bolstering the overall creditworthiness of the
state's municipal market. But economic strength in Virginia and across the U.S.
had a serious downside. It continually fanned inflation fears and prompted the
Federal Reserve to raise interest rates in a "preemptive" strike against
potential inflation. As interest rates rose, municipal bond prices slumped.
Rising interest rates caused all but the shortest-maturity securities and funds
to post significant losses.
Q How did Nuveen Flagship Virginia Municipal Bond Fund perform during the
period ended November 30, 1999?
PAUL Nuveen Flagship Virginia Municipal Bond Fund generated a six-month total
return on net asset value of -3.40%, in line with the -3.18% six-month total
return posted by the Lipper Virginia Municipal Debt Peer group.* Total return
equals a fund's income and capital gain distributions, if any, plus or minus
changes in net asset value. For the one-, five- and ten-year periods ended
November 30, 1999, the Nuveen fund reported average annual total returns of
- -3.03%, 6.89% and 6.58%, respectively, compared to the Lipper peer group average
returns of -2.82%, 6.98% and 6.06% for the same time periods.*
The fund's taxable equivalent total return for the same period, for
investors in the 35% combined federal and state income tax bracket, was
- -2.10%.**
As of November 30, 1999, the fund's SEC 30-day yield was 4.93%. For
investors in the combined 35% federal and state income tax bracket, that is
equivalent to a yield of 7.58% on a taxable investment.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the six-month period ended November 30, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
SEMIANNUAL REPORT page 10
<PAGE>
Q What was your strategy in response to the difficult market environment?
PAUL Rising interest rates, while posing difficulties for the municipal market,
presented us with some attractive opportunities to lock in higher yields, better
diversify, improve the fund's tax efficiency and enhance its protection against
calls.
When interest rates rise, as they did during the period, the yield
"spread," or difference between yields of the highest credit quality securities
and those of lower quality and non-rated bonds, generally widens. As the period
wore on, lower-rated securities offered increasingly more yield and became more
attractive on a risk-adjusted basis. So we capitalized on wider spreads by
purchasing high-yielding lower- and non-rated (but still investment grade)
issues. Using the expertise of Nuveen research, we considered only those bonds
that we felt offered adequate compensation for the level of risk we assumed.
For example, we added bonds issued by Virginia Beach Development Authority
to finance the purchase and renovation of a multi-family apartment building in
the city. The bonds are non-rated, mature in 2039, and carry a 7.50% coupon. In
addition to their attractive risk-adjusted yield, we liked the bonds because of
the project's new management team and its plan for renovations.
We also looked for opportunities to diversify the fund's holdings. One
purchase representative of that effort was a AAA-rated bond issued by the
Virginia Resources Authority to fund municipal clean water programs. The bonds
mature in 2022 and were purchased at an attractive 5.88% yield.
Rising interest rates significantly slowed Virginia municipal bond
activity--both new issuance and refundings. Given that Virginia issuance is
tight under normal circumstances, the further reduction in available supply
prompted us to look beyond the state's borders for attractive, high-yielding,
opportunities that were free from federal and state taxes. For instance, we
bought bonds issued by the Virgin Islands, which carried a 6.50% coupon and were
rated BBB-. As a territory of the United States, the Virgin Islands can issue
bonds that are tax-exempt in all 50 states and offered attractive high-yielding
alternatives to bonds from issuers in Virginia.
To improve the fund's tax efficiency, we sold some bonds at a loss and
subsequently bought newly issued similar securities, whose yield reflected
higher prevailing interest rates. Tax losses, which were created by these
"swaps," are beneficial for the fund because they can be used to offset capital
gains anytime over an eight-year period. The higher yield of the new bonds
should strengthen the fund's income-producing ability as well.
As we purchased newly issued bonds, we concentrated on finding those with
good call protection. Issuers generally have the right to call or redeem their
bonds after a given date prior to maturity, which they generally do when
interest rates decline. Call protection helps protect the fund's income stream
in declining rate environments.
Since interest rates were on the rise, few individual investors were
seeking out call protection and, as a result, it was available fairly cheaply
and, in many cases, virtually cost free. That's in stark contrast to 1998, when
interest rates were falling, the demand for call protection was strong and the
cost of it was rather dear. By increasing the call protection of the fund, the
dividend income that shareholders receive may be more stable and less sensitive
to changes in interest rates in the future.
NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND
Top Five Sectors
U.S. Guaranteed 14%
- ---------------------------------------------------
Tax Obligation (Limited) 11%
- ---------------------------------------------------
Healthcare 11%
- ---------------------------------------------------
Education and Civic Organizations 10%
- ---------------------------------------------------
Water and Sewer 10%
- ---------------------------------------------------
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
"Rising interest
rates, while posing
difficulties for the
municipal market,
presented us with
some attractive
opportunities to
lock in higher yields,
better diversify,
improve the
fund's tax efficiency
and enhance
its protection
against calls."
SEMIANNUAL REPORT page 11
<PAGE>
"Finally, we'll
continue to seek out
opportunities to
buy new bonds
with good call
protection if they
are selling at an
attractive price."
* The Lipper Peer Group returns represent the average annualized total return
of the 35 funds in the Lipper Virginia Municipal Debt Category for the six-
month and one-year periods ended November 30, 1999, 27 funds for the five-
year period, and six funds for the 10-year period. 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.
Q What is your outlook for Nuveen Flagship Virginia Municipal Bond Fund?
PAUL We will continue to utilize Nuveen research and our institutional status
to seek out lower investment grade and non-rated bonds for opportunities to
improve the yield of the fund and enhance its total return potential as long as
yield spreads remain wide enough to compensate the Fund. In addition, we'll
continue to make tax swaps when the market rewards us for doing so. Finally,
we'll continue to seek out opportunities to buy new bonds with good call
protection if they are selling at an attractive price.
Higher interest rates have made it advantageous for us to lock in
attractive yields by extending the portfolio's duration -- a measure of its
interest-rate sensitivity. Should interest rates stabilize or begin to reverse
course and decline, the portfolio's longer duration would be beneficial.
NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed.....40%
AA......................26%
A.......................18%
BBB/NR..................15%
Other....................1%
As a percentage of total bond holdings as of November 30, 1999. Holdings are
subject to change.
SEMIANNUAL REPORT page 12
<PAGE>
NUVEEN FLAGSHIP VIRGINIA MUNICIPAL BOND FUND
Fund Spotlight as of November 30, 1999
<TABLE>
<CAPTION>
Quick Facts
<S> <C> <C> <C> <C>
A Shares B Shares C Shares R Shares
NAV $10.30 $10.29 $10.29 $10.29
- ------------------------------------------------------------------------------------------
Fund Symbol FVATX N/A FVACX NMVAX
- ------------------------------------------------------------------------------------------
CUSIP 67065L690 67065L682 67065L674 67065L666
- ------------------------------------------------------------------------------------------
Inception Date 3/86 2/97 10/93 2/97
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -3.03% -7.11% -3.78% -7.46% -3.57% -2.91%
- ------------------------------------------------------------------------------------------
1-Year TER* -0.45% -4.63% -1.60% -5.29% -1.28% -0.21%
- ------------------------------------------------------------------------------------------
5-Year 6.89% 5.98% 6.18% 6.02% 6.32% 7.01%
- ------------------------------------------------------------------------------------------
10-Year 6.58% 6.12% 6.10% 6.10% 5.99% 6.63%
- ------------------------------------------------------------------------------------------
</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.
* Taxable Equivalent Return (based on a combined federal and state income tax
rate of 35%).
<TABLE>
<CAPTION>
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 4.93% 4.72% 4.18% 4.38% 5.13%
- ----------------------------------------------------------------------------
Taxable Equivalent Yield 7.58% 7.26% 6.43% 6.74% 7.89%
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)[.]
[BAR CHART APPEARS HERE]
12/1998 .0450
1/1999 .0435
2/1999 .0435
3/1999 .0435
4/1999 .0435
5/1999 .0435
6/1999 .0435
7/1999 .0435
8/1999 .0435
9/1999 .0435
10/1999 .0435
11/1999 .0435
[.] The Fund also paid shareholders capital gains and net ordinary income
distributions in December 1998 of $0.0298 per share.
Morningstar Rating/TM/ ++
****
Overall rating among 1,610 municipal bond funds as of 11/30/99
Portfolio Statistics
Total Net Assets $215.2 million
- ----------------------------------------
Average Effective
Maturity 19.41 years
- ----------------------------------------
Average Duration 8.28
- ----------------------------------------
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.
++ The Morningstar rating is an overall rating for the municipal bond category
and relates to the Class A shares only; other classes may vary. Morningstar
proprietary ratings reflect historical risk-adjusted performances as of
11/30/99 and are subject to change every month. Past performance is no
guarantee of future results. Ratings are calculated from the fund's three-,
five- and 10-year average annual returns in excess of 90-day Treasury bill
returns, with appropriate fee adjustments, and a risk factor that reflects
fund performance below 90-day T-bill returns. Class A shares of the fund
received four, four and three stars for the three, five- and 10-year periods
ended 11/30/99, respectively. The top 10% of funds in a broad asset class
receive five stars, the next 22.5% receive four stars and the next 35%
receive three stars. For the three-year period, 1,610 municipal bond funds
were rated; 1,330 for the five-year period and 383 for the 10-year period.
Terms To Know
The following are a few terms used throughout this report.
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.
Fed Easing When the Federal Reserve is following an easy money policy, it is
essentially increasing the money supply by decreasing the federal funds rate and
making money cheaper to borrow. The intention is to help the economy grow.
Fed Tightening When the Federal Reserve is following tight money policy, it is
essentially decreasing the money supply by increasing the fed funds rate and
making money more expensive to borrow. The intention is to slow the growth of
the economy and curtail inflation.
Federal Fund Rates 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.
Taxable Equivalent Yield The return an investor would have to realize on a
fully taxable investment to equal the stated yield on a tax-exempt investment.
SEMIANNUAL REPORT page 13
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Maryland Municipal Bond Fund
November 30, 1999
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 2.2%
$1,500,000 Mayor and City Council of Baltimore (Maryland), Port Facilities 4/02 at 103 AA- $1,596,225
Revenue Bonds (Consolidation Coal Sales Company Project),
Series 1984B, 6.500%, 10/01/11
- ------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 10.4%
1,000,000 Maryland Economic Development Corporation, Student Housing 6/09 at 102 Baa3 968,220
Revenue Bonds (Collegiate Housing Foundation - Salisbury Project),
Series 1999A, 6.000%, 6/01/19
1,250,000 Maryland Economic Development Corporation, Student Housing 6/09 at 102 Baa3 1,175,425
Revenue Bonds (Collegiate Housing Foundation - University Courtyard
Project), Series 1999A, 5.750%, 6/01/19
1,500,000 Maryland Health and Higher Educational Facilities Authority, 10/09 at 101 A 1,256,010
Revenue 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:
665,000 5.300%, 7/01/18 7/06 at 102 BBB- 589,935
1,425,000 5.300%, 7/01/28 7/06 at 102 BBB- 1,209,455
1,000,000 Maryland Health and Higher Educational Facilities Authority, 7/08 at 102 AA 915,620
Refunding Revenue Bonds, The Johns Hopkins University Issue,
Series 1998, 5.125%, 7/01/20
1,500,000 Morgan State University, Maryland, Academic Fees and Auxiliary No Opt. Call AAA 1,563,720
Facilities Fees, Revenue Refunding Bonds, 1993 Series, 6.100%, 7/01/20
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 18.4%
2,165,000 City of Gaithersburg, Maryland, Nursing Home Revenue Refunding No Opt. Call AAA 2,404,449
Bonds (Shady Grove Adventist Nursing and Rehabilitation Center
Project), Series 1992A, 6.500%, 9/01/12
1,790,000 Maryland Economic Development Corporation (Health and Mental 4/11 at 102 N/R 1,664,754
Hygiene Providers Facilities Acquisition Program), Revenue Bonds,
Series 1996A, 7.625%, 4/01/21
2,000,000 Maryland Health and Higher Educational Facilities Authority, 6/09 at 101 A 1,844,020
Kaiser Permanente Revenue Bonds, 1998 Series A, 5.375%, 7/01/15
1,000,000 Maryland Health and Higher Educational Facilities Authority, 7/03 at 102 AAA 955,770
Refunding Revenue Bonds, Francis Scott Key Medical Center Issue,
Series 1993, 5.000%, 7/01/13
1,000,000 Maryland Health and Higher Educational Facilities Authority, 7/03 at 102 Baa1 918,980
Project and Refunding Revenue Bonds, Doctors Community Hospital
Issue, Series 1993, 5.750%, 7/01/13
3,500,000 Maryland Health and Higher Educational Facilities Authority, 1/08 at 101 Aaa 3,022,740
Revenue Bonds, Upper Chesapeake Hospitals Issue, Series 1998A,
5.125%, 1/01/38
2,000,000 Prince George's County, Maryland, Project and Refunding Revenue 7/04 at 102 Baa1 1,699,280
Bonds (Dimensions Health Corporation Issue), Series 1994, 5.375%,
7/01/14
1,000,000 Puerto Rico Industrial, Tourist, Educational, Medical and 1/05 at 102 AAA 1,044,960
Environmental Control Facilities Financing Authority, Hospital
Revenue Bonds, 1995 Series A (Hospital Auxilio Mutuo Obligated
Group Project), 6.250%, 7/01/16
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 24.1%
1,500,000 Baltimore County, Maryland, Mortgage Revenue Refunding Bonds 10/08 at 102 AAA 1,323,975
(GNMA Collateralized - Cross Creek Apartments Project), Series
1998A, 5.250%, 10/20/33
1,000,000 Baltimore City, Maryland, Mortgage Revenue Refunding Bonds, 12/02 at 102 AAA 1,033,170
Series 1992 (GNMA Collateralized - Tindeco Wharf Apartments
Project), 6.700%, 12/20/28
1,000,000 Howard County, Maryland, Mortgage Revenue Refunding Bonds, 7/02 at 102 AAA 1,033,110
Series 1992 (Howard Hills Townhouses Project - FHA-Insured
Mortgage Loan), 6.400%, 7/01/24
2,000,000 Howard County, Maryland, Multifamily Housing Revenue Refunding 7/02 at 104 Baa2 2,130,840
Bonds, Series 1994 (Chase Glen Project), 7.000%, 7/01/24 (Mandatory
put 7/01/04)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
Community Development Administration, Department of Housing and Community
Development, Multifamily Housing Revenue Bonds (Insured Mortgage Loans),
1992 Series D:
$ 700,000 6.700%, 5/15/27 5/02 at 102 Aa $ 729,148
500,000 6.750%, 5/15/33 5/02 at 102 Aa 521,280
1,000,000 Community Development Administration, Department of Housing 1/09 at 101 Aa2 860,580
and Community Development, Housing Revenue Bonds, 1999 Series A,
5.350%, 7/01/41 (Alternative Minimum Tax)
1,000,000 Community Development Administration, Maryland Department of 1/10 at 100 Aa2 999,930
Housing and Community Development, Housing Revenue Bonds, Series
1999B, 6.250%, 7/01/32 (Alternative Minimum Tax)
1,000,000 Community Development Administration, Department of Housing 10/08 at 101 1/2 Aaa 880,920
and Community Development, Multifamily Development Revenue Bonds
(Auburn Manor Project), Series 1998A, 5.300%, 10/01/28
(Alternative Minimum Tax)
1,000,000 Housing Opportunities Commission of Montgomery County 7/05 at 102 Aa2 994,090
(Maryland), Multifamily Housing Revenue Bonds, 1995 Series A,
6.000%, 7/01/20
4,420,000 Housing Opportunities Commission of Montgomery County 7/08 at 101 Aaa 3,832,361
(Maryland), Multifamily Housing Development Bonds, 1998 Series A,
5.250%, 7/01/29 (Alternative Minimum Tax)
1,550,000 Housing Authority of Prince George's County (New Keystone 1/02 at 102 AAA 1,603,863
Apartments - FHA-Insured), 6.800%, 7/01/25
860,000 Housing Authority of Prince George's County, Mortgage Revenue 5/00 at 100 AAA 827,303
Refunding Bonds, Collateralized Foxglenn Apartments Project),
Series 1998A, 5.450%, 5/20/14 (Alternative Minimum Tax)
1,000,000 Housing Authority of Prince George's County, Mortgage Revenue 9/09 at 102 AAA 985,060
Bonds, Series 1999 (GNMA Collateralized - University Landing at
Langley Apartments Project), 6.100%, 3/20/41 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 9.3%
1,130,000 Community Development Administration, Department of Housing 4/01 at 102 Aa2 1,161,245
and Community Development, Single Family Program Bonds, 1991 Fourth
Series, 7.450%, 4/01/32 (Alternative Minimum Tax)
1,500,000 Community Development Administration, Department of Housing 3/08 at 101 1/2 Aa2 1,350,330
and Community Development, Residential Revenue Bonds, 1998
Series A, 5.300%, 9/01/23 (Alternative Minimum Tax)
1,615,000 Housing Opportunities Commission of Montgomery County 7/04 at 102 Aa2 1,652,000
(Maryland), Single Family Mortgage Revenue Bonds, 1994 Series A,
6.600%, 7/01/14
2,885,000 Housing Authority of Prince George's County, FHLMC/FNMA/GNMA 8/07 at 102 AAA 2,719,978
Collateralized Single Family Mortgage Revenue Bonds, Series 1997,
5.750%, 8/01/26 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 1.3%
Carroll County, Maryland, Revenue Bonds, EMA Obligated Group Issue (Fairhaven
and Copper Ridge), 1999A Refunding Revenue Bonds:
500,000 5.500%, 1/01/19 1/09 at 101 AA 471,515
500,000 5.625%, 1/01/25 1/09 at 101 AA 469,965
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 1.3%
1,000,000 Frederick County, Maryland, General Obligation Public 7/09 at 101 AA 978,530
Facilities Bonds of 1999, 5.250%, 7/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 11.2%
1,250,000 Anne Arundel County, Maryland, Special Obligation Bonds 7/09 at 102 N/R 1,249,125
(Arundel Mills Project), Series 1999, 7.100%, 7/01/29 (WI)
1,000,000 Mayor and City Council of Baltimore (Maryland), Certificates 10/07 at 102 AAA 925,880
of Participation (Emergency Telecommunications Facilities),
Series 1997A, 5.000%, 10/01/17
2,000,000 Mayor and City Council of Baltimore (Maryland), Convention 9/08 at 102 AAA 1,799,020
Center Refunding Revenue Bonds, Series 1998, 5.000%, 9/01/19
1,760,000 Maryland Stadium Authority, Convention Center Expansion Lease 12/04 at 102 AAA 1,822,445
Revenue Bonds, Series 1994, 5.875%, 12/15/12
Maryland Stadium Authority, Sports Facilities Lease Revenue
Bonds, Series 1989D:
500,000 7.375%, 12/15/04 (Alternative Minimum Tax) 12/99 at 102 Aa2 511,225
500,000 7.500%, 12/15/10 (Alternative Minimum Tax) 12/99 at 102 Aa2 511,210
</TABLE>
15
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Maryland Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 500,000 Virgin Islands Public Finance Authority, Revenue Bonds 10/10 at 101 BBB- $ 502,400
(Virgin Islands Gross Receipts Taxes Loan Note), Series 1999A,
6.500%, 10/01/24
1,000,000 Washington Suburban Sanitary District (Montgomery and Prince 6/07 at 100 Aa1 920,350
George's Counties, Maryland), General Construction Bonds of 1997,
5.125%, 6/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 5.0%
360,000 Maryland Transportation Authority, Special Obligation 7/04 at 102 AAA 361,084
Revenue Bonds, Baltimore/Washington International Airport Projects,
Series 1994-A (Qualified Airport Bonds), 6.400%, 7/01/19
(Alternative Minimum Tax)
1,000,000 Maryland Transportation Authority, Transportation Facilities 7/02 at 100 A+ 1,004,580
Projects Revenue Bonds, Series 1992, 5.750%, 7/01/15
2,400,000 Washington Metropolitan Area Transit Authority (District of 1/04 at 102 AAA 2,320,368
Columbia), Gross Revenue Transit Refunding Bonds, Series 1993,
5.250%, 7/01/14
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 5.4%
600,000 Mayor and City Council of Baltimore (Maryland), General 10/02 at 100 AAA 634,056
Obligation Consolidated Public Improvement Bonds of 1992-Series
A, 6.500%, 10/15/12 (Pre-refunded to 10/15/02)
700,000 Maryland National Capital Park and Planning Commission 7/02 at 102 AA*** 741,601
(Prince George's County, Maryland), General Obligation Bonds,
Prince George's County Park Acquisition and Development Bonds,
Series L-2, 6.125%, 7/01/10 (Pre-refunded to 7/01/02)
500,000 Maryland Health and Higher Educational Facilities Authority, 7/00 at 102 AAA 518,665
Revenue Bonds, Sinai Hospital of Baltimore Issue, Series 1990,
7.000%, 7/01/19 (Pre-refunded to 7/01/00)
500,000 Maryland Health and Higher Educational Facilities Authority, 7/00 at 102 AAA 517,915
Revenue Bonds, Francis Scott Key Medical Center Issue, Series
1990, 6.750%, 7/01/23 (Pre-refunded to 7/01/00)
1,005,000 Maryland Health and Higher Educational Facilities Authority 7/00 at 102 AAA 1,052,426
(Doctors Community Hospital Issue), Series 1990, 8.750%, 7/01/22
(Pre-refunded to 7/01/00)
500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 7/02 at 101 1/2 AAA 535,762
1992 (General Obligation Bonds), 6.600%, 7/01/13 (Pre-refunded
to 7/01/02)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 3.5%
1,000,000 Montgomery County, Maryland, Solid Waste System Revenue 6/03 at 102 AAA 1,014,050
Bonds (1993 Series A), 5.875%, 6/01/13 (Alternative Minimum Tax)
1,500,000 Prince George's County, Maryland, Pollution Control Revenue 1/03 at 102 A1 1,528,200
Refunding Bonds (Potomac Electric Project), 1993 Series, 6.375%, 1/15/23
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 6.7%
2,000,000 Mayor and City Council of Baltimore (Maryland), Project and No Opt. Call AAA 1,780,900
Refunding Revenue Bonds (Water Projects), Series 1994-A, 5.000%, 7/01/24
2,000,000 Mayor and City Council of Baltimore (Maryland), Project and 7/08 at 101 AAA 1,746,480
Refunding Revenue Bonds (Water Projects), Series 1998-A, 5.000%, 7/01/28
1,500,000 Mayor and City Council of Baltimore (Maryland), Project and 7/06 at 101 AAA 1,420,860
Refunding Revenue Bonds (Water Projects), Series 1996-A, 5.500%, 7/01/26
- ------------------------------------------------------------------------------------------------------------------------------------
$76,030,000 Total Investments - (cost $75,455,244) - 98.8% 72,807,358
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.2% 849,560
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $73,656,918
====================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the
earliest optional call or redemption. There may be other call provisions
at varying prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to
be equivalent to AAA rated securities.
.N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
16
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Pennsylvania Municipal Bond Fund
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Goods - 1.9%
$ 3,000,000 Delaware County Industrial Development Authority (Pennsylvania), 1/08 at 102 BB- $ 2,745,420
Refunding Revenue Bonds, Series A of 1997 (Resource Recovery
Facility), 6.200%, 7/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 19.8%
2,000,000 Allegheny County, Higher Education Building Authority, No Opt. Call Aaa 1,973,400
University Revenue Bonds (Duquesne University), Series 1998,
5.500%, 3/01/16
3,000,000 Allegheny County Higher Education Building Authority 2/06 at 102 Baa3 2,990,070
(Commonwealth of Pennsylvania), College Revenue Bonds,
Series A of 1996 (Robert Morris College), 6.250%, 2/15/26
Allegheny County Higher Education Building Authority (Commonwealth of
Pennsylvania), College Revenue Refunding Bonds, Series A of 1998
(Robert Morris College):
1,190,000 5.500%, 5/01/15 No Opt. Call Baa3 1,128,905
1,500,000 6.000%, 5/01/28 No Opt. Call Baa3 1,441,695
Chester County Health and Education Facilities Authority
(Pennsylvania), College Revenue Bonds, Series of 1998
(Immaculata College):
1,300,000 5.600%, 10/15/18 10/08 at 102 BBB- 1,186,471
2,300,000 5.625%, 10/15/27 10/08 at 102 BBB- 2,035,017
2,315,000 Delaware County Authority (Pennsylvania), College Revenue 10/08 at 100 BBB- 1,957,772
Refunding Bonds (Neumann College), Series 1998A, 5.375%,
10/01/26
Delaware County Authority, School Revenue Bonds, Series of 1998
(The Haverford School Project):
1,000,000 5.000%, 3/15/19 3/04 at 100 A- 866,260
2,000,000 5.125%, 3/15/24 3/04 at 100 A- 1,699,580
New Wilmington Municipal Authority (Lawrence County, Pennsylvania),
College Revenue Bonds, Series 1998 (Westminster College):
1,275,000 5.300%, 3/01/18 3/08 at 100 Baa1 1,128,630
935,000 5.350%, 3/01/28 3/08 at 100 Baa1 803,483
750,000 Northeastern Pennsylvania Hospital and Education Authority, 2/05 at 100 AAA 813,968
College Revenue Bonds (Luzerne County Community College),
6.625%, 8/15/15
Pennsylvania Higher Educational Facilities Authority (Commonwealth
of Pennsylvania), Geneva College Revenue Bonds, Series of 1998:
4,150,000 5.375%, 4/01/15 4/08 at 102 BBB- 3,752,928
1,800,000 5.375%, 4/01/23 4/08 at 102 BBB- 1,537,812
3,000,000 Pennsylvania Higher Educational Facilities Authority 5/09 at 100 A- 2,921,070
(Commonwealth of Pennsylvania), Drexel University Revenue
Bonds, Series 1999, 6.000%, 5/01/29
1,250,000 Pennsylvania Higher Educational Facilities Authority 7/09 at 100 AAA 1,116,975
(Commonwealth of Pennsylvania), Thomas Jefferson University
Revenue Bonds, Series 1999, 5.000%, 7/01/19
865,000 Union County Higher Educational Facilities Financing Authority, 4/06 at 101 AAA 845,347
Pennsylvania, University Revenue Bonds, Series 1996
(Bucknell University), 5.500%, 4/01/16
600,000 The General Municipal Authority of the City of Wilkes-Barre, 12/00 at 100 N/R 632,418
College Misericordia Revenue Bonds, Refunding Series A
of 1992, 7.750%, 12/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Energy - 2.6%
3,500,000 Pennsylvania Economic Development Financing Authority (Sun 12/04 at 102 BBB 3,755,675
Company, Inc. (R&M) Project), Series 1994A, 7.600%, 12/01/24
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 12.0%
1,525,000 Allegheny County Hospital Development Authority (Pennsylvania), No Opt. Call N/R 1,456,375
Hospital Revenue Bonds, Series Q (Allegheny Valley Hospital,
Sublessee), 7.000%, 8/01/15
</TABLE>
17
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Pennsylvania Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
Columbia County Hospital Authority Columbia County, Pennsylvania, Health Care
Revenue Bonds (The Bloomsburg Hospital Obligated Group Project), Series of 1999:
$ 3,735,000 5.850%, 6/01/24 6/09 at 100 BBB- $3,264,539
1,000,000 5.900%, 6/01/29 6/09 at 100 BBB- 871,840
1,585,000 The City of Jeannette Health Services Authority, Hospital Revenue 11/06 at 102 BBB+ 1,495,210
Bonds (Jeannette District Memorial Hospital), Series A of 1996, 6.000%,
11/01/18
2,000,000 Monroeville Hospital Authority, Hospital Revenue Refunding Bonds, 10/05 at 102 N/R 1,866,420
Forbes Health System, 6.250%, 10/01/15
500,000 Montgomery County Higher Education and Health Authority, Hospital 2/00 at 100 AAA 503,085
Revenue Bonds (Holy Redeemer Hospital), Series 1990A, 7.625%, 2/01/20
1,985,000 Philadelphia Hospitals and Higher Education Facilities Authority, 11/02 at 102 A- 1,909,530
Hospital Revenue Refunding Bonds, Chestnut Hill Hospital, 6.500%,
11/15/22
2,500,000 Philadelphia Hospitals and Higher Education Facilities Authority, 7/07 at 102 BBB+ 2,275,400
Hospital Revenue Refunding Bonds, Jeanes Hospital Project, 5.875%,
7/01/17
City of Pottsville Hospital Authority, Hospital Revenue Bonds (The Pottsville
Hospital and Warne Clinic), Series of 1998:
1,265,000 5.250%, 7/01/10 No Opt. Call BBB 1,140,043
2,250,000 5.625%, 7/01/24 7/08 at 100 BBB 1,923,120
230,000 Health Care Facilities Authority of Sayre (Pennsylvania), Series 3/01 at 102 AAA 241,006
1991A, Guthrie Healthcare System, 7.100%, 3/01/17
350,000 Washington County Hospital Authority, Hospital Revenue Bonds, 4/02 at 102 A2 371,707
Series 1992 (Monongahela Valley Hospital, Inc. Project), 6.750%, 12/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 1.3%
500,000 Redevelopment Authority of the County of Bucks, Pennsylvania, 2/02 at 100 AAA 510,040
Mortgage Revenue Refunding Bonds (Warminster Heights Section 8 Assisted -
FHA-Insured Project), 1992 Series A, 6.875%, 8/01/23
1,530,000 Redevelopment Authority of the City of Philadelphia, 2/08 at 100 Aa2 1,414,470
Pennsylvania, Multifamily Housing Refunding Revenue Bonds, Series 1998
(FHA-Insured Mortgage Loan - Woodstock Mutual Homes, Inc. Project),
5.450%, 2/01/23
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 13.7%
3,250,000 Allegheny County Residential Finance Authority, Single Family 11/08 at 102 Aaa 2,894,743
Mortgage Revenue Bonds, 1998 Series DD-2, 5.400%, 11/01/29
(Alternative Minimum Tax)
1,535,000 Allegheny County Residential Finance Authority, Single Family No Opt. Call Aaa 212,106
Mortgage Revenue Bonds, 1994 Series Y, 0.000%, 5/01/27 (Alternative
Minimum Tax)
40,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 4/01 at 102 AA+ 40,976
Revenue Bonds, Series 30, 7.300%, 10/01/17
520,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 10/01 at 102 AA+ 536,396
Revenue Bonds, Series 1991-32, 7.150%, 4/01/15
2,500,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 4/06 at 102 AA+ 2,550,650
Revenue Bonds, Series 1996-50A, 6.000%, 10/01/13
2,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 4/06 at 102 AA+ 2,027,500
Revenue Bonds, Series 1996-51, 6.375%, 4/01/28 (Alternative Minimum Tax)
1,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 10/06 at 102 AA+ 999,900
Revenue Bonds, Series 53A, 6.050%, 4/01/18 (Alternative Minimum Tax)
3,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 10/07 at 101 AA+ 2,695,200
Revenue Bonds, Series 1997-61A, 5.500%, 4/01/29 (Alternative Minimum Tax)
2,600,000 Urban Redevelopment Authority of Pittsburgh, Home Improvement 8/05 at 102 A 2,613,000
Loan Bonds, 1995 Series A, 6.375%, 8/01/18 (Alternative Minimum Tax)
970,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue 4/06 at 102 AAA 955,731
Bonds, Series A, 6.000%, 4/01/19 (Alternative Minimum Tax)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 995,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue 4/06 at 102 AAA $ 1,009,079
Bonds, Series D, 6.250%, 10/01/17
765,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue 4/07 at 102 AAA 771,931
Bonds, 1997 Series A, 6.200%, 10/01/21 (Alternative Minimum Tax)
1,715,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue 4/09 at 100 AAA 1,611,894
Bonds, 1999 Series C, 5.600%, 4/01/20 (Alternative Minimum Tax)
1,055,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue 4/04 at 102 AAA 1,090,902
Bonds, 1994 Series A, 6.625%, 4/01/22 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 6.7%
2,910,000 Allegheny County Residential Finance Authority, Mortgage Revenue 10/05 at 100 AAA 2,970,848
Bonds (FHA-Insured Mortgage - Ladies Grand Army of the Republic
Health Facility Project), 1995 Series G, 6.350%, 10/01/36
2,000,000 Armstrong County Hospital Authority (Pennsylvania), Health Center 12/01 at 100 AAA 2,084,940
Revenue Refunding Bonds, Series 1991 (Canterbury Place Project),
6.500%, 12/01/21
1,000,000 Butler County Industrial Development Authority (Pennsylvania), 6/03 at 102 A 949,460
Health Center Revenue Refunding Bonds, Series 1993, Pittsburgh
Lifetime Care Community (Sherwood Oaks Project), 5.750%, 6/01/16
Chester County Health and Educational Facilities Authority (Pennsylvania),
Mortgage Revenue Refunding Bonds (Tel Hai Obligated Group Project),
Series of 1998:
1,000,000 5.400%, 6/01/18 12/08 at 100 BBB 861,860
1,100,000 5.500%, 6/01/25 12/08 at 100 BBB 930,831
2,000,000 Montgomery County Higher Education and Health Authority, Mortgage 1/06 at 101 BBB 1,909,580
Revenue Bonds, Series 1996 (Waverly Heights Project), 6.375%, 1/01/26
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 9.3%
Chichester School District, Delaware County, Pennsylvania, General
Obligation Bonds, Series of 1999:
3,125,000 0.000%, 3/01/26 (WI) No Opt. Call AAA 623,500
3,125,000 0.000%, 3/01/27 (WI) No Opt. Call AAA 586,031
3,125,000 0.000%, 3/01/28 (WI) No Opt. Call AAA 551,000
3,125,000 0.000%, 3/01/29 (WI) No Opt. Call AAA 517,875
Girard School District (Erie County, Pennsylvania), General Obligation
Bonds, Series of 1999B:
1,645,000 0.000%, 11/01/26 No Opt. Call AAA 313,060
1,635,000 0.000%, 11/01/28 No Opt. Call AAA 273,650
2,000,000 McKeesport Area School District (Allegheny County, Pennsylvania), 10/06 at 100 AAA 2,131,720
General Obligation Bonds, Series of 1996A, 6.000%, 10/01/25
4,875,000 McKeesport Area School District (Allegheny County, Pennsylvania), No Opt. Call AAA 1,062,311
General Obligation Bonds, Series of 1997D, 0.000%, 10/01/24
2,195,000 Montour School District (Allegheny County, Pennsylvania), General No Opt. Call AAA 966,327
Obligation Bonds, Series B of 1993, 0.000%, 1/01/14
520,000 City of Philadelphia, Pennsylvania, General Obligation Bonds, 3/09 at 101 AAA 443,867
Series 1998, 5.000%, 3/15/28
3,500,000 The School District of Philadelphia, Pennsylvania, General 4/09 at 100 AAA 2,809,450
Obligation Bonds, Series A of 1999, 4.500%, 4/01/23
1,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 7/07 at 100 A 1,379,010
5.375%, 7/01/25
2,000,000 Township of Tredyffrin, Chester County, Pennsylvania, General 11/06 at 100 Aa1 1,837,600
Obligation Bonds, Series of 1996, 5.250%, 11/15/21
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 4.8%
1,390,000 Pennsylvania Intergovernmental Cooperative Authority (City of No Opt. Call AAA 1,541,844
Philadelphia Funding Program), Series of 1994, 7.000%, 6/15/05
3,000,000 Public Auditorium Authority of Pittsburgh and Allegheny County 8/09 at 101 AAA 2,582,400
(Pennsylvania), Hotel Room Excise Tax Revenue Bonds, Series of
1999, 5.125%, 2/01/35
3,000,000 Southeastern Pennsylvania Transportation Authority, Special 3/07 at 102 AAA 2,800,680
Revenue Bonds, Series of 1997, 5.375%, 3/01/22
</TABLE>
19
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Pennsylvania Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation - 5.2%
$ 2,300,000 County of Allegheny, Pennsylvania, Airport Revenue Refunding 1/08 at 101 AAA $ 2,144,796
Bonds, Series 1997A (Pittsburgh International Airport), 5.250%,
1/01/16 (Alternative Minimum Tax)
50,000 Pennsylvania Turnpike Commission, Pennsylvania Turnpike Revenue 12/02 at 102 AAA 48,474
Bonds, Series O of 1992, 5.500%, 12/01/17
3,500,000 Philadelphia, Pennsylvania, Airport Revenue Bonds, Philadelphia 6/07 at 102 AAA 3,164,245
Airport System, Series 1997B, 5.400%, 6/15/27 (Alternative
Minimum Tax)
2,530,000 The Philadelphia Parking Authority, Parking Revenue Bonds, 2/09 at 101 AAA 2,161,227
Series of 1999, 5.000%, 2/01/27 U.S.
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 10.8%
200,000 Allegheny County Hospital Development Authority, Hospital 10/01 at 100 BBB+*** 209,388
Revenue Bonds, Series 1991A (St. Margaret Memorial Hospital),
7.125%, 10/01/21 (Pre-refunded to 10/01/01)
200,000 Butler County Hospital Authority (Pennsylvania), Hospital 6/01 at 102 AAA 211,636
Revenue Bonds, Series 1991A (North Hills Passavant Hospital),
7.000%, 6/01/22 (Pre-refunded to 6/01/01)
2,850,000 Deer Lakes School District (Allegheny County, Pennsylvania), 1/04 at 100 AAA 3,027,983
General Obligation Bonds, Series of 1995, 6.350%, 1/15/14
(Pre-refunded to 1/15/04)
1,320,000 Delaware County Authority, Health Facilities Revenue Bonds, 12/06 at 102 Aaa 1,325,887
Series of 1996 (Mercy Health Corporation of Southeastern
Pennsylvania Obligated Group), 6.000%, 12/15/26
2,000,000 Pennsylvania Economic Development Financing Authority (MacMillan 12/05 at 102 A*** 2,299,360
Bloedel Limited Partnership), 7.600%, 12/01/20 (Alternative
Minimum Tax) (Pre-refunded to 12/01/05)
1,500,000 Pennsylvania Intergovernmental Cooperation Authority, Special 6/05 at 100 AAA 1,663,860
Tax Revenue Bonds (City of Philadelphia Funding Program),
Series of 1994, 7.000%, 6/15/14 (Pre-refunded to 6/15/05)
250,000 Philadelphia Authority for Industrial Development Revenue Bonds, 5/02 at 102 N/R*** 266,553
Series of 1992 (National Board of Medical Examiners Project),
6.750%, 5/01/12 (Pre-refunded to 5/01/02)
650,000 City of Philadelphia, Pennsylvania, Gas Works Revenue Bonds, No Opt. Call AAA 738,004
Twelfth Series B, 7.000%, 5/15/20
450,000 City of Philadelphia, Pennsylvania, Gas Works Revenue Bonds, 7/03 at 102 BBB*** 482,436
Fourteenth Series, 6.375%, 7/01/26 (Pre-refunded to 7/01/03)
2,000,000 Philadelphia Hospitals and Higher Education Facilities No Opt. Call BBB+*** 2,132,360
Authority, Hospital Revenue Refunding Bonds, Pennsylvania
Hospital, 6.250%, 7/01/06
1,450,000 The Philadelphia Municipal Authority, Pennsylvania, Criminal 4/00 at 100 AAA 1,468,531
Justice Center Refunding Revenue Bonds, Series of 1988,
7.800%, 4/01/18 (Pre-refunded to 4/01/00)
500,000 Saint Mary Hospital Authority, Hospital Revenue Bonds, Series 7/02 at 102 AAA 534,125
1992A (Franciscan Health System/Saint Mary Hospital of
Langhorne Inc.), 6.500%, 7/01/12 (Pre-refunded to 7/01/02)
935,000 The Municipal Authority of the Borough of West View (Allegheny No Opt. Call AAA 1,230,554
County, Pennsylvania), Special Obligation Bonds, Series of
1985A, 9.500%, 11/15/14
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 9.1%
2,000,000 Beaver County Industrial Development Authority, Pennsylvania, 6/08 at 102 AAA 1,797,240
Exempt Facilities Revenue Bonds, 1998 Series A (Shippingport
Project), 5.375%, 6/01/28 (Alternative Minimum Tax)
800,000 Greater Lebanon Refuse Authority, Lebanon County, Pennsylvania, 11/02 at 100 A- 828,576
Solid Waste Revenue Bonds, Series of 1992, 7.000%, 11/15/04
1,500,000 Lawrence County Industrial Development Authority Pollution 9/01 at 102 Baa2 1,554,390
Control Revenue Refunding Bonds, Pennsylvania Power Company -
New Castle Project, Series A, 7.150%, 3/01/17
1,610,000 Lehigh County Industrial Development Authority, Pollution 11/02 at 102 AAA 1,654,549
Control Revenue Refunding Bonds, 1992 Series A (Pennsylvania
Power and Light Company Project), 6.400%, 11/01/21
550,000 Lehigh County Industrial Development Authority, Pollution 8/05 at 102 AAA 553,449
Control Revenue Refunding Bonds, 1995 Series A (Pennsylvania
Power and Light Company Project), 6.150%, 8/01/29
950,000 Luzerne County Industrial Development Authority, Exempt Facilities 12/02 at 102 A 1,014,800
Revenue Bonds, 1992 Series B (Pennsylvania Gas and Water Company
Project), 7.125%, 12/01/22 (Alternative Minimum Tax)
1,500,000 Luzerne County Industrial Development Authority, Exempt Facilities 12/04 at 102 AAA 1,640,460
Revenue Refunding Bonds, 1994 Series A (Pennsylvania Gas and Water
Company Project), 7.000%, 12/01/17 (Alternative Minimum Tax)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities (continued)
$ 1,000,000 Northampton County Industrial Development Authority (Pennsylvania), 7/05 at 102 AAA $ 1,011,750
Pollution Control Revenue Refunding Bonds, 1995 Series A
(Metropolitan Edison Company Project), 6.100%, 7/15/21
City of Philadelphia, Pennsylvania, Gas Works Revenue Bonds,
Fourteenth Series:
2,000,000 6.375%, 7/01/14 7/03 at 102 AAA 2,127,620
950,000 6.375%, 7/01/26 7/03 at 102 BBB 941,522
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 1.9%
2,000,000 Allegheny County Sanitary Authority, Pennsylvania, Sewer 12/07 at 102 AAA 1,855,000
Revenue Bonds, Series of 1997, 5.375%, 12/01/24
830,000 South Wayne County Water and Sewer Authority, Pennsylvania, 4/02 at 102 N/R 872,637
Sewer Revenue Bonds, 8.200%, 4/15/13 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
$168,775,000 Total Investments - (cost $147,237,621) - 99.1% 143,674,945
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.9% 1,239,931
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $144,914,876
===================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to
be equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1)
See accompanying notes to financial statements.
21
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Virginia Municipal Bond Fund
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 5.9%
$ 2,500,000 Industrial Development Authority of the County of Bedford, Virginia, 2/08 at 102 Baa2 $ 2,206,675
Industrial Development Refunding Revenue Bonds (Nekoosa Packaging
Corporation), Series 1998, 5.600%, 12/01/25 (Alternative Minimum Tax)
2,000,000 Industrial Development Authority of the County of Bedford, Virginia, 12/09 at 101 Baa2 1,958,700
Industrial Development Refunding Revenue Bonds (Nekoosa Packaging
Corporation), Series 1999, 6.300%, 12/01/25 (Alternative Minimum Tax)
2,000,000 Industrial Development Authority of Covington-Alleghany County, Virginia, 9/04 at 102 A2 2,077,240
Pollution Control Facilities Refunding Revenue Bonds (Westvaco
Corporation Project), Series 1994, 6.650%, 9/01/18
3,545,000 Industrial Development Authority of the Isle of Wight County, Virginia, 4/04 at 102 A1 3,591,227
Solid Waste Disposal Facilities Revenue Bonds (Union Camp Corporation
Project), Series 1994, 6.550%, 4/01/24 (Alternative Minimum Tax)
3,000,000 Industrial Development Authority of the Isle of Wight County, Virginia, 5/07 at 102 BBB+ 2,926,920
Solid Waste Disposal Facilities Revenue Bonds (Union Camp Corporation
Project), Series 1997, 6.100%, 5/01/27 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Goods - 0.8%
2,000,000 Industrial Development Authority of the County of Henrico, Virginia, No Opt. Call BB- 1,727,440
Solid Waste Disposal Revenue Bonds, Series 1996A (Browning-Ferris
Industries of South Atlantic, Inc. Project), 5.450%, 1/01/14
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples - 0.7%
1,500,000 Industrial Development Authority of the County of James City, Virginia, 4/07 at 101 A+ 1,463,490
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 - 9.6%
2,000,000 Industrial Development Authority of the City of Alexandria, Virginia, 1/09 at 101 A1 1,961,620
Educational Facilities Revenue Bonds (Episcopal High School),
Series 1999, 5.875%, 1/01/29
1,000,000 Industrial Development Authority of Arlington County, Virginia, 7/07 at 102 Aa1 931,690
Headquarters Facility Revenue Bonds (The Nature Conservancy),
Series 1997A, 5.450%, 7/01/27
500,000 Medical College of Hampton Roads (Virginia), General Revenue 11/01 at 102 A- 521,905
Refunding Bonds, Series 1991A, 6.875%, 11/15/16
Industrial Development Authority of Loudoun County, Virginia, University
Facilities Revenue Refunding Bonds (The George Washington University),
Series of 1992:
500,000 6.250%, 5/15/12 5/02 at 102 A1 522,245
2,225,000 6.250%, 5/15/22 5/02 at 102 A1 2,233,055
2,000,000 Prince William County Park Authority (Virginia), Park Facilities 10/09 at 101 A3 1,937,240
Revenue Refunding and Improvement Bonds, Series 1999, 6.000%,
10/15/28
1,250,000 Industrial Development Authority of Rockingham County, Virginia, 10/03 at 102 Baa3 1,191,350
Educational Facilities Revenue Bonds (Bridgewater College),
Series 1993, 6.000%, 10/01/23
Staunton Industrial Development Authority, Educational Facilities
Revenue Bonds (Mary Baldwin College):
350,000 5.900%, 11/01/03 No Opt. Call N/R 353,521
370,000 6.000%, 11/01/04 No Opt. Call N/R 373,815
750,000 Virginia College Building Authority, Educational Facilities Revenue 1/02 at 102 AAA 793,635
Refunding Bonds, Washington and Lee University Project, 6.400%,
1/01/12
800,000 Virginia College Building Authority, Educational Facilities Revenue 5/02 at 102 Aa2 854,888
Bonds (Randolph-Macon College Project), Series of 1992, 6.625%,
5/01/13
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations (continued)
$ 2,000,000 Virginia College Building Authority, Educational Facilities 10/02 at 102 BBB+ $ 2,088,320
Revenue Refunding Bonds (Roanoke College Project), 6.625%, 10/15/12
3,250,000 Virginia College Building Authority, Educational Facilities Revenue 4/03 at 102 A+ 3,271,190
Refunding Bonds (Hampton University Project), Series of 1993,
5.750%, 4/01/14
2,000,000 Virginia College Building Authority, Educational Facilities Revenue No Opt. Call AAA 1,790,980
Bonds (The Washington and Lee University Project), Series 1998,
5.250%, 1/01/31
420,000 Virginia College Building Authority, Educational Facilities Revenue 1/04 at 102 AA 425,237
Bonds (The Washington and Lee University Project), Series of 1994,
5.750%, 1/01/14
1,250,000 Virginia College Building Authority, Educational Facilities Revenue 7/08 at 102 AA 1,064,838
and Refunding Bonds (Marymount University Project), Series 1998,
5.125%, 7/01/28
Industrial Development Authority of the City of Winchester (Virginia),
Educational Facilities First Mortgage Revenue Bonds (Shenandoah
University Project), Series 1994:
180,000 6.700%, 10/01/14 10/04 at 102 AA 193,630
95,000 6.750%, 10/01/19 10/04 at 102 AA 100,655
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 11.0%
1,125,000 Industrial Development Authority of Albemarle County, Virginia, 10/02 at 102 N/R 1,201,073
Health Services Revenue Bonds (The University of Virginia Health
Services Foundation), Series 1992, 6.500%, 10/01/22
2,060,000 Industrial Development Authority of Albemarle County, Virginia, 10/03 at 102 A2 2,050,174
Hospital Refunding Revenue Bonds (Martha Jefferson Hospital),
Series 1993, 5.875%, 10/01/13
2,000,000 Industrial Development Authority of Fairfax County, Virginia, 8/06 at 102 AA 1,980,080
Health Care Revenue Bonds (Inova Health System Project),
Series 1996A, 6.000%, 8/15/26
2,000,000 Industrial Development Authority of the City of Fredericksburg, 6/07 at 102 AAA 1,801,640
Virginia, Hospital Facilities Revenue Refunding Bonds (MediCorp
Health System Obligated Group), Series 1996, 5.250%, 6/15/23
1,110,000 The Industrial Development Authority of the County of Giles, 12/05 at 102 A2 1,035,186
Virginia, Exempt Facility Revenue Bonds, Hoechst Celanese Project,
Series 1995, 5.950%, 12/01/25 (Alternative Minimum Tax)
500,000 Industrial Development Authority of the City of Hampton, 11/04 at 102 Aa2 534,400
Virginia, Hospital Revenue and Refunding Bonds (Sentara Hampton
General Hospital), Series 1994A, 6.500%, 11/01/12
3,750,000 Industrial Development Authority of the County of Hanover, Virginia, No Opt. Call AAA 3,971,250
Virginia, Hospital Revenue Bonds, Series 1995 (Memorial Regional
Medical Center Project at Hanover Medical Park - Bon Secours Health
System Obligated Group), 6.375%, 8/15/18
2,000,000 Industrial Development Authority of the County of Hanover, Virginia, 8/05 at 102 AAA 1,865,880
Hospital Revenue Bonds, Series 1995 (Bon Secours Health System
Projects), 5.500%, 8/15/25
1,250,000 Industrial Development Authority of Henry County, Virginia, Hospital 1/07 at 101 A+ 1,213,325
Revenue Bonds (Memorial Hospital of Martinsville and Henry County),
Series 1997, 6.000%, 1/01/27
1,700,000 Industrial Development Authority of Loudoun County, Virginia, 6/05 at 102 AAA 1,671,015
Hospital Revenue Bonds (Loudoun Hospital Center), Series 1995,
5.800%, 6/01/20
Industrial Development Authority of the City of Lynchburg, Virginia,
Healthcare Facilities Revenue and Refunding Bonds (Centra Health),
Series 1998:
1,000,000 5.200%, 1/01/23 1/08 at 101 A+ 872,190
3,000,000 5.200%, 1/01/28 1/08 at 101 A+ 2,577,210
1,900,000 Medical College of Virginia Hospitals Authority, General Revenue 7/08 at 102 AAA 1,679,543
Bonds, Series 1998, 5.125%, 7/01/23
1,000,000 Industrial Development Authority of the City of Norfolk (Virginia), 8/07 at 102 AAA 892,770
Health Care Revenue Bonds, Series 1997 (Bon Secours Health System),
5.250%, 8/15/26
400,000 Richmond Industrial Development Authority, Medical Facility Revenue 2/00 at 100 AA- 401,732
Bonds, Richmond Metropolitan Blood Service, 7.125%, 2/01/11
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 5.1%
1,200,000 Fairfax County Redevelopment and Housing Authority, FHA-Insured 9/06 at 102 AAA 1,200,672
Mortgage Housing for the Elderly Revenue Refunding Bonds,
Series 1996 (Little River Glen), 6.100%, 9/01/26
3,665,000 Economic Development Authority of Henrico County, Virginia, Beth 7/09 at 102 AAA 3,538,118
Sholom Assisted Living Revenue Bonds, GNMA Mortgage Backed
Securities Financing, Series 1999A, 6.000%, 7/20/39
</TABLE>
23
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Virginia Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 2,000,000 Newport News Redevelopment and Housing Authority, Mortgage 1/02 at 102 AAA $2,038,320
Revenue Refunding Bonds, West Apartments, Series A, 6.550%, 7/01/24
480,000 Suffolk Redevelopment and Housing Authority, Multifamily 7/02 at 104 Baa2 506,424
Housing Revenue Refunding Bonds, Series 1994 (Chase Heritage at
Dulles Project), 7.000%, 7/01/24 (Mandatory put 7/01/04)
3,000,000 City of Virginia Beach Development Authority, Multifamily 10/14 at 100 N/R 2,965,800
Housing Revenue Bonds (Residential Rental Hamptons Project),
Series 1999, 7.500%, 10/01/39
700,000 Virginia State Housing Development Authority, Multifamily 5/01 at 102 AA+ 725,123
Housing Bonds, Series 1991F, 7.000%, 5/01/04
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 7.4%
110,000 Puerto Rico Housing Finance Corporation, Single Family 9/00 at 102 AAA 113,405
Mortgage Revenue, Portfolio 1, Series B, 7.650%, 10/15/22
Virginia Housing Development Authority, Commonwealth Mortgage
Bonds, 1992 Series A:
3,000,000 7.100%, 1/01/17 1/02 at 102 AA+ 3,080,730
1,000,000 7.100%, 1/01/22 1/02 at 102 AA+ 1,023,300
3,170,000 7.150%, 1/01/33 1/02 at 102 AA+ 3,255,527
1,000,000 Virginia State Housing Development Authority, Commonwealth 7/05 at 102 AA+ 1,011,940
Mortgage Bonds, Series C1, 6.300%, 7/01/25 (Alternative Minimum Tax)
2,000,000 Virginia State Housing Development Authority, Commonwealth 7/05 at 102 AA+ 2,014,920
Mortgage Bonds, Series C3, 6.125%, 7/01/22 (Alternative Minimum Tax)
6,000,000 Virginia State Housing Development Authority, Commonwealth 1/08 at 102 AA+ 5,368,020
Mortgage Bonds, 1996 Series G, Subseries G-1, 5.300%, 1/01/22
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 2.2%
715,000 Industrial Development Authority of Albemarle County, 1/01 at 103 N/R 752,144
Virginia, Mortgage Revenue Refunding Bonds, Series 1986A
(FHA-Insured Project), 8.900%, 7/15/26
1,000,000 Health Center Commission for the County of Chesterfield 12/06 at 102 AAA 978,270
(Virginia), Mortgage Revenue Bonds (GNMA Collateralized - Lucy
Corr Nursing Home Project), Series 1996, 5.875%, 12/01/21
500,000 Fairfax County Redevelopment and Housing Authority, Multifamily 12/06 at 103 AAA 497,260
Housing Revenue Refunding Bonds (FHA-Insured Mortgage Loan -
Paul Spring Retirement Center), Series 1996A, 6.000%, 12/15/28
500,000 Front Royal and Warren County, Industrial Development 1/00 at 106 A 536,835
Authority, Revenue Bonds (Heritage Hall XIII), Series 1986,
9.450%, 7/15/24
1,190,000 Industrial Development Authority of the County of Henrico, 7/03 at 102 AAA 1,173,602
Virginia, Nursing Facility Insured-Mortgage Refunding Revenue
Bonds (Cambridge Manor Nursing Home), Series 1993, 5.875%, 7/01/19
1,000,000 Northern Virginia Health Center Commission, Nursing Home 7/08 at 102 AAA 854,130
Mortgage Revenue Refunding Bonds (Birmingham Green Project), Series
1998, 5.000%, 7/01/28
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 6.5%
1,500,000 City of Portsmouth, Virginia, General Obligation Bonds, Public 8/03 at 102 AA- 1,441,530
Utility Refunding Bonds,
Series 1993, 5.500%, 8/01/19
500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1996 7/06 at 101 1/2 A 461,295
(General Obligation Bonds), 5.400%, 7/01/25
1,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997 7/07 at 100 A 1,379,010
(General Obligation Bonds), 5.375%, 7/01/25
Commonwealth of Puerto Rico, Public Improvement Bonds of 1994 (General
Obligation Bonds):
2,575,000 6.450%, 7/01/17 7/04 at 102 AAA 2,819,651
2,500,000 6.500%, 7/01/23 7/04 at 101 1/2 AAA 2,742,650
3,005,000 City of Richmond, Virginia, General Obligation Public 7/03 at 102 AA 2,843,481
Improvement Bonds, Series 1993B, 5.500%, 7/15/23
Virginia Public School Authority, School Financing Bonds (1991
Resolution), Series 1995B:
1,000,000 5.750%, 8/01/15 8/05 at 102 AA 1,009,470
1,210,000 5.625%, 8/01/16 8/05 at 102 AA 1,203,430
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited - 11.2%
$ 2,300,000 Big Stone Gap Redevelopment and Housing Authority, 9/05 at 102 AA $ 2,248,871
Commonwealth of Virginia, Correctional Facility Lease Revenue Bonds
(Wallens Ridge Development Project), Series 1995, 5.500%, 9/01/15
3,000,000 Industrial Development Authority of Brunswick County, 7/06 at 102 AAA 2,919,150
Virginia, Correctional Facility Lease Revenue Bonds, Series 1996,
5.500%, 7/01/17
860,000 Fairfax County Economic Development Authority (Virginia), 9/09 at 102 AA 874,783
Parking Revenue Bonds (Vienna II Metrorail Station Project), 1999
First Series, 6.000%, 9/01/18
5,000,000 Hampton Roads Regional Jail Authority, Regional Jail 7/06 at 102 AAA 4,720,250
Facility Revenue Bonds, Series 1996A, 5.500%, 7/01/24
2,000,000 Industrial Development Authority of the County of Henrico, 8/05 at 102 AA 2,252,380
Virginia, Public Facility Lease Revenue Bonds (Henrico County
Regional Jail Project), Series 1994, 7.000%, 8/01/13
750,000 Loudoun County, Virginia, Certificates of Participation, No Opt. Call AAA 849,818
Series E, 7.200%, 10/01/10
675,000 Norfolk Redevelopment and Housing Authority (Virginia), 11/09 at 102 AA 648,533
Educational Facility Revenue Bonds (State Board for Community
Colleges - Tidewater Community College Downtown Campus),
Series of 1999, 5.500%, 11/01/19
1,500,000 Peninsula Airport Commission, Virginia, Airport Improvement, 7/01 at 102 AA 1,587,675
7.300%, 7/15/21 (Alternative Minimum Tax)
Prince William County Industrial Development Authority,
Lease Revenue, ATCC Project:
2,000,000 6.000%, 2/01/14 2/06 at 102 A2 1,964,840
1,000,000 6.000%, 2/01/18 2/06 at 102 A2 960,610
2,250,000 Puerto Rico Highway and Transportation Authority, Highway 7/16 at 100 A 2,076,458
Revenue Bonds, Series Y of 1996, 5.500%, 7/01/36
1,000,000 Virgin Islands Public Finance Authority, Revenue Bonds 10/10 at 101 BBB- 1,004,800
(Virgin Islands Gross Receipts Taxes Loan Note), Series 1999A,
6.500%, 10/01/24
1,000,000 Commonwealth Transportation Board, Commonwealth of Virginia, 5/07 at 101 AA 911,740
Transportation Revenue Refunding Bonds, Series 1997C (U.S. Route 58
Corridor Development Program), 5.125%, 5/15/19
1,000,000 Virginia Public School Authority, School Financing Bonds, 8/04 at 102 AA 1,062,850
Series 1994A, 6.200%, 8/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 8.7%
2,250,000 Capital Region Airport Commission, Richmond (Virginia), 7/05 at 102 AAA 2,155,815
International Airport Projects, Airport Revenue Bonds, Series 1995A,
5.625%, 7/01/25
750,000 Charlottesville-Albemarle Airport Authority (Virginia), 12/05 at 102 BBB 752,903
Airport Revenue Refunding Bonds, Series 1995, 6.125%, 12/01/13
(Alternative Minimum Tax)
1,250,000 City of Chesapeake, Virginia, Chesapeake Expressway Toll 7/09 at 101 Baa2 1,190,038
Road Revenue Bonds, Series 1999A, 5.625%, 7/15/19
Loudoun County Industrial Development Authority, Air Cargo Facility
Revenue Bonds, Washington Dulles Air Cargo:
110,000 6.625%, 1/01/00 (Alternative Minimum Tax) No Opt. Call N/R 110,059
3,000,000 7.000%, 1/01/09 (Alternative Minimum Tax) 1/01 at 102 N/R 3,039,840
600,000 6.500%, 1/01/09 (Alternative Minimum Tax) 1/06 at 102 N/R 598,938
1,000,000 Metropolitan Washington Airports Authority, Airport System Revenue 10/04 at 102 AAA 969,820
Bonds, Series 1994A, 5.750%, 10/01/20 (Alternative Minimum Tax)
770,000 Metropolitan Washington D.C. Apartments Authority, Virginia, 10/07 at 101 AA- 715,469
General Airport Revenue Bonds, Series B, 5.500%, 10/01/23
(Alternative Minimum Tax)
Pocahontas Parkway Association, Route 895 Connector Toll Road Revenue
Bonds, Senior Current Interest, Series 1998A:
5,000,000 0.000%, 8/15/16 8/08 at 64 13/16 BBB- 1,610,950
5,500,000 5.500%, 8/15/28 8/08 at 102 BBB- 4,721,695
1,900,000 Puerto Rico Ports Authority, Special Facilities Revenue Bonds, 6/06 at 102 BBB- 1,907,315
1996 Series A (American Airlines, Inc. Project), 6.250%, 6/01/26
(Alternative Minimum Tax)
1,000,000 Virginia Port Authority, Port Facilities Revenue Bonds, 7/07 at 101 AAA 924,630
Series 1997, 5.500%, 7/01/24 (Alternative Minimum Tax)
</TABLE>
25
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Virginia Municipal Bond Fund (continued)
November 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed - 14.6%
$ 1,000,000 Town of Abingdon, Virginia, General Obligation Capital Improvement Bonds, 8/02 at 102 A2*** $ 1,065,290
Series 1992, 6.250%, 8/01/12 (Pre-refunded to 8/01/02)
1,000,000 Blacksburg-Virginia Polytechnic Institute Sanitation Authority 11/02 at 102 A*** 1,067,030
(Virginia), Sewer System Revenue Bonds, Series of 1992, 6.250%, 11/01/12
(Pre-refunded to 11/01/02)
750,000 Chesapeake Bay Bridge and Tunnel District, General Resolution 7/01 at 102 AAA 788,610
Revenue Refunding Bonds, Series 1991, 6.375%, 7/01/22
(Pre-refunded to 7/01/01)
1,000,000 Industrial Development Authority of Covington-Alleghany County, 4/02 at 102 N/R*** 1,063,540
Virginia, Hospital Facility Revenue Bonds (Alleghany Regional Hospital),
Series 1992, 6.625%, 4/01/12 (Pre-refunded to 4/01/02)
730,000 City of Danville, Virginia, General Improvement Bonds of Fiscal 5/02 at 102 A3*** 778,012
Year 1991-1992, 6.500%, 5/01/12 (Pre-refunded to 5/01/02)
1,325,000 Fairfax County Redevelopment and Housing Authority (Virginia), Revenue 6/02 at 102 N/R*** 1,447,417
Bonds, 1992 Issue A, 7.500%, 6/15/18 (Pre-refunded to 6/15/02)
150,000 Fairfax County Water Authority, Water Refunding Revenue Bonds, 4/07 at 102 AAA 162,788
Series 1992, 6.000%, 4/01/22 (Pre-refunded to 4/01/07)
995,000 Henrico County, Virginia, Water and Sewer System Refunding Revenue 5/02 at 100 Aa2*** 1,036,880
Bonds, Series 1992, 6.250%, 5/01/13 (Pre-refunded to 5/01/02)
250,000 Martinsville Industrial Development Authority, Hospital Facility Revenue 1/01 at 100 A2*** 256,983
Bonds, Memorial Hospital of Martinsville and Henry), 7.000%, 1/01/11
(Pre-refunded to 1/01/01)
2,000,000 Peninsula Ports Authority, Virginia, Health Care Facilities Revenue 8/06 at 100 BBB+*** 2,218,920
Refunding Bonds, Mary Immaculate Project, 7.000%, 8/01/17
(Pre-refunded to 8/01/06)
2,080,000 Peninsula Ports Authority, Virginia, Health System Revenue and Refunding 7/02 at 102 Aa2*** 2,227,701
Bonds (Riverside Health System Project), Series 1992-A, 6.625%, 7/01/18
(Pre-refunded to 7/01/02)
3,250,000 Industrial Development Authority of the County of Prince William 10/05 at 102 Aaa 3,653,585
(Virginia), Hospital Facility Revenue Bonds (Potomac Hospital
Corporation of Prince William), Series 1995, 6.850%, 10/01/25
(Pre-refunded to 10/01/05)
2,500,000 Prince William County Park Authority (Virginia), Revenue Bonds, 10/04 at 102 BBB+*** 2,773,550
Series 1994, 6.875%, 10/15/16 (Pre-refunded to 10/15/04)
1,000,000 Prince William County Service Authority (Virginia), Water and 7/01 at 100 AAA 1,027,070
Sewer System Revenue Bonds, Series 1991, 6.000%, 7/01/29
(Pre-refunded to 7/01/01)
1,500,000 Richmond Redevelopment and Housing Authority, Project Revenue 3/05 at 102 AAA 1,663,365
Bonds (1994 Old Manchester Project), Series 1994, 6.800%,
3/01/15 (Pre-refunded to 3/01/05)
2,260,000 City of Virginia Beach Development Authority (Virginia), 11/01 at 102 AA*** 2,385,046
Hospital Revenue Bonds (Sentara Bayside Hospital), Series 1991,
6.300%, 11/01/21 (Pre-refunded to 11/01/01)
Virginia College Building Authority, Educational Facilities
Revenue Bonds, Marymount University Project:
1,000,000 7.000%, 7/01/12 (Pre-refunded to 7/01/02) 7/02 at 102 N/R*** 1,078,290
1,400,000 7.000%, 7/01/22 (Pre-refunded to 7/01/02) 7/02 at 102 N/R*** 1,509,606
Virginia College Building Authority, Educational Facilities Revenue Bonds
(The Washington and Lee University Project), Series of 1994:
580,000 5.750%, 1/01/14 (Pre-refunded to 1/01/04) 1/04 at 102 AAA 613,640
1,000,000 5.800%, 1/01/24 (Pre-refunded to 1/01/04) 1/04 at 102 AAA 1,059,840
1,000,000 Virginia Resources Authority, Water and Sewer System Revenue Bonds, 10/07 at 100 AA*** 1,046,020
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 (Virginia),
Educational Facilities First Mortgage Revenue Bonds (Shenandoah University
Project), Series 1994:
1,620,000 6.700%, 10/01/14 (Pre-refunded to 10/01/04) 10/04 at 102 AA*** 1,787,054
680,000 6.750%, 10/01/19 (Pre-refunded to 10/01/04) 10/04 at 102 AA*** 751,577
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 5.5%
2,110,000 Halifax County Industrial Development Authority (Old Dominion 12/02 at 102 A+ 2,172,688
Electric Cooperative), 6.500%, 12/01/12 (Alternative Minimum Tax)
2,500,000 Mecklenburg County Industrial Development Authority, Exempt Facility, 5/01 at 102 Aa3 2,566,800
Mecklenburg Cogeneration Project, Series 1991A, 7.350%, 5/01/08
(Alternative Minimum Tax)
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities (continued)
$ 1,750,000 City of Richmond, Virginia, Public Utility Revenue and 1/08 at 101 A+ $ 1,520,715
Refunding Bonds, Series 1998A, 5.125%, 1/15/28
1,000,000 Industrial Development Authority of Russell County, Virginia, 11/00 at 102 Baa1 1,037,600
Pollution Control Revenue Bonds (Appalachian Power Company
Project), Series G, 7.700%, 11/01/07
1,500,000 Southeastern Public Service Authority of Virginia, Senior 7/03 at 102 A- 1,483,455
Revenue Bonds, Series 1993 (Regional Solid Waste System),
6.000%, 7/01/13 (Alternative Minimum Tax)
1,000,000 Virginia State Resource Authority, Solid Waste Disposal 11/02 at 102 AA 1,069,190
System Revenue, Series B, 6.750%, 11/01/12
1,960,000 Virginia Resources Authority, Solid Waste Disposal System 4/05 at 102 AA 1,905,473
Revenue Bonds (County of Prince William, Virginia - Refunding),
1995 Series A, 5.500%, 4/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 9.0%
1,000,000 Fairfax County Water Authority (Virginia), Water Refunding No Opt. Call AA 895,400
Revenue Bonds, Series 1997, 5.000%, 4/01/21
Fairfax County (Virginia), Water Authority, Water Refunding
Revenue Bonds, Series 1992:
850,000 6.000%, 4/01/22 4/07 at 102 AA 857,956
1,625,000 5.750%, 4/01/29 4/02 at 100 AA 1,583,303
1,000,000 Frederick-Winchester Service Authority (Virginia), Regional 10/03 at 102 AAA 1,007,050
Sewer System Refunding Revenue Bonds, Series 1993, 5.750%, 10/01/15
1,505,000 Henrico County, Virginia, Water and Sewer System Refunding 5/02 at 100 Aa2 1,545,394
Revenue Bonds, Series 1992, 6.250%, 5/01/13
2,000,000 Leesburg, Virginia, Utility System Revenue Refunding Bonds, 7/07 at 102 AAA 1,790,860
5.125%, 7/01/22
1,000,000 Loudoun County Sanitation Authority (Virginia), Water and 1/03 at 102 AAA 1,039,830
Sewer System Revenue Bonds, Refunding Series 1992, 6.250%, 1/01/16
1,000,000 Loudoun County Sanitation Authority (Virginia), Water and 1/07 at 102 AAA 883,630
Sewer System Revenue Bonds, Refunding Series 1996, 5.125%, 1/01/26
2,500,000 Loudoun County Sanitation Authority (Virginia), Water and 1/09 at 102 AAA 2,044,700
Sewer System Revenue Bonds, Series 1998, 4.750%, 1/01/30
1,500,000 Prince William County Service Authority (Virginia), Water and 7/08 at 101 AAA 1,228,453
Sewer System Refunding Revenue Bonds, Series 1997, 4.750%, 7/01/29
3,500,000 Upper Occoquan Sewage Authority (Virginia), Regional Sewerage 1/04 at 102 AAA 3,096,660
System Revenue Refunding Bonds, Series of 1993, 5.000%, 7/01/21
1,000,000 Virginia Resources Authority, Sewer System Revenue Bonds, 10/05 at 102 AA 986,340
1995 Series A (Hopewell Regional Wastewater Treatment Facility
Project), 6.000%, 10/01/25 (Alternative Minimum Tax)
1,000,000 Virginia Resources Authority, Clean Water State Revolving 10/10 at 100 AAA 969,060
Fund Revenue Bonds, Series 1999, 5.625%, 10/01/22
1,500,000 Virginia Resources Authority, Water System Refunding Revenue 4/02 at 100 AA 1,509,550
Bonds, 1992 Series A, 6.125%, 4/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
$217,635,000 Total Investments - (cost $209,979,460) - 98.2% 211,280,182
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.8% 3,913,140
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $215,193,322
===================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
27
<PAGE>
Statement of Net Assets (Unaudited)
November 30, 1999
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $72,807,358 $143,674,945 $211,280,182
Cash -- 1,469,992 --
Receivables:
Interest 1,510,844 2,585,549 3,906,868
Investments sold 990,704 27,980 2,262,694
Shares sold 1,014,498 25,000 103,105
Other assets 61,643 150,379 157,746
- -----------------------------------------------------------------------------------------------------------------
Total assets 76,385,047 147,933,845 217,710,595
- -----------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft 1,193,318 -- 1,479,637
Payables:
Investments purchased 1,251,972 2,304,094 --
Shares redeemed 25,981 323,883 457,412
Accrued expenses:
Management fees (note 6) 32,949 65,728 96,689
12b-1 distribution and service fees (notes 1 and 6) 10,382 25,734 41,177
Other 24,522 26,070 38,027
Dividends payable 189,005 273,460 404,331
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 2,728,129 3,018,969 2,517,273
- -----------------------------------------------------------------------------------------------------------------
Net assets (note 7) $73,656,918 $144,914,876 $215,193,322
=================================================================================================================
Class A Shares (note 1)
Net assets $22,473,431 $ 67,890,346 $134,220,462
Shares outstanding 2,301,413 6,989,611 13,036,857
Net asset value and redemption price per share $ 9.77 $ 9.71 $ 10.30
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 10.20 $ 10.14 $ 10.75
=================================================================================================================
Class B Shares (note 1)
Net assets $ 4,802,149 $ 8,688,547 $ 11,572,736
Shares outstanding 491,160 892,803 1,124,784
Net asset value, offering and redemption price per share $ 9.78 $ 9.73 $ 10.29
=================================================================================================================
Class C Shares (note 1)
Net assets $ 5,780,738 $ 12,603,426 $ 16,634,069
Shares outstanding 591,903 1,299,213 1,616,950
Net asset value, offering and redemption price per share $ 9.77 $ 9.70 $ 10.29
=================================================================================================================
Class R Shares (note 1)
Net assets $40,600,600 $ 55,732,557 $ 52,766,055
Shares outstanding 4,148,207 5,741,290 5,128,747
Net asset value, offering and redemption price per share $ 9.79 $ 9.71 $ 10.29
=================================================================================================================
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended November 30, 1999
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $ 2,127,536 $ 4,473,103 $ 6,493,943
- -------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 203,346 409,907 597,928
12b-1 service fees - Class A (notes 1 and 6) 21,984 69,723 136,980
12b-1 distribution and service fees - Class B (notes 1 and 6) 23,528 40,837 52,740
12b-1 distribution and service fees - Class C (notes 1 and 6) 18,619 49,237 63,784
Shareholders' servicing agent fees and expenses 35,213 60,371 74,706
Custodian's fees and expenses 30,381 42,014 43,980
Trustees' fees and expenses (note 6) 1,223 2,168 2,884
Professional fees 2,811 5,761 12,370
Shareholders' reports - printing and mailing expenses 26,897 23,839 33,592
Federal and state registration fees 4,237 3,377 209
Other expenses 1,638 5,021 8,538
- -------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 369,877 712,255 1,027,711
Custodian fee credit (note 1) (11,263) (6,893) (11,034)
Expense reimbursement (note 6) (4,922) (30,869) --
- -------------------------------------------------------------------------------------------------------------------
Net expenses 353,692 674,493 1,016,677
- -------------------------------------------------------------------------------------------------------------------
Net investment income 1,773,844 3,798,610 5,477,266
- -------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (notes 1 and 4) 243,099 (839,420) (1,421,222)
Net change in unrealized appreciation or depreciation of investments (5,316,707) (10,154,028) (11,889,664)
- -------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (5,073,608) (10,993,448) (13,310,886)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $(3,299,764) $ (7,194,838) $ (7,833,620)
===================================================================================================================
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Maryland
------------------------------
Six Months Ended Year Ended
11/30/99 5/31/99
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 1,773,844 $ 3,372,749
Net realized gain (loss) from investment transactions (notes 1 and 4) 243,099 571,636
Net change in unrealized appreciation or depreciation
of investments (5,316,707) (1,379,409)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (3,299,764) 2,564,976
- -------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (532,151) (887,278)
Class B (98,997) (136,626)
Class C (103,988) (133,784)
Class R (1,053,333) (2,124,331)
From accumulated net realized gains from investment transactions:
Class A -- --
Class B -- --
Class C -- --
Class R -- --
- -------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (1,788,469) (3,282,019)
- -------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 7,723,612 12,748,209
Net proceeds from shares issued to shareholders due
to reinvestment of distributions 1,089,341 2,071,522
- -------------------------------------------------------------------------------------------------------
8,812,953 14,819,731
Cost of shares redeemed (5,392,079) (5,741,563)
- -------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 3,420,874 9,078,168
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (1,667,359) 8,361,125
Net assets at the beginning of period 75,324,277 66,963,152
- -------------------------------------------------------------------------------------------------------
Net assets at the end of period $73,656,918 $75,324,277
=======================================================================================================
Balance of undistributed net investment
income at the end of period $ 94,162 $ 108,787
=======================================================================================================
</TABLE>
See accompanying notes to financial statements.
30
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania Virginia
------------------------------- -------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
11/30/99 5/31/99 11/30/99 5/31/99
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 3,798,610 $ 7,397,713 $ 5,477,266 $ 10,539,789
Net realized gain (loss) from investment transactions (notes 1
and 4) (839,420) 395,831 (1,421,222) 944,358
Net change in unrealized appreciation or depreciation
of investments (10,154,028) (2,967,385) (11,889,664) (3,060,934)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (7,194,838) 4,826,159 (7,833,620) 8,423,213
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,768,373) (3,437,714) (3,395,564) (6,603,088)
Class B (184,500) (227,324) (230,874) (288,055)
Class C (298,287) (503,249) (373,402) (739,016)
Class R (1,535,611) (3,234,496) (1,414,281) (2,930,514)
From accumulated net realized gains from investment
transactions:
Class A -- (380,650) -- (354,974)
Class B -- (30,257) -- (18,678)
Class C -- (63,063) -- (44,664)
Class R -- (342,018) -- (150,604)
- ----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (3,786,771) (8,218,771) (5,414,121) (11,129,593)
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 11,741,743 26,410,992 18,484,561 33,800,119
Net proceeds from shares issued to shareholders due
to reinvestment of distributions 1,659,084 3,885,514 2,329,562 5,206,747
- ----------------------------------------------------------------------------------------------------------------------------------
13,400,827 30,296,506 20,814,123 39,006,866
Cost of shares redeemed (10,546,733) (12,419,924) (16,140,105) (24,787,027)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 2,854,094 17,876,582 4,674,018 14,219,839
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (8,127,515) 14,483,970 (8,573,723) 11,513,459
Net assets at the beginning of period 153,042,391 138,558,421 223,767,045 212,253,586
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $144,914,876 $153,042,391 $215,193,322 $223,767,045
==================================================================================================================================
Balance of undistributed net investment
income at the end of period $ 12,956 $ 1,117 $ 66,410 $ 3,265
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust I (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Maryland Municipal Bond Fund ("Maryland"), the Nuveen
Flagship Pennsylvania Municipal Bond Fund ("Pennsylvania") and the Nuveen
Flagship Virginia Municipal Bond Fund ("Virginia") (collectively, the "Funds"),
among others. The Trust was organized as a Massachusetts business trust on July
1, 1996.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
November 30, 1999, Maryland and Pennsylvania had outstanding when-issued
purchase commitments of $1,251,972 and $2,304,094, respectively. There were no
such outstanding purchase commitments in Virginia.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, the Funds intend to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain
such tax-exempt status when distributed to shareholders of the Funds. 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 six months ended November 30, 1999.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
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 generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Maryland
---------------------------------------------------
Six Months Ended 11/30/99 Year Ended 5/31/99
------------------------- -----------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 338,542 $ 3,388,802 577,632 $ 6,112,774
Class B 100,292 1,017,252 235,116 2,495,746
Class C 258,051 2,576,581 187,416 1,988,761
Class R 73,748 740,977 203,056 2,150,928
Shares issued to shareholders due to reinvestment of distributions:
Class A 34,384 347,080 57,622 611,952
Class B 4,250 42,913 5,480 58,201
Class C 5,363 54,130 8,572 91,026
Class R 63,762 645,218 123,134 1,310,343
- ---------------------------------------------------------------------------------------------------------------------------
878,392 8,812,953 1,398,028 14,819,731
- ---------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (183,502) (1,830,574) (173,380) (1,842,288)
Class B (65,484) (652,330) (9,376) (99,303)
Class C (62,473) (619,453) (51,865) (546,993)
Class R (225,992) (2,289,722) (305,927) (3,252,979)
- ---------------------------------------------------------------------------------------------------------------------------
(537,451) (5,392,079) (540,548) (5,741,563)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase 340,941 $ 3,420,874 857,480 $ 9,078,168
===========================================================================================================================
</TABLE>
33
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
<TABLE>
<CAPTION>
Pennsylvania
-----------------------------------------------------
Six Months Ended 11/30/99 Year Ended 5/31/99
------------------------- -------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 716,995 $ 7,179,320 1,042,066 $ 11,085,436
Class B 182,210 1,839,877 556,149 5,925,032
Class C 156,681 1,587,796 466,677 4,965,788
Class R 113,481 1,134,750 417,495 4,434,736
Shares issued to shareholders due to reinvestment of distributions:
Class A 58,122 585,163 127,403 1,358,196
Class B 4,763 47,969 6,887 73,512
Class C 6,939 69,726 14,586 155,250
Class R 95,013 956,226 215,836 2,298,556
- -----------------------------------------------------------------------------------------------------------------------------
1,334,204 13,400,827 2,847,099 30,296,506
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (566,309) (5,644,802) (549,431) (5,838,055)
Class B (54,979) (544,273) (48,814) (522,051)
Class C (125,898) (1,249,957) (54,534) (578,008)
Class R (311,681) (3,107,701) (516,487) (5,481,810)
- -----------------------------------------------------------------------------------------------------------------------------
(1,058,867) (10,546,733) (1,169,266) (12,419,924)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase 275,337 $ 2,854,094 1,677,833 $ 17,876,582
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Virginia
-----------------------------------------------------
Six Months Ended 11/30/99 Year Ended 5/31/99
------------------------- -------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,292,071 $ 13,592,514 1,781,027 $ 19,736,719
Class B 215,652 2,281,751 605,747 6,716,554
Class C 134,252 1,416,950 421,265 4,668,341
Class R 112,700 1,193,346 241,908 2,678,505
Shares issued to shareholders due to reinvestment of distributions:
Class A 120,823 1,279,925 261,217 2,903,901
Class B 9,588 101,308 14,259 158,363
Class C 10,183 107,884 23,019 255,663
Class R 79,367 840,445 169,963 1,888,820
- -----------------------------------------------------------------------------------------------------------------------------
1,974,636 20,814,123 3,518,405 39,006,866
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,083,698) (11,342,100) (1,444,306) (16,020,885)
Class B (54,142) (568,337) (18,515) (205,614)
Class C (145,722) (1,541,229) (242,411) (2,672,615)
Class R (254,378) (2,688,439) (531,239) (5,887,913)
- -----------------------------------------------------------------------------------------------------------------------------
(1,537,940) (16,140,105) (2,236,471) (24,787,027)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase 436,696 $ 4,674,018 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 December 20, 1999, to shareholders of record on
December 9, 1999, as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $.0405 $.0420 $.0435
Class B .0340 .0360 .0370
Class C .0360 .0375 .0390
Class R .0420 .0435 .0455
================================================================================
</TABLE>
34
<PAGE>
The Funds also declared taxable distributions which include capital gains and/or
market discount, which were paid on December 7, 1999, to shareholders of record
on December 2, 1999, as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxable distributions per shares $ .0403 $ .0250 $ .0079
===============================================================================
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the six months ended November
30, 1999, were as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Long-term municipal securities $10,315,143 $ 17,367,638 $ 26,440,422
Short-term municipal securities 4,000,000 800,000 3,500,000
Sales:
Long-term municipal securities 5,276,313 15,120,847 22,434,471
Short-term municipal securities 4,000,000 800,000 3,500,000
===============================================================================
</TABLE>
At November 30, 1999, the identified cost of investments owned for federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
$75,455,244 $147,237,621 $210,001,890
===============================================================================
</TABLE>
At May 31, 1999, the Funds' last fiscal year end, Maryland had an unused capital
loss carryforward of $22,799 available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, the carryforward
will expire in the year 2005.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at November 30, 1999, were as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $ 1,064,564 $ 3,234,784 $ 6,644,077
depreciation (3,712,450) (6,797,460) (5,365,785)
- ------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) $(2,647,886) $(3,562,676) $ 1,278,292
==========================================================================================
</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 (Unaudited) (continued)
During the six months ended November 30, 1999, John Nuveen & Co. Incorporated
(the "Distributor"), a wholly owned subsidiary of The John Nuveen Company,
collected sales charges on purchases of Class A Shares, the majority of which
were paid out as concessions to authorized dealers as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales charges collected $ 25,800 $ 67,001 $ 88,684
Paid to authorized dealers 21,801 67,001 80,172
===============================================================================
</TABLE>
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the six months ended November 30, 1999, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Commission advances $ 66,061 $ 122,244 $ 96,058
===============================================================================
</TABLE>
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees 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 six months ended November
30, 1999, the Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 fees retained $ 27,281 $ 47,400 $ 57,030
===============================================================================
</TABLE>
The remaining 12b-1 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
six months ended November 30, 1999, as follows:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
CDSC retained $ 20,475 $ 11,874 $ 14,203
===============================================================================
</TABLE>
7. Composition of Net Assets
At November 30, 1999, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Maryland Pennsylvania Virginia
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $75,990,343 $148,932,311 $215,105,355
Balance of undistributed net investment income 94,162 12,956 66,410
Accumulated net realized gain (loss) from investment transactions 220,299 (467,715) (1,279,165)
Net unrealized appreciation (depreciation) of investments (2,647,886) (3,562,676) 1,300,722
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets $73,656,918 $144,914,876 $215,193,322
===================================================================================================================================
</TABLE>
36
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
---------------------------------- ---------------------------
MARYLAND Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (Loss) Total Income Gains Total Value Return(a)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 (h) $10.46 $.24 $ (.69) $(.45) $(.24) $ -- $(.24) $ 9.77 (4.30)%
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
1995 (f) 9.84 .20 (.23) (.03) (.21) -- (.21) 9.60 (.26)
Class B (3/97)
2000 (h) 10.47 .20 (.69) (.49) (.20) -- (.20) 9.78 (4.67)
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 (g) 10.29 .10 (.04) .06 (.10) -- (.10) 10.25 .83
Class C (9/94)
2000 (h) 10.46 .21 (.69) (.48) (.21) -- (.21) 9.77 (4.58)
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
1995 (f) 9.75 .16 (.15) .01 (.17) -- (.17) 9.59 .12
Class R (12/91)
2000 (h) 10.48 .25 (.69) (.44) (.25) -- (.25) 9.79 (4.21)
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
1995 (e) 10.62 .51 (1.01) (.50) (.51) -- (.51) 9.61 (4.58)
================================================================================================================
</TABLE>
<TABLE>
<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
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 (9/94)
2000 (h) $22,473 1.02%* 4.71%* 1.01%* 4.73%* .98%* 4.76%* 7%
1999 22,093 1.04 4.55 .95 4.64 .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
1995 (f) 1,605 1.59* 4.67* 1.00* 5.26* 1.00* 5.26* 35
Class B (3/97)
2000 (h) 4,802 1.77* 3.97* 1.76* 3.98* 1.73* 4.01* 7
1999 4,732 1.80 3.81 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 (g) 150 1.76* 3.94* 1.70* 4.00* 1.70* 4.00* 3
Class C (9/94)
2000 (h) 5,781 1.57* 4.18* 1.56* 4.19* 1.53* 4.22* 7
1999 4,089 1.59 4.01 1.50 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
1995 (f) 860 1.86* 4.44* 1.75* 4.55* 1.75* 4.55* 35
Class R (12/91)
2000 (h) 40,601 .82* 4.91* .81* 4.92* .78* 4.95* 7
1999 44,411 .83 4.75 .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
1995 (e) 42,741 .89 5.14 .75 5.28 .75 5.28 35
=======================================================================================================================
</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
(note 6).
(c) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(d) For the four months ended May 31.
(e) For the year ended January 31.
(f) From commencement of class operations as noted through January 31.
(g) From commencement of class operations as noted.
(h) For the six months ended November 30, 1999.
37
<PAGE>
Financial Highlights (Unaudited)(continued)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------- ------------------------
Net
PENNSYLVANIA** 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 (e) $10.45 $.25 $ (.74) $ (.49) $ (.25) $ -- $ (.25) $ 9.71 (4.68)%
1999 10.68 .53 (.17) .36 (.53) (.06) (.59) 10.45 3.42
1998 10.25 .56 .45 1.01 (.56) (.02) (.58) 10.68 10.05
1997 10.00 .57 .25 .82 (.57) -- (.57) 10.25 8.37
1996 10.21 .59 (.20) .39 (.60) -- (.60) 10.00 3.83
1995 10.06 .60 .16 .76 (.61) -- (.61) 10.21 7.90
Class B (2/97)
2000 (e) 10.47 .22 (.74) (.52) (.22) -- (.22) 9.73 (5.04)
1999 10.70 .45 (.17) .28 (.45) (.06) (.51) 10.47 2.66
1998 10.27 .48 .45 .93 (.48) (.02) (.50) 10.70 9.23
1997 (d) 10.21 .16 .06 .22 (.16) -- (.16) 10.27 2.18
Class C (2/94)
2000 (e) 10.44 .23 (.74) (.51) (.23) -- (.23) 9.70 (4.95)
1999 10.68 .47 (.17) .30 (.48) (.06) (.54) 10.44 2.80
1998 10.25 .50 .45 .95 (.50) (.02) (.52) 10.68 9.50
1997 9.99 .51 .26 .77 (.51) -- (.51) 10.25 7.88
1996 10.21 .53 (.21) .32 (.54) -- (.54) 9.99 3.16
1995 10.06 .54 .16 .70 (.55) -- (.55) 10.21 7.31
Class R (2/97)
2000 (e) 10.44 .26 (.73) (.47) (.26) -- (.26) 9.71 (4.50)
1999 10.68 .55 (.17) .38 (.56) (.06) (.62) 10.44 3.55
1998 10.25 .58 .45 1.03 (.58) (.02) (.60) 10.68 10.30
1997 (d) 10.21 .20 .03 .23 (.19) -- (.19) 10.25 2.31
=============================================================================================================
</TABLE>
<TABLE>
<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
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 (10/86)
2000 (e) $67,890 .94%* 5.03%* .89%* 5.07%* .89%* 5.08%* 10%
1999 70,865 .94 4.75 .69 5.00 .69 5.00 18
1998 65,826 .95 4.94 .61 5.28 .61 5.28 20
1997 55,667 1.09 5.22 .70 5.61 .70 5.61 46
1996 44,392 1.13 5.42 .79 5.76 .79 5.76 65
1995 42,600 1.29 5.68 .89 6.08 .89 6.08 50
Class B (2/97)
2000 (e) 8,689 1.68* 4.28* 1.65* 4.32* 1.64* 4.33* 10
1999 7,966 1.70 4.01 1.45 4.26 1.45 4.26 18
1998 2,640 1.70 4.14 1.34 4.50 1.34 4.50 20
1997 (d) 229 1.72* 4.47* 1.35* 4.84* 1.35* 4.84* 46
Class C (2/94)
2000 (e) 12,603 1.48* 4.48* 1.44* 4.52* 1.43* 4.53* 10
1999 13,167 1.49 4.21 1.24 4.46 1.24 4.46 18
1998 8,912 1.50 4.39 1.16 4.73 1.16 4.73 20
1997 6,320 1.63 4.68 1.25 5.06 1.25 5.06 46
1996 4,442 1.34 5.19 1.68 4.85 1.68 4.85 65
1995 3,118 1.39 5.50 1.84 5.05 1.84 5.05 50
Class R (2/97)
2000 (e) 55,733 .74* 5.22* .69* 5.27* .68* 5.27* 10
1999 61,044 .74 4.95 .49 5.20 .49 5.20 18
1998 61,180 .75 5.14 .41 5.48 .41 5.48 20
1997 (d) 57,383 .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
(note 6).
(c) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(d) From commencement of class operations as noted.
(e) For the six months ended November 30, 1999.
38
<PAGE>
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
--------------------- ------------------
Net
VIRGINIA** 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 (e) $ 10.93 $.26 $(.63) $(.37) $(.26) $ -- $ (.26) $10.30 (3.40)%
1999 11.06 .53 (.10) .43 (.53) (.03) (.56) 10.93 3.95
1998 10.66 .56 .41 .97 (.56) (.01) (.57) 11.06 9.30
1997 10.40 .58 .25 .83 (.57) -- (.57) 10.66 8.20
1996 10.56 .57 (.15) .42 (.58) -- (.58) 10.40 4.03
1995 10.36 .59 .20 .79 (.59) -- (.59) 10.56 7.99
Class B (2/97)
2000 (e) 10.93 .23 (.65) (.42) (.22) -- (.22) 10.29 (3.86)
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 (e) 10.92 .24 (.64) (.40) (.23) -- (.23) 10.29 (3.67)
1999 11.06 .47 (.11) .36 (.47) (.03) (.50) 10.92 3.30
1998 10.65 .50 .42 .92 (.50) (.01) (.51) 11.06 8.81
1997 10.39 .52 .26 .78 (.52) -- (.52) 10.65 7.61
1996 10.56 .51 (.16) .35 (.52) -- (.52) 10.39 3.37
1995 10.36 .53 .20 .73 (.53) -- (.53) 10.56 7.40
Class R (2/97)
2000 (e) 10.93 .28 (.65) (.37) (.27) -- (.27) 10.29 (3.38)
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
============================================================================================================
</TABLE>
<TABLE>
<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
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 (3/86)
2000 (e) $134,220 .90%* 4.99%* .90%* 4.99%* .89%* 5.00%* 10%
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
1995 112,643 1.10 5.50 .79 5.81 .79 5.81 50
Class B (2/97)
2000 (e) 11,573 1.65* 4.25* 1.65* 4.25* 1.64* 4.26* 10
1999 10,419 1.64 4.03 1.61 4.06 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 (e) 16,634 1.45* 4.45* 1.45* 4.45* 1.44* 4.46* 10
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
1995 6,537 1.65 4.93 1.34 5.24 1.34 5.24 50
Class R (2/97)
2000 (e) 52,766 .70* 5.19* .70* 5.19* .69* 5.20* 10
1999 56,728 .69 4.99 .66 5.02 .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
(note 6).
(c) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(d) From commencement of class operations as noted.
(e) For the six months ended November 30, 1999.
39
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
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(1)
Tax-Free Income
National Funds
High Yield
Long-Term
Insured Long Term
Intermediate-Term
Limited-Term
State 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
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers(SM) including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
quality municipal bonds. The fund shares are listed and traded on the New York
and American stock exchanges. Exchange-traded funds provide the investment
convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
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.
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Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
Chase Global Fund Services Company
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
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SERVING
Investors for Generations
[Photo of John Nuveen Sr. appears here]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive performance over time -- with moderated risk. We emphasize quality
securities carefully chosen through in-depth research, and we follow those
securities closely over time to ensure that they continue to meet our exacting
standards.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
