<PAGE>
NUVEEN
Municipal
Bond Funds
May 31, 1998
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Kansas
Missouri
Wisconsin
<PAGE>
Highlights
As of May 31, 1998
For Class A shares on net asset value
Credit Quality Performance Highlights
Nuveen Flagship Kansas Municipal Bond Fund
[PIE GRAPH APPEARS HERE]
AAA/Pre-refunded 49%
AA 24%
A 17%
BBB/NR 10%
. Taxable-equivalent yield of 7.05%*
. Outperformed Lipper peer group for the
one-year period
. One-year total return of 9.32%
Nuveen Flagship Missouri Municipal Bond Fund
[PIE GRAPH APPEARS HERE]
AAA/Pre-refunded 61%
AA 10%
A 12%
BBB/NR 17%
. Taxable-equivalent yield of 6.78%*
. Outperformed Lipper peer group for the
one-year period
. One-year total return of 9.32%
Nuveen Flagship Wisconsin Municipal Bond Fund
[PIE GRAPH APPEARS HERE]
AAA/Pre-refunded 41%
AA 5%
A 18%
BBB/NR 36%
. Taxable-equivalent yield of 7.25%*
. Ranked in the top 10% of funds in Lipper
peer group
. One-year total return of 10.19%
* For investors in the 31% federal and applicable state income tax bracket. See
your fund's performance overview in this report for more information.
Contents
1 Dear Shareholder
4 Kansas Commentary
and Overview
6 Missouri Commentary
and Overview
8 Wisconsin Commentary
and Overview
10 Report of Independent
Public Accountants
11 Portfolio of Investments
24 Statement of Net Assets
25 Statement of Operations
26 Statement of Changes in Net Assets
28 Notes to Financial Statements
34 Financial Highlights
36 Building Better Portfolios
37 Fund Information
Is it Time for a Financial Check-Up?
Now is a great time to sit down with your financial adviser and review your
financial plan. How can you make sure that your investment strategy is strong
enough to provide the income you need today and versatile enough to change as
your goals do? Here are some guidelines:
. Make sure you and your adviser understand your current situation. How have
your goals, objectives and risk profile changed? What are your current tax
concerns, interests, lifestyle?
. Revisit your current investment choices. If the value of one portion of your
portfolio has grown substantially, it may be time to rebalance asset classes.
. Determine how your asset mix will be implemented. Changing your asset
allocation is generally a gradual process. Make sure you and your adviser
have a clear understanding of each other's responsibilities. Define and
discuss what you want in terms of support from your adviser.
. Keep revisiting your plan. Don't assume that once you've revised your plan
and reallocated your portfolio the process is finished.
It's recommended that you meet at least once a year with your financial adviser
- -- and usually more if there have been significant changes in interest rates,
tax laws, retirement plan distributions, lifestyle or health.
Even if things haven't changed, it makes good financial sense to keep in touch
with your adviser.
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
I'm pleased to share with you this performance report for the Nuveen Kansas,
Missouri and Wisconsin municipal bond funds. Over the past 12 months, each of
the funds continued to perform well and meet their objectives of providing you
with attractive tax-free income and strong after-tax total returns.
For many of our shareholders, this annual report represents the first time you
have received a consolidated report covering performance data for other Nuveen
funds in addition to your own. These consolidated reports are part of our
continuing efforts to control fund expenses; we achieve greater economies of
scale for our shareholders through reducing paper, printing and mailing costs.
By consolidating reports by region and incorporating several funds into one
booklet, we have lowered these administrative expenses and made owning shares in
a Nuveen fund more cost-efficient for you.
The Economy in Review
Fixed-income investments enjoyed bullish performance over the past year, as
declining interest rates and low inflation spurred a bond market rally. The
equity markets also exhibited continued strength despite recent volatility
sparked by Asia's financial problems and their possible effects on U.S.
corporate earnings. Although interest rates have trended slightly upward in
recent months, a year-to-date comparison shows that today's rates are
significantly lower than they were one year ago. As shown in the accompanying
chart, between the end of May 1997 and May 1998, the yield on the Bond Buyer 40,
an unmanaged index of long-term municipal bonds, fell from 5.74% to 5.22%.
Much of the decline in interest rates resulted from expectations that the
financial problems of Asia would restrain the prices of imported goods and
reduce foreign demand for U.S. products and services, thereby keeping inflation
at moderate levels. These inflation expectations were largely fulfilled, as the
Consumer Price Index rose only 1.5% for the 12 months ended May 1998, remaining
at one of its lowest levels in years.
1
<PAGE>
The Asian situation also provided additional strength to the bond market rally,
as many investors made a "flight to quality" by moving assets into high-quality
U.S. bonds in the face of the uncertainty in that region.
In coming months, we will continue to watch closely several key factors that are
likely to affect the future of the economy, including the demand for goods and
services, the availability of qualified employees, the strength of the dollar,
and indications from the Federal Reserve. With many investors still waiting for
the full impact of Asia's difficulties to show up in U.S. economic statistics,
the potential long-term effect of this crisis on American markets continues to
cause concern. We expect that the development of these factors will continue to
influence the tone of the fixed-income markets during the remainder of the year.
Municipal Market Review
As interest rates continued to decline over the past year, bond prices rose.
This price appreciation for the bonds in our portfolios contributed to strong
total returns for the year.
Another major factor in bond performance over the last 12 months was the
continued strength of the U.S. economy, which helped boost the credit quality of
many municipal bonds. With the improvements in the fundamental financial health
of many municipalities and revenue projects financed by bonds, major credit
rating agencies upgraded the credit quality of thousands of issuers over the
past year, while downgrading relatively few. These boosts in credit quality also
contributed to the funds' performance as upgraded bonds increased in value.
The combination of low interest rates and a strong economy set new issuance on a
record pace and stimulated a dramatic increase in the refinancing of existing
bonds as issuers sought to lower their interest costs. The first quarter of 1998
saw $68 billion of new municipal issuance, up 70% from the same period in 1997.
The flood of new issues continued with May's long-awaited sale of the first
segment of Long Island (New York) Power Authority's $7 billion offering, the
largest issuance in municipal bond history. Although the nationwide supply of
municipal bonds remained heavy, the supply of bonds in each state varied
according to local economic conditions. This level of issuance highlights the
value of Nuveen's expertise in the municipal market, as our portfolio management
teams worked diligently to sift through the available issues to select those
undervalued securities that would help the funds achieve their investment
objectives.
"Another major factor in bond performance over the last 12 months was the
continued strength of the U.S. economy, which helped boost the credit quality
of many municipal bonds."
<PAGE>
Diversification: The Key
to a Better Portfolio
In view of current market conditions, we believe that investors will find
diversification to be an increasingly important investment strategy in the
months ahead. An appropriately diversified portfolio -- one that balances
different types of investments, levels of risk and tax management -- can help
cushion your portfolio against volatility and enhance your return potential.
Many investors select Nuveen's municipal bond funds because their emphasis
on dependable tax-free income and attractive after-tax returns makes them ideal
for building and sustaining long-term financial security. These funds also work
well with other Nuveen investments to create the foundation of a diversified,
well-balanced portfolio. In fact, recent studies by Nuveen Research have found
that portfolios combining municipal bonds and stocks generated higher after-tax
returns with lower levels of risk than similar portfolios combining stocks and
Treasury or corporate bonds.
We encourage you to talk to your financial adviser about Nuveen's range of
equity and balanced funds, including the Nuveen European Value Fund. This new
equity mutual fund offers a portfolio of quality European company stocks for
investors seeking long-term growth potential and international diversification.
The fund is just one of an ever-expanding range of Nuveen products and services
designed to help investors achieve diversification while building a tax-
efficient, risk-sensitive investment portfolio. If you'd like to learn more
about the Nuveen European Value Fund or any of our other investments, contact
your financial adviser or call Nuveen Investor Services at (800) 257-8787 for a
prospectus. Please read the information carefully before you invest.
When seeking quality investment solutions that withstand the test of time, we
hope that you continue to think of Nuveen. Today, more than ever, you can count
on Nuveen for a wide range of investments that can help you build a well-
balanced portfolio designed to achieve your financial goals. We thank you for
your continued confidence in us and our family of investments.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1998
" Today, more than ever, you can count on Nuveen for a wide range of investments
that can help you build a well-balanced portfolio designed to achieve your
financial goals."
3
<PAGE>
Nuveen Flagship Kansas Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Mike Davern discusses fund performance,
the municipal market, and key investment strategies for the Kansas fund.
Comments cover the one-year period ended May 31, 1998 and all
performance statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Reflecting the national trend, Kansas enjoyed both economic and employment
growth over the last year. The state's municipal market was remarkably active
for the first half of 1998, offering $904 million dollars of new issuance,
approximately 86% more than the same period last year. Should issuance continue
at this pace through the year, 1998 may be the first year to match the
historically high issuance levels experienced in 1992 and 1993. Education,
general purpose, health care and utility offerings continue to dominate new
issue volume, representing approximately 72% of issuance.
Fund Performance
For the year ended May 31, 1998, the total return on net asset value for the
Kansas Municipal Bond Fund was 9.32%, which is equivalent to a taxable return of
12.21% for investors in the 35.5% combined federal and state income tax bracket.
The fund's total return was in line with the annual return of 9.38% posted by
the unmanaged Lehman Brothers Municipal Bond Index, and significantly
outperformed its Lipper peer group average of 8.0%. The Kansas Municipal Bond
Fund was also ranked third of the 12 Kansas municipal bond funds followed by
Lipper. In addition, the fund provided a competitive tax-free yield of 4.55%,
which translates to a taxable yield of 7.05% for investors in the 35.5% combined
federal and state income tax bracket. Thanks to good call protection and a
number of higher-yielding bonds, the fund's dividend held steady through the
declining interest rate environment.
Key Strategies
There were several elements contributing to the fund's performance during the
past year. First was the Kansas fund's mid-range portfolio duration, which kept
performance in line with the index. Duration is a measure of the fund's price
volatility in relation to changes in interest rates. In addition to maintaining
a moderate duration, we focused on the call protection of the fund, avoiding
issues that would be called away in the event of a near-term change in interest
rates and could (if called away) affect income levels. With that in mind, we
avoided securities with shorter call dates, instead finding value in certain
well-structured health care issues, and in lower-rated but still investment-
quality securities. Nuveen's diligent research team helps us find these lower-
rated bonds that offer competitive yields and solid financial positions.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
As of May 31, 1998, the fund's sector holdings were well-diversified, with 20%
of the portfolio invested in health care debt, 20% in limited tax obligation
issues, 13% in U.S. guaranteed bonds and 12% in multifamily housing securities.
Outlook for the Future
Going forward, we expect conditions in which we can extend the duration of the
portfolio, as well as further enhance its already good call protection.
Presently, narrow yield spreads between lower- and higher-rated securities
provide little reward for the incremental credit risk associated with lower-
rated bonds. However, we plan to take advantage of any BBB-rated securities with
competitive yields that become available over the next year. Overall, we will
continue to maintain the fund's current healthy diversification, which should be
aided by improving supply.
4
<PAGE>
Nuveen Flagship Kansas Municipal Bond Fund
Performance Overview
As of May 31, 1998
Monthly Tax-Free Dividends (Class A Shares)
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
0.0421 6/97
0.0421 7/97
0.042 8/97
0.042 9/97
0.042 10/97
0.042 11/97
0.042 12/97
0.041 1/98
0.041 2/98
0.041 3/98
0.041 4/98
0.041 5/98
</TABLE>
<TABLE>
<CAPTION>
Top 5 Sectors
<S> <C>
Health Care 20%
Tax Obligation (Limited) 20%
U.S.Guaranteed 13%
Housing (Multifamily) 12%
Utilities 8%
</TABLE>
Portfolio Statistics
<TABLE>
<CAPTION>
Share Class A B C R
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception Date 1/92 2/97 2/97 2/97
Net Asset Value $10.60 $10.54 $10.63 $ 10.66
Fund Net Assets ($000) $107,184
Average Weighted Maturity (Years) 20.60
Average Weighted Duration (Years) 7.59
Annualized Total Return/1/
Share Class A(NAV) A(Offer) B C R
- -------------------------------------------------------------------------------------------
1-Year 9.32% 4.70% 8.57% 8.85% 9.84%
5-Year 6.06% 5.14% 5.31% 5.70% 6.23%
Since Inception 7.29% 6.57% 6.57% 6.92% 7.42%
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
- -------------------------------------------------------------------------------------------
Distribution Rate 4.92% 4.72% 4.21% 4.40% 5.12%
SEC 30-Day Yield 4.55% 4.36% 3.81% 4.00% 4.75%
Taxable Equivalent Yield/2/ 7.05% 6.76% 5.91% 6.20% 7.36%
</TABLE>
Index Comparison/3/
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Wisconsin Nuveen Flagship Wisconsin Lehman Brothers
Municipal Bond Fund (NAV) Municipal Bond Fund (Offer) Municipal Bond Index
<S> <C> <C> <C>
6/94 1000 9580 10000
5/95 10734 10283 10911
5/96 11094 10628 11409
5/97 11915 11415 12356
5/98 13131 12580 13516
</TABLE>
[_] Lehman Brothers Municipal Bond Index $15,839
[_] Nuveen Flagship Kansas Municipal Bond Fund (NAV) $15,781
[_] Nuveen Flagship Kansas Municipal Bond Fund (Offer) $15,118
Past performance is not predictive of future results.
/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, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
/2/ Based on SEC yield and a combined federal and state income tax rate of
35.5%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
/3/ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
5
<PAGE>
Nuveen Flagship Missouri Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Mike Davern discusses fund performance,
the municipal market, and key investment strategies for the Missouri fund.
Comments cover the one-year period ended May 31, 1998 and all
performance statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Missouri confirmed its AAA credit quality status as a municipal issuer with
another year of sound financial operations and economic growth. The state ended
fiscal year 1997 with a budget stabilization fund totaling approximately $370
million, or nearly 4% of general fund revenues. The general fund, fueled by
strong individual income tax and sales/use tax revenues, increased 18% to $1.7
billion. High levels of economic growth between 1995 and 1997 and increasing
personal incomes resulted in income tax revenues that surpassed the
constitutional state limit, and taxpayers were subsequently rewarded with a
refund totaling $695 million.
Missouri's economy remains diversified, with recent declines in manufacturing
employment replaced by job gains in the services sector. Lease revenue debt,
which constitutes nearly one-third of total bond issuance, is an important
component of financing state capital programs. Missouri debt should continue to
attract attention, as new issue volume-in line with national municipal
trends-increased 94% during the first quarter of 1998.
Fund Performance
For the year ended May 31, 1998, the total return on net asset value for the
Missouri Municipal Bond Fund was 9.32%, which is equivalent to a taxable return
of 12.18% for investors in the 35.1% combined federal and state income tax
bracket. The fund's total return was in line with the annual return of 9.38%
posted by the unmanaged Lehman Brothers Municipal Bond Index, and outperformed
its Lipper peer group average of 8.65%. The Missouri Municipal Bond Fund was
also ranked fourth of the 23 Missouri municipal bond funds followed by Lipper.
In addition, the fund provided a competitive tax-free yield of 4.40%, which
translates to a taxable yield of 6.78% for investors in the 35.1% combined
federal and state income tax bracket.
Key Strategies
There were several elements contributing to the fund's performance during the
past year. First was the Missouri fund's mid-range portfolio duration, which
kept performance in line with the index. Duration is a measure of the fund's
price volatility in relation to changes in interest rates. In addition to
maintaining a moderate duration, we focused on the call protection of the fund,
avoiding issues that would be called away in the event of a near-term change in
interest rates and may affect income levels. With that in mind, we found value
in several call-protected housing bond issues, as well as in tax obligation
debt.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
As of May 31, 1998, the fund's sector holdings were well-diversified, in part
thanks to steady supply during the past year. Specifically, 17% of the portfolio
was invested in limited tax obligation bonds, 17% in health care securities, 13%
in U.S. guaranteed bonds and 11% in multifamily housing debt.
Outlook for the Future
Going forward, we expect conditions in which we can maintain the duration of the
portfolio, as well as its favorable call protection. Higher-quality issues will
continue to dominate the portfolio, because narrow yield spreads between lower-
and higher-rated securities provide little reward for assuming the increased
credit risk associated with lower-quality bonds. Overall, we will continue to
maintain the fund's current healthy diversification, which should be aided by
continuing strong supply.
6
<PAGE>
Nuveen Flagship Missouri Municipal Bond Fund
Performance Overview
As of May 31, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
0.0465 6/97
0.0465 7/97
0.0465 8/97
0.0465 9/97
0.0465 10/97
0.0465 11/97
0.0465 12/97
0.0465 1/98
0.0465 2/98
0.0465 3/98
0.046 4/98
0.046 5/98
</TABLE>
Top 5 Sectors
Tax Obligation (Limited) 17%
Health Care 17%
U.S. Guaranteed 13%
Housing (Multifamily) 11%
Housing (Single-Family) 8%
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 8/87 2/97 2/94 2/97
Net Asset Value $11.23 $11.23 $11.23 $ 11.23
Fund Net Assets ($000) $246,427
Average Weighted Maturity (Years) 19.49
Average Weighted Duration (Years) 7.17
Annualized Total Return/2/
Share Class A(NAV) A(Offer) B C R
- ---------------------------------------------------------------------------------------------
1-Year 9.32% 4.76% 8.53% 8.74% 9.56%
5-Year 6.31% 5.39% 5.68% 5.73% 6.36%
10-Year 8.29% 7.82% 7.82% 7.70% 8.32%
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
- -------------------------------------------------------------------------------------------
Distribution Rate 4.92% 4.71% 4.17% 4.38% 5.13%
SEC 30-Day Yield 4.40% 4.21% 3.65% 3.85% 4.59%
Taxable Equivalent Yield/3/ 6.78% 6.49% 5.62% 5.93% 7.07%
</TABLE>
Index Comparison/4/
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
A B C
<S> <C> <C> <C>
5/88 10,000 9,580 10,000
5/89 11,370 10,892 11,149
5/90 12,035 11,529 11,965
5/91 13,229 12,673 13,171
5/92 14,511 13,902 14,466
5/93 16,328 15,642 16,195
5/94 16,723 16,021 16,595
5/95 18,092 17,333 18,107
5/96 18,727 17,941 18,934
5/97 20,277 19,426 20,505
5/98 22,167 21,236 22,430
</TABLE>
A Nuveen Flagship Missouri Municipal Bond Fund (NAV)
B Nuveen Flagship Missouri Municipal Bond Fund (Offer)
C Lehman Brothers Municipal Bond Index
[_] Lehman Brothers Municipal Bond Index $22,430
[_] Nuveen Flagship Missouri Municipal Bond Fund (NAV) $22,167
[_] Nuveen Flagship Missouri Municipal Bond Fund (Offer) $21,236
Past performance is not predictive of future results.
/1/ The fund also paid shareholders taxable distributions in December of
$0.0015 per share.
/2/ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
/3/ Based on SEC yield and a combined federal and state income tax rate of
35.1%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
/4/ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
7
<PAGE>
Nuveen Flagship Wisconsin Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Mike Davern discusses fund performance,
the municipal market, and key investment strategies for the Wisconsin fund.
Comments cover the one-year period ended May 31, 1998 and all
performance statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Wisconsin boasted another strong fiscal year in 1997, resulting in a credit
rating upgrade for the state's general obligation debt by Standard and Poor's.
Fueled by strong national economic growth, financial operations remained stable,
with state tax revenues increasing 7.7% during 1997. Manufacturing employment,
representing 24% of total employment, reached an all-time high in August of
1997.
Although the state's debt burden is moderate overall, $450 million in short-term
debt has been issued so far during 1998 -- the largest short-term borrowing year
since 1992. In addition, new issue volume was up 26% during the first quarter of
1998 over the same period last year. Additional issuance during 1998 should
continue to attract investors in the municipal bond market. Despite the new
issuance, strict legislative requirements have limited the amount of new
issuance that is exempt from state income taxes. Given the high state income tax
rate and limited amount of state tax-exempt issuance, finding value in the
Wisconsin market remains a challenge.
Fund Performance
The fund performed well over the past year, generating a total return on net
asset value of 10.19%, which is equivalent to a taxable return of 13.08% for
investors in the 35.7% combined federal and state income tax bracket. The fund's
total return outperformed the annual return of 9.38% posted by the unmanaged
Lehman Brothers Municipal Bond Index and far surpassed its Lipper peer group
average of 8.46%. The Wisconsin Municipal Bond Fund also ranked sixth among the
74 municipal bond funds in the Lipper "other states" category. In addition, the
fund provided a competitive tax-free yield of 4.66%, which is equivalent to a
taxable yield of 7.25% for investors in the 35.7% combined federal and state
income tax bracket. This excellent performance is quite impressive given the
limited amount of issuance that is double tax-exempt in the state.
Key Strategies
The fund's strong performance was due in part to its long portfolio duration,
which is a measure of price volatility in reaction to changes in interest rates.
The fund's duration of 8.60 years was longer than the Lehman Index's average
duration of 7.11 years. The longer duration allowed the fund to better
participate in this year's market rally, although it would have been more
adversely affected had there been a market downturn. In addition to maintaining
a longer duration, we focused on the call protection of the fund, avoiding
issues that might be called away at an inopportune time in order to protect the
fund's strong income levels.
We also took advantage of Nuveen's diligent research team to find value in non-
rated and lower-rated investment-quality bonds. Nuveen Research helps us find
these lower-rated bonds that offer competitive yields and solid financial
positions. Bonds from U.S. territories also played an important role in the
fund's solid performance. Because these bonds are exempt from both federal and
Wisconsin state taxes, they helped support the portfolio when issuance of state
tax-exempt bonds was thin, and their recent price appreciation contributed to
the fund's strong total returns for the year.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
As of May 31, 1998, the fund's sector holdings were heavily weighted toward
limited tax obligation securities, which are among the only double-tax-exempt
securities in the state. They made up 46% of the portfolio. Other key sectors
included long-term care facility bonds at 10%, multifamily housing securities at
10% and utility bonds at 9%.
Outlook for the Future
Going forward, we expect conditions in which we can maintain the duration of the
portfolio, as well as its excellent call protection. Lower investment-grade and
non-rated issues will continue to represent at least a third of the portfolio
until more state tax-exempt issuance makes it possible to find attractive
opportunities in a wider range of securities.
8
<PAGE>
Nuveen Flagship Wisconsin Municipal Bond Fund
Performance Overview
As of May 31, 1998
Monthly Tax-Free Dividends (Class A Shares)
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
0.0435 6/97
0.0435 7/97
0.0435 8/97
0.0435 9/97
0.0435 10/97
0.0435 11/97
0.0435 12/97
0.0435 1/98
0.0435 2/98
0.0435 3/98
0.0435 4/98
0.0435 5/98
</TABLE>
Top 5 Sectors
Tax Obligation (Limited) 46%
Long-Term Care 10%
Housing (Multifamily) 10%
Utilities 9%
Health Care 6%
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 6/94 2/97 2/97 2/97
Net Asset Value $10.28 $10.31 $10.30 $ 10.31
Fund Net Assets ($000) $27,601
Average Weighted Maturity (Years) 22.20
Average Weighted Duration (Years) 8.60
Annualized Total Return/1/
Share Class A(NAV) A(Offer) B C R
- ---------------------------------------------------------------------------------------------
1-Year 10.19% 5.56% 9.46% 9.59% 10.47%
Since Inception 7.05% 5.90% 6.47% 6.66% 7.18%
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
- ----------------------------------------------------------------------------------------------
Distribution Rate 4.79% 4.59% 4.02% 4.25% 4.95%
SEC 30-Day Yield 4.66% 4.46% 3.91% 4.10% 4.80%
Taxable Equivalent Yield/2/ 7.25% 6.94% 6.08% 6.38% 7.47%
</TABLE>
Index Comparison/3/
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
A B C
<S> <C> <C> <C>
1/92 10,000 9,580 10,000
5/92 10,298 9,865 10,215
5/93 11,753 11,259 11,437
5/94 11,829 11,332 11,719
5/95 12,752 12,216 12,786
5/96 13,216 12,661 13,371
5/97 14,434 13,828 14,480
5/98 15,781 15,118 15,839
</TABLE>
A Nuveen Flagship Kansas Municipal Bond Fund (NAV)
B Nuveen Flagship Kansas Municipal Bond Fund (Offer)
C Lehman Brothers Municipal Bond Index
[_] Lehman Brothers Municipal Bond Index $13,516
[_] Nuveen Flagship Wisconsin Municipal Bond Fund (NAV) $13,131
[_] Nuveen Flagship Wisconsin Municipal Bond Fund (Offer) $12,580
Past performance is not predictive of future results.
/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, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
/2/ Based on SEC yield and a combined federal and state income tax rate of
35.7%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
/3/ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
9
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust IV:
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Flagship Kansas Municipal Bond Fund, Nuveen
Flagship Missouri Municipal Bond Fund, and Nuveen Flagship Wisconsin Municipal
Bond Fund (collectively, the "Funds") (three of the portfolios constituting the
Nuveen Flagship Multistate Trust IV (a Massachusetts business trust)), as of May
31, 1998, and the related statements of operations, statements of changes in net
assets and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
statements and financial highlights for the Funds for the years ended May 31,
1997 and prior were audited by other auditors whose report dated July 11, 1997,
expressed an unqualified opinion on those financial statements and financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1998, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Flagship Kansas Municipal Bond Fund, Nuveen Flagship Missouri Municipal Bond
Fund, and Nuveen Flagship Wisconsin Municipal Bond Fund of the Nuveen Flagship
Multistate Trust IV as of May 31, 1998, and the results of their operations, the
changes in their net assets, and the financial highlights for the year then
ended, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 17, 1998
10
<PAGE>
Portfolio of Investments
Nuveen Flagship Kansas Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Basic Materials - 7.5%
$ 4,550,000 City of Clearwater, Kansas, Pollution Control Refunding Revenue Bonds 1/02 at 101 AA- $ 4,849,891
(Vulcan Materials Company), Series 1992, 6.375%, 2/01/12
1,000,000 Dodge City, Kansas, Pollution Control Revenue Refunding Bonds, Series 5/02 at 102 Aa3 1,111,810
1992 (Excel Corporation Project/Cargill), 6.625%, 5/01/05
2,000,000 City of Garden City, Kansas, Sewage Disposal Revenue Bonds, Series 9/07 at 102 BBB+ 2,049,800
1997 (Monfort, Inc. [ConAgra, Inc.-Guarantor] Project), 5.750%,
9/01/17 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 19.9%
1,500,000 Kansas Development Finance Authority, Revenue Bonds, Series 1998C 6/08 at 101 AAA 1,473,585
(Sisters of Charity of Leavenworth Health Services Corporation),
5.000%, 12/01/25
1,000,000 Kansas Development Finance Authority, Revenue Bonds (Catholic Health 6/08 at 101 AA 972,930
Initiatives), Series 1998J, 5.000%, 12/01/27 (DD)
Kansas Development Finance Authority, Health Facilities Revenue Bonds
(Stormont-Vail HealthCare, Inc.), Series 1996F - Tax Exempt:
2,815,000 5.800%, 11/15/16 11/06 at 100 AAA 2,977,904
3,380,000 5.800%, 11/15/21 11/06 at 100 AAA 3,564,616
Kansas Development Finance Authority, Health Facilities Revenue Bonds
(Stormont-Vail HealthCare, Inc.), Series 1996G - Tax Exempt:
750,000 5.800%, 11/15/16 11/06 at 100 AAA 793,403
2,150,000 5.800%, 11/15/21 11/06 at 100 AAA 2,267,433
Kansas Development Finance Authority, Health Facilities Revenue Bonds
(Hays Medical Center Inc.), Series 1997B:
2,200,000 5.500%, 11/15/17 11/07 at 100 Aaa 2,275,350
1,500,000 5.500%, 11/15/22 11/07 at 100 Aaa 1,544,550
1,325,000 Kansas Development Finance Authority, Health Facilities Revenue Bonds 9/07 at 102 Aa3 1,341,072
(Rural Health Resources of Jackson Co., Inc.), Series 1997L, 5.375%,
9/01/27
Lawrence, Kansas, Hospital Revenue, Lawrence Memorial Hospital:
1,075,000 6.200%, 7/01/14 7/04 at 100 A3 1,147,165
400,000 6.200%, 7/01/19 7/04 at 100 A3 425,772
175,000 Lawrence, Kansas, Hospital Revenue Refunding, Lawrence Memorial 7/07 at 100 A3 177,126
Hospital, 5.350%, 7/01/21
City of Newton, Kansas, Hospital Refunding Revenue Bonds, Series
1998A (Newton Healthcare Corporation):
1,000,000 5.700%, 11/15/18 11/08 at 100 BBB- 1,005,610
800,000 5.750%, 11/15/24 11/08 at 100 BBB- 804,472
100,000 Puerto Rico Industrial, Tourist, Educational, Medical and 7/05 at 102 AAA 111,370
Environmental Control Facilities Financing
Authority, Hospital Revenue Bonds, 1995 Series A, (Hospital
Auxilio Mutuo Obligated Group Project),
6.250%, 7/01/24
450,000 Wichita, Kansas, CSJ Health System Wichita Inc., 7.000%, 11/15/18 11/01 at 102 A+ 490,055
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 12.2%
965,000 City of Kansas City, Kansas, Multifamily Housing Revenue Refunding 7/01 at 100 AAA 1,004,083
Bonds, Series 1994 (FHA Insured Mortgage Loan - Rainbow Towers
Project), 6.700%, 7/01/23
Kansas Development Finance Authority, Multifamily Housing Revenue
Bonds (Park Apartments Project), Series 1996:
325,000 5.700%, 12/01/09 (Alternative Minimum Tax) 6/06 at 100 AAA 333,359
665,000 5.900%, 12/01/14 (Alternative Minimum Tax) 6/06 at 100 AAA 689,273
1,150,000 6.000%, 12/01/21 (Alternative Minimum Tax) 6/06 at 100 AAA 1,194,172
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Kansas Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Housing/Multifamily (continued)
Lenexa, Kansas, Multifamily Housing Revenue Refunding, Barrington Park
Apartments Project, Series A:
$ 445,000 6.300%, 2/01/09 2/03 at 102 AA $ 468,674
475,000 6.400%, 2/01/10 2/03 at 102 AA 502,636
2,000,000 6.450%, 2/01/18 2/03 at 102 AA 2,110,440
1,000,000 6.500%, 2/01/23 2/03 at 102 AA 1,046,610
1,000,000 Olathe, Kansas, Multifamily Housing Revenue Refunding, Deerfield 6/04 at 102 AAA 1,062,850
Apartments Project, Series A, 6.450%, 6/01/19
Wichita, Kansas, Multifamily Housing Revenue Refunding, Shores
Apartments Project, Series Xi-A:
1,500,000 6.700%, 4/01/19 4/09 at 102 AA 1,620,885
2,000,000 6.800%, 4/01/24 4/09 at 102 AA 2,164,020
900,000 Wichita, Kansas, Multifamily Housing Revenue, Brentwood Apartments, 11/05 at 102 A 929,124
5.850%, 12/01/25
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 7.7%
2,605,000 City of Kansas City, Kansas, GNMA Collateralized Mortgage Revenue Bonds, 5/05 at 103 Aaa 2,697,842
Series 1995, 5.900%, 11/01/27 (Alternative Minimum Tax)
455,000 Olathe/Labette County, Kansas, Single Family Mortgage Revenue Refunding, 2/05 at 105 Aaa 508,645
Series C - I, 7.800%, 2/01/25
1,500,000 Sedgwick County, Kansas, and Shawnee County, Kansas, Single Family No Opt. Call Aaa 1,657,875
Mortgage Revenue Bonds (Mortgage Backed Securities Program), 1997
Series A-1, 5.500%, 6/01/29 (Alternative Minimum Tax)
1,820,000 Sedgwick County, Kansas, Shawnee County, Kansas, and Leavenworth County, 6/99 at 103 AAA 1,905,358
Kansas, GNMA Collateralized Mortgage Revenue Bonds, 1989 Series A,
7.875%, 12/01/21 (Alternative Minimum Tax)
1,290,000 Sedgwick County, Kansas, Single Family Mortgage Revenue Refunding, 11/04 at 105 Aaa 1,435,486
Collateralized, Series A- Iii, 8.125%, 5/01/24 (Alternative
Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial/Other -- 0.7%
650,000 Wichita, Kansas, Airport Authority, Airport Facilities Revenue Refunding, 3/02 at 102 AA 723,691
Wichita Airport Hotel Association, 7.000%, 3/01/05
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 5.0%
Unified School District No. 470, Cowley County, Kansas (Arkansas City),
General Obligation School Building Bonds, Series 1996:
550,000 5.500%, 12/01/16 12/06 at 100 AAA 570,405
850,000 5.500%, 12/01/19 12/06 at 100 AAA 875,585
800,000 Miami County, Kansas, Unit School District No. 368, 6/02 at 100 AAA 871,336
Refunding, 6.600%, 12/01/08
1,350,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1994 (General 7/04 at 102 AAA 1,531,656
Obligation Bonds), 6.450%, 7/01/17
1,000,000 Shawnee County, Kansas, Unit School District No. 345, Seaman, 9/04 at 100 AAA 1,083,700
5.700%, 9/01/14
350,000 Shawnee County, Kansas, Unit School District No. 437, Auburn and 3/02 at 100 AAA 379,509
Washburn, Refunding, 6.600%, 9/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 19.6%
4,450,000 State of Kansas, Department of Transportation, Highway Revenue Bonds, 9/02 at 102 AA+ 4,852,547
Series 1992A, 6.000%, 9/01/12
1,050,000 Kansas Development Finance Authority, Revenue Bonds, Series T 1992 12/00 at 102 N/R 1,124,886
(Kansas Highway Patrol Central Training Facility), 6.600%, 12/01/07
Puerto Rico Highway and Transportation Authority, Highway Revenue
Bonds, Series W:
1,000,000 5.500%, 7/01/13 No Opt. Call A 1,063,420
1,000,000 5.500%, 7/01/15 No Opt. Call AAA 1,074,880
750,000 Puerto Rico Highway and Transportation Authority, Highway Revenue No Opt. Call A 797,565
Bonds, Series X, 5.500%, 7/01/13
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 7,300,000 Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds,
Series Y of 1996, 5.500%, 7/01/36 7/16 at 100 A $7,650,765
20,000 Puerto Rico Infrastructure Finance Authority, Series 1988A, 7.750%, 7/01/08 7/98 at 102 BBB+ 20,459
1,800,000 Puerto Rico Public Buildings Authority, Revenue Guaranteed Refunding,
Series L, 5.500%, 7/01/21 No Opt. Call A 1,912,140
500,000 Puerto Rico Public Buildings Authority, Revenue Guaranteed Government
Facilities, Series B, 5.250%, 7/01/21 7/07 at 101 1/2 A 499,310
2,000,000 Virgin Islands Public Finance Authority, Revenue and Refunding Bonds
(Virgin Islands Matching Fund Loan Notes), Series 1998A (Senior No Opt. Call BBB-- 2,042,160
Lien/Refunding), 5.625%, 10/01/25
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 1.5%
1,500,000 Puerto Rico Ports Authority, Special Facilities, American Airlines, Series
A, 6.250%, 6/01/26 (Alternative Minimum Tax) 6/06 at 102 BBB-- 1,624,530
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 13.5%
275,000 Cowley County Community College Cowley County, Kansas, Series 1992,
Certificates of Participation, 7.000%, 3/01/12 (Pre-refunded to 3/01/00) 3/00 at 101 A*** 291,577
170,000 City of Derby, Kansas, General Obligation Bonds, Series II 1992, 6.500%,
12/01/12 (Pre-refunded to 12/01/00) 12/00 at 100 A2*** 180,528
325,000 City of Hays, Kansas, Sales Tax Revenue Bonds, Series 1992, 6.875%, 9/01/12
(Pre-refunded to 9/01/00) 9/00 at 100 N/R*** 344,344
Jackson County, Kansas, Unified School District No. 336 (Holton), General
Obligation Bonds, Series 1992:
355,000 6.600%, 10/01/12 (Pre-refunded to 10/01/03) 10/03 at 100 N/R*** 396,872
380,000 6.650%, 10/01/13 (Pre-refunded to 10/01/03) 10/03 at 100 N/R*** 425,725
12,475,000 Johnson County, Kansas, Residual, 0.000%, 5/01/12 No Opt. Call Aaa 6,302,370
1,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1994, General
Obligation Bonds, 6.450%, 7/01/17 (Pre-refunded to 7/01/04) 7/04 at 101 1/2 AAA 1,134,560
80,000 Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds,
Series T, 6.625%, 7/01/18 (Pre-refunded to 7/01/02) 7/02 at 101 1/2 AAA 88,722
80,000 Puerto Rico Infrastructure Finance Authority, Series 1988A,
7.750%, 7/01/08 (Pre-refunded to 7/01/98) 7/98 at 102 BBB+*** 81,865
3,120,000 Reno County and Labette County, Kansas, Single Family Mortgage Revenue,
Capital Accumulator, 1983, Series A, 0.000%, 12/01/15 No Opt. Call AAA 1,293,178
2,095,000 Reno, Sedgwick and Finney Counties, Kansas, Single Family Mortgage Revenue,
Multiple Originators and Servicers, Series A, 0.000%, 4/01/16 No Opt. Call AAA 845,018
440,000 Unified School District No. 340, Jefferson County, Kansas, General
Obligation Bonds, Series 1994, 6.350%, 9/01/14 (Pre-refunded to 9/01/04) 9/04 at 100 AAA 492,430
2,250,000 City of Wichita, Kansas, Revenue Bonds (CSJ Health System of Wichita, Inc.),
Series 1985 XXV (Remarketed), 7.200%, 10/01/15 11/01 at 102 A+ 2,600,595
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 8.0%
1,500,000 City of Gardner, Kansas, Electric Utility System Revenue Bonds, Series 1992
Refunding, 7.000%, 11/01/09 11/01 at 101 N/R 1,623,585
Kansas City Utility System:
2,500,000 6.250%, 9/01/14 9/04 at 102 AAA 2,781,125
1,650,000 6.375%, 9/01/23 9/04 at 102 AAA 1,846,696
Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T:
215,000 6.125%, 7/01/08 7/04 at 102 BBB+ 238,275
150,000 6.000%, 7/01/16 7/04 at 102 BBB+ 160,576
5,000,000 Puerto Rico Electric Power Authority, Power Revenue, Formerly Puerto Rico
Commonwealth Water Resource Authority, Series O, 0.000%, 7/01/17 No Opt. Call AAA 1,962,399
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship Kansas Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer - 3.4%
$ 3,000,000 Kansas Development Finance Authority, Water Pollution Control 11/03 at 102 AA+ $ 3,237,269
Revolving Fund Revenue Bonds, 1993 SRF Series II (Leveraged Bonds),
6.000%, 11/01/14
350,000 Newton, Kansas, Wastewater Treatment System Revenue, 7.125%, 3/01/12 3/02 at 102 N/R 391,601
- -----------------------------------------------------------------------------------------------------------------------------------
$112,595,000 Total Investments -- (cost $97,834,230) -- 99.0% 106,133,100
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.0% 1,051,097
--------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $107,184,197
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices
at later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to
be equivalent to AAA rated securities.
(DD) Security purchased on a delayed delivery basis (note 1).
N/R Investment is not rated.
See accompanying notes to financial statements.
14
<PAGE>
Portfolio of Investments
Nuveen Flagship Missouri Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Consumer Staples - 1.8%
$ 4,500,000 The Industrial Development Authority of the County of Cape Girardeau, 5/08 at 101 AA $ 4,503,825
Missouri, Solid Waste Disposal Revenue Bonds (The Procter and Gamble
Products Company Project), 1998 Series, 5.300%, 5/15/28 (Alternative
Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 6.9%
1,000,000 Missouri Higher Education Loan Authority, Student Loan Revenue, 2/02 at 102 A 1,064,690
Subordinate Lien, 6.500%, 2/15/06 (Alternative Minimum Tax)
4,190,000 Missouri Higher Education Loan Authority, Student Loan Revenue, Series F, 2/04 at 102 A 4,545,605
6.750%, 2/15/09 (Alternative Minimum Tax)
3,630,000 Missouri State Health and Educational Facilities Authority, Educational 6/04 at 102 A2 3,910,962
Facilities Revenue, University Health Sciences Project, 6.350%, 6/01/14
1,500,000 Missouri State Health and Educational Facilities Authority, Educational 10/04 at 101 A2 1,609,560
Facilities Revenue, St. Louis University High School, 6.350%, 10/01/14
Missouri State Health and Educational Facilities Authority, Educational
Facilities Revenue, Maryville University of St. Louis Project:
1,475,000 5.625%, 6/15/13 6/07 at 101 Baa1 1,548,072
1,000,000 5.750%, 6/15/17 6/07 at 101 Baa1 1,036,380
The Industrial Development Authority of the City of St. Louis, Missouri,
Industrial Revenue Refunding Bonds (Kiel Center Multipurpose Arena
Project), Series 1992:
650,000 7.625%, 12/01/09 (Alternative Minimum Tax) 12/02 at 102 N/R 706,225
1,000,000 7.750%, 12/01/13 (Alternative Minimum Tax) 12/02 at 102 N/R 1,083,890
500,000 7.875%, 12/01/24 (Alternative Minimum Tax) 12/02 at 102 N/R 544,630
1,000,000 University of Missouri, System Facilities, 5.800%, 11/01/27 11/07 at 101 AA+ 1,066,000
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 16.4%
1,000,000 The Industrial Development Authority of the County of Cape Girardeau, No Opt. Call AAA 1,036,690
Missouri, Health Facilities Refunding Revenue Bonds (Southeast Missouri
Hospital Association), Series 1993, 5.250%, 6/01/16
415,000 Dent County, Missouri, Industrial Development Authority, Industrial 6/01 at 102 N/R 447,171
Development Revenue Bonds Bonds (Southeast Missouri Community Treatment
Center), 8.500%, 6/01/12
775,000 Farmington, Missouri, Industrial Development Authority, Revenue Bonds, 6/01 at 102 N/R 838,868
Series 1992 (Southeast Missouri Community Treatment Center Project),
8.500%, 6/01/12
1,150,000 The Industrial Development Authority of the City of Hannibal, Missouri, 3/06 at 102 AAA 1,213,124
Health Facilities Revenue Bonds, Series 1996A (Hannibal Regional
Hospital), 5.750%, 3/01/22
The Industrial Development Authority of the County of Jackson, State of
Missouri, Health Care System Revenue Bonds, Saint Joseph Health Center
Issue, Series 1992:
2,000,000 6.500%, 7/01/12 7/02 at 102 AAA 2,173,280
6,250,000 6.500%, 7/01/19 7/02 at 102 AAA 6,803,750
500,000 The Industrial Development Authority of the City of Joplin, Missouri, 6/08 at 101 AA 493,370
Revenue Bonds (Catholic Health Initiatives), Series 1998A, 5.000%,
12/01/18
2,565,000 Health and Educational Facilities Authority of the State of Missouri, 2/02 at 102 AAA 2,760,120
Health Facilities Revenue Bonds (Health Midwest), Series 1992 B,
6.250%, 2/15/12
555,000 Health and Educational Facilities Authority of the State of Missouri, 11/02 at 102 BBB+ 605,461
Health Facilities Revenue Bonds (Heartland Health System Project),
6.875%, 11/15/04
2,450,000 Health and Educational Facilities Authority of the State of Missouri, No Opt. Call AA 2,911,237
Health Facilities Revenue Bonds (BJC Health System), Series 1994A,
6.750%, 5/15/12
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship Missouri Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care (continued)
$ 650,000 Health and Educational Facilities Authority of the State of Missouri, 5/04 at 102 AA $ 716,125
Health Facilities Revenue Bonds (BJC Health System), Series A, 6.500%,
5/15/20
1,200,000 Health and Educational Facilities Authority of the State of Missouri, 2/06 at 102 BBB+ 1,306,092
Health Facilities Revenue Bonds (Lake of the Ozarks General Hospital,
Inc.), Series 1996, 6.500%, 2/15/21
Health and Educational Facilities Authority of the State of Missouri,
Health Facilities Revenue Bonds (Freeman Health System Project), Series
1998:
2,450,000 5.250%, 2/15/18 2/08 at 102 BBB+ 2,395,659
1,000,000 5.250%, 2/15/28 2/08 at 102 BBB+ 966,360
Health and Educational Facilities Authority of the State of Missouri,
Health Facilities Revenue Bonds (Lester Cox Center), Series H:
2,650,000 0.000%, 9/01/17 No Opt. Call AAA 984,316
5,590,000 0.000%, 9/01/21 No Opt. Call AAA 1,674,596
6,300,000 0.000%, 9/01/22 No Opt. Call AAA 1,791,153
200,000 Health and Educational Facilities Authority of the State of Missouri, 10/99 at 102 1/2 BBB+ 215,322
Health Facilities Refunding and Improvement Revenue Bonds (Heartland
Health Systems Project), Series 1989, 8.125%, 10/01/10
300,000 Health and Educational Facilities Authority of the State of Missouri, No Opt. Call BBB 300,771
Health Facilities Revenue Refunding, C.E. Still Osteopathic Hospital,
7.625%, 2/01/08
1,000,000 Missouri State Environmental Improvement and Energy Resource Authority, No Opt. Call A3 1,110,010
Pollution Control Revenue Refunding, American Cyanamid Company, 5.800%,
9/01/09
The Curators of the University of Missouri, Health Facilities Revenue
Bonds (University of Missouri Health System), Series 1996 A:
3,205,000 5.500%, 11/01/16 11/06 at 102 AAA 3,315,380
1,390,000 5.600%, 11/01/26 11/06 at 102 AAA 1,446,726
The Industrial Development Authority of the City of West Plains,
Missouri, Hospital Facilities Revenue Bonds (Ozark Medical Center),
Series 1997:
1,000,000 5.500%, 11/15/12 11/07 at 101 BBB- 1,005,890
1,595,000 5.600%, 11/15/17 11/07 at 101 BBB- 1,607,042
2,230,000 5.650%, 11/15/22 11/07 at 101 BBB- 2,252,434
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 10.6%
650,000 The Industrial Development Authority of Kansas City, Missouri, 2/08 at 102 AAA 657,748
Multifamily Housing Revenue Refunding Bonds (President Gardens
Apartment Project), Series 1997 A, 5.550%, 8/01/25
2,000,000 Missouri State Economic Development Export and Infrastructure Board, 9/99 at 102 AA 2,087,140
Multifamily Housing Revenue Refunding, Quality Hill Projects, Series A,
7.500%, 9/15/21
885,000 Missouri State Housing Development Commission, Multifamily Housing, Primm 12/05 at 103 N/R 918,825
Place Apartment, Series A, 6.250%, 12/01/17 (Alternative Minimum Tax)
1,000,000 Missouri Housing Development Commission, Multifamily Housing Revenue No Opt. Call AAA 1,003,820
Refunding Bonds (FHA-Insured Mortgage Loans), Series 1998, 5.450%,
6/01/28 (Alternative Minimum Tax)
655,000 The Industrial Development Authority of the City of Raytown, Missouri, 1/07 at 100 AAA 662,081
Multifamily Housing Refunding Revenue Bonds (Brittany Place Apartments
Project), Series A, 1997, 5.600%, 1/01/21 (Alternative Minimum Tax)
2,000,000 Saint Louis County, Missouri, Housing Authority, Multifamily Housing 3/05 at 102 AAA 2,139,280
Revenue Refunding, Kensington Square Apartments Project, 6.650%, 3/01/20
500,000 Saint Louis County, Missouri Industrial Development Authority, Multifamily 3/99 at 102 AAA 516,400
Housing Revenue Refunding, Lucas/Hunt Village Project, 7.500%, 9/20/19
9,105,000 Saint Louis County, Missouri, Industrial Development Authority, 8/06 at 105 AAA 9,884,934
Multifamily Housing Revenue, Revenue, Covington Manor Apartments,
Series A, 6.875%, 8/20/36 (Alternative Minimum Tax)
4,685,000 Saint Louis County, Missouri, Industrial Development Authority, 1/08 at 100 AAA 4,719,528
Multifamily Housing Revenue Refunding Bonds (Bonhomme Village
Apartments Project), Series 1997A, 5.450%, 1/01/28
1,890,000 St. Louis, Missouri, Land Clearance Redevelopment Authority, Multifamily 5/03 at 102 AAA 1,971,705
Meeting Revenue Refunding, St. Louis Place Apartments, 6.250%, 8/01/27
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Housing/Multifamily (continued)
$ 1,425,000 University City, Missouri, Industrial Development Authority, Revenue 8/07 at 102 Aaa $ 1,475,759
Refunding, River Valley Apartments, Series A, 5.900%, 2/20/37
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 7.6%
1,500,000 Greene County, Missouri, Collateralized Single Family Mortgage Revenue No Opt. Call AAA 1,626,405
Bonds, Series 1996, 6.300%, 12/01/22 (Alternative Minimum Tax)
1,790,000 Missouri State Housing Development Commission, Single Family Mortgage 3/07 at 102 AAA 1,883,187
Revenue Bonds, Homeowner Loan, Series D, 6.125%, 3/01/28
(Alternative Minimum Tax)
970,000 Missouri State Housing Development Commission, Single Family Mortgage 3/07 at 105 AAA 1,099,379
Revenue Bonds, Homeowner Loan, 1997 Series A-2, 7.300%, 3/01/28
(Alternative Minimum Tax)
260,000 Missouri State Housing Development Commission, Single Family Mortgage 3/07 at 101 AAA 269,932
Revenue Bonds, Homeowner Loan, Series B-2, 5.900%, 9/01/28
(Alternative Minimum Tax)
Missouri State Housing Development Commission, Single Family Mortgage
Revenue Bonds, Series A:
470,000 6.700%, 12/01/07 12/04 at 102 AAA 496,922
2,080,000 7.125%, 12/01/14 12/04 at 102 AAA 2,246,858
920,000 7.200%, 12/01/17 (Alternative Minimum Tax) 12/04 at 102 AAA 994,888
140,000 7.625%, 2/01/22 (Alternative Minimum Tax) 2/00 at 102 AAA 146,224
Missouri State Housing Development Commission, Single Family Mortgage
Revenue Bonds, Series B:
2,340,000 6.375%, 9/01/20 9/06 at 102 AAA 2,485,408
850,000 7.750%, 6/01/22 (Alternative Minimum Tax) 6/00 at 102 AAA 892,169
1,870,000 6.450%, 9/01/27 9/06 at 102 AAA 1,995,552
1,600,000 Missouri State Housing Development Commission, Single Family Mortgage 2/01 at 102 AAA 1,692,096
Revenue Bonds, Series 1991-A (GNMA Mortgage-Backed Securities Program),
7.375%, 8/01/23 (Alternative Minimum Tax)
1,775,000 Missouri State Housing Development Commission Mortgage Revenue, Series 9/07 at 101 AAA 1,813,926
C-2, 5.500%, 9/01/17 (Alternative Minimum Tax)
1,000,000 Missouri State Housing Development Commission, Single Family Mortgage 3/08 at 105 AAA 1,098,680
Revenue Bonds, Homeowner Loan, 1998 Series B-2, 6.400%, 3/01/29
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial/Other - 1.2%
500,000 City of Jefferson, Missouri, Industrial Refunding Revenue Bond, Series 4/00 at 100 N/R 511,535
1992 (Scholastic, Inc. Project), 7.200%, 4/01/03
2,175,000 Missouri State Economic Development Export and Infrastructure Board, 12/01 at 102 N/R 2,335,015
Industrial Development Revenue, Refunding, Drury Inn Project,
8.250%, 12/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 5.7%
1,000,000 Lees Summit, Missouri, Industrial Development Authority, Health 8/05 at 102 N/R 1,066,500
Facilities Revenue, John Knox Village Project, 6.625%, 8/15/13
3,750,000 Missouri State Health and Educational Facilities Authority, Health 2/06 at 102 N/R 3,970,425
Facilities Revenue, Lutheran Senior Services, Series A, 6.375%, 2/01/27
3,000,000 Missouri State Health and Educational Facilities Authority, Health 2/07 at 102 N/R 3,110,490
Facilities Revenue Refunding, Lutheran Senior Services, 5.875%, 2/01/23
Saint Louis County, Missouri, Industrial Development Authority, Revenue
Refunding, Friendship Village West County, Series A:
1,265,000 5.750%, 9/01/05 No Opt. Call N/R 1,346,555
1,800,000 6.250%, 9/01/10 9/06 at 102 N/R 1,974,438
2,425,000 St. Louis County, Missouri, Industrial Development Authority, Health 8/05 at 104 AAA 2,658,140
Facilities Revenue, Mother of Perpetual Help, 6.250%, 8/01/28
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 3.2%
1,000,000 Jefferson City School District, Missouri, General Obligation Bonds, No Opt. Call Aa 1,201,600
Series 1991A, 6.700%, 3/01/11
Commonwealth of Puerto Rico, Public Improvement Bonds of 1994
(General Obligation Bonds):
2,500,000 6.450%, 7/01/17 7/04 at 102 AAA 2,836,400
3,350,000 6.500%, 7/01/23 7/04 at 101 1/2 AAA 3,809,687
</TABLE>
17
<PAGE>
Portfolio of Investments
Nuveen Flagship Missouri Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/Limited - 16.9%
$ 2,285,000 The Public Building Corporation of the City of Branson, Missouri, 11/06 at 101 BBB $ 2,460,054
Leasehold Revenue Bonds, Series 1995 (City Hall and Fire Station
Improvement Projects), 6.250%, 11/01/12
1,500,000 City of Branson, Missouri, Tourism Tax Revenue Bonds, Series 1998B 1/08 at 101 AAA 1,485,150
(Combined Waterworks and Sewerage System Improvement Project
Refunding), 5.000%, 1/01/18
1,025,000 Excelsior Springs, Missouri, School District Building Corporation, No Opt. Call AAA 470,762
Leasehold Revenue Bonds (Excelsior Springs 40 School District),
Series 1994, 0.000%, 3/01/14
2,000,000 Jackson County, Missouri, Public Finance Authority, 6.125%, 12/01/15 12/04 at 100 AAA 2,147,720
1,200,000 Kansas City Land Clearance for Redevelopment Authority, Lease Revenue 12/05 at 102 AAA 1,287,372
Bonds (Municipal Auditorium and Muehlebach Hotel Redevelopment
Projects), Series 1995A, 5.900%, 12/01/18
Kansas City Municipal Assistance Corporation, Leasehold Improvement
Revenue Bonds, Series 1991A (Truman Medical Center Charitable
Foundation Project):
645,000 7.000%, 11/01/09 11/01 at 100 A 683,500
695,000 7.000%, 11/01/10 11/01 at 100 A 735,706
1,250,000 Kansas City Municipal Assistance Corporation, Leasehold Refunding 4/06 at 101 AAA 1,233,563
Revenue Bonds, Series 1996A (H. Roe Bartle Convention Center Project),
5.000%, 4/15/20
Lake St. Louis, Missouri, Certificates of Participation, Public Facilities
Municipal Golf Course Project:
1,020,000 6.900%, 12/01/05 12/02 at 103 N/R 1,065,900
2,720,000 7.550%, 12/01/14 12/02 at 103 N/R 2,856,000
250,000 Missouri School Boards Association, Lease Participation Certificates, 9/98 at 100 AAA 250,670
School District Valley Park, Series A, 7.375%, 3/01/10
1,500,000 Missouri School Boards Association, Lease Participation Certificates, 3/06 at 101 AAA 1,604,085
Insured, Fox C-6 School District, 5.625%, 3/01/11
320,000 Missouri State Certificates of Participation, Psychiatric Rehabilitation 11/05 at 100 AA 341,667
Center Project, Series A, 6.000%, 11/01/15
1,500,000 Puerto Rico Highway and Transportation Authority, 6.625%, 7/01/12 7/02 at 101 1/2 A 1,647,735
5,900,000 Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds, 7/16 at 100 A 6,183,495
Series Y of 1996, 5.500%, 7/01/36
1,400,000 Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds, No Opt. Call AAA 1,504,832
Series W, 5.500%, 7/01/15
5,500,000 Puerto Rico Public Buildings Authority, Revenue Guaranteed Refunding, No Opt. Call A 5,842,650
Series L, 5.500%, 7/01/21
250,000 Puerto Rico Public Buildings Authority, Revenue Guaranteed, Government 7/07 at 101 1/2 A 249,655
Facilities, Series B, 5.250%, 7/01/21
3,000,000 St. Louis, Missouri, Regional Convention and Sports Complex Authority, 8/03 at 102 A 3,097,890
Convention and Sports Facility Project, Refunding, Series B,
5.750%, 8/15/21
780,000 Saint Louis, Missouri, Land Clearance Redevelopment Authority, Revenue 7/07 at 101 AAA 792,028
Refunding, Kiel Site Lease, Series B, 5.300%, 7/01/16
St. Louis, Missouri, Regional Convention and Sports Complex Authority,
Convention and Sports Facility Project, Refunding, Series C:
1,660,000 5.300%, 8/15/17 8/07 at 100 AAA 1,685,000
4,000,000 5.300%, 8/15/20 8/07 at 100 AAA 4,046,160
45,000 St. Louis, Missouri, Regional Convention and Sports Complex Authority, 8/03 at 100 N/R 50,261
Convention and Sports Sports Facility Project, Series C of 1991,
7.900%, 8/15/21
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 4.5%
2,000,000 Puerto Rico Ports Authority, Special Facilities, American Airlines, 6/06 at 102 BBB- 2,166,040
Series A, 6.250%, 6/01/26 (Alternative Minimum Tax)
The City of St. Louis, Missouri, Airport Revenue Bonds, Series 1997
(1997 Capital Improvement Program), Lambert-St. Louis International
Airport:
285,000 5.250%, 7/01/22 (Alternative Minimum Tax) 7/07 at 101 AAA 283,829
4,500,000 5.250%, 7/01/27 (Alternative Minimum Tax) 7/07 at 101 AAA 4,479,840
4,050,000 Saint Louis, Missouri, Parking Facility, Revenue Refunding, 12/06 at 102 AAA 4,126,626
5.375%, 12/15/21
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed - 13.4%
$ 4,500,000 Cape Girardeau County, Missouri, Single Family Mortgage Revenue No Opt. Call Aaa $1,977,255
Bonds, Series 1983, 0.000%, 12/01/14
100,000 Public Water Supply District No. 2 of Cass County, Missouri, 10/98 at 101 N/R*** 102,439
Water System Refunding and Improvement Revenue Bonds, Series 1990,
8.000%, 10/01/10 (Pre-refunded to 10/01/98)
50,000 Clark County (Missouri), Consolidated Public Water Supply 12/98 at 101 N/R*** 51,629
District No. 1, Water Revenue Bonds, Series 1988, 8.250%, 12/01/15
(Pre-refunded to 12/01/98)
1,500,000 Clay County Public Building Authority, Leasehold Refunding and 5/02 at 102 N/R*** 1,711,980
Improvement Revenue Bonds, Series 1992 (Paradise Pointe Golf Course
Project), 7.625%, 5/15/14 (Pre-refunded to 5/15/02)
50,000 City of Concordia, Missouri, Combined Waterworks and Sewerage System 7/98 at 100 N/R*** 50,198
Revenue Bonds, Series 1988, 8.375%, 7/01/08 (Pre-refunded to 7/01/98)
50,000 DeKalb County, Missouri, Public Water Supply District No. 1, 1/99 at 101 N/R*** 51,721
Waterworks Revenue Refunding Bonds, Series 1989, 8.000%, 1/01/09
(Pre-refunded to 1/01/99)
2,070,000 Greene County, Missouri, Single Family Mortgage Revenue Bonds, No Opt. Call Aaa 838,495
Series 1984, 0.000%, 3/01/16
50,000 City of Hamilton, Missouri, Waterworks Revenue Bonds, Series 7/99 at 103 1/2 N/R*** 53,807
1989, 7.750%, 7/01/14 (Pre-refunded to 7/01/99)
4,000,000 City of Kansas City, Missouri, General Improvement Airport Revenue 9/04 at 101 AAA 4,617,360
Bonds, Series 1994 B, 6.875%, 9/01/14 (Pre-refunded to 9/01/04)
2,500,000 Kirkwood, Missouri, Industrial Development Authority, Health Care 7/02 at 102 N/R*** 2,754,550
Corporation Revenue, St. Joseph Hospital, 6.500%, 7/01/12
(Pre-refunded to 7/01/02)
50,000 Knox County, Missouri, Public Water Supply District No. 1, Water 1/99 at 101 N/R*** 51,735
System Revenue Refunding, 8.000%, 1/01/09 (Pre-refunded to 1/01/99)
50,000 Marion County, Missouri, Public Water Supply District No. 001, 1/99 at 101 1/2 N/R*** 52,046
Water Revenue Refunding, 8.250%, 1/01/12 (Pre-refunded to 1/01/99)
1,000,000 Missouri State Economic Development Export and Infrastructure Board, 5/02 at 100 N/R*** 1,106,270
Industrial Development Revenue, Community Water Company Inc. Project,
7.125%, 5/01/17 (Pre-refunded to 5/15/02) (Alternative Minimum Tax)
100,000 Missouri State Health and Educational Facilities Authority, 2/99 at 102 N/R*** 104,868
Health Facilities Revenue, Lake of the Ozarks Hospital, 8.000%,
2/15/11 (Pre-refunded to 2/15/99)
155,000 Missouri State Environmental Improvement and Energy Resource 10/00 at 102 N/R*** 168,045
Authority, Water Pollution Control Revenue, Revolving Fund, Series A,
7.000%, 10/01/10 (Pre-refunded to 10/01/00)
Phelps County, Missouri, Hospital Revenue, Phelps County Regular Medical
Center:
500,000 8.200%, 3/01/05 (Pre-refunded to 3/01/00) 3/00 at 102 AAA 545,060
1,250,000 8.300%, 3/01/20 (Pre-refunded to 3/01/00) 3/00 at 102 AAA 1,364,750
100,000 Pike County, Missouri, Public Water Supply District No. 1, Water 7/99 at 101 N/R*** 105,234
Revenue, 7.750%, 7/01/09 (Pre-refunded to 7/01/99)
St. Louis County, Missouri, Industrial Development Authority, Health
Facilities Revenue, Lutheran Health Care Association, Series A:
4,565,000 7.375%, 2/01/14 2/02 at 102 N/R 5,141,149
2,650,000 7.625%, 2/01/22 2/02 at 102 N/R 3,006,796
290,000 Certificates of Receipt, Series 1993, St. Louis County, Missouri, No Opt. Call AAA 312,055
GNMA Collateralized Mortgage Revenue Bonds, Series 1989A, 5.650%,
8/01/15 (Alternative Minimum Tax)
1,000,000 St. Louis County, Missouri, Regional Convention and Sports Complex 8/03 at 100 AAA 1,132,490
Authority, Series B, 7.000%, 8/15/11 (Pre-refunded to 8/15/03)
1,370,000 St. Louis, Missouri, Land Clearance Redevelopment Authority, Revenue 7/00 at 102 N/R*** 1,494,382
Lease, Redevelopment Project, 7.750%, 7/01/21
(Pre-refunded to 7/01/00)
3,975,000 St. Louis, Missouri, Parking Facility Revenue, 6.625%, 12/15/21 12/02 at 102 AA-*** 4,419,008
(Pre-refunded to 12/15/02)
955,000 St. Louis, Missouri, Regional Convention and Sports Complex 8/03 at 100 Aaa 1,121,428
Authority, Series C, 7.900%, 8/15/21 (Pre-refunded to 8/15/03)
445,000 St. Louis, Missouri, School District, 6.750%, 4/01/11 (Pre-refunded 10/01 at 102 AAA 490,733
to 10/01/01)
</TABLE>
19
<PAGE>
Portfolio of Investments
Nuveen Flagship Missouri Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed (continued)
Vandalia, Missouri, Water and Sewer System Revenue:
$ 50,000 7.625%, 4/01/06 (Pre-refunded to 4/01/00) 4/00 at 101 NR*** $ 53,732
50,000 7.625%, 4/01/07 (Pre-refunded to 4/01/00) 4/00 at 101 NR*** 53,732
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 7.3%
2,025,000 City of Higginsville, Missouri, Electric System Revenue Bonds, Series 6/03 at 101 AAA 2,248,175
1994A, 6.750%, 6/01/16
1,500,000 Missouri State Environmental Improvement and Energy Resource Authority, 5/00 at 102 AA- 1,616,775
Environmental Improvement Revenue, Union Electric Company Project,
Series A, 7.400%, 5/01/20
1,500,000 Puerto Rico Electric Power Authority, Power Revenue, Formerly Puerto Rico No Opt. Call AAA 588,720
Commonwealth Water Resource Authority, Series O, 0.000%, 7/01/17
2,000,000 City of Sikeston, Missouri, Electric System, 6.200%, 6/01/10 No Opt. Call AAA 2,307,680
City of Sikeston, Missouri, Electric System Revenue Refunding Bonds,
1996 Series:
2,750,000 6.000%, 6/01/13 No Opt. Call AAA 3,119,077
1,070,000 6.000%, 6/01/14 No Opt. Call AAA 1,211,004
6,000,000 6.000%, 6/01/16 No Opt. Call AAA 6,783,539
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 3.6%
50,000 Public Water Supply District No. 1 of Carroll County, Missouri, 3/99 at 101 N/R 52,050
Waterworks Revenue Refunding Bonds, Series 1989, 8.000%, 3/01/09
30,000 Public Water Supply District No. 6 Clay County, Missouri, Revenue No Opt. Call N/R 30,398
Bonds, Series 1988, 8.200%, 6/01/01
400,000 East Central, Missouri, Water and Sewer Authority, Water System 8/00 at 100 N/R 412,415
Refunding Revenue Bonds, Series 1992 (St. Charles County Public Water
Supply District No. 2 Project), 7.000%, 8/01/08
Missouri State Environmental Improvement and Energy Resource Authority,
Water Pollution Control Revenue, State Revolving Fund Program,
Series A:
595,000 7.000%, 10/01/10 10/00 at 102 Aa1 639,660
3,600,000 6.875%, 6/01/14 12/01 at 102 Aa1 3,958,235
2,000,000 6.550%, 7/01/14 7/02 at 102 Aa1 2,187,179
600,000 Missouri State Environmental Improvement and Energy Resource Authority, 7/04 at 102 Aa1 689,705
Water Pollution Control Revenue, State Revolving Fund Program,
Series B, 7.200%, 7/01/16
800,000 Missouri State Environmental Improvement and Energy Resource Authority, 1/07 at 101 Aa1 812,959
Water Pollution Control Revenue, State Revolving Fund Program,
Series E, 5.250%, 1/01/19
125,000 Osceola Township, Missouri, Public Schools Refunding and Improvement, 11/99 at 100 N/R 130,638
8.000%, 11/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
$243,740,000 Total Investments - (cost $226,951,176) - 99.1% 244,089,763
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.9% 2,336,781
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $246,426,544
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
20
See accompanying notes to financial statements.
<PAGE>
Portfolio of Investments
Nuveen Flagship Wisconsin Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Capital Goods - 2.1%
Menomonee Falls, Wisconsin, Community Development Authority, Development
Revenue, Herker Industries Inc. Project:
$ 255,000 5.200%, 3/01/07 3/01 at 103 NR $ 264,399
300,000 5.250%, 3/01/08 3/01 at 103 NR 311,199
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 3.9%
475,000 Housing Authority of the City of Ashland (Wisconsin), Student Housing 4/08 at 100 Aa3 472,155
Revenue Bonds, Series 1998 (Northland College Project), 5.100%, 4/01/18
600,000 University of Puerto Rico, University System Revenue Bonds, Series M, 6/05 at 101 1/2 AAA 605,568
5.250%, 6/01/25
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 6.2%
500,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental 7/05 at 102 AAA 556,850
Control Facilities Financing Authority, Hospital Revenue Bonds, 1995
Series A, (Hospital Auxilio Mutuo Obligated Group Project), 6.250%,
7/01/24
450,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental 8/05 at 101 1/2 AAA 490,131
Control Facilities Financing Authority, Hospital Revenue Refunding
Bonds, 1995 Series A, FHA Insured Mortgage-Doctor Pila Hospital
Project, 5.875%, 8/01/12
Superior, Wisconsin, Redevelopment Authority, Superior Memorial Hospital
Mortgage Revenue:
100,000 5.300%, 5/01/04 5/02 at 102 AA 105,486
210,000 5.300%, 11/01/04 5/02 at 102 AA 221,521
150,000 5.600%, 11/01/07 5/02 at 102 AA 158,664
175,000 5.700%, 11/01/09 5/02 at 102 AA 186,587
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 9.8%
Housing Authority of Dane County, Wisconsin, Multifamily Housing Revenue
Bonds (Forest Harbor Apartments Project):
25,000 5.900%, 7/01/12 No Opt. Call N/R 26,001
50,000 5.950%, 7/01/13 No Opt. Call N/R 51,734
50,000 6.000%, 7/01/14 No Opt. Call N/R 51,495
425,000 Madison, Wisconsin, Community Development Authority, Multifamily Housing 12/02 at 102 N/R 437,674
Revenue, Nichols Station Project, 4.950%, 12/01/07
200,000 Milwaukee, Wisconsin, Redevelopment Authority, Multifamily Housing 8/07 at 102 N/R 207,738
Revenue, 6.000%, 8/01/22 (Alternative Minimum Tax)
500,000 Housing Authority of the City of Sheboygan (Wisconsin), Multifamily No Opt. Call AAA 501,545
Revenue Refunding Bonds, Series 1998A (Lake Shore Apartments), 5.100%,
11/20/26 (DD)
300,000 Walworth County, Wisconsin, Housing Authority, Housing Revenue, 9/05 at 102 N/R 305,622
Kiwanis Heritage Senior Apartments, 5.550%, 9/01/22
Waukesha, Wisconsin, Housing Authority, Multifamily Revenue Refunding,
Westgrove Woods, Series A:
350,000 5.800%, 12/01/18 12/06 at 102 AAA 364,245
750,000 6.000%, 12/01/31 12/06 at 102 AAA 785,715
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 6.2%
1,000,000 Guam Housing Corporation, Single Family Mortgage Revenue Bonds No Opt. Call AAA 1,061,750
(Guaranteed Mortgage-Backed Securities Program), 1998 Series A, 5.750%,
9/01/31 (Alternative Minimum Tax) (DD)
300,000 Puerto Rico Housing Bank and Finance Agency, Affordable Housing Mortgage 4/05 at 102 AAA 317,277
Subsidy Program, Single Family Mortgage Revenue Bonds, Portfolio I,
6.250%, 4/01/29 (Alternative Minimum Tax)
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen Flagship Wisconsin Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Housing/Single Family (continued)
$ 300,000 Virgin Islands Housing Finance Authority, Single Family Mortgage Revenue 3/05 at 102 AAA $ 319,992
Refunding Bonds (GNMA Mortgage-Backed Securities Program), 1995
Series A, 6.450%, 3/01/16 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial/Other - 0.6%
150,000 Milwaukee Wisconsin Redevelopment Authority, Redevelopment Revenue 12/01 at 102 A+ 152,015
Refunding, Job Opportunity Veterans Housing, 4.500%, 12/01/02
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 10.6%
Sheboygan County, Wisconsin, Housing Authority, Housing Revenue
Refunding, Rocky Knoll Health Center Project:
150,000 5.300%, 12/01/17 2/04 at 100 A1 150,864
195,000 5.300%, 12/01/18 2/04 at 100 A1 196,028
395,000 5.300%, 12/01/19 2/04 at 100 A1 396,695
1,000,000 Superior, Wisconsin, Housing Authority, Housing Revenue Refunding, GNMA 7/04 at 102 N/R 1,044,120
Collateralized, St. Francis Project, 6.150%, 7/20/31
1,120,000 Waukesha County, Housing Authority, Housing Revenue Refunding Bonds, 12/03 at 102 N/R 1,125,678
Series 1998 (The Arboretum Project), 5.250%, 12/01/21 (Alternative
Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 1.6%
250,000 Government of Guam, General Obligation Bonds, Series 1993A, 5.400%, 11/03 at 102 BBB 251,518
11/15/18
200,000 Commonwealth of Puerto Rico, Public Improvement Refunding Bonds, Series 7/08 at 101 A 194,404
1998 (General Obligation Bonds), 5.000%, 7/01/26
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 47.5%
1,500,000 Community Development Authority of the City of Cudahy (Wisconsin), 6/06 at 100 N/R 1,592,880
Redevelopment Lease Revenue Bonds, Series 1995, 6.000%, 6/01/11
1,500,000 Community Development Authority of the City of Glendale, Wisconsin, 9/08 at 100 N/R 1,520,865
Community Development Lease Revenue Bonds, Series 1998A, 5.400%,
9/01/18
850,000 Government of Guam, Limited Obligation, Infrastructure Improvement Bonds, 11/07 at 102 AAA 851,437
1997 Series A, 5.000%, 11/01/17
300,000 Madison, Wisconsin, Community Development Authority, Lease Revenue, 3/05 at 100 Aa2 324,945
Monona Terrace Community & Convention Center Project, 6.100%, 3/01/10
200,000 Puerto Rico Aqueduct and Sewer Authority, Refunding Bonds, Series 1995, 7/06 at 101 1/2 A 197,280
Guaranteed by the Commonwealth of Puerto Rico, 5.000%, 7/01/15
320,000 Puerto Rico Highway and Transportation Authority, 6.625%, 7/01/12 7/02 at 101 1/2 A 351,517
600,000 Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds, 7/06 at 101 1/2 A 613,014
Series Y of 1996, 5.500%, 7/01/26
Puerto Rico Highway and Transportation Authority, Transportation
Revenue Bonds (Series A):
1,000,000 0.000%, 7/01/17 No Opt. Call AAA 392,480
800,000 5.000%, 7/01/38 7/08 at 101 A 773,120
750,000 Puerto Rico Infrastructure Financing Authority, Special Tax Revenue 1/08 at 101 AAA 749,963
Bonds, Series 1997A, 5.000%, 7/01/17
600,000 Puerto Rico Public Buildings Authority, Public Education and Health 7/03 at 101 1/2 A 629,178
Facilities, Refunding Bonds, Series M, Guaranteed by the Commonwealth
of Puerto Rico, 5.750%, 7/01/15
250,000 Puerto Rico Public Buildings Authority, Revenue Guaranteed, Government 7/07 at 101 1/2 A 249,655
Facilities, Series B, 5.250%, 7/01/21
750,000 Puerto Rico Municipal Finance Agency, 1997 Series A Bonds, 5.500%, 7/07 at 101 1/2 AAA 780,938
7/01/21
Southeast Wisconsin Professional Baseball Park District, Sales Tax
Revenue Bonds, Series 1996:
225,000 5.650%, 12/15/16 3/07 at 101 AAA 237,121
600,000 5.800%, 12/15/26 3/07 at 101 AAA 635,316
1,390,000 0.000%, 12/15/27 No Opt. Call AAA 298,850
1,000,000 0.000%, 12/15/29 No Opt. Call AAA 193,690
600,000 Virgin Islands Public Finance Authority, Revenue and Refunding Bonds No Opt. Call BBB- 612,648
(Virgin Islands Matching Fund Loan Notes), Series 1998A (Senior
Lien/Refunding), 5.625%, 10/01/25
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 500,000 Wauwatosa, Wisconsin, Redevelopment Authority,
Redevelopment Lease Revenue, 5.650%, 12/01/16 12/07 at 100 AAA $ 525,200
1,000,000 Wisconsin Center District, Junior Dedicated Tax Revenue
Bonds, Series 1996B, 5.700%, 12/15/20 12/06 at 101 A 1,050,270
1,500,000 Wisconsin Center District, Senior Dedicated Tax Revenue
Bonds, Series 1996A, 0.000%, 12/15/17 No Opt. Call AAA 548,940
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 2.0%
500,000 Puerto Rico Ports Authority, Special Facilities, American
Airlines, Series A, 6.250%, 6/01/26 (Alternative Minimum Tax) 6/06 at 102 BBB-- 541,510
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 3.0%
590,000 Commonwealth of Puerto Rico, Public Improvement Bonds of
1992 (General Obligation Bonds), 6.800%, 7/01/21 7/02 at 101 1/2 AAA 658,085
(Pre-refunded to 7/01/02)
145,000 Puerto Rico Electric Power Authority, Power Revenue Bonds,
Series 1994-T, 6.375%, 7/01/24 (Pre-refunded to 7/01/04) 7/04 at 102 BBB+*** 164,243
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 9.6%
315,000 Guam Power Authority, Revenue Bonds, 1992 Series A, 6.300%,
10/01/22 10/02 at 102 BBB 335,345
1,085,000 Guam Power Authority, Revenue Bonds, 1993 Series A, 5.250%,
10/01/23 10/03 at 102 BBB 1,080,400
115,000 Puerto Rico Electric Power Authority, Power Revenue Bonds,
Series T, 6.000%, 7/01/16 7/04 at 102 BBB+ 123,108
300,000 Puerto Rico Electric Power Authority, Power Revenue
Refunding Bonds, Series Z, 5.250%, 7/01/21 7/05 at 100 BBB+ 300,161
650,000 Puerto Rico Electric Power Authority, Power Revenue,
Formerly Puerto Rico Commonwealth Water Resource Authority, 7/07 at 101 1/2 AAA 667,738
Series Aa, 5.375%, 7/01/27
125,000 Puerto Rico Telephone Authority, Revenue Refunding, Series M,
5.400%, 1/01/08 1/03 at 101 1/2 A+ 131,247
- -----------------------------------------------------------------------------------------------------------------------------------
$30,985,000 Total Investments - (cost $27,294,958) -- 103.1% 28,445,814
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (3.1)% (845,286)
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $27,600,528
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
(DD) Security purchased on a delayed delivery basis (note 1).
N/R Investment is not rated.
See accompanying notes to financial statements.
23
<PAGE>
<TABLE>
Statement of Net Assets
May 31, 1998
Kansas Missouri Wisconsin
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $106,133,100 $244,089,763 $28,445,814
Cash 472,750 2,491,628 279,420
Receivables:
Fund manager (note 6) - - 4,557
Interest 1,573,029 4,725,350 495,109
Investments sold 237,283 1,765,000 -
Shares sold 168,563 465,271 46,592
Other assets 80,327 116,329 66,110
- --------------------------------------------------------------------------------------------------------------
Total assets 108,665,052 253,653,341 29,337,602
- --------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 967,500 5,948,125 1,555,881
Shares redeemed 551 46,390 204
Accrued expenses:
Management fees (note 6) 20,473 112,977 -
12b-1 distribution and service fees (notes 1 and 6) 20,724 47,850 6,204
Other 36,037 68,871 71,629
Dividends payable 435,570 1,002,584 103,156
- --------------------------------------------------------------------------------------------------------------
Total liabilities 1,480,855 7,226,797 1,737,074
- --------------------------------------------------------------------------------------------------------------
Net assets (note 7) $107,184,197 $246,426,544 $27,600,528
==============================================================================================================
Class A Shares (note 1)
Net assets $102,217,421 $233,455,834 $24,313,150
Shares outstanding 9,639,611 20,784,676 2,364,737
Net asset value and redemption price per share $ 10.60 $ 11.23 $ 10.28
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 11.06 $ 11.72 $ 10.73
==============================================================================================================
Class B Shares (note 1)
Net assets $ 3,238,244 $ 1,676,639 $ 1,876,615
Shares outstanding 307,137 149,327 182,067
Net asset value, offering and redemption price per share $ 10.54 $ 11.23 $ 10.31
==============================================================================================================
Class C Shares (note 1)
Net assets $ 1,716,435 $ 11,252,740 $ 1,366,111
Shares outstanding 161,520 1,002,467 132,611
Net asset value, offering and redemption price per share $ 10.63 $ 11.23 $ 10.30
==============================================================================================================
Class R Shares (note 1)
Net assets $ 12,097 $ 41,331 $ 44,652
Shares outstanding 1,135 3,679 4,330
Net asset value, offering and redemption price per share $ 10.66 $ 11.23 $ 10.31
==============================================================================================================
</TABLE>
24
See accompanying notes to financial statements.
<PAGE>
Statement of Operations
Year Ended May 31, 1998
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- ---------------------------------------------------------------------------------------------------------------
Investment Income (note 1) $5,711,239 $14,170,504 $1,062,047
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses
Management fees (note 6) 551,883 1,308,176 107,940
12b-1 service fees -- Class A (notes 1 and 6) 195,749 458,460 36,486
12b-1 distribution and service fees -- Class B (notes 1 and 6) 16,985 10,095 7,440
12b-1 distribution and service fees -- Class C (notes 1 and 6) 5,028 76,058 3,884
Shareholders' servicing agent fees and expenses 48,593 120,053 18,697
Custodian's fees and expenses 38,453 81,398 38,093
Trustees' fees and expenses (note 6) 1,829 4,384 263
Professional fees 16,775 18,600 9,475
Shareholders' reports -- printing and mailing expenses 21,285 50,534 5,851
Federal and state registration fees 6,931 12,005 12,442
Organizational expenses (note 1) 8,578 -- 32,704
Other expenses 4,787 10,155 790
- ---------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 916,876 2,149,918 274,065
Expense reimbursement (note 6) (191,060) -- (156,639)
- ---------------------------------------------------------------------------------------------------------------
Net expenses 725,816 2,149,918 117,426
- ---------------------------------------------------------------------------------------------------------------
Net investment income 4,985,423 12,020,586 944,621
- ---------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 219,884 1,812,321 1,965
Net change in unrealized appreciation or depreciation of investments 3,771,101 7,426,322 867,069
- ---------------------------------------------------------------------------------------------------------------
Net gain from investments 3,990,985 9,238,643 869,034
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $8,976,408 $21,259,229 $1,813,655
===============================================================================================================
</TABLE>
25
See accompanying notes to financial statements.
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Kansas Missouri
----------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended
5/31/98 5/31/97* 5/31/98 5/31/97**
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 4,985,423 $ 5,063,970 $ 12,020,586 $ 11,733,686
Net realized gain from investment transactions (notes 1 and 4) 219,884 220,983 1,812,321 2,027,744
Net change in unrealized appreciation or depreciation of investments 3,771,101 3,281,763 7,426,322 4,099,492
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 8,976,408 8,566,716 21,259,229 17,860,922
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (4,879,573) (5,060,117) (11,520,934) (11,399,739)
Class B (74,108) (3,064) (44,804) (2,345)
Class C (28,659) (787) (452,917) (327,591)
Class R (638) (1) (2,126) (457)
- ----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (4,982,978) (5,063,969) (12,020,781) (11,730,132)
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 19,450,846 10,132,032 29,016,642 27,511,231
Net proceeds from shares issued to shareholders due to reinvestment
of distributions 2,514,735 2,363,978 6,950,162 5,920,821
- ----------------------------------------------------------------------------------------------------------------------------------
21,965,581 12,496,010 35,966,804 33,432,052
- ----------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (15,361,968) (16,105,371) (26,158,524) (31,119,487)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions 6,603,613 (3,609,361) 9,808,280 2,312,565
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 10,597,043 (106,614) 19,046,728 8,443,355
Net assets at the beginning of year 96,587,154 96,693,768 227,379,816 218,936,461
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $107,184,197 $96,587,154 $246,426,544 $227,379,816
- ----------------------------------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end of year $ 2,446 $ 1 $ 3,359 $ 3,554
==================================================================================================================================
</TABLE>
*Information represents eight months of Flagship Kansas and four months of
Kansas (note 1).
**Information represents eight months of Flagship Missouri and four months of
Missouri (note 1).
26 See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Wisconsin
--------------------------
Year Ended Year Ended
5/31/98 5/31/97*
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 944,621 $ 695,732
Net realized gain from investment transactions (notes 1 and 4) 1,965 56,143
Net change in unrealized appreciation or depreciation of investments 867,069 197,701
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 1,813,655 949,576
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (888,945) (695,122)
Class B (30,662) (113)
Class C (21,939) (292)
Class R (2,181) (179)
- --------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (943,727) (695,706)
- --------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 13,525,996 3,122,525
Net proceeds from shares issued to shareholders due to reinvestment
of distributions 586,627 436,454
- --------------------------------------------------------------------------------------------------------------------------------
14,112,623 3,558,979
- --------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (1,522,817) (2,042,200)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 12,589,806 1,516,779
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 13,459,734 1,770,649
Net assets at the beginning of year 14,140,794 12,370,145
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $27,600,528 $14,140,794
- --------------------------------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end of year $ 920 $ 26
================================================================================================================================
</TABLE>
*Information represents eight months of Flagship Wisconsin and four months of
Wisconsin (note 1).
27 See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust IV (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Kansas Municipal Bond Fund, the Nuveen
Flagship Missouri Municipal Bond Fund and the Nuveen Flagship Wisconsin
Municipal Bond Fund (the "Funds"), among others. The Trust was organized as a
Massachusetts business trust on July 1, 1996.
The John Nuveen Company ("Nuveen"), parent of John Nuveen & Co. Incorporated and
Nuveen Advisory Corp., respectively, the distributor ("Distributor") and
investment advisor ("Adviser") of the Funds, entered into an agreement under
which Nuveen acquired Flagship Resources Inc. and after the close of business on
January 31, 1997, consolidated their respective mutual fund businesses. This
agreement was approved at a meeting by the shareholders of the Flagship Funds in
December 1996.
After the close of business on January 31, 1997, Flagship Kansas Triple Tax
Exempt Fund ("Flagship Kansas"), Flagship Missouri Double Tax Exempt Fund
("Flagship Missouri") and Flagship Wisconsin Double Tax Exempt Fund ("Flagship
Wisconsin") reorganized into the Trust and were renamed Nuveen Flagship Kansas
Municipal Bond Fund ("Kansas"), Nuveen Flagship Missouri Municipal Bond Fund
("Missouri") and Nuveen Flagship Wisconsin Municipal Bond Fund ("Wisconsin").
Prior to these reorganizations, Flagship Kansas, Flagship Missouri and Flagship
Wisconsin were each sub-trusts of the Flagship Tax Exempt Funds Trust.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1998, Kansas and Wisconsin had outstanding delayed delivery purchase
commitments of $967,500 and $1,555,881, respectively. Missouri had no such
outstanding purchase commitments.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
28
<PAGE>
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, the Funds intend to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Funds. All
monthly tax-exempt income dividends paid during the fiscal year ended May 31,
1998, have been designated Exempt Interest Dividends. Net realized capital gain
and market discount distributions are subject to federal taxation.
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Funds are authorized to invest in such
financial instruments, and may do so in the future, they did not make any such
investments during the fiscal year ended May 31, 1998.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
Organizational Expenses
The organizational expenses incurred on behalf of Kansas and Wisconsin
(approximately $42,800 and $98,000, respectively) are being reimbursed to the
Adviser on a straight-line basis over a period of five years and three years,
respectively. As of May 31, 1998, all of the organizational expenses of Kansas
and $65,392 of the organizational expenses of Wisconsin have been reimbursed.
29
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
2. Fund Shares
Transactions in Fund shares were as follows:
Kansas
--------------------------------------------------------
Year Ended Year Ended
5/31/98 5/31/97*
--------------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,446,744 $ 15,169,400 928,359 $ 9,305,649
Class B 246,506 2,575,382 73,398 736,214
Class C 154,351 1,624,614 8,890 90,069
Class R 7,647 81,450 10 100
Shares issued to shareholders due to reinvestment of distributions:
Class A 235,108 2,451,515 235,563 2,363,224
Class B 4,460 46,453 52 523
Class C 1,567 16,481 23 231
Class R 27 286 - -
- ----------------------------------------------------------------------------------------------------------------------------------
2,096,410 21,965,581 1,246,295 12,496,010
- ----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,456,152) (15,220,254) (1,587,941) (15,969,039)
Class B (3,593) (37,812) (13,686) (136,313)
Class C (3,309) (34,615) (2) (19)
Class R (6,549) (69,287) - -
- ----------------------------------------------------------------------------------------------------------------------------------
(1,469,603) (15,361,968) (1,601,629) (16,105,371)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 626,807 $ 6,603,613 (355,334) $ (3,609,361)
==================================================================================================================================
</TABLE>
* Information represents eight months of Flagship Kansas and four months
of Kansas (note 1).
<TABLE>
<CAPTION>
--------------------------------------------------------
Missouri
--------------------------------------------------------
Year Ended Year Ended
5/31/98 5/31/97*
--------------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 2,105,625 $ 23,418,825 2,299,753 $ 24,630,274
Class B 131,214 1,466,418 41,987 449,235
Class C 371,741 4,116,750 223,861 2,397,622
Class R 1,309 14,649 3,129 34,100
Shares issued to shareholders due to reinvestment of distributions:
Class A 594,998 6,583,121 537,641 5,747,970
Class B 2,790 31,032 38 410
Class C 30,239 333,908 16,119 172,138
Class R 189 2,101 28 303
- ----------------------------------------------------------------------------------------------------------------------------------
3,238,105 35,966,804 3,122,556 33,432,052
- ----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,183,973) (24,315,900) (2,814,290) (30,112,429)
Class B (26,702) (298,879) - -
Class C (137,556) (1,532,745) (94,304) (1,007,058)
Class R (976) (11,000) - -
- ----------------------------------------------------------------------------------------------------------------------------------
(2,349,207) (26,158,524) (2,908,594) (31,119,487)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase 888,898 $ 9,808,280 213,962 $ 2,312,565
==================================================================================================================================
</TABLE>
* Information represents eight months of Flagship Missouri and four months of
Missouri (note 1).
30
<PAGE>
<TABLE>
<CAPTION>
Wisconsin
------------------------------------------------
Year Ended Year Ended
5/31/98 5/31/97*
------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,023,987 $10,392,120 307,424 $ 2,987,828
Class B 185,214 1,883,674 2,074 20,074
Class C 123,287 1,250,046 7,750 75,100
Class R 15 156 4,100 39,523
Shares issued to shareholders due to reinvestment of distributions:
Class A 54,801 552,761 44,825 436,398
Class B 1,536 15,642 6 56
Class C 1,578 16,051 -- --
Class R 215 2,173 -- --
- ----------------------------------------------------------------------------------------------------------------------
1,390,633 14,112,623 366,179 3,558,979
- ----------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (143,260) (1,453,452) (210,809) (2,042,200)
Class B (6,763) (69,320) -- --
Class C (4) (45) -- --
Class R -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
(150,027) (1,522,817) (210,809) (2,042,200)
- ----------------------------------------------------------------------------------------------------------------------
Net increase 1,240,606 $12,589,806 155,370 $ 1,516,779
======================================================================================================================
</TABLE>
* Information represents eight months of Flagship Wisconsin and four months of
Wisconsin (note 1).
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on July 1, 1998, to shareholders of record on June 9,
1998, as follows:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- ----------------------------------------------------------------------------------------------------------------------
Dividend per share:
<S> <C> <C> <C>
Class A $.0435 $.0460 $.0410
Class B .0370 .0390 .0345
Class C .0390 .0410 .0365
Class R .0455 .0480 .0425
======================================================================================================================
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the
fiscal year ended May 31, 1998, were as follows:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Investments in municipal securities $19,358,336 $55,222,172 $15,677,135
Temporary municipal investments 8,950,000 8,100,000 995,000
Sales:
Investments in municipal securities 12,959,173 45,224,191 2,045,703
Temporary municipal investments 8,950,000 8,100,000 995,000
======================================================================================================================
</TABLE>
At May 31, 1998, the identified cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes for each
Fund.
31
<PAGE>
Notes to Financial Statements (continued)
At May 31, 1998, the Funds had unused capital loss carryforwards available for
federal income tax purposes to be applied against future capital gains, if any.
If not applied, the carryforwards will expire as follows:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Expiration Year:
2003 $4,627,546 $736,992 $ --
2004 -- -- 5,196
- --------------------------------------------------------------------------------
Total $4,627,546 $736,992 $5,196
================================================================================
</TABLE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 1998, were as follows:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $8,300,163 $17,162,969 $1,162,798
depreciation (1,293) (24,382) (11,942)
- --------------------------------------------------------------------------------
Net unrealized appreciation $8,298,870 $17,138,587 $1,150,856
================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
================================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily agree to reimburse expenses from time to time, which
may be terminated at any time at its discretion.
During the fiscal year ended May 31, 1998, the Distributor 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>
Kansas Missouri Wisconsin
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales charges collected $254,644 $490,201 $142,514
Paid to authorized dealers 219,160 453,757 123,537
================================================================================
</TABLE>
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the fiscal year ended May 31, 1998, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Commission advances $152,007 $132,387 $137,667
================================================================================
</TABLE>
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees on Class B Shares, and all 12b-1 service and
distribution fees on Class C Shares during the first year following a purchase
are retained by the Distributor. During the fiscal year ended May 31, 1998, the
Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 fees retained $21,850 $40,388 $11,270
================================================================================
</TABLE>
The remaining 12b-1 fees charged to the Funds were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
32
<PAGE>
The Distributor also collected and retained CDSC on share redemptions during the
fiscal year ended May 31, 1998, as follows:
<TABLE>
<CAPTION>
Kansas Missouri Wisconsin
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CDSC retained $ 1,624 $ 20,845 $ 2,884
============================================================================================================================
7. Composition of Net Assets
At May 31, 1998, the Funds had an unlimited number of $.01 par
value shares authorized. Net assets consisted of:
Kansas Missouri Wisconsin
- ----------------------------------------------------------------------------------------------------------------------------
Capital paid-in $103,514,845 $230,030,926 $26,453,948
Balance of undistributed net investment income 2,446 3,359 920
Accumulated net realized gain (loss) from investment transactions (4,631,964) (746,328) (5,196)
Net unrealized appreciation of investments 8,298,870 17,138,587 1,150,856
- ----------------------------------------------------------------------------------------------------------------------------
Net assets $107,184,197 $246,426,544 $27,600,528
============================================================================================================================
</TABLE>
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------------- ------------------------------
Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
May 31, Value Income (a) Gain (Loss) Total Income Gain Total Value Return (b)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
KANSAS**
Class A (1/92)
1998 $10.19 $.52 $ .41 $ .93 $(.52) $ -- $(.52) $10.60 9.32%
1997 9.83 .53 .36 .89 (.53) -- (.53) 10.19 9.21
1996 10.01 .54 (.18) .36 (.54) -- (.54) 9.83 3.63
1995 9.83 .55 .18 .73 (.55) -- (.55) 10.01 7.80
1994 10.38 .56 (.46) .10 (.58) (.07)+ (.65) 9.83 .62
Class B (2/97)
1998 10.13 .44 .41 .85 (.44) -- (.44) 10.54 8.57
1997 (c) 10.23 .13 (.12) .01 (.11) -- (.11) 10.13 .13
Class C (2/97)
1998 10.21 .47 .42 .89 (.47) -- (.47) 10.63 8.85
1997 (c) 10.18 .15 .04 .19 (.16) -- (.16) 10.21 1.85
Class R (2/97)
1998 10.22 .56 .43 .99 (.55) -- (.55) 10.66 9.84
1997 (c) 10.20 .18 (.02) .16 (.14) -- (.14) 10.22 1.55
- -----------------------------------------------------------------------------------------------------------------------------------
MISSOURI***
Class A (8/87)
1998 $10.80 $.56 $ .43 $ .99 $(.56) $ -- $(.56) $11.23 9.32%
1997 10.51 .56 .29 .85 (.56) -- (.56) 10.80 8.29
1996 10.72 .58 (.21) .37 (.58) -- (.58) 10.51 3.51
1995 10.50 .60 .22 .82 (.60) -- (.60) 10.72 8.19
1994 10.87 .61 (.34) .27 (.61) (.03)+ (.64) 10.50 2.42
Class B (2/97)
1998 10.80 .47 .44 .91 (.48) -- (.48) 11.23 8.53
1997 (c) 10.81 .16 (.01) .15 (.16) -- (.16) 10.80 1.40
Class C (2/94)
1998 10.80 .50 .43 .93 (.50) -- (.50) 11.23 8.74
1997 10.50 .51 .29 .80 (.50) -- (.50) 10.80 7.80
1996 10.72 .51 (.21) .30 (.52) -- (.52) 10.50 2.84
1995 10.50 .53 .23 .76 (.54) -- (.54) 10.72 7.60
1994 (c) 11.33 .02 (.83) (.81) (.02) -- (.02) 10.50 (17.62)*
Class R (2/97)
1998 10.80 .58 .43 1.01 (.58) -- (.58) 11.23 9.56
1997 (c) 10.90 .17 (.12) .05 (.15) -- (.15) 10.80 .43
- -----------------------------------------------------------------------------------------------------------------------------------
WISCONSIN****
Class A (6/94)
1998 $ 9.80 $.49 $ .49 $ .98 $(.50) $ -- $(.50) $10.28 10.19%
1997 9.61 .51 .19 .70 (.51) -- (.51) 9.80 7.40
1996 9.79 .50 (.18) .32 (.50) -- (.50) 9.61 3.35
1995 (c) 9.58 .49 .21 .70 (.49) -- (.49) 9.79 7.36*
Class B (2/97)
1998 9.82 .42 .49 .91 (.42) -- (.42) 10.31 9.46
1997 (c) 9.87 .12 (.06) .06 (.11) -- (.11) 9.82 .60
Class C (2/97)
1998 9.82 .44 .49 .93 (.45) -- (.45) 10.30 9.59
1997 (c) 9.87 .13 (.07) .06 (.11) -- (.11) 9.82 .65
Class R (2/97)
1998 9.82 .53 .48 1.01 (.52) -- (.52) 10.31 10.47
1997 (c) 9.87 .15 (.07) .08 (.13) -- (.13) 9.82 .84
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio Investment Ratio Investment
of Expenses Income to of Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before Before Before Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets (000) ment ment ment ment Rate
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 102,217 .90% 4.79% .71% 4.98% 13%
95,891 1.03 4.89 .68 5.24 40
96,694 1.08 4.80 .57 5.31 55
83,683 1.10 5.11 .54 5.67 72
80,060 1.06 4.57 .26 5.37 93
3,238 1.65 4.02 1.45 4.22 13
605 1.65* 4.24* 1.27* 4.62* 40
1,716 1.44 4.21 1.24 4.41 13
91 1.45* 4.49* 1.09* 4.85* 40
12 .70 4.97 .51 5.16 13
- .08* 6.53* - 6.61* 40
=======================================================================================
$ 233,456 .87% 5.02% .87% 5.02% 19%
218,924 1.00 5.13 .86 5.27 41
212,717 1.05 5.12 .80 5.37 38
205,089 1.08 5.37 .67 5.78 40
187,347 1.06 5.08 .62 5.52 34
1,677 1.62 4.25 1.62 4.25 19
454 1.62* 4.42* 1.45* 4.59* 41
11,253 1.42 4.47 1.42 4.47 19
7,968 1.55 4.57 1.40 4.72 41
6,220 1.60 4.54 1.35 4.79 38
3,989 1.63 4.76 1.20 5.19 40
1,877 1.61* 3.98* 1.15* 4.44* 34
41 .67 5.22 .67 5.22 19
34 .67* 5.53* .55* 5.65* 41
=======================================================================================
$ 24,313 1.36% 4.06% .55% 4.87% 10%
14,004 1.61 4.10 .51 5.20 42
12,370 1.51 4.15 .64 5.02 47
8,278 2.31* 3.33* .39* 5.25 52
1,877 2.08 3.28 1.32 4.04 10
20 2.18* 3.57* .94* 4.81* 42
1,366 1.89 3.47 1.11 4.25 10
76 1.98* 3.62* .69* 4.91* 42
45 1.12 4.28 .32 5.08 10
40 1.28* 4.39* - 5.67* 42
=======================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Kansas.
*** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Missouri.
**** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Wisconsin.
+ The amounts shown reflect distributions in excess of capital gains
of $.05 per share for Kansas and $.01 per share for Missouri.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total Returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
35
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
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, experienced, professional
security selection and surveillance and daily liquidity at that day's net asset
value for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred/R/
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
36
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and Shareholder Services
As of August 8, 1998
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius, LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
37
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time -- 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 current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
1898
NUVEEN 1998
OUR SECOND CENTURY
helping investors sustain the wealth of a life time.(TM)
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
<PAGE>
NUVEEN
Municipal
Bond Funds
May 31, 1998
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Kentucky
Kentucky
Limited
Michigan
Ohio
<PAGE>
Highlights
As of May 31, 1998
For Class A shares on net asset value
Credit Quality Performance Highlights
Nuveen Flagship Kentucky Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 52% . Taxable equivalent yield of 6.61%*
AA 6% . Outperformed Lipper peer group average
for the one-year period
A 24% . One-year total return of 9.00%
BBB/NR 18%
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 45% . Steady dividend for 12 consecutive months
AA 19% . Outperformed Lipper peer group average
for the one-year period
A 25% . One-year total return of 6.53%
BBB/NR 11%
Nuveen Flagship Michigan Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 54% . Taxable equivalent yield of 6.48%*
AA 19% . Outperformed Lipper peer group average
for the one-year period
A 14% . One-year total return of 8.95%
BBB/NR 13%
Nuveen Flagship Ohio Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 68% . Taxable equivalent yield of 6.14%*
AA 7% . Outperformed Lipper peer group average
for the one-year period
A 12% . One-year total return of 8.76%
BBB/NR 13%
Contents
1 Dear Shareholder
4 Kentucky Commentary
and Overview
6 Kentucky Limited Term
Commentary and Overview
8 Michigan Commentary
and Overview
10 Ohio Commentary
and Overview
12 Report of Independent
Public Accountants
13 Portfolio of Investments
40 Statement of Net Assets
41 Statement of Operations
42 Statement of Changes in Net Assets
44 Notes to Financial Statements
51 Financial Highlights
56 Building Better Portfolios
57 Fund Information
* For investors in the 31% federal and applicable state income tax bracket.
See your fund's performance overview in this report for more information.
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes
a lifetime
to build.
Once achieved,
it should be
preserved.
I'm pleased to share with you this performance report for your Nuveen municipal
bond fund. Over the past 12 months, each of the funds in this report continued
to perform well and meet their objectives of providing you with attractive tax-
free income and strong after-tax total returns.
For many of our shareholders, this annual report represents the first time you
have received a consolidated report covering performance data for other Nuveen
funds in addition to your own. These consolidated reports are part of our
continuing efforts to control fund expenses; we achieve greater economies of
scale for our shareholders through reducing paper, printing and mailing costs.
By consolidating reports by region and incorporating several funds into one
booklet, we have lowered these administrative expenses and made owning shares in
a Nuveen fund more cost-efficient for you.
The Economy in Review
Fixed-income investments enjoyed bullish performance over the past year, as
declining interest rates and low inflation spurred a bond market rally.
The equity markets also exhibited continued strength despite recent volatility
sparked by Asia's financial problems and their possible effects on U.S.
corporate earnings. Although interest rates have trended slightly upward in
recent months, a year-to-date comparison shows that today's rates are
significantly lower than they were one year ago. As shown in the accompanying
chart, between the end of May 1997 and May 1998, the yield on the Bond Buyer 40,
an unmanaged index of long-term municipal bonds, fell from 5.74% to 5.22%.
Much of the decline in interest rates resulted from expectations that the
financial problems of Asia would restrain the prices of imported goods and
reduce foreign demand for U.S. products and services, thereby keeping inflation
at moderate levels. These inflation expectations were largely fulfilled, as the
Consumer Price Index rose only 1.5% for the 12 months ended May 1998, remaining
at one of
1
<PAGE>
"Another major factor in bond performance over the last 12 months was the
continued strength of the U.S. economy, which helped boost the credit quality
of many municipal bonds."
its lowest levels in years. The Asian situation also provided additional
strength to the bond market rally, as many investors made a "flight to quality"
by moving assets into high-quality U.S. bonds in the face of the uncertainty in
that region.
In coming months, we will continue to watch closely several key factors that are
likely to affect the future of the economy, including the demand for goods and
services, the availability of qualified employees, the strength of the dollar,
and indications from the Federal Reserve. With many investors still waiting for
the full impact of Asia's difficulties to show up in U.S. economic statistics,
the potential long-term effect of this crisis on American markets continues to
cause concern. We expect that the development of these factors will continue to
influence the tone of the fixed-income markets during the remainder of the year.
Municipal Market Review
As interest rates continued to decline over the past year, bond prices rose.
This price appreciation for the bonds in our portfolios contributed to strong
total returns for the year.
Another major factor in bond performance over the last 12 months was the
continued strength of the U.S. economy, which helped boost the credit quality of
many municipal bonds. With the improvements in the fundamental financial health
of many municipalities and revenue projects financed by bonds, major credit
rating agencies upgraded the credit quality of thousands of issuers over the
past year, while downgrading relatively few. These boosts in credit quality also
contributed to the funds' performance as upgraded bonds increased in value.
The combination of low interest rates and a strong economy set new issuance on a
record pace and stimulated a dramatic increase in the refinancing of existing
bonds as issuers sought to lower their interest costs. The first quarter of 1998
saw $68 billion of new municipal issuance, up 70% from the same period in 1997.
The flood of new issues continued with May's long-awaited sale of the first
segment of Long Island (New York) Power Authority's $7 billion offering, the
largest issuance in municipal bond history. Although the nationwide supply of
municipal bonds remained heavy, the supply of bonds in each state varied
according to local economic conditions. This level of issuance highlights the
value of Nuveen's expertise in the municipal market, as our portfolio management
teams worked diligently to sift through the available issues to select those
undervalued securities that would help the funds achieve their investment
objectives.
2
<PAGE>
"Today, more than ever, you can count on Nuveen for a wide range of investments
that can help you build a well-balanced portfolio designed to achieve your
financial goals."
Diversification: The Key to a Better Portfolio
In view of current market conditions, we believe that investors will find
diversification to be an increasingly important investment strategy in the
months ahead. An appropriately diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can help
cushion your portfolio against volatility and enhance your return potential.
Many investors select Nuveen's municipal bond funds because their emphasis on
dependable tax-free income and attractive after-tax returns makes them ideal for
building and sustaining long-term financial security. These funds also work well
with other Nuveen investments to create the foundation of a diversified, well-
balanced portfolio. In fact, recent studies by Nuveen Research have found that
portfolios combining municipal bonds and stocks generated higher after-tax
returns with lower levels of risk than similar portfolios combining stocks and
Treasury or corporate bonds.
We encourage you to talk to your financial adviser about Nuveen's range of
equity and balanced funds, including the Nuveen European Value Fund. This new
equity mutual fund offers a portfolio of quality European company stocks for
investors seeking long-term growth potential and international diversification.
The fund is just one of an ever-expanding range of Nuveen products and services
designed to help investors achieve diversification while building a tax-
efficient, risk-sensitive investment portfolio. If you'd like to learn more
about the Nuveen European Value Fund or any of our other investments, contact
your financial adviser or call Nuveen Investor Services at (800) 257-8787 for a
prospectus. Please read the information carefully before you invest.
When seeking quality investment solutions that withstand the test of time, we
hope that you continue to think of Nuveen. Today, more than ever, you can count
on Nuveen for a wide range of investments that can help you build a well-
balanced portfolio designed to achieve your financial goals. We thank you for
your continued confidence in us and our family of investments.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1998
3
<PAGE>
Nuveen Flagship Kentucky Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Rick Huber discusses fund performance, the municipal market,
and key investment strategies for the Kentucky fund.
Comments cover the one-year period ended May 31, 1998 and all performance
statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Kentucky's stable financial and economic conditions continued through the first
half of 1998, as recognized by the state's AA credit rating from Standard &
Poor's. Although Kentucky has not issued general obligation debt since 1965, the
state actively issues appropriation-secured debt from several different
agencies--all of which totaled $3 billion in issuance at fiscal year-end.
The commonwealth's new issue volume was up almost 15% during the first quarter
of 1998. Municipal bond investors anticipate a number of statewide projects
authorized for the 1996-1998 biennium, including $103 million of new debt to
fund new juvenile detention centers, state parks, and university projects. In
spite of this increased supply, good values were hard to find, as yield spreads
remained narrow between lower- and higher-rated securities.
Fund Performance
For the year ended May 31, 1998, the total return on net asset value for the
Kentucky Municipal Bond Fund was 9.00%, which is equivalent to a taxable return
of 11.93% for investors in the 35.1% combined federal and state income tax
bracket. The fund slightly underperformed the annual return of 9.38% posted by
the Lehman Brothers Municipal Bond Index, but surpassed its Lipper peer group
average of 8.55%. The discrepancy between the national Lehman Index and the
Lipper peer group average of Kentucky municipal bond funds highlights the
effects of the tight supply of long-term bonds in the Kentucky market. The
limited supply and high demand keep bond prices high and yields low compared
with other states that have better bond supplies to meet investor demand.
The fund maintained a portfolio duration similar to its benchmark (a 6.41
duration), which helped keep its performance in line with its peers despite the
difficulty in finding value in the market. Duration is a measure of the fund's
price volatility in relation to changes in interest rates.
Key Strategies
We worked during the year to improve the fund's diversification among different
sectors of the market and investment-grade credit quality levels. To that end,
we focused on reducing the fund's holdings in the health care sector, and at the
same time found attractive opportunities in some bonds issued by U.S.
territories (which are exempt from both federal and Kentucky state income
taxes). We also moved to improve the portfolio's protection against bond calls,
which decreases the likelihood that higher-paying bonds will be called away if
interest rate conditions change.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
As of May 31, 1998, the fund's key sectors were limited tax obligation and
health care bonds, each of which comprised 23% of the portfolio. Other important
areas included utility bonds at 10% and U.S. guaranteed bonds at 9%.
Outlook for the Future
On July 1, 1998, Nuveen made several changes in the management of its mutual
funds to make more efficient use of staff resources and portfolio manager
expertise. As a result, Tom O'Shaughnessy assumed management responsibilities
for this fund. Tom is a 15-year veteran of Nuveen and an experienced investment
professional who has managed a range of other municipal bond funds.
Tom and his team anticipate a continued healthy state economy, which might
translate into strong bond supply in late 1998 or 1999. Until lower-rated bonds
offer more competitive yields, they will continue to seek value from small,
higher-rated bond issues. At the same time, they will continue to reduce the
fund's holdings in the health care sector and, in the event that bond supplies
and yield spreads improve, will attempt to extend portfolio duration somewhat.
4
<PAGE>
<TABLE>
<CAPTION>
Nuveen Flagship Kentucky Municipal Bond Fund
Performance Overview
As of May 31, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
<S> <C>
0.0495 6/97
0.0495 7/97
0.0495 8/97
0.0495 9/97
0.0495 10/97
0.0495 11/97
0.0495 12/97
0.0475 1/98
0.0475 2/98
0.0475 3/98
0.0475 4/98
0.0475 5/98
</TABLE>
<TABLE>
<CAPTION>
Top 5 Sectors
<S> <C>
Tax Obligation (Limited) 23%
Health Care 23%
Utilities 10%
U.S. Guaranteed 9%
Water and Sewer 6%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 5/87 2/97 10/93 2/97
Net Asset Value $11.39 $11.39 $11.38 $ 11.37
Fund Net Assets ($000) $484,917
Average Weighted Maturity (Years) 20.33
Average Weighted Duration (Years) 6.41
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/2/
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 9.00% 4.46% 8.10% 8.43% 9.25%
5-Year 6.40% 5.50% 5.77% 5.81% 6.43%
10-Year 8.45% 7.98% 7.97% 7.85% 8.46%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Distribution Rate 5.00% 4.79% 4.27% 4.48% 5.22%
SEC 30-Day Yield 4.29% 4.11% 3.55% 3.75% 4.49%
Taxable Equivalent Yield/3/ 6.61% 6.33% 5.47% 5.78% 6.92%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Index Comparison/4/
NUVEEN FLAGSHIP KENTUCKY NUVEEN FLAGSHIP KENTUCKY LEHMAN BROTHERS
MUNICIPAL BOND FUND (NAV) MUNICIPAL BOND OFFER (OFFER) MUNICIPAL BOND INDEX
<S> <C> <C> <C>
5/88 10,000 9,580 10,000
5/89 11,415 10,936 11,149
5/90 12,143 11,633 11,965
5/91 13,403 12,840 13,171
5/92 14,677 14,060 14,466
5/93 16,497 15,804 16,195
5/94 16,813 16,107 16,595
5/95 18,397 17,625 18,107
5/96 19,141 18,337 18,934
5/97 20,645 19,778 20,505
5/98 22,501 21,556 22,430
</TABLE>
Lehman Brothers Municipal Bond Index $22,430
Nuveen Flagship Kentucky Municipal Bond Fund (NAV) $22,501
Nuveen Flagship Kentucky Municipal Bond Fund (Offer) $21,556
Past performance is not predictive of future results.
1 The fund also paid shareholders taxable distributions in December of
$0.0508 per share.
2 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
3 Based on SEC yield and a combined federal and state income tax rate of
35.1%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
4 The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
5
<PAGE>
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Rick Huber discusses fund performance, the municipal market,
and key investment strategies for the Kentucky Limited fund.
Comments cover the one-year period ended May 31, 1998 and all
performance statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Kentucky's stable financial and economic conditions continued through the first
half of 1998, as recognized by the state's AA credit rating from Standard &
Poor's. Although Kentucky has not issued general obligation debt since 1965, the
state actively issues appropriation-secured debt from several different
agencies--all of which totaled $3 billion in issuance at fiscal year-end.
The commonwealth's new issue volume was up almost 15% during the first quarter
of 1998. Kentucky municipal bond investors anticipate a number of statewide
projects authorized for the 1996-1998 biennium, including $103 million of new
debt to fund new juvenile detention centers, state parks, and university
projects. In spite of this increased supply, good values were hard to find, as
yield spreads remained narrow between lower- and higher-rated securities.
Fund Performance
For the year ended May 31, 1998, the total return on net asset value for the
Kentucky Limited Term Municipal Bond Fund was 6.53%, which is equivalent to a
taxable return of 8.97% for investors in the 35.1% combined federal and state
income tax bracket. The total return was in line with the annual return of 6.69%
posted by the unmanaged Lehman Brothers Five-Year Municipal Bond Index, and
surpassed the Lipper peer group average return of 5.71% for the short-
intermediate term municipal bond funds in the "other states" category. In
addition, the fund provided a competitive taxable equivalent yield of 6.01% for
investors in the 35.1% combined federal and state income tax bracket, and
maintained a steady dividend throughout the period.
Key Strategies
We worked this year to extend the fund's duration, a strategy that helped the
fund outperform its peers. Duration is a measure of the fund's price volatility
in relation to changes in interest rates. The fund's duration of 5.0 years was
longer than the Lehman Five-Year Municipal Bond Index's average duration of 4.05
years. The longer duration allowed the fund to better participate in this year's
market rally, although it would have been more adversely affected had there been
a market downturn. At the same time, we worked to improve the fund's
diversification among different sectors of the market and investment-grade
credit quality levels. To that end, we reduced the fund's holdings in the health
care sector, and at the same time found unique opportunities in the housing
sector.
In addition, we felt that high demand for bonds in the middle of the limited-
term maturity range reduced the selection of good values among those issues.
Instead, we sought attractive opportunities in longer-maturity bonds when
possible.
As of May 31, 1998, the fund was focused on two primary sectors: health care
(23%) and limited tax obligation bonds (22%). Other key holdings included
education and civic organization bonds at 14% and multifamily housing bonds at
10%.
Outlook for the Future
On July 1, 1998, Nuveen made several changes in the management of its mutual
funds to make more efficient use of staff resources and portfolio manager
expertise. As a result, Tom O'Shaughnessy assumed management responsibilities
for this fund. Tom is a 15-year veteran of Nuveen and an experienced investment
professional who has managed a range of other state and national municipal bond
funds.
Tom and his team anticipate a continued healthy state economy, which might
translate into strong bond supply in late 1998 or 1999. Until lower-rated bonds
offer more competitive yields, they will continue to seek value from small,
higher-rated bond issues. They believe the fund is well-positioned for the
coming year, although they will work toward reducing the fund's duration
slightly. At the same time, they expect the fund's steady cash flow to continue,
which will allow them to take advantage of good values and uncommon
opportunities that arise in the market.
6
<PAGE>
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Performance Overview
As of May 31, 1998
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
0.0365 6/97
0.0365 7/97
0.0365 8/97
0.0365 9/97
0.0365 10/97
0.0365 11/97
0.0365 12/97
0.0365 1/98
0.0365 2/98
0.0365 3/98
0.0365 4/98
0.0365 5/98
<TABLE>
<CAPTION>
Top 5 Sectors
<S> <C>
Health Care 23%
Tax Obligation (Limited) 22%
Education and Civic Organizations 14%
Housing (Multifamily) 10%
Transportation 9%
- --------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A C R
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Inception Date 9/95 9/95 2/97
Net Asset Value $10.12 $10.12 $ 10.10
Fund Net Assets ($000) $11,421
Average Weighted Maturity (Years) 6.11
Average Weighted Duration (Years) 5.00
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/1/
Share Class A(NAV) A(Offer) C R
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1-Year 6.53% 3.92% 6.17% 6.58%
Since Inception 6.05% 5.07% 5.71% 6.09%
- ----------------------------------------------------------------------
Tax-Free Yields
Share Class A(NAV) A(Offer) C R
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Distribution Rate 4.33% 4.22% 3.97% 4.57%
SEC 30-Day Yield 3.90% 3.80% 3.55% 4.10%
Taxable Equivalent Yield/2/ 6.01% 5.86% 5.47% 6.32%
- ----------------------------------------------------------------------
</TABLE>
Index Comparison/3/
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman Brothers
Nuveen Flagship Kentucky Nuveen Flagship Kentucky Five-Year
Limited Term Municipal Bond Limited Term Municipal Bond Municipal Bond
Fund (NAV) Fund (Offer) Index
<S> <C> <C> <C>
9/95 10000 9750 10000
5/96 10308 10050 10201
5/97 10921 10648 10812
5/98 11634 11343 11537
</TABLE>
Lehman Brothers Five-Year Municipal Bond Index $11,537
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund (NAV) $11,634
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund (Offer) $11,343
Past performance is not predictive of future results.
1 Class A share returns are actual. Class 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 2.5% maximum sales charge. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
2 Based on SEC yield and a combined federal and state income tax rate of 35.1%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
3 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Five-Year Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or ongoing
expenses. The Nuveen fund return depicted in the chart reflects the initial
maximum sales charge applicable to A shares (2.5%) and all ongoing fund
expenses.
7
<PAGE>
Nuveen Flagship Michigan Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Mike Davern discusses fund performance, the municipal market,
and key investment strategies for the Michigan fund.
Comments cover the one-year period ended May 31, 1998 and all
performance statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Michigan's economy has remained healthy throughout 1997 and thus far in 1998,
resulting in credit upgrades for the state's general obligation debt by all
three major debt rating agencies. The upgrades were due in part to Michigan's
accumulated Budget Stabilization Fund reserves, which exceeded $1.2 billion in
1997. These reserves should provide a cushion against future economic downturns,
which are possible because of Michigan's continuing dependence on the cyclical
automobile manufacturing industry. Due in part to the strong national economy,
the state's unemployment rate has been lower than the national average for four
consecutive years, and per capita income has surpassed national averages for the
past two years.
Education spending remains Michigan's priority, with total state and local
funding for schools projected to grow to approximately $12 billion by 1999 - a
50% increase since 1990. Michigan's overall debt burden is manageable, despite a
doubling of new issuance volume during the first quarter of 1998. Investors can
expect additional debt issuance to fund the Michigan Department of
Transportation's Build Michigan II program, which is designed to finance the
rebuilding of the state's roads and bridges.
Fund Performance
For the year ended May 31, 1998, the total return on net asset value for the
Michigan Municipal Bond Fund was 8.95%, which is equivalent to a taxable return
of 11.69% for investors in the 34% combined federal and state income tax
bracket. The total return was in line with the annual return of 9.38% posted by
the Lehman Brothers Municipal Bond Index, and surpassed the average return of
8.72% for the peer group of Michigan municipal bond funds tracked by Lipper
Analytical Service, a nationally recognized performance measurement service. In
addition, the fund provided a competitive yield of 4.28%, which is Equivalent
to a taxable yield of 6.48% for investors in the 34% combined federal and state
income tax bracket.
Key Strategies
There were several elements contributing to the fund's performance during the
past year. First was the Michigan fund's conservative structure and shorter
portfolio duration going into the year, which kept the fund largely in line with
its peer group. Duration is a measure of the fund's price volatility in relation
to changes in interest rates. To offset its shorter duration, we focused on
maintaining longer call protection, avoiding issues that would hinder portfolio
performance by being called away because of a near-term change in interest
rates. Education bonds were plentiful this past year, while hospital bonds were
comparatively scarce. Nonetheless, we found good value in both areas in the past
year.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
As of May 31, 1998, the fund's sector holdings were weighted toward health care
issues, which represented 24% of the portfolio. Other key sectors included U.S.
guaranteed bonds representing 17% of the portfolio, 16% in limited tax
obligation issues, and another 16% in general tax obligation issues.
Outlook for the Future
Going forward, we expect conditions in which we can lengthen the duration of the
portfolio and enhance its already favorable call protection. Higher-quality
issues will continue to dominate the portfolio, because lower-rated securities
currently provide little reward for assuming the additional credit risk.
Overall, we will continue to maintain the fund's current healthy
diversification, which should be aided by continuing strong supply.
8
<PAGE>
Nuveen Flagship Michigan Municipal Bond Fund
Performance Overview
As of May 31, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
[BAR CHART APPEARS HERE]
0.051 6/97
0.051 7/97
0.051 8/97
0.051 9/97
0.051 10/97
0.051 11/97
0.051 12/97
0.05 1/98
0.05 2/98
0.05 3/98
0.05 4/98
0.05 5/98
Top 5 Sectors
Health Care 24%
U.S. Guaranteed 17%
Tax Obligation (General) 16%
Tax Obligation (Limited) 16%
Water and Sewer 6%
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception Date 6/85 2/97 6/93 2/97
Net Asset Value $12.07 $12.09 $12.06 $ 12.07
Fund Net Assets ($000) $340,065
Average Weighted Maturity (Years) 18.05
Average Weighted Duration (Years) 6.45
Annualized Total Return/2/
Share Class A(NAV) A(Offer) B C R
- ------------------------------------------------------------------------------------------------
1-Year 8.95% 4.39% 8.12% 8.45% 9.16%
5-Year 6.24% 5.33% 5.64% 5.59% 6.30%
10-Year 8.10% 7.64% 7.63% 7.47% 8.13%
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
- ------------------------------------------------------------------------------------------------
Distribution Rate 4.97% 4.76% 4.22% 4.43% 5.17%
SEC 30-Day Yield 4.28% 4.10% 3.54% 3.74% 4.49%
Taxable Equivalent Yield/3/ 6.48% 6.21% 5.36% 5.67% 6.80%
</TABLE>
Index Comparison/4/
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
Nuveen Flagship Michigan Nuveen Flagship Michigan Lehman Brothers
Municipal Bond Fund(NAV) Municipal Bond Fund(Offer) Municipal Bond Index
<S> <C> <C>
5/88 10,000 9,580 10,000
5/89 11,313 10,837 11,149
5/90 12,014 11,510 11,965
5/91 13,065 12,516 13,171
5/92 14,338 13,735 14,466
5/93 16,095 15,419 16,195
5/94 16,393 15,704 16,595
5/95 17,795 17,047 18,107
5/96 18,440 17,666 18,934
5/97 19,998 19,158 20,505
5/98 21,790 20,875 22,430
</TABLE>
Lehman Brothers Municipal Bond Index $22,430
Nuveen Flagship Michigan Municipal Bond Fund(NAV) $21,790
Nuveen Flagship Michigan Municipal Bond Fund(Offer) $20,875
Past performance is not predictive of future results.
/1/ The fund also paid shareholders taxable distributions in December of
$0.0281 per share.
/2/ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
/3/ Based on SEC yield and a combined federal and state income tax rate of 34%.
Represents the yield on a taxable investment necessary to equal the yield
of the Nuveen fund on an after-tax basis.
/4/ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
9
<PAGE>
Nuveen Flagship Ohio Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Walt Parker discusses fund performance, the municipal market,
and key investment strategies for the Ohio fund.
Comments cover the one-year period ended May 31, 1998 and all
performance statistics are quoted for Class A shares on net asset value.
State Economic and Market Review
Ohio's municipal market remained solid through the first half of 1998 with $3.6
billion of new issuance, a 54.4% increase over 1997 levels. General purpose,
health care and education offerings continue to dominate new issue volume,
representing approximately 66% of issuance.
Ohio school district financing continues to occupy the attention of municipal
market participants, as voters rejected a one percent sales tax increase
proposal intended to provide additional school funding last May. Also rejected
was a proposal that would have allowed the legislature to issue general
obligation bonds for school projects. As a consequence, bonds enhanced by the
Ohio School District Credit Enhancement Program continue to carry relatively
diverse ratings in comparison to bonds from other states with similar programs.
Fund Performance
The fund performed well, generating a total return on net asset value of 8.76%,
which is equivalent to a taxable return of 11.76% for investors in the 35.8%
combined federal and state income tax bracket. The fund outperformed the average
return of 8.57% for the peer group of Ohio municipal bond funds tracked by
Lipper Analytical Service, a nationally recognized performance measurement
service. However, it slightly underperformed the return of 9.38% posted by the
Lehman Brothers Municipal Bond Index, primarily due to its shorter duration of
6.44 years, compared with the Lehman Index duration of 7.11 years. Duration is a
measure of price volatility in reaction to changes in interest rates. Although
the shorter duration hindered the fund's ability to participate in this year's
market rally, it helped protect the fund from volatility and would help it to
outperform in a market downturn.
Key Strategies
Since the Ohio Municipal Bond Fund is among Nuveen's largest municipal funds, we
must buy bonds in larger blocks to affect the portfolio's performance.
Therefore, we looked to large issuers and heavy-issuance sectors to implement
many of our strategies during the year.
Through our in-depth research, we continued to uncover value investing
opportunities, as several portfolio holdings received credit upgrades or were
pre-refunded during the year. In a pre-refunding, bonds are essentially paid off
by their issuer and backed by U.S. Treasury securities, which typically leads to
price appreciation. Nuveen's diligent research team helped us find those
securities with the potential for credit upgrades and pre-refundings. That
strategy paid off this year, as evidenced by the fund's 68% holding in AAA rated
bonds and attractive total returns.
In addition, we felt that bonds in the 20-30 year maturity range seldom offered
enough incremental yield for taking on the additional interest rate risk
associated with these longer-maturity bonds. Instead, we sought attractive
opportunities among bonds with maturities of 15-20 years, which offered the best
values given their historical levels of volatility.
As of May 31, 1998, the fund's sector holdings were well-diversified, with 20%
of the portfolio invested in U.S. guaranteed issues (which are mostly pre-
refunded bonds), 18% in general tax obligation bonds, 15% in health care issues
and 11% in utility bonds.
Outlook for the Future
On July 1, 1998, Nuveen made several changes in the management of its mutual
funds to make more efficient use of staff resources and portfolio manager
expertise. As a result, Tom Futrell assumed management responsibilities for this
fund. Tom is a 15-year veteran of Nuveen and an experienced investment
professional who has managed a range of other municipal bond funds.
Tom and his team anticipate a continued strong state economy in the near future.
In addition, they expect the yield spread between lower- and higher-quality
bonds to remain tight. With that in mind, they will continue to seek value from
overlooked sectors and issues offering higher yields or strong appreciation
potential. Particular areas they will be monitoring include housing bonds and
issues subject to the alternative minimum tax (AMT), which offer better
opportunities in the current market environment.
10
<PAGE>
Nuveen Flagship Ohio Municipal Bond Fund
Performance Overview
As of May 31, 1998
Monthly Tax-Free Dividends (Class A Shares)/1/
0.0505 6/97
0.0505 7/97
0.0505 8/97
0.0505 9/97
0.0505 10/97
0.0505 11/97
0.0505 12/97
0.049 1/98
0.049 2/98
0.049 3/98
0.049 4/98
0.049 5/98
Top 5 Sectors
U.S. Guaranteed 20%
- ---------------------------------------------------
Tax Obligation (General) 18%
- ---------------------------------------------------
Health Care 15%
- ---------------------------------------------------
Utilities 11%
- ---------------------------------------------------
Water and Sewer 7%
- ---------------------------------------------------
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception Date 6/85 2/97 8/93 2/97
- -------------------------------------------------------------------------------
Net Asset Value $11.74 $11.73 $11.73 $ 11.73
- -------------------------------------------------------------------------------
Fund Net Assets ($000) $689,498
- -------------------------------------------------------------------------------
Average Weighted Maturity (Years) 18.86
- -------------------------------------------------------------------------------
Average Weighted Duration (Years) 6.44
- -------------------------------------------------------------------------------
Annualized Total Return/2/
Share Class A(NAV) A(Offer) B C R
- -------------------------------------------------------------------------------
1-Year 8.76% 4.19% 7.89% 8.12% 8.89%
- -------------------------------------------------------------------------------
5-Year 5.95% 5.05% 5.31% 5.37% 5.99%
- -------------------------------------------------------------------------------
10-Year 7.82% 7.36% 7.35% 7.23% 7.84%
- -------------------------------------------------------------------------------
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
- -------------------------------------------------------------------------------
Distribution Rate 5.01% 4.80% 4.30% 4.50% 5.22%
- -------------------------------------------------------------------------------
SEC 30-Day Yield 3.94% 3.78% 3.20% 3.40% 4.14%
- -------------------------------------------------------------------------------
Taxable Equivalent Yield/3/ 6.14% 5.89% 4.98% 5.30% 6.45%
- -------------------------------------------------------------------------------
</TABLE>
Index Comparison/4/
<TABLE>
<CAPTION>
Nuveen Flagship Ohio Nuveen Flagship Ohio Lehman Brothers
Municipal Bond Fund (NAV) Municipal Bond Fund (Offer) Municipal Bond Index
<S> <C> <C> <C>
5/88 10000 9580 10000
5/89 11236 10764 11149
5/90 11893 11394 11965
5/91 13023 12476 13171
5/92 14295 13695 14466
5/93 15897 15229 16195
5/94 16249 15567 16595
5/95 17549 16812 18107
5/96 18180 17417 18934
5/97 19522 18702 20505
5/98 21229 20337 22430
</TABLE>
[_] Lehman Brothers Municipal Bond Fund (Index) $22,430
[_] Nuveen Flagship Ohio Municipal Bond Fund (NAV) $21,229
[_] Nuveen Flagship Ohio Municipal Bond Fund (Offer) $20,337
Past performance is not predictive of future results.
/1/ The fund also paid shareholders taxable distributions in December of
$0.0504 per share.
/2/ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
/3/ Based on SEC yield and a combined federal and state income tax rate of
35.8%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
/4/ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Index is comprised of a broad range of
investment-grade municipal bonds, and does not reflect any initial or
ongoing expenses. The Nuveen fund return depicted in the chart reflects the
initial maximum sales charge applicable to A shares (4.20%) and all ongoing
fund expenses.
11
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust IV:
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Flagship Kentucky Municipal Bond Fund,
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund, Nuveen Flagship
Michigan Municipal Bond Fund and Nuveen Flagship Ohio Municipal Bond Fund
(collectively, the "Funds") (four of the portfolios constituting the Nuveen
Flagship Multistate Trust IV (a Massachusetts business trust)), as of May 31,
1998, and the related statements of operations, statements of changes in net
assets and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
statements and financial highlights for the Funds for the years ended May 31,
1997 and prior were audited by other auditors whose report dated July 11, 1997,
expressed an unqualified opinion on those financial statements and financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1998, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Flagship Kentucky Municipal Bond Fund, Nuveen Flagship Kentucky Limited Term
Municipal Bond Fund, Nuveen Flagship Michigan Municipal Bond Fund and Nuveen
Flagship Ohio Municipal Bond Fund of the Nuveen Flagship Multistate Trust IV as
of May 31, 1998, and the results of their operations, the changes in their net
assets, and the financial highlights for the year then ended, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 17, 1998
12
<PAGE>
Portfolio of Investments
Nuveen Flagship Kentucky Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Basic Materials - 0.2%
$ 1,000,000 Jefferson County, Kentucky, Pollution Control Revenue Bonds (E.I. du 7/03 at 103 AA- $ 1,092,910
Pont de Nemours and Company Project), 1982 Series A, 6.300%, 7/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 2.4%
Lexington-Fayette Urban County Government (Kentucky), Governmental
Project Bonds (University of Kentucky Alumni Association,
Inc./Commonwealth Library Project), Series 1994:
3,195,000 6.750%, 11/01/17 11/04 at 102 AAA 3,639,968
4,320,000 6.750%, 11/01/24 11/04 at 102 AAA 4,921,646
2,000,000 Northern Kentucky University, Certificates of Participation, Student 1/01 at 102 AAA 2,194,620
Housing Facilities, 7.250%,1/01/12
700,000 Northern Kentucky University (Formerly Northern Kentucky State 5/01 at 102 AAA 765,338
College), Educational Buildings, Series F, 7.000%, 5/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Energy - 4.2%
5,000,000 City of Ashland, Kentucky, Pollution Control Refunding Bonds (Ashland 8/02 at 102 Baa1 5,422,250
Oil, Inc. Project), Series 1992, 6.650%, 8/01/09
9,000,000 City of Ashland, Kentucky, Sewage and Solid Waste Bonds (Ashland Oil, 2/05 at 102 Baa1 10,235,340
Inc. Project), Series 1995, 7.125%, 2/01/22 (Alternative Minimum Tax)
4,360,000 City of Ashland, Kentucky, Solid Waste Revenue Bonds (Ashland Oil, 10/01 at 102 Baa1 4,763,256
Inc. Project), Series 1991, 7.200%, 10/01/20 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 6.0%
2,370,000 Hancock County, Kentucky, Solid Waste Disposal Facilities Revenue 5/06 at 102 A- 2,648,309
Bonds (Willamette Industries, Inc. Project), Series 1996, 6.600%, 5/01/26
9,750,000 County of Henderson, Kentucky, Solid Waste Disposal Revenue Bonds 3/05 at 102 Baa2 10,684,343
(MacMillan Bloedel Project), Series 1995, 7.000%, 3/01/25
(Alternative Minimum Tax)
1,500,000 Maysville, Kentucky, Industrial Development Revenue, Crystal Tissue 2/00 at 103 N/R 1,581,420
Project, 8.000%, 2/01/09 (Alternative Minimum Tax)
Perry County, Kentucky, Solid Waste Disposal Revenue, TJ International:
3,750,000 7.000%, 6/01/24 (Alternative Minimum Tax) 6/04 at 102 N/R 4,153,575
4,240,000 6.800%, 5/01/26 (Alternative Minimum Tax) 5/06 at 102 N/R 4,738,030
2,000,000 6.550%, 4/15/27 (Alternative Minimum Tax) 4/07 at 102 N/R 2,204,720
2,820,000 Wickliffe, Kentucky, Solid Waste Disposal Facility, Westvaco 4/06 at 102 A1 3,094,442
Corporation Project, 6.375%, 4/01/26 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 22.1%
1,310,000 County of Christian, Kentucky, Hospital Revenue Bonds, Jennie Stuart 7/06 at 102 A- 1,393,722
Medical Center, Series 1996A, 6.000%, 7/01/17
3,500,000 County of Christian, Kentucky, Hospital Revenue and Refunding Bonds, 7/06 at 102 A- 3,764,425
Jennie Stuart Medical Center, Series 1997A, 6.000%, 7/01/13
5,270,000 County of Clark, Kentucky, Hospital Refunding and Improvement Revenue 4/07 at 102 BBB- 5,559,376
Bonds (Clark Regional Medical Center Project), Series 1997,
6.200%, 4/01/13
3,300,000 County of Daviess, Kentucky, Insured Hospital Revenue Bonds, 1992 8/02 at 102 AAA 3,578,586
(ODCH, Inc. Project), Series A, 6.250%, 8/01/22
2,905,000 County of Floyd, Kentucky, Hospital Revenue Refunding Bonds (FHA 2/01 at 102 AAA 3,126,100
Insured Mortgage Loan Highland Hospital Corporation Project),
Series 1991, 7.500%, 8/01/10
4,000,000 County of Hopkins, Kentucky, Hospital Revenue Bonds (The Trover 11/01 at 102 AAA 4,338,120
Clinic Foundation, Incorporated), Series 1991, 6.625%, 11/15/11
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship Kentucky Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care (continued)
County of Jefferson, Kentucky, Health Facilities Revenue Bonds (Jewish
Hospital Healthcare Services Inc. Project), Series 1992:
$ 1,190,000 6.500%, 5/01/15 5/02 at 102 AAA $ 1,292,400
12,785,000 6.550%, 5/01/22 5/02 at 102 AAA 13,907,779
4,625,000 County of Jefferson, Kentucky, Health Facilities Revenue Bonds 7/07 at 101 AAA 4,632,493
(University Medical Center, Inc. Project), Series 1997, 5.250%, 7/01/22
15,640,000 County of Jefferson, Kentucky, Health Facilities Revenue Bonds 10/07 at 101 AAA 15,370,836
(Alliant Health System, Inc. Project), Series 1997, 5.125%, 10/01/27
7,800,000 County of Jefferson, Kentucky, Insured Hospital Revenue Bonds (Alliant 10/02 at 102 AAA 8,528,754
Health System, Inc. Project), Series 1992, 6.436%, 10/23/14
Kentucky Development Finance Authority, Medical Center Revenue Refunding
and Improvement Bonds (Ashland Hospital Corporation/Kings Daughters
Hospital):
860,000 9.750%, 8/01/05 8/98 at 102 A 884,759
610,000 9.750%, 8/01/11 8/98 at 102 A 627,751
3,000,000 Kentucky Development Finance Authority (Saint Luke Hospital, Inc.), 10/99 at 102 A 3,199,380
Series 1989A, 7.500%, 10/01/12
1,750,000 Kentucky Development Finance Authority, Hospital Revenue Bonds 11/99 at 102 A1 1,858,833
(Sisters of Charity of Nazareth Health Corporation), Series 1989,
7.375%, 11/01/16
2,000,000 Kentucky Development Finance Authority, Hospital Facilities Revenue 10/01 at 102 AAA 2,219,700
Bonds (Saint Lukes Hospital, Inc. Project), Series 1991A,
7.000%, 10/1/11
1,000,000 Kentucky Development Finance Authority (Saint Elizabeth Medical 11/01 at 100 AAA 1,054,180
Center, Inc. Project), 6.000%, 11/01/10
5,000,000 Kentucky Economic Development Finance Authority, Hospital Facilities 12/03 at 102 AAA 5,392,050
Revenue Bonds (Saint Elizabeth Medical Center, Inc. Project), Series
1993A, 6.000%, 12/01/22
4,000,000 Kentucky Economic Development Finance Authority, Hospital Revenue 8/04 at 102 AAA 3,874,760
Bonds (Baptist Healthcare System), Series 1994, 5.000%, 8/15/24
9,500,000 Kentucky Economic Development Finance Authority, Hospital Revenue and 2/07 at 102 AAA 10,003,880
Refunding Revenue Bonds (Pikeville United Methodist Hospital of Kentucky,
Inc. Project), Series 1997, 5.700%, 2/01/28
Kentucky Economic Development Finance Authority, Hospital System Refunding
and Improvement Revenue Bonds (Appalachian Regional Healthcare, Inc.
Project), Series 1997:
500,000 5.600%, 10/01/08 4/08 at 102 BBB 520,265
3,500,000 5.850%, 10/01/17 4/08 at 102 BBB 3,586,870
1,500,000 5.875%, 10/01/22 4/08 at 102 BBB 1,540,455
2,050,000 McCracken County, Kentucky, Hospital Revenue Refunding, Mercy Health 11/04 at 102 AAA 2,288,210
System, Series A, 6.300%, 11/01/06
1,555,000 Radcliff, Kentucky, Mortgage Revenue Refunding, Lincoln Trail Care, 7/07 at 102 AAA 1,625,550
5.650%, 1/20/19
2,800,000 City of Russell, Kentucky, Health System Revenue Bonds, Our Lady of 1/08 at 102 Baa1 2,815,344
Bellefonte Hospital Issue, Series 1997 (Franciscan Health Partnership,
Inc. Refunding Revenue Bonds), 5.500%, 7/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 0.5%
2,500,000 Greater Kentucky Housing Assistance Corporation, Mortgage Revenue 7/03 at 100 AAA 2,583,150
Refunding Bonds, Series 1993A (FHA Insured Mortgage Loans-Section 8
Assisted Projects), 6.250%, 7/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 4.4%
7,000,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1996 Series E, 7/06 at 102 AAA 7,524,160
6.300%, 1/01/28 (Alternative Minimum Tax)
3,000,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1997 Series B, 7/07 at 102 AAA 3,199,230
6.250%, 7/01/28 (Alternative Minimum Tax)
435,000 Kentucky Housing Corporation, Housing Revenue Bonds (FHA Insured/VA 1/99 at 102 AAA 447,537
Guaranteed Mortgage Loans), 1988 Series A, 7.625%, 1/01/09 (Alternative
Minimum Tax)
1,630,000 Kentucky Housing Corporation, Housing Revenue Bonds (FHA Insured/VA 7/00 at 102 AAA 1,720,938
Guaranteed Mortgage Loans), 1988 Series C, 7.900%, 1/01/21 (Alternative
Minimum Tax)
1,125,000 Kentucky Housing Corporation, Housing Revenue Bonds (FHA Insured/VA 7/00 at 102 AAA 1,184,063
Guaranteed Mortgage Loans), 1990 Series B, 7.800%, 1/01/21 (Alternative
Minimum Tax)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family(continued)
$1,000,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally 7/02 at 102 AAA $1,071,100
Insured or Guaranteed Mortgage Loans), Series 1992B, 6.625%, 7/01/14
Kentucky Housing Corporation, Housing Revenue Bonds (Federally Insured
or Guaranteed Mortgage Loans), Series 1991C-1:
465,000 6.600%, 1/01/11 1/03 at 102 AAA 494,276
130,000 6.650%, 1/01/17 1/03 at 102 AAA 135,078
920,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally 1/04 at 102 AAA 980,490
Insured or Guaranteed Mortgage Loans), 1994 Series A, 6.500%, 7/01/17
2,230,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally 7/04 at 102 AAA 2,389,757
Insured or Guaranteed Mortgage Loans), 1994 Series C, 6.400%, 1/01/17
1,985,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally 1/05 at 102 AAA 2,131,255
Insured or Guaranteed Mortgage Loans), 1995 Series B, 6.625%, 7/01/26
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 3.6%
County of Jefferson, Kentucky, First Mortgage Revenue Bonds, Series 1994
(The First Christian Church Homes of Kentucky Project):
1,240,000 6.000%, 11/15/09 11/04 at 102 BBB 1,308,051
715,000 6.125%, 11/15/13 11/04 at 102 BBB 757,786
3,210,000 6.125%, 11/15/18 11/04 at 102 BBB 3,402,086
Kentucky Economic Development Finance Authority, Health Care Facilities
Revenue Bonds, Series 1998 (The Christian Church Homes of Kentucky, Inc.
Obligated Group):
1,800,000 5.375%, 11/15/23 5/08 at 102 BBB 1,776,600
4,250,000 5.500%, 11/15/30 5/08 at 102 BBB 4,211,750
5,700,000 Kentucky Economic Development Finance Authority, Tax Exempt Mortgage 1/08 at 105 AAA 6,084,240
Revenue Bonds (South Central Nursing Homes, Inc. Project), Series 1997A,
6.000%, 7/01/27
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 1.4%
4,790,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1996 7/06 at 101 1/2 A 4,860,461
(General Obligation Bonds), 5.400%, 7/01/25
2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 7/07 at 101 1/2 A 2,023,560
5.375%, 7/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 22.8%
430,000 Bardstown Independent School District Finance Corporation, School 11/02 at 102 A1 467,965
Building Refunding and Improvement Revenue Bonds, Series of 1992,
6.375%, 5/01/17
725,000 Bell County, Kentucky, School District Finance Corporation, School 9/01 at 102 A 799,197
Building Revenue Bonds, Series 1991, 6.875%, 9/01/11
1,000,000 Boone County, Kentucky, School District Finance Corporation, School 9/01 at 103 A1 1,107,660
Building Revenue Bonds, 1991 Series C, 6.750%, 9/01/11
1,215,000 Boone County, Kentucky, School District Finance Corporation, School 12/02 at 102 A1 1,306,332
Building Refunding and Improvement Revenue Bonds, Series 1992,
6.125%, 12/01/17
615,000 Boone County, Kentucky, School District Finance Corporation, School 2/03 at 102 A1 648,474
Building Refunding and Improvement Revenue Bonds, Series 1993,
6.000%, 2/01/18
1,595,000 City of Bowling Green Municipal Projects Corporation, Kentucky, 12/04 at 102 A2 1,780,754
Lease Revenue Bonds, Series 1994, 6.500%, 12/01/14
1,005,000 Casey County School District Finance Corporation, School Building 3/05 at 102 A1 1,069,230
Revenue Bonds, Series 1995, 5.750%, 3/01/15
Christian County, Kentucky, School District Finance Corporation,
School Building Revenue Bonds, Series 1991:
565,000 6.750%, 6/01/10 6/01 at 102 A 618,709
600,000 6.750%, 6/01/11 6/01 at 102 A 657,036
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship Kentucky Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
Daviess County, Kentucky, School District Finance Corporation,
School Building Revenue Bonds, Series 1994:
$ 505,000 5.800%, 5/01/11 5/04 at 102 A1 $ 543,799
535,000 5.800%, 5/01/12 5/04 at 102 A1 576,104
570,000 5.800%, 5/01/13 5/04 at 102 A1 612,254
600,000 5.800%, 5/01/14 5/04 at 102 A1 642,864
1,070,000 Fleming County School District Finance Corporation, School Building 3/05 at 102 A 1,137,720
Revenue Bonds, Series 1995, 5.875%, 3/01/15
3,155,000 City of Florence, Kentucky, Public Properties Corporation, First 6/07 at 102 AAA 3,273,754
Mortgage Revenue Bonds (Administrative Office Complex Project),
Series 1997, 5.500%, 6/01/27
Floyd County, Kentucky, Public Properties Corporation, First Mortgage
Revenue Bonds (Floyd County Justice Center Project), Series 1995A:
465,000 5.500%, 9/01/17 3/06 at 102 A 484,567
1,260,000 5.550%, 9/01/23 3/06 at 102 A 1,321,173
3,550,000 Floyd County, Kentucky, Public Properties Corporation, First Mortgage 3/06 at 105 A 3,840,497
Revenue Bonds (Floyd County Justice Center Project), Series
1996B, 6.200%, 9/01/26
1,200,000 Floyd County, Kentucky, School District Finance Corporation, School 5/05 at 102 A1 1,244,232
Building Revenue Bonds, Series 1995, 5.500%, 5/01/15
2,280,000 Grant County School District Finance Corporation, School Building 3/07 at 102 Aaa 2,338,824
Revenue Bonds, Series 1997, 5.375%, 3/01/17
Hardin County, Kentucky, Building Commission Revenue Bonds
(Detention Facility Project), Series 1994:
525,000 6.200%, 12/01/11 No Opt. Call AAA 584,288
1,775,000 6.250%, 12/01/14 12/04 at 102 AAA 1,980,421
300,000 Hardin County, Kentucky, School District Finance Corporation, School 6/01 at 103 A1 328,674
Building Revenue Bonds, Series of 1991, 6.800%, 6/01/10
3,465,000 Hopkins County, Kentucky, School District Finance Corporation, School 6/04 at 102 A1 3,758,174
Building Revenue Bonds, Series 1994, 6.200%, 6/01/19
1,250,000 Jefferson County, Kentucky, Economic Development Corporation, Lease 7/01 at 100 A1 1,272,938
Revenue Bonds, Series 1986, 7.750%, 7/01/16
4,195,000 Jefferson County, Kentucky, School District Finance Corporation, School 2/06 at 102 AAA 4,218,534
Building Revenue Bonds (Series 199A), 5.125%, 2/01/16
1,258,871 Jefferson County, Kentucky, Equipment Lease Purchase Revenue Bonds, No Opt. Call N/R 1,289,310
Series 1987 (Energy System Project), 9.000%, 6/01/03
231,641 Jefferson County, Kentucky, Equipment Lease Purchase Revenue Bonds, No Opt. Call N/R 240,452
Series 1988 (Energy System Project), 9.500%, 6/01/03
2,500,000 Jefferson County, Kentucky, Capital Projects Corporation Lease Revenue 2/02 at 100 A1 1,203,775
Bonds, Series 1987B, 0.000%, 8/15/08
1,000,000 City of Jeffersontown, Kentucky, Public Projects Refunding and No Opt. Call A 1,071,220
Improvements, Certificates of Participation, 5.750%, 11/01/15
Jessamine County, Kentucky, School District Finance Corporation,
School Building Revenue Bonds, Series 1991,
510,000 6.750%, 6/01/10 6/01 at 103 A1 562,086
545,000 6.750%, 6/01/11 6/01 at 103 A1 600,661
2,500,000 Jessamine County, Kentucky, School District Finance Corporation, School 6/04 at 102 A1 2,693,700
Building Revenue Bonds, Series 1994, 6.125%, 6/01/19
5,650,000 Jessamine County, Kentucky, School District Finance Corporation, School 1/06 at 102 A1 5,882,102
Building Revenue Bonds, Series 1996, 5.500%, 1/01/21
400,000 Kentucky State Property and Buildings Commission Revenue Refunding, 11/01 at 102 A+ 441,240
Project No. 40, 2nd Series, 6.875%, 11/01/07
250,000 Kentucky State Property and Buildings Commission, Revenue Refunding, 10/01 at 102 A 274,108
Project No. 53, 6.625%, 10/01/07
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 2,075,000 Kentucky State Property and Buildings Commission, Project No. 56, 6.000%, 9/04 at 102 A+ $ 2,234,173
9/01/14
250,000 Laurel County, Kentucky, School District Finance Corporation, School 3/01 at 102 A 273,380
Building Revenue, 7.000%, 3/01/10
1,000,000 Lawrence County, Kentucky, School District Finance Corporation, School 11/04 at 102 A1 1,144,100
Building Revenue, 6.750%, 11/01/14
Lexington, Kentucky, Center Corporation Mortgage Revenue Refunding
and Improvement, Series A:
2,600,000 0.000%, 10/01/11 No Opt. Call A 1,368,458
2,550,000 0.000%, 10/01/12 No Opt. Call A 1,261,332
435,000 Lincoln County, Kentucky, School District Finance Corporation, School 5/02 at 102 A1 467,629
Building Revenue, 6.200%, 5/01/12
1,525,000 McCracken County, Kentucky, Public Properties Corporation Revenue, Public 9/06 at 102 AAA 1,639,207
Project, Court Facilities Project, 5.900%, 9/01/26
2,365,000 McCreary County, Kentucky, School District Finance Corporation, School 8/05 at 102 A 2,485,591
Building Revenue, Second Series, 5.600%, 8/01/16
1,410,000 Morgan County, Kentucky, School District Finance Corporation, School 9/04 at 102 A1 1,526,128
Building Revenue, 6.000%, 9/01/14
13,000,000 Mount Sterling, Kentucky, Lease Revenue Bonds (Kentucky League of Cities 3/03 at 102 Aa 13,769,210
Funding Program), Series 1993A, 6.200%, 3/01/18
Pendleton County, Kentucky, County Lease Revenue Bonds, Kentucky
Associated Counties Leasing Trust Program, Series 1993A:
12,960,000 6.500%, 3/01/19 3/03 at 102 A 13,835,189
500,000 6.400%, 3/01/19 No Opt. Call A 582,590
1,230,000 Perry County, Kentucky, School District Finance Corporation, School 7/02 at 102 A1 1,335,325
Building Revenue, 6.250%, 7/01/11
2,000,000 Puerto Rico Aqueduct and Sewer Authority, Refunding Bonds, Series 1995, 7/06 at 101 1/2 A 1,954,040
Guaranteed by the Commonwealth of Puerto Rico, 5.000%, 7/01/19
8,250,000 Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds, 7/16 at 100 A 8,646,413
Series Y of 1996, 5.500%, 7/01/36
115,000 Puerto Rico Infrastructure Finance Authority, Series 1988A, 7/98 at 102 BBB+ 117,637
7.750%, 7/01/08
7,000,000 Warren County, Kentucky, Justice Center Expansion Corporation Revenue, 9/07 at 102 AAA 7,035,980
First Mortgage, AOC Judicial Facility, Series A, 5.250%, 9/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation -- 5.8%
10,640,000 Kenton County Airport Board (Delta Airlines), 6.125%, 2/01/22 2/02 at 100 BBB- 10,901,744
(Alternative Minimum Tax)
1,250,000 Kenton County, Kentucky, Airport Board, Cincinnati/Northern Kentucky 3/06 at 102 AAA 1,323,063
International Airport Revenue Bonds, Series 1996B, 5.750%, 3/01/13
1,000,000 Kentucky State Turnpike Authority, Economic Development Road Revenue 7/05 at 102 AAA 1,053,370
Refunding, Revitalization Projects, 5.625%, 7/01/15
5,000,000 Regional Airport Authority of Louisville and Jefferson County, Kentucky, 7/05 at 102 AAA 5,166,750
Airport System Revenue Bonds, 1995 Series A, 5.625%, 7/01/25
(Alternative Minimum Tax)
6,165,000 Louisville, Kentucky, Airport Lease Revenue, Series A, 7.875%, 2/01/19 2/99 at 103 A 6,506,171
(Alternative Minimum Tax)
2,790,000 Louisville, Kentucky, Parking Authority, River City, First Mortgage 6/01 at 103 A 3,083,871
Revenue, 6.875%, 12/01/20
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 8.8%
500,000 City of Covington, Kentucky, Municipal Properties Corporation, First 8/98 at 103 N/R*** 518,660
Mortgage, City Hall Parking and Park Revenue Bonds, Series
1988A, 8.250%, 8/01/10 (Pre-refunded to 8/01/98)
1,645,000 City of Edgewood, Kentucky, Public Properties Corporation, First 12/01 at 102 A2*** 1,818,992
Mortgage Revenue Bonds (Public Facilities Project), Series 1991,
6.700%, 12/01/21 (Pre-refunded to 12/01/01)
</TABLE>
17
<PAGE>
Portfolio of Investments
Nuveen Flagship Kentucky Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
City of Florence, Kentucky, Public Properties Corporation,
First Mortgage Revenue Bonds (Recreational Facilities Project):
$ 100,000 7.000%, 3/01/10 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** $ 110,163
320,000 7.000%, 3/01/14 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 353,411
345,000 7.000%, 3/01/15 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 381,021
360,000 7.000%, 3/01/16 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 397,588
2,750,000 County of Hardin, Kentucky, Hospital Refunding Revenue Bonds, 10/98 at 103 AAA 2,869,983
Series 1988 (Hardin Memorial Hospital Project), 7.875%,
10/01/14 (Pre-refunded to 10/01/98)
16,750,000 Jefferson County, Kentucky, Capital Projects Corporation, 2/01 at 24 11/16 AAA 3,698,903
Lease Revenue Bonds, Series 1989B, 0.000%, 8/15/19
(Pre-refunded to 2/15/01)
Kenton County, Kentucky, Public Parks Corporation, Mortgage Revenue
Bonds, Series 1990:
1,290,000 7.000%, 3/01/08 (Pre-refunded to 3/01/00) 3/00 at 101 A*** 1,367,542
1,070,000 7.100%, 3/01/10 (Pre-refunded to 3/01/00) 3/00 at 101 A*** 1,136,115
815,000 Kenton County, Kentucky, School District Finance Corporation, 12/01 at 102 A+*** 901,472
School Building Revenue Bonds, Series 1991, 6.800%, 12/01/11
(Pre-refunded to 12/01/01)
500,000 Kentucky Development Finance Authority, Sisters of Charity of 11/99 at 102 AAA 530,855
Nazareth Health Corporation, Hospital Revenue Bonds, Series
1989, 7.375%, 11/01/16
9,070,000 Kentucky Development Finance Authority, Hospital Facilities 10/01 at 102 AAA 10,066,340
Revenue Bonds, Series 1991A (St. Luke Hospital, Inc.), 7.000%,
10/01/21 (Pre-refunded to 10/01/01)
2,795,000 Kentucky Infrastructure Authority, Revenue Bonds (Community 9/98 at 102 AAA 2,879,465
Loan Program), Series 1988, 7.850%, 9/01/18 (Pre-refunded to
9/01/98)
1,495,000 Kentucky Infrastructure Authority, Governmental Agencies 8/99 at 102 A*** 1,591,323
Revenue Refunding Program, Series A,
7.800%, 8/01/08 (Pre-refunded to 8/01/99)
1,800,000 Kentucky State Property and Buildings Commission, Project No. 48, 8/98 at 102 A+*** 1,848,564
8.000%, 8/01/08 (Pre-refunded to 8/01/98)
4,875,000 The Turnpike Authority of Kentucky, Economic Development Road 5/00 at 101 1/2 AAA 5,246,719
Revenue Bonds (Revitalization Projects), Series 1990, 7.250%, 5/15/10
(Pre-refunded to 5/15/00)
Lexington, Kentucky, Fayette Urban County Government, Sewer
System Revenue:
830,000 7.600%, 7/01/07 (Pre-refunded 7/01/98) 7/98 at 102 AAA 849,273
900,000 7.600%, 7/01/08 (Pre-refunded 7/01/98) 7/98 at 102 AAA 920,898
Montgomery County, Kentucky, School District Finance Corporation,
School Building Revenue:
305,000 6.800%, 6/01/09 (Pre-refunded to 6/01/01) 6/01 at 102 A1*** 333,838
325,000 6.800%, 6/01/10 (Pre-refunded to 6/01/01) 6/01 at 102 A1*** 355,729
350,000 6.800%, 6/01/11 (Pre-refunded to 6/01/01) 6/01 at 102 A1*** 383,093
385,000 Puerto Rico Infrastructure Finance Authority, Series 1988A, 7/98 at 102 BBB+*** 393,974
7.750%, 7/01/08 (Pre-refunded to 7/01/98)
500,000 Richmond, Kentucky, Water Gas and Sewer, Revenue Refunding 7/98 at 102 AAA 511,525
Bond, Series B, 7.400%, 7/01/15 (Pre-refunded to 7/01/98)
1,990,000 Western, Kentucky, University Revenues, Formerly Western 12/00 at 102 AAA 2,189,239
Kentucky State College, Housing and Dining System, Series L,
7.400%, 12/01/10 (Pre-refunded to 12/01/00)
940,000 Western, Kentucky, University Revenues, Formerly Western 11/00 at 102 AAA 1,031,782
Kentucky State College, Educational Buildings, Series J, 7.400%,
5/01/10 (Pre-refunded to 11/01/00)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 10.2%
10,000,000 County of Boone, Kentucky, Collateralized Pollution Control 1/04 at 102 AAA 10,261,300
Revenue Refunding Bonds, 1994 Series A (The Cincinnati Gas and
Electric Company Project), 5.500%, 1/01/24
5,030,000 County of Carroll, Kentucky, Collateralized Pollution Control 2/02 at 102 AA 5,321,187
Revenue Bonds (Kentucky Utilities Company Project), 1992 Series B,
6.250%, 2/01/18
1,000,000 County of Jefferson, Kentucky, Pollution Control Revenue 6/00 at 102 Aa2 1,081,580
Bonds, 1990 Series A (Louisville Gas and Electric Company
Project), 7.450%, 6/15/15
1,750,000 County of Jefferson, Kentucky, Pollution Control Revenue 4/05 at 102 Aa2 1,854,230
Bonds, 1995 Series A (Louisville Gas and Electric Company
Project), 5.900%, 4/15/23
1,250,000 Mercer County, Kentucky, Collateralized Pollution Control 2/02 at 102 AA 1,331,263
Revenue, Kentucky Utilities Company Project, Series A, 6.250%,
2/01/18
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities (continued)
<S> <C> <C> <C> <C>
Owensboro, Kentucky, Electric Light and Power Revenue, Series B:
$ 7,100,000 0.000%, 1/01/11 No Opt. Call AAA $ 3,898,184
6,475,000 0.000%, 1/01/12 No Opt. Call AAA 3,344,985
7,900,000 0.000%, 1/01/17 No Opt. Call AAA 3,092,297
13,300,000 0.000%, 1/01/18 No Opt. Call AAA 4,940,285
5,100,000 0.000%, 1/01/19 No Opt. Call AAA 1,793,823
4,725,000 0.000%, 1/01/20 No Opt. Call AAA 1,579,662
2,500,000 Puerto Rico Electric Power Authority, Power 7/08 at 101 BBB+ 2,424,250
Revenue Bonds, Series DD, 5.000%, 7/01/28
3,000,000 Puerto Rico Electric Power Authority, Power 7/04 at 102 BBB+ 3,211,530
Revenue Bonds, Series T, 6.000%, 7/01/16
4,795,000 Trimble County, Kentucky, Pollution Control 11/00 at 102 Aa2 5,237,674
Revenue, Louisville Gas and Electric Company,
Series A, 7.625%, 11/01/20 (Alternative
Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 6.0%
625,000 City of Danville, Kentucky, Multi-City Lease 12/01 at 103 AAA 681,625
Revenue Bonds (City of Radcliff Kentucky), Sewer
System Revenue Project, Series 1991 B, 6.875%, 3/01/19
1,750,000 City of Henderson, Kentucky, Water and Sewer Revenue 11/04 at 103 AAA 1,947,173
and Refunding Bonds, Series of 1994 A, 6.100%, 11/01/14
2,040,000 Kenton County Water District No. 1, Water District 2/05 at 102 AAA 2,156,198
Revenue Bonds, Series 1995 B, 5.700%, 2/01/20
500,000 Kentucky Infrastructure Authority, Revolving Fund Program, 6/01 at 102 A 543,130
Series E, 6.500%, 6/01/11
1,000,000 Kentucky Infrastructure Authority, Refunding, Governmental 8/03 at 102 A 1,037,340
Agencies Program, Series E, 5.750%, 8/01/18
Kentucky Infrastructure Authority, Revolving Fund, Series J:
440,000 6.300%, 6/01/10 6/05 at 102 A 488,800
360,000 6.350%, 6/01/11 6/05 at 102 A 399,395
600,000 6.375%, 6/01/14 6/05 at 102 A 677,292
1,690,000 Kentucky Infrastructure Authority, Governmental Agencies 8/05 at 102 A 1,891,540
Program, Series G, 6.375%, 8/01/14
405,000 Kentucky Infrastructure Authority, Revenue Refunding, 8/99 at 102 A 428,606
Governmental Agencies Program, Series, A, 7.800%, 8/01/08
Louisville and Jefferson County, Metropolitan Sewer District
(Commonwealth of Kentucky), Sewer and Drainage System
Revenue Bonds, Series 1994A:
2,720,000 6.750%, 5/15/19 11/04 at 102 AAA 3,154,655
2,070,000 6.500%, 5/15/24 11/04 at 102 AAA 2,371,743
2,500,000 6.750%, 5/15/25 11/04 at 102 AAA 2,899,499
3,865,000 Louisville and Jefferson County, Kentucky, Metropolitan 2/05 at 102 Aaa 3,930,781
Sewer District, Sewer and Drain System Revenue, Series A,
5.400%, 5/15/22
6,000,000 Louisville and Jefferson County, Kentucky, Metropolitan 11/07 at 101 AAA 6,102,779
Sewer District, Sewer and Drain System Refunding Revenue,
Series B, 5.350%, 5/15/22
500,000 Paducah, Kentucky, Waterworks Revenue Refunding, 6.700%, 7/01/09 7/01 at 102 AAA 547,764
- -----------------------------------------------------------------------------------------------------------------------------------
$493,480,512 Total Investments - (cost $439,366,089) - 98.4% 477,311,529
============-----------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities -0.4%
$ 2,000,000 Puerto Rico Highway, Variable Rate Demand Bonds, 3.750%, 7/01/28 A-1+ 2,000,000
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.2% 5,605,510
---------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $484,917,039
=====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of
independent public accountants): Dates (month and year) and
prices of the earliest optional call or redemption. There may
be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or Moody's
rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. government or U.S. government agency
securities which ensures the timely payment of principal and
interest. Securities are normally considered to be equivalent
to AAA rated securities.
N/R Investment is not rated.
+ The security has a maturity of more than one year, but has
variable rate and demand features which qualify it as a short-
term security. The rate disclosed is that currently in effect.
This rate changes periodically based on market conditions or a
specified market index.
See accompanying notes to financial statements.
19
<PAGE>
Portfolio of Investments
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer Staples - 0.2%
$ 20,000 Newport, Kentucky, Industrial Building, Revenue Refunding, Louis No Opt. Call N/R $ 20,178
Trauth Dairy, Series A, 4.800%, 6/01/99
- ------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 13.5%
500,000 City of Berea, Kentucky, Berea College, General Obligation Bonds, No Opt. Call Aaa 504,160
Series 1998, 4.800%, 7/01/08 (Alternative Minimum Tax) (WI)
500,000 Kentucky Higher Education Student Loan Corporation, Insured Student No Opt. Call Aaa 548,120
Loan Revenue Bonds, 1991 Series B, 6.800%, 6/01/03 (Alternative
Minimum Tax)
475,000 University of Kentucky, University Revenues, Consolidated Educational No Opt. Call AAA 492,580
Buildings, Series O, 5.000%, 5/01/03
- ------------------------------------------------------------------------------------------------------------------------------
Energy - 3.0%
325,000 City of Ashland, Kentucky, Pollution Control Revenue Refunding Bonds 2/00 at 102 1/2 Baa1 347,240
(Ashland Oil Inc. Project), Series 1988A, 7.375%, 7/01/09
- ------------------------------------------------------------------------------------------------------------------------------
Health Care - 22.7%
580,000 Kentucky Development Finance Authority, Sisters of Charity of 11/01 at 102 A1 630,680
Nazareth Health Corporation, Revenue Refunding Bonds, Series
1991, 6.600%, 11/01/06
270,000 Kentucky Economic Development Finance Authority, Medical Center No Opt. Call AAA 272,444
Revenue Refunding and Improvement Bonds, Series 1993A (Ashland
Hospital Corporation/Kings Daughter Medical Center Project),
5.100%, 2/01/99
500,000 Kentucky Economic Development Finance Authority, Hospital System No Opt. Call BBB 516,930
Refunding and Improvement Revenue Bonds, Series 1997 (Appalachian
Regional Healthcare, Inc. Project), 5.500%, 10/01/07
385,000 Mc Cracken County, Kentucky, Hospital Revenue Refunding, Mercy Health 11/04 at 102 AAA 429,737
System, Series A, 6.300%, 11/01/06
710,000 Radcliff, Kentucky, Mortgage Revenue Refunding, Lincoln Trail Care, No Opt. Call AAA 741,055
5.100%, 7/20/07
- ------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 9.5%
705,000 Louisville, Kentucky, Multifamily Revenue Refunding, Station House No Opt. Call Aa2 713,862
Square Association, LP Project, 5.125%, 7/15/19
360,000 Martin County, Kentucky, Mortgage Revenue Refunding, Assisted 7/01 at 100 Aa 371,225
Project, 5.375%, 7/01/05
- ------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 1.8%
100,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1993 Series B 1/04 at 102 AAA 103,550
(Federally Insured or Guaranteed Mortgage Loans), 5.150%, 7/01/07
100,000 Kentucky Housing Corporation, Housing Revenue Bonds (Federally No Opt. Call AAA 102,398
Insured or Guaranteed Mortgage Loans), 1995 Series F, 4.800%,
7/01/03
- ------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 1.8%
200,000 Kentucky Economic Development Finance Authority, Hospital Revenue No Opt. Call Aa3 205,056
Refunding Bonds,Series 1996 (Green River Regional Mental Health/Mental
Retardation Board, Inc.), 5.200%, 11/01/01
- ------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 2.6%
280,000 Commonwealth of Puerto Rico, Public Improvement Refunding Bonds, No Opt. Call A 295,848
Series 1993 (General Obligation Bonds), 5.375%, 7/01/05
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/Limited - 21.2%
$ 265,000 Hardin County (Kentucky), School District Finance Corporation, 6/01 at 103 A1 $ 291,519
School Building Revenue Bonds, Series of 1991, 6.800%, 6/01/08
300,000 Jefferson County, Kentucky, Capital Projects Corporation, Lease No Opt. Call AAA 317,439
Revenue Bonds, Series 1996A, 5.500%, 4/01/03
City of Jeffersontown, Kentucky, Public Projects Refunding and
Improvements, Certificates of Participation:
505,000 4.850%, 11/01/04 No Opt. Call A 523,008
100,000 5.000%, 11/01/05 No Opt. Call A 104,340
50,000 Kentucky Interlocal School Transportation Association, Equipment No Opt. Call A1 51,788
Lease Revenue, 5.200%, 3/01/02
775,000 Mount Sterling, Kentucky, Lease Revenue Bonds (Kentucky League of No Opt. Call Aa 816,811
Cities Funding Program), Series 1993A, 5.625%, 3/01/03
325,000 Puerto Rico Commonwealth, Urban Renewal and Housing Corporation, No Opt. Call BBB 320,697
Commonwealth Appropriation Refunding, 0.000%, 10/01/98
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 8.9%
300,000 Kenton County (Kentucky), Airport Board, Cincinnati/Northern No Opt. Call AAA 308,658
Kentucky International Airport Revenue Bonds, Series 1996A, 5.000%,
3/01/02 (Alternative Minimum Tax)
360,000 Kentucky State Turnpike Authority, Economic Development Road No Opt. Call AAA 384,188
Revenue Refunding, Revitalization Projects, 5.400%, 7/01/05
125,000 The Turnpike Authority of Kentucky, Resource Recovery, Road No Opt. Call A+ 125,224
Revenue Refunding Bonds, 1985 Series A, 6.000%, 7/01/09
200,000 Regional Airport Authority of Louisville and Jefferson County, No Opt. Call AAA 200,318
Kentucky, Airport System Revenue Bonds, 1997 Series A, 5.750%,
7/01/98 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 0.5%
250,000 Jefferson County, Kentucky, Capital Projects Corporation, Lease 2/01 at 24 11/16 AAA 55,208
Revenue Bonds, Series 1989B, 0.000%, 8/15/19 (Pre-refunded to 2/15/01)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 2.8%
400,000 City of Owensboro, Kentucky, Electric Light and Power System No Opt. Call AAA 315,872
Revenue Bonds, Series 1993A, 0.000%, 1/01/04 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 8.3%
200,000 Kenton County, Water District No. 1, Water District Revenue No Opt. Call AAA 214,302
Bonds, Series 1995B, 5.600%, 2/01/04
Kentucky Infrastructure Authority, Revenue Refunding Wastewater Revolving
Fund Program,Series C:
150,000 5.300%, 6/01/03 No Opt. Call A 157,310
200,000 5.500%, 6/01/05 No Opt. Call A 213,263
350,000 Kentucky Infrastructure Authority, Governmental Agencies Program, No Opt. Call A 363,789
Revenue and Refunding Bonds, 1995 Series H, 5.200%, 8/01/02
- -----------------------------------------------------------------------------------------------------------------------------------
$10,865,000 Total Investments - (cost $10,737,735) - 96.8% 11,058,797
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 3.2% 361,840
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $11,420,637
====================================================================================================================
</TABLE>
* Optional Call Provision (not covered by the report of independent
public accountants): Dates (month and year) and prices of the
earliest optional call or redemption. There may be other call
provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or Moody's
rating.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
21
<PAGE>
Portfolio of Investments
Nuveen Flagship Michigan Municipal Bond Fund
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Capital Goods - 0.3%
$ 1,055,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (WMX 12/03 at 102 A1 $1,108,562
Technologies, Inc. Project), Series 1993, 6.000%, 12/01/13
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclical - 2.5%
2,500,000 Michigan State Strategic Fund, Limited Obligation Refunding Revenue No Opt. Call A1 2,933,150
Bonds, Series 1991A, 7.100%, 2/01/06
5,000,000 Michigan State Strategic Fund, Pollution Control Revenue Refunding, 9/05 at 102 A 5,441,950
General Motors Corporation, 6.200%, 9/01/20
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 1.5%
1,000,000 Board of Control of Grand Valley State University, Michigan, General 10/98 at 102 A 1,034,510
Revenue Bonds, Series 1988, 7.875%, 10/01/08
750,000 Michigan Higher Education Student Loan Authority, Student Loan, 6/06 at 102 Aaa 793,253
Series A, 5.750%, 6/01/13 (Alternative Minimum Tax)
1,000,000 Board of Trustees of Michigan State University, General Revenue Bonds, 2/06 at 101 AAA 977,910
Series 1996, 5.000%, 2/15/26
1,000,000 Oakland County Michigan Economic Development Corporation, Limited 11/04 at 102 Aa2 1,140,930
Obligation Revenue Refunding, Cranbrook Educational Community,
Series C, 6.900%, 11/01/14
1,000,000 Board of Trustees of Western Michigan University (Michigan), General 11/02 at 102 AAA 1,104,160
Revenue Bonds, Series 1992A, 6.250%, 11/15/12
- -----------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 2.3%
7,500,000 The Economic Development Corporation of Dickinson County (Michigan), 10/03 at 102 Baa1 7,831,050
Pollution Control Refunding Revenue Bonds (Champion International
Corporation Project), Series 1993, 5.850%, 10/01/18
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 23.8%
1,000,000 The Economic Development Corporation of the City of Dearborn, 11/05 at 102 AAA 1,068,400
Hospital Revenue Bonds (Oakwood Obligated Group), Series 1995A,
5.750%, 11/15/15
500,000 City of Farmington Hills, Hospital Finance Authority (Michigan), 2/02 at 102 AAA 549,940
Hospital Revenue Bonds (Botsford General Hospital), Series 1992A,
6.500%, 2/15/11
City of Flint Hospital Building Authority, Revenue Rental Bonds,
Series 1998B (Hurley Medical Center):
1,000,000 5.375%, 7/01/18 7/08 at 101 Baa 980,100
1,000,000 5.375%, 7/01/28 7/08 at 101 Baa 974,490
500,000 County of Grand Traverse (Michigan), Hospital Finance Authority, 7/02 at 102 AAA 541,635
Hospital Revenue Refunding Bonds (Munson Healthcare Obligated Group),
Series 1992A, 6.250%, 7/01/22
1,940,000 City of Kalamazoo (Michigan), Hospital Finance Authority, Hospital 5/03 at 102 A1 2,159,181
Revenue Refunding and Improvement Bonds (Bronson Methodist Hospital),
Series 1992A, 6.375%, 5/15/17
6,000,000 City of Kalamazoo (Michigan), Hospital Finance Authority, Hospital 5/06 at 102 AAA 6,369,120
Revenue Refunding and Improvement Bonds (Bronson Methodist Hospital),
Series 1996, 5.875%, 5/15/26
1,290,000 Kent Hospital Finance Authority (Michigan), Hospital Revenue 11/01 at 102 AAA 1,396,077
Refunding Bonds (Pine Rest Christian Hospital), Series 1992,
6.500%, 11/01/10
3,530,000 Lake View Community Hospital Authority, Michigan Hospital Revenue 2/07 at 101 N/R 3,472,320
Refunding, 6.250%, 2/15/13
3,000,000 Michigan State Hospital Finance Authority, Revenue Refunding, 1/00 at 100 BBB+ 3,036,360
Memorial Hospital, Owosso, Michigan, Series A, 7.375%, 1/01/03
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$ 40,000 Michigan State Hospital Finance Authority, Revenue and 8/98 at 102 A $ 41,129
Refunding Bonds (The Detroit Medical Center Obligated Group),
Series 1988B, 8.125%, 8/15/08
6,500,000 Michigan State Hospital Finance Authority, Revenue and Refunding 8/03 at 102 A 7,089,355
Bonds (The Detroit Medical Center Obligated Group), Series 1993A,
6.500%, 8/15/18
2,920,000 Michigan State Hospital Finance Authority, Revenue and Refunding 8/04 at 102 A 2,952,412
Bonds (The Detroit Medical Center Obligated Group), Series 1993B,
5.500%, 8/15/23
1,000,000 Michigan State Hospital Finance Authority, Revenue Refunding, 7/99 at 102 AAA 1,049,110
Oakland General Hospital, 7.000%, 7/01/15
1,000,000 Michigan State Hospital Finance Authority, Revenue Refunding Bonds 11/01 at 102 AAA 1,082,240
(Sparrow Obligated Group), Series 1991, 6.500%, 11/15/11
1,000,000 Michigan State Hospital Finance Authority, Revenue and Refunding 1/05 at 102 AA- 1,086,300
Bonds (Otsego Memorial Hospital, Gaylord, Michigan), Series
1995, 6.125%, 1/01/15
2,000,000 Michigan State Hospital Finance Authority, Revenue Refunding, Port 7/05 at 102 AAA 2,064,860
Huron Hospital Obligation, 5.500%, 7/01/15
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue No Opt. Call BBB 1,074,410
Refunding Bonds (Gratiot Community Hospital, Alma, Michigan),
Series 1995, 6.100%, 10/01/07
4,500,000 Michigan State Hospital Finance Authority, Hospital Revenue and 5/06 at 102 AA 4,470,570
Refunding Bonds (Henry Ford Health System), Series 1995A,
5.250%, 11/15/20
1,000,000 Michigan State Hospital Finance Authority, Central Michigan 10/06 at 102 BBB 1,056,430
Community Hospital, 6.250%, 10/01/27
5,250,000 Michigan State Hospital Finance Authority (Mercy Health Services 8/06 at 101 AAA 5,305,073
Obligated Group), 1996 Series Q, 5.375%, 8/15/26
2,000,000 Michigan State Hospital Finance Authority, Revenue Refunding 8/07 at 101 AA- 2,057,180
(Mercy Health Services), Series S, 5.500%, 8/05/20
Michigan State Hospital Finance Authority, Revenue and Refunding
Bonds (Genesys Regional Medical Center Obligated Group),
Series 1998A:
1,000,000 5.500%, 10/01/18 10/08 at 102 BBB 989,660
4,000,000 5.500%, 10/01/27 10/08 at 102 BBB 3,948,040
2,000,000 Michigan State Hospital Finance Authority, Revenue and Refunding No Opt. Call A3 1,910,060
Bonds (Hackley Hospital Obligated Group), Series 1998A, 5.000%,
5/01/18 (WI)
Pontiac, Michigan, Hospital Finance Authority, Revenue Refunding,
NOMC Obligation Group:
3,000,000 6.000%, 8/01/18 8/03 at 102 BBB- 3,051,930
- -----------------------------------------------------------------------------------------------------------------------------------
5,165,000 6.000%, 8/01/23 8/03 at 102 BBB- 5,251,669
- -----------------------------------------------------------------------------------------------------------------------------------
8,345,000 Royal Oak, Michigan, Hospital Finance Authority, Revenue Refunding, 1/06 at 102 AA 8,301,940
William Beaumont Hospital, 5.250%, 1/01/20
2,000,000 City of Saginaw, Hospital Finance Authority (Saginaw General 10/99 at 102 BBB+ 2,115,820
Hospital), 7.625%, 10/01/08
500,000 City of Saginaw (Michigan), Hospital Finance Authority (St. Lukes 7/01 at 102 AAA 541,550
Hospital), Revenue Refunding Bonds, Series 1991 C, 6.750%, 7/01/17
1,000,000 Regents of the University of Michigan, Hospital Revenue Bonds, 12/00 at 100 AA 1,056,530
Series 1990, 6.375%, 12/01/24
3,500,000 Regents of the University of Michigan, Medical Service Plan 12/01 at 102 Aa2 3,795,260
Revenue Bonds, Series 1991, 6.500%, 12/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 3.4%
435,000 Grand Rapids Housing Corporation, Multifamily Revenue Refunding 1/04 at 104 AAA 487,187
Bonds, Series 1992 (FHA Insured Mortgage Loan--Section 8
Assisted, Elderly Project), 7.375%, 7/15/41
750,000 Grand Rapids Housing Finance Authority, Multifamily Housing 9/04 at 100 AAA 824,978
Refunding Revenue Bonds, Series 1990A (Fannie Mae Collateralized),
7.625%, 9/01/23
1,190,000 Michigan State Housing Development Authority, Limited Obligation 10/05 at 102 Aaa 1,276,620
Multi-Family Revenue Refunding Bonds, Series 1995A (GNMA
Collateralized Program--Parc Pointe Apartments), 6.500%,
10/01/15
6,000,000 Michigan State Housing Development Authority, Series I, 0.000%, No Opt. Call AA- 1,595,520
4/01/14
5,000,000 Michigan State Housing Development Authority, Rental Housing 4/01 at 102 AA- 5,362,150
Revenue Bonds, 1990 Series B, 7.550%, 4/01/23
</TABLE>
23
<PAGE>
Portfolio of Investments
Nuveen Flagship Michigan Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Housing/Multifamily (continued)
$290,000 Michigan State Housing Development Authority, Rental Housing Revenue No Opt. Call AA- $ 311,448
Bonds, 1991 Series B, 7.100%, 4/01/21
460,000 Michigan State Housing Development Authority, Rental Housing Revenue 10/02 at 102 AA- 494,422
Bonds, 1992 Series A, 6.650%, 4/01/23
1,000,000 Michigan State Housing Development Authority, Rental Housing Revenue 6/05 at 102 AAA 1,060,980
Bonds, 1995 Series B, 6.150%, 10/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 4.7%
Michigan State Housing Development Authority, Single Family Mortgage
Revenue, Series A:
2,000,000 6.450%, 12/01/14 6/04 at 102 AA+ 2,124,360
1,280,000 7.500%, 6/01/15 6/00 at 102 AA+ 1,338,509
415,000 7.700%, 12/01/16 6/99 at 102 AA+ 426,126
1,250,000 6.050%, 12/01/27 (Alternative Minimum Tax) 6/07 at 102 AAA 1,314,638
3,250,000 Michigan State Housing Development Authority, Single Family Mortgage 12/00 at 102 AA+ 3,419,293
Revenue, Series C, 7.550%, 12/01/15
3,930,000 Michigan State Housing Development Authority, Single Family Mortgage 12/04 at 102 AA+ 4,124,181
Revenue Refunding, Series C, 6.500%, 6/01/16
1,500,000 Michigan State Housing Development Authority, Single Family Mortgage 6/05 at 102 AA+ 1,612,635
Revenue Bonds, 1995 Series A, 6.800%, 12/01/16
1,500,000 Michigan State Housing Development Authority, Single Family Mortgage 12/06 at 102 AA+ 1,579,005
Revenue, Series D, 5.950%, 12/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 2.5%
2,500,000 The Economic Development Corporation of the City of Kalamazoo (Kalamazoo 5/07 at 102 BBB 2,647,475
County, Michigan), Limited Obligation Revenue and Refunding Bonds
(Friendship Village of Kalamazoo), Series 1997A, 6.250%, 5/15/27
1,200,000 Michigan State Hospital Finance Authority, Revenue Bonds (Presbyterian 7/05 at 102 N/R 1,288,428
Villages of Michigan Obligation Group), 6.500%, 1/01/25
Michigan State Hospital Finance Authority, Revenue Bonds (Presbyterian
Villages of Michigan Obligation Group), Series 1997:
600,000 6.375%, 1/01/15 1/07 at 102 N/R 644,172
500,000 6.375%, 1/01/25 1/07 at 102 N/R 534,320
Michigan Strategic Fund, Limited Obligation Revenue Bonds (Porter Hills
Presbyterian Village Inc. Project), Series 1998:
400,000 5.300%, 7/01/18 7/08 at 101 A 400,644
2,675,000 5.375%, 7/01/28 7/08 at 101 A 2,654,750
250,000 The Economic Development Corporation of the City of Warren, Nursing Home 3/02 at 101 Aaa 265,868
Revenue Refunding Bonds (GNMA Mortgage-Backed Security-Autumn Woods
Project), Series 1992, 6.900%, 12/20/22
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 16.3%
400,000 County of Bay, Michigan, Bay County West Side Regional Sewage Disposal 11/98 at 102 A 411,252
System Bonds, 6.400%, 5/01/02
5,000,000 Brighton Area Schools, County of Livingston, State of Michigan, 1992 No Opt. Call AAA 1,626,100
Refunding Bonds, Series II (General Obligation Unlimited Tax),
0.000%, 5/01/20
3,600,000 School District of the City of Detroit, Wayne County, Michigan, School 5/06 at 102 AAA 3,792,204
Building and Site Improvement Bonds (Unlimited Tax General Obligation),
Series 1996A, 5.700%, 5/01/25
500,000 City of East Lansing Building Authority, County of Ingham, State of 10/99 at 102 AA 529,420
Michigan, Building Authority Refunding Bonds, Series 1991,
7.000%, 10/01/16
2,430,000 School District of the City of Garden City, County of Wayne, State of 5/04 at 101 AAA 2,692,926
Michigan, 1994 Refunding Bonds (General Obligation - Unlimited Tax),
6.400%, 5/01/11
1,000,000 Lake Orion Community School District, County of Oakland, State of 5/05 at 101 AAA 1,027,070
Michigan, 1995 Refunding Bonds (General Obligation-Unlimited Tax),
5.500%, 5/01/20
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 1,000,000 School District of the City of Lincoln Park, County of Wayne, State of 5/08 at 100 AAA $ 972,100
Michigan, 1998 Refunding Bonds (Unlimited Tax), 5.000%, 5/01/26 (WI)
510,000 Livingston County, Michigan, Genoa, Oceola Sanitation Sewer No. 1, 5/99 at 102 A 530,247
6.000%, 5/01/08
2,700,000 Livonia, Michigan Public Schools School District, Series II, No Opt. Call AAA 1,719,441
0.000%, 5/01/08
2,410,000 Mona Shores, Michigan, School District, School District 5/05 at 102 AAA 2,529,849
Building and Site, 5.500%, 5/01/14
Okemos Public Schools, County of Ingham, State of Michigan, 1993
Refunding Bonds:
1,000,000 0.000%, 5/01/17 No Opt. Call AAA 381,360
1,020,000 0.000%, 5/01/18 No Opt. Call AAA 368,954
1,500,000 Portage Lake, Michigan, Water and Sewer Authority, Refunding, 10/05 at 102 AAA 1,665,450
6.200%, 10/01/20
Commonwealth of Puerto Rico, Public Improvement Bonds of 1994
(General Obligation Bonds):
3,125,000 6.450%, 7/01/17 7/04 at 102 AAA 3,545,500
2,370,000 6.500%, 7/01/23 7/04 at 101 1/2 AAA 2,695,211
500,000 Redford Union Schools, District No. 1, County of Wayne, State No Opt. Call AAA 499,285
of Michigan, 1997 Refunding Bonds (General
Obligation - Unlimited Tax), 5.000%, 5/01/22
2,420,000 Rockford Public Schools, Kent County, 1997 School Building 5/07 at 100 AAA 2,426,728
and Site Bonds, General Obligation Unlimited Tax, 5.250%, 5/01/27
1,650,000 Saint Clair County Building Authority, Michigan, General 4/06 at 101 AAA 1,698,807
Obligation Bonds, 5.375%, 4/01/15
750,000 South Lyon Community Schools, Counties of Oakland, Washtenaw 5/01 at 102 AA+ 802,763
and Livingston, State of Michigan, 1991 Refunding Bonds
(General Obligation-Unlimited Tax), 6.250%, 5/01/14
2,925,000 Spring Lake Public Schools, General Obligation Bonds, Series 5/07 at 100 AAA 3,068,647
1997, 5.700%, 5/01/23
Waterford, Michigan, School District:
2,470,000 6.370%, 6/01/14 6/04 at 101 AAA 2,773,884
2,500,000 6.250%, 6/01/23 6/04 at 101 AAA 2,791,150
5,000,000 Wayland, Michigan, Unit School District, 6.250%, 5/01/14 5/05 at 101 AAA 5,636,250
1,250,000 Wayne County, Michigan, Building Authority, Capital Improvement, 6/06 at 102 AAA 1,266,500
Series A, 5.250%, 6/01/16
3,270,000 West Ottawa, Michigan, Public School District Refunding, 0.000%, 5/01/17 No Opt. Call AAA 1,247,047
2,000,000 Western Townships Utilities Authority, Sewage Disposal System 1/99 at 102 BBB+ 2,086,040
Bonds, Series 1989, 8.200%, 1/01/18
1,000,000 Western Townships Utilities Authority, Sewage Disposal System Refunding 1/02 at 100 AAA 1,071,370
Bonds, Series 1991, 6.500%, 1/01/10
5,175,000 Williamston Community School District, General Obligation-Unlimited Tax, No Opt. Call AAA 5,547,341
Series 1996, 5.500%, 5/01/25
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 16.3%
2,000,000 City of Detroit Building Authority, Building Authority Revenue Bonds 2/07 at 101 A 2,150,700
(District Court Madison Center), Series A, 6.150%, 2/01/11
10,700,000 City of Detroit (Michigan), Downtown Development Authority, 7/06 at 102 A- 11,555,358
Tax Increment Refunding Bonds (Development Area No. 1
Projects), Series 1996C, 6.250%, 7/01/25
9,460,000 Detroit/Wayne County Stadium Authority (State of Michigan), Building 2/07 at 102 AAA 9,489,988
Authority, Series 1997 (Wayne County Limited Tax General
Obligation), 5.250%, 2/01/27
Downtown Development Authority of the City of Grand Rapids, Michigan, Tax
Increment Revenue Bonds, Series 1994:
3,985,000 0.000%, 6/01/17 No Opt. Call AAA 1,513,304
3,495,000 0.000%, 6/01/18 No Opt. Call AAA 1,258,829
1,650,000 6.875%, 6/01/24 6/04 at 102 AAA 1,879,482
2,000,000 Lansing, Michigan, Building Authority, Refunding, 5.600%, 6/01/19 6/05 at 101 AA+ 2,086,740
250,000 Michigan Municipal Bond Authority, State Revolving Fund Revenue Bonds, 12/01 at 100 AAA 251,443
Series 1992A, 4.750%, 12/01/09
5,500,000 Michigan Municipal Bond Authority, Revenue Refunding, Government Loan, No Opt. Call AAA 3,576,210
Series A, 0.000%, 12/01/07
2,800,000 Michigan Municipal Bond Authority, Local Government Loan, Series No Opt. Call AAA 1,773,240
C, 0.000%, 6/15/08
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Flagship Michigan Municipal Bond Fund (continued)
May 31, 1998
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
State Building Authority, State of Michigan, 1991 Revenue Refunding
Bonds, Series I:
$1,000,000 6.750%, 10/01/11 10/01 at 102 AA $1,089,450
5,000,000 6.250%, 10/01/20 10/01 at 102 AA 5,344,600
7,585,000 State Building Authority, State of Michigan, 1991 Revenue Bonds, 10/01 at 102 AA 8,107,758
Series II, 6.250%, 10/01/20
2,260,000 Puerto Rico Highway and Transportation Authority, 6.625%, 7/01/12 7/02 at 101 1/2 A 2,482,587
1,500,000 Puerto Rico Highway and Transportation Authority, Transportation 7/08 at 101 A 1,449,600
Revenue Bonds, Series A, 5.000%, 7/01/38
1,085,000 Romulus, Michigan, Tax Increment Finance Authority, Limited 11/06 at 100 N/R 1,153,594
Obligation Revenue, 6.750%, 11/01/19
250,000 Capital Region Airport Authority (Lansing, Michigan), Airport 7/02 at 102 AAA 273,408
Revenue Bonds, Series 1992, 6.700%, 7/01/21 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 16.7%
1,000,000 City of Battle Creek, County of Calhoun, State of Michigan, 5/04 at 102 BBB+*** 1,186,130
Battle Creek Downtown Development Authority, 1994 Development Bonds,
7.600%, 5/01/16 (Pre-refunded to 5/01/04)
1,800,000 City of Battle Creek, County of Calhoun, State of Michigan, Tax 5/04 at 102 A-*** 2,120,544
Increment Finance Authority, 1994 Development Bonds, 7.400%, 5/01/16
(Pre-refunded to 5/01/04)
1,000,000 City of Bay City, County of Bay, State of Michigan, Electric 1/01 at 102 AAA 1,081,730
Utility System Revenue Bonds, 1991 Series, 6.600%, 1/01/12
(Pre-refunded to 1/01/01)
1,895,000 Buena Vista School District, County of Saginaw, State of 5/01 at 102 N/R*** 2,093,520
Michigan, 1991 School Building and Site Bonds (General Obligation
Unlimited Tax), 7.200%, 5/01/16 (Pre-refunded to 5/01/01)
1,000,000 The Central Michigan University Board of Trustees, General 10/00 at 102 A+*** 1,084,630
Revenue Bonds, Series 1990, 7.000%, 10/01/10 (Pre-refunded to 10/01/00)
750,000 City of Detroit, Michigan, General Obligation Bonds (Unlimited 4/01 at 102 AAA 842,558
Tax), Series 1991, 8.000%, 4/01/11 (Pre-refunded to 4/01/01)
300,000 School District of the City of Detroit, Wayne County, Michigan, 5/00 at 102 N/R*** 326,073
School Building and Site Bonds, Series XXIII, 7.750%, 5/01/10
(Pre-refunded to 5/01/00)
1,650,000 School District of the City of Detroit, Wayne County, Michigan, 5/01 at 102 AA+*** 1,818,663
School Building and Site Bonds (Unlimited Tax General Obligation),
Series 1991, 7.150%, 5/01/11 (Pre-refunded to 5/01/01)
1,000,000 City of Detroit, Michigan, Sewage Disposal System Revenue Bonds, 7/99 at 101 1/2 AAA 1,050,090
Series 1989, 7.125%, 7/01/19 (Pre-refunded to 7/01/99)
2,000,000 City of Detroit, Michigan, Water Supply System Revenue Bonds, 7/00 at 102 AAA 2,168,900
Series 1990, 7.250%, 7/01/20 (Pre-refunded to 7/01/00)
500,000 City of Farmington Hills Hospital Finance Authority (Michigan), 2/02 at 102 AAA 549,940
Hospital Revenue Bonds (Botsford General Hospital), Series 1992A,
6.500%, 2/15/22 (Pre-refunded to 2/15/02)
3,000,000 City of Grand Rapids, Michigan, Water Supply System Improvement 1/00 at 102 AAA 3,208,950
Revenue Bonds, Series 1990, 7.250%, 1/01/20 (Pre-refunded to 1/01/00)
2,500,000 Haslett Public Schools, Counties of Ingham, Clinton and 5/00 at 101 AA+*** 2,685,575
Shiawassee, State of Michigan, 1990 School Building and Site Bonds,
7.500%, 5/01/20 (Pre-refunded to 5/01/00)
750,000 City of Hudsonville Building Authority, County of Ottawa, State 10/02 at 102 AAA 836,843
of Michigan, Building Authority Refunding Bonds, Series 1992, 6.600%,
10/01/17 (Pre-refunded to 10/01/02)
2,000,000 Huron Valley School District, Counties of Oakland and 5/01 at 102 N/R*** 2,198,220
Livingston, State of Michigan, 1991 School Building and Site Bonds,
7.100%, 5/01/08 (Pre-refunded to 5/01/01)
4,000,000 Lake Orion, Michigan, Community School District, Refunding, 5/05 at 101 AAA 4,682,080
7.000%, 5/01/15 (Pre-refunded to 5/01/05)
City of Marquette, Hospital Finance Authority, Hospital Revenue
Refunding Bonds (Marquette General Hospital, Marquette, Michigan),
1989 Series C:
930,000 7.500%, 4/01/07 (Pre-refunded to 4/01/99) 4/99 at 102 A+*** 976,537
2,240,000 7.500%, 4/01/19 (Pre-refunded to 4/01/99) 4/99 at 102 A+*** 2,352,090
825,000 Menominee, Michigan, Area Public School District, 7.400%, 5/01/20 5/00 at 102 AA+*** 893,343
(Pre-refunded to 5/01/00)
3,000,000 Michigan Higher Education Facilities Authority, Limited 5/01 at 103 A*** 3,347,070
Obligation, Aquinas College Project, 7.350%, 5/01/11 (Pre-refunded
to 5/01/01)
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed (continued)
$ 555,000 Michigan Municipal Bond Authority, State Revolving Fund Reserve 10/02 at 102 AA+*** $ 618,553
Bonds, Series 1992A, 6.600%, 10/01/18 (Pre-refunded to 10/01/02)
Michigan Municipal Bond Authority, State Revolving Fund Revenue
Bonds, Series 1994:
950,000 7.000%, 10/01/04 No Opt. Call AA+ 1,094,619
1,000,000 6.500%, 10/01/14 (Pre-refunded to 10/01/04) 10/04 at 102 AA+*** 1,141,230
1,000,000 6.500%, 10/01/17 (Pre-refunded to 10/01/04) 10/04 at 102 AA+*** 1,141,230
500,000 Michigan State Hospital Finance Authority, Hospital Revenue Bonds 12/02 at 102 AAA 564,795
(MidMichigan Obligated Group), Series 1992, 6.900%, 12/01/24
(Pre-refunded to 12/01/02)
1,000,000 Michigan State Hospital Finance Authority, Henry Ford Health 7/00 at 102 AAA 1,078,860
System, Series A, 7.000%, 7/01/10 (Pre-refunded to 7/01/00)
6,000,000 Michigan Hospital Finance Authority (Oakwood Hospital Obligated 7/00 at 102 AAA 6,485,040
Group), 7.100%, 7/01/18 (Pre-refunded to 7/01/00)
800,000 Michigan State Hospital Finance Authority, Sisters of Mercy 2/01 at 102 AAA 878,480
Health Corporation, 7.200%, 2/15/18 (Pre-refunded to 2/15/01)
1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue Bonds 11/01 at 102 Aa2*** 1,109,590
(Daughters of Charity National Health System-Providence Hospital),
Series 1991, 7.000%, 11/01/21 (Pre-refunded to 11/01/01)
2,400,000 Oakland County, Michigan, Economic Development Corporation, 1/00 at 102 N/R*** 2,648,232
Limited Obligation Revenue, Pontiac Osteopathic Hospital
Project, 9.625%, 1/01/20 (Pre-refunded to 1/01/00)
1,800,000 Puerto Rico Commonwealth Highway Authority, Highway Revenue, 7/00 at 102 AAA 1,971,414
Series Q, 7.750%, 7/01/16 (Pre-refunded to 7/01/00)
1,040,000 Rockford Public Schools, County of Kent, State of Michigan, 1990 5/00 at 101 N/R*** 1,113,611
School Building and Site Refunding Bonds (General Obligation
Bonds), 7.375%, 5/01/19 (Pre-refunded to 5/01/00)
180,000 Saginaw-Midland Municipal Water Supply Corporation, State of 9/04 at 102 A*** 208,737
Michigan, Water Supply Revenue Bonds (Limited Tax General
Obligation), Series 1992, 6.875%, 9/01/16 (Pre-refunded
to 9/01/04)
7,000,000 Vicksburg Community Schools, Counties of Kalamazoo and St. 5/06 at 37 1/4 AAA 1,837,360
Joseph, State of Michigan, 1991 School Building and Site
Bonds, 0.000%, 5/01/20 (Pre-refunded to 5/01/06)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 3.4%
400,000 Michigan Public Power Agency, Belle River Project Refunding 1/03 at 102 AA- 400,644
Revenue Bonds, 1993 Series A, 5.250%, 1/01/18
3,000,000 Michigan State South Central Power Agency, Power Supply System 11/04 at 102 BBB+ 3,415,890
Revenue Refunding, 7.000%, 11/01/11
3,500,000 Michigan State Strategic Fund, Limited Obligation Revenue 6/04 at 102 AAA 3,901,240
Refunding, Detroit Education Company, Series B, 6.450%, 6/15/24
1,000,000 Monroe County, Michigan, Economic Development Corporation, No Opt. Call AAA 1,269,020
Limited Obligation Revenue Refunding Collateralized, Detroit
Edison Company, Series Aa, 6.950%, 9/01/22
1,000,000 County of Monroe, Michigan, Pollution Control Revenue Bonds (The No Opt. Call AAA 1,106,360
Detroit Edison Company Project), Series A-1994, 6.350%, 12/01/04
(Alternative Minimum Tax)
4,000,000 Puerto Rico Electric Power Authority, Power Revenue, Formerly No Opt. Call AAA 1,569,920
Puerto Rico Commonwealth Water Resource Authority Power, Capital
Appreciation Refunding, Series N, MBIA, IBC, 0.000%, 7/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 6.3%
City of Detroit, Michigan, Sewage Disposal System, Revenue Refunding
Bonds, Series 1995-B:
1,500,000 5.250%, 7/01/15 7/05 at 101 AAA 1,525,950
10,500,000 5.250%, 7/01/21 7/05 at 101 AAA 10,529,610
2,885,000 City of Detroit, Michigan, Sewage Disposal System Revenue Bonds, 7/07 at 101 AAA 2,813,856
Series 1997-A, 5.000%, 7/01/22
1,570,000 City of Detroit, Michigan, Water Supply System Revenue, Second No Opt. Call AAA 1,701,235
Lien Bonds, Series 1995-A, 5.550%, 7/01/12
2,230,000 City of Detroit, Michigan, Water Supply System Revenue, Second No Opt. Call AAA 2,416,405
Lien Bonds, Series 1995-B, 5.550%, 7/01/12
</TABLE>
27
<PAGE>
Portfolio of Investments
Nuveen Flagship Michigan Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Water and Sewer (continued)
$ 1,000,000 City of Grand Rapids, Michigan, Sanitary Sewer System Improvement 1/00 at 102 AA-- $ 1,063,349
Revenue Refunding Bonds, Series 1990, 7.000%, 1/01/16
1,250,000 Michigan Municipal Bond Authority, State Revolving Fund, 5.125%, 10/07 at 101 AA+ 1,247,437
10/01/20
- ------------------------------------------------------------------------------------------------------------------------------------
$348,855,000 Total Investments -- (cost $309,809,533) -- 100.0% 340,187,675
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.0% (123,085)
---------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $340,064,590
=====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent
public accountants): Dates (month and year) and prices of the
earliest optional call or redemption. There may be other call
provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or Moody's
rating.
*** Securities are backed by an escrow or trust containing sufficient
U.S. government or U.S. government agency securities which ensures
the timely payment of principal and interest. Securities are
normally considered to be equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
28
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Flagship Michigan Municipal Bond Fund (continued)
May 31, 1998
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Basic Materials -- 0.3%
$1,650,000 Toledo, Lucas County, Ohio, Port Authority, Port Revenue 3/02 at 102 AA-- $1,846,218
Refunding Facilities, Cargill Inc. Project, 7.250%, 3/01/22
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Goods -- 0.2%
1,425,000 Ohio Water Development Authority, Revenue Bonds, USA Waste 3/02 at 102 N/R 1,545,498
Services, Series 1992, 7.750%, 9/01/07 (Alternative Minimum Tax)
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples -- 0.1%
1,000,000 Summit County, Ohio, Industrial Development Revenue, Century 11/99 at 100 Aa1 1,022,880
Products Inc. Project, 7.750%, 11/01/05
- ----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations -- 4.4%
1,000,000 Kent State University (A State University of Ohio), General 5/02 at 102 AAA 1,091,710
Receipts Bonds, Series 1992, 6.500%, 5/01/22
2,050,000 Miami University, Ohio, University Revenues, 6.900%, 12/01/04 12/99 at 102 A+ 2,175,583
3,500,000 State of Ohio, Education Loan Revenue Bonds, Series 1997
(Supplemental Student Loan Program), 1997A1, 5.850%, 12/01/19 6/07 at 102 AAA 3,635,275
(Alternative Minimum Tax)
1,750,000 State of Ohio (Ohio Higher Educational Facility Commission), 12/04 at 102 AAA 1,852,235
Higher Educational Facility Revenue Bonds (University of Dayton,
1994 Project), 5.800%, 12/01/19
2,025,000 State of Ohio (Ohio Higher Educational Facility Commission), 12/03 at 102 AAA 2,267,312
Higher Educational Facility Mortgage Revenue Bonds (University of
Dayton, 1992 Project), 6.600%, 12/01/17
1,200,000 State of Ohio (Ohio Higher Educational Facility Commission), 9/06 at 101 N/R 1,256,364
Higher Educational Facility Revenue Bonds (The University of
Findlay, 1996 Project), 6.125%, 9/01/16
7,000,000 State of Ohio, Higher Educational Facility Revenue Bonds (Xavier 5/07 at 102 AAA 7,136,360
University 1997 Project), 5.375%, 5/15/22
Ohio Higher Educational Facility Commission, Case Western Reserve
University, Ohio:
1,870,000 7.125%, 10/01/14 10/00 at 102 AA 2,037,608
750,000 6.500%, 10/01/20 No Opt. Call AA 902,565
2,250,000 Ohio State Higher Educational Facility, John Carroll University 4/07 at 102 A2 2,387,790
Project Revenue, 5.750%, 4/01/19
4,250,000 University of Cincinnati (Ohio), General Receipts Bonds, Series 6/07 at 100 AAA 4,321,273
AB, 5.375%, 6/01/20
1,230,000 Youngstown State University, Ohio, General Receipts, 6.000%, 12/04 at 102 AAA 1,375,386
12/15/16
- ----------------------------------------------------------------------------------------------------------------------------------
Energy -- 0.5%
2,125,000 County of Ashtabula, Ohio, Industrial Development Refunding 5/02 at 102 Baa1 2,299,165
Revenue Bonds, 1992 Series A (Ashland Oil, Inc. Project), 6.900%,
5/01/10
1,000,000 Ohio Air Quality Development Authority, State of Ohio, Air 4/01 at 102 Baa1 1,062,490
Quality Development Refunding Revenue Bonds, Series 1992 (Ashland
Oil, Inc. Project), 6.850%, 4/01/10
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care -- 14.9%
1,250,000 County of Butler, Ohio, Hospital Facilities Revenue Refunding and 1/02 at 102 BBB-- 1,357,088
Improvement Bonds, Series 1991 (Fort Hamilton-Hughes Memorial
Hospital Center), 7.500%, 1/01/10
City of Cambridge, Ohio, Hospital Revenue Refunding Bonds, Series
1991 (Guernsey Memorial Hospital Project):
500,000 8.000%, 12/01/06 12/01 at 102 BBB 556,610
1,000,000 8.000%, 12/01/11 12/01 at 102 BBB 1,112,190
</TABLE>
29
<PAGE>
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care (continued)
$ 1,500,000 County of Cuyahoga, Ohio, Hospital Improvement and Refunding Revenue 1/06 at 102 AAA $ 1,560,390
Bonds, Series 1996A (University Hospitals Health System, Inc. Project),
5.625%, 1/15/26
1,000,000 County of Cuyahoga, Ohio, Hospital Improvement and Refunding Revenue 2/07 at 102 AAA 1,046,190
Bonds, Series 1997 (The MetroHealth System Project), 5.625%, 2/15/17
2,000,000 Cuyahoga County, Ohio, Industrial Development Refunding Revenue Bonds, 8/01 at 103 AAA 2,206,320
Series 1991 (University Health Care Center Project), 7.300%, 8/01/11
2,010,000 County of Erie, Ohio, Hospital Improvement and Refunding Revenue Bonds, 1/02 at 102 A 2,195,302
Series 1992 (Firelands Community Hospital Project), 6.750%, 1/01/08
County of Franklin, Ohio, Hospital Refunding and Improvement Revenue
Bonds, 1996 Series A (The Childrens Hospital Project):
1,575,000 5.750%, 11/01/15 11/06 at 101 Aa 1,667,689
5,275,000 5.875%, 11/01/25 11/06 at 101 Aa 5,614,130
County of Franklin, Ohio, Hospital Revenue Bonds, Holy Cross Health
Systems Corporation, Series 1996:
965,000 5.800%, 6/01/16 6/06 at 102 AA 1,019,822
2,000,000 5.875%, 6/01/21 6/06 at 102 AA 2,142,960
1,500,000 Franklin County, Ohio, Hospital Revenue Refunding Bonds (Holy Cross 6/00 at 102 AAA 1,624,515
Health System--Mt. Carmel Health), Series 1990-A, 7.625%, 6/01/09
City of Garfield Heights, Ohio, Hospital Improvement and Refunding
Revenue Bonds, Series 1992B (Marymount Hospital Project):
3,000,000 6.650%, 11/15/11 11/02 at 102 A 3,272,790
3,500,000 6.700%, 11/15/15 11/02 at 102 A 3,822,245
3,000,000 County of Hamilton, Ohio, Hospital Facilities Revenue Refunding Bonds, 1/03 at 102 A 3,246,030
Series 1992A (Bethesda Hospital, Inc.), 6.250%, 1/01/12
1,720,000 Franciscan Sisters of the Poor Health System, Inc., Hamilton County, 7/02 at 102 Baa1 1,858,305
Ohio, Health System Revenue Bonds, Providence Hospital Issue, Series
1992, 6.875%, 7/01/15
7,890,000 Lorain County, Ohio, Hospital Revenue Refunding, EMH Regional Medical 11/05 at 102 AAA 7,979,788
Center, 5.375%, 11/01/21
2,250,000 County of Lorain, Ohio, Hospital Facilities Revenue Bonds, Series 1997 B 9/07 at 102 AAA 2,326,163
(Catholic Healthcare Partners), 5.500%, 9/01/27
1,000,000 County of Lucas, Ohio, Hospital Improvement Revenue Bonds, Series 1990A 8/00 at 102 AAA 1,071,800
(St. Vincent Medical Center), 6.750%, 8/15/20
3,000,000 County of Lucas, Ohio, Hospital Improvement Revenue Bonds, Series 1992 8/02 at 102 AAA 3,289,470
(St. Vincent Medical Center), 6.500%, 8/15/12
500,000 Mansfield, Hospital Improvement Revenue (Mansfield General Hospital), 12/01 at 102 AAA 546,765
6.700%, 12/01/09
2,000,000 County of Marion, Ohio, Hospital Refunding and Improvement Revenue Bonds, 5/06 at 102 BBB+ 2,191,880
Series 1996 (The Community Hospital), 6.375%, 5/15/11
1,250,000 Maumee Hospital Facilities Revenue (St. Lukes Hospital), 5.800%, 12/01/14 12/04 at 102 AAA 1,338,788
4,405,000 County of Miami, Ohio, Hospital Facilities Revenue Refunding and 5/06 at 102 BBB 4,681,722
Improvement Bonds, Series 1996A (Upper Valley Medical Center), 6.250%,
5/15/16
4,205,000 Miami County, Ohio, Hospital Facilities Revenue Refunding & Improvement, 5/06 at 102 BBB 4,469,158
Upper Valley Medical Center, Series C, 6.250%, 5/15/13
City of Middleburg Heights, Ohio, Hospital Improvement Refunding Revenue
Bonds, Series 1995 (Southwest General Health Center Project):
4,000,000 5.625%, 8/15/15 8/08 at 102 AAA 4,233,600
2,000,000 5.750%, 8/15/21 8/08 at 102 AAA 2,130,020
11,000,000 Montgomery County, Ohio, Health System Revenue Bonds, Franciscan Medical 1/08 at 102 Baa1 11,018,040
Center Dayton Campus Issue, Series 1997, 5.500%, 7/01/18
County of Montgomery, Ohio, Hospital Facilities Revenue Refunding and
Improvement Bonds, Series 1996 (Kettering Medical Center):
1,500,000 5.625%, 4/01/16 4/06 at 102 AAA 1,568,490
7,000,000 6.250%, 4/01/20 No Opt. Call AAA 8,183,070
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care (continued)
- -----------------------------------------------------------------------------------------------------------------------------------
$ 2,500,000 Montgomery County, Ohio, Sisters Charity Health Care, Series A, 5/03 at 101 AAA $ 2,755,325
6.250%, 5/15/08
2,790,000 City of Mount Vernon, Ohio, Hospital Refunding Revenue Bonds, Series 6/02 at 100 N/R 2,852,663
1986A (Knox Community Hospital), 7.875%, 6/01/12
1,725,000 County of Shelby, Ohio, Hospital Facilities Revenue Refunding and 9/02 at 102 BBB 1,929,326
Improvement Bonds, Series 1992 (The Shelby County Memorial Hospital
Association), 7.700%, 9/01/18
2,750,000 County of Trumbull, Ohio, Hospital Refunding and Improvement Revenue 11/01 at 102 AAA 3,112,230
Bonds, Series 1991 (Trumbull Memorial Hospital Project), Series 1991
B, 6.900%, 11/15/12
750,000 County of Tuscarawas, Ohio, Hospital Facilities Revenue Bonds, Series 10/03 at 102 Baa2 800,843
1993A (Union Hospital Project), 6.500%, 10/01/21
1,500,000 Washington County (Marietta Area Health Care Project), 7.375%, 9/01/12 9/02 at 102 Baa1 1,649,175
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 3.9%
16,160,000 County of Franklin, Ohio, Mortgage Revenue Bonds, Series 1997 (GNMA 10/07 at 103 Aaa 16,389,795
Collateralized -- Columbus Properties Project), 5.600%, 4/20/39
(Alternative Minimum Tax)
6,200,000 Hamilton County, Multi-Family Housing Revenue Bonds (Huntington 1/07 at 102 AAA 6,374,158
Meadows Project), Series 1997, 5.700%, 1/01/27 (Alternative Minimum Tax)
2,800,000 Ohio Capital Corporation for Housing, Mortgage Revenue Refunding, FHA, 11/02 at 100 AAA 2,827,832
Section 8 Assisted Project, Series C, 5.700%, 1/01/24
Ohio Capital Corporation for Housing, Multifamily Housing Refunding
Revenue Bonds, Series 1989A:
310,000 7.500%, 11/01/11 11/02 at 100 AAA 326,291
1,215,000 7.600%, 11/01/23 11/02 at 100 AAA 1,278,836
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 5.7%
5,000,000 Ohio Housing Finance Agency, Residential Mortgage Revenue Bonds, 1996 9/07 at 102 AAA 5,141,450
Series B-3 (Mortgage-Backed Securities Program), 5.750%, 9/01/28
(Alternative Minimum Tax)
5,500,000 Ohio Housing Finance Agency, Residential Mortgage Revenue, Series C, 9/07 at 102 AAA 5,655,595
5.750%, 9/01/28 (Alternative Minimum Tax)
5,045,000 Ohio Housing Finance Agency, Residential Mortgage Revenue Bonds, 1997 3/08 at 101 AAA 5,136,415
Series D-1 (Mortgage-Backed Securities Program), 5.500%, 3/01/19
(Alternative Minimum Tax)
1,990,000 Ohio Housing Finance Agency, Residential Mortgage Revenue Bonds, 9/04 at 102 AAA 2,110,156
Series 1994-A1 (GNMA Mortage-Backed Securities Program), 6.100%, 9/01/14
5,255,000 Ohio Housing Finance Agency, Residential Mortgage Revenue, Series B-1, 9/04 at 102 AAA 5,633,518
6.375%, 9/01/14
12,995,000 Ohio Housing Finance Agency, Residential Mortgage Revenue, Series A-1, 9/07 at 102 AAA 13,785,226
6.150%, 3/01/29 (Alternative Minimum Tax)
590,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue Bonds (GNMA 3/00 at 102 AAA 617,146
Mortgage-Backed Securities Program), 1990 Series A, 7.400%, 9/01/15
600,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue Bonds 9/00 at 102 AAA 632,526
(GNMA Mortgage-Backed Securities Program), 1990 Series D, 7.500%, 9/01/13
265,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue Bonds (GNMA 9/01 at 102 AAA 280,932
Mortgage-Backed Securities Program), 1991 Series D, 7.050%, 9/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial/Other -- 0.4%
2,860,000 Cleveland-Cuyahoga County Port Authority (Ohio), Development Revenue 5/08 at 102 N/R 2,773,142
Bonds (Port of Cleveland Bond Fund -- Jergens, Inc., Project),
Series 1998A, 5.375%, 5/15/18 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Care -- 3.5%
4,030,000 County of Cuyahoga, Ohio, Health Care Facilities Revenue Bonds, Series 6/00 at 100 N/R 4,355,261
1990 (Altenheim Project), 9.280%, 6/01/15
2,500,000 Fairlawn, Ohio, Health Care Facilities Revenue Bonds, Series 1989 (The 10/99 at 102 N/R 2,637,150
Village at Saint Edward Project), 8.750%, 10/01/19
1,500,000 County of Franklin, Ohio, Health Care Facilities Revenue Bonds, Series 7/03 at 102 N/R 1,524,015
1993 (Ohio Presbyterian Retirement Services), 6.500%, 7/01/23
</TABLE>
31
<PAGE>
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Long Term Care (continued)
$ 3,120,000 County of Franklin, Ohio, Health Care Facilities Revenue Bonds, Series 11/05 at 102 Aa2 $ 3,309,384
1995 (Heinzerling Foundation), 6.200%, 11/01/20
1,350,000 County of Franklin, Ohio, Hospital Facilities Mortgage Revenue Bonds, 7/01 at 103 N/R 1,511,744
1991 Series A (Ohio Presbyterian Retirement Services), 8.750%, 7/01/21
670,000 Franklin County, Hospital Revenue Refunding, FHA Insured Mortgage Loan 8/00 at 102 N/R 698,984
(Worthington Christian Village Nursing Home), 7.000%, 8/01/16
County of Marion, Ohio, Health Care Facilities Refunding and Improvement
Revenue Bonds, Series 1993 (United Church Homes, Inc. Project):
1,250,000 6.375%, 11/15/10 11/03 at 102 BBB 1,324,788
750,000 6.300%, 11/15/15 11/03 at 102 BBB 791,453
2,175,000 City of Napoleon, Ohio, Health Care Facilities Mortgage Revenue 9/04 at 102 Aa 2,404,898
Refunding Bonds, Series 1994 (The Lutheran Orphans and Old Folks
Home Society at Napoleon, Ohio, Inc., FHA Insured Project), 6.875%, 8/01/23
4,775,000 County of Warren, Ohio, Hospital Facilities Improvement and Refunding 7/01 at 102 Aa2 5,286,594
Revenue Bonds, Series 1991 (Otterbein Home Project), 7.200%, 7/01/11
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General--17.7%
Adams County/Ohio Valley School District, Counties of Adams and Highland, Ohio,
School Improvement Unlimited Tax General Obligation Bonds, Series 1995:
6,000,000 7.000%, 12/01/15 No Opt. Call AAA 7,485,780
9,500,000 5.250%, 12/01/21 12/05 at 102 AAA 9,528,215
3,955,000 City of Akron, Ohio, General Obligation Bonds, Various Purpose 12/04 at 102 AAA 4,511,271
Improvement Bonds, Series 1994 (Limited Tax), 6.750%, 12/01/14
Anthony Wayne Local School District, Lucas, Wood and Fulton Counties,
Ohio, School Facilities Construction and Improvement Bonds:
600,000 0.000%, 12/01/13 No Opt. Call AAA 278,994
2,850,000 5.750%, 12/01/24 12/05 at 101 AAA 3,000,651
1,000,000 Archbold Area Local School District, General Obligation Bonds 12/06 at 102 AAA 1,089,740
(Unlimited Tax), Series 1996, 6.000%, 12/01/21
1,000,000 Aurora City School District, Ohio, General Obligation (Unlimited Tax), 12/05 at 102 AAA 1,071,350
School Improvement Bonds, Series 1995, 5.800%, 12/01/16
2,905,000 Board of Education, Batavia Local School District, County of Clermont, 12/05 at 102 AAA 3,337,787
Ohio, School Improvement Bonds, Series 1995 (Unlimited Tax), Bank
Qualified, 6.300%, 12/01/22
1,000,000 Board of Education, Beavercreek Local School District, County of No Opt. Call AAA 1,203,020
Greene, Ohio, School Improvement Bonds, Series 1996 (Unlimited Tax
General Obligation), 6.600%, 12/01/15
2,500,000 Buckeye Valley Local School District, Ohio, General Obligation No Opt. Call AAA 3,077,275
(Unlimited Tax), School Improvement Bonds, Series 1995A, 6.850%, 12/01/15
Chesapeake-Union Exempt Village School District, Ohio, General Obligation
Bonds, Series 1986:
125,000 8.500%, 12/01/04 No Opt. Call N/R 152,495
125,000 8.500%, 12/01/05 No Opt. Call N/R 155,153
125,000 8.500%, 12/01/06 No Opt. Call N/R 157,436
125,000 8.500%, 12/01/07 No Opt. Call N/R 159,914
125,000 8.500%, 12/01/08 No Opt. Call N/R 162,150
130,000 8.500%, 12/01/09 No Opt. Call N/R 170,654
4,745,000 City of Cleveland, Ohio, Various Purpose General Obligation Bonds, 11/04 at 102 AAA 5,467,047
Series 1994, 6.625%, 11/15/14
550,000 County of Columbiana, Ohio, County Jail Facilities Construction Bonds 12/04 at 102 AA 634,387
(General Obligation--Unlimited Tax), 6.600%, 12/01/17
1,500,000 City of Columbus, Ohio, General Obligation Refunding Bonds, Series 1/02 at 102 Aaa 1,634,340
1992B, 6.500%, 1/01/10
City of Columbus, Franklin County, Ohio, General Obligation Bonds:
590,000 9.375%, 4/15/06 No Opt. Call AAA 784,741
500,000 9.375%, 4/15/07 No Opt. Call AAA 680,035
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/General (continued)
$ 1,000,000 County of Cuyahoga, Ohio, General Obligation Various Purpose No Opt. Call AA+ $1,057,320
Refunding Bonds, Series 1993B (Limited Tax Obligation),
5.250%, 10/01/13
1,345,000 County of Cuyahoga, Ohio, General Obligation Bonds (Limited Tax No Opt. Call AA+ 1,468,888
Obligation), 5.650%, 5/15/18
200,000 City of Dayton, Ohio, General Obligation Bonds, Limited Tax, No Opt. Call A+ 217,036
10.500%, 10/01/99
750,000 City of Defiance, Ohio, Waterworks System Improvement Bonds, Series 12/04 at 102 AAA 830,205
1994, 6.200%, 12/01/20
Delaware City School District, Delaware County, Ohio, School
Facilities Construction and Improvement Bonds (General
Obligation - Unlimited Tax):
1,000,000 0.000%, 12/01/10 No Opt. Call AAA 554,600
1,000,000 0.000%, 12/01/11 No Opt. Call AAA 522,130
250,000 East Holmes Local School District, Ohio, School Improvement 12/98 at 102 AAA 259,728
Refunding Bonds, General Obligation - Unlimited Tax,
7.700%, 12/01/08
1,110,000 City of Fairborn, Ohio, General Obligation Bonds, Utility 10/02 at 102 AAA 1,241,158
Improvement Bonds, Series 1991, 7.000%, 10/01/11
4,040,000 County of Franklin, Ohio, Refunding Bonds, Series 1993 (Limited Tax 12/08 at 102 AAA 4,130,536
General Obligation Bonds), 5.375%, 12/01/20
1,575,000 Garaway Local School District, Ohio, School Improvement Bonds, 12/00 at 102 AAA 1,714,640
Series 1990 (General Obligation - Unlimited Tax Bonds),
7.200%, 12/01/14
620,000 County of Geauga, Ohio, General Obligation (Limited Tax), Sewer No Opt. Call Aa 751,607
District Improvement Bonds (Bainbridge Water Project),
6.850%, 12/01/10
1,000,000 Grandview Heights City School District, Franklin County, Ohio, 12/05 at 101 AA 1,078,940
School Facilities Construction and Improvement Bonds
(General Obligation - Unlimited Tax), 6.100%, 12/01/19
1,000,000 Highland Local School District, Morrow and Delaware Counties, Ohio, 12/07 at 102 AAA 1,077,670
School Facilities Construction and Improvement Bonds
(General Obligation - Unlimited Tax), 5.875%, 12/01/19
1,000,000 Huron County, Ohio, Correctional Facility Bonds (Limited Tax General 12/07 at 102 AAA 1,091,440
Obligation), 5.850%, 12/01/16
1,000,000 Indian Valley Local School District, Ohio, General Obligation 12/05 at 102 AAA 1,060,070
(Unlimited Tax), School Improvement Bonds, Series 1995,
5.750%, 12/01/19
1,200,000 County of Jefferson, Ohio, Human Services Building Construction 12/01 at 102 AAA 1,324,428
Bonds, Series 1991 (General Obligation - Limited Tax),
6.625%, 12/01/14
1,885,000 City of Kent, Ohio, General Obligation (Limited Tax), Sewer System 12/02 at 102 Aa3 2,076,177
Improvement Refunding Bonds, Series 1992, 6.500%, 12/01/10
1,070,000 Kettering, Ohio, 6.650%, 12/01/12 12/01 at 102 Aa3 1,167,616
1,000,000 Kettering City School District, General Obligation Unlimited Tax, 12/05 at 101 AAA 1,002,720
5.250%, 12/01/22
500,000 Kings Local School District, General Obligation (Unlimited Tax), 12/05 at 100 AAA 513,910
School Improvement Bonds, Series 1995, 5.500%, 12/01/21
500,000 Kirtland Local School District, Ohio, School Improvement Bonds, 12/99 at 102 N/R 532,465
Series 1989, General Obligation Unlimited Tax Bonds,
7.500%, 12/01/09
1,000,000 Lakeview, Ohio, Local School District, 6.900%, 12/01/14 12/04 at 102 AAA 1,170,260
1,440,000 Lakewood, Ohio, Series B, 5.750%, 12/01/15 12/05 at 102 Aa3 1,530,994
1,000,000 Lakota Local School District, County of Butler, Ohio, School 12/05 at 100 AAA 1,120,440
Improvement Unlimited Tax General Obligation Bonds, Series
1994, 6.125%, 12/01/17
Logan County, Ohio, Series 1986:
155,000 7.750%, 12/01/02 No Opt. Call A 177,340
155,000 7.750%, 12/01/03 No Opt. Call A 181,341
155,000 7.750%, 12/01/04 No Opt. Call A 185,017
155,000 7.750%, 12/01/05 No Opt. Call A 187,941
155,000 7.750%, 12/01/06 No Opt. Call A 190,954
1,000,000 County of Lucas, Ohio, General Obligation (Limited Tax), Various 12/02 at 102 A 1,073,450
Purpose Improvement Bonds, Series 1992, 6.650%, 12/01/12
1,000,000 County of Lucas, Ohio, General Obligation (Limited Tax), Various 12/05 at 102 AAA 1,035,320
Purpose Improvement Bonds, Series 1995-1, 5.400%, 12/01/15
</TABLE>
33
<PAGE>
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/General (continued)
$ 1,000,000 County of Mahoning, Ohio, General Obligation Bonds, Various Purpose 12/99 at 102 AAA $ 1,067,130
Improvement Bonds, Series 1989, Limited Tax, 7.200%, 12/01/09
865,000 Marysville, Ohio, Exempt Village School District, Improvement, No Opt. Call AAA 344,331
0.000%, 12/01/16
1,215,000 Mason City School District, Counties of Warren and Butler, Ohio, School 12/09 at 101 Aa3 1,249,044
Improvement Unlimited Tax General Obligation Bonds, Series 1998,
5.300%, 2/01/17
3,000,000 North Canton City School District, Ohio, School Improvement Refunding Bonds, 12/08 at 101 Aaa 2,972,670
Series 1998 (General Obligation Unlimited Tax), 5.000%, 12/01/19
1,000,000 City of North Olmsted, Ohio, General Obligation (Limited Tax), Various 12/02 at 102 AAA 1,091,840
Purpose Bonds, Series 1992, 6.250%, 12/15/12
North Royalton City School District, Ohio, School Improvement Bonds,
Series 1994:
2,200,000 6.000%, 12/01/14 12/09 at 102 AAA 2,473,526
2,400,000 6.100%, 12/01/19 12/09 at 102 AAA 2,658,288
600,000 Oak Hills, Ohio, Local School District, Series A, 5.700%, 12/01/25 12/07 at 101 Aa3 633,996
1,250,000 Oak Hills Local School District, Hamilton County, Ohio, School Facilities 12/07 at 101 AAA 1,243,600
Construction and Improvement Bonds, Series B, 5.125%, 12/01/25
1,000,000 State of Ohio, Full Faith and Credit, General Obligation Infrastructure No Opt. Call AA+ 1,138,830
Improvement Bonds, Series 1994, 6.000%, 8/01/10
Ohio State Infrastructure Improvement:
750,000 6.200%, 8/01/13 8/05 at 102 AA+ 849,893
2,000,000 6.200%, 8/01/14 8/05 at 102 AA+ 2,266,380
7,640,000 Ohio State, MBIA, 0.000%, 8/01/13 No Opt. Call AAA 3,611,504
500,000 Olmsted Falls, Ohio, Local School District, 7.050%, 12/15/11 12/01 at 102 AAA 558,875
1,750,000 Pickerington Local School District, Fairfield and Franklin Counties, Ohio, 12/01 at 102 A 1,886,780
General Obligation Bonds (Pickerington Public Library Project), Unlimited
Tax, 6.750%, 12/01/16
Pickerington, Ohio, Local School District Refunding:
500,000 0.000%, 12/01/11 No Opt. Call AAA 261,065
500,000 0.000%, 12/01/13 No Opt. Call AAA 232,495
220,000 Puerto Rico Commonwealth Refunding, 8.000%, 7/01/07 7/98 at 102 A 225,124
2,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1998, 7/08 at 101 A 2,421,675
5.000%, 7/01/27
1,000,000 Revere Local School District, Ohio, School Improvement Bonds, Series 1993 12/03 at 102 AAA 1,087,570
(General Obligation Unlimited Tax Bonds), 6.000%, 12/01/16
1,200,000 Ridgemont Local School District, Ohio, General Obligation (Unlimited Tax), 12/02 at 102 N/R 1,319,772
School Improvement Bonds, Series 1992, 7.250%, 12/01/14
2,340,000 City of Stow, Ohio, Safety Center Construction Bonds (General Obligation 12/05 at 102 A1 2,538,572
Limited Tax), 6.200%, 12/01/20
2,870,000 City of Strongsville, Ohio, Various Purpose Improvement Bonds, Series 1996 12/06 at 102 Aa3 3,095,582
(General Obligation-Limited Tax), 5.950%, 12/01/21
540,000 Trumbull County, Ohio, 6.200%, 12/01/14 12/04 at 102 AAA 599,362
1,070,000 County of Trumbull, Ohio, Correctional Facilities Bonds, Series 1995 No Opt. Call AAA 1,238,343
(General Obligation Limited Tax), 7.000%, 12/01/04
1,320,000 Twinsburg, Ohio, City School District, Certificates Eligible, 12/01 at 102 AAA 1,444,819
6.700%, 12/01/11
Upper Arlington, Ohio, City School District:
1,830,000 0.000%, 12/01/11 No Opt. Call AAA 955,498
1,870,000 0.000%, 12/01/12 No Opt. Call AAA 917,441
1,000,000 Upper Arlington, Ohio, City School District, General Obligation Bonds, 12/06 at 101 AAA 995,480
Series 1996, Improvement Bonds, 5.125%, 12/01/19
1,910,000 Vandalia, Ohio, Various Purpose Improvement, 5.850%, 12/01/21 12/06 at 101 Aa 2,038,295
750,000 West Geauga Local School District, Ohio, School Improvement Bonds, 11/04 at 102 AAA 820,215
Series 1994 (General Obligation Unlimited Tax), 5.950%, 11/01/12
1,000,000 Woodridge, Ohio, Local School District, 6.000%, 12/01/19 12/04 at 102 AAA 1,091,050
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/General (continued)
$ 1,425,000 Wooster City School District, Wayne County, Ohio, General 12/02 at 102 AAA $ 1,589,075
Obligation Bonds (Unlimited Tax), School Building Construction
and Improvement, 6.500%, 12/01/17
300,000 Youngstown, Ohio, 6.125%, 12/01/14 12/04 at 102 AAA 331,722
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited--6.2%
500,000 County of Athens, Ohio, Community Mental Health Revenue Bonds, 1991 6/01 at 102 AA 539,050
Series I, 6.900%, 6/01/10
6,000,000 City of Cleveland, Ohio, Certificates of Participation, Series 11/07 at 102 AAA 6,015,240
1997, Cleveland Stadium Project, 5.250%, 11/15/27
1,500,000 Ohio State Building Authority (Juvenile Correctional Building), 9/04 at 102 AAA 1,694,565
6.600%, 10/01/14
1,100,000 Ohio State Department of Transportation, Certificates of 4/02 at 102 AAA 1,193,874
Participation, Panhandle Rail Line Project, Series A, 6.500%, 4/15/12
1,000,000 Ottawa County, Ohio, Special Assessment, Portage, Catawba Isle, 9/01 at 102 AAA 1,098,530
7.000%, 9/01/11
27,850,000 Puerto Rico Highway and Transportation Authority, Highway Revenue 7/16 at 100 A 29,188,193
Bonds, Series Y of 1996, 5.500%, 7/01/36
2,700,000 Puerto Rico Public Buildings Authority, Revenue Guaranteed No Opt. Call A 2,868,210
Refunding, Series L, 5.500%, 7/01/21
- ------------------------------------------------------------------------------------------------------------------------------------
Technology--0.2%
1,000,000 County of Franklin, Ohio, Revenue Bonds, Series 1991 (OCLC - Online 7/01 at 100 N/R 1,059,920
Computer Library Center, Incorporated Project), 7.200%, 7/15/06
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation--3.6%
9,840,000 City of Cleveland, Ohio, Airport System Revenue Bonds, Series 1/08 at 101 AAA 9,644,184
1997A, 5.125%, 1/01/27 (Alternative Minimum Tax)
4,000,000 City of Dayton, Ohio, Special Facilities Revenue Refunding Bonds, 2/08 at 102 BBB 4,026,640
Series 1998A (Emery Air Freight Corporation and Emery Worldwide
Airlines, Inc.--Guarantors) (Non-AMT), 5.625%, 2/01/18
11,000,000 State of Ohio, Turnpike Revenue Bonds, 1996 Series A, Issued by No Opt. Call AAA 11,375,320
the Ohio Turnpike Commission, 5.500%, 2/15/26
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed--19.6%
2,000,000 City of Athens (County of Athens, Ohio), Sanitary Sewer System 12/09 at 100 A*** 2,332,680
Mortgage Revenue Bonds, Series 1989, 7.300%, 12/01/14 (Pre-refunded
to 12/01/09)
3,000,000 City of Barberton, Ohio, Hospital Facilities Revenue Bonds, Series 1/02 at 102 N/R*** 3,356,100
1992 (The Barberton Citizens Hospital Company Project), 7.250%,
1/01/12 (Pre-refunded to 1/01/02)
2,790,000 City of Bedford, Ohio, Hospital Facilities Refunding Revenue Bonds, 5/00 at 102 N/R*** 3,050,558
Series 1990 (The Community Hospital of Bedford, Inc.), 8.500%,
5/15/09 (Pre-refunded to 5/15/00)
1,000,000 Canal Winchester Local School District, Franklin and Fairfield 12/01 at 102 AAA 1,118,390
Counties, Ohio, General Obligation Bonds (Unlimited Tax), School
Facilities Construction and Improvement, 7.100%, 12/01/13
(Pre-refunded to 12/01/01)
1,400,000 City of Canton, Ohio, General Obligation Bonds, Limited Tax, 12/98 at 103 A+*** 1,470,210
7.875%, 12/01/08 (Pre-refunded to 12/01/98)
County of Clermont, Ohio, Hospital Facilities Revenue Bonds, Series
1989A (Mercy Health System, Province of Cincinnati):
3,660,000 7.500%, 9/01/19 (Pre-refunded to 9/01/99) 9/99 at 102 AAA 3,894,240
1,085,000 7.500%, 9/01/19 (Pre-refunded to 9/01/01) 9/01 at 100 AAA 1,197,829
County of Clermont, Ohio, Sewer System Revenue Bonds, Series 1990,
Clermont County Sewer District:
1,000,000 7.250%, 12/01/11 (Pre-refunded to 12/01/00) 12/00 at 102 AAA 1,096,320
2,000,000 7.375%, 12/01/20 (Pre-refunded to 12/01/00) 12/00 at 102 AAA 2,198,560
3,700,000 County of Clermont, Ohio, Sewer System Revenue Bonds, Series 1991, 12/01 at 102 AAA 4,132,863
Clermont County Sewer District, 7.100%, 12/01/21 (Pre-refunded to
12/01/01)
City of Cleveland, Ohio, General Obligation Bonds, Series 1988:
1,010,000 7.500%, 8/01/08 (Pre-refunded to 2/01/03) 2/03 at 100 AAA 1,152,046
1,010,000 7.500%, 8/01/09 (Pre-refunded to 2/01/03) 2/03 at 100 AAA 1,152,046
</TABLE>
35
<PAGE>
Portfolio of Investments
Nuveen Flagship Ohio Municipal Bond Fund (continued)
May 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed (continued)
$ 500,000 City of Cleveland, Ohio, Various Purpose General Obligation Bonds, 7/02 at 102 AAA $ 551,170
Series 1992, 6.375%, 7/01/12 (Pre-refunded to 7/01/02)
790,000 Board of Education of the Cleveland City School District, Ohio, School 12/01 at 102 Aaa 911,858
Improvement Bonds, Series 1991 (General Obligation Unlimited Tax
Bonds), 8.250%, 12/01/08 (Pre-refunded to 12/01/01)
10,000 City of Cleveland, Ohio, First Mortgage Revenue Refunding Bonds, Series F 1/02 at 102 AAA 10,978
1992-B, 6.500%, 1/01/11 (Pre-refunded to 1/01/02)
5,750,000 County of Cuyahoga, Ohio, Hospital Revenue Bonds (Meridia Health System), 8/05 at 102 AAA 6,548,100
Series 1995, 6.250%, 8/15/14 (Pre-refunded to 8/15/05)
1,250,000 Conversion and Remarketing of the County of Cuyahoga, Ohio, Hospital 10/00 at 103 N/R*** 1,377,538
Improvement Revenue Bonds (Deaconess Hospital of Cleveland Project),
Series 1995B, 7.450%, 10/01/18 (Pre-refunded to 10/01/00)
1,000,000 County of Cuyahoga, Ohio, Hospital Revenue Improvement and Refunding 1/99 at 102 AAA 1,038,900
Bonds, Series 1989 A (University Hospitals Health System, Inc.
Project), 6.875%, 1/15/19 (Pre-refunded to 1/15/99)
4,000,000 County of Cuyahoga, Ohio, Hospital Facilities Revenue Bonds, Series 1989 8/99 at 102 Aaa 4,239,400
(Fairview General Hospital), 7.375%, 8/01/19 (Pre-refunded to 8/01/99)
5,750,000 County of Cuyahoga, Ohio, Hospital Revenue Bonds, Series 1990 (Meridia 8/00 at 102 AAA 6,255,540
Health System), 7.250%, 8/15/19 (Pre-refunded to 8/15/00)
4,990,000 County of Cuyahoga, Ohio, Distribution System Improvement Revenue Bonds, 6/99 at 102 N/R*** 5,278,672
Series 1989 (The Medical Center Company Project), 7.800%, 6/01/09
(Pre-refunded to 6/01/99)
1,000,000 City of Delphos, Ohio, Sewer System Mortgage Revenue Bonds, Series 1990, 9/00 at 102 AAA 1,088,500
7.250%, 9/01/20 (Pre-refunded to 9/01/00)
2,600,000 County of Erie, Ohio, Franciscan Services Corporation, Revenue Bonds, 1/99 at 102 N/R*** 2,708,498
Series 1989A (Providence Hospital, Inc), 7.625%, 1/01/19 (Pre-refunded
to 1/01/99)
1,500,000 City of Findlay, Ohio, General Obligation Bonds, 7.200%, 8/01/11 (Pre- 8/99 at 102 AA-*** 1,586,790
refunded to 8/01/99)
1,350,000 County of Franklin, Ohio, Hospital Facilities Improvement Revenue Bonds, 5/00 at 102 AAA 1,458,122
Series 1990A (Riverside United Methodist Hospital Project), 7.250%,
5/15/20 (Pre-refunded to 5/15/00)
1,000,000 County of Franklin, Ohio, Hospital Facilities Refunding and Improvement 5/00 at 102 AAA 1,086,630
Revenue Bonds, Series 1990B (Riverside United Methodist Hospital
Project), 7.600%, 5/15/20 (Pre-refunded to 5/15/00)
1,000,000 Board of Education, Gahanna-Jefferson City School District, Franklin 12/00 at 102 N/R*** 1,091,860
County, Ohio, General Obligation Bonds, Series 1990 A, 7.125%, 12/01/14
(Pre-refunded to 12/01/00)
6,750,000 City of Hamilton, Ohio, Electric System Mortgage Revenue Bonds, 1988 10/98 at 102 AAA 6,991,988
Series B, 8.000%, 10/15/22 (Pre-refunded to 10/15/98)
1,495,000 County of Hamilton, Ohio, Judson Care Center Nursing Home and Board 8/00 at 101 1/4 AA-*** 1,629,490
and Care Project (FHA Insured Mortgage), 7.800%, 8/01/19 (Pre-
refunded to 8/01/00)
2,325,000 Hancock County, Ohio, Hospital Facilities Revenue Bonds, Series 1989 11/98 at 103 A+*** 2,434,926
(Blanchard Valley Hospital), 7.625%, 11/15/14 (Pre-refunded to
11/15/98)
1,000,000 Hudson Local School District, General Obligation Unlimited Tax, 7.100%, 12/00 at 102 A1*** 1,093,040
12/15/13 (Pre-refunded to 12/15/00)
1,000,000 Board of Education of the Hudson Local School District, Ohio, School 12/00 at 102 A1*** 1,094,310
Facilities Improvement Bonds, Series 1991A, 7.100%, 12/15/14 (Pre-
refunded to 12/15/00)
1,500,000 City of Lorain, Ohio, Hospital Refunding Revenue Bonds, Series 1992 11/02 at 102 A1 1,698,330
(Lakeland Community Hospital, Inc.), 6.500%, 11/15/12
1,500,000 County of Lucas, Ohio, Hospital Facilities Revenue Bonds, Series 1991 12/01 at 102 N/R*** 1,720,500
(Flower Memorial Hospital), 8.125%, 12/01/11 (Pre-refunded to 12/01/01)
2,000,000 County of Mahoning, Ohio, Hospital Improvement and Refunding Revenue No Opt. Call A1 2,127,000
Bonds, Series 1986 (St. Elizabeth Hospital Medical Center Project),
7.375%, 12/01/09
4,250,000 County of Mahoning, Ohio, Hospital Improvement Revenue Bonds, Series 1991 10/02 at 100 AAA 4,732,758
(YHA, Inc. Project), Series 1991A, 7.000%, 10/15/14 (Pre-refunded to
10/15/02)
1,150,000 County of Marion, Ohio, Health Care Facilities Revenue Bonds, Series 1990 12/99 at 103 N/R*** 1,264,977
(United Church Homes, Inc.), 8.875%, 12/01/12 (Pre-refunded to 12/01/99)
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,000,000 The Board of Education of the Marysville Exempted Village 12/00 at 102 AAA $ 1,095,140
School District, Union County, Ohio, School Improvement Bonds, General
Obligation (Unlimited Taxes), 7.200%, 12/01/10
(Pre-refunded to 12/01/00)
1,250,000 City of Marysville, Ohio, Water System Mortgage Revenue Bonds, 12/01 at 101 AAA 1,383,350
Series 1991, 7.050%, 12/01/21 (Pre-refunded to 12/01/01)
1,850,000 Massillon City School District, Ohio, General Obligation 12/00 at 102 AAA 2,026,009
Unlimited Tax Bonds, School Improvement Bonds, Series 1990,
7.200%, 12/01/11 (Pre-refunded to 12/01/00)
1,000,000 Board of Education of the Mentor Exempted Village School 12/02 at 100 AAA 1,071,170
District, Ohio, Improvement Bonds, Series 1989 (General
Obligation Bonds), 7.400%, 12/01/11 (Pre-refunded to 12/01/02)
3,000,000 City of Middleburg Heights, Ohio, Hospital Improvement Revenue 8/01 at 102 AAA 3,333,900
Bonds, Series 1991 (Southwest General Hospital Project),
7.200%, 8/15/19 (Pre-refunded to 8/15/01)
Ohio Housing Finance Agency, Single Family Mortgage Revenue (Mandatory
redemption at 7/15/11):
6,460,000 0.000%, 1/15/15 (Pre-refunded to 1/15/11) 1/11 at 67 1/32 AAA 2,360,290
5,700,000 0.000%, 1/15/15 (Pre-refunded to 7/15/11) 7/11 at 70 15/32 AAA 2,137,329
20,000 Ohio Building Authority, State Facilities Refunding Bonds 4/03 at 100 AAA 24,000
(Frank J. Lausche State Office Building), 1982 Series A, 10.125%,
10/01/06 (Pre-refunded to 4/01/03)
3,250,000 State of Ohio (Ohio Building Authority), State Correctional 8/99 at 102 Aaa 3,444,740
Facilities Bonds, 1986 Series A, 7.350%, 8/01/06
(Pre-refunded to 8/01/99)
1,000,000 State of Ohio, Ohio Higher Educational Facilities Commission 5/00 at 100 AAA 1,063,090
(Ohio Northern University Project), 7.300%, 5/15/10
(Pre-refunded to 5/15/00)
1,900,000 Ohio State Public Facilities Commission, Higher Education 11/99 at 102 AA-*** 1,996,406
Facilities, Series A, 7.250%, 5/01/04 (Pre-refunded to 11/01/99)
4,630,000 Ohio Water Development Authority, State of Ohio, Water Development No Opt. Call AAA 5,131,707
Revenue Bonds, Pure Water 1990 Series I, 6.000%, 12/01/16
1,000,000 City of Parma, Ohio, Various Purpose General Obligation Bonds, 12/00 at 102 A*** 1,105,100
Series 1990 (Limited Tax Obligation), 7.600%, 12/01/11
(Pre-refunded to 12/01/00)
1,600,000 Pickerington, Ohio, Local School District, Series B, 7.250%, 12/00 at 102 AAA 1,755,728
12/01/13 (Pre-refunded to 12/01/00)
Puerto Rico Aqueduct and Sewer Authority, Revenue Bonds, Series 1988A:
1,000,000 7.900%, 7/01/07 (Pre-refunded to 7/01/98) 7/98 at 102 AAA 1,023,480
3,600,000 7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 AAA 3,684,456
700,000 Puerto Rico Commonwealth Highway Authority, Highway Revenue, 7/00 at 102 AAA 766,661
Series Q, 7.750%, 7/01/10 (Pre-refunded to 7/01/00)
1,500,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/01 at 102 Aaa 1,656,705
Series P, 7.000%, 7/01/21 (Pre-refunded to 7/01/01)
3,165,000 Reynoldsburg City School District, Ohio, General Obligation 12/02 at 102 AAA 3,535,843
Bonds, School Building Construction and Improvement, 6.550%, 12/01/17
(Pre-refunded to 12/01/02)
605,000 Scioto County, Ohio, Human Services Building Bonds, General 8/01 at 101 N/R*** 666,250
Obligation, 7.150%, 8/01/11 (Pre-refunded to 8/01/01)
750,000 Southwest Local School District, Ohio, Hamilton County, 12/99 at 103 AAA 813,645
7.650%, 12/01/10 (Pre-refunded to 12/01/99)
1,500,000 County of Stark, Ohio, Sanitary Sewerage System Revenue Bonds, 11/98 at 102 AAA 1,557,240
Series 1988, 7.750%, 11/15/18 (Pre-refunded to 11/15/98)
1,000,000 Sylvania, Ohio, City School District, 6.600%, 6/01/16 6/02 at 102 AAA 1,109,070
1,000,000 University of Cincinnati, General Receipts Bonds, Series O, 12/02 at 102 AA*** 1,105,670
6.300%, 6/01/12 (Pre-refunded to 12/01/02)
1,250,000 City of Warren, Ohio, General Obligation Limited Tax, Various 11/98 at 102 BBB+*** 1,302,650
Purpose Improvement Bonds, 8.625%, 11/15/13 (Pre-refunded to 11/15/98)
1,500,000 City of Warren, Ohio, General Obligation (Limited Tax), 11/00 at 102 BBB+*** 1,658,100
Sewerage System Improvement Bonds, Series 1990, 7.750%, 11/01/10
(Pre-refunded to 11/01/00)
1,500,000 Westerville, Minerva Park and Blendon, Ohio, Joint Township Hospital 9/01 at 102 AAA 1,665,690
District (St. Anns Hospital Project), Series 1991A, 7.100%, 9/15/21
(Pre-refunded to 9/15/01)
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Utilities - 11.2%
City of Cleveland, Ohio, Public Power System, First Mortgage Revenue
Bonds, Series 1994A:
$ 2,250,000 0.000%, 11/15/12 No Opt. Call AAA $ 1,106,280
1,535,000 0.000%, 11/15/13 No Opt. Call AAA 715,325
10,685,000 City of Cleveland, Ohio, Public Power System Improvement, First 11/01 at 102 AAA 11,769,634
Mortgage Revenue Bonds, Series 1991B, 7.000%, 11/15/17
1,900,000 Cleveland Public Power System, 7.000%, 11/15/17 11/01 at 102 AAA 2,092,869
4,900,000 City of Cleveland, Ohio, Public Power System, First Mortgage Revenue 11/06 at 102 AAA 4,829,146
Refunding Bonds, Series 1996, Sub-Series 1, 5.000%, 11/15/24
7,520,000 Ohio Municipal Electric Generation Agency (American Municipal Power - 2/03 at 102 AAA 7,605,878
Ohio, Inc.), 5.375%, 2/15/24
Ohio Air Quality Development Authority, Revenue Bonds, 1985 Series A
(Columbus Southern Power Company Project):
1,750,000 6.375%,12/01/20 12/02 at 102 AAA 1,903,615
7,000,000 6.250%,12/01/20 6/03 at 102 Baa1 7,362,810
750,000 State of Ohio, Pollution Control Revenue Refunding Bonds, Ohio Air 7/99 at 102 Baa3 785,715
Quality Development Authority, 1989 Series B (Ohio Edison Company
Project), 7.625%, 7/01/23
5,900,000 Ohio Air Quality Development Authority, State of Ohio, Air Quality 8/99 at 102 Baa1 6,162,137
Development Revenue Refunding Bonds (Ohio Power Company Project),
Series B, 7.400%, 8/01/09
2,000,000 Ohio Air Quality Development Authority, State of Ohio, Pollution 3/00 at 102 AAA 2,142,360
Control Revenue Refunding Bonds, 1990 Series A (Ohio Edison
Company Project), 7.450%, 3/01/16
15,000,000 State of Ohio, Ohio Air Quality Development Authority, Revenue 9/05 at 102 A+ 16,187,700
Refunding Bonds, 1995 Series (The Dayton Power and Light Company
Project), 6.100%, 9/01/30
6,000,000 State of Ohio, Ohio Air Quality Development Authority, Air Quality 4/07 at 102 AAA 6,239,040
Development Revenue Bonds (JMG Funding, Limited Partnership Project),
Series 1997, 5.625%, 1/01/23 (Alternative Minimum Tax)
500,000 Ohio Water Development Authority, State of Ohio, Collateralized Water 8/02 at 102 AA- 540,015
Development Revenue Refunding Bonds, 1992 Series A (The Dayton Power
and Light Company Project), 6.400%, 8/15/27
7,050,000 Ohio Water Development Authority, Pollution Control Revenue (Ohio 7/99 at 102 Baa3 7,377,261
Edison Company), 7.625%, 7/01/23
1,545,000 Puerto Rico Electric Power Authority, Power Revenue, Formerly Puerto No Opt. Call BBB+ 595,196
Rico Commonwealth Water Resource Authority Power, Series O,
0.000%, 7/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 6.5%
City of Bellefontaine, Ohio, Sewer System, First Mortgage Revenue
Refunding and Improvement Bonds (Bank Qualified):
1,000,000 6.800%, 12/01/07 12/02 at 101 Baa1 1,084,870
1,000,000 6.900%, 12/01/11 12/02 at 101 Baa1 1,088,020
3,000,000 County of Butler, Ohio, Sewer System Revenue Bonds, Series 1996, 12/06 at 101 AAA 3,008,910
5.250%, 12/01/21
13,000,000 City of Cleveland, Ohio, Waterworks Improvement, First Mortgage No Opt. Call AAA 14,039,220
Refunding Revenue Bonds, Series 1993-G, 5.500%, 1/01/21
City of Cleveland, Ohio, Waterworks Improvement, First Mortgage
Revenue Refunding Bonds, Series 1996-H:
2,320,000 5.750%, 1/01/21 1/06 at 102 AAA 2,452,959
5,850,000 5.750%, 1/01/26 1/06 at 102 AAA 6,185,264
990,000 City of Cleveland, Ohio, Waterworks Improvement, First Mortgage 1/02 at 102 AAA 1,075,209
Revenue Refunding Bonds, Series 1992-B, 6.500%, 1/01/11
1,600,000 County of Greene, Ohio, Water System Revenue Bonds, Series 1996, 12/07 at 102 AAA 1,762,559
6.125%, 12/01/21
2,200,000 City of Greenville, Ohio (Dark County), Wastewater System, First 12/02 at 102 AAA 2,414,521
Mortgage Revenue Bonds, Series 1992 (Governmental Enterprise
Revenue Bonds), 6.350%, 12/01/17
1,000,000 City of Hamilton, Ohio, Water System Mortgage Revenue Bonds, 1991 10/01 at 102 AAA 1,085,269
Series A, 6.400%, 10/15/10
795,000 City of Huber Heights, Ohio, Water System Revenue Bonds, Series 1995, No Opt. Call AAA 264,130
0.000%, 12/01/19
1,000,000 County of Montgomery, Ohio, Water Revenue Bonds, Greater 11/02 at 102 AAA 1,092,779
Moraine-Beavercreek Sewer District, Series 1992, 6.250%, 11/15/17
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Water and Sewer (continued)
$ 1,000,000 Mount Gilead, Ohio, Water System, First Mortgage Revenue, 7.200%, 12/02 at 102 N/R $ 1,082,689
12/01/17
1,000,000 Ohio Water Development Authority, State of Ohio Water Development 6/05 at 102 AAA 1,068,359
Revenue Bonds, Fresh Water, Series 1995, 5.900%, 12/01/21
5,000,000 Ohio Water Development Authority, State of Ohio Water Development 6/08 at 101 AAA 4,975,299
Revenue Bonds, Fresh Water, Series 1998, 5.125%, 12/01/23
750,000 Toledo, Ohio, Sewer System Mortgage Revenue, 6.350%, 11/15/17 11/04 at 102 AAA 840,524
500,000 Toledo, Ohio, Waterworks Revenue Refunding Mortgage, 6.450%, 11/04 at 102 AAA 563,129
11/15/24
750,000 County of Warren, Ohio, Waterworks System Revenue Bonds, Series 12/02 at 102 AAA 829,102
1992, Warren County Water District, 6.600%, 12/01/16
- --------------------------------------------------------------------------------------------------------------------------------
$658,690,000 Total Investments -- (cost $627,367,527) -- 98.9% 681,649,166
============--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.1% 7,848,963
-----------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $689,498,129
=================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent
public accountants): Dates (month and year) and prices of the
earliest optional call or redemption. There may be other call
provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or Moody's
rating.
*** Securities are backed by an escrow or trust containing sufficient
U.S. government or U.S. government agency securities which ensures
the timely payment of principal and interest. Securities are
normally considered to be equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
39
<PAGE>
Statement of Net Assets
May 31,1998
<TABLE>
<CAPTION>
Kentucky Kentucky Limited Term Michigan Ohio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $477,311,529 $11,058,797 $340,187,675 $681,649,166
Temporary investments in short-term municipal securities,
at amoritized cost, which approximates market value (note 1) 2,000,000 - - -
Cash 324,141 142,320 997,437 2,061,114
Receivables:
Fund manager (note 6) - 1,031 - -
Interest 7,336,323 144,653 5,269,075 12,649,721
Investments sold - 627,300 315,000 390,000
Shares sold 648,011 - 1,175,888 598,019
Other assets 165,937 33,104 165,975 320,708
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets 487,785,941 12,007,205 348,111,050 697,668,728
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased - 500,000 5,554,721 4,000,000
Shares redeemed 476,076 - 855,552 675,205
Accrued expenses:
Management fees (note 6) 216,069 - 154,381 307,873
12b-1 distribution and service fees (notes 1 and 6) 97,524 2,654 75,351 114,631
Other 74,388 42,978 18,381 186,054
Dividends payable 2,004,845 40,936 1,388,074 2,886,836
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,868,902 586,568 8,046,460 8,170,599
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $484,917,039 $11,420,637 $340,064,590 $689,498,129
==================================================================================================================================
Class A Shares (note 1)
Net assets $451,337,877 $ 8,988,770 $263,632,098 $472,820,542
Shares outstanding 39,619,843 888,181 21,836,586 40,290,430
Net asset value and redemption price per share $ 11.39 $ 10.12 $ 12.07 $ 11.74
Offering price per share (net asset value per share plus maximum
sales charge of 4.20%, 2.50%, 4.20% and 4.20%, respectively
of offering price) $ 11.89 $ 10.38 $ 12.60 $ 12.25
==================================================================================================================================
Class B Shares (note 1)
Net assets $ 4,273,347 N/A $ 3,838,585 $ 7,421,912
Shares outstanding 375,057 N/A 317,623 632,682
Net asset value, offering and redemption price per share $ 11.39 N/A $ 12.09 $ 11.73
==================================================================================================================================
Class C Shares (note 1)
Net assets $ 28,630,427 $ 2,416,140 $ 45,689,614 $ 47,035,721
Shares outstanding 2,514,961 238,841 3,789,908 4,010,159
Net asset value, offering and redemption price per share $ 11.38 $ 10.12 $ 12.06 $ 11.73
==================================================================================================================================
Class R Shares (note 1)
Net assets $ 675,388 $ 15,727 $ 26,904,293 $162,219,954
Shares outstanding 59,405 1,557 2,228,513 13,824,489
Net asset value, offering and redemption price per share $ 11.37 $ 10.10 $ 12.07 $ 11.73
==================================================================================================================================
</TABLE>
N/A - Kentucky Limited Term is not authorized to issue Class B
Shares.
See accompanying notes to financial statements.
40
<PAGE>
Statement of Operations
Year Ended May 31, 1998
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Income (note 1) $28,198,412 $589,327 $19,875,897 $40,990,841
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses
Management fees (note 6) 2,537,577 52,982 1,804,027 3,609,901
12b-1 service fees -- Class A (notes 1 and 6) 888,602 18,810 525,468 946,661
12b-1 distribution and service fees -- Class B (notes 1 and 6) 22,890 N/A 14,397 40,065
12b-1 distribution and service fees -- Class C (notes 1 and 6) 203,304 12,956 328,163 324,807
Shareholders' servicing agent fees and expenses 238,250 3,712 167,041 515,446
Custodian's fees and expenses 82,943 43,066 77,583 119,003
Trustees' fees and expenses (note 6) 8,672 172 6,733 12,743
Professional fees 24,075 9,475 13,720 18,392
Shareholders' reports - printing and mailing expenses 99,639 1,536 63,857 142,305
Federal and state registration fees 17,381 12,821 5,742 2,611
Organizational expenses (note 1) -- 9,800 -- --
Other expenses 19,458 453 4,739 15,695
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 4,142,791 165,783 3,011,470 5,747,629
Expense reimbursement (note 6) (310,289) (79,972) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net expenses 3,832,502 85,811 3,011,470 5,747,629
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 24,365,910 503,516 16,864,427 35,243,212
- ---------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 2,172,160 32,390 1,595,690 4,967,956
Net change in unrealized appreciation or depreciation of investments 14,097,294 204,860 10,225,980 16,619,119
- ---------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 16,269,454 237,250 11,821,670 21,587,075
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $40,635,364 $740,766 $28,686,097 $56,830,287
=================================================================================================================================
N/A -- Kentucky Limited Term is not authorized to issue Class B Shares.
</TABLE>
See accompanying notes to financial statements.
41
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Kentucky Kentucky Limited Term
---------------------------- ---------------------------
Year Ended Year Ended Year Ended Year Ended
5/31/98 5/31/97* 5/31/98 5/31/97**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 24,365,910 $ 24,225,117 $ 503,516 $ 418,298
Net realized gain (loss) from investment
transactions (notes 1 and 4) 2,172,160 1,216,787 32,390 (70,626)
Net change in unrealized appreciation or
depreciation of investments 14,097,294 8,326,260 204,860 204,943
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 40,635,364 33,768,164 740,766 552,615
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (22,954,811) (23,056,260) (409,988) (345,290)
Class B (102,552) (3,383) N/A N/A
Class C (1,254,173) (1,154,172) (94,041) (70,918)
Class R (32,294) (8,367) (590) (1)
From accumulated net realized gains from investment transactions:
Class A (1,984,678) (227,076) -- --
Class B (10,705) -- N/A N/A
Class C (120,396) (12,818) -- --
Class R (2,930) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (26,462,539) (24,462,076) (504,619) (416,209)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 47,501,865 45,888,380 3,676,589 5,492,681
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 15,618,317 13,715,085 312,624 263,078
- -----------------------------------------------------------------------------------------------------------------------------------
63,120,182 59,603,465 3,989,213 5,755,759
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (48,645,223) (44,095,674) (3,818,637) (5,035,029)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 14,474,959 15,507,791 170,576 720,730
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 28,647,784 24,813,879 406,723 857,136
Net assets at the beginning of year 456,269,255 431,455,376 11,013,914 10,156,778
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $484,917,039 $456,269,255 $11,420,637 $11,013,914
===================================================================================================================================
Balance of undistributed net investment income at end of year $ 25,015 $ 2,935 $ 986 $ 2,089
===================================================================================================================================
</TABLE>
* Information represents eight months of Flagship
Kentucky and four months of Kentucky (note 1).
** Information represents eight months of Flagship Kentucky Limited
Term and four months of Kentucky Limited Term (note 1).
N/A -- Kentucky Limited Term is not authorized to issue Class B Shares.
See accompanying notes to financial statements.
42
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Michigan Ohio
--------------------------- ---------------------------
Year Ended Year Ended Year Ended Year Ended
5/31/98 5/31/97* 5/31/98 5/31/97**
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 16,864,427 $ 16,075,312 $ 35,243,212 $ 29,268,587
Net realized gain from investment
transactions (notes 1 and 4) 1,595,690 762,060 4,967,956 4,460,158
Net change in unrealized appreciation or
depreciation of investments 10,225,980 7,545,758 16,619,119 4,107,165
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 28,686,097 24,383,130 56,830,287 37,835,910
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (13,344,536) (13,549,214) (24,388,584) (24,358,638)
Class B (63,731) (2,097) (182,260) (10,649)
Class C (1,982,594) (2,012,105) (2,008,254) (1,876,872)
Class R (1,409,716) (479,101) (8,687,614) (2,962,615)
From accumulated net realized gains from investment transactions:
Class A (597,076) (280,388) (1,996,392) --
Class B (3,361) -- (16,956) --
Class C (101,904) (46,664) (178,327) --
Class R (61,084) -- (681,846) --
- ------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (17,564,002) (16,369,569) (38,140,233) (29,208,774)
- ------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the
reorganization of Nuveen Michigan/Ohio (note 1) -- 32,952,082 -- 183,170,717
Net proceeds from shares issued as a capital contribution -- 50,000 -- 50,000
Net proceeds from sale of shares 28,641,868 29,696,576 63,755,865 53,603,783
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 10,647,679 7,300,800 24,926,989 14,753,008
- ------------------------------------------------------------------------------------------------------------------------------
39,289,547 69,999,458 88,682,854 251,577,508
- ------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (37,642,403) (40,504,903) (83,801,938) (72,294,456)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 1,647,144 29,494,555 4,880,916 179,283,052
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 12,769,239 37,508,116 23,570,970 187,910,188
Net assets at the beginning of year 327,295,351 289,787,235 665,927,159 478,016,971
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $340,064,590 $327,295,351 $689,498,129 $665,927,159
==============================================================================================================================
Balance of undistributed net investment income at end of year $ 96,645 $ 32,795 $ 36,313 $ 59,813
==============================================================================================================================
</TABLE>
* Information represents eight months of Flagship Michigan and four months of
Michigan (note 1).
** Information represents eight months of Flagship Ohio and four months of Ohio
(note 1).
43
See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust IV (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Kentucky Municipal Bond Fund, the Nuveen
Flagship Kentucky Limited Term Municipal Bond Fund, the Nuveen Flagship Michigan
Municipal Bond Fund and the Nuveen Flagship Ohio Municipal Bond Fund (the
"Funds"), among others. The Trust was organized as a business trust on July 1,
1996.
The John Nuveen Company ("Nuveen"), parent of John Nuveen & Co. Incorporated and
Nuveen Advisory Corp., respectively, the distributor ("Distributor") and
investment advisor ("Adviser") of the Funds, entered into an agreement under
which Nuveen acquired Flagship Resources Inc. and after the close of business on
January 31, 1997, consolidated their respective mutual fund businesses. This
agreement was approved at a meeting by the shareholders of the Flagship Funds in
December 1996.
After the close of business on January 31, 1997, Flagship Kentucky Triple Tax
Exempt Fund ("Flagship Kentucky") and Flagship Kentucky Limited Term Municipal
Bond Fund ("Flagship Kentucky Limited Term") were reorganized into the Trust and
renamed Nuveen Flagship Kentucky Municipal Bond Fund ("Kentucky") and Nuveen
Flagship Kentucky Limited Term Municipal Bond Fund ("Kentucky Limited Term"),
respectively. Prior to these reorganizations, each Fund was a sub-trust of the
Flagship Tax Exempt Funds Trust.
After the close of business on January 31, 1997, Flagship Michigan Triple Tax
Exempt Fund ("Flagship Michigan") and Nuveen Michigan Tax-Free Value Fund
("Nuveen Michigan") reorganized into Nuveen Flagship Michigan Municipal Bond
Fund ("Michigan"). Prior to the reorganization, Flagship Michigan was a
sub-trust of the Flagship Tax Exempt Funds Trust while Nuveen Michigan was a
series of the Nuveen Multistate Tax-Free Trust. Nuveen Michigan had a fiscal
year end of January 31 prior to being reorganized into Nuveen Flagship Michigan
which has retained the fiscal year end of Flagship Michigan.
After the close of business on January 31, 1997, Flagship Ohio Double Tax Exempt
Fund ("Flagship Ohio") and Nuveen Ohio Tax-Free Value Fund ("Nuveen Ohio")
reorganized into Nuveen Flagship Ohio Municipal Bond Fund ("Ohio"). Prior to the
reorganization, Flagship Ohio was a sub-trust of the Flagship Tax Exempt Funds
Trust while Nuveen Ohio was a series of the Nuveen Tax-Free Bond Fund, Inc.
Nuveen Ohio had a fiscal year end of February 28 prior to being reorganized into
Nuveen Flagship Ohio which has retained the fiscal year end of Flagship Ohio.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1998, Kentucky Limited Term and Michigan had outstanding when-issued
purchase commitments of $500,000 and $2,861,460, respectively. There were no
such outstanding purchase commitments in Kentucky and Ohio.
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.
44
<PAGE>
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, the Funds intend to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Funds. All
monthly tax-exempt income dividends paid during the fiscal year ended May 31,
1998, have been designated Exempt Interest Dividends. Net realized capital gain
and market discount distributions are subject to federal taxation.
Flexible Sales Charge Program
Each Fund offers Class A, C and R Shares. Kentucky, Michigan and Ohio also offer
Class B Shares. Class A Shares are sold with a sales charge and incur an annual
12b-1 service fee. Class A Share purchases of $1 million or more are sold at net
asset value without an up-front sales charge but may be subject to a 1%
contingent deferred sales charge ("CDSC") if redeemed within 18 months of
purchase. Class B Shares are sold without a sales charge but incur annual 12b-1
distribution and service fees. An investor purchasing Class B Shares agrees to
pay a CDSC of up to 5% depending upon the length of time the shares are held by
the investor (CDSC is reduced to 0% at the end of six years). Class B Shares
convert to Class A Shares eight years after purchase. Class C Shares are sold
without a sales charge but incur annual 12b-1 distribution and service fees. An
investor purchasing Class C Shares agrees to pay a CDSC of 1% if Class C Shares
are redeemed within one year of purchase. Class R Shares are not subject to any
sales charge or 12b-1 distribution or service fees. Class R Shares are available
for purchases of over $1 million and in other limited circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Funds are authorized to invest in such
financial instruments, and may do so in the future, they did not make any such
investments during the fiscal year ended May 31, 1998.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
Organizational Expenses
The organizational expenses incurred on behalf of Kentucky Limited Term
(approximately $29,400) are being reimbursed to the Adviser on a straight-line
basis over a period of three years. As of May 31, 1998, $19,595 has been
reimbursed.
45
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
2. Fund Shares
Transactions in Fund shares were as follows:
Kentucky Kentucky Limited Term
--------------------------------------------------- ------------------------------------------------
Year Ended 5/31/98 Year Ended 5/31/97* Year Ended 5/31/98 Year Ended 5/31/97**
--------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 3,217,301 $ 36,434,351 3,460,838 $ 37,993,876 286,922 $ 2,892,341 410,367 $ 4,052,500
Class B 323,485 3,657,888 49,144 540,802 N/A N/A N/A N/A
Class C 639,620 7,226,085 630,496 6,904,170 76,327 769,248 145,916 1,440,077
Class R 16,255 183,541 40,643 449,532 1,495 15,000 10 104
Shares issued to shareholders
due to reinvestment of
distributions:
Class A 1,281,834 14,485,026 1,178,853 12,941,813 23,560 236,867 22,414 221,045
Class B 4,212 47,833 25 269 N/A N/A N/A N/A
Class C 94,246 1,063,652 69,875 766,751 7,475 75,229 4,292 42,033
Class R 1,937 21,806 570 6,252 52 528 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
5,578,890 63,120,182 5,430,444 59,603,465 395,831 3,989,213 582,999 5,755,759
- ------------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (3,866,440) (43,715,326) (3,622,758) (39,765,461) (316,310) (3,201,570) (395,384) (3,906,315)
Class B (1,809) (20,440) -- -- N/A N/A N/A N/A
Class C (434,290) (4,909,457) (394,142) (4,330,213) (61,079) (617,067) (114,591) (1,128,714)
Class R -- -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
(4,302,539) (48,645,223) (4,016,900) (44,095,674) (377,389) (3,818,637) (509,975) (5,035,029)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase 1,276,351 $ 14,474,959 1,413,544 $ 15,507,791 18,442 $ 170,576 73,024 $ 720,730
====================================================================================================================================
</TABLE>
* Information represents eight months of Flagship Kentucky and four months of
Kentucky (note 1).
** Information represents eight months of Flagship Kentucky Limited Term and
four months of Kentucky Limited Term (note 1).
N/A-Kentucky Limited Term is not authorized to issue Class B Shares.
46
<PAGE>
<TABLE>
<CAPTION>
Michigan
-----------------------------------------------------
Year Ended 5/31/98 Year Ended 5/31/97*
-----------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization of
Nuveen Michigan/Ohio:
Class A -- $ -- 473,278 $ 5,517,761
Class B -- -- -- --
Class C -- -- 29,683 345,582
Class R -- -- 2,323,498 27,088,739
Shares issued as a capital contribution:
Class A -- -- 1,072 12,500
Class B -- -- 1,072 12,500
Class C -- -- 1,074 12,500
Class R -- -- 1,072 12,500
Shares sold:
Class A 1,390,245 16,660,336 2,027,123 23,392,705
Class B 287,386 3,449,240 31,393 364,727
Class C 589,706 7,052,332 474,635 5,492,503
Class R 123,751 1,479,960 38,458 446,641
Shares issued to shareholders due to
reinvestment of distributions:
Class A 678,487 8,087,898 520,958 6,027,568
Class B 2,834 34,056 38 446
Class C 127,033 1,512,300 89,370 1,032,725
Class R 84,732 1,013,425 20,714 240,061
- -----------------------------------------------------------------------------------------------
3,284,174 39,289,547 6,033,438 69,999,458
- -----------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,418,756) (28,925,631) (2,692,127) (31,154,360)
Class B (5,100) (61,520) -- --
Class C (498,829) (5,971,586) (667,098) (7,733,727)
Class R (224,782) (2,683,666) (138,930) (1,616,816)
- -----------------------------------------------------------------------------------------------
(3,147,467) (37,642,403) (3,498,155) (40,504,903)
- -----------------------------------------------------------------------------------------------
Net increase 136,707 $ 1,647,144 2,535,283 $ 29,494,555
===============================================================================================
Ohio
------------------------------------------------------
Year Ended 5/31/98 Year Ended 5/31/97**
------------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization of
Nuveen Michigan/Ohio:
Class A -- $ -- 1,658,349 $ 18,937,973
Class B -- -- -- --
Class C -- -- 257,097 2,935,519
Class R -- -- 14,124,377 161,297,225
Shares issued as a capital contribution:
Class A -- -- 1,095 12,500
Class B -- -- 1,095 12,500
Class C -- -- 1,095 12,500
Class R -- -- 1,095 12,500
Shares sold:
Class A 3,219,388 37,568,749 3,479,121 39,481,904
Class B 516,543 6,021,505 143,044 1,632,067
Class C 995,368 11,636,371 777,074 8,826,593
Class R 730,018 8,529,240 320,322 3,663,219
Shares issued to shareholders due to
reinvestment of distributions:
Class A 1,424,465 16,558,328 1,078,011 12,246,653
Class B 9,946 116,135 370 4,189
Class C 139,502 1,619,985 83,238 991,709
Class R 569,608 6,632,541 133,093 1,510,457
- ---------------------------------------------------------------------------------------------------
7,604,838 88,682,854 22,058,476 251,577,508
- ---------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (4,938,984) (57,591,525) (5,159,717) (58,567,125)
Class B (38,316) (446,171) -- --
Class C (692,246) (8,051,008) (668,440) (7,657,334)
Class R (1,520,403) (17,713,234) (533,621) (6,069,997)
- ---------------------------------------------------------------------------------------------------
(7,189,949) (83,801,938) (6,361,778) (72,294,456)
- ---------------------------------------------------------------------------------------------------
Net increase 414,889 $ 4,880,916 15,696,698 $179,283,052
====================================================================================================
</TABLE>
* Information represents eight months of Flagship Michigan and four months of
Michigan (note 1).
** Information represents eight months of Flagship Ohio and four months of Ohio
(note 1).
47
<PAGE>
Notes to Financial Statements (continued)
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on July 1, 1998, to shareholders of record on June 9,
1998, as follows:
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $.0475 $.0365 $.0500 $.0490
Class B .0405 N/A .0425 .0420
Class C .0425 .0335 .0445 .0440
Class R .0495 .0385 .0520 .0510
====================================================================================================
</TABLE>
N/A - Kentucky Limited Term is not authorized to issue Class B Shares.
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended May 31,
1998, were as follows:
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases:
Investments in municipal securities $65,088,861 $4,076,566 $47,201,267 $109,670,698
Temporary municipal investments 12,200,000 2,400,000 12,490,000 36,800,000
Sales:
Investments in municipal securities 55,577,312 4,280,183 41,593,563 101,944,564
Temporary municipal investments 10,200,000 2,400,000 12,490,000 46,800,000
====================================================================================================
</TABLE>
At May 31, 1998, the identified cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes for each
Fund.
At May 31, 1998, Kentucky Limited Term had unused capital loss carryforwards of
$70,735 available for federal income tax purposes to be applied against future
capital gains, if any. If not applied, $135 of the carryforward will expire in
the year 2004 and $70,600 of the carryforward will expire in the year 2005.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 1998, were as follows:
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
appreciation $37,982,636 $324,750 $30,388,047 $54,281,639
depreciation (37,196) (3,688) (9,905) --
- ----------------------------------------------------------------------------------------------------
Net unrealized appreciation $37,945,440 $321,062 $30,378,142 $54,281,639
====================================================================================================
</TABLE>
48
<PAGE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Kentucky, Michigan & Ohio
Average Daily Net Asset Value Management Fee
- -----------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
===========================================================
Kentucky Limited Term
Average Daily Net Asset Value Management Fee
- -----------------------------------------------------------
For the first $125 million .4500 of 1%
For the next $125 million .4375 of 1
For the next $250 million .4250 of 1
For the next $500 million .4125 of 1
For the next $1 billion .4000 of 1
For net assets over $2 billion .3750 of 1
===========================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 1998, the Distributor 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>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales charges collected $1,076,392 $25,344 $396,900 $890,567
Paid to authorized dealers 935,851 20,109 341,800 777,704
========================================================================
</TABLE>
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the fiscal year ended May 31, 1998, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commission advances $232,216 $ 14,811 $ 224,418 $ 379,147
====================================================================
</TABLE>
49
<PAGE>
Notes to Financial Statements (continued)
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares, except for Kentucky Limited Term, during the
first year following a purchase, all 12b-1 distribution fees on Class B Shares,
except for Kentucky Limited Term, and all 12b-1 service and distribution fees on
Class C Shares during the first year following a purchase are retained by the
Distributor. Kentucky Limited Term is not authorized to issue Class B Shares.
During the fiscal year ended May 31, 1998, the Distributor retained such 12b-1
fees as follows:
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12b-1 fees retained $ 88,309 $ 7,484 $ 68,801 $ 123,577
====================================================================================================================================
</TABLE>
The remaining 12b-1 fees charged to the Funds were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
fiscal year ended May 31, 1998, as follows:
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CDSC retained $ 4,580 $ 2,558 $ 7,977 $ 31,894
====================================================================================================================================
</TABLE>
7. Composition of Net Assets
At May 31, 1998, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Kentucky
Limited
Kentucky Term Michigan Ohio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $446,277,887 $11,169,517 $309,095,846 $633,173,082
Balance of undistributed net investment income 25,015 986 96,645 36,313
Accumulated net realized gain (loss) from investment transactions 668,697 (70,925) 493,957 2,007,095
Net unrealized appreciation of investments 37,945,440 321,062 30,378,142 54,281,639
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $484,917,039 $11,420,637 $340,064,590 $689,498,129
====================================================================================================================================
</TABLE>
50
<PAGE>
Financial Highlights
51
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is
as follows:
Class (Inception Date)
<TABLE>
<CAPTION>
Investment Operations Less Distributions
----------------------------------- --------------------------------
Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
May 31, Value Income (a) Gain (Loss) Total Income Gain Total Value Return (b)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
KENTUCKY**
CLASS A (5/87)
1998 $11.05 $.59 $ .38 $ .97 $(.58) $(.05) $(.63) $11.39 9.00%
1997 10.82 .60 .24 .84 (.60) (.01) (.61) 11.05 7.87
1996 10.99 .61 (.17) .44 (.61) -- (.61) 10.82 4.04
1995 10.65 .61 .35 .96 (.62) -- (.62) 10.99 9.42
1994 11.06 .62 (.40) .22 (.63) -- (.63) 10.65 1.90
CLASS B (2/97)
1998 11.06 .50 .38 .88 (.50) (.05) (.55) 11.39 8.10
1997(c) 11.07 .17 (.01) .16 (.17) -- (.17) 11.06 1.47
CLASS C (10/93)
1998 11.04 .52 .39 .91 (.52) (.05) (.57) 11.38 8.43
1997 10.81 .54 .24 .78 (.54) (.01) (.55) 11.04 7.29
1996 10.99 .54 (.17) .37 (.55) -- (.55) 10.81 3.38
1995 10.65 .55 .35 .90 (.56) -- (.56) 10.99 8.82
1994(c) 11.46 .36 (.81) (.45) (.36) -- (.36) 10.65 (5.88)*
CLASS R (2/97)
1998 11.03 .61 .39 1.00 (.61) (.05) (.66) 11.37 9.25
1997(c) 11.08 .20 (.04) .16 (.21) -- (.21) 11.03 1.42
- -----------------------------------------------------------------------------------------------------------------------------------
KENTUCKY LIMITED TERM***
CLASS A (9/95)
1998 $ 9.92 $.44 $ .20 $ .64 $(.44) $ -- $(.44) $10.12 6.53%
1997 9.79 .45 .12 .57 (.44) -- (.44) 9.92 5.96
1996(c) 9.75 .31 .04 .35 (.31) -- (.31) 9.79 5.45*
CLASS C (9/95)
1998 9.92 .40 .20 .60 (.40) -- (.40) 10.12 6.17
1997 9.79 .41 .13 .54 (.41) -- (.41) 9.92 5.64
1996(c) 9.75 .29 .04 .33 (.29) -- (.29) 9.79 5.12*
CLASS R (2/97)
1998 9.92 .46 .18 .64 (.46) -- (.46) 10.10 6.58
1997(c) 9.98 .15 (.10) .05 (.11) -- (.11) 9.92 .56
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- -----------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets (000) ment ment ment(a) ment(a) Rate
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$451,338 .84% 5.12% .77% 5.19% 12%
430,803 .99 5.20 .75 5.44 13
410,808 1.02 5.19 .71 5.50 17
394,457 1.04 5.49 .68 5.85 28
369,495 1.03 5.15 .58 5.60 12
4,273 1.59 4.33 1.54 4.38 12
544 1.59* 4.56* 1.39* 4.76* 13
28,630 1.39 4.57 1.33 4.63 12
24,468 1.54 4.64 1.29 4.89 13
20,647 1.57 4.63 1.27 4.93 17
15,831 1.58 4.92 1.23 5.27 28
11,172 1.65* 4.39* 1.08* 4.96* 12
675 .64 5.31 .58 5.37 12
455 .64* 5.62* .49* 5.77* 13
============================================================================
$ 8,989 1.34% 3.67% .66% 4.35% 36%
8,870 1.68 3.37 .53 4.52 56
8,389 1.67* 3.07* .37* 4.37* 48
2,416 1.69 3.32 1.01 4.00 36
2,144 2.00 3.03 .84 4.19 56
1,767 1.98* 2.78* .64* 4.12* 48
16 1.13 3.87 .46 4.54 36
- .86* 4.87* - 5.73* 56
============================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Kentucky.
*** Information included prior to the fiscal year ended May 31, 1997 reflects
the financial highlights of Flagship Kentucky Limited Term.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized except where noted.
(c) From commencement of class operations as noted.
53
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
-------------------------------- -----------------------------
Net
Realized/ Ending
Beginning Net Unrealized Net Net
Year Ended Net Asset Investment Investment Investment Capital Asset Total
May 31, Value Income (a) Gain (Loss) Total Income Gain Total Value Return (b)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MICHIGAN**
CLASS A (6/85)
1998 $11.68 $.61 $ .42 $1.03 $(.61) $(.03) $(.64) $12.07 8.95%
1997 11.37 .62 .31 .93 (.61) (.01) (.62) 11.68 8.42
1996 11.59 .63 (.22) .41 (.63) -- (.63) 11.37 3.61
1995 11.31 .65 .28 .93 (.65) -- (.65) 11.59 8.57
1994 11.77 .66 (.43) .23 (.66) (.03)+ (.69) 11.31 1.87
CLASS B (2/97)
1998 11.70 .52 .42 .94 (.52) (.03) (.55) 12.09 8.12
1997(c) 11.66 .17 .04 .21 (.17) -- (.17) 11.70 1.86
CLASS C (6/93)
1998 11.66 .54 .43 .97 (.54) (.03) (.57) 12.06 8.45
1997 11.35 .55 .32 .87 (.55) (.01) (.56) 11.66 7.84
1996 11.58 .56 (.22) .34 (.57) -- (.57) 11.35 2.96
1995 11.30 .58 .28 .86 (.58) -- (.58) 11.58 7.98
1994(c) 11.86 .54 (.52) .02 (.55) (.03)+ (.58) 11.30 .19*
CLASS R (2/97)
1998 11.68 .63 .42 1.05 (.63) (.03) (.66) 12.07 9.16
1997(c) 11.66 .21 .02 .23 (.21) -- (.21) 11.68 2.01
==========================================================================================================================
OHIO***
CLASS A (6/85)
1998 $11.41 $.60 $ .38 $ .98 $(.60) $(.05) $(.65) $11.74 8.76%
1997 11.21 .61 .20 .81 (.61) -- (.61) 11.41 7.38
1996 11.43 .62 (.21) .41 (.63) -- (.63) 11.21 3.59
1995 11.21 .64 .22 .86 (.64) -- (.64) 11.43 7.99
1994 11.59 .64 (.38) .26 (.64) -- (.64) 11.21 2.24
CLASS B (2/97)
1998 11.41 .51 .38 .89 (.52) (.05) (.57) 11.73 7.89
1997(c) 11.42 .17 (.01) .16 (.17) -- (.17) 11.41 1.45
CLASS C (8/93)
1998 11.41 .54 .37 .91 (.54) (.05) (.59) 11.73 8.12
1997 11.21 .55 .20 .75 (.55) -- (.55) 11.41 6.80
1996 11.43 .55 (.21) .34 (.56) -- (.56) 11.21 3.03
1995 11.20 .57 .23 .80 (.57) -- (.57) 11.43 7.50
1994(c) 11.69 .46 (.49) (.03) (.46) -- (.46) 11.20 (.17)*
CLASS R (2/97)
1998 11.41 .62 .37 .99 (.62) (.05) (.67) 11.73 8.89
1997(c) 11.42 .21 (.01) .20 (.21) -- (.21) 11.41 1.77
==========================================================================================================================
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets (000) ment ment ment (a) ment (a) Rate
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$263,632 .84% 5.11% .84% 5.11% 13%
259,055 .97 5.21 .85 5.33 34
248,422 1.01 5.23 .82 5.42 54
250,380 1.03 5.59 .80 5.82 37
242,993 1.02 5.29 .75 5.56 28
3,839 1.59 4.32 1.59 4.32 13
380 1.59* 4.52* 1.59* 4.52* 34
45,690 1.39 4.56 1.39 4.56 13
41,649 1.52 4.65 1.40 4.77 34
41,365 1.56 4.67 1.37 4.86 54
37,122 1.58 5.02 1.35 5.25 37
30,042 1.61* 4.53* 1.25* 4.89* 28
26,904 .64 5.31 .64 5.31 13
26,211 .65* 5.57* .65* 5.57* 34
- ------------------------------------------------------------------------------------
$472,821 .85% 5.15% .85% 5.15% 15%
463,253 .96 5.32 .89 5.39 17
443,077 1.02 5.31 .92 5.41 31
445,566 1.03 5.70 .95 5.78 31
445,272 1.02 5.39 .93 5.48 9
7,422 1.61 4.39 1.61 4.39 15
1,649 1.60* 4.63* 1.60* 4.63* 17
47,036 1.40 4.60 1.40 4.60 15
40,713 1.51 4.77 1.44 4.84 17
34,939 1.56 4.75 1.47 4.84 31
28,461 1.58 5.13 1.50 5.21 31
25,674 1.60* 4.65* 1.46* 4.79* 9
162,220 .65 5.35 .65 5.35 15
160,312 .65* 5.65* .65* 5.65* 17
- ------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Michigan.
*** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Ohio.
+ The amount shown includes a distribution in excess of capital gains
of $.02 per share.
(a) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its predecessor Flagship
Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized except where noted.
(c) From commencement of class operations as noted.
55
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family
of Mutual Funds
Nuveen offers a variety
of funds designed to
help you reach your
financial goals.
Growth
Nuveen Rittenhouse
Growth Fund
Growth and
Income
European Value Fund
Growth and
Income Stock Fund
Balanced Stock
and Bond Fund
Balanced Municipal
and Stock Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
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, experienced, professional
security selection and surveillance and daily liquidity at that day's net asset
value for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred/(R)/
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
56
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
As of August 8, 1998
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
57
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time - 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 current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
NUVEEN 1898
OUR SECOND CENTURY 1998
helping investors sustain the wealth of a lifetime./TM/
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
VAN-5-5.98
