<PAGE>
Nuveen
Municipal
Bond Funds
November 30, 1997
Semiannual Report
[PHOTO APPEARS HERE]
Dependable, tax-free income
to help you keep more of
what you earn.
Ohio
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Performance Overview
8 Portfolio of Investments
25 Statement of Net Assets
26 Statement of Operations
27 Statement of Changes in Net Assets
28 Notes to Financial Statements
34 Financial Highlights
36 Additional Investment Opportunities
37 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime
to build. Once achieved,
it should be preserved.
It's a pleasure to share with you the Nuveen Flagship Ohio Municipal Bond Fund's
outstanding performance record for the 12 months ended November 30, 1997. Over
the past year, investors continued to enjoy attractive, tax-free dividends
generated by the fund's portfolio of municipal bonds. As of November 30, 1997,
Class A shareholders were receiving a current yield on net asset value of 4.22%.
To match this yield, investors in the 36% combined federal and state income tax
bracket would have had to earn at least 6.59% on taxable alternatives.
During this same period, the fund provided Class A shareholders with a
competitive total return on net asset value of 6.34% with income reinvested,
outpacing the average return of 6.24% for its peer group, the Lipper Ohio
municipal bond fund category. You will find additional details on the fund's
performance on pages 6-7.
The Year in Review
Over the past year, U.S. investors have benefited from robust economic growth
with little evidence of inflationary pressures. With unemployment rates at 20-
year lows and the current economic expansion entering its seventh year, the
presence of benign inflation has sparked debate over whether the traditional
link between growth and inflation has been broken. During 1997, expectations
that excess growth would generate inflation disrupted the markets on several
occasions, most notably following the Federal Reserve's interest rate tightening
in March and speeches by Fed Chairman Alan Greenspan. Still, falling commodity
prices kept producer prices in check, while
1
<PAGE>
low import prices--due in part to the weakness in Asian markets--limited U.S.
companies' ability to raise consumer prices. This combination has kept inflation
subdued and the Federal Reserve "On hold" since March. The reduction in the
federal deficit and passage of the Taxpayer Relief Act of 1997 offer additional
encouragement to long-term fixed-income investors.
Helping You Build A Better Portfolio
The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation. Stock market volatility,
especially late in the year, provided a vivid illustration of the steadying
effect that fixed-income investments can provide in a well-constructed
investment portfolio. Nuveen mutual funds provide an excellent balance to other
stock and bond investments. Your financial adviser can introduce you to a
variety of other Nuveen products and services to round out your investment
portfolio, including the Nuveen Growth and Income Stock Fund and two balanced
stock and bond funds.
In addition, we recently expanded our private asset management capabilities
through the acquisition of Rittenhouse Financial Services, a well-respected
growth investment manager. We encourage you to talk with your financial adviser
about ways to complement your current Nuveen investments by taking advantage of
these additional products and services.
We at Nuveen remain committed to providing you with quality investment solutions
that withstand the test of time. We thank you for your confidence in us and our
family of investments, and we look forward to our next report to you.
Sincerely,
/s/ Timothy R. Schwertfeger
- ---------------------------
Timothy R. Schwertfeger
Chairman of the Board
January 15, 1998
"The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation."
- -----
2
<PAGE>
Answering Your Questions
[PHOTO OF TED NEILD APPEARS HERE]
Ted Neild, managing director of Nuveen's portfolio management team, talks about
the municipal bond market and offers insights into factors that affected the
performance of the fund over the past year.
What economic and market factors influenced the performance of municipal bonds
over the past year?
Over the past 12 months, the performance of the municipal bond market was
influenced by three major factors: the continued strength of the U.S. economy,
minimal inflation and volatility in the equity markets. During 1997, these
factors contributed to a positive environment for fixed-income investments, as
reflected in the steady-to-declining interest rates evident during the year.
Between December 1996 and November 1997, the yield on the 30-year Treasury bond
dropped from 6.36% to 6.05%, and the municipal market followed suit, as the
yield on the Bond Buyer 40 declined from 5.63% to 5.36%. The spread between tax-
free municipal bonds and taxable Treasury bonds remained tight, making municipal
bonds very attractive.
How has the fund performed during this period?
As Tim mentioned in his letter to shareholders, the fund performed very well
during the one-year period ended November 30, 1997. The total return on net
asset value for Class A shares of the fund was 6.34%, which compares favorably
with the one-year average return of 6.24% for the peer group of Ohio municipal
bond funds tracked by Lipper Analytical Services.
- -----
3
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"One focus will be maintaining good call protection, which helps sustain the
fund's dividend, regardless of the direction that interest rates take."
Given the current municipal market, where were you able to find value?
The fund has benefited from a high embedded yield and extremely high-quality
holdings. Because of severe quality compression during the period, it was
possible to increase investments in high-quality, essential service municipal
bonds. We found value in several issues of high-quality Ohio housing bonds,
which continue to pay a higher yield than other sectors of the municipal market.
We also continued to look for value for shareholders in individual bonds that
enhanced the structure of the portfolio, allowing the fund to rally as the
market moved forward. Specifically, we purchased longer duration bonds with good
call protection at the lower prices available earlier this year.
What are your key strategies for the coming year?
We take a holistic approach to portfolio management--assessing all of the
factors that determine a fund's performance and taking advantage of all of them
to contribute to total return and dividend stability. In the coming year, one
focus will be maintaining good call protection, which helps sustain the fund's
dividend, regardless of the direction that interest rates take.
We will continue to focus on sustaining a high level of tax-free income while
continuing to maintain a long enough duration to successfully perform against
the fund's peer group. The state of Ohio continues to enjoy
4
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"Looking at the year ahead, we believe the overall market will continue to
strike a good balance between supply and demand."
substantial public investment, supporting bond prices.
A strong level of new issuance within the state has served to meet this demand.
While credit spreads are tight, we will continue to take advantage of
opportunities to purchase bonds with high credit quality at yields that are
similar to bonds with lower ratings. During the past year, the yield
differentials between AAA and BBB bonds narrowed significantly. We believe that
if credit spreads widen, these high-quality issues will increase in value
relative to lower-rated bonds.
What is your outlook for the municipal market?
Looking at the year ahead, we believe the overall market will continue to strike
a good balance between supply and demand. We expect supply to increase as new
issuers continue to enter the market. A continued decline in yields could also
cause new supply to come to market through refunding of current debt. On the
demand side, volatility in the equity markets, plus the potential for a
weakening of the economy, could spark increased interest in bonds of all types.
The financial crises in Asia, coupled with the continued strength of the dollar
and low commodity prices, are all contributing to the excellent inflation
picture. This backdrop should help offset stronger labor markets and limit the
effects of any bond market corrections. In the meantime, positive underlying
fundamentals provide good support for the municipal market.
5
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Nuveen Flagship Ohio
Municipal Bond Fund
Performance Overview
As of November 30, 1997
<TABLE>
<S> <C> <C> <C> <C>
Fund Highlights
Share Class A B C R
Inception Date 6/85 2/97 8/93 2/97
Net Asset Value (NAV) $11.66 $11.66 $11.66 $11.66
CUSIP 67065R762 67065R754 67065R747 67065R739
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Total Net Assets ($000) $681,911
Average Weighted Maturity (Years) 19.52
Average Weighted Duration (Years) 7.28
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/1/
- ---------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
1-Year 6.34% 1.85% 5.60% 5.78% 6.52%
5-Year 6.48% 5.57% 5.87% 5.91% 6.52%
10-Year 8.24% 7.78% 7.77% 7.65% 8.26%
- ---------------------------------------------------------
Tax-Free Yields
- ---------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
Dist Rate 5.20% 4.98% 4.48% 4.68% 5.40%
SEC 30-Day Yld 4.22% 4.04% 3.47% 3.67% 4.42%
Taxable Equiv Yld2 6.59% 6.31% 5.42% 5.73% 6.91%
- ---------------------------------------------------------
</TABLE>
1 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum up-front sales charge. Class B shares have a
contingent deferred sales charge (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 B
shares automatically convert to Class A shares eight years after purchase.
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 36%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
6
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Credit Quality
[PIE CHART APPEARS HERE]
A 13%
BBB/NR 11%
AA 8%
AAA/Pre-refunded 68%
- ------------------------
Diversification
[PIE CHART APPEARS HERE]
Tax Obligation (G.O.) 19%
Transportation 3%
U.S. Guaranteed 18%
Long-Term Care 3%
Health Care 16%
Housing (Multi-Family) 5%
Housing (Single-Family) 5%
Education/Civic Org. 5%
Tax Obligation (Limited) 6%
Other 1%
Water & Sewer 6%
Utilities 13%
- -------------------------------
Dividend History (A Shares)
[BAR GRAPH APPEARS HERE]
12/96 0.05158
1/97 0.05206
2/97 0.0507
3/97 0.0507
4/97 0.0507
5/97 0.0507
6/97 0.0505
7/97 0.0505
8/97 0.0505
9/97 0.0505
10/97 0.0505
11/97 0.0505
7
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Capital Goods -- 0.2%
$1,425,000 Ohio State Water Development Authority, 3/02 at 102 N/R $1,546,282
Mid--American Waste System Inc. Project,
7.750%, 9/01/07
- ------------------------------------------------------------------------------------------------------------------------
Consumer Staples -- 0.2%
1,000,000 Summit County, Ohio, Industrial Development Revenue, 11/99 at 100 A1 1,031,680
Century Inc. Project, 7.750%, 11/01/05
- ------------------------------------------------------------------------------------------------------------------------
Education and Civic Organization -- 4.8%
1,000,000 Kent State University and Ohio University, 5/02 at 102 AAA 1,093,710
General Receipts, 6.500%, 5/01/22
2,050,000 Miami University of Ohio, University Revenues, 12/99 at 102 A+ 2,201,700
6.900%, 12/01/04
3,500,000 Ohio State Education Loan Revenue, Series A, 6/07 at 102 AAA 3,540,915
5.850%, 12/01/19
Ohio State Higher Educational Facility Commission,
University of Dayton Project:
2,025,000 6.600%, 12/01/17 12/03 at 102 AAA 2,260,649
1,750,000 5.800%, 12/01/19 12/04 at 102 AAA 1,833,720
1,200,000 Ohio State Higher Educational Facility Commission, 9/06 at 101 N/R 1,244,004
University of Findlay Project, 6.125%, 9/01/16
3,775,000 Ohio State Higher Educational Facility Commission, 11/06 at 101 AA 3,774,849
Denison University Project, 5.300%, 11/01/21
7,000,000 Ohio State Higher Educational Facility Commission, 5/07 at 102 AAA 7,008,750
Xavier University, 5.375%, 5/15/22
Ohio State Higher Educational Facility Commission,
Case Western University, Series B:
1,870,000 7.125%, 10/01/14 10/00 at 102 AA 2,049,763
750,000 6.500%, 10/01/20 No Opt. Call AA 883,867
2,250,000 Ohio State Higher Educational Facility Commission, 4/07 at 102 A2 2,345,062
John Carroll University Project, 5.750%, 4/01/19
4,250,000 University of Cincinnati, Ohio, General Receipts, 6/07 at 100 AAA 4,254,675
Series Ab, 5.375%, 6/01/20
1,230,000 Youngstown State University, Ohio, General Receipts, 12/04 at 102 AAA 1,321,377
6.000%, 12/15/16
</TABLE>
8
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<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Energy - 0.5%
$2,125,000 Ashtabula County, Ohio, Industrial Development 5/02 at 102 Baa1 $2,285,310
Revenue Refunding, Ashland Oil Inc. Project,
Series A, 6.900%, 5/01/10
1,000,000 Ohio State Air Quality Development Authority, Revenue 4/01 at 102 Baa1 1,058,950
Refunding, Ashland Oil Inc. Project, 6.850%, 4/01/10
- --------------------------------------------------------------------------------------------------------------
Health Care - 16.3%
1,250,000 Butler County, Ohio, Hospital Facilities Revenue 1/02 at 102 BBB- 1,358,987
Refunding & Improvement, Fort Hamilton, Hughes,
7.500%, 1/01/10
Cambridge, Ohio, Hospital Improvement Revenue
Refunding, Guernsey Memorial Hospital:
500,000 8.000%, 12/01/06 12/01 at 102 BBB 556,340
1,000,000 8.000%, 12/01/11 12/01 at 102 BBB 1,108,700
Cuyahoga County, Ohio, Hospital Revenue, Meridia
Health System:
250,000 6.250%, 8/15/14 8/05 at 102 A1 269,797
5,750,000 7.250%, 8/15/19 8/00 at 102 A1 6,189,702
5,500,000 6.250%, 8/15/24 8/05 at 102 A1 5,849,250
1,500,000 Cuyahoga County, Ohio, Hospital Revenue Refunding & 1/06 at 102 AAA 1,535,370
Improvement, University Hospitals Health, Series A,
5.625%, 1/15/26
1,000,000 Cuyahoga County, Ohio, Hospital Revenue Refunding & 2/07 at 102 AAA 1,029,680
Improvement, Metrohealth System Project,
5.625%, 2/15/17
2,000,000 Cuyahoga County, Ohio, Industrial Development 8/01 at 103 AAA 2,206,100
Revenue Refunding, University Health Care Project,
7.300%, 8/01/11
2,010,000 Erie County, Ohio, Hospital Improvement Revenue 1/02 at 102 A 2,187,825
Refunding, Firelands Community Hospital Project,
6.750%, 1/01/08
Franklin County, Ohio, Hospital Revenue Refunding &
Improvement, Childrens Hospital Project, Series A:
1,575,000 5.750%, 11/01/15 11/06 at 101 Aa 1,633,999
5,275,000 5.875%, 11/01/25 11/06 at 101 Aa 5,523,083
Franklin County, Ohio, Hospital Revenue Refunding,
Holy Cross Health System Corporation:
965,000 5.800%, 6/01/16 6/06 at 102 AA 1,002,625
2,000,000 5.875%, 6/01/21 6/06 at 102 AA 2,098,320
9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio - continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care - continued
$1,500,000 Franklin County, Ohio, Hospital Revenue Refunding, 6/00 at 102 AAA $1,637,595
Holy Cross Health System, Series A, Mount Carmel
Health, 7.625%, 6/01/09
3,000,000 Garfield Heights, Ohio, Hospital Revenue Refunding & 11/02 at 102 A 3,248,310
Improvement, Marymont Hospital Project, Series B,
6.650%, 11/15/11
3,500,000 Garfield Heights, Ohio, Hospital Revenue Refunding & 11/02 at 102 A 3,794,070
Improvement, Marymont Hospital Project, Series A,
6.700%, 11/15/15
3,000,000 Hamilton County, Ohio, Hospital Facilities Revenue, 1/03 at 102 A1 3,214,650
Refunding, Bethesda Hospital, Series A,
6.250%, 1/01/12
1,720,000 Hamilton County, Ohio, Health System Revenue 7/02 at 102 Baa1 1,853,145
Refunding, Providence Hospital, Franciscan,
6.875%, 7/01/15
7,890,000 Lorain County, Ohio, Hospital Revenue Refunding, 11/05 at 102 AAA 7,852,838
EMH Regional Medical Center, 5.375%, 11/01/21
2,250,000 Lorain County, Ohio, Hospital Revenue Refunding, 9/07 at 102 AAA 2,275,042
Catholic Healthcare Partners, Series B,
5.500%, 9/01/27
1,500,000 Lorain, Ohio, Hospital lmprovement Revenue, Lakeland 11/02 at 102 A1 1,697,655
Community Hospital Inc., Refunding, 6.500%, 11/15/12
Lucas County, Ohio, Hospital Revenue Improvement,
St. Vincent Medical Center, Series A:
3,000,000 6.500%, 8/15/12 8/02 at 102 AAA 3,281,910
1,000,000 6.750%, 8/15/20 8/00 at 102 AAA 1,074,780
2,000,000 Mahoning County, Ohio, Hospital Facilities Revenue 6/98 at 100 A1 2,135,020
Refunding, St. Elizabeth Hospital Medical Center,
7.375%, 12/01/09
4,250,000 Mahoning County, Ohio, Hospital Facilities Revenue, 10/00 at 102 AAA 4,610,952
Yha Inc. Project, Series A, Refunding,
7.000%, 10/15/14
500,000 Mansfield, Ohio, Hospital lmprovement Revenue, 12/0l at 101 AAA 546,755
Mansfield General Hospital Project,
6.700%, 12/01/09
2,000,000 Marion County, Ohio, Hospital lmprovement Revenue 5/06 at 102 BBB+ 2,123,060
Refunding, Community Hospital, 6.375%, 5/15/11
1,250,000 Maumee, Ohio, Hospital Revenue Refunding, St. Lukes 12/04 at 102 AAA 1,308,700
Hospital Project, 5.800%,12/01/14
10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care -- continued
Miami County, Ohio, Hospital Facilities Revenue
Refunding & Improvement, Upper Valley Medical Center,
Series A:
$ 4,205,000 6.250%, 5/15/13 5/06 at 102 BBB $ 4,395,402
4,405,000 6.250%, 5/15/16 5/06 at 102 BBB 4,604,458
Middleburg Heights, Ohio, Hospital Revenue Refunding,
Southwest General Health Center:
4,000,000 5.625%, 8/15/15 8/08 at 102 AAA 4,186,720
2,000,000 5.750%, 8/15/21 8/08 at 102 AAA 2,097,420
Montgomery County, Ohio, Hospital Revenue Refunding
Facilities & Improvement, Kettering Medical Center:
1,500,000 5.625%, 4/01/16 4/06 at 102 AAA 1,546,755
7,000,000 6.250%, 4/01/20 No Opt. Call AAA 8,012,410
2,500,000 Montgomery County, Ohio, Sisters Charity 5/03 at 101 AAA 2,745,300
Health Care, Series A, 6.250%, 5/15/08
2,900,000 Mount Vernon, Ohio, Hospital Revenue Refunding, Knox 6/02 at 100 N/R 2,979,141
Community Hospital, 7.875%, 6/01/12
1,725,000 Shelby County, Ohio, Hospital Facilities Revenue 9/02 at 102 BBB 1,916,095
Refunding & Improvement, Memorial Hospital
Association, 7.700%, 9/01/18
2,750,000 Trumbull County, Ohio, Hospital Revenue Refunding & 11/01 at 102 AAA 3,019,527
Improvement, Series B. Trumbull Memorial Hospital,
6.900%, 11/15/12
750,000 Tuscarawas County, Ohio, Hospital Facilities Revenue, 10/03 at 102 Baa3 783,735
Union Hospital Project, Series A, 6.500%, 10/01/21
1,500,000 Washington County, Ohio, Hospital Revenue, Marietta 9/02 at 102 Baa1 1,646,625
Area Health Care Inc. Project, 7.375%, 9/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 4.5%
16,160,000 Franklin County, Ohio, Mortgage Revenue, Columbus 10/07 at 103 Aaa 16,081,462
Properties, Pool 11, 5.600%, 4/20/39
6,200,000 Hamilton County, Ohio, Economic Development 1/07 at 102 AAA 6,267,766
Revenue, Multifamily Housing, Huntington Meadows,
5.700%, 7/01/27
2,800,000 Ohio Capital Corporation, Housing Mortgage Revenue 11/02 at 100 AAA 2,800,000
Refunding, Section 8 Assisted Project, Series C,
5.700%, 1/01/24 (WI)
</TABLE>
11
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily -- continued
Ohio Capital Corporation, Multifamily Housing Revenue
Refunding, Series A:
$ 1,000,000 7.500%, 11/01/11 11/02 at 100 AAA $ 1,051,120
4,250,000 7.600%, 11/01/23 11/02 at 100 AAA 4,467,302
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 4.9%
5,000,000 Ohio Housing Finance Agency, Mortgage Revenue, 9/07 at 102 AAA 5,067,800
Residential, Series B, 3, 5.750%, 9/01/28
5,500,000 Ohio Housing Finance Agency, Mortgage Revenue, 9/07 at 102 AAA 5,574,580
Residential, Series C, 5.750%, 9/01/28
Ohio Housing Finance Agency, Mortgage Revenue,
Residential, Series A:
1,990,000 6.100%, 9/01/14 9/04 at 102 AAA 2,100,206
13,000,000 6.150%, 3/01/29 9/07 at 102 AAA 13,677,170
5,255,000 Ohio Housing Finance Agency, Mortgage Revenue, 9/04 at 102 AAA 5,600,726
Residential, Series B, 6.375%, 9/01/14
645,000 Ohio Housing Finance Agency, Single Family Mortgage 3/00 at 102 AAA 677,805
Revenue, Series B, 7.400%, 9/01/15
Ohio Housing Finance Agency, Single Family Mortgage
Revenue, Series D:
645,000 7.500%, 9/01/13 9/00 at 102 AAA 680,133
300,000 7.050%, 9/01/16 9/01 at 102 AAA 318,141
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial/Other -- 0.3%
1,650,000 Toledo Lucas County, Ohio, Port Authority, Port Revenue 3/02 at 102 AA- 1,849,353
Refunding Facilities, Cargill Inc. Project,
7.250%, 3/01/22
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Care -- 3.5%
4,030,000 Cuyahoga County, Ohio, Health Care Facilities Revenue, 6/00 at 100 N/R 4,358,767
Altenheim Project, 9.280%, 6/01/15
2,500,000 Fairlawn, Ohio, Health Care Facilities Revenue, Village 10/99 at 102 N/R 2,660,400
at St. Edward Project, 8.750%, 10/01/19
1,500,000 Franklin County, Ohio, Health Care Facilities Revenue, 7/03 at 02 N/R 1,509,600
Ohio Presbyterian Retire Services, 6.500%, 7/01/23
3,120,000 Franklin County, Ohio, Health Care Facilities Revenue, 11/05 at 102 Aa2 3,246,422
Heinzerling Foundation, Series A, 6.200%, 11/01/20
1,350,000 Franklin County, Ohio, Hospital Revenue, Mortgage, 7/01 at 103 N/R 1,521,383
Ohio Presbyterian Retirement Services,
8.750%, 7/01/21
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Care--continued
$ 680,000 Franklin County, Ohio, Hospital Revenue Refunding, 8/00 at 102 N/R $ 709,804
Worthington Village, 7.000%, 8/01/16
Marion County, Ohio, Health Care Facility Revenue
Refunding & Improvement, United Church Homes Project:
1,250,000 6.375%, 11/15/10 11/03 at 102 BBB- 1,313,163
750,000 6.300%, 11/15/15 11/03 at 102 BBB- 783,833
2,205,000 Napoleon, Ohio, Health Care Facility Revenue 9/04 at 102 Aa 2,407,132
Refunding Mortgage, Lutherans Orphans Project,
6.875%, 8/01/23
4,775,000 Warren County, Ohio, Hospital Facilities Revenue 7/01 at 102 Aa2 5,219,266
Refunding & Improvement, Otterbein Home Project,
7.200%, 7/01/11
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 18.7%
Adams County, Ohio, Valley Local School District,
Improvement:
6,000,000 7.000%, 12/01/15 No Opt. Call AAA 7,377,120
9,500,000 5.250%, 12/01/21 12/05 at 102 AAA 9,410,415
3,955,000 Akron, Ohio, Variable Purpose Improvement, 12/04 at 102 AAA 4,491,456
6.750%, 12/01/14
3,000,000 Akron, Ohio, Variable Purpose Improvement, Series 2, 12/07 at 100 AA- 3,047,580
5.375%, 12/01/17
Anthony Wayne, Ohio, Local School District:
600,000 0.000%, 12/01/13 No Opt. Call AAA 264,198
2,850,000 5.750%, 12/01/24 12/05 at 101 AAA 2,959,526
1,000,000 Archbold, Ohio, Area Local School District, 12/06 at 102 AAA 1,078,590
6.000%, 12/01/21
1,000,000 Aurora, Ohio, City School District, Improvement & 12/05 at 102 AAA 1,051,610
Refunding, 5.800%, 12/01/16
2,905,000 Batavia, Ohio, Local School District, 6.300%, 12/01/22 12/05 at 102 AAA 3,215,225
1,000,000 Beavercreek, Ohio, Local School District, Series 1996, No Opt. Call AAA 1,182,560
6.600%, 12/01/15
2,500,000 Buckeye Valley, Ohio, Local School District, Delaware No Opt. Call AAA 3,029,775
County, Series A, 6.850%, 12/01/15
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio - continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/General - continued
Chesapeake Union Exempt Village School District, Ohio:
$ 125,000 8.500%, 12/01/04 No Opt. Call N/R $ 151,876
125,000 8.500%, 12/01/05 No Opt. Call N/R 154,373
125,000 8.500%, 12/01/06 No Opt. Call N/R 156,265
125,000 8.500%, 12/01/07 No Opt. Call N/R 157,991
125,000 8.500%, 12/01/08 No Opt. Call N/R 159,475
130,000 8.500%, 12/01/09 No Opt. Call N/R 166,878
500,000 Cleveland, Ohio, Series A, 6.375%, 7/01/12 7/02 at 102 AAA 551,565
4,745,000 Cleveland, Ohio, 6.625%, 11/15/14 11/04 at 102 AAA 5,434,638
550,000 Columbiana County, Ohio, County Jail Facility, 12/04 at 102 AA 607,409
6.600%, 12/01/17
1,500,000 Columbus, Ohio, Refunding, Series B, 6.500%, 1/01/10 1/02 at 102 Aaa 1,637,085
Columbus, Ohio, Sewer System Improvement:
590,000 9.375%, 4/15/06 No Opt. Call AAA 787,986
500,000 9.375%, 4/15/07 No Opt. Call AAA 680,705
1,000,000 Cuyahoga County, Ohio, Jail Facilities, 5.250%, 10/01/13 No Opt. Call AA 1,032,050
1,345,000 Cuyahoga County, Ohio, 5.650%, 5/15/18 No Opt. Call AA 1,439,150
200,000 Dayton, Ohio, 10.500%, 10/01/99 No Opt. Call A+ 222,612
750,000 Defiance, Ohio, 6.200%, 12/01/20 12/04 at 102 AAA 823,088
Delaware, Ohio, City School District:
1,000,000 0.000%, 12/01/10 No Opt. Call AAA 523,350
1,000,000 0.000%, 12/01/11 No Opt. Call AAA 494,550
250,000 East Holmes, Ohio, Local School District, Refunding, 12/98 at 102 AAA 263,868
School Improvement, 7.700%, 12/01/08
1,110,000 Fairborn, Ohio, Limited Tax, Utility, 7.000%, 10/01/11 10/02 at 102 AAA 1,245,786
4,040,000 Franklin County, Ohio, Refunding, 5.375%, 12/01/20 12/08 at 102 AAA 4,113,851
1,575,000 Garaway, Ohio, Local School District, 7.200%, 12/01/14 12/00 at 102 AAA 1,731,256
1,000,000 Garfield Heights, Ohio, Refunding Improvement, 11/06 at 102 AAA 1,037,710
5.600%, 11/01/16
Geauga County, Ohio, Bainbridge Water Project
620,000 6.850%, 12/01/10 No Opt. Call Aa 735,946
1,000,000 5.625%, 12/01/15 12/05 at 102 Aa 1,039,160
1,000,000 Grandview Heights, Ohio, City School District, 12/05 at 101 AA 1,061,120
Construction & Improvement Bonds, 6.100%, 12/01/19
1,000,000 Highland, Ohio, Local School District, 5.875%, 12/01/19 12/07 at 102 AAA 1,065,250
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<C> <S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - continued
$1,000,000 Huron County, Ohio, Correctional Facility, Issue 1, 12/07 at 102 AAA $1,065,060
5.850%, 12/01/16
1,200,000 Indian Lake, Ohio, Local School District, Construction & 12/06 at 101 AAA 1,199,160
Improvement, 5.375%, 12/01/23
1,000,000 Indian Valley, Ohio, Local School District, 12/05 at 102 AAA 1,044,080
5.750%, 12/01/19
1,200,000 Jefferson County, Ohio, Human Services Building 12/01 at 102 AAA 1,315,896
Construction, 6.625%, 12/01/14
1,885,000 Kent, Ohio, Sewer System Improvement, Refunding, 12/02 at 102 Aa 2,067,374
6.500%, 12/01/10
1,070,000 Kettering, Ohio, 6.650%, 12/01/12 12/01 at 102 Aa 1,175,149
1,000,000 Kettering, Ohio, City School District, School 12/05 at 101 AAA 990,380
Improvement, 5.250%, 12/01/22
500,000 Kings Local School District, Ohio, 5.500%, 12/01/21 12/05 at 100 AAA 505,805
500,000 Kirtland, Ohio, Local School District, 7.500%, 12/01/09 12/99 at 102 N/R 536,840
1,000,000 Lakeview, Ohio, Local School District, 6.900%, 12/01/14 12/04 at 102 AAA 1,145,290
1,440,000 Lakewood, Ohio, Series B, 5.750%, 12/01/15 12/05 at 102 Aa 1,512,648
1,000,000 Lakota, Ohio, Local School District, 6.125%, 12/01/17 12/05 at 100 AAA 1,074,860
Logan County, Ohio:
155,000 7.750%, 12/01/02 No Opt. Call A 178,811
155,000 7.750%, 12/01/03 No Opt. Call A 182,091
155,000 7.750%, 12/01/04 No Opt. Call A 185,332
155,000 7.750%, 12/01/05 No Opt. Call A 188,128
155,000 7.750%, 12/01/06 No Opt. Call A 190,574
1,000,000 6.650%, 12/01/12 12/02 at 102 A 1,064,080
590,000 Logan Hocking, Ohio, Local School District, Refunding, No Opt. Call AAA 308,777
Series A, 0.000%, 12/01/10
1,000,000 Lucas County, Ohio, lmprovement, 5.400%, 12/01/15 12/05 at 102 AAA 1,020,770
1,000,000 Mahoning County, Ohio, lmprovement, 7.200%, 12/01/09 12/99 at 102 AAA 1,073,990
Marysville, Ohio, Exempt Village School District,
Improvement:
735,000 0.000%, 12/01/10 No Opt. Call AAA 384,662
865,000 0.000%, 12/01/16 No Opt. Call AAA 323,008
1,000,000 North Olmsted, Ohio, 6.250%, 12/15/12 12/02 at 102 AAA 1,092,750
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio - continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General - continued
North Royalton, Ohio, City School District:
$2,200,000 6.000%, 12/01/14 12/09 at 102 AAA $2,410,364
2,400,000 6.100%, 12/01/19 12/09 at 102 AAA 2,650,848
600,000 Oak Hills, Ohio, Local School District, Series A, 12/07 at 101 Aa3 617,298
5.700%, 12/01/25
3,250,000 Oak Hills, Ohio, Local School District, 5.125%, 12/01/25 12/07 at 101 AAA 3,200,113
1,000,000 Ohio State, Improvement, 6.000%, 8/01/10 No Opt. Call AA+ 1,111,880
Ohio State, Infrastructure Improvement:
750,000 6.200%, 8/01/13 8/05 at 102 AA+ 822,540
2,000,000 6.200%, 8/01/14 8/05 at 102 AA+ 2,186,700
7,640,000 Ohio State, 0.000%, 8/01/13 No Opt. Call AAA 3,422,032
500,000 Olmsted Falls, Ohio, Local School District, 12/01 at 102 AAA 563,465
7.050%, 12/15/11
1,750,000 Pickerington, Ohio, Local School District, Pickerington 12/01 at 102 A 1,880,760
Public Library Project, 6.750%, 12/01/16
Pickerington, Ohio, Local School District, Refunding:
940,000 0.000%, 12/01/09 No Opt. Call AAA 523,157
650,000 0.000%, 12/01/10 No Opt. Call AAA 340,178
500,000 0.000%, 12/01/11 No Opt. Call AAA 247,275
500,000 0.000%, 12/01/13 No Opt. Call AAA 220,165
220,000 Puerto Rico Commonwealth, Refunding, 7/98 at 102 A 230,087
8.000%, 7/01/07
1,000,000 Revere, Ohio, Local School District, 6.000%, 12/01/16 12/03 at 102 AAA 1,068,040
1,200,000 Ridgemont, Ohio, Local School District, 12/02 at 102 N/R 1,320,216
7.250%, 12/01/14
2,340,000 Stow, Ohio, Safety Center Construction, Refunding, 12/05 at 102 A1 2,494,440
6.200%, 12/01/20
2,870,000 Strongsville, Ohio, 5.950%, 12/01/21 12/06 at 102 Aa3 3,028,969
1,100,000 Summit County, Ohio, 5.250%, 12/01/15 12/06 at 102 AAA 1,109,152
1,000,000 Sylvania, Ohio, City School District, 6.600%, 6/01/16 6/02 at 102 AAA 1,098,860
540,000 Trumbull County, Ohio, 6.200%, 12/01/14 12/04 at 102 AAA 589,918
Trumbull County, Ohio, Correctional Facilities:
1,070,000 7.000%, 12/01/04 No Opt. Call AAA 1,239,007
1,300,000 0.000%, 12/01/10 No Opt. Call AAA 680,355
1,320,000 Twinsburg, Ohio, City School District, 6.700%, 12/01/11 12/01 at 102 AAA 1,451,089
16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General - continued
Upper Arlington, Ohio, City School District:
$1,830,000 0.000%, 12/01/11 No Opt. Call AAA $ 905,027
1,870,000 0.000%, 12/01/12 No Opt. Call AAA 873,066
1,000,000 5.125%, 12/01/19 12/06 at 101 AAA 987,650
1,910,000 Vandalia, Ohio, Various Purpose Improvement, 12/06 at 101 Aa 2,006,474
5.850%, 12/01/21
750,000 West Geauga, Ohio, Local School District, 11/04 at 102 AAA 802,095
5.950%, 11/01/12
1,000,000 Woodridge, Ohio, Local School District, 12/04 at 102 AAA 1,069,570
6.000%, 12/01/19
1,425,000 Wooster, Ohio, City School District, 6.500%, 12/01/17 12/02 at 102 AAA 1,589,645
300,000 Youngstown, Ohio, 6.125%, 12/01/14 12/04 at 102 AAA 323,529
- ---------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 6.1%
500,000 Athens County, Ohio, Community Mental Health 6/01 at 102 AA 537,125
Revenue, West Center Project, Series 1,
6.900%, 6/01/10
6,000,000 Cleveland, Ohio, Certificates of Participation, Cleveland 11/07 at 102 AAA 5,928,420
Stadium Project, 5.250%, 11/15/27
90,000 East Cleveland, Ohio, Local Government Fund, No Opt. Call N/R 90,024
7.900%, 12/01/97
1,500,000 Ohio State Building Authority, State Facilities, Juvenile 9/04 at 102 AAA 1,681,740
Correctional Projects, Series A, 6.600%, 10/01/14
1,100,000 Ohio State Department Transportation, Certificates of 4/02 at 102 AAA 1,196,360
Participation, Panhandle Rail Line Project, Series A,
6.500%, 4/15/12
1,000,000 Ottawa County, Ohio, Special Assessment, Portage, 9/01 at 102 AAA 1,104,950
Catawba Isle, 7.000%, 9/01/11
27,850,000 Puerto Rico Commonwealth Highway & Transportation 7/16 at 100 A 28,271,092
Authority, Highway Revenue, Series Y,
5.500%, 7/01/36
2,700,000 Puerto Rico Public Buildings Authority, Revenue No Opt. Call A 2,809,215
Guaranteed, Refunding, Series L, 5.500%, 7/01/21
- ---------------------------------------------------------------------------------------------------------------
Technology - 0.2%
1,000,000 Franklin County, Ohio, Online Computer 7/01 at 100 N/R 1,062,590
Library Center Inc., 7.200%, 7/15/06
</TABLE>
17
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Transportation - 3.0%
$9,840,000 Cleveland, Ohio, Airport System Revenue, Series A, 1/08 at 101 AAA $ 9,472,673
5.125%, 1/01/27 (WI)
11,000,000 Ohio State Turnpike Commission, Turnpike Revenue, 2/06 at 102 AAA 11,153,560
Series A, 5.500%, 2/15/26
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 17.5%
2,000,000 Athens, Ohio, Sewer System Revenue Mortgage, 12/09 at 100 A*** 2,220,240
7.300%, 12/01/14 (Pre-refunded to 12/01/09)
3,000,000 Barberton, Ohio, Hospital Facilities Revenue, Barberton 1/02 at 102 N/R*** 3,371,220
Citizens Hospital Company Project,
7.250%, 1/01/12 (Pre-refunded to 1/01/02)
2,940,000 Bedford, Ohio, Hospital Improvement Revenue 5/00 at 102 N/R*** 3,275,836
Refunding, Community Hospital Bedford Inc.,
8.500%, 5/15/09 (Pre-refunded to 5/15/00)
1,000,000 Canal Winchester, Ohio, Local School District, 12/01 at 102 AAA 1,127,840
7.100%, 12/01/13 (Pre-refunded to 12/01/01)
1,400,000 Canton, Ohio, Variable Purpose, 7.875%, 12/01/08 12/98 at 103 N/R*** 1,494,374
(Pre-refunded to 12/01/98)
1,085,000 Clermont County, Ohio, Hospital Facilities Revenue 9/01 at 100 AAA 1,206,791
Refunding, Mercy Health System, Series A,
7.500%, 9/01/19 (Pre-refunded to 9/01/01)
3,660,000 Clermont County, Ohio, Hospital Facilities Revenue 9/99 at 102 AAA 3,940,429
Refunding, Mercy Health System, Series A,
7.500%, 9/01/19 (Pre-refunded to 9/01/99)
Clermont County, Ohio, Sewer System Revenue:
1,000,000 7.250%, 12/01/11 (Pre-refunded to 12/01/00) 12/00 at 102 AAA 1,106,750
2,000,000 7.375%, 12/01/20 (Pre-refunded to 12/01/00) 12/00 at 102 AAA 2,220,520
3,700,000 7.100%, 12/01/21 (Pre-refunded to 12/01/01) 12/01 at 102 AAA 4,155,433
Cleveland, Ohio:
1,010,000 7.500%, 8/01/08 (Pre-refunded to 2/01/03) 2/03 at 100 AAA 1,154,662
1,010,000 7.500%, 8/01/09 (Pre-refunded to 2/01/03) 2/03 at 100 AAA 1,154,662
790,000 Cleveland, Ohio, City School District, 8.250%,12/01/08 12/01 at 102 Aaa 920,184
Pre-refunded to 12/01/01)
10,000 Cleveland, Ohio, Waterworks Revenue, 1st Mortgage, 1/02 at 102 AAA 10,995
Series F, 6.500%, 1/01/11 (Pre-refunded to 1/01/02)
1,250,000 Cuyahoga County, Ohio, Hospital Revenue, Deaconess 10/00 at 103 N/R*** 1,390,438
Hospital, Series B, 7.450%, 10/01/18
(Pre-refunded to 10/01/00)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed--continued
$1,000,000 Cuyahoga County, Ohio, Hospital Revenue lmprovement 1/99 at 102 AAA $1,051,580
& Refunding, University Hospitals Health System,
Series A, 6.875%, 1/15/19 (Pre-refunded to 1/15/99)
4,000,000 Cuyahoga County, Ohio, Hospital Revenue, Fairview 8/99 at 102 Aaa 4,288,120
General Hospital, 7.375%, 8/01/19
(Pre-refunded to 8/01/99)
5,270,000 Cuyahoga County, Ohio, lmprovement Revenue, 6/99 at 102 N/R*** 5,650,283
Distribution System, Medical Center Company
Project, 7.800%, 6/01/09 (Pre-refunded to 6/01/99)
1,000,000 Delphos, Ohio, Sewer System Mortgage Revenue, 9/00 at 102 AAA 1,098,750
7.250%, 9/01/20 (Pre-refunded to 9/01/00)
2,600,000 Erie County, Ohio, Franciscan Services Corporation, 1/99 at 102 N/R*** 2,749,552
Providence Hospital Inc., Series A, 7.625%, 1/01/19
(Pre-refunded to 1/01/99)
1,500,000 Findlay, Ohio, Sewer System, 7.200%, 8/01/11 8/99 at 102 AA-*** 1,603,830
(Pre-refunded to 8/01/99)
Franklin County, Ohio, Hospital Revenue Refunding &
Improvement, Riverside United Hospital:
1,000,000 7.600%, 5/15/20 (Pre-refunded to 5/15/00) 5/00 at 102 AAA 1,098,930
1,350,000 7.250%, 5/15/20 (Pre-refunded to 5/15/00) 5/00 at 102 AAA 1,472,594
1,000,000 Gahanna, Jefferson City School District, Ohio, Series A, A, 12/00 at 102 N/R*** 1,101,150
School Building Construction, 7.125%, 12/01/14
(Pre-refunded to 12/01/00)
6,750,000 Hamilton, Ohio, Electric System Mortgage Revenue, 10/98 at 102 AAA 7,121,925
Series B, 8.000%, 10/15/22 (Pre-refunded to 10/15/98) )
1,495,000 Hamilton County, Ohio, Mortgage Revenue, Judson 8/00 at 101 1/4 AA-*** 1,648,626
Care Center, Series A, 7.800%, 8/01/19
(Pre-refunded to 8/01/00)
2,325,000 Hancock County, Ohio, Hospital Revenue, Blanchard 11/98 at 103 A+*** 2,473,312
Valley Hospital, 7.625%, 11/15/14
(Pre-refunded to 11/15/98)
1,000,000 Hudson, Ohio, Local School District, Series A, 12/00 at 102 A1*** 1,102,310
7.100%, 12/15/13 (Pre-refunded to 12/15/00)
1,000,000 Hudson, Ohio, Local School District, Series A, School 12/00 at 102 A1*** 1,104,130
Facilities Improvement, 7.100%, 12/15/14
(Pre-refunded to 12/01/00)
1,575,000 Lorain, Ohio, Sewer System Mortgage Revenue 4/98 at 102 N/R*** 1,631,826
Refunding, 8.750%, 4/01/11 (Pre-refunded to 4/01/98)
----------
</TABLE>
19
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed -- continued
$1,500,000 Lucas County, Ohio, Hospital Revenue, Flower Memorial 12/01 at 102 N/R $1,735,140
Hospital, Series A, 8.125%, 12/01/11
(Pre-refunded to 12/01/01)
1,150,000 Marion County, Ohio, Health Care Facility Revenue, 12/99 at 103 N/R 1,284,700
United Church Homes Inc., Refunding,
8.875%, 12/01/12 (Pre-refunded to 12/01/99)
1,000,000 Marysville, Ohio, Exempt Village School District, 12/00 at 102 AAA 1,105,350
7.200%, 12/01/10 (Pre-refunded to 12/01/00)
1,250,000 Marysville, Ohio, Water System Mortgage Revenue, 12/01 at 101 AAA 1,390,988
7.050%, 12/01/21 (Pre-refunded to 12/01/01)
1,850,000 Massillon, Ohio, City School District, 7.200%, 12/01/11 12/00 at 102 AAA 2,044,898
(Pre-refunded to 12/01/00)
1,000,000 Mentor, Ohio, Exempt Village School District, 12/99 at 102 AAA 1,083,150
7.400%, 12/01/11 (Pre-refunded to 12/01/02)
3,000,000 Middleburg Heights, Ohio, Hospital Revenue, 8/01 at 102 AAA 3,353,820
Improvement, Southwest General Hospital,
7.200%, 8/15/19 (Pre-refunded to 8/15/01)
12,160,000 Ohio Housing Finance Agency, Single Family Mortgage 1/11 at 67 1/32 AAA 4,216,298
Revenue, 0.000%, 1/15/15 (Pre-refunded to 1/15/11)
20,000 Ohio State Building Authority, Frank J Lausch State 7/11 at 70 15/32 AAA 24,381
Office Building, Series A, Cleveland, Refunding,
10.125%, 10/01/06 (Pre-refunded to 4/01/03)
3,250,000 Ohio State Building Authority, Correctional Facilities, 8/99 at 102 Aaa 3,484,975
Series A, 7.350%, 8/01/06 (Pre-refunded to 8/01/99)
1,000,000 Ohio State Higher Educational Facility Commission 5/00 at 100 AAA 1,074,850
Revenue, Ohio Northern University Project,
7.300%, 5/15/10 (Pre-refunded to 5/15/00)
1,900,000 Ohio State Public Facilities Commission, Higher 5/99 at 102 AA-- 2,020,137
Education Facilities, Series A,
7.250%, 5/01/04 (Pre-refunded to 11/01/99)
4,630,000 Ohio State Water Development Authority Revenue, No Opt. Call AAA 5,023,967
Pure Water, Series 1, 6.000%, 12/01/16
1,000,000 Parma, Ohio, 7.600%, 12/01/11 12/00 at 102 A 1,117,170
(Pre-refunded to 12/01/01)
1,600,000 Pickerington, Ohio, Local School District, Series B, 12/00 at 102 AAA 1,776,592
7.250%, 12/01/13 (Pre-refunded to 12/01/00)
</TABLE>
20
<PAGE>
<TABLE>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - continued
$2,000,000 Puerto Rico Commonwealth, Public Improvement, 7/98 at 102 AAA $2,086,140
Series A, 7.750%, 7/01/06 (Pre-refunded to 7/01/98)
780,000 Puerto Rico Commonwealth, Refunding, 7/98 at 102 A*** 814,538
8.000%, 7/01/07 (Pre-refunded to 7/01/98)
Puerto Rico Commonwealth Aqueduct & Sewer Authority,
Series A:
1,000,000 7.900%, 7/01/07 (Pre-refunded to 7/01/98) 7/98 at 102 AAA 1,043,940
3,600,000 7.875%, 7/01/17 (Pre-refunded to 7/01/98) 7/98 at 102 AAA 3,757,680
700,000 Puerto Rico Commonwealth Highway Authority, 7/00 at 102 AAA 777,070
Highway Revenue, Series Q, 7.750%, 7/01/10
(Pre-refunded to 7/01/00)
1,500,000 Puerto Rico Electric Power Authority Power, Revenue 7/01 at 102 Aaa 1,669,500
Formerly Puerto Rico Commonwealth Water
Resource Authority, Series P, 7.000%, 7/01/21
(Pre-refunded to 7/01/01)
3,165,000 Reynoldsburg, Ohio, City School District, 12/02 at 102 AAA 3,537,742
6.550%, 12/01/17 (Pre-refunded to 12/01/02)
605,000 Scioto County, Ohio, 7.150%, 8/01/11 8/01 at 101 N/R*** 671,102
(Pre-refunded to 8/01/01)
750,000 Southwest Local School District, Ohio, Hamilton County, 12/99 at 103 AAA 824,723
7.650%, 12/01/10 (Pre-refunded to 12/01/99)
1,500,000 Stark County, Ohio, Sanitation Sewer System Revenue, No Opt. Call AAA 1,583,880
7.750%, 11/15/18
1,000,000 University of Cincinnati, Ohio, General Receipts, 12/02 at 102 AA*** 1,104,700
Series O, 6.300%, 6/01/12 (Pre-refunded to 12/01/02)
1,750,000 University of Toledo, Ohio, General Reception, 6/98 at 102 AAA 1,818,618
7.700%, 6/01/18 (Pre-refunded to 6/01/98)
Warren, Ohio:
1,500,000 7.750%, 11/01/10 (Pre-refunded to 11/01/00) 11/00 at 102 BBB+*** 1,677,150
1,250,000 8.625%, 11/15/13 (Pre-refunded to 11/15/98) 11/98 at 102 BBB+*** 1,329,913
1,500,000 Westerville, Ohio, Minerva Park & Blendon Joint 9/01 at 102 AAA 1,674,735
Township Hospital District Revenue, Improvement,
St. Anns Hospital, Series A, 7.100%, 9/15/21
(Pre-refunded to 9/15/01)
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio - continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Utilities - 12.6%
Cleveland, Ohio, Public Power System Revenue, First
Mortgage, Series A:
$2,250,000 0.000%, 11/15/12 No Opt. Call AAA $ 1,052,843
1,535,000 0.000%, 11/15/13 No Opt. Call AAA 677,442
10,685,000 Cleveland, Ohio, Public Power System Revenue 11/01 at 102 AAA 11,852,657
Improvement, 1st Mortgage, Series B, Refunding,
7.000%, 11/15/17
1,900,000 Cleveland, Ohio, Public Power System Revenue 11/01 at 102 AAA 2,107,632
Improvement, 1st Mortgage, Series A,
7.000%, 11/15/17
6,400,000 Cleveland, Ohio, Public Power System Revenue 11/06 at 102 AAA 6,188,352
Refunding, First Mortgage, Series 1, 5.000%, 11/15/24
1,000,000 Hamilton, Ohio, Gas System Revenue, Series A, 10/03 at 102 AAA 963,550
5.000%, 10/15/18
13,520,000 Ohio Municipal Electric Generation Agency, Joint 2/03 at 102 AAA 13,434,148
Venture 5, Certificates of Beneficial Interest,
5.375%, 2/15/24
1,750,000 Ohio State Air Quality Development Authority, 12/02 at 102 AAA 1,919,540
Series A, Columbus Southern Power Company
Project, 6.375%, 12/01/20
7,000,000 Ohio State Air Quality Development Authority, 6/03 at 102 Baa2 7,294,490
Series B, Columbus Southern Power Company
Project, 6.250%, 12/01/20
750,000 Ohio State Air Quality Development Authority, Revenue 7/99 at 102 Baa3 792,218
Refunding, Pollution Control, Ohio Edison, Series B,
7.625%, 7/01/23
5,900,000 Ohio State Air Quality Development Authority, Revenue 8/99 at 102 Baa1 6,189,454
Refunding, Ohio Power Company Project, Series B,
7.400%, 8/01/09
2,000,000 Ohio State Air Quality Development Authority, Revenue 3/00 at 102 AAA 2,164,480
Refunding, Pollution Control, Ohio Edison, Series A,
7.450%, 3/01/16
15,000,000 Ohio State Air Quality Development Authority, Revenue
Refunding, Dayton Power & Light Company Project, 9/05 at 102 A+ 15,821,850
6.100%, 9/01/30
7,000,000 Ohio State Air Quality Development Authority, 4/07 at 102 AAA 7,066,640
JMG Funding Limited Partnership Project,
5.625%, 1/01/23 (WI)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities - continued
$ 500,000 Ohio State Water Development Authority, Revenue 8/02 at 102 AA- $ 537,825
Refunding, Collateralized, Water Development,
Dayton Power, Series A, 6.400%, 8/15/27
7,050,000 Ohio State Water Development Authority, Pollution 7/99 at 102 Baa3 7,423,509
Control Facilities, Revenue Refunding, Ohio Edison,
Series A, 7.625%, 7/01/23
1,545,000 Puerto Rico Electric Power Authority, Power Revenue, No Opt. Call BBB+ 554,423
Formerly Puerto Rico Commonwealth Water
Resource Authority, Series O, 0.000%, 7/01/17
- ----------------------------------------------------------------------------------------------------------------------
Water and Sewer - 6.0%
Bellefontaine, Ohio, Sewer System Revenue, First
Mortgage, Refunding & Improvement:
1,000,000 6.800%, 12/01/07 12/02 at 101 Baa1 1,083,450
1,000,000 6.900%, 12/01/11 12/02 at 101 Baa1 1,087,830
3,000,000 Butler County, Ohio, Sewer System Revenue, 12/06 at 101 AAA 2,971,710
5.250%, 12/01/21
13,000,000 Cleveland, Ohio, Waterworks Revenue Refunding, First No Opt. Call AAA 13,645,840
Mortgage, Series G, 5.500%, 1/01/21
Cleveland, Ohio, Waterworks Revenue Refunding &
Improvement, 1st Mortgage, Series H:
2,320,000 5.750%, 1/01/21 1/06 at 102 AAA 2,417,231
5,850,000 5.750%, 1/01/26 1/06 at 102 AAA 6,095,173
990,000 Cleveland, Ohio, Waterworks Revenue, 1st Mortgage, 1/02 at 102 AAA 1,078,526
Series F, 6.500%, 1/01/11
1,600,000 Greene County, Ohio, Water System Revenue, Series A, 12/07 at 102 AAA 1,753,248
6.125%, 12/01/21
2,200,000 Greenville, Ohio, Wastewater System Revenue, First 12/02 at 102 AAA 2,421,100
Mortgage, 6.350%, 12/01/17
1,000,000 Hamilton, Ohio, Waterworks Revenue Mortgage, 10/01 at 102 AAA 1,086,340
Series A, 6.400%, 10/15/10
1,175,000 Hubbard, Ohio, Sewer System Mortgage Revenue, 5/98 at 102 N/R 1,224,926
8.800%, 11/15/17
795,000 Huber Heights, Ohio, Water System Revenue, No Opt. Call AAA 249,797
0.000%, 12/01/19
1,000,000 Montgomery County, Ohio, Water Revenue, Greater 11/02 at 102 AAA 1,089,350
Moraine, Beavercreek, 6.250%, 11/15/17
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Ohio -- continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------
Water and Sewer -- continued
<C> <S> <C> <C> <C>
$ 1,000,000 Mount Gilead, Ohio, Water System Revenue, First 12/02 at 102 N/R $ 1,081,470
Mortgage, 7.200%, 12/01/17
1,000,000 Ohio State Water Development Authority, 6/05 at 102 AAA 1,058,910
Fresh Water Series, 5.900%, 12/01/21
750,000 Toledo, Ohio, Sewer System Revenue Mortgage, 11/04 at 102 AAA 832,665
6.350%, 11/15/17
500,000 Toledo, Ohio, Waterworks Revenue Refunding 11/04 at 102 AAA 557,415
Mortgage, 6.450%, 11/15/24
750,000 Warren County, Ohio, Waterworks Revenue, 12/02 at 102 AAA 829,996
6.600%, 12/01/16
- ------------------------------------------------------------------------------------------------------------------------
$ 662,675,000 Total Investments -- (cost $628,162,086) -- 99.3% 677,257,890
=============-----------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.7% 4,652,957
-------------------------------------------------------------------------------------------------
Net Assets -- 100% $681,910,847
=================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices
at later dates.
** Ratings: Using the higher of Standard and Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust
containing sufficient U.S. Government or U.S.
Government agency securities, which ensures the
timely payment of principal and interest. Securities
are normally considered to be equivalent to AAA rated
securities.
N/R - Investment is not rated.
(WI) Security purchased on a when-issued basis (see note 1).
24 See accompanying notes to financial statements.
<PAGE>
Statement of Net Assets (Unaudited)
November 30, 1997
<TABLE>
<CAPTION>
Nuveen Flagship Ohio
- --------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $677,257,890
Cash 4,649,348
Receivables:
Interest 12,794,606
Investments sold 9,369,400
Shares sold 815,348
Other assets 19,091
- --------------------------------------------------------------------------------------------------
Total assets 704,905,683
- --------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 19,302,412
Shares redeemed 303,597
Accrued expenses:
Management fees (note 6) 294,906
12b-1 distribution and service fees (notes 1 and 6) 105,637
Other 33,073
Dividends payable 2,955,211
- --------------------------------------------------------------------------------------------------
Total liabilities 22,994,836
- --------------------------------------------------------------------------------------------------
Net assets (note 7) $681,910,847
==================================================================================================
Class A Shares (note 1)
Net assets $474,080,042
Shares outstanding 40,648,693
Net asset value and redemption price per share $ 11.66
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 12.17
==================================================================================================
Class B Shares (note 1)
Net assets $ 3,904,238
Shares outstanding 334,834
Net asset value, offering and redemption price per share $ 11.66
==================================================================================================
Class C Shares (note 1)
Net assets $ 41,995,617
Shares outstanding 3,601,987
Net asset value, offering and redemption price per share $ 11.66
==================================================================================================
Class R Shares (note 1)
Net assets $161,930,950
Shares outstanding 13,885,299
Net asset value, offering and redemption price per share $ 11.66
==================================================================================================
</TABLE>
25 See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations (Unaudited)
Six months ended November 30, 1997
Nuveen Flagship
Ohio
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment Income
Tax-exempt interest income (note 1) $20,596,626
- --------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 1,791,643
12b-1 service fees -- Class A (notes 1 and 6) 471,932
12b-1 distribution and service fees -- Class B (notes 1 and 6) 13,785
12b-1 distribution and service fees -- Class C (notes 1 and 6) 155,479
Shareholders' servicing agent fees and expenses 259,926
Custodian's fees and expenses 58,941
Trustees' fees and expenses (note 6) 6,325
Professional fees 9,033
Shareholders' reports -- printing and mailing expenses 71,397
Federal and state registration fees 1,096
Other expenses 6,956
- --------------------------------------------------------------------------------------------------------------------------
Total expenses 2,846,513
- --------------------------------------------------------------------------------------------------------------------------
Net investment income 17,750,113
- --------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 3,052,153
Net change in unrealized appreciation or depreciation of investments 11,433,285
- --------------------------------------------------------------------------------------------------------------------------
Net gain from investments 14,485,438
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $32,235,551
==========================================================================================================================
</TABLE>
26 See accompanying notes to financial statements.
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Nuveen Flagship Ohio
------------------------------------
Six months ended Year ended
11/30/97 5/31/97*
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 17,750,113 $ 29,268,587
Net realized gain from investment transactions
(notes 1 and 4) 3,052,153 4,460,158
Net change in unrealized appreciation or depreciation
of investments 11,433,285 4,107,165
- ---------------------------------------------------------------------------------------------------
Net increase in net assets from operations 32,235,551 37,835,910
- ---------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (12,333,650) (24,358,638)
Class B (64,097) (10,649)
Class C (978,879) (1,876,872)
Class R (4,385,135) (2,962,615)
- ---------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (17,761,761) (29,208,774)
- ---------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the reorganization
of Nuveen Ohio (note 1) -- 183,170,717
Net proceeds from shares issued as a capital contribution -- 50,000
Net proceeds from sale of shares 27,881,594 53,603,783
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 12,215,344 14,753,008
- ---------------------------------------------------------------------------------------------------
40,096,938 251,577,508
- ---------------------------------------------------------------------------------------------------
Cost of shares redeemed (38,587,040) (72,294,456)
- ---------------------------------------------------------------------------------------------------
Net increase in net assets
from Fund share transactions 1,509,898 179,283,052
- ---------------------------------------------------------------------------------------------------
Net increase in net assets 15,983,688 187,910,188
Net assets at the beginning of period 665,927,159 478,016,971
- ---------------------------------------------------------------------------------------------------
Net assets at the end of period $681,910,847 $665,927,159
- ---------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end of period $ 48,165 $ 59,813
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Ohio and four
months of Nuveen Flagship Ohio (see note 1).
- ----- See accompanying notes to financial statements.
27
<PAGE>
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust 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 Ohio Municipal Bond Fund (the "Fund"), 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 Fund, 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 Ohio Double Tax Exempt
Fund ("Flagship Ohio") and Nuveen Ohio Tax-Free Value Fund ("Nuveen Ohio")
reorganized into Nuveen Flagship Ohio Municipal Bond Fund ("Nuveen Flagship
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 Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
The prices of municipal bonds in the Fund's investment portfolio are provided by
a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
November 30, 1997, the Fund had outstanding when-issued purchase commitments of
$19,302,413.
28
<PAGE>
Interest Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
The Fund is a separate taxpayer for federal income tax purposes. The Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Ohio state income taxes, to retain such
tax-exempt status when distributed to the shareholders of the Fund. Net realized
capital gain and market discount distributions are subject to federal taxation.
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of $1
million or more are sold at net asset value without 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.
29
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the six months ended November 30, 1997.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
30
<PAGE>
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six months ended 11/30/97 Year ended 5/31/97*
----------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization
of Nuveen 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 1,505,326 17,466,135 3,479,121 39,481,904
Class B 222,339 2,576,010 143,044 1,632,067
Class C 354,077 4,109,895 777,074 8,826,593
Class R 322,199 3,729,554 320,322 3,663,219
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 722,346 8,329,138 1,078,011 12,246,653
Class B 2,628 30,435 370 4,189
Class C 71,281 820,632 83,238 991,709
Class R 262,522 3,035,139 133,093 1,510,457
- ------------------------------------------------------------------------------------------------------------------------------
3,462,718 40,096,938 22,058,476 251,577,508
- ------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,164,540) (25,046,596) (5,159,717) (58,567,125)
Class B (34,642) (403,219) -- --
Class C (390,906) (4,520,087) (668,440) (7,657,334)
Class R (744,688) (8,617,138) (533,621) (6,069,997)
- ------------------------------------------------------------------------------------------------------------------------------
(3,334,776) (38,587,040) (6,361,778) (72,294,456)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase 127,942 $ 1,509,898 15,696,698 $179,283,052
==============================================================================================================================
</TABLE>
* Information represents eight months of Flagship Ohio and four months of Nuveen
Flagship Ohio (see note 1).
31
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
3. Distributions to Shareholders
On December 9, 1997, the Fund declared dividend distributions from its tax-
exempt net investment income which were paid on December 31, 1997, to
shareholders of record on December 9, 1997, as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Dividend per share:
<S> <C>
Class A $.0505
Class B .0435
Class C .0455
Class R .0525
- ----------------------------------------------------------------------
</TABLE>
At the same time, the Fund also declared taxable distributions, which includes
capital gains and/or market discount, of $.0504 per share.
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities for the six months ended November 30, 1997, aggregated $74,373,967
and $63,498,064, respectively. Purchases and sales (including maturities) of
temporary municipal investments for the six months ended November 30, 1997,
aggregated $8,300,000 and $18,300,000, respectively.
At November 30, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for the Fund.
At May 31, 1997, the Fund's last fiscal year end, the Fund had an unused capital
loss carryforward of $87,848 available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, the carryforward
will expire in the year 2002.
5. Unrealized Appreciation (Depreciation)
At November 30, 1997, net unrealized appreciation aggregated $49,095,804 all of
which related to appreciated securities.
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, the Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of the 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>
32
<PAGE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to 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.
The Adviser has agreed to waive part of its management fees or reimburse certain
expenses of the Fund in order to limit total expenses to .75 of 1% of the
average daily net asset value, excluding any 12b-1 fees applicable to Class A,
B, C and R Shares.
The Adviser may also voluntarily reimburse additional expenses from time to
time, which may be terminated at any time at its discretion.
During the six months ended November 30, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $407,300 of which
approximately $362,000 were paid out as concessions to authorized dealers. The
Distributor also received 12b-1 service fees on Class A Shares, substantially
all of which were paid to compensate authorized dealers for providing services
to shareholders relating to their investments.
During the six months ended November 30, 1997, the Distributor compensated
authorized dealers directly with approximately $144,300 in commission advances
at the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the six months
ended November 30, 1997, the Distributor retained approximately $50,600 in such
12b-1 fees. The remaining 12b-1 fees charged to the Fund were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments. The distributor also collected and retained approximately $28,000
of CDSC on share redemptions during the six months ended November 30, 1997.
7. Composition of Net Assets
At November 30, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
Capital paid-in $629,802,573
Balance of undistributed net investment income 48,165
Accumulated net realized gain from investment transactions 2,964,305
Net unrealized appreciation of investments 49,095,804
- --------------------------------------------------------------------------------
Net assets $681,910,847
================================================================================
</TABLE>
33
<PAGE>
Financial Highlights (Unaudited)
Selected data for a common share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
--------------------- ------------------
Net
Nuveen Flagship Ohio** Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income (b) investments income gains period value(a)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (6/85)
1998 (d) $11.41 $.30 $ .25 $(.30) $ -- $11.66 4.89%
1997 11.21 .61 .20 (.61) -- 11.41 7.38
1996 11.43 .62 (.21) (.63) -- 11.21 3.59
1995 11.21 .64 .22 (.64) -- 11.43 7.99
1994 11.59 .64 (.38) (.64) -- 11.21 2.24
1993 11.05 .66 .54 (.66) -- 11.59 11.20
1992 10.72 .68 .33 (.68) -- 11.05 9.77
1991 10.45 .68 .28 (.69) -- 10.72 9.57
1990 10.54 .69 (.09) (.69) -- 10.45 5.86
1989 10.04 .69 .51 (.70) -- 10.54 12.36
1988 9.82 .71 .23 (.71) (.01) 10.04 10.12
Class B (2/97)
1998 (d) 11.41 .26 .25 (.26) -- 11.66 4.51
1997 (c) 11.42 .17 (.01) (.17) -- 11.41 1.45
Class C (8/93)
1998 (d) 11.41 .27 .25 (.27) -- 11.66 4.62
1997 11.21 .55 .20 (.55) -- 11.41 6.80
1996 11.43 .55 (.21) (.56) -- 11.21 3.03
1995 11.20 .57 .23 (.57) -- 11.43 7.50
1994 (c) 11.69 .46 (.49) (.46) -- 11.20 (.17)*
Class R (2/97)
1998 (d) 11.41 .31 .26 (.32) -- 11.66 5.00
1997 (c) 11.42 .21 (.01) (.21) -- 11.41 1.77
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ending May 31,
1997, reflects the financial highlights of Flagship Ohio.
(a) Total returns are calculated on net asset value without any
sales charge and are not annualized except where noted.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its
predecessor Flagship Financial.
(c) From commencement of class operations as noted.
(d) For the six months ending November 30, 1997.
34
<PAGE>
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
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment (b) ment (b) rate
- -------------------------------------------------------------------------------
$ 474,080 .85%* 5.23%* .85%* 5.23%* 10%
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
410,467 1.02 5.75 .96 5.81 15
325,273 .99 6.20 .95 6.24 18
268,213 1.02 6.53 1.02 6.53 14
231,311 1.01 6.51 .96 6.56 42
195,135 1.03 6.69 .93 6.79 37
157,511 1.01 7.03 .88 7.16 85
3,904 1.60* 4.46* 1.60* 4.46* 10
1,649 1.60* 4.63* 1.60* 4.63* 17
41,996 1.40* 4.68* 1.40* 4.68* 10
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
161,931 .65* 5.43* .65* 5.43* 10
160,312 .65* 5.65* .65* 5.65* 17
- -------------------------------------------------------------------------------
35
<PAGE>
Additional Investment Opportunities
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth Funds
Nuveen Rittenhouse Growth Fund
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate
Limited Term
State Funds
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Fund, contact your financial
adviser. If you would like to add to your current investment on a regular basis,
you can sign up for NuveenOs systematic investing program, which allows you to
invest a fixed dollar amount every month automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fundOs dividends back into the fund, you give your investment the added
growth potential of long-term compounding.
For more information on any of these service options, call your adviser, or
Nuveen at (800) 225-8530.
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
Boston Financial Data Service
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, Illinois
37
<PAGE>
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Serving Investors
for Generations
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
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
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 products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 225-8530 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
Nuveen
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 225-8530
www.nuveen.com VSA-OH-11.97
<PAGE>
Nuveen
Municipal
Bond Funds
November 30, 1997
Semiannual Report
[PHOTO APPEARS HERE]
Dependable, tax-free income
to help you keep more of
what you earn.
Michigan
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Performance Overview
8 Portfolio of Investments
19 Statement of Net Assets
20 Statement of Operations
21 Statement of Changes in Net Assets
22 Notes to Financial Statements
28 Financial Highlights
30 Additional Investment Opportunities
31 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime
to build. Once achieved,
it should be preserved.
It's a pleasure to share with you the Nuveen Flagship Michigan Municipal Bond
Fund's outstanding performance record for the 12 months ended November 30, 1997.
Over the past year, investors continued to enjoy attractive, tax-free dividends
generated by the fund's portfolio of municipal bonds. As of November 30, 1997,
Class A shareholders were receiving a current yield on net asset value of 4.31%.
To match this yield, investors in the 34.5% combined federal and state income
tax bracket would have had to earn at least 6.58% on taxable alternatives.
During this same period, the fund provided Class A shareholders with a highly
competitive total return on net asset value of 7.06% with income and capital
gains reinvested, outpacing the average return of 6.34% for its peer group, the
Lipper Michigan municipal bond fund category. You will find additional details
on the fund's performance on pages 6-7.
The Year in Review
Over the past year, U.S. investors have benefited from robust economic growth
with little evidence of inflationary pressures. With unemployment rates at 20-
year lows and the current economic expansion entering its seventh year, the
presence of benign inflation has sparked debate over whether the traditional
link between growth and inflation has been broken. During 1997, expectations
that excess growth would generate inflation disrupted the markets on several
occasions, most notably following the Federal Reserve's interest rate tightening
in March and speeches by Fed Chairman Alan Greenspan. Still, falling commodity
prices kept producer
1
<PAGE>
prices in check, while low import prices--due in part to the weakness in Asian
markets--limited U.S. companies' ability to raise consumer prices. This
combination has kept inflation subdued and the Federal Reserve "on hold" since
March. The reduction in the federal deficit and passage of the Taxpayer Relief
Act of 1997 offer additional encouragement to long-term fixed-income investors.
Helping You Build A Better Portfolio
The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation. Stock market volatility,
especially late in the year, provided a vivid illustration of the steadying
effect that fixed-income investments can provide in a well-constructed
investment portfolio. Nuveen mutual funds provide an excellent balance to other
stock and bond investments. Your financial adviser can introduce you to a
variety of other Nuveen products and services to round out your investment
portfolio, including the Nuveen Growth and Income Stock Fund and two balanced
stock and bond funds.
In addition, we recently expanded our private asset management capabilities
through the acquisition of Rittenhouse Financial Services, a well-respected
growth investment manager. We encourage you to talk with your financial adviser
about ways to complement your current Nuveen investments by taking advantage of
these additional products and services.
We at Nuveen remain committed to providing you with quality investment solutions
that withstand the test of time. We thank you for your confidence in us and our
family of investments, and we look forward to our next report to you.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
January 15, 1998
"The events of 1997 have
focused renewed attention
on the need for diversification
and appropriate asset allocation."
2
<PAGE>
Answering Your Questions
[PHOTO OF TED NEILD APPEARS HERE]
Ted Neild, managing director of Nuveen's
portfolio management team, talks about the
municipal bond market and offers insights into
factors that affected the performance of the fund
over the past year.
What economic and market factors influenced the
performance of municipal bonds over the past year?
Over the past 12 months, the performance of the municipal bond market was
influenced by three major factors: the continued strength of the U.S. economy,
minimal inflation, and volatility in the equity markets. During 1997, these
factors contributed to a positive environment for fixed-income investments, as
reflected in the steady-to-declining interest rates evident during the year.
Between December 1996 and November 1997, the yield on the 30-year Treasury bond
dropped from 6.36% to 6.05%, and the municipal market followed suit, as the
yield on the Bond Buyer 40 declined from 5.63% to 5.36%. The spread between tax-
free municipal bonds and taxable Treasury bonds remained tight, making municipal
bonds very attractive.
How has the fund performed during this period?
As Tim mentioned in his letter to shareholders, the fund performed very well
during the one-year period ended November 30, 1997. The total return on net
asset value for Class A shares of the fund was 7.06%, which compares favorably
with the one-year average return of 6.34% for the peer group of Michigan
municipal bond funds tracked by Lipper Analytical Services--a 72 basis point
difference. Once again, this fund was a top performer in its category, ranking
eighth among the 50 municipal bond funds in the grouping.
3
<PAGE>
"One focus will be
maintaining good call
protection, which helps
sustain the fund's dividend,
regardless of the direction
that interest rates take."
Given the current municipal market, where were you able to find value?
One of the ways that we achieved such outstanding performance and created value
for shareholders was by finding individual bonds that enhanced the structure of
the portfolio, allowing the fund to rally as the market moved forward.
Specifically, we purchased longer duration bonds with good call protection at
the lower prices available earlier this year. These bonds are becoming more
difficult to find as other market participants struggle to maintain good
structure in their portfolios. We also executed "swaps" earlier in the year,
which allowed the fund to maintain its tax-free distribution yield even as
interest rates declined.
What are your key strategies for the coming year?
To sustain this level of performance, we take a holistic approach to portfolio
management--assessing all of the factors that determine a fund's performance and
taking advantage of all of them to contribute to total return and dividend
stability. In the coming year, one focus will be maintaining good call
protection, which helps sustain the fund's dividend, regardless of the direction
that interest rates take.
While credit spreads are tight, we will continue to take advantage of
opportunities to purchase bonds with high credit quality at yields that are
similar to bonds with lower ratings. During the past year, the yield
differentials between AAA and BBB bonds narrowed significantly. We
4
<PAGE>
believe that if credit spreads widen, these high-quality issues will increase in
value relative to lower-rated bonds.
What is your outlook for the municipal market?
Looking at the year ahead, we believe the overall market will continue to strike
a good balance between supply and demand. We expect supply to increase as new
issuers continue to enter the market. A continued decline in yields could also
cause new supply to come to market through refunding of current debt. On the
demand side, volatility in the equity markets, plus the potential for a
weakening of the economy, could spark increased interest in bonds of all types.
The financial crises in Asia, coupled with the continued strength of the dollar
and low commodity prices, are all contributing to the excellent inflation
picture. This backdrop should help offset stronger labor markets and limit the
effects of any bond market corrections. In the meantime, positive underlying
fundamentals provide good support for the municipal market.
"Looking at the year ahead,
we believe the overall
market will continue to
strike a good balance
between supply and
demand."
5
<PAGE>
Nuveen Flagship Michigan
Municipal Bond Fund
Performance Overview
As of November 30, 1997
<TABLE>
<CAPTION>
Fund Highlights
======================================================================================================
<S> <C> <C> <C> <C> <C>
Share Class A B C R
Inception Date 6/85 2/97 6/93 2/97
Net Asset Value (NAV) $11.99 $12.00 $11.97 $ 11.99
CUSIP 67065R853 67065R846 67065R838 67065R820
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Total Net Assets ($000) $334,015
Average Weighted Maturity (Years) 18.31
Average Weighted Duration (Years) 7.26
- -------------------------------------------------------------------------------------------------------
Annualized Total Return/1/
=======================================================================================================
Share Class A(NAV) A(Offer) B C R
1-Year 7.06% 2.55% 6.38% 6.49% 7.24%
5-Year 6.85% 5.94% 6.25% 6.18% 6.89%
10-Year 8.37% 7.91% 7.90% 7.74% 8.39%
- -------------------------------------------------------------------------------------------------------
Tax-Free Yields
=======================================================================================================
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.10% 4.89% 4.35% 4.56% 5.30%
SEC 30-Day Yld 4.31% 4.13% 3.56% 3.76% 4.51%
Taxable Equiv Yld/2/ 6.58% 6.31% 5.44% 5.74% 6.89%
- -------------------------------------------------------------------------------------------------------
</TABLE>
1 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum up-front sales charge. Class B shares have a
contingent deferred sales change (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 B
shares automatically convert to Class A shares eight years after purchase.
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 34.5%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
3 The fund paid a capital gains distribution to shareholders in January of
$0.0129 per share.
6
<PAGE>
Credit Quality
[PIE CHART APPEARS HERE]
AAA/Pre-refunded 50%
AA 22%
A 16%
BBB/NR 12%
- --------------------------------------------------------------------------------
Diversification
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Health Care 23%
Housing (Single-Family) 5%
Utilities 4%
Housing (Multi-Family) 3%
Tax Obligation (Limited) 18%
Tax Obligation (G.O.) 16%
Other 9%
Water & Sewer 6%
U.S. Guaranteed 16%
</TABLE>
- --------------------------------------------------------------------------------
Dividend History (A Shares)/3/
[BAR CHART APPEARS HERE]
December 1996 $0.050
January 1997 0.051
February 0.050
March 0.050
April 0.050
May 0.050
June 0.050
July 0.050
August 0.050
September 0.050
October 0.050
November 0.050
7
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Michigan
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Goods -- 0.3%
$ 1,055,000 Michigan State Strategic Fund, Limited Obligation 12/03 at 102 A1 $1,107,592
Revenue, WMX Technologies Inc. Project,
6.000%, 12/01/13
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclical -- 2.5%
2,500,000 Michigan State Strategic Fund, Limited Obligation No Opt. Call A1 2,939,900
Revenue Refunding, Ford Motor Company Project,
Series A, 7.100%, 2/01/06
5,000,000 Michigan State Strategic Fund, Pollution Control 9/05 at 102 A- 5,307,600
Revenue Refunding, General Motors Corporation,
6.200%, 9/01/20
- ------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations -- 1.8%
1,000,000 Grand Valley, Michigan State University, General 10/98 at 102 A 1,053,600
Revenue, 7.875%, 10/01/08
750,000 Michigan Higher Education Student Loan Authority, 6/06 at 102 AAA 775,395
Series A, 5.750%, 6/01/13
1,000,000 Michigan State University, Formerly 2/06 at 101 AAA 960,490
Michigan State University Agricultural & Applied
Science, Series A, 5.000%, 2/15/26
1,000,000 Oakland County, Michigan, Economic Development 11/04 at 102 Aa2 1,131,770
Corporation, Limited Obligation Revenue
Refunding, Cranbrook Educational Community,
Series C, 6.900%, 11/01/14
1,000,000 Oakland County, Michigan, Economic Development 11/07 at 102 Aa2 969,300
Corporation, Limited Obligation Revenue,
Cranbrook Educational Community Project, Series B,
5.000%, 11/01/17
1,000,000 Western Michigan University, General Revenues, 11/02 at 102 AAA 1,103,210
6.250%, 11/15/12
- ------------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products -- 2.3%
7,500,000 Dickinson County, Michigan, Economic Development 10/03 at 102 Baa1 7,719,825
Corporation, Pollution Control Revenue Refunding,
Champion International Corporation Project,
5.850%, 10/01/18
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care -- 22.8%
$ 1,000,000 Dearborn, Michigan, Economic Development 11/05 at 102 AAA $1,046,280
Corporation, Hospital Revenue, Oakwood Obligation
Group, Series A, 5.750%, 11/15/15
Farmington Hills, Michigan, Hospital Finance Authority,
Hospital Revenue, Botsford General Hospital,
Series A:
500,000 6.500%, 2/15/11 2/02 at 102 AAA 541,620
500,000 6.500%, 2/15/22 2/02 at 102 AAA 541,220
500,000 Grand Traverse County, Michigan, Hospital Finance 7/02 at 102 AAA 532,240
Authority, Hospital Revenue Refunding, Munson
Healthcare, Series A, 6.250%, 7/01/22
1,940,000 Kalamazoo, Michigan, Hospital Finance Authority, 5/03 at 102 A1 2,084,161
Hospital Facility Revenue Refunding & Improvement,
Bronson Methodist, Series A, 6.375%, 5/15/17
6,000,000 Kalamazoo, Michigan, Hospital Finance Authority, 5/06 at 102 AAA 6,293,880
Hospital Facility Revenue Refunding & Improvement,
Bronson Methodist, 5.875%, 5/15/26
1,290,000 Kent Hospital Finance Authority, Michigan Hospital 11/01 at 102 AAA 1,397,173
Facility Revenue Refunding, Pine Rest Christian
Hospital, 6.500%, 11/01/10
3,530,000 Lake View Community Hospital Authority, Michigan 2/07 at 101 N/R 3,382,693
Hospital Revenue Refunding, 6.250%, 2/15/13
40,000 Michigan State Hospital Finance Authority, Revenue 8/98 at 102 A 41,839
Refunding, Detroit Medical Center, Series B,
8.125%, 8/15/08
3,000,000 Michigan State Hospital Finance Authority, Revenue 1/00 at 100 BBB+ 3,065,790
Refunding, Memorial Hospital Owosso, Michigan,
Series A, 7.375%, 1/01/03
500,000 Michigan State Hospital Finance Authority, Revenue 12/02 at 102 A+ 564,765
Refunding, Mid-Michigan Obligation Group,
6.900%, 12/01/24
6,500,000 Michigan State Hospital Finance Authority, Revenue 8/03 at 102 A 7,016,750
Refunding, Detroit Medical Center Obligation,
Series A, 6.500%, 8/15/18
1,000,000 Michigan State Hospital Finance Authority, Revenue 7/99 at 102 AAA 1,057,680
Refunding, Oakland General Hospital,
7.000%, 7/01/15
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Michigan -- continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care -- continued
$1,000,000 Michigan State Hospital Finance Authority, Revenue 11/01 at 102 AAA $1,083,670
Refunding, Sparrow Obligated Group,
6.500%, 11/15/11
2,920,000 Michigan State Hospital Finance Authority, Revenue 8/04 at 102 A 2,919,737
Refunding, Detroit Medical Center, Series B,
5.500%, 8/15/23
1,000,000 Michigan State Hospital Finance Authority, Revenue 1/05 at 102 AA- 1,073,780
Refunding, Otsego Memorial Hospital Gaylord,
6.125%, 1/01/15
2,000,000 Michigan State Hospital Finance Authority, Revenue 7/05 at 102 AAA 2,041,740
Refunding, Port Huron Hospital Obligation,
5.500%, 7/01/15
1,000,000 Michigan State Hospital Finance Authority, Revenue No Opt. Call BBB 1,053,280
Refunding, Gratiot Community Hospital,
6.100%, 10/01/07
8,500,000 Michigan State Hospital Finance Authority, Revenue 5/06 at 102 AA 8,333,145
Refunding, Henry Ford Health, Series A,
5.250%, 11/15/20
1,000,000 Michigan State Hospital Finance Authority, 10/06 at 102 BBB 1,038,190
Central Michigan Community Hospital,
6.250%, 10/01/27
5,250,000 Michigan State Hospital Finance Authority, 8/06 at 101 AAA 5,215,350
Mercy Health Services, Series Q, 5.375%, 8/15/26
2,000,000 Michigan State Hospital Finance Authority, Revenue 8/07 at 101 AA- 2,006,680
Refunding, Mercy Health Services, Series S,
5.500%, 8/15/20
Pontiac, Michigan, Hospital Finance Authority,
Hospital Revenue Refunding, Nome Obligation Group:
3,000,000 6.000%, 8/01/18 8/03 at 102 BBB- 3,010,860
5,165,000 6.000%, 8/01/23 8/03 at 102 BBB- 5,167,634
8,345,000 Royal Oak, Michigan, Hospital Finance Authority, 1/06 at 102 AA 8,173,677
Hospital Revenue Refunding, William Beaumont
Hospital, 5.250%, 1/01/20
2,000,000 Saginaw, Michigan, Hospital Finance Authority, 10/99 at 102 BBB+ 2,136,760
Hospital Revenue Refunding, Saginaw General
Hospital, 7.625%, 10/01/08
500,000 Saginaw Michigan Hospital Finance Authority, 7/01 at 102 AAA 543,160
Hospital Revenue Refunding, Series C, St. Luke's
Hospital, 6.750%, 7/01/17
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care -- continued
$1,000,000 University of Michigan, University Revenues, 12/00 at 100 AA $1,040,220
Hospital, 6.375%, 12/01/24
3,500,000 University of Michigan, University Revenues, Medical 12/01 at 102 Aa2 3,779,160
Service Plan, 6.500%, 12/01/21
- ----------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 3.4%
435,000 Grand Rapids, Michigan, Housing Corporation, 1/04 at 104 AAA 485,556
Multifamily Revenue Refunding, Elderly Project,
7.375%, 7/15/41
750,000 Grand Rapids Michigan, Housing Finance Authority, 9/04 at 100 AAA 825,532
Multifamily Revenue Refunding, Series A,
7.625%, 9/01/23
1,190,000 Michigan State Housing Development Authority, 10/05 at 102 Aaa 1,271,432
MultiFamily Revenue Refunding, Limited Obligation,
Series A, 6.500%, 10/01/15
6,000,000 Michigan State Housing Development Authority, No Opt. Call AA- 1,539,420
Series I, 0.000%, 4/01/14
Michigan State Housing Development Authority,
Rental Housing Revenue, Series B:
1,000,000 6.150%, 10/01/15 6/05 at 102 AAA 1,050,650
370,000 7.100%, 4/01/21 1/02 at 102 AA- 394,520
5,000,000 7.550%, 4/01/23 4/01 at 102 AA- 5,363,350
460,000 Michigan State Housing Development Authority, 10/02 at 102 AA- 485,493
Rental Housing Revenue, Series A, 6.650%, 4/01/23
- ----------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 4.9%
Michigan State Housing Development Authority,
Single Family Mortgage Revenue, Series A:
2,000,000 6.450%, 12/01/14 6/04 at 102 AA+ 2,116,580
1,280,000 7.500%, 6/01/15 6/00 at 102 AA+ 1,342,131
730,000 7.700%, 12/01/16 6/99 at 102 AA+ 747,600
1,500,000 6.800%, 12/01/16 6/05 at 102 AA+ 1,606,185
1,250,000 6.050%, 12/01/27 6/07 at 102 AAA 1,297,237
Michigan State Housing Development Authority,
Single Family Mortgage Revenue, Series C:
3,250,000 7.550%, 12/01/15 12/00 at 102 AA+ 3,429,237
3,930,000 6.500%, 6/01/16 12/04 at 102 AA+ 4,109,680
1,500,000 Michigan State Housing Development Authority, 12/06 at 102 AA+ 1,553,925
Single Family Mortgage Revenue, Series D,
5.950%, 12/01/16
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Michigan -- continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,500,000 Kalamazoo, Michigan, Economic Development 5/07 at 102 BBB $2,610,225
Corporation, Revenue Refunding, Limited Obligation,
Friendship Village, Series A, 6.250%, 5/15/27
Michigan State Hospital Finance Authority,
Presbyterian VLGS Michigan Obligation Group:
600,000 6.375%, 1/01/15 1/07 at 102 N/R 626,892
1,200,000 6.500%, 1/01/25 7/05 at 102 N/R 1,256,868
500,000 6.375%, 1/01/25 1/07 at 102 N/R 516,220
250,000 Warren, Michigan, Economic Development 3/02 at 101 Aaa 265,707
Corporation, Nursing Home, Autumn Woods,
6.900%, 12/20/22
- ---------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 15.6%
400,000 Bay County, Michigan, West Side Regional Sewer 5/98 at 102 A 411,008
Disposal System, 6.400%, 5/01/02
5,000,000 Brighton, Michigan, Area School District, Refunding, No Opt. Call AAA 1,517,000
Series II, 0.000%, 5/01/20
3,600,000 Detroit, Michigan, City School District, Series A, 5/06 at 102 AAA 3,737,412
5.700%, 5/01/25
825,000 Dexter, Michigan, Community Schools, Refunding, 5/03 at 102 AA 798,088
5.000%, 5/01/17
500,000 East Lansing, Michigan, Building Authority, 10/99 at 102 AA 534,065
Refunding, 7.000%, 10/01/16
2,430,000 Garden City, Michigan, School District, Refunding, 5/04 at 101 AAA 2,666,512
6.400%, 5/01/11
750,000 Hudsonville, Michigan, Building Authority, Refunding, 10/02 at 102 AAA 837,352
6.600%, 10/01/17
1,000,000 Lake Orion, Michigan, Community School District, 5/05 at 101 AAA 1,010,020
Refunding, 5.500%, 5/01/20
510,000 Livingston County, Michigan, Genoa, Oceola 5/99 at 102 A 531,945
Sanitation Sewer No 1, 6.000%, 5/01/08
2,700,000 Livonia, Michigan, Public Schools School District, No Opt. Call AAA 1,631,664
Series II, 0.000%, 5/01/08
2,410,000 Mona Shores, Michigan, School District, School 5/05 at 102 AAA 2,484,156
Building & Site, 5.500%, 5/01/14
Okemos, Michigan, Public School District, Refunding:
1,000,000 0.000%, 5/01/17 No Opt. Call AAA 359,950
1,020,000 0.000%, 5/01/18 No Opt. Call AAA 344,882
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- continued
<C> <S> <C> <C> <C>
$ 1,500,000 Portage Lake, Michigan, Water & Sewer Authority, 10/05 at 102 AAA $ 1,637,880
Refunding, 6.200%, 10/01/20
Puerto Rico Commonwealth:
3,125,000 6.450%, 7/01/17 7/04 at 102 A 3,462,500
2,370,000 6.500%, 7/01/23 7/04 at 101 1/2 A 2,618,400
1,650,000 Saint Clair County, Michigan, Building Authority, 4/06 at 101 AAA 1,674,073
5.375%, 4/01/15
750,000 South Lyon, Michigan, Community Schools, 5/01 at 102 AA 804,330
Refunding, 6.250%, 5/01/14
2,925,000 Spring Lake, Michigan, Public Schools, 5/07 at 100 AAA 3,028,340
5.700%, 5/01/23
Waterford, Michigan, School District:
2,500,000 6.250%, 6/01/13 6/04 at 101 AAA 2,772,875
2,470,000 6.375%, 6/01/14 6/04 at 101 AAA 2,756,890
5,000,000 Wayland, Michigan, Unit School District, 5/05 at 101 AAA 5,587,850
6.250%, 5/01/14
1,250,000 Wayne County, Michigan, Building Authority, Capital 6/06 at 102 AAA 1,253,000
Improvement, Series A, 5.250%, 6/01/16
3,270,000 West Ottawa, Michigan, Public School District, No Opt. Call AAA 1,177,036
Refunding, 0.000%, 5/01/17
2,000,000 Western Townships, Michigan, Utilities Authority, 1/99 at 102 BBB+ 2,118,820
Sewer Disposal System, 8.200%, 1/01/18
1,000,000 Western Townships, Michigan, Utilities Authority, 1/02 at 100 AAA 1,070,850
Sewer Disposal System, Crossover Refunding,
6.500%, 1/01/10
5,175,000 Williamston, Michigan, Community School District, No Opt. Call AAA 5,415,844
Building & Site, 5.500%, 5/01/25
- ---------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 18.0%
1,000,000 Battle Creek, Michigan, Downtown Development 5/04 at 102 BBB+ 1,184,740
Authority, Tax Increment Revenue, 7.600%, 5/01/16
1,800,000 Battle Creek, Michigan, Tax Increment Finance 5/04 at 102 A- 2,114,874
Authority, 7.400%, 5/01/16
2,000,000 Detroit, Michigan, Building Authority, 2/07 at 101 A 2,112,860
District Court Madison Center, Series A,
6.150%, 2/01/11
</TABLE>
13
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Michigan -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- continued
<C> <S> <C> <C> <C>
$ 10,700,000 Detroit, Michigan, Downtown Development 7/06 at 102 A- $ 11,354,733
Authority, Tax Increment Revenue, Development
Area No 1 Projects, Series C, 6.250%, 7/01/25
9,460,000 Detroit/Wayne County, Michigan, Stadium Authority, 2/07 at 102 AAA 9,361,711
5.250%, 2/01/27
Grand Rapids, Michigan, Downtown Development
Authority, Tax Increment Revenue:
3,985,000 0.000%, 6/01/17 No Opt. Call AAA 1,428,104
3,495,000 0.000%, 6/01/18 No Opt. Call AAA 1,176,522
1,650,000 6.875%, 6/01/24 6/04 at 102 AAA 1,869,632
2,000,000 Lansing, Michigan, Building Authority, Refunding, 6/05 at 101 AA+ 2,060,920
5.600%, 6/01/19
250,000 Michigan Municipal Bond Authority, Local 11/99 at 102 AAA 268,178
Government Loan Program, Series C,
7.250%, 5/01/20
Michigan Municipal Bond Authority, Revenue
Refunding, Local Government Loan Program, Series A:
5,500,000 0.000%, 12/01/07 No Opt. Call AAA 3,424,630
250,000 4.750%, 12/01/09 12/01 at 100 AAA 247,073
2,800,000 Michigan Municipal Bond Authority, Local No Opt. Call AAA 1,682,128
Government Loan, Series C, 0.000%, 6/15/08
Michigan State Building Authority, Revenue
Refunding, Series I:
1,000,000 6.750%, 10/01/11 10/01 at 102 AA- 1,093,860
5,000,000 6.250%, 10/01/20 10/01 at 102 AA- 5,323,650
7,585,000 Michigan State Building Authority, Series II, 10/01 at 102 AA- 8,075,977
6.250%, 10/01/20
2,260,000 Puerto Rico Commonwealth, Highway & 7/02 at 101 1/2 A 2,477,841
Transportation Authority, Highway Revenue
Refunding, Series V, 6.625%, 7/01/12
2,300,000 Puerto Rico Commonwealth, Highway & 7/16 at 100 A 2,334,776
Transportation Authority, Highway Revenue,
Series Y, 5.500%, 7/01/36
1,200,000 Puerto Rico Commonwealth, Highway & No Opt. Call AAA 1,268,880
Transportation Authority, Highway Revenue,
Series W, 5.500%, 7/01/15
1,085,000 Romulus, Michigan,Tax Increment Finance Authority, 11/06 at 100 N/R 1,142,071
Limited Obligation Revenue, 6.750%, 11/01/19
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited - continued
$180,000 Saginaw, Midland Michigan, Municipal Water Supply 9/04 at 102 A $ 203,935
Corporation, Water Supply Revenue,
6.875%, 9/01/16
- --------------------------------------------------------------------------------------------------------------------------------
Transportation - 0.1%
250,000 Capital Region Airport Authority, Michigan Revenue, 7/02 at 102 AAA 272,293
6.700%, 7/01/21
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 16.0%
1,000,000 Bay City, Michigan, Electric Utility Revenue, 1/01 at 102 AAA 1,086,900
6.600%, 1/01/12 (Pre-refunded to 1/01/01)
1,895,000 Buena Vista, Michigan, School District, 7.200%, 5/01 at 102 N/R*** 2,108,358
5/01/16 (Pre-refunded to 5/01/01)
1,000,000 Central Michigan University, 7.000%, 10/00 at 102 A+*** 1,093,230
10/01/10 (Pre-refunded to 10/01/00)
750,000 Detroit, Michigan, 8.000%, 4/01/11 4/01 at 102 AAA 851,363
(Pre-refunded to 4/01/01)
300,000 Detroit, Michigan, City School District, Series Xxiii, 5/00 at 102 N/R*** 329,904
7.750%, 5/01/10 (Pre-refunded to 5/01/00)
1,650,000 Detroit, Michigan, City School District, 7.150%, 5/01 at 102 AA*** 1,829,240
5/01/11 (Pre-refunded to 5/01/01)
1,000,000 Detroit, Michigan, Sewer Disposal Revenue, 7.125%, 7/99 at 101 1/2 AAA 1,061,680
7/01/19 (Pre-refunded to 7/01/99)
2,000,000 Detroit, Michigan, Water Supply System Revenue, 7/00 at 102 AAA 2,190,080
7.250%, 7/01/20 (Pre-refunded to 7/01/00)
3,000,000 Grand Rapids, Michigan, Water Supply System 1/00 at 102 AAA 3,244,740
Revenue, 7.250%, 1/01/20 (Pre-refunded to 1/01/00)
2,500,000 Haslett, Michigan, Public School District, 7.500%, 5/00 at 101 AA*** 2,715,350
5/01/20 (Pre-refunded to 5/01/00)
2,000,000 Huron Valley, Michigan, School District, 7.100%, 5/01 at 102 N/R*** 2,210,740
5/01/08 (Pre-refunded to 5/01/01)
600,000 Ingham County, Michigan, Building Authority, 5/98 at 103 AA-*** 626,700
Refunding, 7.400%, 5/01/08
(Pre-refunded to 5/01/98)
4,000,000 Lake Orion, Michigan, Community School District, 5/05 at 101 AAA 4,657,960
Refunding, 7.000%, 5/01/15
(Pre-refunded to 5/01/05)
</TABLE>
15
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Michigan - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - continued
Marquette, Michigan, City Hospital Finance Authority,
Revenue Refunding, Marquette General Hospital,
Series C:
$ 930,000 7.500%, 4/01/07 (Pre-refunded to 4/01/99) 4/99 at 102 A+*** $ 989,232
2,240,000 7.500%, 4/01/19 (Pre-refunded to 4/01/99) 4/99 at 102 A+*** 2,382,666
825,000 Menominee, Michigan, Area Public School District, 5/00 at 102 AA*** 904,266
7.400%, 5/01/20 (Pre-refunded to 5/01/00)
3,000,000 Michigan Higher Education Facilities Authority, 5/01 at 103 A*** 3,367,710
Limited Obligation, Aquinas College Project,
7.350%, 5/01/11 (Pre-refunded to 5/01/01)
555,000 Michigan Municipal Bond Authority, State 10/02 at 102 AA+*** 618,609
Revolving Fund, Series A, 6.600%, 10/01/18
(Pre-refunded 10/01/02)
Michigan Municipal Bond Authority, State Revolving Fund:
950,000 7.000%, 10/01/04 No Opt. Call AA+*** 1,091,769
1,000,000 6.500%, 10/01/14 (Pre-refunded to 10/01/04) 10/04 at 102 AA+*** 1,132,910
1,000,000 6.500%, 10/01/17 (Pre-refunded to 10/01/04) 10/04 at 102 AA+*** 1,132,910
460,000 Michigan State Hospital Finance Authority, 8/98 at 102 A*** 482,485
Revenue Refunding, Detroit Medical Center, Series B,
8.125%, 8/15/08 (Pre-refunded to 8/15/98)
1,000,000 Michigan State Hospital Finance Authority, 7/00 at 102 AAA 1,087,920
Henry Ford Health System, Series A,
7.000%, 7/01/10 (Pre-refunded to 7/01/00)
6,000,000 Michigan State Hospital Finance Authority, 7/00 at 102 AAA 6,542,160
Oakwood Hospital Obligated Group,
7.100%, 7/01/18 (Pre-refunded to 7/01/00)
800,000 Michigan State Hospital Finance Authority, 2/01 at 102 AAA 884,744
Sisters of Mercy Health Corporation, Series J,
7.200%, 2/15/18 (Pre-refunded to 2/15/01)
1,000,000 Michigan State Hospital Finance Authority, 11/01 at 102 Aa*** 1,114,020
Daughters Charity, Providence, 7.000%, 11/01/21
(Pre-refunded to 11/01/01)
2,460,000 Oakland County, Michigan, Economic Development 1/00 at 102 N/R*** 2,766,639
Corporation, 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, 7/00 at 102 AAA 1,998,180
Highway Revenue, Series Q, 7.750%, 7/01/16
(Pre-refunded to 7/01/00)
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - continued
$1,040,000 Rockford, Michigan, Public Schools, Refunding, 5/00 at 101 N/R $ 1,125,363
7.375%, 5/01/19 (Pre-refunded to 5/01/00)
7,000,000 Vicksburg, Michigan, Community Schools, 5/06 at 37 8/32 AAA 1,758,890
0.000%, 5/01/20 (Pre-refunded to 5/01/06)
- ---------------------------------------------------------------------------------------------------------------------------------
Utilities - 3.9%
1,540,000 Michigan Public Power Agency, Revenue Refunding, 1/03 at 102 AA- 1,515,514
Belle River Project, Series A, 5.250%, 1/01/18
3,000,000 Michigan State South Central Power Agency, Power 11/04 at 102 BBB+ 3,399,480
Supply System Revenue Refunding,
7.000%, 11/01/11
3,500,000 Michigan State Strategic Fund Limited Obligation, 6/04 at 102 AAA 3,882,830
Revenue Refunding, Detroit Education Company,
Series B, 6.450%, 6/15/24
1,000,000 Monroe County, Michigan, Economic Development No Opt. Call AAA 1,243,630
Corporation, Limited Obligation Revenue Refunding,
Collateralized, Detroit Edison Company, Series Aa,
6.950%, 9/01/22
1,000,000 Monroe County, Michigan, Pollution Control Revenue, No Opt. Call AAA 1,097,930
Detroit Edison Company Project, Series A,
6.350%, 12/01/04
300,000 Puerto Rico Electric Power Authority, Power Revenue, 7/05 at 100 BBB+ 295,200
Formerly Puerto Rico Commonwealth Water
Resource Authority, Refunding, Series Z,
5.250%, 7/01/21
4,000,000 Puerto Rico Electric Power Authority, Power Revenue, No Opt. Call AAA 1,502,720
Formerly Puerto Rico Commonwealth Water
Resource Authority, Capital Appreciation,
Refunding, Series N, 0.000%, 7/01/17
- ---------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 5.6%
1,500,000 Detroit, Michigan, Sewer Disposal Revenue, Series A, 7/05 at 101 AAA 1,505,535
Water Supply System, 5.250%, 7/01/15
10,500,000 Detroit, Michigan, Sewer Disposal Revenue 7/05 at 101 AAA 10,332,000
Refunding, Series B, 5.250%, 7/01/21
1,570,000 Detroit, Michigan, Water Supply System Revenue, No Opt. Call AAA 1,659,443
Second Lien, Series A, 5.550%, 7/01/12
2,230,000 Detroit, Michigan, Water Supply System Revenue No Opt. Call AAA 2,357,043
Refunding, Series B, 5.550%, 7/01/12
</TABLE>
17
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Michigan - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer - continued
$ 1,000,000 Grand Rapids, Michigan, Sanitation Sewer System 1/00 at 102 AA- $ 1,075,050
Revenue Improvement & Refunding,
7.000%, 1/01/16
1,000,000 Michigan Municipal Bond Authority, State 10/07 at 101 AA+ 978,200
Revolving Fund, 5.125%, 10/01/20
Muskegon, Michigan, Water Revenue,
450,000 4.500%, 5/01/12 5/01 at 101 BBB+ 411,026
450,000 4.500%, 5/01/13 5/01 at 101 BBB+ 407,075
- ----------------------------------------------------------------------------------------------------------------------------
$341,655,000 Total Investments - (cost $301,682,883) - 98.8% 329,917,780
================------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.2% 4,097,449
------------------------------------------------------------------------------------------------------------
Net Assets - 100% $334,015,229
============================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of
the earliest optional call or redemption. There may be other
call provisions at varying prices at later dates.
** Ratings: Using the higher of Standard and 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.
18
<PAGE>
Statement of Net Assets (Unaudited)
November 30, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Michigan
- ----------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $329,917,780
Cash 567,675
Receivables:
Interest 5,222,885
Investments sold 40,443
Shares sold 84,728
Other assets 82,235
- ----------------------------------------------------------------------------------------
Total assets 335,915,746
- ----------------------------------------------------------------------------------------
Liabilities
Payables for shares redeemed 226,855
Accrued expenses:
Management fees (note 6) 147,615
12b-1 distribution and service fees (notes 1 and 6) 70,987
Other 48,890
Dividends payable 1,406,170
- ----------------------------------------------------------------------------------------
Total liabilities 1,900,517
- ----------------------------------------------------------------------------------------
Net assets (note 7) $334,015,229
- ----------------------------------------------------------------------------------------
Class A Shares (note 1)
Net assets $261,585,944
Shares outstanding 21,816,283
Net asset value and redemption price per share $ 11.99
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 12.52
- ----------------------------------------------------------------------------------------
Class B Shares (note 1)
Net assets $ 1,469,210
Shares outstanding 122,421
Net asset value, offering and redemption price per share $ 12.00
- ----------------------------------------------------------------------------------------
Class C Shares (note 1)
Net assets $ 44,254,910
Shares outstanding 3,696,008
Net asset value, offering and redemption price per share $ 11.97
- ----------------------------------------------------------------------------------------
Class R Shares (note 1)
Net assets $ 26,705,165
Shares outstanding 2,227,254
Net asset value, offering and redemption price per share $ 11.99
- ----------------------------------------------------------------------------------------
</TABLE>
- ----- See accompanying notes to financial statements.
19
<PAGE>
Statement of Operations (Unaudited)
Six months ended November 30, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Michigan
- ----------------------------------------------------------------------------------
<S> <C>
Investment Income
Tax-exempt interest income (note 1) $ 9,984,050
- ----------------------------------------------------------------------------------
Expenses
Management fees (note 6) 899,463
12b-1 service fees--Class A (notes 1 and 6) 263,042
12b-1 distribution and service fees--Class B (notes 1 and 6) 4,287
12b-1 distribution and service fees--Class C (notes 1 and 6) 161,809
Shareholders' servicing agent fees and expenses 89,794
Custodian's fees and expenses 38,540
Trustees' fees and expenses (note 6) 3,422
Professional fees 7,208
Shareholders' reports--printing and mailing expenses 28,385
Federal and state registration fees 2,707
Other expenses 1,905
- ----------------------------------------------------------------------------------
Total expenses 1,500,562
- ----------------------------------------------------------------------------------
Net investment income 8,483,488
- ----------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 713,605
Net change in unrealized appreciation or depreciation of investments 8,082,736
- ----------------------------------------------------------------------------------
Net gain from investments 8,796,341
- ----------------------------------------------------------------------------------
Net increase in net assets from operations $17,279,829
- ----------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Nuveen Flagship Michigan
Six months ended Year ended
11/30/97 5/31/97*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 8,483,488 $ 16,075,312
Net realized gain from investment transactions
(notes 1 and 4) 713,605 762,060
Net change in unrealized appreciation or depreciation
of investments 8,082,736 7,545,758
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 17,279,829 24,383,130
- ---------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (6,760,399) (13,549,214)
Class B (19,258) (2,097)
Class C (990,780) (2,012,105)
Class R (711,175) (479,101)
From accumulated net realized gains
from investment transactions:
Class A -- (280,388)
Class B -- --
Class C -- (46,664)
Class R -- --
- ---------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (8,481,612) (16,369,569)
- ---------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the reorganization
of Nuveen Michigan (note 1) -- 32,952,082
Net proceeds from shares issued as a capital contribution -- 50,000
Net proceeds from sale of shares 11,600,600 29,696,576
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 5,646,578 7,300,800
- ---------------------------------------------------------------------------------------------------------------------
17,247,178 69,999,458
- ---------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (19,325,517) (40,504,903)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions (2,078,339) 29,494,555
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets 6,719,878 37,508,116
Net assets at the beginning of period 327,295,351 289,787,235
- ---------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $334,015,229 $327,295,351
=====================================================================================================================
Balance of undistributed net investment income
at end of period $ 34,671 $ 32,795
=====================================================================================================================
</TABLE>
* Information represents eight months of Flagship Michigan and four months of
Nuveen Flagship Michigan (see note 1).
21 See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements (Unaudited)
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 Michigan Municipal Bond Fund (the "Fund"),
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 Michigan Triple Tax
Exempt Fund ("Flagship Michigan") and Nuveen Michigan Tax-Free Value Fund
("Nuveen Michigan") reorganized into Nuveen Flagship Michigan Municipal Bond
Fund. Prior to the reorganization, Flagship Michigan was each 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.
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
The prices of municipal bonds in the Fund's investment portfolio are provided by
a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
November 30, 1997, the Fund had no such outstanding purchase commitments.
22
<PAGE>
Interest Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
The Fund is a separate taxpayer for federal income tax purposes. The Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Michigan state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Fund. Net
realized capital gains and market discount distributions are subject to federal
taxation.
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of $1
million or more are sold at net asset value without 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.
23
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the six months ended November 30, 1997.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
24
<PAGE>
<TABLE>
<CAPTION>
2. Fund Shares
Transactions in Fund shares were as follows:
Six months ended 11/30/97 Year ended 5/31/97*
--------------------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization
of Nuveen Michigan:
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 575,268 6,846,403 2,027,123 23,392,705
Class B 89,408 1,064,375 31,393 364,727
Class C 239,699 2,843,867 474,635 5,492,503
Class R 71,243 845,955 38,458 446,641
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 368,160 4,346,721 520,958 6,027,568
Class B 852 10,146 38 446
Class C 68,104 802,833 89,370 1,032,725
Class R 41,040 486,878 20,714 240,061
- --------------------------------------------------------------------------------------------------------------------
1,453,774 17,247,178 6,033,438 69,999,458
- --------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,313,755) (15,603,971) (2,692,127) (31,154,360)
Class B (342) (4,092) --- ---
Class C (183,793) (2,176,739) (667,098) (7,733,727)
Class R (129,841) (1,540,715) (138,930) (1,616,816)
- --------------------------------------------------------------------------------------------------------------------
(1,627,731) (19,325,517) (3,498,155) (40,504,903)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (173,957) $ (2,078,339) 2,535,283 $29,494,555
====================================================================================================================
</TABLE>
* Information represents eight months of Flagship Michigan and four months of
Nuveen Flagship Michigan (see note 1).
25
<PAGE>
Notes to Financial Statements (Unaudited) - continued
3. Distributions to Shareholders
On December 9, 1997, the Fund declared dividend distributions from its tax-
exempt net investment income which were paid on December 31, 1997, to
shareholders of record on December 9, 1997, as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Dividend per share:
<S> <C>
Class A $.0510
Class B .0435
Class C .0455
Class R .0530
- -------------------------------------------------------------------------------
</TABLE>
At the same time, the Fund also declared taxable distributions,
which includes capital gains and/or market discount, of $.0281 per
share.
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities for the six months ended November 30, 1997, aggregated $15,908,791
and $16,982,396, respectively. Purchases and sales (including maturities) of
temporary municipal investments for the six months ended November 30, 1997,
aggregated $5,500,000 and $5,500,000, respectively.
At November 30, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for the Fund.
At May 31, 1997, the Fund's last fiscal year end, the Fund had an unused capital
loss carryforward of $57,342 available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, the carryforward
will expire in the year 2004.
5. Unrealized Appreciation (Depreciation)
At November 30, 1997, net unrealized appreciation aggregated
$28,234,897, all of which related to appreciated securities.
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, the Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of the 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>
26
<PAGE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to 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.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $192,300 of which
approximately $167,100 were paid out as concessions to authorized dealers. The
Distributor also received 12b-1 service fees on Class A Shares, substantially
all of which were paid to compensate authorized dealers for providing services
to shareholders relating to their investments.
During the six months ended November 30, 1997, the Distributor compensated
authorized dealers directly with approximately $84,600 in commission advances at
the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the six months
ended November 30, 1997, the Distributor retained approximately $32,100 in such
12b-1 fees. The remaining 12b-1 fees charged to the Fund were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments. The Distributor also collected and retained approximately $1,200 of
CDSC on share redemptions during the six months ended November 30, 1997.
7. Composition of Net Assets
At November 30, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------
Capital paid-in $305,370,364
Balance of undistributed net investment income 34,671
Accumulated net realized gain
from investment transactions 375,297
Net unrealized appreciation of investments 28,234,897
- --------------------------------------------------------------------------------
Net assets $334,015,229
================================================================================
</TABLE>
27
<PAGE>
Financial Highlights (Unaudited)
Selected data for a common share outstanding throughout each
period is as follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
--------------------- ------------------
NUVEEN FLAGSHIP MICHIGAN** Net
Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income (b) investments income gains period value (a)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (6/85)
1998 (d) $11.68 $.31 $ .31 $(.31) $ --- $11.99 5.32%
1997 11.37 .62 .31 (.61) (.01) 11.68 8.42
1996 11.59 .63 (.22) (.63) --- 11.37 3.61
1995 11.31 .65 .28 (.65) --- 11.59 8.57
1994 11.77 .66 (.43) (.66) (.03)*** 11.31 1.87
1993 11.12 .68 .65 (.68) --- 11.77 12.27
1992 10.80 .69 .32 (.69) --- 11.12 9.74
1991 10.61 .69 .20 (.70) --- 10.80 8.73
1990 10.67 .70 (.06) (.70) --- 10.61 6.21
1989 10.10 .71 .57 (.71) --- 10.67 13.12
1988 9.95 .72 .15 (.72) --- 10.10 8.95
Class B (2/97)
1998 (d) 11.70 .26 .30 (.26) --- 12.00 4.83
1997 (c) 11.66 .17 .04 (.17) --- 11.70 1.86
Class C (6/93)
1998 (d) 11.66 .27 .31 (.27) --- 11.97 5.04
1997 11.35 .55 .32 (.55) (.01) 11.66 7.84
1996 11.58 .56 (.22) (.57) --- 11.35 2.96
1995 11.30 .58 .28 (.58) --- 11.58 7.98
1994 (c) 11.86 .54 (.52) (.55) (.03)*** 11.30 .19*
Class R (2/97)
1998 (d) 11.68 .32 .31 (.32) --- 11.99 5.42
1997 (c) 11.66 .21 .02 (.21) --- 11.68 2.01
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ending May
31, 1997, reflects the financial highlights of Flagship
Michigan.
*** The amount shown includes a distribution in excess of
capital gains of $.02 per share.
(a) Total returns are calculated on net asset value without any
sales charge and are not annualized except where noted.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its
predecessor Flagship Financial.
(c) From commencement of class operations as noted.
(d) For the six months ending November 30, 1997.
28
<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
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment (b) ment (b) rate
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$261,586 .84%* 5.14%* .84%* 5.14%* 5%
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
227,333 1.02 5.64 .81 5.85 10
176,584 1.01 6.14 .81 6.34 11
134,243 1.03 6.43 .90 6.56 23
102,519 1.05 6.44 .95 6.54 47
84,608 1.06 6.70 .96 6.80 54
73,481 1.07 6.98 .94 7.11 78
1,469 1.60* 4.39* 1.60* 4.39* 5
380 1.59* 4.52* 1.59* 4.52* 34
44,255 1.39* 4.59* 1.39* 4.59* 5
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
26,705 .64* 5.34* .64* 5.34* 5
26,211 .65* 5.57* .65* 5.57* 34
- ---------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
Additional Investment Opportunities
To purchase additional shares of your Nuveen Fund, contact your financial
adviser. If you would like to add to your current investment on a regular basis,
you can sign up for Nuveen's systematic investing program, which allows you to
invest a fixed dollar amount every month automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you give your investment the added
growth potential of long-term compounding.
For more information on any of these service options, call your adviser, or
Nuveen at (800) 225-8530.
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth Funds
Nuveen Rittenhouse Growth Fund
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate
Limited Term
State Funds
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
30
<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
Boston Financial Data Service
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Independent Public
Accountants
Arthur Andersen LLP
Chicago, Illinois
31
<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
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
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 products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 225-8530 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
Nuveen
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 225-8530
www.nuveen.com
VSA-MI-11.97
<PAGE>
NUVEEN
Municipal
Bond Funds
November 30, 1997
Semiannual Report
[PHOTO APPEARS HERE]
Dependable, tax-free income
to help you keep more of
what you earn.
Kentucky
Kentucky
Limited
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Kentucky Performance Overview
8 Kentucky Limited
Performance Overview
10 Portfolio of Investments
25 Statement of Net Assets
26 Statement of Operations
27 Statement of Changes in Net Assets
29 Notes to Financial Statements
36 Financial Highlights
40 Additional Investment Opportunities
41 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Wealth takes a lifetime
to build. Once achieved,
it should be preserved.
Timothy R. Schwertfeger
Chairman of the Board
It's a pleasure to share with you the outstanding performance record of the
Nuveen Flagship Kentucky and Kentucky Limited Term Municipal Bond Funds for the
12 months ended November 30, 1997. Over the past year, investors continued to
enjoy attractive, tax-free dividends generated by the portfolios of municipal
bonds. As of November 30, 1997, Class A shareholders in the Kentucky fund were
receiving a current yield on net asset value of 4.49%. Class A shareholders in
the shorter-term Kentucky Limited fund were receiving a current yield on net
asset value of 4.00%. To match these yields, investors in the 35% combined
federal and state income tax bracket would have had to earn at least 6.91% and
6.15%, respectively, on taxable alternatives.
During this same period, the Kentucky fund provided Class A shareholders with a
competitive total return on net asset value of 7.14% with income and capital
gains reinvested, outpacing the average return of 6.73% for its peer group, the
Kentucky municipal bond fund category. The Kentucky Limited fund generated a
total return on net asset value of 5.76%, far outpacing its peer group average
of 4.01% for state short-intermediate term municipal bond funds. You will find
additional details on the performance of the funds on pages 6-9.
The Year in Review
Over the past year, U.S. investors have benefited from robust economic growth
with little evidence of inflationary pressures. With unemployment rates at 20-
year lows and the current economic expansion entering its seventh year, the
presence of benign inflation has sparked debate over whether the traditional
link between growth and inflation has been broken. During 1997, expectations
that excess growth would generate inflation disrupted the
1
<PAGE>
"The events of 1997 have
focused renewed attention
on the need for diversi-
fication and appropriate
asset allocation."
markets on several occasions, most notably following the Federal Reserve's
interest rate tightening in March and speeches by Fed Chairman Alan Greenspan.
Still, falling commodity prices kept producer prices in check, while low import
prices--due in part to the weakness in Asian markets--limited U.S. companies'
ability to raise consumer prices. This combination has kept inflation subdued
and the Federal Reserve "on hold" since March. The reduction in the federal
deficit and passage of the Taxpayer Relief Act of 1997 offer additional
encouragement to long-term fixed-income investors.
Helping You Build A Better Portfolio
The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation. Stock market volatility,
especially late in the year, provided a vivid illustration of the steadying
effect that fixed-income investments can provide in a well-constructed
investment portfolio. Nuveen mutual funds provide an excellent balance to other
stock and bond investments. Your financial adviser can introduce you to a
variety of other Nuveen products and services to round out your investment
portfolio, including the Nuveen Growth and Income Stock Fund and two balanced
stock and bond funds.
In addition, we recently expanded our private asset management capabilities
through the acquisition of Rittenhouse Financial Services, a well-respected
growth investment manager. We encourage you to talk with your financial adviser
about ways to complement your current Nuveen investments by taking advantage of
these additional products and services.
We at Nuveen remain committed to providing you with quality investment solutions
that withstand the test of time. We thank you for your confidence in us and our
family of investments, and we look forward to our next report to you.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
January 15, 1998
2
<PAGE>
Answering Your Questions
[PHOTO OF TED NEILD APPEARS HERE]
Ted Neild, managing director of Nuveen's
portfolio management team, talks about the
municipal bond market and offers insights into
factors that affected the performance of the
funds over the past year.
What economic and market factors influenced the performance of municipal bonds
over the past year?
Over the past 12 months, the performance of the municipal bond market was
influenced by three major factors: the continued strength of the U.S. economy,
minimal inflation, and volatility in the equity markets. During 1997, these
factors contributed to a positive environment for fixed-income investments, as
reflected in the steady-to-declining interest rates evident during the year.
Between December 1996 and November 1997, the yield on the 30-year Treasury bond
dropped from 6.36% to 6.05%, and the municipal market followed suit, as the
yield on the Bond Buyer 40 declined from 5.63% to 5.36%. The spread between tax-
free municipal bonds and taxable Treasury bonds remained tight, making municipal
bonds very attractive. The strong total returns produced in this environment
were somewhat muted by a heavy supply of newly issued bonds that temporarily
reduced bond prices. The increased supply worked to our advantage, however, as
it expanded opportunities to find value in the marketplace.
How have the funds performed during this period?
As Tim mentioned in his letter to shareholders, the funds performed well during
the one-year period ended November 30, 1997. The total return on net asset value
for Class A shares of the Kentucky fund was 7.14%, which compares favorably with
the one-year average return of 6.73% for the peer group of Kentucky municipal
bond funds tracked by Lipper Analytical Services. The Kentucky Limited fund also
performed well compared with its peers, generating a total return on net asset
value of 5.76%, compared with the average return of 4.01% for the Lipper "other
states" short-intermediate term municipal bond fund category.
3
<PAGE>
"Shareholders were rewarded with income rates that were higher than those
available in the current market, along with increased value in the underlying
securities."
Given the current municipal market, where were you able to find value?
One of the ways that we achieved such outstanding performance and created value
for shareholders was by purchasing bonds priced at a discount to their par
value. During the declining interest rate environment we experienced over the
past year, these discount bonds appreciated in value and continued to pay the
higher coupon rates that were available when rates were higher. So, shareholders
were rewarded with income rates that were higher than those available in the
current market, along with increased value in the underlying securities. This
level of price appreciation allowed us to maintain strong dividends as interest
rates fell during the year.
In addition, we used our strong network of institutional investors to purchase
bonds at competitive prices in the secondary market. The limited supply of new
issuance in the state can sometimes be problematic, so we found value in the
secondary market during this lean issuance period. However, we did uncover good
value in some new issuance within the transportation and health care sectors.
What are your key strategies for the coming year?
To sustain such outstanding performance, we take a holistic approach to
portfolio management--assessing all of the factors that determine a fund's
performance and taking advantage of all of them to contribute to total return
and dividend stability. In the coming year, one focus will be boosting the
credit quality of the funds. As long as credit spreads remain tight, we will
continue to take advantage of opportunities to purchase bonds with high credit
quality at yields that are similar to bonds with lower ratings. We believe that
if credit spreads widen, these high-quality issues will increase in value
relative to lower-rated bonds.
4
<PAGE>
In addition to credit quality, we will also strive to improve the call
protection of the funds. Call protection refers to the amount of time before an
issuer can pay off a bond early. By purchasing non-callable bonds and/or bonds
with longer call protection, we ensure that the funds' income streams will be
more stable and that they will be less susceptible to changes in interest rates.
As part of our value investing approach, we will also continue to look for
individual bonds that offer good long-term value with the potential for
appreciating returns. Our thorough research helps us find investment quality
bonds that offer the best values--such as bonds from specific regions and
sectors that have the best potential for performance and appreciation. We plan
to continue to search for bonds with pre-refunding potential, as well as those
that we feel are undervalued by the market as a whole.
What is your outlook for the municipal market?
Looking at the year ahead, we believe the overall market will continue to strike
a good balance between supply and demand. We expect supply to increase as new
issuers continue to enter the market. A continued decline in yields could also
cause new supply to come to market through refunding of current debt. On the
demand side, volatility in the equity markets, plus the potential for a
weakening of the economy, could spark increased interest in bonds of all types.
The financial crises in Asia, coupled with the continued strength of the dollar
and low commodity prices, are all contributing to the excellent inflation
picture. This backdrop should help offset stronger labor markets and limit the
effects of any bond market corrections. In the meantime, positive underlying
fundamentals provide good support for the municipal market.
"Looking at the year ahead, we believe the overall market will continue to
strike a good balance between supply and demand."
5
<PAGE>
Nuveen Flagship Kentucky
Municipal Bond Fund
Performance Overview
As of November 30, 1997
<TABLE>
<CAPTION>
Fund Highlights
- --------------------------------------------------------------------------------------------------------------------------
Share Class A B C R
<S> <C> <C> <C> <C> <C>
Inception Date 5/87 2/97 10/93 2/97
..........................................................................................................................
Net Asset Value (NAV) $11.34 $11.35 $11.34 $11.32
..........................................................................................................................
CUSIP 67065R507 67065R606 67065R705 67065R804
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Total Net Assets ($000) $472,985
..........................................................................................................................
Average Weighted Maturity (Years) 20.38
..........................................................................................................................
Average Weighted Duration (Years) 6.96
..........................................................................................................................
Annualized Total Return/1/
- --------------------------------------------------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
1-Year 7.14% 2.64% 6.47% 6.66% 7.14%
..........................................................................................................................
5-Year 7.09% 6.17% 6.49% 6.51% 7.09%
..........................................................................................................................
10-Year 8.81% 8.34% 8.34% 8.22% 8.81%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Tax-Free Yields
- --------------------------------------------------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.24% 5.02% 4.49% 4.71% 5.46%
..........................................................................................................................
SEC 30-Day Yld 4.49% 4.30% 3.74% 3.94% 4.69%
..........................................................................................................................
Taxable Equiv Yld/2/ 6.91% 6.62% 5.75% 6.06% 7.22%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum up-front sales charge. Class B shares have a
contingent deferred sales charge (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 B
shares automatically convert to Class A shares eight years after purchase.
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%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
3 The fund paid a capital gains distribution to shareholders in December of
$0.0059 per share.
6
<PAGE>
Credit Quality
[PIE CHART APPEARS HERE]
A 25%
BBB/NR 17%
AA 7%
AAA/Pre-refunded 51%
Diversification
[PIE CHART APPEARS HERE]
Health Care 23%
Transportation 6%
U.S. Guaranteed 9%
Water & Sewer 7%
Forest/Paper Products 6%
Utilities 11%
Housing (Single-Family) 5%
Other 5%
Energy 4%
Tax Obligation (Limited) 24%
Dividend History (A Shares)/3/
[BAR GRAPH APPEARS HERE]
0.05031 December 1996
0.05045 January 1997
0.0495 February
0.0495 March
0.0495 April
0.0495 May
0.0495 June
0.0495 July
0.0495 August
0.0495 September
0.0495 October
0.0495 November
68726 KY Ltd.
7
<PAGE>
Nuveen Flagship Kentucky Limited Term
Municipal Bond Fund
Performance Overview
As of November 30, 1997
<TABLE>
<CAPTION>
Fund Highlights
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Share Class A C R
Inception Date 9/95 9/95 2/97
.........................................................................................................
Net Asset Value (NAV) $10.09 $10.08 $ 10.07
.........................................................................................................
CUSIP 67065R887 67065R879 67065R861
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Total Net Assets ($000) $12,227
.........................................................................................................
Average Weighted Maturity (Years) 6.03
.........................................................................................................
Average Weighted Duration (Years) 4.37
.........................................................................................................
Annualized Total Return/1/
- ---------------------------------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) C R
1-Year 5.76% 3.07% 5.32% 5.73%
.........................................................................................................
Since Inception 6.28% 5.07% 5.90% 6.27%
- ---------------------------------------------------------------------------------------------------------
Tax-Free Yields
- ---------------------------------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) C R
Dist Rate 4.34% 4.23% 3.99% 4.59%
.........................................................................................................
SEC 30-Day Yld 4.00% 3.90% 3.66% 4.21%
.........................................................................................................
Taxable Equiv Yld/2/ 6.15% 6.00% 5.63% 6.48%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
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%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
8
<PAGE>
Credit Quality
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
A....... 24%
AA...... 18%
BBB/NR.. 15%
AAA..... 43%
</TABLE>
- --------------------------------------------------------------------------------
Diversification
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Education/Civic Org....... 9%
Tax Obligation (Limited).. 25%
Water & Sewer............. 9%
Other..................... 7%
Health Care............... 22%
Energy.................... 3%
Utilities................. 3%
Transportation............ 8%
Consumer Staples.......... 5%
Housing (Multi-Family).... 9%
</TABLE>
- --------------------------------------------------------------------------------
Dividend History (A Shares)
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
1996
December... 0.03718
1997
January.... 0.03728
February... 0.0366
March...... 0.0366
April...... 0.0366
May........ 0.0366
June....... 0.0365
July....... 0.0365
August..... 0.0365
September.. 0.0365
October.... 0.0365
November... 0.0365
</TABLE>
- -----
9
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Kentucky
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, 7/03 at 103 AA- $ 1,087,490
E. I. Du Pont, Series A, 6.300%, 7/01/12
- -------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations -- 2.4%
Lexington, Fayette and Urban County, Kentucky,
Governmental Project, University of Kentucky Alumni
Association Inc. Project:
3,195,000 6.750%, 11/01/17 11/04 at 102 AAA 3,624,504
4,320,000 6.750%, 11/01/24 11/04 at 102 AAA 4,900,738
2,000,000 Northern Kentucky University Certificates of 1/01 at 102 AAA 2,186,980
Participation, Student Housing Facilities,
7.250%, 1/01/12
700,000 Northern Kentucky University, Formerly 5/01 at 102 AAA 769,783
Northern Kentucky State College to 1976,
Educational Buildings, Series F, 7.000%, 5/01/10
- -------------------------------------------------------------------------------------------------------------------------------
Energy -- 4.3%
5,000,000 Ashland, Kentucky, Pollution Control Revenue, 8/02 at 102 Baa1 5,406,650
Ashland Oil Inc. Project, 6.650%, 8/01/09
9,000,000 Ashland, Kentucky, Sewer and Solid Waste Revenue, 2/05 at 102 Baa1 10,109,790
Ashland Inc. Project, 7.125%, 2/1/22
4,360,000 Ashland, Kentucky, Solid Waste Revenue, 10/01 at 102 Baa1 4,769,666
Ashland Oil Inc. Project, 7.200%, 10/1/20
- -------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products -- 6.1%
2,370,000 Hancock County, Kentucky, Solid Waste Disposal 5/06 at 102 A- 2,599,084
Revenue, Willamette Inc. Project,
6.600%, 5/01/26
9,750,000 Henderson County, Kentucky, Solid Waste Disposal 3/05 at 102 Baa2 10,792,373
Revenue, Macmillan Bloedel Project, 7.000%, 3/01/25
1,500,000 Maysville,Kentucky, Industrial Development Revenue, 2/00 at 103 N/R 1,586,040
Crystal Tissue Project, 8.000%, 2/01/09
Perry County, Kentucky, Solid Waste Disposal Revenue,
TJ International Project:
3,750,000 7.000%, 6/01/24 6/04 at 102 N/R 4,083,675
4,240,000 6.800%, 5/01/26 5/06 at 102 N/R 4,628,638
2,000,000 6.550%, 4/15/27 4/07 at 102 N/R 2,156,760
2,820,000 Wickliffe, Kentucky, Solid Waste Disposal Facility 4/06 at 102 A1 3,030,823
Revenue, Westvaco Corporation Project,
6.375%, 4/01/26
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care -- 22.5%
Christian County, Kentucky, Hospital Revenue, Jennie
Stuart Medical Center, Series A:
$3,500,000 6.000%, 7/01/13 7/06 at 102 A- $ 3,697,890
1,310,000 6.000%, 7/01/17 7/06 at 102 A- 1,369,684
5,270,000 Clark County, Kentucky, Hospital Revenue Refunding 4/07 at 102 BBB- 5,490,602
and Improvement, Regional Medical Center Project,
6.200%, 4/01/13
3,300,000 Daviess County, Kentucky, Hospital Revenue, 8/02 at 102 AAA 3,522,189
Series A, 6.250%, 8/01/22
3,005,000 Floyd County, Kentucky, Hospital Revenue, Insured 2/01 at 102 AAA 3,238,188
Loan, Highland Hospital Corporation Project,
7.500%, 8/1/10
4,000,000 Hopkins County, Kentucky, Hospital Revenue, 11/01 at 102 AAA 4,352,600
Trover Clinic Foundation Inc., 6.625%, 11/15/11
Jefferson County, Kentucky, Health Facilities Revenue,
Jewish Hospital Healthcare Services Inc.:
1,190,000 6.500%, 5/1/15 5/02 at 102 AAA 1,291,519
12,785,000 6.550%, 5/1/22 5/02 at 102 AAA 13,899,852
4,625,000 Jefferson County, Kentucky, Health Facilities Revenue, 7/07 at 101 AAA 4,568,159
University Medical Center Inc. Project,
5.250%, 7/01/22
12,750,000 Jefferson County, Kentucky, Health Facilities Revenue, 10/07 at 101 AAA 12,342,255
Alliant Health System Inc., 5.125%, 10/01/27
7,800,000 Jefferson County, Kentucky, Hospital Revenue, Regular 10/02 at 102 AAA 8,486,166
Linked Aces and Inverse Floaters, Alliant Health
System Project, 6.436%, 10/23/14
Jefferson County, Kentucky, Mortgage Revenue,
1st Mortgage, Christian Church Homes:
1,240,000 6.000%, 11/15/09 11/04 at 102 BBB 1,283,474
715,000 6.125%, 11/15/13 11/04 at 102 BBB 740,132
3,210,000 6.125%, 11/15/18 11/04 at 102 BBB 3,311,436
900,000 Kentucky Development Finance Authority, Hospital 2/98 at 102 A 926,154
Revenue Refunding Improvement, Ashland Hospital,
Kings Project, 9.750%, 8/1/05
3,000,000 Kentucky Development Finance Authority, Hospital 10/99 at 102 A 3,235,440
Revenue, St. Lukes Hospital, Series A,
7.500%, 10/01/12
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Kentucky -- continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------
Health Care -- continued
<S> <C> <C> <C> <C>
$ 1,750,000 Kentucky Development Finance Authority, Hospital 11/99 at 102 A+ $ 1,873,148
Revenue, Sisters of Charity of Nazareth Health
Company, 7.375%, 11/1/16
500,000 Kentucky Development Finance Authority, Hospital 11/99 at 102 AAA 536,050
Revenue, Sisters of Charity, Nazareth,
7.375%, 11/01/16
2,000,000 Kentucky Development Finance Authority, Hospital 10/01 at 102 AAA 2,231,100
Revenue, St. Luke Hospital Inc., Series A,
7.000%, 10/01/11
1,000,000 Kentucky Development Finance Authority, Hospital 11/01 at 100 AAA 1,052,280
Revenue Refunding and Improvement, St. Elizabeth
Medical, Series A, 6.000%, 11/01/10
610,000 Kentucky Development Finance Authority, Hospital 2/98 at 102 A 627,592
Revenue Refunding and Improvement, Ashland
Hospital Kings Project, 9.750%, 8/1/11
5,000,000 Kentucky Economic Development Finance Authority, 12/03 at 102 AAA 5,285,550
Hospital Facilities Revenue, St. Elizabeth Medical
Center Project, Series A, 6.000%, 12/01/22
4,000,000 Kentucky Economic Development Finance Authority, 8/04 at 102 AAA 3,812,760
Hospital Facilities Revenue, Baptist Healthcare
System, 5.000%, 8/15/24
9,500,000 Kentucky Economic Development Finance Authority, 2/07 at 102 AAA 9,849,030
Hospital Facilities Revenue, Pikeville United
Methodist Hospital, Kentucky Project, 5.700%, 2/1/28
Kentucky Economic Development Finance Authority,
Hospital System Revenue Refunding and Improvement,
Appalachian Regional:
500,000 5.600%, 10/01/08 4/08 at 102 BBB 506,650
3,500,000 5.850%, 10/01/17 4/08 at 102 BBB 3,539,585
1,500,000 5.875%, 10/01/22 4/08 at 102 BBB 1,513,635
2,050,000 McCracken County, Kentucky, Hospital 11/04 at 102 AAA 2,280,625
Revenue, Mercy Health System, Series A,
6.300%, 11/01/06
1,555,000 Radcliff, Kentucky, Mortgage Revenue, 7/07 at 102 AAA 1,592,211
Lincoln Trail Care, 5.650%, 1/20/19
- ------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 0.5%
2,500,000 Greater Kentucky Housing Assistance Corporation, 7/03 at 100 AAA 2,576,550
Mortgage Revenue, Series A, 6.250%, 7/01/24
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family -- 4.6%
Kentucky Housing Corporation, Housing Revenue,
Series A:
$ 485,000 7.625%, 1/01/09 1/99 at 102 AAA $ 502,019
930,000 6.500%, 7/1/17 1/04 at 102 AAA 985,661
Kentucky Housing Corporation, Housing Revenue,
Series B:
1,000,000 6.625%, 7/01/14 7/00 at 102 AAA 1,061,050
1,520,000 7.800%, 1/01/21 7/00 at 102 AAA 1,607,050
2,000,000 6.625%, 7/01/26 1/05 at 102 AAA 2,123,880
3,000,000 6.250%, 7/01/28 7/07 at 102 AAA 3,153,360
Kentucky Housing Corporation, Housing Revenue,
Series C:
2,255,000 6.400%, 1/01/17 7/04 at 102 AAA 2,386,016
1,795,000 7.900%, 1/01/21 7/00 at 102 AAA 1,900,259
Kentucky Housing Corporation, Housing Revenue,
Guaranteed, Series C-1:
465,000 6.600%, 1/01/11 1/03 at 102 AAA 492,714
290,000 6.650%, 1/01/17 1/03 at 102 AAA 302,812
7,000,000 Kentucky Housing Corporation, Housing Revenue, 7/06 at 102 AAA 7,352,800
Series E, 6.300%, 1/01/28
- -------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 1.4%
4,790,000 Puerto Rico Commonwealth, 5.400%, 7/1/25 7/06 at 101 1/2 A 4,769,307
2,000,000 Puerto Rico Commonwealth, Public 7/07 at 101 1/2 A 1,992,760
Improvement, 5.375%, 7/01/25
- -------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 24.1%
430,000 Bardstown, Kentucky, Independent School District 11/02 at 102 A1 465,785
Finance Corporation, School Building Revenue
Refunding and Improvements, 6.375%, 5/01/17
725,000 Bell County, Kentucky, School District Finance 9/01 at 102 A 789,677
Corporation, School Building Revenue,
6.875%, 9/01/11
1,000,000 Boone County, Kentucky, School District Finance 9/01 at 103 A1 1,100,820
Corporation, School Building Revenue, Series C,
6.750%, 9/01/11
1,215,000 Boone County, Kentucky, School District Finance 12/02 at 102 A1 1,297,778
Corporation, School Building Revenue Refunding
and Improvement, 6.125%, 12/01/17
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Kentucky -- continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- continued
<S> <C> <C> <C> <C>
$ 615,000 Boone County, Kentucky, School District Finance 2/03 at 102 A1 $ 643,874
Corporation, School Building Revenue,
6.000%, 2/01/18
1,595,000 Bowling Green, Kentucky, Municipal Projects 12/04 at 102 A2 1,763,544
Corporation, Lease Revenue, 6.500%, 12/01/14
1,005,000 Casey County, Kentucky, School District Finance 3/05 at 102 A1 1,054,938
Corporation, School Building Revenue,
5.750%, 3/01/15
Christian County, Kentucky, School District Finance
Corporation, School Building Revenue:
565,000 6.750%, 6/01/10 6/01 at 102 A 621,410
600,000 6.750%, 6/01/11 6/01 at 102 A 659,904
Daviess County, Kentucky, School District Finance
Corporation, School Building Revenue:
505,000 5.800%, 5/01/11 5/04 at 102 A1 537,689
535,000 5.800%, 5/01/12 5/04 at 102 A1 568,839
570,000 5.800%, 5/01/13 5/04 at 102 A1 604,673
600,000 5.800%, 5/01/14 5/04 at 102 A1 634,278
1,645,000 Edgewood, Kentucky, Public Properties Corporation, 12/01 at 102 A2 1,826,016
1st Mortgage, Public Facilities Project,
6.700%, 12/1/21
1,070,000 Fleming County, Kentucky, School District Finance 3/05 at 102 A 1,123,864
Corporation, School Building Revenue,
5.875%, 3/01/15
3,155,000 Florence, Kentucky, Public Properties Corporation 6/07 at 102 AAA 3,203,398
Revenue, 1st Mortgage, Administration Office
Complex, 5.500%, 6/1/27
Floyd County, Kentucky, Public Properties Corporation
Revenue, 1st Mortgage, Justice Center Project,
Series A:
465,000 5.500%, 9/01/17 3/06 at 102 A 481,270
1,260,000 5.550%, 9/01/23 3/06 at 102 A 1,302,235
3,550,000 Floyd County, Kentucky, Public Properties Corporation 3/06 at 105 A 3,787,495
Revenue, First Mortgage, Justice Center Project,
Series B, 6.200%, 9/01/26
1,200,000 Floyd County, Kentucky, School District Finance 5/05 at 102 A1 1,224,528
Corporation, School Building Revenue,
5.500%, 5/01/15
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- continued
<S> <C> <C> <C> <C>
$2,280,000 Grant County, Kentucky, School District Finance 3/07 at 102 Aaa $2,305,741
Corporation, School Building Revenue,
5.375%, 3/01/17
Hardin County, Kentucky, Buildings Commission
Revenue, Detention Facility Project:
525,000 6.200%, 12/01/11 No Opt. Call AAA 573,468
1,775,000 6.250%, 12/01/14 12/04 at 102 AAA 1,953,210
300,000 Hardin County, Kentucky, School District Finance 6/01 at 103 A1 328,932
Corporation, School Building Revenue, Second
Series, 6.800%, 6/01/10
3,465,000 Hopkins County, Kentucky, School District Finance 6/04 at 102 A1 3,725,776
Corporation, School Building Revenue,
6.200%, 6/01/19
1,250,000 Jefferson County, Kentucky, Economic Development 7/01 at 100 A1 1,279,013
Corporation, Lease Revenue, 7.750%, 7/01/16
4,195,000 Jefferson County, Kentucky, School District Finance 2/06 at 102 AAA 4,157,497
Corporation, School Building Revenue, Series A,
5.125%, 2/1/16
Jefferson County, Kentucky, Equipment Lease Purchase
Revenue, Energy System Project:
247,411 9.500%, 6/01/03 6/03 at 100 N/R 254,702
1,345,905 9.000%, 6/01/03 6/03 at 100 N/R 1,371,383
2,500,000 Jefferson County, Kentucky, Capital Projects 2/02 at 100 A1 1,158,050
Corporation, Series B, 0.000%, 8/15/08
1,000,000 Jeffersontown, Kentucky, Certificates of Participation, No Opt. Call A 1,050,460
Refunding and Improvement, Public Projects,
5.750%, 11/1/15
Jessamine County, Kentucky, School District Finance
Corporation, School Building Revenue:
510,000 6.750%, 6/01/10 6/01 at 103 A1 558,894
545,000 6.750%, 6/01/11 6/01 at 103 A1 597,249
2,500,000 6.125%, 6/01/19 6/04 at 102 A1 2,672,125
5,650,000 5.500%, 1/01/21 1/06 at 102 A1 5,771,023
Kenton County, Kentucky, Public PKS Corporation,
Mortgage Revenue:
1,290,000 7.000%, 3/1/08 3/00 at 101 A 1,381,139
1,070,000 7.100%, 3/1/10 3/00 at 101 A 1,147,875
815,000 Kenton County, Kentucky, School District Finance 12/01 at 100 A+ 887,396
Corporation, School Building Revenue,
6.800%, 12/01/11
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Kentucky -- continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited -- continued
$ 400,000 Kentucky State Property and Buildings Commission, 11/01 at 102 A+ $ 441,600
Project No. 40, 2nd Series, 6.875%,11/01/07
250,000 Kentucky State Property and Buildings Commission, 10/01 at 102 A 276,110
Project No. 53, 6.625%, 10/01/07
2,075,000 Kentucky State Property and Buildings Commission, 9/04 at 102 A+ 2,202,384
Project No. 56, 6.000%, 9/01/14
250,000 Laurel County, Kentucky, School District Finance 3/01 at 102 A 270,588
Corporation, School Building Revenue,
7.000%, 3/01/10
1,000,000 Lawrence County, Kentucky, School District Finance 11/04 at 102 A1 1,162,210
Corporation, School 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 1,287,936
2,550,000 0.000%, 10/01/12 No Opt. Call A 1,191,998
435,000 Lincoln County, Kentucky, School District Finance 5/02 at 102 A1 465,511
Corporation, School Building Revenue,
6.200%, 5/01/12
1,525,000 McCracken County, Kentucky, Public Properties 9/06 at 102 AAA 1,628,685
Corporation, Court Facilities Project,
5.900%, 9/01/26
2,365,000 McCreary County, Kentucky, School District Finance 8/05 at 102 A 2,444,842
Corporation, School Building Revenue, Second
Series, 5.600%, 8/01/16
Montgomery County, Kentucky, School District Finance
Corporation, School Building Revenue:
305,000 6.800%, 6/01/09 6/01 at 102 A1 333,374
325,000 6.800%, 6/01/10 6/01 at 102 A1 354,679
350,000 6.800%, 6/01/11 6/01 at 102 A1 381,367
1,410,000 Morgan County, Kentucky, School District Finance 9/04 at 102 A1 1,510,096
Corporation, School Building Revenue,
6.000%, 9/01/14
13,000,000 Mt. Sterling, Kentucky, Lease Revenue, Kentucky, 3/03 at 102 Aa 13,608,400
League Cities, Series A, 6.200%, 3/1/18
12,960,000 Pendleton County, Kentucky, Multi County, 3/03 at 102 A 13,717,642
Lease Revenue, Association Counties
Leasing Tollroad, Series A, 6.500%, 3/01/19
</TABLE>
- --------
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited - continued
$ 500,000 Pendleton County, Kentucky, Multi County Lease No Opt. Call A $ 563,395
Revenue, Association Counties Leasing
Tollroad, Series B, 6.400%, 3/01/19
1,230,000 Perry County, Kentucky, School District Finance 7/02 at 102 A1 1,327,195
Corporation, School Building Revenue,
6.250%, 7/01/11
8,250,000 Puerto Rico Commonwealth Highway and 7/16 at 100 A 8,374,740
Transportation Authority, Highway Revenue, Series Y,
5.500%, 7/01/36
500,000 Puerto Rico Commonwealth lnfrastructure 7/98 at 102 BBB+ 521,805
Financing Authority, Series A, 7.750%, 7/01/08
7,000,000 Warren County, Kentucky, Justice Center 9/07 at 102 AAA 6,939,730
Expansion Corporation, First Mortgage,
Judicial Facility, Series A, 5.250%, 9/01/24
- ---------------------------------------------------------------------------------------------------------------------------
Transportation - 5.9%
10,640,000 Kenton County, Kentucky, Airport Board 2/02 at 100 BBB- 10,880,145
Revenue, Special Facilities, Delta Airlines Project,
Series A, 6.125%, 2/1/22
1,250,000 Kenton County, Kentucky, Airport Board 3/06 at 102 AAA 1,293,463
Revenue, Cincinnati/Northern Kentucky,
International, Series B, 5.750%, 3/1/13
1,000,000 Kentucky Turnpike Authority, Economic Development 7/05 at 102 AAA 1,036,310
Road Revenue, Revitalization Projects,
5.625%, 7/01/15
5,000,000 Louisville and Jefferson County, Kentucky, Regional 7/05 at 102 AAA 5,064,400
Airport Authority, Airport System Revenue, Series A,
Louisville International Airport, 5.625%, 7/01/25
6,165,000 Louisville, Kentucky, Airport Lease 2/99 at 103 A 6,601,420
Revenue, Series A, 7.875%, 2/01/19
2,790,000 Louisville, Kentucky, Parking Authority, River City, 6/01 at 103 A 3,097,123
First Mortgage Revenue, 6,875% 12/01/20
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 8.8%
500,000 Covington, Kentucky, Municipal Properties Corporation, 8/98 at 103 N/R*** 528,950
First Mortgage, Parking and Park, Series A,
8.250%, 8/1/10 (Pre-refunded to 8/01/98)
1,370,000 Daviess County, Kentucky, Hospital Revenue, Mercy 1/98 at 102 AAA 1,401,990
Health Care System, Series A, 7.625%, 1/01/15
(Pre-refunded to 1/01/98)
</TABLE>
17
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Kentucky - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - continued
Florence, Kentucky, Public Properties Corporation, First
Mortgage, Recreational Facilities Project:
$ 100,000 7.000%, 3/01/10 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** $ 110,876
320,000 7.000%, 3/01/14 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 356,054
345,000 7.000%, 3/01/15 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 383,871
360,000 7.000%, 3/01/16 (Pre-refunded to 3/01/01) 3/01 at 103 A3*** 400,561
2,750,000 Hardin County, Kentucky, Hospital Revenue, Hardin 10/98 at 103 AAA 2,920,308
Memorial Hospital Refunding, 7.875%, 10/01/14
(Pre-refunded to 10/01/98)
16,750,000 Jefferson County, Kentucky, Capital Projects 2/01 at 24 11/16 AAA 3,602,088
Corporation, Series B, 0.000%, 8/15/19
(Pre-refunded to 2/15/01)
9,070,000 Kentucky Development Finance Authority, Hospital 10/01 at 102 AAA 10,118,039
Revenue, St. Luke Hospital Inc., Series A, 7.000%,
10/01/21 (Pre-refunded to 10/01/01)
990,000 Kentucky Development Finance Authority, Hospital 2/98 at 102 A*** 1,019,571
Revenue, Ashland Hospital, Kings Project, 9.750%,
8/1/11 (Pre-refunded to 2/01/98)
2,795,000 Kentucky Infrastructure Authority, Community Loan 9/98 at 102 AAA 2,932,821
Program, Series A, 7.850%, 9/01/18
(Pre-refunded to 9/01/98)
1,495,000 Kentucky lnfrastructure Authority, Governmental 8/99 at 102 A*** 1,612,358
Agencies Program, Series A, 7.800%, 8/01/08
(Pre-refunded to 8/01/99)
1,800,000 Kentucky Property and Buildings Commission, 8/98 at 102 A+*** 1,884,204
Project No. 48, 8.000%, 8/01/08
(Pre-refunded to 8/01/98)
4,875,000 Kentucky Turnpike Authority, Economic Development 5/00 at 101 1/2 AAA 5,301,660
Road Revenue, Revitalization Project, 7.250%,
5/15/10 (Pre-refunded to 5/15/00)
Lexington, Fayette and Urban County, Kentucky,
Sewer System Revenue:
830,000 7.600%, 7/01/07 (Pre-refunded to 7/01/98) 7/98 at 102 AAA 864,553
900,000 7.600%, 7/01/08 (Pre-refunded to 7/01/98) 7/98 at 102 AAA 937,467
3,200,000 Lexington, Fayette and Urban County, Kentucky, 5/98 at 102 AAA 3,320,288
Residential Facilities Revenue, Richmond PL Project,
Series A, 7.750%, 5/15/15 (Pre-refunded to 5/15/98)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - continued
$ 500,000 Richmond, Kentucky, Water Gas and Sewer 7/98 at 102 AAA $ 520,240
Revenue, Series B, 7.400%, 7/1/15
(Pre-refunded to 7/01/98)
1,990,000 Western Kentucky University, Formerly 12/00 at 102 AAA 2,211,407
Western 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, Formerly 11/00 at 102 AAA 1,042,310
Western Kentucky State College, Educational
Buildings, Series J, 7.400%, 5/01/10
(Pre-refunded to 11/01/00)
- ------------------------------------------------------------------------------------------------------------------------
Utilities - 11.3%
13,000,000 Boone County, Kentucky, Pollution Control Revenue, 1/04 at 102 AAA 13,134,550
Cincinnati Gas and Electric,
Series A, 5.500%, 1/01/24
5,030,000 Carroll County, Kentucky, Collateralized Pollution 2/02 at 102 AA 5,309,970
Control Revenue, Kentucky Utilities Company
Project, Series B, 6.250%, 2/01/18
2,750,000 Jefferson County, Kentucky, Pollution Control Revenue, 8/03 at 102 Aa2 2,777,995
Louisville Gas and Electric Company, Project, B,
5.625%, 8/15/19
Jefferson County, Kentucky, Pollution Control Revenue,
Louisville Gas and Electric Company, Series A:
1,000,000 7.450%, 6/15/15 6/00 at 102 Aa2 1,089,470
1,750,000 5.900%, 4/15/23 4/05 at 102 Aa2 1,828,418
1,250,000 Mercer County, Kentucky, Collateralized Pollution 2/02 at 102 AA 1,317,788
Control Revenue, Kentucky Utilities Company Project,
Series A, 6.250%, 2/01/18
Owensboro, Kentucky, Electric Light and Power
Revenue, Series B:
7,100,000 0.000%, 1/1/11 No Opt. Call AAA 3,676,877
6,475,000 0.000%, 1/1/12 No Opt. Call AAA 3,166,987
7,900,000 0.000%, 1/1/17 No Opt. Call AAA 2,920,946
13,300,000 0.000%, 1/1/18 No Opt. Call AAA 4,622,282
5,100,000 0.000%, 1/1/19 No Opt. Call AAA 1,681,623
4,725,000 0.000%, 1/1/20 No Opt. Call AAA 1,475,003
1,515,000 Puerto Rico Electric Power Authority, Power Revenue, 7/02 at 101 1/2 BBB+ 1,616,308
Formerly Puerto Rico Commonwealth Water
Resource Authority, Series R, 6.250%, 7/01/17
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Kentucky-continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Utilities -- continued
$3,000,000 Puerto Rico Electric Power Authority, Power Revenue, 7/04 at 102 BBB+ $ 3,170,820
Formerly Puerto Rico Commonwealth Water
Resource Authority, Series T, 6.000%, 7/01/16
4,795,000 Trimble County, Kentucky, Pollution Control Revenue, 11/00 at 102 Aa2 5,271,191
Louisville Gas and Electric Company, Series A,
7.625%, 11/01/20
- -------------------------------------------------------------------------------------------------------------------------------
Water and Sewer -- 6.5%
625,000 Danville, Kentucky, Multi City Lease Revenue, Sewer 12/01 at 103 AAA 680,556
System Revenue, Project B (City of Radcliff),
6.875%, 3/01/19
1,750,000 Henderson, Kentucky, Water and Sewer Revenue, 11/04 at 103 AAA 1,899,153
Series A, 6.100%, 11/1/14
Kenton County, Kentucky, Water District Number 1,
Waterworks Revenue, Series B:
1,530,000 6.000%, 2/01/17 8/02 at 103 AAA 1,632,051
2,040,000 5.700%, 2/01/20 2/05 at 102 AAA 2,129,903
500,000 Kentucky Infrastructure Authority, Revolving Fund 6/01 at 102 A 544,680
Program, Series E, 6.500%, 6/01/11
1,000,000 Kentucky Infrastructure Authority, Government 8/03 at 102 A 1,023,560
Agencies Program, Series E, 5.750%, 8/01/18
Kentucky Infrastructure Authority, Infrastructure
Revolving Fund, Series J:
440,000 6.300%, 6/01/10 8/05 at 102 A 483,551
360,000 6.350%, 6/01/11 8/05 at 102 A 395,320
600,000 6.375%, 6/01/14 8/05 at 102 A 670,212
Kentucky Infrastructure Authority, Government
Agencies Program, Series G:
420,000 6.300%, 8/01/10 8/05 at 102 A 462,143
445,000 6.350%, 8/01/11 8/05 at 102 A 489,255
825,000 6.375%, 8/01/14 8/05 at 102 A 919,562
405,000 Kentucky Infrastructure Authority, Government 8/99 at 102 A 433,196
Agencies Program, Series, A, 7.800%, 8/01/08
Louisville and Jefferson County, Kentucky,
Metropolitan Sewer District Sewer and Drain System
Revenue, Series A:
2,720,000 6.750%, 5/15/19 11/04 at 102 AAA 3,137,275
3,865,000 5.400%, 5/15/22 2/05 at 102 AAA 3,876,286
2,070,000 6.500%, 5/15/24 11/04 at 102 AAA 2,356,840
2,500,000 6.750%, 5/15/25 11/04 at 102 AAA 2,883,525
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer--continued
$ 6,000,000 Louisville and Jefferson County, Kentucky, Metropolitan 11/07 at 101 AAA $ 5,991,720
Sewer District Sewer and Drain System Revenue,
Series B, 5.350%, 5/15/22
500,000 Paducah, Kentucky, Waterworks Revenue, 7/01 at 102 AAA 546,692
6.700%, 7/01/09
- -----------------------------------------------------------------------------------------------------------------------------
$ 486,958,316 Total Investments--(cost $431,873,361)--98.6% 466,323,608
=============================================================================================================================
Other Assets Less Liabilities--1.4% 6,661,236
-----------------------------------------------------------------------------------------------------
Net Assets--100% $472,984,844
=====================================================================================================
* Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or
redemption. There may be other call provisions at varying prices at later dates.
** Ratings: Using the higher of Standard and 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.
</TABLE>
21 See accompanying notes to financial statements.
<PAGE>
<TABLE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Kentucky Limited
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Staples -- 5.2%
$ 635,000 Newport, Kentucky, Industrial Building Revenue, No Opt. Call N/R $ 640,417
Louis Trauth Dairy, Series A, 4.800%, 6/01/99
- ------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations -- 8.5%
500,000 Kentucky Higher Education, Student Loan Corporation, No Opt. Call Aaa 552,860
Insured Student Loan Revenue, Series B,
6.800%, 6/01/03
475,000 University of Kentucky, University Revenues, No Opt. Call AAA 489,298
Educational Buildings, Series O, 5.000%, 5/01/03
- ------------------------------------------------------------------------------------------------------------------------------------
Energy -- 2.9%
325,000 Ashland, Kentucky, Pollution Control Revenue, 2/00 at 102 1/2 Baa1 349,668
Ashland Oil, Series A, 7.375%, 7/01/09
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care -- 22.0%
Kentucky Development Finance Authority, Sisters of
Charity Health, Nazareth Health Corporation:
100,000 5.750%, 11/01/98 No Opt. Call A+ 101,536
580,000 6.600%, 11/01/06 11/01 at 102 A+ 629,375
270,000 Kentucky Economic Development Finance Authority, No Opt. Call AAA 273,580
Medical Center Revenue Refunding and Improvement,
Ashland Hospital Corporation, Series A,
5.100%, 2/01/99
500,000 Kentucky Economic Development Finance Authority, No Opt. Call BBB 505,640
Hospital System Revenue Refunding and Improvement,
Appalachian Regional, 5.500%, 10/01/07
385,000 McCracken County, Kentucky, Hospital Revenue, 11/04 at 102 AAA 428,313
Mercy Health System, Series A, 6.300%, 11/01/06
735,000 Radcliff, Kentucky, Mortgage Revenue, No Opt. Call AAA 754,676
Lincoln Trail Care, 5.100%, 7/20/07
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 9.0%
705,000 Louisville, Kentucky, Multifamily Revenue, Station 7/99 at 100 Aa2 716,365
House SQ Association, LP Project, 5.125%, 7/15/19
370,000 Martin County, Kentucky, Mortgage Revenue, 7/01 at 100 Aa 379,269
Assisted Project, 5.375%, 7/01/05
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family -- 1.7%
$100,000 Kentucky Housing Corporation, Housing Revenue, 1/04 at 102 AAA $101,917
Series B, 5.150%, 7/01/07
100,000 Kentucky Housing Corporation, Housing Revenue, No Opt. Call AAA 101,875
Series F, 4.800%, 7/01/03
- --------------------------------------------------------------------------------------------------------------------
Long-Term Care -- 1.7%
200,000 Kentucky Economic Development Finance Authority, No Opt. Call Aa3 203,646
Hospital Facilities Revenue, 5.200%, 11/01/01
- --------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 2.4%
280,000 Puerto Rico Commonwealth, Refunding and
Improvement, 5.375%, 7/01/05 No Opt. Call A 294,400
- --------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 25.0%
265,000 Hardin County, Kentucky, School District Finance 6/01 at 103 A1 291,924
Corporation, School Building Revenue, Second
Series, 6.800%, 6/01/08
300,000 Jefferson County, Kentucky, Capital Projects No Opt. Call AAA 315,975
Corporation, Series A, 5.500%, 4/01/03
Jeffersontown, Kentucky, Certificates of Participation,
Refunding and Improvement, Kentucky Public Projects:
300,000 4.650%, 11/01/02 No Opt. Call A 305,007
505,000 4.850%, 11/01/04 No Opt. Call A 517,514
100,000 5.000%, 11/01/05 No Opt. Call A 103,299
50,000 Kentucky Interlocal School Transportation Association, No Opt. Call A+ 51,672
Equipment Lease Revenue, 5.200%, 3/01/02
Lexington, Fayette and Urban County, Kentucky,
Government Public Facilities Corporation, Mortgage
Revenue:
175,000 5.000%, 11/01/02 No Opt. Call AAA 181,008
160,000 5.000%, 11/01/03 No Opt. Call AAA 165,629
775,000 Mt. Sterling, Kentucky, Lease Revenue, No Opt. Call Aa 811,487
League Cities, Series A, 5.625%, 3/01/03
325,000 Puerto Rico Commonwealth Urban Renewal and No Opt. Call BBB 314,707
Housing Corporation, Commonwealth Appropriation
Refunding, 0.000%, 10/01/98
-----
23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Kentucky Limited -- continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation -- 8.3%
$ 300,000 Kenton County, Kentucky, Airport Board No Opt. Call AAA $ 307,251
Revenue, Cincinnati/Northern Kentucky
International, Series A, 5.000%, 3/1/02
360,000 Kentucky Turnpike Authority, Economic Development No Opt. Call AAA 381,337
Road Revenue, Revitalization Projects,
5.400%, 7/01/05
125,000 Kentucky Turnpike Authority, Resource Recovery 7/09 at 100 A+ 125,195
Road Revenue, 1985 Series A, 6.000%, 7/01/09
200,000 Louisville and Jefferson County, Kentucky, Regional No Opt. Call AAA 202,206
Airport Authority, Airport System Revenue, Series A,
5.750%, 7/01/98
- ------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 0.4%
250,000 Jefferson County, Kentucky, Capital Projects 2/01 at 24 11/16 AAA 53,763
Corporation Revenue, Series B, 0.000%, 8/15/19
(Pre-refunded to 2/15/01)
- ------------------------------------------------------------------------------------------------------------------------
Utilities -- 2.5%
400,000 Owensboro, Kentucky, Electric Light and Power No Opt. Call AAA 306,660
Revenue, Series A, 0.000%, 1/1/04
- ------------------------------------------------------------------------------------------------------------------------
Water and Sewer -- 8.6%
500,000 Kenton County, Kentucky, Water District Number 001, No Opt. Call AAA 532,660
Waterworks Revenue, Series B, 5.600%, 2/01/04
150,000 Kentucky Infrastructure Authority, Wastewater No Opt. Call A 156,317
Revolving Fund Program, Series C, 5.300%, 6/01/03
350,000 Kentucky Infrastructure Authority, Governmental No Opt. Call A 362,737
Agencies Program, Series H, 5.200%, 8/01/02
- ------------------------------------------------------------------------------------------------------------------------
$11,850,000 Total Investments -- (cost $11,722,460) -- 98.2% 12,009,183
====================----------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.8% 218,247
-----------------------------------------------------------------------------------------------
Net Assets -- 100% $12,227,430
===============================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year)
and prices of the earliest optional call or
redemption. There may be other call provisions
at varying prices at later dates.
** Ratings: Using the higher of Standard and Poor's
or Moody's rating.
N/R -- Investment is not rated.
24 See accompanying notes to financial statements.
<PAGE>
Statement of Net Assets (Unaudited)
November 30, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Nuveen Flagship Kentucky
Kentucky Limited Term
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $466,323,608 $12,009,183
Cash 1,130,723 93,952
Receivables:
Fund Manager (note 6) -- 2,225
Interest 7,340,950 165,762
Investments sold -- 96,514
Shares sold 710,038 13,249
Other assets 5,087 70
- ---------------------------------------------------------------------------------------------------
Total assets 475,510,406 12,380,955
- ---------------------------------------------------------------------------------------------------
Liabilities
Payable for shares redeemed 199,422 86,135
Accrued expenses:
Management fees (note 6) 157,175 --
12b-1 distribution and service fees (notes 1 and 6) 90,856 2,681
Other 28,523 21,594
Dividends payable 2,049,586 43,115
- ---------------------------------------------------------------------------------------------------
Total liabilities 2,525,562 153,525
- ---------------------------------------------------------------------------------------------------
Net assets (note 7) $472,984,844 $12,227,430
===================================================================================================
Class A Shares (note 1)
Net assets $442,754,086 $ 9,814,010
Shares outstanding 39,031,824 972,769
Net asset value and redemption price per share $ 11.34 $10.09
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% and 2.50%, respectively,
of offering price) $ 11.84 $10.35
===================================================================================================
Class B Shares (note 1)
Net assets $ 2,392,204 $ N/A
Shares outstanding 210,846 N/A
Net asset value, offering and redemption price per share $ 11.35 $ N/A
===================================================================================================
Class C Shares (note 1)
Net assets $ 27,187,119 $ 2,398,092
Shares outstanding 2,398,022 237,811
Net asset value, offering and redemption price per share $ 11.34 $10.08
===================================================================================================
Class R Shares (note 1)
Net assets $ 651,435 $ 15,328
Shares outstanding 57,536 1,522
Net asset value, offering and redemption price per share $ 11.32 $ 10.07
===================================================================================================
</TABLE>
N/A - Nuveen Flagship Kentucky Limited Term is not authorized to issue Class B
Shares.
See accompanying notes to financial statements.
25
<PAGE>
Statement of Operations (Unaudited)
Six months ended November 30, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Nuveen Flagship Kentucky
Kentucky Limited Term
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Tax-exempt interest income (note 1) $14,055,639 $287,557
- -----------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 1,254,914 25,953
12b-1 service fees - Class A (notes 1 and 6) 440,575 9,225
12b-1 distribution and service fees - Class B (notes 1 and 6) 7,402 N/A
12b-1 distribution and service fees - Class C (notes 1 and 6) 99,144 6,321
Shareholders' servicing agent fees and expenses 119,451 1,861
Custodian's fees and expenses 41,585 21,482
Trustees' fees and expenses (note 6) 4,348 86
Professional fees 12,071 4,751
Shareholders' reports - printing and mailing expenses 48,991 679
Federal and state registration fees 8,714 6,884
Organizational expenses (note 1) -- 4,914
Other expenses 9,361 135
- -----------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 2,046,556 82,291
Expense reimbursement (note 6) (291,823) (40,791)
- -----------------------------------------------------------------------------------------------
Net expenses 1,754,733 41,500
- -----------------------------------------------------------------------------------------------
Net investment income 12,300,906 246,057
- -----------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 1,568,900 18,465
Net change in unrealized appreciation or depreciation
of investments 10,602,102 170,521
- -----------------------------------------------------------------------------------------------
Net gain from investments 12,171,002 188,986
- -----------------------------------------------------------------------------------------------
Net increase in net assets from operations $24,471,908 $435,043
===============================================================================================
</TABLE>
N/A - Nuveen Flagship Kentucky Limited Term is not authorized to issue Class B
Shares.
See accompanying notes to financial statements.
26
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Nuveen Flagship Kentucky
Six months ended Year ended
11/30/97 5/31/97*
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 12,300,906 $ 24,225,117
Net realized gain from investment transactions
(notes 1 and 4) 1,568,900 1,216,787
Net change in unrealized appreciation or depreciation
of investments 10,602,102 8,326,260
- -------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 24,471,908 33,768,164
- -------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (11,621,847) (23,056,260)
Class B (33,310) (3,383)
Class C (626,909) (1,154,172)
Class R (14,732) (8,367)
From accumulated net realized gains from investment transactions:
Class A -- (227,076)
Class B -- --
Class C -- (12,818)
Class R -- --
- -------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (12,296,798) (24,462,076)
- -------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 23,061,355 45,888,380
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 7,349,356 13,715,085
- -------------------------------------------------------------------------------------------------------
30,410,711 59,603,465
- -------------------------------------------------------------------------------------------------------
Cost of shares redeemed (25,870,232) (44,095,674)
- -------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 4,540,479 15,507,791
- -------------------------------------------------------------------------------------------------------
Net increase in net assets 16,715,589 24,813,879
Net assets at the beginning of period 456,269,255 431,455,376
- -------------------------------------------------------------------------------------------------------
Net assets at the end of period $472,984,844 $456,269,255
- -------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end of period $ 7,043 $ 2,935
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Kentucky and
four months of Nuveen Flagship Kentucky (see note 1).
27 See accompanying notes to financial statements.
<PAGE>
Statement of Changes in Net Assets (Unaudited) -- continued
<TABLE>
<CAPTION>
Nuveen Flagship Kentucky Limited Term
-------------------------------------
Six months ended Year ended
11/30/97 5/31/97
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 246,057 $ 418,298
Net realized gain (loss) from investment transactions
(notes 1 and 4) 18,465 (70,626)
Net change in unrealized appreciation or depreciation
of investments 170,521 204,943
- -----------------------------------------------------------------------------------------------------
Net increase in net assets from operations 435,043 552,615
- -----------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (199,794) (345,290)
Class B N/A N/A
Class C (46,387) (70,918)
Class R (234) (1)
From accumulated net realized gains
from investment transactions:
Class A -- --
Class B N/A N/A
Class C -- --
Class R -- --
- -----------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (246,415) (416,209)
- -----------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 1,856,927 5,492,681
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 164,300 263,078
- -----------------------------------------------------------------------------------------------------
2,021,227 5,755,759
- -----------------------------------------------------------------------------------------------------
Cost of shares redeemed (996,339) (5,035,029)
- -----------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 1,024,888 720,730
- -----------------------------------------------------------------------------------------------------
Net increase in net assets 1,213,516 857,136
Net assets at the beginning of period 11,013,914 10,156,778
- -----------------------------------------------------------------------------------------------------
Net assets at the end of period $12,227,430 $11,013,914
=====================================================================================================
Balance of undistributed net investment income at end of period $ 1,731 $ 2,089
=====================================================================================================
</TABLE>
* Information represents eight months of Flagship Kentucky Limited Term and
four months of Nuveen Flagship Kentucky Limited Term (see note 1).
N/A - Nuveen Flagship Kentucky Limited Term is not authorized to issue Class B
Shares.
See accompanying notes to financial statements.
28
<PAGE>
Notes to Financial Statements (Unaudited)
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 and the Nuveen
Flagship Kentucky Limited Term 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 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 ("Nuveen Flagship
Kentucky") and Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
("Nuveen Flagship Kentucky Limited Term"), respectively. Prior to these
reorganizations, each Fund was a sub-trust 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
November 30, 1997, the Funds had no such outstanding purchase commitments.
29
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
Interest Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, the Funds intend to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and Kentucky state income taxes, to retain such
tax-exempt status when distributed to the shareholders of the Funds. Net
realized capital gain and market discount distributions are subject to federal
taxation.
Flexible Sales Charge Program
Each Fund offers Class A, C and R Shares. Nuveen Flagship Kentucky also offers
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.
30
<PAGE>
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 six months ended November 30, 1997.
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 Nuveen Flagship Kentucky
Limited Term (approximately $29,400) will be reimbursed to the Adviser on a
straight-line basis over a period of three years. As of November 30, 1997,
$14,709 has been reimbursed.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Kentucky
--------------------------------------------------------
Six months ended Year ended
11/30/97 5/31/97*
--------------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,498,305 $ 16,853,432 3,460,838 $ 37,993,876
Class B 160,846 1,805,042 49,144 540,802
Class C 376,596 4,232,631 630,496 6,904,170
Class R 15,084 170,250 40,643 449,532
Shares issued to shareholders due
to reinvestment of distributions:
Class A 607,772 6,812,013 1,178,853 12,941,813
Class B 831 9,355 25 269
Class C 45,940 514,106 69,875 766,751
Class R 1,239 13,882 570 6,252
- ----------------------------------------------------------------------------------------------
2,706,613 30,410,711 5,430,444 59,603,465
- ----------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,061,401) (23,170,943) (3,622,758) (39,765,461)
Class B -- -- -- --
Class C (239,899) (2,699,289) (394,142) (4,330,213)
Class R -- -- -- --
- ----------------------------------------------------------------------------------------------
(2,301,300) (25,870,232) (4,016,900) (44,095,674)
- ----------------------------------------------------------------------------------------------
Net increase 405,313 $ 4,540,479 1,413,544 $ 15,507,791
==============================================================================================
</TABLE>
* Information represents eight months of Flagship Kentucky and
four months of Nuveen Flagship Kentucky (see note 1).
31
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
<TABLE>
<CAPTION>
Nuveen Flagship Kentucky Limited Term
-------------------------------------------------
Six months ended Year ended
11/30/97 5/31/97*
-------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 144,787 $1,453,907 410,367 $ 4,052,500
Class C 38,668 388,020 145,916 1,440,077
Class R 1,495 15,000 10 104
Shares issued to shareholders due
to reinvestment of distributions:
Class A 12,537 125,215 22,414 221,045
Class C 3,888 38,911 4,292 42,033
Class R 17 174 -- --
- ------------------------------------------------------------------------------------------
201,392 2,021,227 582,999 5,755,759
- ------------------------------------------------------------------------------------------
Shares redeemed:
Class A (78,564) (787,013) (395,384) (3,906,315)
Class C (20,863) (209,326) (114,591) (1,128,714)
Class R -- -- -- --
- ------------------------------------------------------------------------------------------
(99,427) (996,339) (509,975) (5,035,029)
- ------------------------------------------------------------------------------------------
Net increase 101,965 $1,024,888 73,024 $ 720,730
==========================================================================================
</TABLE>
* Information represents eight months of Flagship Kentucky Limited Term and
four months of Nuveen Flagship Kentucky Limited Term (see note 1).
3. Distributions to Shareholders
On December 9, 1997, the Funds declared dividend distributions from their tax-
exempt net investment income which were paid on December 31, 1997, to
shareholders of record on December 9, 1997, as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Kentucky
Kentucky Limited Term
- -----------------------------------------------------------------
<S> <C> <C>
Dividend per share:
Class A $.0495 $.0365
Class B .0425 N/A
Class C .0445 .0335
Class R .0515 .0385
- -----------------------------------------------------------------
</TABLE>
N/A-Nuveen Flagship Kentucky Limited Term is not authorized to issue Class
B Shares.
At the same time, Nuveen Flagship Kentucky also declared taxable distributions,
which includes capital gains and/or market discount, of $.0508 per share.
32
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the six months ended November
30, 1997, were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Kentucky
Kentucky Limited Term
- ------------------------------------------------------------------------------------
<S> <C> <C>
Purchases:
Investments in municipal securities $40,282,373 $2,314,481
Temporary municipal investments 3,700,000 1,900,000
Sales:
Investments in municipal securities 36,910,069 1,514,548
Temporary municipal investments 3,700,000 1,900,000
- ------------------------------------------------------------------------------------
</TABLE>
At November 30, 1997, 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, 1997, the Funds' last fiscal year end, Nuveen Flagship Kentucky
Limited Term had unused capital loss carryforwards of $97,751 available for
federal income tax purposes to be applied against future capital gains, if any.
If not applied, $27,151 of the carryforwards will expire in the year 2004 and
$70,600 will expire in the year 2005.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at November 30, 1997, were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Kentucky
Kentucky Limited Term
- ---------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $34,495,465 $288,014
depreciation (45,218) (1,291)
- ---------------------------------------------------------------------------
Net unrealized appreciation $34,450,247 $286,723
===========================================================================
</TABLE>
33
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, the Funds
pay 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>
Nuveen Flagship Kentucky
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
- --------------------------------------------------------------------------------
Nuveen Flagship
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 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.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $542,600 and $16,000 for
Nuveen Flagship Kentucky and Nuveen Flagship Kentucky Limited Term,
respectively, of which approximately $467,300 and $12,500, respectively, were
paid out as concessions to authorized dealers. The Distributor also received
12b-1 service fees on Class A Shares, substantially all of which were paid to
compensate authorized dealers for providing services to shareholders relating to
their investments.
During the six months ended November 30, 1997, the Distributor compensated
authorized dealers directly with approximately $117,600 and $3,700 in commission
advances at the time of purchase for Nuveen Flagship Kentucky and Nuveen
Flagship Kentucky Limited Term, respectively. To compensate for commissions
advanced to authorized dealers, all 12b-1 service fees collected on Class B
Shares for Nuveen Flagship Kentucky during the first year following a purchase,
all 12b-1 distribution fees on Class B Shares for Nuveen Flagship Kentucky, and
all 12b-1 service and distribution
34
<PAGE>
fees on Class C Shares during the first year following a purchase are retained
by the Distributor. During the six months ended November 30, 1997, the
Distributor retained approximately $41,400 and $4,500 in such 12b-1 fees for
Nuveen Flagship Kentucky and Nuveen Flagship Kentucky Limited Term,
respectively. The remaining 12b-1 fees charged to the Fund were paid to
compensate authorized dealers for providing services to shareholders relating to
their investments. The Distributor also collected and retained approximately
$2,500 of CDSC on share redemptions for Nuveen Flagship Kentucky during the six
months ended November 30, 1997.
7. Composition of Net Assets
At November 30, 1997, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
Kentucky Kentucky Limited Term
- --------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in $436,343,408 $12,023,829
Balance of undistributed net
investment income 7,043 1,731
Accumulated net realized gain (loss)
from investment transactions 2,184,146 (84,853)
Net unrealized appreciation
of investments 34,450,247 286,723
- --------------------------------------------------------------------------------
Net assets $472,984,844 $12,227,430
================================================================================
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period is as
follows:
Class (Inception date) Operating performance Less distributions
--------------------- ------------------
Net
Nuveen Flagship Net realized and Dividends Net Total
Kentucky** asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income (b) investments income gains period value (a)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (5/87)
1998 (d) $11.05 $.30 $ .29 $(.30) $ -- $11.34 5.36%
1997 10.82 .60 .24 (.60) (.01) 11.05 7.87
1996 10.99 .61 (.17) (.61) -- 10.82 4.04
1995 10.65 .61 .35 (.62) -- 10.99 9.42
1994 11.06 .62 (.40) (.63) -- 10.65 1.90
1993 10.45 .64 .62 (.65) -- 11.06 12.41
1992 10.19 .66 .27 (.66) (.01) 10.45 9.46
1991 9.87 .66 .32 (.66) -- 10.19 10.37
1990 9.97 .66 (.05) (.66) (.05) 9.87 6.92
1989 9.38 .67 .60 (.67) (.01) 9.97 14.31
1988 9.37 .66 .02 (.67) -- 9.38 7.79
Class B (2/97)
1998 (d) 11.06 .26 .29 (.26) -- 11.35 4.96
1997 (c) 11.07 .17 (.01) (.17) -- 11.06 1.47
Class C (10/93)
1998 (d) 11.04 .27 .30 (.27) -- 11.34 5.18
1997 10.81 .54 .24 (.54) (.01) 11.04 7.29
1996 10.99 .54 (.17) (.55) -- 10.81 3.38
1995 10.65 .55 .35 (.56) -- 10.99 8.82
1994 (c) 11.46 .36 (.81) (.36) -- 10.65 (5.88)*
Class R (2/97)
1998 (d) 11.03 .31 .29 (.31) -- 11.32 5.48
1997 (c) 11.08 .20 (.04) (.21) -- 11.03 1.42
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ending May 31,
1997, reflects the financial highlights of Flagship Kentucky.
(a) Total returns are calculated on net asset value without any
sales charge and are not annualized except were noted.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its predecessor
Flagship Financial.
(c) From commencement of class operations as noted.
(d) For the six months ending November 30, 1997.
36
<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
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment (b) ment (b) rate
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$442,754 .84%* 5.15%* .71%* 5.28%* 8%
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
309,223 1.05 5.52 .61 5.96 15
207,395 1.05 5.96 .62 6.39 5
142,449 1.06 6.31 .72 6.65 23
111,234 1.07 6.31 .75 6.63 57
72,059 1.11 6.50 .67 6.94 32
40,945 1.10 6.50 .51 7.09 36
2,392 1.59* 4.41* 1.47* 4.53* 8
544 1.59* 4.56* 1.39* 4.76* 13
27,187 1.39* 4.60* 1.26* 4.73* 8
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
651 .64* 5.35* .51* 5.48* 8
455 .64* 5.62* .49* 5.77* 13
- --------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
Financial Highlights (Unaudited) -- continued
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
------------------------- ---------------------------
Net
Nuveen Flagship Net realized and Dividends Net Total
Kentucky Limited Term** asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income (b) investments income gains period value (a)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/95)
1998 (d) $9.92 $.22 $ .17 $(.22) $-- $10.09 3.95%
1997 9.79 .45 .12 (.44) -- 9.92 5.96
1996 (c) 9.75 .31 .04 (.31) -- 9.79 5.45*
Class C (9/95)
1998 (d) 9.92 .20 .16 (.20) -- 10.08 3.68
1997 9.79 .41 .13 (.41) -- 9.92 5.64
1996 (c) 9.75 .29 .04 (.29) -- 9.79 5.12*
Class R (2/97)
1998 (d) 9.92 .23 .15 (.23) -- 10.07 3.87
1997 (c) 9.98 .15 (.10) (.11) -- 9.92 .56
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ending May 31,
1997, reflects the financial highlights of Flagship Kentucky
Limited Term.
(a) Total returns are calculated on net asset value without any sales
charge and are not annualized except where noted.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its predecessor
Flagship Financial.
(c) From commencement of class operations as noted.
(d) For the six months ending November 30, 1997.
38
<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
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment(b) ment(b) rate
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$9,814 1.36%* 3.63%* .65%* 4.34%* 13%
8,870 1.68 3.37 .53 4.52 56
8,389 1.67* 3.07* .37* 4.37* 48
2,398 1.71* 3.28* 1.00* 3.99* 13
2,144 2.00 3.03 .84 4.19 56
1,767 1.98* 2.78* .64* 4.12* 48
15 1.15* 3.78* .45* 4.48* 13
-- .86* 4.87* -- 5.73* 56
- --------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
Additional Investment
Opportunities
To purchase additional shares of your Nuveen Fund, contact your financial
adviser. If you would like to add to your current investment on a regular basis,
you can sign up for Nuveen's systematic investing program, which allows you to
invest a fixed dollar amount every month automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you give your investment the added
growth potential of long-term compounding.
For more information on any of these service options, call your adviser, or
Nuveen at (800) 225-8530.
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth Funds
Nuveen Rittenhouse Growth Fund
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate
Limited Term
State Funds
<TABLE>
<CAPTION>
<S> <C>
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
</TABLE>
-----
40
<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
Boston Financial Data Service
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Independent Public
Accountants
Arthur Andersen LLP
Chicago, Illinois
-----
41
<PAGE>
Serving Investors
for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
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 products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 225-8530 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 225-8530
www.nuveen.com
VSA-KY-11.97
<PAGE>
NUVEEN
Municipal
Bond Funds
November 30, 1997
Semiannual Report
[PHOTO APPEARS HERE]
Dependable, tax-free income
to help you keep more of
what you earn.
Wisconsin
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Performance Overview
8 Portfolio of Investments
12 Statement of Net Assets
13 Statement of Operations
14 Statement of Changes in Net Assets
15 Notes to Financial Statements
22 Financial Highlights
24 Additional Investment Opportunities
25 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime
to build. Once achieved,
it should be preserved.
It's a pleasure to share with you the Nuveen Flagship Wisconsin Municipal Bond
Fund's outstanding performance record for the 12 months ended November 30, 1997.
Over the past year, investors continued to enjoy attractive, tax-free dividends
generated by the fund's portfolio of municipal bonds. As of November 30, 1997,
Class A shareholders were receiving a current yield on net asset value of 4.90%.
To match this yield, investors in the 36% combined federal and state income tax
bracket would have had to earn at least 7.66% on taxable alternatives.
During this same period, the fund provided Class A shareholders with a
competitive total return on net asset value of 7.26% with income reinvested,
outpacing the average return of 6.61% for its peer group, the Lipper other
states long-term municipal bond fund category. You will find additional details
on the fund's performance on pages 6-7.
The Year in Review
Over the past year, U.S. investors have benefited from robust economic growth
with little evidence of inflationary pressures. With unemployment rates at
20-year lows and the current economic expansion entering its seventh year, the
presence of benign inflation has sparked debate over whether the traditional
link between growth and inflation has been broken. During 1997, expectations
that excess growth would generate inflation disrupted the markets on several
occasions, most notably following the Federal Reserve's interest rate tightening
in March and speeches by Fed Chairman Alan Greenspan. Still, falling commodity
prices kept producer prices in check, while low import prices--due in part to
the
1
<PAGE>
weakness in Asian markets--limited U.S. companies' ability to raise consumer
prices. This combination has kept inflation subdued and the Federal Reserve "on
hold" since March. The reduction in the federal deficit and passage of the
Taxpayer Relief Act of 1997 offer additional encouragement to long-term fixed-
income investors.
Helping You Build A Better Portfolio
The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation. Stock market volatility,
especially late in the year, provided a vivid illustration of the steadying
effect that fixed-income investments can provide in a well-constructed
investment portfolio. Nuveen mutual funds provide an excellent balance to other
stock and bond investments. Your financial adviser can introduce you to a
variety of other Nuveen products and services to round out your investment
portfolio, including the Nuveen Growth and Income Stock Fund and two balanced
stock and bond funds.
In addition, we recently expanded our private asset management capabilities
through the acquisition of Rittenhouse Financial Services, a well-respected
growth investment manager. We encourage you to talk with your financial adviser
about ways to complement your current Nuveen investments by taking advantage of
these additional products and services.
We at Nuveen remain committed to providing you with quality investment solutions
that withstand the test of time. We thank you for your confidence in us and our
family of investments, and we look forward to our next report to you.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
January 15, 1998
"The events of 1997
have focused renewed
attention on the need
for diversification and
appropriate asset
allocation."
2
<PAGE>
Answering Your Questions
[PHOTO OF TED NEILD]
Ted Neild, managing director of Nuveen's
portfolio management team, talks about the
municipal bond market and offers insights into
factors that affected the performance of the fund
over the past year.
What economic and market factors influenced the
performance of municipal bonds over the past year?
Over the past 12 months, the performance of the municipal bond market was
influenced by three major factors: the continued strength of the U.S. economy,
minimal inflation, and volatility in the equity markets. During 1997, these
factors contributed to a positive environment for fixed-income investments, as
reflected in the steady-to-declining interest rates evident during the year.
Between December 1996 and November 1997, the yield on the 30-year Treasury bond
dropped from 6.36% to 6.05%, and the municipal market followed suit, as the
yield on the Bond Buyer 40 declined from 5.63% to 5.36%. The spread between tax-
free municipal bonds and taxable Treasury bonds remained tight, making municipal
bonds very attractive. The strong total returns produced in this environment
were somewhat muted by a heavy supply of newly issued bonds that temporarily
reduced bond prices. The increased supply worked to our advantage, however, as
it expanded opportunities to find value in the marketplace.
How has the fund performed during this period?
As Tim mentioned in his letter to shareholders, the fund performed well during
the one-year period ended November 30, 1997. The total return on net asset value
for Class A shares of the fund was 7.26%, which compares favorably with the one-
year average return of 6.61% for the peer group of long-term state municipal
3
<PAGE>
"The price appreciation of
the bonds in the portfolio
has allowed us to maintain
strong dividends even as
interest rates fell during
the year."
bond funds tracked by Lipper Analytical Services--a 65 basis point difference.
The fund was one of the top performers in its category, ranking 12th among the
67 municipal bond funds in the grouping.
Given the current municipal market, where were you able to find value?
One of the ways that we achieved such outstanding performance and created value
for shareholders was by finding well-structured bonds to add to the portfolio.
We looked for bonds with the combination of maturity, credit quality and call
protection that we felt would appreciate in value. Well-structured state bonds
are becoming more difficult to find in the competitive marketplace, so those
bonds in our portfolio are increasing in value. The price appreciation of the
bonds in the portfolio has allowed us to maintain strong dividends even as
interest rates fell during the year.
What are your key strategies for the coming year?
To sustain this level of performance, we take a holistic approach to portfolio
management--assessing all of the factors that determine a fund's performance and
taking advantage of all of them to contribute to total return and dividend
stability. In the coming year, we will continue to selectively purchase the
bonds that we feel will keep the portfolio balanced in all of these areas. With
the future of the economy so uncertain and many experts calling for a market
correction, we will lean toward a more cautious portfolio management strategy in
the coming months.
4
<PAGE>
"Looking at the year ahead,
we believe the overall
market will continue to
strike a good balance
between supply and
demand."
As part of our value investing approach, we will also continue to look for
individual bonds that offer good long-term value with the potential for
appreciating returns. Our thorough research helps us find investment quality
bonds that offer the best values--such as bonds from specific regions and
sectors that have the best potential for performance and appreciation. We plan
to continue to search for bonds with pre-refunding potential, as well as those
that we feel are undervalued by the market as a whole.
What is your outlook for the municipal market?
Looking at the year ahead, we believe the overall market will continue to strike
a good balance between supply and demand. We expect supply to increase as new
issuers continue to enter the market. A continued decline in yields could also
cause new supply to come to market through refunding of current debt. On the
demand side, volatility in the equity markets, plus the potential for a
weakening of the economy, could spark increased interest in bonds of all types.
The financial crises in Asia, coupled with the continued strength of the dollar
and low commodity prices, are all contributing to the excellent inflation
picture. This backdrop should help offset stronger labor markets and limit the
effects of any bond market corrections. In the meantime, positive underlying
fundamentals provide good support for the municipal market.
5
<PAGE>
Nuveen Flagship Wisconsin
Municipal Bond Fund
Performance Overview
As of November 30, 1997
<TABLE>
<CAPTION>
Fund Highlights
==========================================================================================
<S> <C> <C> <C> <C> <C>
Share Class A B C R
Inception Date 6/94 2/97 2/97 2/97
Net Asset Value (NAV) $10.09 $10.12 $10.11 $ 10.12
CUSIP 67065R721 67065R713 67065R697 67065R689
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Total Net Assets ($000) $18,709
Average Weighted Maturity (Years) 21.22
Average Weighted Duration (Years) 8.41
- ------------------------------------------------------------------------------------------
Annualized Total Return/1/
==========================================================================================
Share Class A(NAV) A(Offer) B C R
1-Year 7.26% 2.80% 6.83% 6.94% 7.72%
3-Year 9.76% 8.21% 9.22% 9.39% 9.92%
Since Inception 6.78% 5.48% 6.24% 6.42% 6.91%
- ------------------------------------------------------------------------------------------
Tax-Free Yields
==========================================================================================
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.00% 4.79% 4.21% 4.45% 5.16%
SEC 30-Day Yld 4.90% 4.70% 4.15% 4.35% 5.10%
Taxable Equiv Yld/2/ 7.66% 7.34% 6.48% 6.80% 7.97%
- ------------------------------------------------------------------------------------------
</TABLE>
1 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum up-front sales charge. Class B shares have a
contingent deferred sales charge (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 B
shares automatically convert to Class A shares eight years after purchase.
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 36%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
6
<PAGE>
Credit Quality
[PIE CHART APPEAR HERE]
BBB/NR 34%
A 20%
AA 5%
AAA 41%
Diversification
[PIE CHART APPEAR HERE]
Tax Obligation (limited) 37%
Utilities 13%
Housing (Multi-Family) 12%
Long-Term Care 10%
Health Care 9%
U.S. Guaranteed 4%
Capital Goods 3%
Education/Civic Org. 3%
Housing (Single-Family) 3%
Transportation 3%
Other 3%
Dividend History (A Shares)
[BAR CHART APPEAR HERE]
0.04277 December 1996
0.04289 January 1997
0.0421 February 1997
0.0421 March 1997
0.0421 April 1997
0.0421 May 1997
0.042 June 1997
0.042 July 1997
0.042 August 1997
0.042 September 1997
0.042 October 1997
0.042 November 1997
7
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Wisconsin
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Goods -- 3.0%
Menomonee Falls, Wisconsin, Community Development
Authority, Development Revenue, Herker Industries Inc.
Project:
$255,000 5.200%, 3/01/07 3/01 at 103 N/R $261,877
300,000 5.250%, 3/01/08 3/01 at 103 N/R 307,260
- -------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations -- 3.2%
600,000 University of Puerto Rico, University Revenues, Series M, 6/05 at 101 1/2 AAA 599,994
5.250%, 6/01/25
- -------------------------------------------------------------------------------------------------------------------------
Health Care -- 9.1%
500,000 Puerto Rico Industrial Tourist Educational Medical 7/05 at 102 AAA 543,635
& Environmental Control Facilities Financing
Authority, Hospital Revenue, Hospital Auxilio Mutuo
Obligation Group, Series A, 6.250%
450,000 Puerto Rico Industrial Tourist Educational Medical 8/05 at 101 1/2 AAA 484,142
& Environmental Control Facilities Financing Authority,
Hospital Revenue Refunding, Pila Hospital Project,
Series A, 5.875%, 8/01/12
Superior Wisconsin Redevelopment Authority,
Superior Memorial Hospital Mortgage:
100,000 5.300%, 5/01/04 5/02 at 102 AA 104,758
210,000 5.300%, 11/01/04 5/02 at 102 AA 219,992
150,000 5.600%, 11/01/07 5/02 at 102 AA 157,661
175,000 5.700%, 11/01/09 5/02 at 102 AA 183,022
- -------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 11.8%
Dane County, Wisconsin, Housing Authority, Multifamily
Revenue, Forest Harbor Apartments Project:
25,000 5.900%, 7/1/12 No Opt. Call N/R 25,900
50,000 5.950%, 7/1/13 No Opt. Call N/R 51,516
50,000 6.000%, 7/1/14 No Opt. Call N/R 51,262
425,000 Madison, Wisconsin, Community Development Authority, 12/02 at 102 N/R 435,408
Multifamily Revenue, Nichols Station II Project,
4.950%, 12/01/07
200,000 Milwaukee, Wisconsin, Redevelopment Authority, 8/07 at 102 N/R 204,702
Multifamily Revenue, City Hall, 6.000%, 8/01/22
300,000 Walworth County, Wisconsin, Housing Authority, 9/05 at 102 N/R 303,579
Housing Revenue, Kiwanis Heritage Senior
Apartments, 5.550%, 9/1/22
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily -- continued
Waukesha, Wisconsin, Housing Authority, Multifamily
Revenue Refunding, Westgrove Woods, Series A:
$ 350,000 5.800%, 12/01/18 12/06 at 102 AAA $ 360,623
750,000 6.000%, 12/01/31 12/06 at 102 AAA 778,770
- -------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 3.4%
300,000 Puerto Rico Housing Bank and Finance Agency, 4/05 at 102 AAA 313,341
Single Family Mortgage Revenue, Afford
Housing Mortgage, Portfolio I,
6.250%, 4/01/29
300,000 Virgin Islands Housing Finance Authority, Single 3/05 at 102 AAA 317,085
Family Revenue, Series A, 6.450%, 3/01/16
- -------------------------------------------------------------------------------------------------------------
Industrial/Other -- 0.8%
150,000 Milwaukee, Wisconsin, Redevelopment Authority, 12/01 at 102 A+ 151,271
Redevelopment Revenue, Job Opportunity,
Veterans Housing, 4.500%, 12/01/02
- -------------------------------------------------------------------------------------------------------------
Long Term Care -- 9.5%
Sheboygan County, Wisconsin, Housing Authority,
Housing Revenue Refunding, Rocky Knoll Health
Center Project:
150,000 5.300%, 12/01/17 12/04 at 100 A1 150,192
195,000 5.300%, 12/01/18 12/04 at 100 A1 195,800
395,000 5.300%, 12/01/19 12/04 at 100 A1 396,414
1,000,000 6.150%, 7/20/31 7/04 at 102 N/R 1,037,200
- -------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 1.3%
250,000 Guam Government, Series A, 5.400%, 11/15/18 11/03 at 102 BBB 247,828
- -------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 36.5%
1,500,000 Cudahy, Wisconsin, Community Development Authority, 6/06 at 100 N/R 1,513,905
Redevelopment Lease Revenue, 6.000%, 6/01/11
300,000 Madison, Wisconsin, Community Development Authority, 3/05 at 100 Aa2 326,283
Revenue Lease, Monona Terrace Community and
Convention Center Project, 6.100%, 3/01/10
200,000 Puerto Rico Commonwealth Aqueduct and Sewer 7/06 at 101 1/2 A 194,294
Authority, Revenue Refunding, 5.000%, 7/01/15
320,000 Puerto Rico Commonwealth Highway and Transportation 7/02 at 101 1/2 A 350,845
Authority, Highway Revenue, Series V,
6.625%, 7/01/12
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Wisconsin -- continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited -- continued
$ 200,000 Puerto Rico Commonwealth Highway and Transportation 7/06 at 101 1/2 A $ 201,266
Authority, Highway Revenue, Series Y,
5.500%, 7/01/26
600,000 Puerto Rico Public Buildings Authority, Guaranteed 7/03 at 101 1/2 A 616,662
Public Education and Health Facilities, Refunding,
Series M, 5.750%, 7/01/15
250,000 Puerto Rico Public Buildings Authority, 7/07 at 101 1/2 A 246,000
Government Facilities, Series B, 5.250%, 7/01/21
Southeast, Wisconsin, Professional Baseball Park District
Sales Tax Revenue:
225,000 5.650%, 12/15/16 3/07 at 101 AAA 233,226
600,000 5.800%, 12/15/26 3/07 at 101 AAA 625,926
1,390,000 0.000%, 12/15/27 No Opt. Call AAA 274,497
1,000,000 0.000%, 12/15/29 No Opt. Call AAA 177,160
500,000 Wauwatosa, Wisconsin, Redevelopment Authority, 12/07 at 100 AAA 516,355
Redevelopment Lease Revenue, 5.650%, 12/01/16
1,000,000 Wisconsin Center District, Wisconsin, Tax Revenue, 12/06 at 101 A 1,029,250
Junior Dedicated, Series B, 5.700%, 12/15/20
1,500,000 Wisconsin Center District, Wisconsin, Tax Revenue, No Opt. Call AAA 517,455
Senior Dedicated, Series A, 0.000%, 12/15/17
- -------------------------------------------------------------------------------------------------------------
Transportation -- 2.9%
500,000 Puerto Rico Ports Authority, Special Facilities, 6/06 at 102 BBB- 539,780
American Airlines, Series A, 6.250%, 6/01/26
- -------------------------------------------------------------------------------------------------------------
U.S.Guaranteed -- 3.5%
590,000 Puerto Rico Commonwealth, Public Improvement, 7/02 at 101 1/2 AAA 661,136
6.800%, 7/01/21
- -------------------------------------------------------------------------------------------------------------
Utilities -- 13.1%
Guam Power Authority, Series A:
315,000 6.300%, 10/01/22 10/02 at 102 BBB 328,995
285,000 5.250%, 10/01/23 10/03 at 102 BBB 275,592
500,000 Municipal Electric Authority, Georgia, Project One, 1/07 at 101 AAA 488,665
Subseries B, Refunding, 5.125%, 1/01/20
Puerto Rico Electric Power Authority, Power Revenue,
Formerly Puerto Rico Commonwealth Water Resource
Authority, Series T:
115,000 6.000%, 7/01/16 7/04 at 102 BBB+ 121,548
145,000 6.375%, 7/01/24 7/04 at 102 BBB+ 159,370
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities -- continued
$ 300,000 Puerto Rico Electric Power Authority, Power Revenue, 7/05 at 100 BBB+ $ 295,200
Formerly Puerto Rico Commonwealth Water
Resource Authority, Power Refunding, Series Z,
5.250%, 7/01/21
650,000 Puerto Rico Electric Power Authority, Power Revenue, 7/07 at 101 1/2 AAA 653,029
Formerly Puerto Rico Commonwealth Water
Resource Authority, Series Aa, 5.375%, 7/01/27
125,000 Puerto Rico Telephone Authority, Revenue 1/03 at 101 1/2 A+ 129,682
Refunding, Series M, 5.400%, 1/01/08
- --------------------------------------------------------------------------------------------------------------------------
$20,740,000 Total Investments -- (cost $17,620,210) -- 98.1% 18,359,353
============--------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.9% 349,381
--------------------------------------------------------------------------------------------------------
Net Assets -- 100% $18,708,734
========================================================================================================
* Optional Call Provisions: Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings: Using the higher of Standard & Poor's or
Moody's rating.
N/R-- Investment is not rated.
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets (Unaudited)
November 30, 1997
Nuveen Flagship
Wisconsin
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $18,359,353
Cash 15,641
Receivables:
Fund Manager (note 6) 4,730
Interest 380,496
Shares sold 32,294
Other assets 128
- --------------------------------------------------------------------------------------------------------------
Total assets 18,792,642
- --------------------------------------------------------------------------------------------------------------
Liabilities
Payable for shares redeemed 200
Accrued expenses:
12b-1 distribution and service fees (notes 1 and 6) 3,625
Other 3,889
Dividends payable 76,194
- --------------------------------------------------------------------------------------------------------------
Total liabilities 83,908
- --------------------------------------------------------------------------------------------------------------
Net assets (note 7) $18,708,734
==============================================================================================================
Class A Shares (note 1)
Net assets $17,508,756
Shares outstanding 1,734,633
Net asset value and redemption price per share $ 10.09
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 10.53
==============================================================================================================
Class B Shares (note 1)
Net assets $ 666,921
Shares outstanding 65,932
Net asset value, offering and redemption price per share $ 10.12
==============================================================================================================
Class C Shares (note 1)
Net assets $ 490,487
Shares outstanding 48,509
Net asset value, offering and redemption price per share $ 10.11
==============================================================================================================
Class R Shares (note 1)
Net assets $ 42,570
Shares outstanding 4,208
Net asset value, offering and redemption price per share $ 10.12
==============================================================================================================
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
Statement of Operations (Unaudited)
Six months ended November 30, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Wisconsin
- ------------------------------------------------------------------------------------------
<S> <C>
Investment Income
Tax-exempt interest income (note 1) $463,796
- ------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 46,070
12b-1 service fees - Class A (notes 1 and 6) 16,106
12b-1 distribution and service fees - Class B (notes 1 and 6) 1,578
12b-1 distribution and service fees - Class C (notes 1 and 6) 1,023
Shareholders' servicing agent fees and expenses 6,398
Custodian's fees and expenses 17,354
Trustees' fees and expenses (note 6) 132
Professional fees 4,751
Shareholders' reports -- printing and mailing expenses 2,718
Federal and state registration fees 5,583
Organizational expenses 16,397
Other expenses 298
- ------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 118,408
Expense reimbursement (note 6) (72,905)
- ------------------------------------------------------------------------------------------
Net expenses 45,503
- ------------------------------------------------------------------------------------------
Net investment income 418,293
- ------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 2,947
Net change in unrealized appreciation or depreciation of investments 455,354
- ------------------------------------------------------------------------------------------
Net gain from investments 458,301
- ------------------------------------------------------------------------------------------
Net increase in net assets from operations $876,594
==========================================================================================
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Nuveen Flagship Wisconsin
------------------------------------
Six months ended Year ended
11/30/97 5/31/97*
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 418,293 $ 695,732
Net realized gain from investment transactions
(notes 1 and 4) 2,947 56,143
Net change in unrealized appreciation or depreciation
of investments 455,354 197,701
- ----------------------------------------------------------------------------------------------
Net increase in net assets from operations 876,594 949,576
- ----------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (403,448) (695,122)
Class B (6,669) (113)
Class C (5,966) (292)
Class R (1,087) (179)
- ----------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (417,170) (695,706)
- ----------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 4,323,007 3,122,525
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 268,507 436,454
- ----------------------------------------------------------------------------------------------
4,591,514 3,558,979
- ----------------------------------------------------------------------------------------------
Cost of shares redeemed (482,998) (2,042,200)
- ----------------------------------------------------------------------------------------------
Net increase in net assets
from Fund share transactions 4,108,516 1,516,779
- ----------------------------------------------------------------------------------------------
Net increase in net assets 4,567,940 1,770,649
Net assets at the beginning of period 14,140,794 12,370,145
- ----------------------------------------------------------------------------------------------
Net assets at the end of period $18,708,734 $14,140,794
==============================================================================================
Balance of undistributed net investment
income at end of period $ 1,149 $ 26
==============================================================================================
</TABLE>
* Information represents eight months of Flagship Wisconsin and four months of
Nuveen Flagship Wisconsin (see note 1).
14 See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements (Unaudited)
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 Wisconsin Municipal Bond Fund (the "Fund"),
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 Fund, 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 Wisconsin Double Tax
Exempt Fund ("Flagship Wisconsin") was reorganized into the Trust and renamed
Nuveen Flagship Wisconsin Municipal Bond Fund ("Nuveen Flagship Wisconsin").
Prior to the reorganization, Flagship Wisconsin was a sub-trust of the Flagship
Tax Exempt Funds Trust.
The Fund seeks to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
The prices of municipal bonds in the Fund's investment portfolio are provided by
a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
November 30, 1997, the Fund had no such outstanding purchase commitments.
Interest 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.
15
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
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
The Fund is a separate taxpayer for federal income tax purposes. The Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Wisconsin state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Fund. Net
realized capital gain and market discount distributions are subject to
federal taxation.
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of $1
million or more are sold at net asset value without 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.
16
<PAGE>
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the six months ended November 30, 1997.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
Organizational Expenses
The organizational expenses incurred on behalf of the Fund (approximately
$98,000) will be reimbursed to the Adviser on a straight-line basis over a
period of three years. As of November 30, 1997, $49,085 has been reimbursed.
17
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six months ended 11/30/97 Year ended 5/31/97*
-----------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 327,807 $3,285,608 307,424 $ 2,987,828
Class B 63,457 633,938 2,074 20,074
Class C 40,376 403,461 7,750 75,100
Class R -- -- 4,100 39,523
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 26,078 259,624 44,825 436,398
Class B 395 3,964 6 56
Class C 383 3,838 -- --
Class R 108 1,081 -- --
- --------------------------------------------------------------------------------------
458,604 4,591,514 366,179 3,558,979
- --------------------------------------------------------------------------------------
Shares redeemed:
Class A (48,461) (482,998) (210,809) (2,042,200)
Class B -- -- -- --
Class C -- -- -- --
Class R -- -- -- --
- --------------------------------------------------------------------------------------
(48,461) (482,998) (210,809) (2,042,200)
- --------------------------------------------------------------------------------------
Net increase 410,143 $4,108,516 155,370 $ 1,516,779
======================================================================================
</TABLE>
* Information represents eight months of Flagship Wisconsin and four months of
Nuveen Flagship Wisconsin (see note 1).
18
<PAGE>
3. Distributions to Shareholders
On December 9, 1997, the Fund declared dividend distributions from its tax-
exempt net investment income which were paid on December 31, 1997, to
shareholders of record on December 9, 1997, as follows:
<TABLE>
<S> <C>
- ---------------------------
Dividend per share:
Class A $.0420
Class B .0355
Class C .0375
Class R .0435
- ---------------------------
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities for the six months ended November 30, 1997, aggregated $4,065,557 and
$80,894, respectively. Purchases and sales (including maturities) of temporary
municipal investments for the six months ended November 30, 1997, aggregated
$495,000 and $495,000, respectively.
At November 30, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for the Fund.
At May 31, 1997, the Fund's last fiscal year end, the Fund had an unused capital
loss carryforward of $7,162 available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, the carryforward
will expire in the year 2004.
19
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
5. Unrealized Appreciation (Depreciation)
At November 30, 1997, net unrealized appreciation aggregated $739,143, of which
$740,917 related to appreciated securities and $1,774 related to depreciated
securities.
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, the Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of the 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 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.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $70,100 of which
approximately $60,700 were paid out as concessions to authorized dealers. The
Distributor also received 12b-1 service fees on Class A Shares, substantially
all of which were paid to compensate authorized dealers for providing services
to shareholders relating to their investments.
During the six months ended November 30, 1997, the Distributor compensated
authorized dealers directly with approximately $45,000 in commission advances at
the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the six months
ended November 30, 1997, the Distributor retained approximately $2,600 in such
12b-1 fees. The remaining 12b-1 fees charged to the Fund were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments.
20
<PAGE>
7. Composition of Net Assets
At November 30, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
<S> <C>
Capital paid-in $17,972,657
Balance of undistributed net investment income 1,149
Accumulated net realized gain (loss) from investment transactions (4,215)
Net unrealized appreciation of investments 739,143
- -----------------------------------------------------------------------------------------------
Net assets $18,708,734
===============================================================================================
</TABLE>
21
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
--------------------- ------------------
Net
Nuveen Flagship Net realized and Dividends Net Total
Wisconsin** asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income (b) investments income gains period value (a)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (6/94)
1998 (d) $9.80 $.25 $ .29 $(.25) -- $10.09 5.58%
1997 9.61 .51 .19 (.51) -- 9.80 7.40
1996 9.79 .50 (.18) (.50) -- 9.61 3.35
1995 (c) 9.58 .49 .21 (.49) -- 9.79 7.36*
Class B (2/97)
1998 (d) 9.82 .22 .30 (.22) -- 10.12 5.29
1997 (c) 9.87 .12 (.06) (.11) -- 9.82 .60
Class C (2/97)
1998 (d) 9.82 .22 .30 (.23) -- 10.11 5.29
1997 (c) 9.87 .13 (.07) (.11) -- 9.82 .65
Class R (2/97)
1998 (d) 9.82 .26 .30 (.26) -- 10.12 5.77
1997 (c) 9.87 .15 (.07) (.13) -- 9.82 .84
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ending May 31,
1997, reflects the financial highlights of Flagship Wisconsin.
(a) Total returns are calculated on net asset value without any
sales charge and are not annualized except where noted.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its predecessor
Flagship Financial.
(c) From commencement of class operations as noted.
(d) For the six months ending November 30, 1997.
22
<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
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment(b) ment(b) rate
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 17,509 1.39%* 4.15%* .52%* 5.02%* --%
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
667 2.13* 3.39* 1.26* 4.26* --
20 2.18* 3.57* .94* 4.81* 42
490 1.94* 3.58* 1.06* 4.46* --
76 1.98* 3.62* .69* 4.91* 42
43 1.19* 4.35* .32* 5.22* --
40 1.28* 4.39* -- 5.67* 42
- ----------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
Additional Investment Opportunities
To purchase additional shares of your Nuveen Fund, contact your financial
adviser. If you would like to add to your current investment on a regular basis,
you can sign up for Nuveen's systematic investing program, which allows you to
invest a fixed dollar amount every month automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you give your investment the added
growth potential of long-term compounding.
For more information on any of these service options, call your adviser, or
Nuveen at (800) 225-8530.
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth Funds
Nuveen Rittenhouse Growth Fund
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate
Limited Term
State Funds
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
24
<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
Boston Financial Data Service
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, Illinois
25
<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
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
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 products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 225-8530 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 225-8530
www.nuveen.com
VSA-WI-11.97
<PAGE>
NUVEEN
Municipal
Bond Funds
November 30, 1997
Semiannual Report
[PHOTO APPEARS HERE]
Dependable, tax-free income
to help you keep more of
what you earn.
Missouri
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Performance Overview
8 Portfolio of Investments
18 Statement of Net Assets
19 Statement of Operations
20 Statement of Changes in Net Assets
21 Notes to Financial Statements
27 Financial Highlights
30 Additional Investment Opportunities
31 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime
to build. Once achieved,
it should be preserved.
It's a pleasure to share with you the Nuveen Flagship Missouri Municipal Bond
Fund's outstanding performance record for the 12 months ended November 30, 1997.
Over the past year, investors continued to enjoy attractive, tax-free dividends
generated by the fund's portfolio of municipal bonds. As of November 30, 1997,
Class A shareholders were receiving a current yield on net asset value of 4.50%.
To match this yield, investors in the 35% combined federal and state income tax
bracket would have had to earn at least 6.92% on taxable alternatives.
During this same period, the fund provided Class A shareholders with a
competitive total return on net asset value of 7.30% with income reinvested,
outpacing the average return of 6.57% for its peer group, the Lipper Missouri
municipal bond fund category. You will find additional details on the fund's
performance on pages 6-7.
The Year in Review Over the past year, U.S. investors have benefited from robust
economic growth with little evidence of inflationary pressures. With
unemployment rates at 20-year lows and the current economic expansion entering
its seventh year, the presence of benign inflation has sparked debate over
whether the traditional link between growth and inflation has been broken.
During 1997, expectations that excess growth would generate inflation disrupted
the markets on several occasions, most notably following the Federal Reserve's
interest rate tightening in March and speeches by Fed Chairman Alan Greenspan.
Still, falling
1
<PAGE>
"The events of 1997 have focused renewed attention on the need for diversication
and appropriate asset allocation."
commodity prices kept producer prices in check, while low import prices--due in
part to the weakness in Asian markets--limited U.S. companies' ability to raise
consumer prices. This combination has kept inflation subdued and the Federal
Reserve "on hold" since March. The reduction in the federal deficit and passage
of the Taxpayer Relief Act of 1997 offer additional encouragement to long-term
fixed-income investors.
Helping You Build A Better Portfolio
The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation. Stock market volatility,
especially late in the year, provided a vivid illustration of the steadying
effect that fixed-income investments can provide in a well-constructed
investment portfolio. Nuveen mutual funds provide an excellent balance to other
stock and bond investments. Your financial adviser can introduce you to a
variety of other Nuveen products and services to round out your investment
portfolio, including the Nuveen Growth and Income Stock Fund and two balanced
stock and bond funds.
In addition, we recently expanded our private asset management capabilities
through the acquisition of Rittenhouse Financial Services, a well-respected
growth investment manager. We encourage you to talk with your financial adviser
about ways to complement your current Nuveen investments by taking advantage of
these additional products and services.
We at Nuveen remain committed to providing you with quality investment solutions
that withstand the test of time. We thank you for your confidence in us and our
family of investments, and we look forward to our next report to you.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
January 15, 1998
2
<PAGE>
Answering Your Questions
[PHOTO OF TED NEILD APPEARS HERE]
Ted Neild, managing director of Nuveen's portfolio management team, talks about
the municipal bond market and offers insights into factors that affected the
performance of the fund over the past year.
What economic and market factors influenced the performance of municipal bonds
over the past year?
Over the past 12 months, the performance of the municipal bond market was
influenced by three major factors: the continued strength of the U.S. economy,
minimal inflation, and volatility in the equity markets. During 1997, these
factors contributed to a positive environment for fixed-income investments, as
reflected in the steady-to-declining interest rates evident during the year.
Between December 1996 and November 1997, the yield on the 30-year Treasury bond
dropped from 6.36% to 6.05%, and the municipal market followed suit, as the
yield on the Bond Buyer 40 declined from 5.63% to 5.36%. The spread between tax-
free municipal bonds and taxable Treasury bonds remained tight, making municipal
bonds very attractive. The strong total returns produced in this environment
were somewhat muted by a heavy supply of newly issued bonds that temporarily
reduced bond prices. The increased supply worked to our advantage, however, as
it expanded opportunities to find value in the marketplace.
How has the fund performed during this period?
As Tim mentioned in his letter to shareholders, the fund performed well during
the one-year period ended November 30, 1997. The total return on net asset value
for Class A shares of the fund was 7.30%, which compares favorably with the one-
year average return of 6.57% for the peer group of Missouri municipal bond funds
3
<PAGE>
"The price appreciation
of the bonds in the
portfolio has allowed
us to maintain strong
dividends even as
interest rates fell during
the year."
tracked by Lipper Analytical Services--a 73 basis point difference. Once again,
this fund was one of the top performers in its category, ranking third among the
22 municipal bond funds in the grouping.
Given the current municipal market, where were you able to find value?
One of the ways that we achieved such outstanding performance and created value
for shareholders was by finding well-structured bonds to add to the portfolio.
We looked for bonds with the combination of maturity, credit quality and call
protection that we felt would appreciate in value. Well-structured state bonds
are becoming more difficult to find in the competitive marketplace, so those
bonds in our portfolio are increasing in value. The price appreciation of the
bonds in the portfolio has allowed us to maintain strong dividends even as
interest rates fell during the year.
What are your key strategies for the coming year?
To sustain this level of performance, we take a holistic approach to portfolio
management--assessing all of the factors that determine a fund's performance and
taking advantage of all of them to contribute to total return and dividend
stability. In the coming year, we will continue to selectively purchase the
bonds that we feel will keep the portfolio balanced in all of these areas.
With the future of the economy so uncertain and many experts calling for a
market correction, we will lean toward a more cautious portfolio management
strategy in the coming months.
4
<PAGE>
"Looking at the year ahead,
we believe the overall
market will continue to
strike a good balance
between supply and
demand."
As part of our value investing approach, we will also continue to look for
individual bonds that offer good long-term value with the potential for
appreciating returns. Our thorough research helps us find investment quality
bonds that offer the best values--such as bonds from specific regions and
sectors that have the best potential for performance and appreciation. We plan
to continue to search for bonds with pre-refunding potential, as well as those
that we feel are undervalued by the market as a whole.
What is your outlook for the municipal market?
Looking at the year ahead, we believe the overall market will continue to strike
a good balance between supply and demand. We expect supply to increase as new
issuers continue to enter the market. A continued decline in yields could also
cause new supply to come to market through refunding of current debt. On the
demand side, volatility in the equity markets, plus the potential for a
weakening of the economy, could spark increased interest in bonds of all types.
The financial crises in Asia, coupled with the continued strength of the dollar
and low commodity prices, are all contributing to the excellent inflation
picture. This backdrop should help offset stronger labor markets and limit the
effects of any bond market corrections. In the meantime, positive underlying
fundamentals provide good support for the municipal market.
5
<PAGE>
Nuveen Flagship Missouri
Municipal Bond Fund
Performance Overview
As of November 30, 1997
<TABLE>
<CAPTION>
Fund Highlights
==========================================================================================================
<S> <C> <C> <C> <C>
Share Class A B C R
Inception Date 8/87 2/97 2/94 2/97
- ----------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) $11.11 $11.10 $11.10 $11.11
- ----------------------------------------------------------------------------------------------------------
CUSIP 67065R812 67065R796 67065R788 67065R770
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Total Net Assets ($000) $240,954
- ----------------------------------------------------------------------------------------------------------
Average Weighted Maturity (Years) 20.19
- ----------------------------------------------------------------------------------------------------------
Average Weighted Duration (Years) 7.68
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/1/
========================================================================================================
<S> <C> <C> <C> <C> <C>
Share Class A(NAV) A(Offer) B C R
1-Year 7.30% 2.77% 6.45% 6.72% 7.47%
- --------------------------------------------------------------------------------------------------------
5-Year 7.00% 6.09% 6.37% 6.40% 7.04%
- --------------------------------------------------------------------------------------------------------
10-Year 8.38% 7.92% 7.91% 7.78% 8.40%
- --------------------------------------------------------------------------------------------------------
Tax-Free Yields
========================================================================================================
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.02% 4.81% 4.27% 4.49% 5.24%
- --------------------------------------------------------------------------------------------------------
SEC 30-Day Yld 4.50% 4.31% 3.75% 3.95% 4.70%
- --------------------------------------------------------------------------------------------------------
Taxable Equiv Yld/2/ 6.92% 6.63% 5.77% 6.08% 7.23%
- --------------------------------------------------------------------------------------------------------
</TABLE>
1 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum up-front sales charge. Class B shares have a
contingent deferred sales charge (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 B
shares automatically convert to Class A shares eight years after purchase.
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%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
6
<PAGE>
Credit Quality
[PIE CHART APPEARS HERE]
BBB/NR 19%
A 17%
AA 8%
AAA/Pre-refunded 56%
- -------------------------------
Diversification
[PIE CHART APPEARS HERE]
Health Care 13%
U.S. Guaranteed 10%
Long-Term Care 9%
Education/Civic Org. 8%
Housing (Multi-Family) 8%
Housing (Single-Family) 8%
Utilities 7%
Tax Obligation (G.O.) 6%
Transportation 5%
Water & Sewer 5%
Other 1%
Tax Obligation (Limited) 20%
- -------------------------------
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
12/96 0.04743
1/97 0.04756
2/97 0.0467
3/97 0.0467
4/97 0.0467
5/97 0.0467
6/97 0.0465
7/97 0.0465
8/97 0.0465
9/97 0.0465
10/97 0.0465
11/97 0.0465
7
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Missouri
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 7.5%
$1,000,000 Missouri Higher Education Loan Authority, Student 2/02 at 102 A $1,059,950
Loan Revenue, Sub Lien, 6.500%, 2/15/06
4,190,000 Missouri Higher Educationl Loan Authority, Student 2/04 at 102 A 4,517,281
Loan Revenue, Series F, 6.750%, 2/15/09
3,630,000 Missouri Health and Educational Facilities Authority, 6/04 at 102 A2 3,848,780
Educational Facilities Revenues, University Health
Sciences Project, 6.350%, 6/01/14
1,500,000 Missouri Health and Educational Facilities Authority, 10/04 at 101 A2 1,585,080
Educational Facilities Revenue, St. Louis University
High School, 6.350%, 10/01/14
1,200,000 Missouri Health and Educational Facilities Authority, 10/06 at 102 AAA 1,180,536
Educational Facilities Revenue, St. Louis University,
5.200%, 10/01/26
Missouri 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 1,510,194
1,000,000 5.750%, 6/15/17 6/07 at 101 Baa1 1,024,570
Saint Louis County, Missouri, Industrial Development
Authority, Industrial Revenue, Kiel Center
Multipurpose Arena:
650,000 7.625%, 12/01/09 12/02 at 102 N/R 705,159
1,000,000 7.750%, 12/01/13 12/02 at 102 N/R 1,087,940
500,000 7.875%, 12/01/24 12/02 at 102 N/R 546,635
1,000,000 University of Missouri, University Revenues, 11/07 at 101 AA+ 1,043,550
System Facilities, 5.800%, 11/01/27
- -------------------------------------------------------------------------------------------------------------------------------
Health Care - 12.5%
415,000 Dent County, Missouri, Industrial Development Authority, 6/01 at 102 N/R 448,366
Industrial Development Revenue, Southeast Missouri
Community Treatment Center, 8.500%, 6/01/12
775,000 Farmington, Missouri, Industrial Development Authority, 6/01 at 102 N/R 841,666
Industrial Development Revenue, Southeast Missouri
Community Treatment Center, 8.500%, 6/01/12
1,150,000 Hannibal, Missouri, Industrial Development Authority, 3/06 at 102 AAA 1,197,829
Health Facilities Revenue, Hannibal Regional
Hospital, Series A, 5.750%, 3/01/22
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care - continued
Jackson County, Missouri, Industrial Development
Authority, Health Care Corporation Revenue,
St. Joseph Health Center:
$2,000,000 6.500%, 7/01/12 7/02 at 102 AAA $2,172,420
6,250,000 6.500%, 7/01/19 7/02 at 102 AAA 6,783,375
250,000 Joplin, Missouri, Catholic Health Corporation, Industrial 6/99 at 100 AAA 255,580
Development Authority, Health Facilities Revenue,
St. Johns Regional Medical, 7.125%, 6/01/14
2,565,000 Missouri Health and Educational Facilities Authority, 2/02 at 102 AAA 2,759,401
Health Facilities Revenue, Health Midwest, Series B,
6.250%, 2/15/12
555,000 Missouri Health and Educational Facilities Authority, 11/02 at 102 BBB+ 604,900
Health Facilities Revenue, Heartland Health System
Project, 6.875%, 11/15/04
Missouri Health and Educational Facilities Authority,
Health Facilities Revenue, BJC Health System, Series A:
2,450,000 6.750%, 2/15/12 No Opt. Call AA 2,880,710
650,000 6.500%, 5/15/20 5/04 at 102 AA 704,451
1,000,000 Missouri Health and Educational Facilities Authority, 2/06 at 102 BBB+ 1,063,580
Health Facilities Revenue, Lake of the Ozarks
General Hospital, 6.500%, 2/15/21
Missouri Health and Educational Facilities Authority,
Health Facilities Revenue, Lester Cox Center, Series H:
2,650,000 0.000%, 9/01/17 No Opt. Call AAA 928,295
5,690,000 0.000%, 9/01/21 No Opt. Call AAA 1,589,672
6,300,000 0.000%, 9/01/22 No Opt. Call AAA 1,668,114
200,000 Missouri Health and Educational Facilities Authority, 10/99 at 102-1/2 BBB+ 217,526
Health Facilities Revenue Refunding and
Improvement, Heartland Health, 8.125%, 10/01/10
300,000 Missouri Health and Educational Facilities Authority, 11/05 at 100 BBB 300,723
Health Facilities Revenue, C E Still Osteopathic
Hospital, 7.625%, 2/01/08
1,000,000 Missouri Environmental Improvement and Energy No Opt. Call A3 1,096,710
Resource Authority, Pollution Control Revenue,
American Cyanamid Company, 5.800%, 9/01/09
University of Missouri Health Facilities Revenue,
University of Missouri Health System, Series A:
3,205,000 5.500%, 11/01/16 11/06 at 102 AAA 3,270,831
1,390,000 5.600%, 11/01/26 11/06 at 102 AAA 1,421,873
</TABLE>
9
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Missouri -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily -- 7.8%
$ 2,000,000 Missouri Economic Development Export and 9/99 at 102 AA $2,100,160
Infrastructure Board, Multifamily Revenue, Quality
Hill Projects, Series A, 7.500%, 9/15/21
885,000 Missouri Housing Development Commission, 12/05 at 103 N/R 911,258
Multifamily, Primm Place Apartments, Series A,
6.250%, 12/01/17
2,000,000 Saint Louis County, Missouri, Housing Authority, 3/05 at 102 AAA 2,129,080
Multifamily Housing Revenue, Kensington Square
Apartments Project, 6.650%, 3/01/20
500,000 Saint Louis County, Missouri, Industrial Development 3/99 at 102 AAA 519,620
Authority, Multifamily Housing Revenue, Lucas and
Hunt Village Project, 7.500%, 9/20/19
9,105,000 Saint Louis County, Missouri, Industrial Development 8/06 at 105 AAA 9,815,281
Authority, Multifamily Housing Revenue, Covington
Manor Apartments, Series A, 6.875%, 8/20/36
1,890,000 St. Louis, Missouri, Land Clearance Redevelopment 5/03 at 102 AAA 1,961,366
Authority, Multifamily Revenue, St. Louis Place
Apartments, 6.250%, 8/01/27
1,425,000 University City, Missouri, Industrial Development 8/07 at 102 Aaa 1,460,027
Authority, River Valley Apartments, Series A,
5.900%, 2/20/37
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 8.2%
2,950,000 Greene County, Missouri, Single Family Mortgage No Opt. Call AAA 3,163,787
Revenue, 6.300%, 12/01/22
1,940,000 Missouri Housing Development Commission, Mortgage 3/07 at 102 AAA 2,013,448
Revenue, Homeowner Loan, Series D,
6.125%, 3/01/28
1,000,000 Missouri Housing Development Commission, Mortgage 3/07 at 105 AAA 1,122,270
Revenue, Homeowner Loan, Series A-2,
7.300%, 3/01/28
265,000 Missouri Housing Development Commission, Mortgage 3/07 at 101 AAA 270,907
Revenue, Homeowner Loan, Series B-2,
5.900%, 9/01/28
Missouri Housing Development Commission, Mortgage
Revenue Series B:
2,350,000 6.375%, 9/01/20 9/06 at 102 AAA 2,472,153
1,880,000 6.450%, 9/01/27 9/06 at 102 AAA 1,990,469
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family -- continued
$ 935,000 Missouri Housing Development Commission, Mortgage 6/00 at 102 AAA $ 985,565
Revenue, GNMA Mortgage, Series B,
7.750%, 6/01/22
Missouri Housing Development Commission, Mortgage
Revenue, Series A:
500,000 6.700%, 12/01/07 12/04 at 102 AAA 525,645
2,210,000 7.125%, 12/01/14 12/04 at 102 AAA 2,358,888
980,000 7.200%, 12/01/17 12/04 at 102 AAA 1,047,561
145,000 7.625%, 2/01/22 2/00 at 102 AAA 151,848
1,650,000 7.375%, 8/01/23 2/01 at 102 AAA 1,748,258
1,775,000 Missouri State Housing Development Commission, 9/07 at 101 AAA 1,794,951
Mortgage Revenue, Series C, 5.500%, 9/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial/Other -- 1.2%
500,000 Jefferson City, Missouri, Industrial Development 4/00 at 100 N/R 512,520
Revenue, Scholastic Inc. Project, 7.200%, 4/01/03
2,175,000 Missouri Economic Development Export and 12/01 at 102 N/R 2,335,341
Infrastructure Board, Industrial Development
Revenue, Drury Inn Project, 8.250%, 12/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Care -- 8.2%
1,000,000 Lee's Summit, Missouri, Industrial Development 8/05 at 102 N/R 1,055,860
Authority, Health Facilities Revenue, John Knox
Village Project, 6.625%, 8/15/13
3,750,000 Missouri Health and Educational Facilities Authority, 2/06 at 102 N/R 3,927,113
Health Facilities Revenue, Lutheran Senior Services,
Series A, 6.375%, 2/01/27
3,000,000 Missouri Health and Educational Facilities Authority, 2/07 at 102 N/R 3,040,200
Health Facilities Revenue, Lutheran Senior Services,
5.875%, 2/01/23
Saint Louis County, Missouri, Industrial Development
Authority, Friendship Village West County, Series A:
1,265,000 5.750%, 9/01/05 No Opt. Call N/R 1,327,769
1,800,000 6.250%, 9/01/10 9/06 at 102 N/R 1,918,890
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 5,163,882
2,650,000 7.625%, 2/01/22 2/02 at 102 N/R 3,022,670
</TABLE>
11
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Missouri-continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long Term Care - continued
$2,425,000 St. Louis County, Missouri, Industrial Development 8/05 at 104 AAA $2,608,112
Authority, Health Facilities Revenue, Mother of
Perpetual Help, 6.250%, 8/01/28
- --------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 6.8%
40,000 Clay County, Missouri, Public Water Supply 6/01 at 100 N/R 40,531
District No 6, 8.200%, 6/01/01
1,000,000 Jefferson City, Missouri, School District, Series A, No Opt. Call Aa 1,179,270
6.700%, 3/01/11
2,200,000 Missouri, Fourth State Building, Series A, 8/06 at 100 AAA 2,237,752
5.500%, 8/01/21
Puerto Rico Commonwealth:
2,500,000 6.450%, 7/01/17 7/04 at 102 A 2,770,000
2,400,000 5.000%, 7/01/21 7/03 at 100 A 2,297,352
3,350,000 6.500%, 7/01/23 7/04 at 101 1/2 A 3,701,114
1,500,000 Troy, Missouri, Reorganization School District No 3, 3/05 at 100 AAA 1,649,520
Lincoln County, 6.100%, 3/01/14
- --------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 19.9%
2,285,000 Branson, Missouri, Public Building Corporation, 11/06 at 101 BBB 2,385,677
Leasehold Revenue, City Hall and Fire Station
Improvements, 6.250%, 11/01/12
Branson, Missouri, Tax Increment Allocation Revenue,
Branson Meadows Project, Series A:
1,095,000 6.700%, 11/01/07 No Opt. Call N/R 1,123,470
1,245,000 6.950%, 11/01/09 No Opt. Call N/R 1,277,358
1,500,000 Clay County, Missouri, Public Building Authority, 5/02 at 102 N/R 1,636,935
Leasehold Revenue Refunding and Improvement,
Paradise Point Golf Project, 7.625%, 5/15/14
1,025,000 Excelsior Springs, Missouri, School District Building No Opt. Call AAA 444,891
Corporation, Leasehold Revenue, Excelsior Springs
40 School District, 0.000%, 3/01/14
Jackson County, Missouri, Public Facilities Authority,
Insured Leasehold Revenue Refunding and
Improvement, Capital Imports Project:
2,000,000 6.125%, 12/01/15 12/04 at 100 AAA 2,120,120
3,010,000 5.375%, 12/01/16 12/06 at 101 AAA 3,048,679
1,200,000 Kansas City, Missouri, Land Clearance Redevelopment 12/05 at 102 AAA 1,280,952
Authority, Lease Revenue, Municipal Auditorium and
Muehlebach Hotel, Series A, 5.900%, 12/01/18
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - continued
Kansas City, Missouri, Municipal Assistance Corporation,
Leasehold Improvement, Truman Medical, Series A:
$ 645,000 7.000%, 11/01/09 11/01 at 100 A $ 682,055
695,000 7.000%, 11/01/10 11/01 at 100 A 734,045
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 1,050,559
2,720,000 7.550%, 12/01/14 12/02 at 103 N/R 2,801,627
250,000 Missouri School Boards Association, Lease 9/98 at 100 AAA 252,115
Participation Certificates, School District Valley Park,
Series A, 7.375%, 3/01/10
1,500,000 Missouri School Boards Association, Lease 3/06 at 101 AAA 1,577,760
Participation Certificates, No. 6 School District,
Series C, 5.625%, 3/01/11
320,000 Missouri Certificates of Participation, Psychiatric 11/05 at 100 AA 330,771
Rehabilitation Center Project, Series A,
6.000%, 11/01/15
1,500,000 Puerto Rico Commonwealth Highway and 7/02 at 101 1/2 A 1,644,585
Transportation Authority, Highway Revenue,
Series V, 6.625%, 7/01/12
5,900,000 Puerto Rico Commonwealth Highway and 7/16 at 100 A 5,989,208
Transportation Authority, Highway Revenue,
Series Y, 5.500%, 7/01/36
1,400,000 Puerto Rico Commonwealth Highway and No Opt. Call AAA 1,480,360
Transportation Authority, Highway Revenue,
Series W, 5.500%, 7/01/15
4,500,000 Puerto Rico Public Buildings Authority, Series L, No Opt. Call A 4,682,025
5.500%, 7/01/21
250,000 Puerto Rico Public Buildings Authority, Government 7/07 at 101 1/2 A 246,000
Facilities, Series B, 5.250%, 7/01/21
4,650,000 St. Louis County, Missouri, Regional Convention 8/03 at 102 A 4,724,772
and Sports Complex Authority, Convention and
Sports Project, Series B, 5.750%, 8/15/21
1,370,000 Saint Louis, Missouri, Land Clearance Redevelopment 7/00 at 102 N/R 1,511,165
Authority, Stadium East Redevelopment Project,
7.750%, 7/01/21
300,000 Saint Louis, Missouri, Land Clearance Redevelopment No Opt. Call AAA 294,945
Authority, Kiel Site Lease, Series A, 5.125%, 7/01/21
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship Missouri -- continued
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- continued
<S> <C> <C> <C> <C>
$ 930,000 Saint Louis, Missouri, Land Clearance 7/07 at 101 AAA $ 933,990
Redevelopment Authority, Kiel Site Lease,
Series B, 5.300%, 7/01/16
St. Louis, Missouri, Regional Convention and
Sports Complex Authority, Convention and Sports
Facility, Series C:
1,660,000 5.300%, 8/15/17 8/07 at 100 AAA 1,668,615
4,000,000 5.300%, 8/15/20 8/07 at 100 AAA 3,963,160
45,000 7.900%, 8/15/21 8/03 at 100 N/R 50,299
- ------------------------------------------------------------------------------------------------------------------------
Transportation -- 5.1%
2,000,000 Puerto Rico Ports Authority, 6/06 at 102 BBB- 2,159,120
Special Facilities, American Airlines,
Series A, 6.250%, 6/01/26
300,000 Saint Louis, Missouri, Airport Revenue, 7/07 at 101 AAA 294,840
Lambert, St. Louis International
Airport, Series A, 5.125%, 7/01/22
Saint Louis, Missouri, Airport Revenue, Lambert,
St. Louis International, Series B:
600,000 5.250%, 7/01/17 7/07 at 101 AAA 597,426
545,000 5.250%, 7/01/22 7/07 at 101 AAA 536,100
4,740,000 5.250%, 7/01/27 7/07 at 101 AAA 4,655,912
4,050,000 Saint Louis, Missouri, Parking 12/06 at 102 AAA 4,047,165
Facility Revenue, 5.375%, 12/15/21
- ------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 9.4%
4,500,000 Cape Girardeau County, Missouri, No Opt. Call Aaa 1,840,860
Single Family Mortgage Revenue, 0.000%,
12/01/14
100,000 Cass County, Missouri, Public Water 10/98 at 101 N/R*** 104,402
Supply District No 2, 8.000%, 10/01/10
(Pre-refunded to 10/01/98)
50,000 Clark County, Missouri, Public Water Supply 12/98 at 101 N/R*** 52,641
District No 1, Water System Revenue,
8.250%, 12/01/15 (Pre-refunded to 12/01/98)
50,000 Concordia, Missouri, Waterworks and Sewer System 7/98 at 100 N/R*** 51,325
Revenue, 8.375%, 7/01/08 (Pre-refunded to 7/01/98)
50,000 Cooper County, Missouri, Nursing Home District, 3/98 at 100 N/R*** 50,432
8.375%, 3/01/08 (Pre-refunded to 3/01/98)
50,000 De Kalb County, Missouri, Public Water Supply 1/99 at 101 N/R*** 52,637
District No 001, Waterworks Revenue,
8.000%, 1/01/09 (Pre-refunded to 1/01/99)
2,070,000 Greene County, Missouri, Single Family No Opt. Call Aaa 783,143
Mortgage Revenue, Municipal Multiplier,
0.000%, 3/01/16
-----
14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed -- continued
$ 50,000 Hamilton, Missouri, Waterworks Revenue, Junior Lien, 7/99 at 103 1/2 N/R*** $ 54,525
7.750%, 7/01/14 (Pre-refunded to 7/01/99)
50,000 Johnson County, Missouri, Public Water Supply District 5/98 at 100 N/R*** 50,965
No 1, Refunding and Improvement, 8.500%, 5/01/09
(Pre-refunded to 5/01/98)
200,000 Johnson County, Missouri, Public Water Supply District 1/98 at 102 N/R*** 204,832
No 2, 8.500%, 1/01/09 (Pre-refunded to 1/01/98)
4,000,000 Kansas City, Missouri, Airport Revenue, General 9/04 at 101 AAA 4,596,480
Improvement, Series B, 6.875%, 9/01/14
(Pre-refunded to 9/01/04)
2,500,000 Kirkwood, Missouri, Industrial Development Authority, 7/02 at 102 N/R*** 2,755,300
Health Care Corporation Revenue, St. Joseph
Hospital, 6.500%, 7/01/12 (Pre-funded to 7/01/02)
50,000 Knox County, Missouri, Public Water Supply District 1/99 at 101 N/R*** 52,711
No 1, Water System Revenue, 8.000%, 1/01/09
(Pre-refunded to 1/01/99)
50,000 Marion County, Missouri, Public Water Supply District 1/99 at 101 1/2 N/R*** 53,038
No 001, Water Revenue, 8.250%, 1/01/12
(Pre-refunded to 1/01/99)
1,000,000 Missouri Economic Development Export and 5/02 at 100 N/R*** 1,110,830
Infrastructure Board, Industrial Development
Revenue, Community Water Company Inc. Project,
7.125%, 5/01/17 (Pre-refunded to 5/15/02)
100,000 Missouri Health and Educational Facilities Authority, 4/98 at 101 Aaa 102,351
Health Facilities Revenue, Bethesda Health Group Inc.
Project, 7.875%, 4/01/08 (Pre-refunded to 4/01/98)
100,000 Missouri Health and Educational Facilities Authority, 2/99 at 102 N/R*** 106,575
Health Facilities Revenue, Lake of the Ozarks
Hospital, 8.000%, 2/15/11 (Pre-refunded to 2/15/99)
650,000 Missouri Health and Educational Facilities Authority, 6/00 at 102 AAA 717,529
Health Facilities Revenue, SSM Health Care
Projects, Series B, 7.000%, 6/01/15
155,000 Missouri Environmental Improvement and Energy 10/00 at 102 Aa1*** 169,627
Resource Authority, Water Pollution Control Revenue,
Revolving Fund, Series A, 7.000%, 10/01/10
(Pre-refunded to 10/01/00)
</TABLE>
15
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Missouri -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed -- continued
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 $ 552,850
1,250,000 8.300%, 3/01/20 (Pre-refunded to 3/01/00) 3/00 at 102 AAA 1,384,713
100,000 Pike County, Missouri, Public Water Supply District 7/99 at 101 N/R*** 106,813
No 1, Water Revenue, 7.750%, 7/01/09
(Pre-refunded to 7/01/99)
1,000,000 St. Louis County, Missouri, Regional Convention and 8/03 at 100 AAA 1,131,360
Sports Complex Authority, Series B, 7.000%,
8/15/11 (Pre-refunded to 8/15/03)
350,000 St. Louis, Missouri, Municipal Finance Corporation, 2/05 at 100 AAA 387,916
Leasehold Revenue Refunding and Improvement,
6.250%, 2/15/12 (Pre-refunded to 2/15/05)
3,975,000 Saint Louis, Missouri, Parking Facility Revenue, 12/02 at 102 AA-*** 4,395,078
6.625%, 12/15/21 (Pre-refunded to 12/15/02)
955,000 St. Louis, Missouri, Regional Convention and Sports 8/03 at 100 Aaa 1,123,472
Complex Authority, Series C, 7.900%, 8/15/21
(Pre-refunded to 8/15/03)
445,000 Saint Louis, Missouri, School District, 10/01 at 102 AAA 492,344
6.750%, 4/01/11 (Pre-refunded to 10/01/01)
Vandalia, Missouri, Water and Sewer System Revenue:
50,000 7.625%, 4/01/06 (Pre-refunded to 4/01/00) 4/00 at 100 N/R*** 54,424
50,000 7.625%, 4/01/07 (Pre-refunded to 4/01/00) 4/00 at 100 N/R*** 54,424
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities -- 7.3%
2,025,000 Higginsville, Missouri, Electric Light System 6/03 at 101 AAA 2,240,075
Revenue, Series A, 6.750%, 6/01/16
1,500,000 Missouri Environmental Improvement and Energy 5/00 at 102 AA- 1,629,465
Resource Authority, Improvement Revenue, Union
Electric Company Project, Series A, 7.400%, 5/01/20
1,500,000 Puerto Rico Electric Power Authority, Power Revenue, No Opt. Call AAA 561,375
Formerly Puerto Rico Commonwealth Water Resource
Authority, Series O, 0.000%, 7/01/17
Sikeston, Missouri, Electric Revenue:
2,000,000 6.200%, 6/01/10 No Opt. Call AAA 2,257,000
2,750,000 6.000%, 6/01/13 No Opt. Call AAA 3,052,143
1,070,000 6.000%, 6/01/14 No Opt. Call AAA 1,186,106
6,000,000 6.000%, 6/01/16 No Opt. Call AAA 6,661,020
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer -- 4.4%
$ 50,000 Callaway County, Missouri, Public Water Supply District 1/98 at 102 N/R $ 51,159
No 1, Series B, 8.375%, 1/01/05
50,000 Carroll County, Missouri, Public Water Supply District 3/99 at 101 N/R 52,919
No 1, Water System Revenue, 8.000%, 3/01/09
400,000 East Central, Missouri, Water and Sewer Authority, 8/00 at 100 N/R 412,888
Water System Revenue, St. Charles County, Public
Water Project, 7.000%, 8/01/08
1,150,000 Missouri Environmental Improvement and Energy 2/98 at 102 AAA 1,177,853
Resource Authority, Water Facility Revenue, St. Louis
County, Water Company Project, 6.900%, 2/01/21
Missouri Environmental Improvement and Energy
Resource Authority, Water Pollution Control Revenue,
State Revolving Fund, Series A:
595,000 7.000%, 10/01/10 10/00 at 102 Aa1 642,213
3,600,000 6.875%, 6/01/14 12/01 at 102 Aa1 3,956,688
2,000,000 6.550%, 7/01/14 7/02 at 102 Aa1 2,183,420
600,000 Missouri Environmental Improvement and Energy 7/04 at 102 Aa1 692,244
Resource Authority, Water Pollution Control Revenue,
State Revolving Fund Program, Series B,
7.200%, 7/01/16
1,400,000 Missouri Environmental Improvement and Energy 1/07 at 101 Aa1 1,403,430
Resource Authority, Water Pollution Control Revenue,
State Revolving Fund Program, Series E,
5.250%, 1/01/19
125,000 Osceola Township, Missouri, Public Schools, 11/99 at 100 N/R 132,091
Refunding and Improvement, 8.000%, 11/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
$238,960,000 Total Investments -- (cost $221,078,001) -- 98.3% 236,758,522
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.7% 4,195,951
------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $240,954,473
------------------------------------------------------------------------------------------------------------------
* Optional Call Provisions: Dates (month and year) and
prices of the earliest optional call or redemption. There
may be other call provisions at varying prices at later
dates.
** Ratings: Using the higher of Standard and 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
</TABLE>
17 See accompanying notes to financial statements.
<PAGE>
Statement of Net Assets (Unaudited)
November 30, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Missouri
- -------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $ 236,758,522
Receivables:
Interest 4,752,995
Investments sold 255,000
Shares sold 496,413
Other assets 2,584
- -------------------------------------------------------------------------------
Total assets 242,265,514
- -------------------------------------------------------------------------------
Liabilities
Cash overdraft 54,619
Payable for shares redeemed 72,469
Accrued expenses:
Management fees (note 6) 107,362
12b-1 distribution and service fees (notes 1 and 6) 44,829
Other 27,579
Dividends payable 1,004,183
- -------------------------------------------------------------------------------
Total liabilities 1,311,041
- -------------------------------------------------------------------------------
Net assets (note 7) $ 240,954,473
===============================================================================
Class A Shares (note 1)
Net assets $ 229,501,940
Shares outstanding 20,655,389
Net asset value and redemption price per share $ 11.11
Offering price per share (net asset value per share
plus maximum sales charge of 4.20% of offering price) $ 11.60
===============================================================================
Class B Shares (note 1)
Net assets $ 918,774
Shares outstanding 82,744
Net asset value, offering and redemption price per share $ 11.10
===============================================================================
Class C Shares (note 1)
Net assets $10,492,818
Shares outstanding 944,885
Net asset value, offering and redemption price per share $ 11.10
===============================================================================
Class R Shares (note 1)
Net assets $ 40,941
Shares outstanding 3,686
Net asset value, offering and redemption price per share $ 11.11
===============================================================================
See accompanying notes to financial statements.
</TABLE>
- -----
18
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations (Unaudited)
Six months ended November 30, 1997
Nuveen Flagship
Missouri
-----------------------------------------------------------------------------------------------------------
<S> <C>
Investment Income
Tax-exempt interest income (note 1) $ 7,046,713
-----------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 642,338
12b-1 service fees-Class A (notes 1 and 6) 225,889
12b-1 distribution and service fees-Class B (notes 1 and 6) 3,288
12b-1 distribution and service fees-Class C (notes 1 and 6) 35,529
Shareholders' servicing agent fees and expenses 60,191
Custodian's fees and expenses 40,811
Trustees' fees and expenses (note 6) 2,198
Professional fees 9,326
Shareholders' reports-printing and mailing expenses 24,833
Federal and state registration fees 6,019
Other expenses 4,758
-----------------------------------------------------------------------------------------------------------
Total expenses 1,055,180
-----------------------------------------------------------------------------------------------------------
Net investment income 5,991,533
-----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 562,149
Net change in unrealized appreciation or depreciation of investments 5,968,256
-----------------------------------------------------------------------------------------------------------
Net gain from investments 6,530,405
-----------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $12,521,938
===========================================================================================================
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (Unaudited)
Nuveen Flagship Missouri
------------------------------------
Six months ended Year ended
11/30/97 5/31/97*
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 5,991,533 $ 11,733,686
Net realized gain from investment transactions (notes 1 and 4) 562,149 2,027,744
Net change in unrealized appreciation or depreciation of
investments 5,968,256 4,099,492
-----------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 12,521,938 17,860,922
-----------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (5,714,542) (11,399,739)
Class B (14,860) (2,345)
Class C (211,839) (327,591)
Class R (1,017) (457)
------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (5,942,258) (11,730,132)
------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 13,779,662 27,511,231
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 3,704,718 5,920,821
-----------------------------------------------------------------------------------------------------------
17,484,380 33,432,052
-----------------------------------------------------------------------------------------------------------
Cost of shares redeemed (10,489,403) (31,119,487)
-----------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 6,994,977 2,312,565
-----------------------------------------------------------------------------------------------------------
Net increase in net assets 13,574,657 8,443,355
Net assets at the beginning of period 227,379,816 218,936,461
-----------------------------------------------------------------------------------------------------------
Net assets at the end of period $240,954,473 $227,379,816
===========================================================================================================
Balance of undistributed net investment income at end of period $ 52,829 $ 3,554
===========================================================================================================
</TABLE>
*Information represents eight months of Flagship Missouri and four
months of Nuveen Flagship Missouri (see note 1).
See accompanying notes to financial statements.
20
<PAGE>
Notes to Financial Statements (Unaudited)
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
Missouri Municipal Bond Fund (the "Fund"), 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 Fund, 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 Missouri
Double Tax Exempt Fund ("Flagship Missouri") was reorganized into
the Trust and renamed Nuveen Flagship Missouri Municipal Bond Fund
("Nuveen Flagship Missouri"). Prior to the reorganization,
Flagship Missouri was a sub-trust of the Flagship Tax Exempt Funds
Trust.
The Fund seeks to provide high tax-free income and preservation of
capital through investments in a diversified portfolio of quality
municipal bonds.
The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial
statements in accordance with generally accepted accounting
principles.
Securities Valuation
The prices of municipal bonds in the Fund's investment portfolio
are provided by a pricing service approved by the Fund's Board of
Trustees. When price quotes are not readily available (which is
usually the case for municipal securities), the pricing service
establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon,
maturity and rating, indications of value from securities dealers
and general market conditions. Temporary investments in securities
that have variable rate and demand features qualifying them as
short-term securities are valued at amortized cost, which
approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis.
Realized gains and losses from such transactions are determined on
the specific identification method. Securities purchased or sold
on a when-issued or delayed delivery basis may have extended
settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the
custodian to segregate assets in a separate account with a current
value at least equal to the amount of the when-issued and delayed
delivery purchase commitments. At November 30, 1997, the Fund had
no such outstanding purchase commitments.
Interest 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.
21
<PAGE>
Notes to Financial Statements (Unaudited) - continued
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
The Fund is a separate taxpayer for federal income tax purposes.
The Fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its tax-exempt net investment income, in
addition to any significant amounts of net realized capital gains
and/or market discount from investment transactions. The Fund
currently considers significant net realized capital gains and/or
market discount as amounts in excess of $.001 per share.
Furthermore, the Fund intends to satisfy conditions which will
enable interest from municipal securities, which is exempt from
regular federal and Missouri state income taxes, to retain such
tax-exempt status when distributed to the shareholders of the
Fund. Net realized capital gain and market discount distributions
are subject to federal taxation.
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are
sold with a sales charge and incur an annual 12b-1 service fee.
Class A Share purchases of $1 million or more are sold at net
asset value without an up-front sales charge but may be subject to
a 1% contingent deferred sales charge (OCDSCO) 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.
22
<PAGE>
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments
including futures, forward, swap, option contracts, and other
financial instruments with similar characteristics. Although the
Fund is authorized to invest in such financial instruments, and
may do so in the future, it did not make any such investments
during the six months ended November 30, 1997.
Expense Allocation
Expenses of the Fund that are not directly attributable to a
specific class of shares are prorated among the classes based on
the relative net assets of each class. Expenses directly
attributable to a class of shares, which presently only includes
12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of increases and decreases in net assets from
operations during the reporting period.
23
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six months ended 11/30/97 Year ended 5/31/97*
--------------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 962,805 $ 10,613,647 2,299,753 $ 24,630,274
Class B 39,834 438,447 41,987 449,235
Class C 247,420 2,722,778 223,861 2,397,622
Class R 439 4,790 3,129 34,100
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 321,059 3,515,638 537,641 5,747,970
Class B 953 10,476 38 410
Class C 16,277 177,614 16,119 172,138
Class R 90 990 28 303
- --------------------------------------------------------------------------------------------
1,588,877 17,484,380 3,122,556 33,432,052
- --------------------------------------------------------------------------------------------
Shares redeemed:
Class A (896,501) (9,861,078) (2,814,290) (30,112,429)
Class B (68) (749) -- --
Class C (56,855) (627,576) (94,304) (1,007,058)
Class R -- -- -- --
- --------------------------------------------------------------------------------------------
(953,424) (10,489,403) (2,908,594) (31,119,487)
- --------------------------------------------------------------------------------------------
Net increase 635,453 $ 6,994,977 213,962 $ 2,312,565
============================================================================================
</TABLE>
*Information represents eight months of Flagship Missouri and four months of
Nuveen Flagship Missouri (see note 1).
3. Distributions to Shareholders
On December 9, 1997, the Fund declared dividend distributions from its tax-
exempt net investment income which were paid on December 31, 1997, to
shareholders of record on December 9, 1997, as follows:
<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C>
Dividend per share:
Class A $.0465
Class B .0395
Class C .0415
Class R .0485
- --------------------------------------------------------------------------------------------
</TABLE>
At the same time, the Fund also declared taxable distributions, which includes
capital gains and/or market discount, of $.0015 per share.
24
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in
municipal securities for the six months ended November 30, 1997,
aggregated $23,213,866 and $17,655,460, respectively. Purchases
and sales (including maturities) of temporary municipal
investments for the six months ended November 30, 1997, aggregated
$800,000 and $800,000, respectively.
At November 30, 1997, the identified cost of investments owned for
federal income tax purposes was the same as the cost for financial
reporting purposes for the Fund.
At May 31, 1997, the Fund's last fiscal year end, the Fund had an
unused capital loss carryforward of $2,543,690 available for
federal income tax purposes to be applied against future capital
gains, if any. If not applied, the carryforward will expire in the
year 2003.
5. Unrealized Appreciation (Depreciation)
At November 30, 1997, net unrealized appreciation aggregated
$15,680,521, all of which related to appreciated securities.
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the
Adviser, the Fund pays an annual management fee, payable monthly,
at the rates set forth below which are based upon the average
daily net asset value of the 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 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.
The Adviser may voluntarily reimburse expenses from time to time,
which may be terminated at any time at its discretion.
During the six months ended November 30, 1997, the Distributor
collected sales charges on purchases of Class A Shares of
approximately $236,900 of which approximately $214,400 were paid
out as concessions to authorized dealers. The Distributor also
received 12b-1 service fees on Class A Shares, substantially all
of which were paid to compensate authorized dealers for providing
services to shareholders relating to their investments.
25
<PAGE>
Notes to Financial Statements (Unaudited) - continued
During the six months ended November 30, 1997, the Distributor
compensated authorized dealers directly with approximately $56,100
in commission advances at the time of purchase. To compensate for
commissions advanced to authorized dealers, all 12b-1 service fees
collected on Class B Shares during the first year following a
purchase, all 12b-1 distribution fees on Class B Shares, and all
12b-1 service and distribution fees on Class C Shares during the
first year following a purchase are retained by the Distributor.
During the six months ended November 30, 1997, the Distributor
retained approximately $17,700 in such 12b-1 fees. The remaining
12b-1 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their
investments. The Distributor also collected and retained
approximately $4,000 of CDSC on share redemptions during the six
months ended November 30, 1997.
7. Composition of Net Assets
At November 30, 1997, the Fund had an unlimited number of $.01 par
value shares authorized. Net assets consisted of:
<TABLE>
<CAPTION>
<S> <C>
--------------------------------------------------------------------------------
Capital paid-in $227,217,623
Balance of undistributed net investment income 52,829
Accumulated net realized gain (loss) from investment transactions (1,996,500)
Net unrealized appreciation of investments 15,680,521
--------------------------------------------------------------------------------
Net assets $240,954,473
================================================================================
</TABLE>
26
<PAGE>
Financial Highlights
27
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
-------------------------- ----------------------
<S>
Net
Nuveen Flagship Net realized and Dividends Net Total
Missouri** asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
Year ending beginning investment from investment from capital end of asset
May 31, of period income (b) investments income gains period value (a)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (8/87)
1998 (d) $ 10.80 $ .28 $ .31 $ (.28) $ - $ 11.11 5.50%
1997 10.51 .56 .29 (.56) - 10.80 8.29
1996 10.72 .58 (.21) (.58) - 10.51 3.51
1995 10.50 .60 .22 (.60) - 10.72 8.19
1994 10.87 .61 (.34) (.61) (.03)*** 10.50 2.42
1993 10.32 .64 .60 (.63) (.06) 10.87 12.54
1992 10.04 .65 .29 (.65) (.01) 10.32 9.70
1991 9.76 .65 .28 (.65) - 10.04 9.92
1990 9.86 .65 (.10) (.65) - 9.76 5.89
1989 9.30 .65 .57 (.65) (.01) 9.86 13.70
1988 (c) 9.58 .49 (.26) (.51) - 9.30 2.98*
Class B (2/97)
1998 (d) 10.80 .24 .30 (.24) - 11.10 5.03
1997 (c) 10.81 .16 (.01) (.16) - 10.80 1.40
Class C (2/94)
1998 (d) 10.80 .25 .30 (.25) - 11.10 5.12
1997 10.50 .51 .29 (.50) - 10.80 7.80
1996 10.72 .51 (.21) (.52) - 10.50 2.84
1995 10.50 .53 .23 (.54) - 10.72 7.60
1994 (c) 11.33 .02 (.83) (.02) - 10.50 (17.62)*
Class R (2/97)
1998 (d) 10.80 .29 .31 (.29) - 11.11 5.61
1997 (c) 10.90 .17 (.12) (.15) - 10.80 .43
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ending May 31,
1997, reflects the financial highlights of Flagship Missouri.
*** The amount shown includes a distribution in excess of capital
gains of $.01 per share.
(a) Total returns are calculated on net asset value without any
sales charge and are not annualized except where noted.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its predecessor
Flagship Financial.
(c) From commencement of class operations as noted.
(d) For the six months ending November 30, 1997.
28
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental data
- ---------------------------------------------------------------------------------------------------------------------
Ratio Ratio
of net of net
Ratio of investment Ratio of nvestment
expenses income to expenses income to
to average average to average average
net assets net assets net assets net assets
Net assets before before after after Portfolio
end of period reimburse- reimburse- reimburse- reimburse- turnover
(in thousands) ment ment ment (b) ment (b) rate
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 229,502 .87%* 5.10%* .87%* 5.10%* 8%
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
144,775 1.11 5.43 .55 5.99 33
76,069 1.13 5.73 .47 6.39 32
43,391 1.23 5.92 .58 6.57 44
19,080 1.42 5.88 .66 6.64 36
13,028 1.72 5.77 .69 6.80 69
7,786 1.55* 5.27* .50* 6.32* 119
919 1.62* 4.34* 1.62* 4.34* 8
454 1.62* 4.42* 1.45* 4.59* 41
10,493 1.42* 4.54* 1.42* 4.54* 8
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* 5.30* .67* 5.30* 8
34 .67* 5.53* .55* 5.65* 41
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
Additional Investment Opportunities
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to
help you reach your financial goals.
Growth Funds
Nuveen Rittenhouse Growth Fund
Growth and Income Funds
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Municipal Bond Funds
National Funds
Long-Term
Insured
Intermediate
Limited Term
State Funds
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Fund, contact your financial
adviser. If you would like to add to your current investment on a regular basis,
you can sign up for NuveenOs systematic investing program, which allows you to
invest a fixed dollar amount every month automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fundOs dividends back into the fund, you give your investment the added
growth potential of long-term compounding.
For more information on any of these service options, call your adviser, or
Nuveen at (800) 225-8530.
30
<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
Boston Financial Data Service
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Independent Public
Accountants
Arthur Andersen LLP
Chicago, Illinois
31
<PAGE>
Serving Investors
for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 225-8530
www.nuveen.com
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
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
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 products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 225-8530 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
<PAGE>
NUVEEN
Municipal
Bond Funds
November 30, 1997
Semiannual Report
[PHOTO APPEARS HERE]
Dependable, tax-free income
to help you keep more of
what you earn.
Kansas
<PAGE>
CONTENTS
1 Dear Shareholder
3 Answering Your Questions
6 Performance Overview
8 Portfolio of Investments
13 Statement of Net Assets
14 Statement of Operations
15 Statement of Changes in Net Assets
16 Notes to Financial Statements
22 Financial Highlights
24 Additional Investment Opportunities
25 Fund Information
<PAGE>
DEAR SHAREHOLDER
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
TIMOTHY R. SCHWERTFEGER
CHAIRMAN OF THE BOARD
WEALTH TAKES A LIFETIME TO BUILD. ONCE ACHIEVED, IT SHOULD BE PRESERVED.
It's a pleasure to share with you the Nuveen Flagship Kansas Municipal Bond
Fund's outstanding performance record for the 12 months ended November 30, 1997.
Over the past year, investors continued to enjoy attractive, tax-free dividends
generated by the fund's portfolio of municipal bonds. As of November 30, 1997,
Class A shareholders were receiving a current yield on net asset value of 4.60%.
To match this yield, investors in the 35.5% combined federal and state income
tax bracket would have had to earn at least 7.13% on taxable alternatives.
During this same period, the fund provided Class A shareholders with a highly
competitive total return on net asset value of 7.71% with income reinvested, far
outpacing the average return of 5.98% for its peer group, the Lipper Kansas
municipal bond fund category. You will find additional details on the fund's
performance on pages 6-7.
THE YEAR IN REVIEW
Over the past year, U.S. investors have benefited from robust economic growth
with little evidence of inflationary pressures. With unemployment rates at 20-
year lows and the current economic expansion entering its seventh year, the
presence of benign inflation has sparked debate over whether the traditional
link between growth and inflation has been broken. During 1997, expectations
that excess growth would generate inflation disrupted the markets on several
occasions, most notably following the Federal Reserve's interest rate tightening
in March and speeches by Fed Chairman Alan Greenspan. Still, falling commodity
_____
1
<PAGE>
"The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation."
prices kept producer prices in check, while low import prices--due in part to
the weakness in Asian markets--limited U.S. companies' ability to raise consumer
prices. This combination has kept inflation subdued and the Federal Reserve "on
hold" since March. The reduction in the federal deficit and passage of the
Taxpayer Relief Act of 1997 offer additional encouragement to long-term fixed-
income investors.
HELPING YOU BUILD A BETTER PORTFOLIO
The events of 1997 have focused renewed attention on the need for
diversification and appropriate asset allocation. Stock market volatility,
especially late in the year, provided a vivid illustration of the steadying
effect that fixed-income investments can provide in a well-constructed
investment portfolio. Nuveen mutual funds provide an excellent balance to other
stock and bond investments. Your financial adviser can introduce you to
a variety of other Nuveen products and services to round out your investment
portfolio, including the Nuveen Growth and Income Stock Fund and two balanced
stock and bond funds.
In addition, we recently expanded our private asset management capabilities
through the acquisition of Rittenhouse Financial Services, a well-respected
growth investment manager. We encourage you to talk with your financial adviser
about ways to complement your current Nuveen investments by taking advantage of
these additional products and services.
We at Nuveen remain committed to providing you with quality investment solutions
that withstand the test of time. We thank you for your confidence in us and our
family of investments, and we look forward to our next report to you.
Sincerely,
/s/ Timothy R. Schwertfeger
TIMOTHY R. SCHWERTFEGER
Chairman of the Board
January 15, 1998
_____
2
<PAGE>
ANSWERING YOUR QUESTIONS
[PHOTO OF TED NEILD APPEARS HERE]
TED NEILD, MANAGING DIRECTOR OF NUVEEN'S PORTFOLIO MANAGEMENT TEAM, TALKS ABOUT
THE MUNICIPAL BOND MARKET AND OFFERS INSIGHTS INTO FACTORS THAT AFFECTED THE
PERFORMANCE OF THE FUND OVER THE PAST YEAR.
WHAT ECONOMIC AND MARKET FACTORS INFLUENCED THE PERFORMANCE OF MUNICIPAL BONDS
OVER THE PAST YEAR?
Over the past 12 months, the performance of the municipal bond market was
influenced by three major factors: the continued strength of the U.S. economy,
minimal inflation and volatility in the equity markets. During 1997, these
factors contributed to a positive environment for fixed-income investments, as
reflected in the steady-to-declining interest rates evident during the year.
Between December 1996 and November 1997, the yield on the 30-year Treasury bond
dropped from 6.36% to 6.05%, and the municipal market followed suit, as the
yield on the Bond Buyer 40 declined from 5.63% to 5.36%. The spread between tax-
free municipal bonds and taxable Treasury bonds remained tight, making municipal
bonds very attractive.
HOW HAS THE FUND PERFORMED DURING THIS PERIOD?
As Tim mentioned in his letter to shareholders, the fund performed very well
during the one-year period ended November 30, 1997. The total return on net
asset value for Class A shares of the fund was 7.71%, which compares favorably
with the one-year average return of 5.98% for the peer group of Kansas municipal
bond funds tracked by Lipper Analytical Services--a 173 basis point difference.
Once again, this fund was the top performer
_____
3
<PAGE>
"One focus will be on maintaining good call protection, which helps sustain the
fund's dividend, regardless of the direction that interest rates take."
in its category, ranking first among the nine municipal bond funds in the
grouping.
GIVEN THE CURRENT MUNICIPAL MARKET, WHERE WERE YOU ABLE TO FIND VALUE?
One of the ways that we achieved such outstanding performance and created value
for shareholders was by finding individual bonds that enhanced the structure of
the portfolio, allowing the fund to rally as the market moved forward.
Specifically, we purchased longer duration bonds with good call protection at
the lower prices available earlier this year. These bonds are becoming more
difficult to find as other market participants struggle to maintain good
structure in their portfolios. We also executed "swaps" earlier in the year,
which allowed the fund to maintain its tax-free distribution yield even as
interest rates declined.
WHAT ARE YOUR KEY STRATEGIES FOR THE COMING YEAR?
To sustain this level of performance, we take a holistic approach to portfolio
management--assessing all of the factors that determine a fund's performance and
taking advantage of all of them to contribute to total return and dividend
stability. In the coming year, one focus will be on maintaining good call
protection, which helps sustain the fund's dividend, regardless of the direction
that interest rates take.
_____
4
<PAGE>
"Looking at the year ahead, we believe the overall market will continue to
strike a good balance between supply and demand."
While credit spreads are tight, we will continue to take advantage of
opportunities to purchase bonds with high credit quality at yields that are
similar to bonds with lower ratings. During the past year, the yield
differentials between AAA and BBB bonds narrowed significantly. We believe that
if credit spreads widen, these high-quality issues will increase in value
relative to lower-rated bonds.
WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET?
Looking at the year ahead, we believe the overall market will continue to strike
a good balance between supply and demand. We expect supply to increase as new
issuers continue to enter the market. A continued decline in yields could also
cause new supply to come to market through refunding of current debt. On the
demand side, volatility in the equity markets, plus the potential for a
weakening of the economy, could spark increased interest in bonds of all types.
The financial crises in Asia, coupled with the continued strength of the dollar
and low commodity prices, are all contributing to the excellent inflation
picture. This backdrop should help offset stronger labor markets and limit the
effects of any bond market corrections. In the meantime, positive underlying
fundamentals provide good support for the municipal market.
_____
5
<PAGE>
Nuveen Flagship Kansas
Municipal Bond Fund
PERFORMANCE OVERVIEW
As of November 30, 1997
<TABLE>
<CAPTION>
FUND HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------
SHARE CLASS A B C R
<S> <C> <C> <C> <C>
Inception Date 1/92 2/97 2/97 2/97
.........................................................................................................
Net Asset Value (NAV) $10.46 $10.40 $10.48 $ 10.52
.........................................................................................................
CUSIP 67065R101 67065R200 67065R309 67065R408
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Total Net Assets ($000) $99,295
- ---------------------------------------------------------------------------------------------------------
Average Weighted Maturity (Years) 20.84
- ---------------------------------------------------------------------------------------------------------
Average Weighted Duration (Years) 7.62
- ---------------------------------------------------------------------------------------------------------
ANNUALIZED TOTAL RETURN/1/
- ---------------------------------------------------------------------------------------------------------
SHARE CLASS A(NAV) A(OFFER) B C R
1-Year 7.71% 3.17% 6.37% 7.37% 8.49%
.........................................................................................................
5-Year 6.86% 5.95% 6.12% 6.50% 7.01%
.........................................................................................................
Since Inception 7.23% 6.46% 6.52% 6.87% 7.37%
- ---------------------------------------------------------------------------------------------------------
TAX-FREE YIELDS
- ---------------------------------------------------------------------------------------------------------
SHARE CLASS A(NAV) A(OFFER) B C R
Dist Rate 4.99% 4.78% 4.27% 4.47% 5.19%
.........................................................................................................
SEC 30-Day Yld 4.60% 4.40% 3.85% 4.05% 4.79%
.........................................................................................................
Taxable Equiv Yld/2/ 7.13% 6.82% 5.97% 6.28% 7.43%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum up-front sales charge. Class B shares
have a contingent deferred sales charge (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 B shares automatically convert to Class A shares eight years
after purchase. 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.
_____
6
<PAGE>
Credit Quality
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
A 24%
AA 18%
BBB/NR 8%
AAA/Pre-refunded 50%
</TABLE>
- --------------------------------------------------------------------------------
Diversification
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Tax Obligation (Limited) 17%
Housing (Multi-Family) 13%
U.S. Guaranteed 12%
Housing (Single-Family) 9%
Utilities 9%
Tax Obligation (G.O.) 8%
Basic Materials 5%
Water & Sewer 4%
Industrial Development 4%
Other 2%
Health Care 17%
</TABLE>
- --------------------------------------------------------------------------------
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<S> <C>
0.0443 Dec. 1996
0.0444 Jan. 1997
0.0436 Feb. 1997
0.0436 Mar. 1997
0.0436 Apr. 1997
0.0436 May 1997
0.0435 June 1997
0.0435 July 1997
0.0435 Aug. 1997
0.0435 Sept. 1997
0.0435 Oct. 1997
0.0435 Nov. 1997
</TABLE>
_____
7
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP KANSAS
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BASIC MATERIALS -- 4.9%
$4,550,000 Clearwater, Kansas, Pollution Control Revenue 1/02 at 101 AA- $4,837,924
Refunding, Vulcan Materials Company,
6.375%, 2/01/12
- -----------------------------------------------------------------------------------------------------------------------------
HEALTH CARE -- 17.0%
Kansas State Development Finance Authority, Health
Facilities Revenue Refunding, Stormont Vail
Healthcare Inc., Series F:
2,815,000 5.800%, 11/15/16 11/06 at 100 AAA 2,933,906
3,380,000 5.800%, 11/15/21 11/06 at 100 AAA 3,518,850
Kansas State Development Finance Authority, Health
Facilities Revenue, Stormont Vail Healthcare Inc.,
Series G:
750,000 5.800%, 11/15/16 11/06 at 100 AAA 781,680
2,150,000 5.800%, 11/15/21 11/06 at 100 AAA 2,239,870
Kansas State Development Finance Authority, Health
Facilities Revenue, Hays Medical Center Inc.,
Series B:
2,200,000 5.500%, 11/15/17 11/07 at 100 Aaa 2,240,480
1,500,000 5.500%, 11/15/22 11/07 at 100 Aaa 1,516,020
1,325,000 Kansas State Development Finance Authority, Health 9/07 at 102 Aa3 1,325,450
Facilities Revenue, Rural Health Resource Jackson
Company Inc., 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 1,135,512
400,000 6.200%, 7/01/19 7/04 at 100 A3 421,604
175,000 5.350%, 7/01/21 7/07 at 100 A3 174,759
100,000 Puerto Rico Industrial Tourist Educational Medical & 7/05 at 102 AAA 108,727
Environmental Control Facilities Financing Authority,
Hospital Revenue, Series A, 6.250%, 7/01/24
450,000 Wichita, Kansas, CSJ Health System Wichita Inc., 11/01 at 102 A+ 489,731
7.000%, 11/15/18
- -----------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY -- 13.1%
965,000 Kansas City, Kansas, Multifamily Housing Revenue 7/01 at 100 AAA 1,006,041
Refunding, Mortgage Loan Rainbows Towers
Project, 6.700%, 7/01/23
</TABLE>
_____
8
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING/MULTIFAMILY -- CONTINUED
Kansas State Development Finance Authority,
Multifamily Revenue Housing, Park Apartments
Projects, Series L:
$ 325,000 5.700%, 12/01/09 6/06 at 100 AAA $ 330,489
665,000 5.900%, 12/01/14 6/06 at 100 AAA 683,693
1,150,000 6.000%, 12/01/21 6/06 at 100 AAA 1,181,372
Lenexa, Kansas, Multifamily Housing Revenue
Refunding, Barrington Park Apartments Projects,
Series A:
445,000 6.300%, 2/01/09 2/03 at 102 AA 467,174
475,000 6.400%, 2/01/10 2/03 at 102 AA 499,444
2,000,000 6.450%, 2/01/18 2/03 at 102 AA 2,093,120
1,000,000 6.500%, 2/01/23 2/03 at 102 AA 1,040,510
1,000,000 Olathe, Kansas, Multifamily Housing Revenue, 6/04 at 102 AAA 1,058,980
Refunding, Deerfield Apartments Projects,
Series A, 6.450%, 6/01/19
Wichita, Kansas, Multifamily Housing Revenue
Refunding, Shores Apartments Project, Series Xi:
1,500,000 6.700%, 4/01/19 4/09 at 102 AA 1,609,605
2,000,000 6.800%, 4/01/24 4/09 at 102 AA 2,149,080
900,000 Wichita, Kansas, Multifamily Housing Revenue, 11/05 at 102 A 920,520
Brentwood Apartments, Series A,
5.850%, 12/01/25
- ----------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY -- 8.9%
2,675,000 Kansas City, Kansas, Mortgage Revenue, 5/05 at 103 Aaa 2,737,595
5.900%, 11/01/27
620,000 Olathe Labette County, Kansas, Single Family 2/05 at 105 Aaa 691,765
Mortgage Revenue Refunding, Series C,
7.800%, 2/01/25
1,500,000 Sedgwick & Shawnee Counties, Kansas, Single No Opt. Call Aaa 1,639,575
Family Revenue, Series A, 5.500%, 6/01/29
2,075,000 Sedgwick County, Kansas, Mortgage Loan Revenue, 6/99 at 103 AAA 2,185,452
Series A, 7.875%, 12/01/21
1,400,000 Sedgwick County, Kansas, Single Family Mortgage 11/04 at 105 Aaa 1,555,008
Revenue, Refunding, Series A, 8.125%, 5/01/24
</TABLE>
_____
9
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP KANSAS -- CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL/OTHER -- 3.9%
$1,000,000 Dodge City,Kansas, Pollution Control Revenue 5/02 at 102 Aa3 $1,112,010
Refunding, Excel Corporation Project,
6.625%, 5/01/05
2,000,000 Garden City, Kansas, Sewer Disposal Revenue, 9/07 at 102 BBB+ 2,016,820
Monfort Inc. Project, 5.750%, 9/01/17
650,000 Wichita, Kansas, Airport Authority, Airport Facilities 3/02 at 102 AA 718,491
Revenue Refunding, Wichita Airport Hotel
Assoc, 7.000%, 3/01/05
- ----------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL -- 8.2%
275,000 Cowley County, Kansas, Community College 3/00 at 101 A 289,944
Certificates of Participation, Arts, Science &
Technology Building, 7.000%, 3/01/12
Cowley County, Kansas, Unit School District No 470,
Arkansas City:
1,550,000 5.500%, 12/01/16 12/06 at 100 AAA 1,581,977
850,000 5.500%, 12/01/19 12/06 at 100 AAA 862,657
440,000 Jefferson County, Kansas, Unit School District No 340, 9/04 at 100 AAA 489,245
6.350%, 9/01/14
800,000 Miami County, Kansas, Unity School District No 368, 6/02 at 100 AAA 870,576
Refunding, 6.600%, 12/01/08
Puerto Rico Commonwealth:
1,350,000 6.450%, 7/01/17 7/04 at 102 A 1,495,800
1,000,000 6.450%, 7/01/17 7/04 at 101 1/2 AAA 1,114,630
1,000,000 Shawnee County, Kansas, Unit School District No 345, 9/04 at 100 AAA 1,035,580
5.700%, 9/01/14
350,000 Shawnee County, Kansas, Unit School District No 437, 3/02 at 100 AAA 377,041
Auburn, Washburn, Refunding, 6.600%, 9/01/09
- ----------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED -- 16.9%
4,450,000 Kansas State Department of Transportation, Highway 9/02 at 102 AA 4,761,144
Revenue, Series A, 6.000%, 9/01/12
1,050,000 Kansas State Development Finance Authority, 12/00 at 102 N/R 1,129,138
Highway Patrol Central Training Facility, Series T,
6.600%, 12/01/07
Puerto Rico Commonwealth Highway & Transportation
Authority, Highway Revenue, Series W:
1,000,000 5.500%, 7/01/13 No Opt. Call A 1,036,060
1,000,000 5.500%, 7/01/15 No Opt. Call AAA 1,057,400
</TABLE>
_____
10
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/LIMITED -- CONTINUED
$750,000 Puerto Rico Commonwealth Highway & Transportation No Opt. Call A $ 777,045
Authority, Highway Revenue Refunding, Series X,
5.500%, 7/01/13
7,300,000 Puerto Rico Commonwealth Highway & Transportation 7/16 at 100 A 7,410,376
Authority, Highway Revenue, Series Y,
5.500%, 7/01/36
100,000 Puerto Rico Commonwealth Infrastructure Financing 7/98 at 102 BBB+ 104,361
Authority, Series A, 7.750%, 7/01/08
500,000 Puerto Rico Public Buildings Authority, Revenue 7/07 at 101 1/2 A 492,000
Guaranteed, Government Facilities, Series B,
5.250%, 7/01/21
- ----------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 1.6%
1,500,000 Puerto Rico Ports Authority, Special Facilities, 6/06 at 102 BBB- 1,619,340
American Airlines, Series A, 6.250%, 6/01/26
- ----------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED -- 11.6%
170,000 Derby, Kansas, Series Ii, 6.500%, 12/01/12 12/00 at 100 A*** 181,710
(Pre-refunded to 12/01/00)
325,000 Hays, Kansas, Sales Tax Revenue, 6.875%, 9/01/12 9/00 at 100 N/R*** 347,087
(Pre-refunded to 9/01/00)
Jackson County, Kansas, Unit School District No 336,
Denison, Holton:
355,000 6.600%, 10/01/12 (Pre-refunded to 10/01/03) 10/03 at 100 N/R*** 395,498
380,000 6.650%, 10/01/13 (Pre-refunded to 10/01/03) 10/03 at 100 N/R*** 424,319
12,475,000 Johnson County, Kansas, Residual Revenue Refunding, No Opt. Call Aaa 5,928,120
0.000%, 5/01/12
80,000 Puerto Rico Commonwealth Highway & Transportation 7/02 at 101 1/2 AAA 89,066
Authority, Highway Revenue, Series T,
6.625%, 7/01/18 (Pre-refunded to 7/01/02)
2,120,000 Reno County and Labette County, Kansas, Single Family No Opt. Call AAA 819,974
Mortgage Revenue, Capital Accumulator, 1983 Series A,
0.000%, 12/01/15
2,095,000 Reno, Sedgwick, Finney Counties, Kansas, Single Family No Opt. Call AAA 789,103
Mortgage Revenue, Multiple Originators & Services,
Series A, 0.000%, 4/01/16
2,250,000 Wichita, Kansas, Revenue, CSJ Health System, 11/01 at 102 A+*** 2,595,937
Series XXV, 7.200%, 10/01/15
</TABLE>
_____
11
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP KANSAS--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITIES -- 8.6%
$1,500,000 Gardner, Kansas, Electric Utility Revenue Refunding, 11/01 at 101 N/R $ 1,627,485
7.000%, 11/01/09
Kansas City, Kansas, Utility System Revenue Refunding
& Improvement:
2,500,000 6.250%, 9/01/14 9/04 at 102 AAA 2,772,300
1,650,000 6.375%, 9/01/23 9/04 at 102 AAA 1,828,348
Puerto Rico Electric Power Authority, Power Revenue,
Formerly Puerto Rico Commonwealth Water
Resource Authority, Series T:
215,000 6.125%, 7/01/08 7/04 at 102 BBB+ 235,477
150,000 6.000%, 7/01/16 7/04 at 102 BBB+ 158,541
5,000,000 Puerto Rico Electric Power Authority, Power Revenue, No Opt. Call AAA 1,871,250
Formerly Puerto Rico Commonwealth Water
Resource Authority, Capital Appreciation, Series O,
0.000%, 7/01/17
- ----------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER -- 3.6%
3,000,000 Kansas State Development Finance Authority, Water 11/03 at 102 AA+ 3,184,110
Pollution Control, Series II, 6.000%, 11/01/14
350,000 Newton, Kansas, Wastewater Treatment System 3/02 at 102 N/R 384,128
Revenue, 7.125%, 3/01/12
- ----------------------------------------------------------------------------------------------------------------------------
$105,095,000 Total Investments -- (cost $90,674,879) -- 98.3% 97,558,024
- ----------------------------------------------------------------------------------------------------------------------------
Assets Less Liabilities -- 1.7% 1,737,339
-----------------------------------------------------------------------------------------------------
Net Assets -- 100% $99,295,363
-----------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions: Dates (month and year) and
prices of the earliest optional call or redemption. There
may be other call provisions at varying prices at later
dates.
** Ratings: Using the higher of Standard & Poor's or Moody's
rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities, which ensures the timely payment of principal
and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R - Investment is not rated.
See accompanying notes to financial statements.
_____
12
<PAGE>
STATEMENT OF NET ASSETS (UNAUDITED)
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP
KANSAS
- -------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $97,558,024
Cash 841,591
Receivables:
Interest 1,482,490
Shares sold 40,258
Other assets 2,021
- -------------------------------------------------------------------------------------------------------------
Total assets 99,924,384
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables for shares redeemed 169,970
Accrued expenses:
Management fees (note 6) 30,070
12b-1 distribution and service fees (notes 1 and 6) 17,437
Other 428
Dividends payable 411,116
- -------------------------------------------------------------------------------------------------------------
Total liabilities 629,021
- -------------------------------------------------------------------------------------------------------------
Net assets (note 7) $99,295,363
- -------------------------------------------------------------------------------------------------------------
CLASS A SHARES (NOTE 1)
Net assets $97,193,123
Shares outstanding 9,293,761
Net asset value and redemption price per share $ 10.46
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 10.92
- -------------------------------------------------------------------------------------------------------------
CLASS B SHARES (NOTE 1)
Net assets $ 1,608,502
Shares outstanding 154,656
Net asset value, offering and redemption price per share $ 10.40
- -------------------------------------------------------------------------------------------------------------
CLASS C SHARES (NOTE 1)
Net assets $ 484,047
Shares outstanding 46,182
Net asset value, offering and redemption price per share $ 10.48
- -------------------------------------------------------------------------------------------------------------
CLASS R SHARES (NOTE 1)
Net assets $ 9,691
Shares outstanding 921
Net asset value, offering and redemption price per share $ 10.52
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
_____
13
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Kansas
- ----------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1) $2,830,056
- ----------------------------------------------------------------------------------
EXPENSES
Management fees (note 6) 270,951
12b-1 service fees -- Class A (notes 1 and 6) 96,976
12b-1 distribution and service fees -- Class B (notes 1 and 6) 5,650
12b-1 distribution and service fees -- Class C (notes 1 and 6) 1,347
Shareholders' servicing agent fees and expenses 24,363
Custodian's fees and expenses 19,279
Trustees' fees and expenses (note 6) 917
Professional fees 8,411
Shareholders' reports -- printing and mailing expenses 10,431
Federal and state registration fees 3,475
Organizational expenses (note 1) 4,301
Other expenses 2,306
- ----------------------------------------------------------------------------------
Total expenses before expense reimbursement 448,407
Expense reimbursement (note 6) (88,262)
- ----------------------------------------------------------------------------------
Net expenses 360,145
- ----------------------------------------------------------------------------------
Net investment income 2,469,911
- ----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 4) 214,232
Net change in unrealized appreciation or depreciation of investments 2,355,376
- ----------------------------------------------------------------------------------
Net gain from investments 2,569,608
- ----------------------------------------------------------------------------------
Net increase in net assets from operations $5,039,519
- ----------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
_____
14
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
NUVEEN FLAGSHIP KANSAS
--------------------------------
SIX MONTHS ENDED YEAR ENDED
11/30/97 5/31/97*
- -------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 2,469,911 $ 5,063,970
Net realized gain from investment transactions
(notes 1 and 4) 214,232 220,983
Net change in unrealized appreciation or depreciation
of investments 2,355,376 3,281,763
- -------------------------------------------------------------------------------------------
Net increase in net assets from operations 5,039,519 8,566,716
- -------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (2,435,838) (5,060,117)
Class B (24,680) (3,064)
Class C (7,747) (787)
Class R (44) (1)
- -------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (2,468,309) (5,063,969)
- -------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from sale of shares 7,451,201 10,132,032
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 1,302,137 2,363,978
- -------------------------------------------------------------------------------------------
8,753,338 12,496,010
- -------------------------------------------------------------------------------------------
Cost of shares redeemed (8,616,339) (16,105,371)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions 136,999 (3,609,361)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 2,708,209 (106,614)
Net assets at the beginning of period 96,587,154 96,693,768
- -------------------------------------------------------------------------------------------
Net assets at the end of period $99,295,363 $ 96,587,154
- -------------------------------------------------------------------------------------------
Balance of undistributed net investment income
at end of period $ 1,603 $ 1
- -------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Kansas and four months of
Nuveen Flagship Kansas (see note 1).
See accompanying notes to financial statements.
_____
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Nuveen Flagship Multistate Trust 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 "Fund"),
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") was reorganized into the Trust and renamed
Nuveen Flagship Kansas Municipal Bond Fund ("Nuveen Flagship Kansas"). Prior to
the reorganization, Flagship Kansas was a sub-trust of the Flagship Tax Exempt
Funds Trust.
The Fund seek to provide high tax-free income and preservation of capital
through investments in a diversified portfolio of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
SECURITIES VALUATION
The prices of municipal bonds in the Funds's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
SECURITIES TRANSACTIONS
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
November 30, 1997, the Fund had no such outstanding purchase commitments.
INTEREST 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.
_____
16
<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
The Fund is a separate taxpayer for federal income tax purposes. The Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Fund
currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, the Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Kansas state income taxes, to retain
such tax-exempt status when distributed to the shareholders of the Fund. Net
realized capital gains and market discount distributions are subject to federal
taxation.
FLEXIBLE SALES CHARGE PROGRAM
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of $1
million or more are sold at net asset value without 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.
_____
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the six months ended November 30, 1997.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
Organizational Expenses
The organizational expenses incurred on behalf of the Fund (approximately
$42,800) will be reimbursed to the Adviser on a straight-line basis over a
period of five years. As of November 30, 1997, $38,636 has been reimbursed.
_____
18
<PAGE>
2. FUND SHARES
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED 11/30/97 YEAR ENDED 5/31/97*
------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 585,806 $ 6,076,202 931,362 $ 9,305,649
Class B 93,173 960,011 73,398 736,214
Class C 39,236 405,509 8,890 90,069
Class R 911 9,479 10 100
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 124,008 1,279,236 235,560 2,363,224
Class B 1,764 18,166 52 523
Class C 455 4,734 23 231
Class R -- 1 -- --
- ---------------------------------------------------------------------------------------------------------------
845,353 8,753,338 1,249,295 12,496,010
- ---------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (829,964) (8,590,684) (1,587,941) (15,969,039)
Class B (45) (463) (13,686) (136,313)
Class C (2,420) (25,192) (2) (19)
Class R -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
(832,429) (8,616,339) (1,601,629) (16,105,371)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) 12,924 $ 136,999 (352,334) $ (3,609,361)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Information represents eight months of Flagship Kansas and four months of
Nuveen Flagship Kansas (see note 1).
3. DISTRIBUTIONS TO SHAREHOLDERS
On December 9, 1997, the Fund declared dividend distributions from its tax-
exempt net investment income which were paid on December 31, 1997, to
shareholders of record on December 9, 1997, as follows:
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Dividend per share:
Class A $.0435
Class B .0370
Class C .0390
Class R .0455
- --------------------------------------------------------------------------------
</TABLE>
_____
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
4. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities for the six months ended November 30, 1997, aggregated $8,301,434 and
$8,791,146, respectively. Purchases and sales (including maturities) of
temporary municipal investments for the six months ended November 30, 1997,
aggregated $1,350,000 and $1,350,000, respectively.
At November 30, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for the Fund.
At May 31, 1997, the Fund's last fiscal year end, the Fund had an unused capital
loss carryforward of $4,851,848 available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, the carryforward
will expire in the year 2003.
5. UNREALIZED APPRECIATION (DEPRECIATION)
At November 30, 1997, net unrealized appreciation aggregated $6,883,145, all of
which related to appreciated securities.
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Trust's investment management agreement with the Adviser, the Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of the 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 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.
The Adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the six months ended November 30, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $117,100 of which
approximately $101,000 were paid out as concessions to authorized dealers. The
Distributor also received 12b-1 service fees on Class A Shares, substantially
all of which were paid to compensate authorized dealers for providing services
to shareholders relating to their investments.
_____
20
<PAGE>
During the six months ended November 30, 1997, the Distributor compensated
authorized dealers directly with approximately $57,500 in commission advances at
the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the fiscal
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the six months
ended November 30, 1997, the Distributor retained approximately $7,000 in such
12b-1 fees. The remaining 12b-1 fees charged to the Fund were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments.
7. COMPOSITION OF NET ASSETS
At November 30, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
Capital paid-in $97,048,231
Balance of undistributed net investment income 1,603
Accumulated net realized gain (loss)
from investment transactions (4,637,616)
Net unrealized appreciation of investments 6,883,145
- --------------------------------------------------------------------------------
Net assets $99,295,363
- --------------------------------------------------------------------------------
</TABLE>
_____
21
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
Selected data for a common share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
OPERATING PERFORMANCE LESS DISTRIBUTIONS
-------------------------- -------------------------
NUVEEN FLAGSHIP NET
KANSAS** NET REALIZED AND DIVIDENDS NET TOTAL
ASSET UNREALIZED FROM TAX- ASSET RETURN
VALUE NET GAIN (LOSS) EXEMPT NET DISTRIBUTIONS VALUE ON NET
YEAR ENDING BEGINNING INVESTMENT FROM INVESTMENT FROM CAPITAL END OF ASSET
MAY 31, OF PERIOD INCOME (B) INVESTMENTS INCOME GAINS PERIOD VALUE (A)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A (1/92)
1998 (d) $ 10.19 $ .26 $ .27 $ (.26) $ -- $ 10.46 5.26%
1997 9.83 .53 .36 (.53) -- 10.19 9.21
1996 10.01 .54 (.18) (.54) -- 9.83 3.63
1995 9.83 .55 .18 (.55) -- 10.01 7.80
1994 10.38 .56 (.47) (.57) (.07)*** 9.83 .62
1993 9.65 .58 .73 (.58) -- 10.38 14.15
1992 (c) 9.58 .19 .07 (.19) -- 9.65 5.95*
CLASS B (2/97)
1998 (d) 10.13 .22 .27 (.22) -- 10.40 4.89
1997 (c) 10.23 .13 (.12) (.11) -- 10.13 .13
CLASS C (2/97)
1998 (d) 10.21 .23 .27 (.23) -- 10.48 4.97
1997 (c) 10.18 .15 .04 (.16) -- 10.21 1.85
ClASS R (2/97)
1998 (d) 10.22 .28 .29 (.27) -- 10.52 5.66
1997 (c) 10.20 .18 (.02) (.14) -- 10.22 1.55
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the fiscal year ending May 31, 1997,
reflects the financial highlights of Flagship Kansas.
*** The amount shown reflects a distribution in excess of capital gains
of $.05 per share.
(a) Total returns are calculated on net asset value without any sales
charge and are not annualized except where noted.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory or its predecessor
Flagship Financial.
(c) From commencement of class operations as noted.
(d) For the six months ending November 30, 1997.
_____
22
<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
NET ASSETS BEFORE BEFORE AFTER AFTER PORTFOLIO
END OF PERIOD REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
(IN THOUSANDS) MENT MENT MENT(B) MENT(B) RATE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$97,193 .90%* 4.85%* .72%* 5.03%* 9%
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
62,585 1.22 4.63 .11 5.74 56
9,552 2.01* 3.50* .40* 5.11* 59
1,609 1.65* 4.09* 1.47* 4.27* 9
605 1.65* 4.24* 1.27* 4.62* 40
484 1.45* 4.29* 1.27* 4.47* 9
91 1.45* 4.49* 1.09* 4.85* 40
10 .69* 5.12* .52* 5.29* 9
-- .08* 6.53* -- 6.61* 40
- ----------------------------------------------------------------------------------------------------
</TABLE>
_____
23
<PAGE>
ADDITIONAL INVESTMENT OPPORTUNITIES
NUVEEN FAMILY OF MUTUAL FUNDS
Nuveen offers a variety of funds designed to help you reach your financial
goals.
GROWTH FUNDS
Nuveen Rittenhouse Growth Fund
GROWTH AND INCOME FUNDS
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
MUNICIPAL BOND FUNDS
NATIONAL FUNDS
Long-Term
Insured
Intermediate
Limited Term
STATE FUNDS
Alabama Michigan
Arizona Missouri
California New Jersey
Colorado New Mexico
Connecticut New York
Florida North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts Wisconsin
To purchase additional shares of your Nuveen Fund, contact your financial
adviser. If you would like to add to your current investment on a regular basis,
you can sign up for Nuveen's systematic investing program, which allows you to
invest a fixed dollar amount every month automatically.
You can also invest automatically through dividend reinvestment. By reinvesting
your fund's dividends back into the fund, you give your investment the added
growth potential of long-term compounding.
For more information on any of these service options, call your adviser, or
Nuveen at (800) 225-8530.
______
24
<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
Boston Financial Data Service
Nuveen Investor Services
P.O. Box 8509
Boston, MA 02266-8509
(800) 225-8530
LEGAL COUNSEL
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, Illinois
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SERVING INVESTORS FOR GENERATIONS
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
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 products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 225-8530 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
NUVEEN
John Nuveen
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 225-8530
www.nuveen.com
