<PAGE>
NUVEEN
Municipal
Bond Funds
August 31, 1997
Semiannual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
California
California
Insured
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 California Performance
Overview
8 California Insured
Performance Overview
11 Financial Section
42 Shareholder Information
43 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY SCHWERTFEGER APPEARS HERE]
Wealth takes a lifetime to build. Once achieved, it should be preserved.
It is a pleasure to report to you on the performance of the Nuveen California
Municipal Bond Funds. Both funds performed well over the past six months,
rewarding investors with attractive tax-free income, consistent performance and
capital preservation.
For the 12 months ended August 31, 1997, the uninsured California fund provided
Class A shareholders with a total return on net asset value of 9.25%, outpacing
the average return of 8.98% for its peer group, the Lipper California Municipal
Bond Fund Category. The insured California fund provided Class A shareholders
with an annual total return of 8.26%, trailing its Lipper peer group average of
8.78%. The fund, which has a shorter duration than its peers, will experience
subdued performance in declining interest rate environments and enhanced
performance in rising rate environments. Both funds continued to provide
consistent income, and each fund experienced an increase in the monthly dividend
during the period.
This performance was achieved in an environment of periodic interest rate
volatility. Positive news on the inflation front helped soften the effects of a
hike in short-term interest rates by the Federal Reserve Board in late March.
After tightening short-term interest rates by 0.25%, the Federal Reserve
demonstrated its confidence in the economy's path by maintaining the status quo
at subsequent meetings.
1
<PAGE>
"Both funds performed well over the past six months, rewarding investors with
attractive tax-free income, consistent performance and capital preservation."
So far in 1997, investors have focused their attention on fiscal issues such as
the federal budget accord and tax cut measures, including a reduction in the
capital gains tax. The economy continued to experience record expansion and the
lowest unemployment rates in almost two decades, a combination that in the past
has predictably been accompanied by an increase in inflation. Current
conditions, however, give every indication that inflation is under control.
Nuveen's financial products and services continue to evolve as we extend our
commitment to helping prudent investors achieve their investment goals. In
addition to our 35 municipal mutual funds, Nuveen now offers a variety of other
products and services designed for the distinct needs of investors who rely on
their investment portfolios as their principal source of income and financial
security. We recently celebrated the successful first year of our high-
performing Nuveen Growth and Income Stock Fund, as well as two new balanced
stock and bond funds. We have also expanded our private asset management service
by acquiring Rittenhouse Financial Services, a well-respected provider of growth
investment management services.
Nuveen prides itself on helping more than 1.3 million investors achieve their
financial goals by providing quality investment solutions that withstand the
test of time. We thank you for your confidence in Nuveen and our family of
investments, and we look forward to reporting to you again in six months.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
October 1, 1997
2
<PAGE>
Answering Your Questions
Portfolio Manager Steve Krupa talks about the municipal bond market and offers
insights into the factors that affected fund performance over the past year.
What key economic and market factors affected the funds' performance over the
past year?
The combination of strong economic growth and low inflation has led to slightly
falling bond yields over the past year. Periodic volatility in the bond market
created a positive environment for the funds, providing us with a number of
opportunities to purchase attractive bonds at discounts during brief declines in
the market. The market also experienced a significant tightening of credit
spreads during the year, meaning that the difference in the yields of high-
quality and low-quality bonds was gradually reduced to the smallest levels we've
seen in many years. This allowed us to purchase very high quality bonds for the
portfolios without sacrificing much yield.
The California economy continues to recover from the national and state
recessions experienced in the early 1990s, as evidenced by the construction boom
and labor shortages throughout the state. The California bond market also
performed well, due in part to the tight supply levels experienced over the last
year.
Given these market conditions,
how have the funds performed?
As Tim mentioned in his letter to shareholders, both funds performed well during
the one-year period ended August 31, 1997. In addition to strong total returns,
the
3
<PAGE>
"In addition to strong total returns, the funds continued to produce consistent
dividends and attractive yields."
funds continued to produce consistent dividends and attractive yields. For Class
A shares, the uninsured California fund generated an annual tax-free yield of
4.45%, and the insured California fund generated a 4.19% annual tax-free yield.
Investors in the 37.5% combined state and federal income tax bracket would have
had to earn at least 7.12% and 6.70%, respectively, on taxable alternatives to
equal these yields on an after-tax basis.
What strategies did you use to add value?
With the tight credit spreads we have seen this year, we took advantage of the
opportunity to improve the credit quality of the uninsured fund without
sacrificing much yield. As always, we utilized our value approach in seeking
bonds that were undervalued by the market. We purchased several bonds that later
experienced significant increases in value when they were refunded by the issuer
in advance of their call date. In addition, we sought higher yields on
investment-grade quality bonds from issuers in new and growing areas of the
state, finding good value in bonds from Rancho Cucamonga, a rapidly growing area
due east of the midpoint between Los Angeles and San Diego.
What is your outlook for the municipal market?
As long as interest rates remain relatively stable, we foresee no major supply
changes in the national municipal bond market. New issuance will likely expand
somewhat as the
4
<PAGE>
economy continues to grow. However, if the volatility in the equity market
continues at current levels, we expect demand for bonds to grow as shareholders
move some of their assets from stocks into bonds.
We also anticipate continued strength in the California bond market, and in the
state economy overall. While national supply levels continue to grow slowly, we
expect that California municipal bond issuance will expand more rapidly in the
coming months.
What strategies will you employ in the coming year?
We expect the California bond market to offer a number of opportunities in the
coming year. We plan to capitalize on the supply of new issues coming to market,
as well as new regional growth areas throughout the state. In addition, we will
seek value in larger issues that can sometimes overwhelm the market and
temporarily reduce prices. With credit spreads at such tight levels, we will
also focus on trying to improve the credit quality of the uninsured fund. And,
as always, we will continue to utilize our diligent research team to find bonds
that are presently undervalued by the market.
5
<PAGE>
California
Performance Overview
As of August 31, 1997
Morningstar Rating/1/
* * * *
<TABLE>
<CAPTION>
Fund Highlights
================================================================================
Share Class A B C R
<S> <C> <C> <C> <C>
Inception Date 9/94 3/97 9/94 7/86
- --------------------------------------------------------------------------------
Net Asset Value (NAV) $10.74 $10.75 $10.74 $10.76
- --------------------------------------------------------------------------------
CUSIP 67065N100 67065N209 67065N308 67065N407
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Net Assets ($000) $239,730
- --------------------------------------------------------------------------------
Average Weighted Maturity (years) 22.56
- --------------------------------------------------------------------------------
Average Weighted Duration (years) 6.64
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/2/
================================================================================
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
1-Year 9.25% 4.66% 8.47% 8.56% 9.39%
- --------------------------------------------------------------------------------
5-Year 6.29% 5.39% 5.63% 5.58% 6.61%
- --------------------------------------------------------------------------------
10-Year 7.76% 7.29% 7.18% 6.99% 8.05%
- --------------------------------------------------------------------------------
Tax-Free Yields
================================================================================
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.08% 4.87% 4.35% 4.53% 5.30%
- --------------------------------------------------------------------------------
SEC 30-Day Yld 4.45% 4.26% 3.69% 3.90% 4.65%
- --------------------------------------------------------------------------------
Taxable Equiv
Yld/3/ 7.12% 6.82% 5.90% 6.24% 7.44%
- --------------------------------------------------------------------------------
</TABLE>
1 Overall rating for Class R Shares based on risk-adjusted performance for
the period ending August 31, 1997, by Morningstar Inc., an independent
mutual fund rating service. The fund was compared with 1,354 municipal bond
funds for the three-year period, 654 funds for the five-year period and
316 funds for the 10-year period. The top 10% of funds in the category
receive five stars, and the next 22.5% of funds receive four stars.
2 Class R Share returns are actual. Class A, B and C Share returns are
actual for the period since class inception; returns prior to class
inception are Class R Share returns adjusted for differences in sales
charges and expenses, which are primarily differences in distribution and
service fees. Class A Shares have a 4.2% maximum sales charge. Class B
Shares have a CDSC that begins at 5% for redemptions during the first year
after purchase and declines periodically to 0% over the following five
years, which is not reflected in the return figures. Class C Shares have a
1% CDSC for redemptions within one year which is not reflected in the
one-year total return.
3 Based on SEC yield and a combined federal and state income tax rate of
37.5%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
6
<PAGE>
Nuveen California Municipal Bond Fund
August 31, 1997 Semiannual Report
Credit Quality
[PIE CHART APPEARS HERE]
AAA 48%
AA 11%
A 23%
BBB/NR 18%
- -------------------------------------------------------------------------------
Diversfication
[PIE CHART APPEARS HERE]
Utilities 4%
Escrowed Bonds 15%
Education 6%
Health Care 15%
Pollution Control 3%
Housing 23%
Transportation 5%
Lease Rental 9%
Other 20%
- -------------------------------------------------------------------------------
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
Capital Gains
9/30/1996 0.045 0.
10/31/1996 0.045 0.
11/30/1996 0.045 0.0032
12/31/1996 0.045 0.
1/31/1997 0.045
2/28/1997 0.0455
3/31/1997 0.0455
4/30/1997 0.0455
5/31/1997 0.0455
6/30/1997 0.0455
7/31/1997 0.0455
8/31/1997 0.0455
7
<PAGE>
California Insured
Performance Overview
As of August 31, 1997
<TABLE>
<CAPTION>
Fund Highlights
================================================================================
Share Class A B C R
<S> <C> <C> <C> <C>
Inception Date 9/94 3/97 9/94 7/86
- --------------------------------------------------------------------------------
Net Asset Value (NAV) $10.81 $10.81 $10.73 $10.79
- --------------------------------------------------------------------------------
CUSIP 67065N506 67065N605 67065N704 67065N803
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Net Assets ($000) $227,968
- --------------------------------------------------------------------------------
Average Weighted Maturity (years) 22.86
- --------------------------------------------------------------------------------
Average Weighted Duration (years) 6.63
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/1/
================================================================================
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
1-Year 8.26% 3.72% 7.45% 7.58% 8.49%
- --------------------------------------------------------------------------------
5-Year 6.48% 5.57% 5.70% 5.61% 6.71%
- --------------------------------------------------------------------------------
10-Year 7.82% 7.36% 7.20% 6.98% 8.07%
- --------------------------------------------------------------------------------
Tax-Free Yields
================================================================================
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.00% 4.79% 4.22% 4.42% 5.17%
- --------------------------------------------------------------------------------
SEC 30-Day Yld 4.19% 4.02% 3.44% 3.64% 4.39%
- --------------------------------------------------------------------------------
Taxable Equiv
Yld/2/ 6.70% 6.43% 5.50% 5.82% 7.02%
- --------------------------------------------------------------------------------
</TABLE>
1 Class R Share returns are actual. Class A, B and C Share returns are actual
for the period since class inception; returns prior to class inception are
Class R Share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A Shares have a 4.2% maximum sales charge. Class B Shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C Shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
2 Based on SEC yield and a combined federal and state income tax rate of
37.5%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
8
<PAGE>
Nuveen California Insured Municipal Bond Fund
August 31, 1997 Semiannual Report
Credit Quality
[PIE CHART APPEARS HERE]
AA 2%
AAA 98%
- --------------------------------------------------------------------------------
Diversification
[PIE CHART APPEARS HERE]
Utilities 3%
Other 22%
General Obligation 4%
Housing 16%
Transportation 4%
Lease Rental 19%
Health Care 6%
Escrowed Bonds 19%
Water & Sewer 7%
- --------------------------------------------------------------------------------
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
Capital Gains
9/30/1996 0.004
10/31/1996 0.004
11/30/1996 0.0445 0.0034
12/31/1996 0.0445
1/31/1997 0.0445
2/28/1997 0.045
3/31/1997 0.045
4/30/1997 0.045
5/31/1997 0.045
6/30/1997 0.045
7/31/1997 0.045
8/31/1997 0.045
9
<PAGE>
Financial Section
<TABLE>
<CAPTION>
Contents
<C> <S>
12 Portfolio of Investments
26 Statement of Net Assets
27 Statement of Operations
28 Statement of Changes in Net Assets
30 Notes to Financial Statements
38 Financial Highlights
</TABLE>
11
<PAGE>
Portfolio of Investments (Unaudited)
California
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Educational Facilities--5.6%
$ 3,150,000 California Educational Facilities Authority Revenue Bonds 10/97 at 102 AA $3,222,797
(University of Southern California Project),
Series 1989 A, 7.200%, 10/01/15
960,000 California Educational Facilities Authority, Pooled College 4/07 at 102 Baa2 995,923
and University Projects Revenue Bonds, Series 1997B
(Southern California College of Optometry), 6.300%,
4/01/21
985,000 California State Public Works Board, High Technology No Opt. Call A1 1,102,855
Facilities Lease, The Regents of the University of
California, San Diego Facility, 7.375%, 4/01/06
The Regents of the University of California, 1993
Refunding Certificates of Participation (UCLA Central
Chiller/Cogeneration Facility):
3,500,000 5.600%, 11/01/20 11/03 at 102 Aa 3,506,510
4,335,000 6.000%, 11/01/21 11/03 at 102 Aa 4,504,629
- ------------------------------------------------------------------------------------------------------------------------------------
Escrowed Bonds -- 14.9%***
2,000,000 California Health Facilities Financing Authority, Health 5/00 at 102 Aaa 2,206,980
Facility Revenue Bonds (Health Dimensions,
Incorporated) 1990 Series A, 7.500%, 5/01/15
(Pre-refunded to 05/01/00)
2,000,000 California Health Facilities Financing Authority, Health 10/00 at 102 N/R 2,224,100
Facility Revenue Bonds (Sisters of Providence) Series
1990, 7.500%, 10/01/10 (Pre-refunded to 10/01/00)
8,470,000 State Public Works Board of the State of California Lease 10/02 at 102 Aaa 9,549,078
Revenue Bonds (The Trustees of The California State
University) 1992 Series A (Various California State
University Project), 6.700%, 10/01/17 (Pre-refunded to
10/01/02)
2,035,000 Certificates of Participation (1991 Capital Improvement 10/01 at 102 Baa 2,312,554
Project), Bella Vista Water District (California), 7.375%,
10/01/17 (Pre-refunded to 10/01/01)
2,000,000 Hospital Revenue Certificates of Participation (Desert 7/00 at 102 AAA 2,249,660
Hospital Corporation Project), Series 1990, 8.100%,
7/01/20 (Pre-refunded to 7/01/00)
1,950,000 East Bay Municipal Utility District (Alameda and Contra 6/00 at 102 Aaa 2,157,675
Costa Counties, California), Water System Subordinated
Revenue Bonds, Series 1990, 7.500%, 6/01/18 (Pre-
refunded to 6/01/00)
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Escrowed Bonds - continued
$ 4,000,000 East Bay Municipal Utility District (Alameda and Contra 12/01 at 102 Aaa $ 4,411,600
Costa Counties, California), Water System Subordinated
Revenue Bonds, Series 1991, 6.375%, 6/01/21 (Pre-
refunded to 12/01/01)
2,505,000 Harbor Department of the City of Los Angeles (California), No Opt. Call AAA 3,135,158
Revenue Bonds, Issue of 1988, 7.600%, 10/01/18
1,500,000 Community Facilities District No. 1 of the North City West 9/99 at 102 Aaa 1,640,235
School Facilities Financing Authority, Special Tax Bonds,
Series 1989A, 7.850%, 9/01/19 (Pre-refunded to
9/01/99)
3,500,000 Sacramento Municipal Utility District, Electric Revenue 8/98 at 102 Aaa 3,701,985
Bonds, 1988 Series W, 7.875%, 8/15/16 (Pre-refunded
to 8/15/98)
2,000,000 Certificates of Participation (1990 Financing Project), 7/00 at 102 A+ 2,210,200
Sonoma County Office of Education, 7.375%, 07/01/20
(Pre-refunded to 7/01/00)
- ---------------------------------------------------------------------------------------------------------------------------
General Obligations Bonds - 1.5%
Petaluma Joint High School District (Sonoma County,
California), General Obligation Bonds, Election of 1992,
Series C, Capital Appreciation Bonds:
4,220,000 0.000%, 8/01/20 8/04 at 38 3/8 AAA 1,072,175
2,080,000 0.000%, 8/01/21 8/04 at 36 3/32 AAA 496,933
2,000,000 City and County of San Francisco, General Obligation 6/04 at 102 Aaa 2,107,280
Bonds (School District Facilities Improvements), Series
1996 D, 6.000%, 6/15/14
- ---------------------------------------------------------------------------------------------------------------------------
Health Care Facilities - 15.4%
California Health Facilities Financing Authority, Insured
Health Facility Revenue Bonds (Small Facilities Pooled
Loan Program), 1994 Series B:
3,000,000 7.400%, 4/01/14 4/05 at 102 A 3,476,640
3,635,000 7.500%, 4/01/22 4/05 at 102 A 4,235,211
3,750,000 California Health Facilities Financing Authority, Insured 8/06 at 102 Aaa 3,880,125
Revenue Bond (Sutter/CHS), 5.875%, 8/15/16
1,700,000 California Health Facilities Financing Authority, Hospital 1/99 at 102 A+ 1,794,979
Revenue Refunding Bonds (Sutter Health), Series
1989A, 7.000%, 1/01/09
</TABLE>
13
<PAGE>
Portfolio of Investments (Unaudited)
California -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care Facilities -- continued
$ 3,380,000 California Health Facilities Financing Authority, 12/00 at 102 AA $3,713,031
Kaiser Permanente, Revenue Bonds, 1990 Series A,
7.000%, 12/01/10
5,000,000 California Health Facilities Financing Authority, 5/03 at 102 A- 5,033,500
Hospital Revenue Bonds (Downey Community Hospital),
Series 1993, 5.750%, 5/15/15
2,500,000 Certificates of Participation, California Statewide 11/04 at 102 A 2,692,525
Communities Development Authority (Solheim Lutheran
Home), 6.500%, 11/01/17
3,000,000 Certificates of Participation, California Statewide 7/04 at 102 Aa 3,284,010
Communities Development, St. Joseph Health System
Obligated Group, 6.500%, 7/01/15
1,500,000 Insured Certificates of Participation (Channing 1/01 at 102 A+ 1,619,790
House), Series 1991A, ABAG Finance Authority For
Nonprofit Corporations, 7.125%, 1/01/21
1,755,000 Central Joint Powers Health Financing Authority, 2/03 at 100 Baa1 1,549,296
Certificates of Participation, Series 1993
(Community Hospitals of Central California),
5.000%, 2/01/23
2,000,000 Certificates of Participation, Insured Health 2/01 at 102 A 2,123,020
Facility Revenue (Sierra Sunrise Lodge), Series
1991A, 6.750%, 2/01/21
2,475,000 City of Loma Linda California, Hospital Revenue 12/03 at 102 BBB 2,578,653
Bonds (Loma Linda University Medical Center
Project), Series 1993-A, 6.000%, 12/01/06
840,000 City of Monterey, Hospital Revenue Bonds (Monterey 1/98 at 101 A+ 858,883
Peninsula Hospital Project), Series 1984 A,
7.375%, 7/01/14
- --------------------------------------------------------------------------------------------------------------------
Housing Facilities -- 23.2%
4,750,000 California Housing Finance Agency Home Mortgage 8/05 at 102 Aaa 4,911,548
Revenue Bonds, 1995 Series F, 5.950%, 8/01/14
6,570,000 California Housing Finance Agency, Multifamily 8/04 at 100 Aaa 6,754,683
Housing Revenue Bonds II, 1996 Series A,
6.050%, 8/01/27
2,250,000 California Housing Finance Agency, Home Mortgage 2/07 at 102 Aaa 2,315,160
Revenue Bonds, 1997 Series B, 6.100%, 2/01/28
(Alternative Minimum Tax)
</TABLE>
14
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing Facilities -- continued
$ 3,000,000 California Rural Home Mortgage Finance Authority, No Opt. Call AAA $3,318,060
Single Family Mortgage Revenue Bonds (Mortgage-
Backed Securities Program), 1997 Series A,
6.250%, 9/01/29 (Alternative Minimum Tax)
2,905,000 California Statewide Communities Development 9/06 at 100 AAA 3,030,235
Authority, Senior Lien Multifamily Housing
Revenue Bonds (Monte Vista Terrace), Series
1996A, 6.375%, 9/01/20
2,200,000 City of Corona (California), Single Family Mortgage 11/06 at 102 Aaa 2,273,810
Revenue Bonds, Series 1996A (Senior),
6.050%, 5/01/27
400,000 City of Corona (California), Single Family Mortgage 11/06 at 102 A 414,572
Revenue Bonds, Series 1996B (Subordinate),
6.300%, 11/01/28
5,000,000 The Community Redevelopment Agency of the City of 6/05 at 105 AAA 5,699,950
Los Angeles, California, Multifamily Housing Revenue
Refunding Bonds, 1995 Series A (Angelus Plaza
Project), 7.400%, 6/15/10
215,000 The City of Los Angeles 1987 Home Mortgage Revenue No Opt. Call Aaa 231,039
Bonds (GNMA Mortgaged-Backed Securities Program),
8.100%, 5/01/17
4,500,000 The City of Los Angeles, Multifamily Housing 7/07 at 102 AAA 4,556,970
Revenue Bonds (Earthquake Rehabilitation Project),
Series 1997C, 5.900%, 1/01/30 (Alternative Minimum
Tax)
165,000 County of Los Angeles Single Family Mortgage Revenue No Opt. Call Aaa 176,466
Bonds (GNMA Mortgage Backed Securities Program),
1987 Issue A, 8.000%, 3/01/17
740,000 Community Development Agency of the City of Menlo 12/97 at 103 Aa 766,536
Park, Multifamily Housing Revenue Bonds (FHA-
Insured Mortgage Loan -- The Gateway Project),
Series 1987A, 8.250%, 12/01/28
3,285,000 City of Riverside, California, Multifamily Housing 7/02 at 100 AAA 3,397,248
Revenue Bonds (Fannie Mae Pass-Through Certificate
Program/Birchwood Park Apartment Project), Series
1992A, 6.500%, 1/01/18
4,005,000 City of Riverside, California, Multifamily Housing 7/02 at 100 AAA 4,141,851
Revenue Bonds (Fannie Mae Pass-Through Certificate
Program/Palm Shadows Apartments Project), 1992
Series A, 6.500%, 1/01/18
</TABLE>
15
<PAGE>
Portfolio of Investments (Unaudited)
California -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing Facilities -- continued
$ 2,080,000 City of Salinas, Housing Facility Refunding Revenue 7/04 at 102 AAA $2,188,742
Bonds Series 1994A (GNMA Collateralized -- Villa
Serra Project), 6.500%, 7/20/17
5,000,000 County of San Bernardino (California), Single Family 5/07 at 103 AAA 5,168,150
Home Mortgage Revenue Bonds (Mortgage-Backed
Securities Program), 1997 Series A,
6.200%, 5/01/21
24,670,000 County of San Bernardino (California), Single 5/07 at 22 9/16 AAA 3,125,196
Family Home Mortgage Revenue Bonds (Mortgage-
Backed Securities Program), 1997 Series A,
0.000%, 5/01/31 (Alternative Minimum Tax)
3,000,000 Housing Authority of the County of Santa Cruz, 7/00 at 102 AAA 3,214,830
Multifamily Housing Refunding Revenue Bonds,
Series 1990A (Fannie Mae Collateralized),
7.750%, 7/01/23
- --------------------------------------------------------------------------------------------------------------------
Lease Rental -- 9.4%
4,915,000 Certificates of Participation (1991 Financing 9/06 at 102 Aaa 5,187,586
Project), County of Alameda, California, Alameda
County Public Facilities Corporation,
6.000%, 9/01/21
1,410,000 Redding Joint Powers Financing Authority Lease 6/03 at 102 A 1,470,475
Revenue Bonds (Capital Improvement Projects),
Series 1993, 6.250%, 6/01/23
1,000,000 Certificate of Participation Series 1991, San Mateo 5/99 at 102 A+ 1,056,910
County Board of Education (Administration Building
Project), 7.100%, 5/01/21
2,950,000 Santa Monica Community College District, Refunding 2/07 at 102 A 3,048,943
Certificates of Participation 1991 Series A,
5.900%, 2/01/27
4,000,000 Shafter Joint Powers Financing Authority Lease 1/07 at 101 BBB+ 4,098,600
Revenue Bonds 1997 Series A (Community Correctional
Facility Acquisition Project), 6.050%, 1/01/17
2,000,000 Taft Public Financing Authority Lease Revenue Bonds 1/07 at 101 BBB+ 2,049,300
1997 Series A (Community Correctional Facility
Acquisition Project), 6.050%, 1/01/17
1,100,000 Certificates of Participation (1992 Financing 11/02 at 102 A 1,177,979
Project), Series B, County of Tulare, Tulare
County Public Facilities Corporation,
6.875%, 11/15/12
4,200,000 Certificates of Participation (Capital Improvement 2/06 at 102 Aaa 4,412,982
Program), 1996 Series A, County of Tulare,
California, 6.000%, 2/15/16
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other Revenue -- 17.8%
$ 7,000,000 Brea Redevelopment Agency (Orange County, 8/03 at 102 Aaa $6,991,250
California), 1993 Tax Allocation Refunding Bonds
(Redevelopment Project AB), 5.500%, 8/01/17
2,000,000 Carson Redevelopment Agency (California), 10/03 at 102 Baa1 2,038,340
Redevelopment Project Area No. 1, Tax Allocation
Bonds, Series 1993, 6.000%, 10/01/16
2,500,000 Fontana Public Financing Authority (San Bernardino 9/00 at 102 BB+ 2,640,050
County, California), Tax Allocation Revenue Bonds
(North Fontana Redevelopment Project), 1990
Series A, 7.250%, 9/01/20
4,595,000 Los Angeles County Public Works Finance Authority, 10/04 at 102 AA- 4,939,120
Revenue Bonds, Series 1994A (Los Angeles County
Regional Park and Open Space District),
6.125%, 10/01/10
2,000,000 Los Angeles County Transportation Commission 7/99 at 102 Aa 2,146,800
(California), Sales Tax Revenue Refunding Bonds,
Series 1989-A, 7.400%, 7/01/15
1,260,000 Marysville Community Development Agency, Marysville 3/02 at 102 Baa 1,366,672
Plaza Project, 1992 Tax Allocation Refunding Bonds
(Bank Qualified), 7.250%, 3/01/21
2,080,000 City of Ontario (San Bernardino County, California), 9/97 at 103 N/R 2,165,550
Limited Obligation Improvement Bonds, Assessment
District No. 100C (California Commerce Center --
Phase III), 8.000%, 9/02/11
4,300,000 Orange County Development Agency, Santa Ana Heights 9/03 at 102 Baa 4,421,690
Project Area, 1993 Tax Allocation Revenue Bonds,
6.125%, 9/01/23
1,645,000 City of Rancho Cucamonga, Assessment District No. 3/99 at 103 N/R 1,642,927
93-1 (Masi Plaza), Limited Obligation Improvement
Bonds, 6.250%, 9/02/22
2,315,000 Limited Obligation Refunding Bonds, City of Salinas, 9/06 at 103 N/R 2,410,748
Consolidated Refunding District 94-3, Series
No. A-181 Monterey County, California,
7.400%, 9/02/09
5,000,000 City and County of San Francisco, Redevelopment 8/03 at 103 A 4,774,400
Financing Authority, 1993 Series C, Tax Allocation
Revenue Bonds (San Francisco Redevelopment
Projects), 5.125%, 8/01/18
</TABLE>
17
<PAGE>
Portfolio of Investments (Unaudited)
California -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other Revenue -- continued
$ 7,090,000 Redevelopment Agency of the City of San Marcos, Tax 10/07 at 102 A- $7,168,557
Allocation Bonds (1997 Affordable Housing Project),
Series 1977A, 6.000%, 10/01/27 (Alternative
Minimum Tax)
- --------------------------------------------------------------------------------------------------------------------
Pollution Control Facilities -- 3.0%
2,000,000 California Pollution Control Financing Authority, 6/03 at 102 A 2,038,420
Pollution Control Revenue Bonds (Pacific Gas and
Electric Company), 1993 Series A, 5.875%, 6/01/23
(Alternative Minimum Tax) (DD)
5,000,000 California Pollution Control Financing Authority, 12/03 at 102 A 5,087,200
Pollution Control Revenue Bonds (Pacific Gas and
Electric Company), 1993 Series B, 5.850%, 12/01/23
(Alternative Minimum Tax)
- --------------------------------------------------------------------------------------------------------------------
Transportation -- 4.7%
5,000,000 California Statewide Communities Development 10/07 at 102 Baa3 4,877,250
Authority, Special Facilities Lease Revenue Bonds,
1997 Series A, 5.700%, 10/01/33 (Alternative
Minimum Tax) (DD)
7,150,000 Foothill/Eastern Transportation Corridor Agency, Toll 1/05 at 100 Baa1 6,389,097
Road Revenue Bonds, Series 1995A, 5.000%, 1/01/35
- --------------------------------------------------------------------------------------------------------------------
Utilities -- 3.6%
5,000,000 Modesto Irrigation District Financing Authority, 10/06 at 102 Aaa 5,308,000
Refunding Revenue Bonds, Series A, 6.000%, 10/01/15
2,905,000 Northern California Power Agency, Hydroelectric 7/98 at 102 A- 3,028,288
Project Number One Revenue Bonds, Refunding
Series E, 7.150%, 7/01/24
205,000 Sacramento Municipal Utility District (California), 9/97 at 100 Baa1 205,615
Subordinated Electric Revenue Bonds, 1985 Refunding
Series, 8.000%, 11/15/10
- --------------------------------------------------------------------------------------------------------------------
$253,080,000 Total Investments -- (cost $222,819,351) - 99.1% 237,475,785
=====================-----------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Temporary Investments in Short-Term Municipal Securities -- 1.6%
$ 1,000,000 California Health Facilities Financing Authority, Insured VMIG-1 $ 1,000,000
Revenue Bonds, Variable Rate Demand Bonds
(Sutter/CHS), 3.400%, 7/01/22+
300,000 Orange County Irvine Coast Assessment District #88-1 VMIG-1 300,000
Variable Rate Demand Bonds, 3.550%, 9/02/18+
2,600,000 Orange County Sanitation District Certificates of VMIG-1 2,600,000
Participation Variable Rate Demand Bonds, 3.550%,
8/01/17+
- ------------------------------------------------------------------------------------------------------------------------------
$ 3,900,000 Total Temporary Investments -- 1.6% 3,900,000
=====================---------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (0.7%) (1,645,556)
-----------------------------------------------------------------------------------------------------
Net Assets -- 100% $239,730,229
=====================================================================================================
</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 & 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.
(DD) Security Purchased on a delayed delivery basis
(see note 1 of the Notes to Financial
Statements).
+ The security has a maturity of more than one
year, but has variable rate and demand features
which qualify it as a short-term security. The
rate disclosed is that currently in effect. This
rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
19
<PAGE>
Portfolio of Investments (Unaudited)
California Insured
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Educational Facilities -- 2.1%
$ 4,500,000 California Educational Facilities Authority Revenue 10/06 at 102 Aaa $ 4,726,665
Bonds (University of San Francisco), Series 1996,
6.000%, 10/01/26
- ------------------------------------------------------------------------------------------------------------------------------
Escrowed Bonds -- 19.2%
1,000,000 California Educational Facilities Authority, Revenue 11/00 at 102 Aaa 1,109,950
Bonds (Pepperdine University), Series 1990, 7.200%,
11/01/15 (Pre-refunded to 11/01/00)
5,000,000 State Public Works Board of the State of California 9/00 at 102 Aaa 5,499,850
Lease Revenue Bonds (Department of Corrections),
1990 Series A (State Prison-Madera County),
7.000%, 9/01/09 (Pre-refunded to 9/01/00)
7,000,000 City of Big Bear Lake, California, 1992 Water 4/02 at 102 Aaa 7,730,870
Revenue Refunding Bonds, 6.375%, 4/01/22
(Pre-refunded to 4/01/02)
3,525,000 Brea Public Financing Authority (Orange County, 8/01 at 102 Aaa 3,945,744
California), 1991 Tax Allocation Revenue
Bonds, Series A (Redevelopment Project AB),
7.000%, 8/01/15 (Pre-refunded to 8/01/01)
3,000,000 Calaveras County Water District (California), 5/01 at 102 Aaa 3,330,240
Certificates of Participation (1991 Ebbetts Pass
Water System Improvements Project), 6.900%,
5/01/16 (Pre-refunded to 5/01/01)
2,000,000 East Bay Municipal Utility District (Alameda and 6/00 at 102 Aaa 2,213,000
Contra Costa Counties, California), Water System
Subordinated Revenue Bonds, Series 1990, 7.500%,
6/01/18 (Pre-refunded to 6/01/00)
2,000,000 Eastern Municipal Water District (Riverside County, 7/01 at 102 Aaa 2,199,600
California), Water and Sewer Revenue, Certificates
of Participation, Series 1991, 6.500%, 7/01/20
(Pre-refunded to 7/01/01)
2,000,000 The City of Los Angeles (California) Los Angeles 8/00 at 102 Aaa 2,197,680
Convention and Exhibition Center Certificates of
Participation, 1990 Series, 7.000%, 8/15/21
(Pre-refunded to 8/15/00)
2,500,000 Mt. Diablo Hospital District, Insured Hospital 12/00 at 102 Aaa 2,839,125
Revenue Bonds, 1990 Series A, 8.000%, 12/01/11
(Pre-refunded to 12/01/00)
</TABLE>
20
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed Bonds -- continued
$ 2,000,000 Mt. Diablo Unified School District, Community Facilities 8/00 at 102 Aaa $ 2,198,400
District No. 1, Special Tax Bonds, Series 1990 (Contra
Costa County, California), 7.050%, 8/01/20
(Pre-refunded to 8/01/00)
2,000,000 Redevelopment Agency of the City of Pittsburg, California, 8/01 at 103 Aaa 2,266,500
Los Medanos Community Development Project, Tax
Allocation Bonds, Series 1991, 7.150%, 8/01/21
(Pre-refunded to 8/01/01)
3,000,000 Sacramento Municipal Utility District, Electric Revenue 9/01 at 102 Aaa 3,309,180
Bonds, 1991 Series Y, 6.500%, 9/01/21
(Pre-refunded to 9/01/01)
2,500,000 San Bernardino County Transportation Authority Sales Tax 3/02 at 102 Aaa 2,684,100
Revenue Bonds (Limited Tax Bonds), 1992 Series A,
6.000%, 3/01/10
2,000,000 San Diego Regional Building Authority Lease Revenue 1/00 at 102 Aaa 2,178,900
Bonds, Series 1990A (San Miguel Consolidated Fire
Protection District Project), 7.250%, 1/01/20
(Pre-refunded to 1/01/00)
- ------------------------------------------------------------------------------------------------------------------------------
General Obligation Bonds -- 4.1%
5,000,000 State of California Various Purpose General Obligation 4/03 at 102 Aaa 4,980,950
Bonds, 5.500%, 4/01/19
500,000 Cotati-Rohnert Park Unified School District (Sonoma 8/99 at 102 Aaa 555,500
County, California), General Obligation Bonds, Election
1990, Series B, 9.000%, 8/01/06
2,500,000 City of Oakland, California, Special Refunding Revenue 8/98 at 102 Aaa 2,625,025
Bonds (Pension Financing), 1988 Series A,
7.600%, 8/01/21
3,040,000 Sulphur Springs Union School District (County of Los No Opt. Call Aaa 1,138,450
Angeles California), General Obligation Bonds,
Election 1991, Series A, 0.000%, 9/01/15
- ------------------------------------------------------------------------------------------------------------------------------
Health Care Facilities -- 6.1%
5,000,000 California Health Facilities Authority Kaiser Permanente 10/01 at 101 AA 4,975,900
Medical Care Program Semiannual Tender Revenue
Bonds, 1983 Tender Bonds, 5.450%, 10/01/13
8,500,000 California Statewide Communities Development Authority, 8/02 at 102 Aaa 8,838,385
Sutter Health Obligated Group, Certificates of
Participation, 6.125%, 8/15/22
</TABLE>
21
<PAGE>
Portfolio of Investments (Unaudited)
California -- Insured continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing Facilities -- 16.1%
$ 4,750,000 California Housing Finance Agency, Single Family 2/07 at 102 Aaa $ 4,847,898
Mortgage Bonds II, 1997 Series A,
6.050%, 8/01/26 (Alternative Minimum Tax)
6,340,000 California Housing Finance Agency, Housing Revenue 2/02 at 102 Aaa 6,702,141
Bonds (Insured), 1991 Series B, 6.850%, 8/01/23
1,500,000 California Housing Finance Agency, Home Mortgage 2/06 at 102 Aaa 1,546,470
Revenue Bonds, 1996 Series E, 6.150%, 8/01/25
(Alternative Minimum Tax)
5,000,000 California Housing Finance Agency, Home Mortgage 8/05 at 102 Aaa 5,170,050
Revenue Bonds, 1995 Series F, 5.950%, 8/01/14
2,545,000 California Housing Finance Agency, Multifamily Housing 8/04 at 100 Aaa 2,616,540
Revenue Bonds II, 1996 Series A, 6.050%, 8/01/27
1,010,000 California Housing Finance Agency Multifamily Housing 2/07 at 102 Aaa 1,022,534
Revenue Bonds III, 1997 Series A, 5.850%, 8/01/17
(Alternative Minimum Tax)
5,000,000 California Housing Finance Agency Home Mortgage 8/07 at 102 Aaa 5,149,250
Revenue Bonds, 1997 Series E, 6.100%, 8/01/29
(Alternative Minimum Tax)
4,000,000 The Community Redevelopment Agency of the City of Los 6/05 at 105 AAA 4,559,960
Angeles, California, Multifamily Housing Revenue
Refunding Bonds, 1995 Series A, (Angelus Plaza Project),
7.400%, 6/15/10
220,000 The City of Los Angeles 1987 Home Mortgage Revenue No Opt. Call Aaa 236,412
Bonds (GNMA Mortgage-Backed Securities Program),
8.100%, 5/01/17
2,555,000 City of Napa Mortgage Revenue Refunding Bonds, Series 7/02 at 102 Aaa 2,691,488
1992A (FHA Insured Mortgage Loan -- Creekside Park
Apartments Project), 6.625%, 7/01/24
2,000,000 City of Napa Mortgage Revenue Refunding Bonds, Series 7/04 at 101 Aaa 2,119,340
1994A (FHA Insured Mortgage Loan -- Creekside Park II
Apartments Project), 6.625%, 7/01/25
60,000 Thousand Oaks Redevelopment Agency (Ventura County, 1/98 at 101 Aaa 61,064
California), Single Family Mortgage Revenue Refunding
Bonds, Issue of 1986, 7.900%, 1/01/16
- ------------------------------------------------------------------------------------------------------------------------------
Lease Rental -- 19.0%
4,915,000 Certificates of Participation (1991 Financing Project), 9/06 at 102 Aaa 5,187,586
County of Alameda, California, Alameda County Public
Facilities Corporation, 6.000%, 9/01/21
</TABLE>
22
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lease Rental -- continued
$ 20,000,000 Anaheim Public Financing Authority, Lease Revenue Bonds No Opt. Call Aaa $ 2,700,000
(Anaheim Public Improvements Project), Senior Lease
Revenue Bonds, 1997 Series C, 0.000%, 9/01/32
7,000,000 Chino Unified School District, Certificates of Participation 9/05 at 102 Aaa 7,393,890
(1995 Master Lease Program), 6.125%, 9/01/26
3,865,000 Fallbrook Sanitary District (San Diego County, California) 2/01 at 100 Aaa 4,107,026
1991 Certificates of Participation (Wastewater
Facilities Refunding Project), 6.600%, 2/01/13
3,000,000 Gilroy Unified School District, Santa Clara County, 9/04 at 102 Aaa 3,239,550
California, Certificates of Participation, Series of 1994,
6.250%, 9/01/12
8,500,000 County of Orange, California, 1996 Recovery Certificates 7/06 at 102 Aaa 8,920,750
of Participation, Series A, 6.000%, 7/01/26
County of Riverside, California (1994 Desert Justice
Facility Project), Certificates of Participation:
3,600,000 6.000%, 12/01/17 12/04 at 101 Aaa 3,751,740
2,500,000 6.250%, 12/01/21 12/04 at 101 Aaa 2,653,475
1,750,000 County of Riverside Asset Leasing Corporation Leasehold 6/12 at 101 Aaa 1,805,685
Revenue Bonds, 1997 Series B (County of Riverside
Hospital Project), 5.700%, 6/01/16
Redevelopment Agency of the City and County of San
Francisco Lease Revenue Bonds, Series 1994 (George
R. Moscone Convention Center):
2,250,000 6.800%, 7/01/19 7/04 at 102 Aaa 2,532,218
1,000,000 6.750%, 7/01/24 7/04 at 102 Aaa 1,122,550
- ------------------------------------------------------------------------------------------------------------------------------
Other Revenue -- 19.3%
235,000 California Public Capital Improvements Financing Authority 3/98 at 102 Aaa 244,186
(A Joint Powers Agency), Revenue Bonds (Pooled
Projects), Series 1988B, 8.100%, 3/01/18
1,225,000 Redevelopment Agency of the City of Barstow, Central No Opt. Call Aaa 1,482,054
Redevelopment Project Tax Allocation Bonds, 1994
Series A, 7.000%, 9/01/14
7,005,000 Big Bear Lake Financing Authority (San Bernardino County, 8/05 at 102 Aaa 7,602,597
California), 1995 Tax Allocation Refunding Revenue
Bonds, 6.300%, 8/01/25
850,000 Redevelopment Agency of the City of Concord, Central 7/98 at 102 Aaa 892,118
Concord Redevelopment Project, Tax Allocation Bonds,
Series 1988-2, 7.875%, 7/01/07
</TABLE>
23
<PAGE>
Portfolio of Investments (Unaudited)
California Insured -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other Revenue -- continued
$ 2,500,000 Fontana Public Financing Authority (San Bernardino County, 9/00 at 102 Aaa $ 2,723,525
California), Tax Allocation Revenue Bonds, (North Fontana
Redevelopment Project), 1990 Series A, 7.000%, 9/01/10
1,000,000 La Quinta Redevelopment Agency, La Quinta No Opt. Call Aaa 1,232,940
Redevelopment Project Tax Allocation Refunding Bonds,
Series 1994 (Project Area No.1), 7.300%, 9/01/12
5,000,000 Los Angeles County Transportation Commission (California), 7/02 at 102 Aaa 5,377,600
Proposition C Sales Tax Revenue Bonds, Second Senior
Bonds, Series 1992-A, 6.250%, 7/01/13
7,040,000 Norwalk Community Facilities Financing Authority (Los 9/05 at 102 Aaa 7,430,861
Angeles County, California), Tax Allocation Refunding
Revenue Bonds, 1995 Series A, 6.050%, 9/01/25
5,595,000 Palm Desert Financing Authority, Tax Allocation Refunding 4/02 at 100 Aaa 5,622,695
Revenue Bonds (Project Area No.1, As Amended),
Series 1997, 5.625%, 4/01/23
6,560,000 Palm Desert Redevelopment Agency Tax Allocation 9/04 at 102 Aaa 6,970,853
Revenue Bonds, 1996 Series A (Desert Rose Project
Refunding), 6.100%, 9/01/16
2,250,000 Redevelopment Agency of the City of San Jose, Merged 2/04 at 102 Aaa 1,999,868
Area Redevelopment Project, Tax Allocation Bonds,
Series 1993, 4.750%, 8/01/24
2,000,000 Southern California Rapid Transit District, 1/01 at 102 1/2 Aaa 2,229,660
Certificates of Participation
(Workers' Compensation Funding Program), 7.500%, 7/01/05
- ------------------------------------------------------------------------------------------------------------------------------
Transportation -- 3.9%
9,000,000 Airports Commission, City and County of San Francisco, 5/06 at 101 Aaa 8,958,420
California, San Francisco International Airport, Second
Series Revenue Bond, Issue 13B, 5.625%, 5/01/21
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------
Utilities -- 2.4%
2,420,000 Eldorado County Public Agency Financing Authority, 2/06 at 102 Aaa 2,416,781
5.500%, 2/15/21 (DD)
3,000,000 City of Shasta Lake 1996-2 Certificates of Participation, 4/05 at 102 Aaa 3,142,320
6.000%, 4/01/16
</TABLE>
24
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water/Sewer Facilities -- 6.6%
$ 9,500,000 Modesto Irrigation District Financing Authority, Domestic 9/02 at 102 Aaa $ 9,976,329
Water Project Revenue Bonds, Series 1992A,
6.125%, 9/01/19
5,000,000 City of Vallejo Refunding Revenue Bonds, 1996 Series A 5/06 at 102 Aaa 5,161,649
(Water Improvement Project), 5.875%, 5/01/26
- ------------------------------------------------------------------------------------------------------------------------------
$232,105,000 Total Investments -- (cost $209,867,760) -- 98.8% 225,146,087
=====================---------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities -- 0.9%
$ 1,600,000 Irvine Ranch Water District, Consolidated Refunding Bonds, A-1+ 1,600,000
Series 1985-B, 1986 Capital Improvement Project,
Variable Rate Demand Bonds, 3.350%, 10/01/04+
500,000 City of Santa Ana, Multi-Modal Interchangeable Rate A-1 500,000
Health Facility Revenue Bonds, (Town and Country
Manor Project), Series 1990, Variable Rate Demand
Bonds, 3.500%, 10/01/20+
- ------------------------------------------------------------------------------------------------------------------------------
$ 2,100,000 Total Temporary Investments -- 0.9% 2,100,000
=====================---------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.3% 721,996
-----------------------------------------------------------------------------------------------------
Net Assets -- 100% $227,968,083
=====================================================================================================
</TABLE>
All of the bonds in the portfolio, excluding temporary
investments in short-term municipal securities, are
either covered by Original Issue Insurance, Secondary
Market Insurance or Portfolio Insurance, or are backed
by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities, any of
which ensure the timely payment of principal and
interest.
* 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.
(DD) Security purchased on a delayed delivery basis
(see note 1 to the Notes to Financial Statements)
+ The security has a maturity of more than one year,
but has variable rate and demand features which
qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate
changes periodically based on market conditions or
a specified market index.
25 See accompanying notes to financial statements.
<PAGE>
Statement of Net Assets (Unaudited)
August 31, 1997
<TABLE>
<CAPTION>
California
California Insured
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investment in municipal securities, at market value (note 1) $237,475,785 $225,146,087
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) 3,900,000 2,100,000
Cash 230,814 100,389
Receivables:
Interest 3,695,438 3,571,416
Investments sold 105,000 85,000
Shares sold 65,487 253,369
Other assets 1,159 57,197
- -------------------------------------------------------------------------------------------------
Total assets 245,473,683 231,313,458
- -------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 4,900,908 2,405,110
Shares redeemed 68,360 205,813
Accrued expenses:
Management fees (note 6) 110,772 105,593
12b-1 distribution and service fees (notes 1 and 6) 5,637 7,485
Other 21,720 52,428
Dividends payable 636,057 568,946
- -------------------------------------------------------------------------------------------------
Total liabilities 5,743,454 3,345,375
- -------------------------------------------------------------------------------------------------
Net assets (note 7) $239,730,229 $227,968,083
=================================================================================================
Class A Shares (note 1)
Net assets $ 24,193,048 $ 32,484,479
Shares outstanding 2,251,935 3,005,330
Net asset value and redemption price per share $ 10.74 $ 10.81
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 11.21 $ 11.28
=================================================================================================
Class B Shares (note 1)
Net assets $ 985,818 $ 986,816
Shares outstanding 91,703 91,276
Net asset value, offering and redemption price per share $ 10.75 $ 10.81
=================================================================================================
Class C Shares (note 1)
Net assets $ 1,660,636 $ 2,385,070
Shares outstanding 154,556 222,220
Net asset value, offering and redemption price per share $ 10.74 $ 10.73
=================================================================================================
Class R Shares (note 1)
Net assets $212,890,727 $192,111,718
Shares outstanding 19,779,713 17,809,058
Net asset value, offering and redemption price per share $ 10.76 $ 10.79
=================================================================================================
</TABLE>
26 See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations (Unaudited) Nuveen Municipal Bond Funds
Six months ended August 31, 1997 August 31, 1997 Semiannual Report
California
California Insured
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Tax-exempt interest income (note 1) $7,160,226 $6,625,469
- ------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 646,558 615,423
12b-1 service fees - Class A (notes 1 and 6) 22,371 30,126
12b-1 distribution and service fees - Class B (notes 1 and 6) 1,979 2,505
12b-1 distribution and service fees - Class C (notes 1 and 6) 4,587 7,260
Shareholders' servicing agent fees and expenses 71,592 59,931
Custodian's fees and expenses 29,349 29,576
Trustees' fees and expenses (note 6) 2,349 2,243
Professional fees 7,943 8,076
Shareholders' reports - printing and mailing expenses 39,745 36,649
Federal and state registration fees 910 152
Portfolio insurance expense -- 8,835
Other expenses 8,680 6,964
- ------------------------------------------------------------------------------------------------
Total expenses 836,063 807,740
- ------------------------------------------------------------------------------------------------
Net investment income 6,324,163 5,817,729
- ------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 949,601 200,178
Net change in unrealized appreciation or depreciation
of investments 2,514,896 2,061,523
- ------------------------------------------------------------------------------------------------
Net gain from investments 3,464,497 2,261,701
- ------------------------------------------------------------------------------------------------
Net increase in net assets from operations $9,788,660 $8,079,430
================================================================================================
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
California
---------------------------------------
Six months ended Year ended
8/31/97 2/28/97
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 6,324,163 $ 12,366,634
Net realized gain (loss) from investment transactions
(notes 1 and 4) 949,601 169,342
Net change in unrealized appreciation or depreciation
of investments 2,514,896 27,943
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 9,788,660 12,563,919
- ----------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (566,539) (850,904)
Class B (8,150) --
Class C (26,618) (33,408)
Class R (5,691,017) (11,568,807)
- ----------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (6,292,324) (12,453,119)
- ----------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 8,891,039 21,474,243
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 3,867,266 7,567,054
- ----------------------------------------------------------------------------------------------------------
12,758,305 29,041,297
- ----------------------------------------------------------------------------------------------------------
Cost of shares redeemed (12,351,074) (23,108,724)
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 407,231 5,932,573
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets 3,903,567 6,043,373
Net assets at the beginning of period 235,826,662 229,783,289
- ----------------------------------------------------------------------------------------------------------
Net assets at the end of period $239,730,229 $235,826,662
==========================================================================================================
Balance of undistributed net investment income at end of period $ 88,309 $ 56,470
==========================================================================================================
</TABLE>
28
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
California Insured
---------------------------------------
Six months ended Year ended
8/31/97 2/28/97
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 5,817,729 $ 11,661,339
Net realized gain (loss) from investment transactions
(notes 1 and 4) 200,178 (196,727)
Net change in unrealized appreciation or depreciation
of investments 2,061,523 (1,102,480)
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 8,079,430 10,362,132
- ----------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (748,392) (1,112,015)
Class B (10,798) --
Class C (42,874) (49,035)
Class R (5,020,967) (10,458,018)
- ----------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (5,823,031) (11,619,068)
- ----------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 12,134,306 25,329,867
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 3,455,722 6,819,379
- ----------------------------------------------------------------------------------------------------------
15,590,028 32,149,246
- ----------------------------------------------------------------------------------------------------------
Cost of shares redeemed (14,747,892) (29,955,249)
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 842,136 2,193,997
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets 3,098,535 937,061
Net assets at the beginning of period 224,869,548 223,932,487
- ----------------------------------------------------------------------------------------------------------
Net assets at the end of period $227,968,083 $224,869,548
==========================================================================================================
Balance of undistributed net investment income at end of period $ 171,116 $ 176,418
==========================================================================================================
</TABLE>
29
<PAGE>
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust II (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen California Municipal Bond Fund ("California") and the
Nuveen California Insured Municipal Bond Fund ("California Insured")
(collectively, 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, California and California
Insured were renamed and reorganized into the Trust. Prior to the
reorganization, California (formerly Nuveen California Tax-Free Value Fund) and
California Insured (formerly Nuveen California Insured Tax-Free Value Fund)
were each a series of the Nuveen California Tax-Free Bond Fund, Inc., an
open-end diversified management investment company.
Each Fund seeks 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 their when-issued and delayed delivery purchase
commitments. At August 31, 1997, California and California Insured had
outstanding purchase commitments of $4,900,908 and $2,405,110, respectively.
30
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
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 carryovers.
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 net 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, each Fund
intends to satisfy conditions which will enable interest from municipal
securities, which is exempt from regular federal and California state personal
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.
Insurance
California Insured invests in municipal securities which are either covered by
insurance or backed by an escrow or trust account containing sufficient U.S.
Government or U.S. Government agency securities, both of which ensure the timely
payment of principal and interest. Each insured municipal security is covered by
Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance.
Such insurance does not guarantee the market value of the municipal securities
or the value of the Fund's shares. Original Issue Insurance and Secondary Market
Insurance remain in effect as long as the municipal securities covered thereby
remain outstanding and the insurer remains in business, regardless of whether
the Fund ultimately disposes of such municipal securities. Consequently, the
market value of the municipal securities covered by Original Issue Insurance or
Secondary Market Insurance may reflect value attributable to the insurance.
Portfolio Insurance is effective only while the municipal securities are held by
the Fund. Accordingly, neither the prices used in determining
31
<PAGE>
Notes to Financial Statements (Unaudited) - continued
the market value of the underlying municipal securities nor the net asset value
of the Fund's shares include value, if any, attributable to the Portfolio
Insurance. Each policy of the Portfolio Insurance does, however, give the Fund
the right to obtain permanent insurance with respect to the municipal security
covered by the Portfolio Insurance policy at the time of its sale.
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
buy may be subject to a 1% contingent deferred sales charge ("CDSC") if
redeemed within 18 months of purchase. Class B Shares are sold without a sales
charge but incur annual 12b-1 distribution and service fees. An investor
purchasing Class B Shares agrees to pay a CDSC of up to 5% depending upon the
length of time the shares are held by the investor (CDSC is reduced to 0% at the
end of six years). Class B Shares convert to Class A Shares eight years after
purchase. Class C Shares are sold without a sales charge but incur annual 12b-1
distribution and service fees. An investor purchasing Class C Shares agrees to
pay a CDSC of 1% if Class C Shares are redeemed within one year of purchase.
Class R Shares are not subject to any sales charge or 12b-1 distribution or
service fees. Class R Shares are available for purchases of over $1 million and
in other limited circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Funds are authorized to invest in such
financial instruments, and may do so in the future, they did not make any such
investments during the six months ended August 31, 1997.
Expense Allocation
Expenses of each 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.
32
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
2. Fund Shares
Transactions in Fund shares were as follows:
California
-----------------------------------------------------------------
Six months ended Year ended
8/31/97 2/28/97
-----------------------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 422,982 $ 4,487,654 834,264 $ 8,711,708
Class B 91,458 969,092 -- --
Class C 79,597 852,049 41,611 437,417
Class R 242,537 2,582,244 1,174,955 12,325,118
Shares issued to shareholders due to
reinvestment of distributions:
Class A 29,748 315,182 43,465 455,861
Class B 245 2,623 -- --
Class C 1,687 17,852 2,382 24,945
Class R 332,864 3,531,609 675,181 7,086,248
- ----------------------------------------------------------------------------------------------------------------------
1,201,118 12,758,305 2,771,858 29,041,297
- ----------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (144,337) (1,537,815) (135,750) (1,422,346)
Class B -- -- -- --
Class C (21,450) (228,229) (13,949) (144,511)
Class R (998,034) (10,585,030) (2,059,535) (21,541,867)
- ----------------------------------------------------------------------------------------------------------------------
(1,163,821) (12,351,074) (2,209,234) (23,108,724)
- ----------------------------------------------------------------------------------------------------------------------
Net increase 32,297 $ 407,231 562,624 $ 5,932,573
======================================================================================================================
</TABLE>
33
<PAGE>
Notes to Financial Statements (Unaudited) - continued
<TABLE>
<CAPTION>
California Insured
-----------------------------------------------------------------
Six months ended Year ended
8/31/97 2/28/97
-----------------------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 596,727 $ 6,349,996 1,300,597 $ 13,757,024
Class B 91,195 970,494 -- --
Class C 72,179 770,770 91,768 972,104
Class R 377,701 4,043,046 1,001,613 10,600,739
Shares issued to shareholders due to
reinvestment of distributions:
Class A 37,268 398,245 52,994 563,347
Class B 95 1,036 -- --
Class C 2,676 28,414 3,107 32,774
Class R 284,117 3,028,027 587,632 6,223,258
- ----------------------------------------------------------------------------------------------------------------------
1,461,958 15,590,028 3,037,711 32,149,246
- ----------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (207,365) (2,205,584) (378,089) (4,026,630)
Class B (14) (155) -- --
Class C (14,389) (153,668) (30,587) (320,023)
Class R (1,162,614) (12,388,485) (2,426,927) (25,608,596)
- ----------------------------------------------------------------------------------------------------------------------
(1,384,382) (14,747,892) (2,835,603) (29,955,249)
- ----------------------------------------------------------------------------------------------------------------------
Net increase 77,576 $ 842,136 202,108 $ 2,193,997
======================================================================================================================
</TABLE>
34
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
3. Distributions to Shareholders
On September 9, 1997, the Funds declared dividend distributions from their tax-
exempt net investment income which were paid on October 1, 1997, to
shareholders of record on September 9, 1997, as follows:
<TABLE>
<CAPTION>
California California Insured
- -------------------------------------------------------------------------------
<S> <C> <C>
Dividend per share:
Class A $ .0455 $ .0450
Class B .0390 .0380
Class C .0405 .0395
Class R .0475 .0465
===============================================================================
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the six months ended August
31, 1997, were as follows:
<TABLE>
<CAPTION>
California California Insured
- -------------------------------------------------------------------------------
<S> <C> <C>
Purchases
Investments in municipal securities $75,420,191 $46,273,226
Temporary municipal investments 24,580,000 28,100,000
Sales
Investments in municipal securities 75,414,819 45,284,521
Temporary municipal investments 21,680,000 26,600,000
===============================================================================
</TABLE>
At August 31, 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 February, 28, 1997, the Funds' last fiscal year end, the Funds had unused
capital loss carryforwards available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, the carryovers
will expire as follows:
<TABLE>
<CAPTION>
California California Insured
- -------------------------------------------------------------------------------
<S> <C> <C>
Expiration year:
2003 $ 595,964 $ 341,931
2005 -- 196,727
- -------------------------------------------------------------------------------
Total $ 595,964 $ 538,658
===============================================================================
</TABLE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at August 31, 1997, were as follows:
<TABLE>
<CAPTION>
California California Insured
- -------------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $14,666,657 $15,319,518
depreciation (10,223) (41,191)
- -------------------------------------------------------------------------------
Net unrealized appreciation $14,656,434 $15,278,327
===============================================================================
</TABLE>
35
<PAGE>
Notes to Financial Statements (Unaudited) - continued
6. Management Fee and Other Transactions with Affiliates
Under the Trusts' investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Average daily net asset value Management fee
- --------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
- --------------------------------------------------------------------------------
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to 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 each Fund in order to limit total expenses to .75 of 1% of the
average daily net asset value of California and .975 of 1% of the average daily
net asset value of California Insured, excluding any 12b-1 fees applicable to
Class A, B and C Shares. The Adviser may voluntarily reimburse additional
expenses from time to time, which may be terminated at any time at its
discretion.
During the six months ended August 31, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $97,300 and $149,300 for
California and California Insured, respectively, of which approximately $83,500
and $126,800, 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 August 31, 1997, the Distributor compensated
authorized dealers directly with approximately $48,500 and $44,900 in commission
advances at the time of purchase for California and California Insured,
respectively. 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 August 31,
1997, the Distributor retained approximately $4,900 and $6,900 in such 12b-1
fees for California and California Insured, respectively. The remaining 12b-1
fees charged to the Funds were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
36
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
7. Composition of Net Assets
At August 31, 1997, each Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
California California Insured
- -------------------------------------------------------------------------------
<S> <S> <C>
Capital paid-in $224,627,715 $212,857,120
Balance of undistributed net
investment income 88,309 171,116
Accumulated net realized gain (loss)
from investment transactions 357,771 (338,480)
Net unrealized appreciation
of investments 14,656,434 15,278,327
- -------------------------------------------------------------------------------
Net assets $239,730,229 $227,968,083
===============================================================================
</TABLE>
37
<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
California Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
beginning investment from investment from capital end of asset
Year ending February 28/29, of period income(b) investments income gains period value(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1998(f) $10.58 $.27 $.16 $ (.27) $ -- $10.74 4.15%
1997 10.58 .55 (.01) (.54) -- 10.58 5.29
1996 10.10 .55 .47 (.54) -- 10.58 10.36
1995(d) 10.21 .27 (.03) (.28) (.07) 10.10 2.52
Class B (3/97)
1998(g) 10.56 .23 .19 (.23) -- 10.75 4.06
Class C (9/94)
1998(f) 10.58 .24 .16 (.24) -- 10.74 3.86
1997 10.58 .47 (.01) (.46) -- 10.58 4.53
1996 10.10 .47 .47 (.46) -- 10.58 9.53
1995(c) 10.04 .22 .13 (.22) (.07) 10.10 3.71
Class R (7/86)
1998(f) 10.61 .29 .15 (.29) -- 10.76 4.16
1997 10.60 .57 .01 (.57) -- 10.61 5.67
1996 10.13 .58 .46 (.57) -- 10.60 10.54
1995 10.74 .58 (.53) (.59) (.07) 10.13 .78
1994 10.85 .60 (.05) (.60) (.06) 10.74 5.08
1993 10.14 .63 .71 (.63) -- 10.85 13.66
1992 (d) 9.92 .43 .22 (.43) -- 10.14 6.61
1991 (e) 9.79 .64 .13 (.64) -- 9.92 8.16
1990 (e) 9.85 .64 (.06) (.64) -- 9.79 6.14
1989 (e) 9.24 .65 .61 (.65) -- 9.85 14.12
1988 (e) 9.28 .65 (.04) (.65) -- 9.24 6.87
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without sales charge
and are not annualized.
(b) After waiver of certain management fees or reimbursement of expenses,
if applicable, by Nuveen Advisory.
(c) From commencement of class operations as noted.
(d) For the eight months ending February 29.
(e) For the year ending June 30.
(f) For the six months ending August 31, 1997.
(g) From commencement of class operations as noted through August 31, 1997.
38
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Annual Report
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>
$ 24,193 .88%* 5.14%* .88%* 5.14%* 32%
20,571 .94 5.16 .94 5.16 74
12,709 1.00 5.23 .96 5.27 36
3,146 1.41* 5.40* 1.00* 5.81* 32
986 1.62* 4.33* 1.62* 4.33* 32
1,661 1.43* 4.57* 1.43* 4.57* 32
1,003 1.67 4.44 1.67 4.44 74
684 1.84 4.39 1.71 4.52 36
200 2.41* 4.37* 1.75* 5.03* 32
212,891 .68* 5.35* .68* 5.35* 32
214,253 .70 5.41 .70 5.41 74
216,390 .71 5.53 .71 5.53 36
208,080 .71 5.83 .71 5.83 32
218,430 .73 5.47 .73 5.47 19
183,215 .71 6.05 .71 6.05 5
133,377 .67* 6.30* .67* 6.30* -
107,508 .69 6.48 .69 6.48 15
78,704 .69 6.51 .69 6.51 8
52,048 .77 6.77 .75 6.79 22
29,640 .88 6.91 .70 7.09 48
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
Financial Highlights (Unaudited) - continued
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
-------------------------- --------------------------
Net
California Insured Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distribution value on net
beginning investment from investment from capital end of asset
Year ending February 28/29, of period income(b) investments income gains period value(a)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1998(f) $10.70 $.27 $ .11 $(.27) $ -- $10.81 3.60%
1997 10.76 .55 (.08) (.53) -- 10.70 4.57
1996 10.25 .53 .51 (.53) -- 10.76 10.32
1995(c) 10.22 .26 .07 (.27) (.03) 10.25 3.33
Class B (3/97)
1998(g) 10.67 .22 .15 (.23) -- 10.81 3.49
Class C (9/94)
1998(f) 10.63 .24 .10 (.24) -- 10.73 3.21
1997 10.67 .46 (.05) (.45) -- 10.63 3.99
1996 10.15 .45 .51 (.44) -- 10.67 9.67
1995(c) 10.06 .21 .13 (.22) (.03) 10.15 3.45
Class R (7/86)
1998(f) 10.68 .28 .11 (.28) -- 10.79 3.70
1997 10.74 .56 (.07) (.55) -- 10.68 4.81
1996 10.23 .56 .51 (.55) -- 10.75 10.63
1995 10.67 .56 (.41) (.56) (.03) 10.23 1.68
1994 10.85 .56 (.10) (.56) (.08) 10.67 4.27
1993 10.01 .58 .87 (.58) (.04) 10.84 15.05
1992(d) 9.65 .40 .36 (.40) -- 10.01 7.99
1991(e) 9.48 .60 .18 (.61) -- 9.65 8.43
1990(e) 9.63 .61 (.15) (.61) -- 9.48 4.93
1989(e) 9.02 .61 .61 (.61) -- 9.63 13.97
1988(e) 8.98 .60 .04 (.60) -- 9.02 7.44
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without sales
charge and are not annualized.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(c) From commencement of class operations as noted.
(d) For the eight months ending February 29.
(e) For the year ending June 30.
(f) For the six months ending August 31, 1997.
(g) From commencement of class operations as noted through
August 31, 1997.
40
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Annual Report
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>
$ 32,484 .88%* 4.98%* .88%* 4.98%* 21%
27,598 .94 5.05 .94 5.05 51
17,250 .98 4.99 .97 5.00 38
4,753 1.24* 5.26* 1.05* 5.45* 25
987 1.62* 4.16* 1.62* 4.16* 21
2,385 1.43* 4.42* 1.43* 4.42* 21
1,719 1.67 4.32 1.67 4.32 51
1,040 1.74 4.23 1.71 4.26 38
222 2.44* 4.05* 1.80* 4.69* 25
192,112 .68* 5.18* .68* 5.18* 21
195,553 .69 5.30 .69 5.30 51
205,642 .70 5.29 .70 5.29 38
198,928 .70 5.60 .70 5.60 25
208,115 .71 5.12 .71 5.12 14
168,852 .75 5.72 .75 5.72 9
100,933 .64* 5.97* .64* 5.97* 7
74,551 .68 6.26 .68 6.26 29
50,625 .70 6.36 .70 6.36 13
35,032 .82 6.52 .82 6.52 23
22,394 .99 6.60 .82 6.77 31
- ----------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
Shareholder Information
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
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-Term
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 Municipal Bond 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) 621-7227.
42
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremmer
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
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
Shareholder Services, Inc.
Nuveen Investor Services
P.O. Box 5330
Denver, CO 80217-5330
(800) 621-7227
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, Illinois
43
<PAGE>
Serving Investors
for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
NUVEEN
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 mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
trusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach - purchasing securities of strong companies and
communities that represent good long-term value - is the cornerstone of Nuveen's
investment philosophy. It is a careful, long-term strategy that offers the
potential for attractive returns with moderated risk. Successful value investing
begins with in-depth research and a discerning eye for marketplace opportunity.
Nuveen's team of investment professionals is backed by the discipline, resources
and expertise of almost a century of investment experience, including one of the
most recognized research departments in the industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of equity and fixed-income mutual funds,
unit trusts, exchange-traded funds, individual managed account services, and
cash management products, including many that generate tax-free income.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, or call us
at (800) 621-7227 for more information, including a prospectus where applicable.
Please read that information carefully before you invest.
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
<PAGE>
NUVEEN
Municipal
Bond Funds
August 31, 1997
Semiannual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Connecticut
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Connecticut Performance
Overview
9 Financial Section
30 Shareholder Information
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 is a pleasure to report to you on the performance of the Nuveen Flagship
Connecticut Municipal Bond Fund. The fund performed well over the past six
months, rewarding investors with attractive tax-free income, consistent
performance and capital preservation.
For the 12 months ended August 31, 1997, the fund provided Class A shareholders
with a total return on net asset value of 8.84%, outpacing the average return on
net asset value of 8.38% for the Lipper Connecticut Municipal Bond Category. The
fund was ranked among the top quartile of funds in this peer group.
This strong performance was achieved in an environment of periodic interest rate
volatility. Positive news on the inflation front helped soften the effects of a
hike in short-term interest rates by the Federal Reserve Board in late March.
After tightening short-term interest rates by 0.25%, the Federal Reserve
demonstrated its confidence in the economy's path by maintaining the status quo
at subsequent meetings.
So far in 1997, investors have focused their attention on fiscal issues such as
the federal budget accord and tax cut measures, including a reduction in the
capital gains tax. The economy continued to experience record expansion and the
lowest unemployment rates in almost two decades, a combination that in the past
has predictably been accompanied by an increase in inflation. Current
1
<PAGE>
"The fund performed well
over the past six months,
rewarding investors with
attractive tax-free income,
consistent performance
and capital preservation."
conditions, however, give every indication that inflation is under control.
Nuveen's financial products and services continue to evolve as we extend our
commitment to helping prudent investors achieve their investment goals. In
addition to our 35 municipal mutual funds, Nuveen now offers a variety of other
products and services designed for the distinct needs of investors who rely on
their investment portfolios as their principal source of income and financial
security. We recently celebrated the successful first year of our high-
performing Nuveen Growth and Income Stock Fund, as well as two new balanced
stock and bond funds. We have also expanded our private asset management service
by acquiring Rittenhouse Financial Services, a well-respected provider of growth
investment management services.
Nuveen prides itself on helping more than 1.3 million investors achieve their
financial goals by providing quality investment solutions that withstand the
test of time. We thank you for your confidence in Nuveen and our family of
investments, and we look forward to reporting to you again in six months.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
October 1, 1997
2
<PAGE>
Answering Your Questions
Portfolio Manager Rick Huber talks about the municipal bond market and offers
insights into the factors that affected fund performance over the past year.
What key economic and market factors affected the fund's performance over the
past year?
The combination of strong economic growth and low inflation has led to slightly
falling bond yields over the past year. Periodic volatility in the bond market
created a positive environment for the fund, providing a number of opportunities
to purchase attractive bonds at a discount during brief declines in the market.
The market also experienced a significant tightening of credit spreads during
the year, meaning that the difference in the yields of high-quality and low-
quality bonds was gradually reduced to the smallest levels we've seen in many
years. This allowed us to purchase very high quality bonds for the portfolio
without sacrificing much yield.
The Connecticut municipal market experienced very tight supply levels as the
economy continues to feel the effects of the recession of the early 1990s. Also,
state support and tax benefits for municipal bond issuance continue to decline,
resulting in few in-state bonds being issued. Fortunately, we anticipated these
supply problems several years ago, and structured the fund to remain stable
through this market environment.
3
<PAGE>
"By maintaining high
credit quality and being
structured to withstand
limited supply, the fund
continues to perform well
throughout market cycles."
Given these market conditions, how has the fund performed?
As Tim mentioned in his letter to shareholders, the fund performed well during
the one-year period ended August 31, 1997. The fund outperformed its peer group
average and was ranked favorably by Lipper Analytical Services. In addition to
strong total returns, the fund continued to produce consistent dividends and
generated an annual tax-free yield of 4.53% for Class A shares. Investors in the
34% combined state and federal income tax bracket would have had to earn at
least 6.86% on taxable alternatives to equal that yield on an after-tax basis.
By maintaining high credit quality and being structured to withstand limited
supply, the fund continues to perform well throughout market cycles.
What strategies did you use to add value?
Because of the tight supply of Connecticut bonds, we looked to other areas to
find quality bonds that provided double tax-exemption, rather than sacrificing
credit quality with state bonds that do not meet our credit standards for the
fund. For example, we found several U.S. Territory issues, such as bonds from
Puerto Rico, that proved to be a great addition to the fund. Bonds from U.S.
Territories are exempt from state as well as federal taxes in Connecticut. In
addition, we found value in a number of smaller issues that were largely
overlooked by the retail market.
4
<PAGE>
What is your outlook for the municipal market?
As long as interest rates remain relatively stable, we foresee no major supply
changes in the national municipal bond market. New issuance will likely expand
somewhat as the economy continues to grow. However, if the volatility in the
equity market continues at current levels, we expect demand for bonds to grow as
shareholders move some of their assets from stocks into bonds.
Although the state economy is still recovering from its economic downturn, we
believe that the worst is over and the economy in Connecticut, and all along the
East Coast, will continue to improve. As a result, we anticipate an increased
supply of municipal bonds in the coming months.
What strategies will you employ in the coming year?
We will continue to improve call protection, which will add to the dividend
stability of the fund and reduce its susceptibility to future interest rate
declines. In addition, we will focus on improving the yield of the fund as
credit spreads begin to widen and we are able to seek more value in lower-rated
(but still investment-grade quality) bonds with higher yields. In the meantime,
however, we will strive to take advantage of the opportunities presented by
tight credit spreads to increase the quality of the fund without significantly
sacrificing yield.
5
<PAGE>
Connecticut
Performance Overview
As of August 31, 1997
<TABLE>
<CAPTION>
Fund Highlights
===============================================================================
Share Class A B C R
<C> <S> <S> <S> <S>
Inception Date 7/87 2/97 10/93 2/97
...............................................................................
Net Asset Value (NAV) $10.62 $10.60 $10.60 $10.64
...............................................................................
CUSIP 67065N886 67065N878 67065N860 67065N852
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Net Assets ($000) $219,461
...............................................................................
Average Weighted Maturity (years) 19.61
...............................................................................
Average Weighted Duration (years) 7.21
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/1/
===============================================================================
Share Class A(NAV) A(Offer) B C R
<C> <S> <S> <S> <S> <S>
1-Year 8.84% 4.27% 7.93% 8.27% 9.15%
...............................................................................
5-Year 6.54% 5.63% 5.90% 5.92% 6.60%
...............................................................................
10-Year 7.66% 7.20% 7.19% 7.05% 7.69%
- -------------------------------------------------------------------------------
Tax-Free Yields
===============================================================================
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.25% 5.03% 4.53% 4.70% 5.47%
SEC 30-Day Yld 4.53% 4.34% 3.78% 3.98% 4.73%
Taxable Equiv Yld/2/ 6.86% 6.58% 5.73% 6.03% 7.17%
</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 (in the case of Class B and
Class C) for differences in sales charges and expenses, which are
primarily differences in distribution and service fees. Class A Shares have
a 4.2% maximum sales charge. Class B Shares have a CDSC that begins at 5%
for redemptions during the first year after purchase and declines
periodically to 0% over the following five years, which is not reflected
in the return figures. Class C Shares have a 1% CDSC for redemptions within
one year which is not reflected in the one-year total return.
2 Based on SEC yield and a combined federal and state income tax rate of
34.0%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
- -----
6
<PAGE>
Nuveen Flagship Connecticut Municipal Bond Fund
August 31, 1997 Semiannual Report
Credit Quality
[PIE CHART APPEARS HERE]
AA 19%
A 25%
BBB/NR 6%
AAA 50%
Diversification
[PIE CHART APPEARS HERE]
General Obligation 9%
Escrowed Bonds 9%
Housing 11%
Education 16%
Pollution Control 4%
Health Care 35%
Other 16%
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
9/30/1996 0.04574
10/31/1996 0.04726
11/30/1996 0.04574
12/31/1996 0.04726
1/31/1997 0.04739
2/28/1997 0.0465
3/31/1997 0.0465
4/30/1997 0.0465
5/31/1997 0.0465
6/30/1997 0.0465
7/31/1997 0.0465
8/31/1997 0.0465
7
<PAGE>
Financial Section
Contents
10 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
9
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Connecticut
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education -- 12.1%
$ 250,000 Connecticut State Health and Educational Facilities 7/99 at 102 BBB+ $ 259,428
Authority, Fairfield University, Series F,
6.900%, 7/01/14
8,285,000 Connecticut State Health and Educational Facilities 7/03 at 103 BBB- 8,241,090
Authority, Quinnipiac College, Series D,
6.000%, 7/01/23
Connecticut State Health and Educational Facilities
Authority, Sacred Heart University, Series B:
500,000 5.700%, 7/01/16 7/03 at 102 BBB- 482,070
2,200,000 5.800%, 7/01/23 7/03 at 102 BBB- 2,111,736
1,000,000 Connecticut State Health and Educational Facilities 5/02 at 102 AAA 1,027,060
Authority, Yale University, 5.929%, 6/10/30
4,000,000 Connecticut State Health and Educational Facilities 7/04 at 102 AAA 4,244,640
Authority, Trinity College, Series D,
6.125%, 7/01/24
2,000,000 Connecticut State Health and Educational Facilities 7/04 at 101 1/2 AAA 2,102,600
Authority, Loomis Chaffee School Project, Series B,
6.000%, 7/01/25
2,500,000 Connecticut State Health and Educational Facilities 7/05 at 101 AAA 2,472,325
Authority, Kent School Issue, Series B,
5.400%, 7/01/23
2,240,000 Connecticut State Health and Educational Facilities 11/05 at 102 AAA 2,184,000
Authority, Connecticut State University System Issue,
Series A, 5.125%, 11/01/15
1,600,000 Connecticut State Health and Educational Facilities 7/06 at 102 AAA 1,661,472
Authority, Trinity College Issue, Series E,
5.875% 7/01/26
1,435,000 Connecticut State Health and Educational Facilities 7/06 at 101 AAA 1,422,587
Authority, Loomis Chaffee School Issue, Series C,
5.500%, 7/01/26
320,000 Connecticut State Health and Educational Facilities 1/01 at 102 AAA 349,200
Authority, Capital Asset, Series C, 7.000%, 1/01/20
- -----------------------------------------------------------------------------------------------------------------------
Escrowed to Maturity -- 0.7%***
1,300,000 Connecticut State Health and Educational Facilities No opt. call AAA 1,553,227
Authority, Lutheran General Health Care System,
Parkside Lodges, 7.375%, 7/01/19
</TABLE>
10
<PAGE>
Nuveen Flagship Connecticut Municipal Bond Fund
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care -- 19.7%
Connecticut State Health and Educational Facilities
Authority, St. Camillus Health Center Project:
$ 2,000,000 6.250%, 11/01/18 11/04 at 102 AA- $ 2,123,000
3,695,000 6.250%, 11/01/18 11/04 at 102 AAA 3,974,859
1,000,000 Connecticut State Health and Educational Facilities 11/04 at 102 AAA 1,076,490
Authority, Sharon Health Care Project,
6.250%, 11/01/21
5,000,000 Connecticut State Health and Educational Facilities 11/04 at 102 AAA 5,356,100
Authority, St. Joseph's Manor, 6.250%, 11/01/16
3,000,000 Connecticut State Health and Educational Facilities 11/04 at 102 AAA 3,229,470
Authority, Jewish Nursing Home Program,
6.250%, 11/01/20
Connecticut State Health and Educational Facilities
Authority, Nursing Home (Highland):
1,500,000 7.200%, 11/01/10 11/04 at 102 AAA 1,711,215
4,200,000 7.500%, 11/01/16 11/04 at 102 AAA 4,838,904
Connecticut State Health and Educational Facilities
Authority (Wadsworth Nursing Home):
1,100,000 7.000%, 11/01/10 11/04 at 102 AAA 1,254,891
1,000,000 7.500%, 11/01/16 11/04 at 102 AAA 1,152,120
2,000,000 Connecticut State Health and Educational Facilities 11/04 at 102 AAA 2,281,400
Authority, Nursing Home Program, AHF/ Hartford,
7.125%, 11/01/24
4,115,000 Connecticut State Health and Educational Facilities 11/06 at 102 AA- 4,172,199
Authority (Abbott Terrace Health Center Project)
Series A, 5.750%, 11/01/13
4,365,000 Connecticut State Health and Educational Facilities 11/06 at 102 AA- 4,635,150
Authority, Revenue Refunding (Fairfield Health
Center Project), 6.250%, 11/01/21
7,000,000 Connecticut State Development Authority, Health Care 9/02 at 102 A2 7,510,510
Project (Duncaster Inc. Project), 6.750%, 9/01/15
- -----------------------------------------------------------------------------------------------------------------------
Hospitals -- 14.5%
100,000 Connecticut State Health and Educational Facilities
Authority (St. Mary's Hospital), Issue B,
7.600%, 7/01/03 7/98 at 102 Aaa 105,010
</TABLE>
11
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Connecticut -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hospitals -- continued
Connecticut State Health and Educational Facilities
Authority (Greenwich Academy), Series A:
$ 1,000,000 5.700%, 3/01/16 3/06 at 101 AAA $ 1,031,900
2,000,000 5.750%, 3/01/26 3/06 at 101 AAA 2,063,660
2,600,000 Connecticut State Health and Educational Facilities 7/00 at 102 AAA 2,817,022
Authority (Bristol Hospital), Issue A, 7.000%, 7/01/20
190,000 Connecticut State Health and Educational Facilities 7/00 at 102 Aaa 208,943
Authority (St. Mary's Hospital), Series C,
7.375%, 7/01/20
1,750,000 Connecticut State Health and Educational Facilities 7/00 at 102 AAA 1,896,073
Authority (Waterbury Hospital), Issue B,
7.000%, 7/01/20
900,000 Connecticut State Health and Educational Facilities 7/01 at 102 AAA 978,516
Authority (St. Raphael Hospital), Series D,
6.625%, 7/01/14
3,500,000 Connecticut State Health and Educational Facilities 7/02 at 102 AAA 3,733,030
Authority (Middlesex Hospital), Series G,
6.250%, 7/01/12
2,000,000 Connecticut State Health and Educational Facilities 7/02 at 102 AAA 2,196,700
Authority (Bridgeport Hospital), Series A,
6.625%, 7/01/18
4,200,000 Connecticut State Health and Educational Facilities 7/04 at 102 AAA 4,359,978
Authority (New Britain General Hospital),
Series B, 6.000%, 7/01/24
1,100,000 Connecticut State Health and Educational Facilities 7/02 at 102 A+ 1,124,618
Authority (William W. Backus Hospital),
Series C, 6.000%, 7/01/12
1,645,000 Connecticut State Health and Educational Facilities 7/06 at 102 AAA 1,606,014
Authority (Day Kimball Hospital), Series A,
5.375%, 7/01/26
Connecticut State Health and Educational Facilities
Authority (Greenwich Hospital), Series A:
3,000,000 5.750%, 7/01/16 7/06 at 102 AAA 3,075,150
1,500,000 5.800%, 7/01/26 7/06 at 102 AAA 1,538,715
3,000,000 Connecticut State Health and Educational Facilities 7/06 at 102 AAA 3,053,160
Authority, Revenue Refunding, Yale/New Haven
Hospital Issue, Series H, 5.700%, 7/01/25
</TABLE>
12
<PAGE>
Nuveen Flagship Connecticut Municipal Bond Fund
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hospitals -- continued
$ 2,000,000 Connecticut State Health and Educational Facilities 7/07 at 102 AAA $ 2,046,420
Authority, William W. Backus Hospital, Series D,
5.750%, 7/01/27
- -----------------------------------------------------------------------------------------------------------------------
Housing/Multi Family -- 0.7%
1,500,000 New Britain Connecticut, Senior Citizens Housing 1/02 at 102 AAA 1,568,205
Development Corporation, Mortgage Revenue
Refunding Bonds, Nathan Hale Apartments, Series A,
6.875%, 7/01/24
- -----------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 10.1%
660,000 Connecticut State Housing Finance Authority, Housing 11/01 at 102 AA 689,370
Mortgage Finance Program, Series A-2,
7.200%, 11/15/08
785,000 Connecticut State Housing Finance Authority, Housing 11/02 at 102 AA 830,797
Mortgage Finance Program, Series C2,
6.700%, 11/15/22
Connecticut State Housing Finance Authority, Housing
Mortgage Finance Program, Series A:
1,250,000 6.200%, 5/15/14 5/03 at 102 AA 1,313,075
2,750,000 6.100%, 5/15/17 5/04 at 102 AA 2,832,033
1,240,000 Connecticut State Housing Finance Authority, 5/04 at 102 AA 1,307,394
Housing Mortgage Finance Program, Series B-2,
6.750%, 5/15/22
1,500,000 Connecticut State Housing Finance Authority, Housing 5/05 at 102 AA 1,548,630
Mortgage Finance Program, Series A-1,
6.100%, 5/15/17
4,160,000 Connecticut State Housing Finance Authority, Housing 11/07 at 102 AA 4,163,162
Mortgage Finance Program, Series B-2,
5.850%, 11/15/28
1,000,000 Connecticut State Housing Finance Authority, Housing 11/05 at 102 AA 1,027,560
Mortgage Finance Program, Series F-1, 6.000%, 5/15/17
1,500,000 Connecticut State Housing Finance Authority, Housing 5/06 at 102 AA 1,548,795
Mortgage, Series B-1, 6.050%, 5/15/18
5,000,000 Connecticut State Housing Finance Authority, 11/06 at 102 AA 5,125,650
Series E-2, 6.150%, 11/15/27
1,500,000 Connecticut State Housing Finance Authority, Housing 11/06 at 102 AA 1,525,560
Mortgage Finance Program, Series F-2,
6.000%, 11/15/27
</TABLE>
13
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Connecticut -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Development and Pollution Control -- 3.4%
$ 770,000 Connecticut State Development Authority, Water 6/00 at 102 A+ $ 827,812
Facility Revenue, Bridgeport Hydraulic Company
Project, 7.250%, 6/01/20
2,000,000 Connecticut State Development Authority, Water 12/03 at 102 AAA 2,231,920
Facility Revenue, Connecticut Water Company
Project, 6.650%, 12/15/20
1,750,000 Connecticut State Development Authority, Water 4/07 at 102 A+ 1,833,825
Facility Revenue, Bridgeport Hydraulic, 6.150%,
4/01/35
2,250,000 Connecticut State Development Authority, Solid Waste 7/05 at 102 AAA 2,610,360
Disposal Facilities Revenue, Pfizer Inc. Project,
7.000%, 7/01/25
- -----------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Other -- 0.6%
New Haven, Connecticut, Easter Seal Goodwill
Rehabilitation Project:
345,000 8.500%, 4/01/01 No Opt. Call N/R 324,542
995,000 8.875%, 4/01/16 4/01 at 102 N/R 936,205
- -----------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Water & Sewer -- 0.5%
1,000,000 Connecticut State Clean Water Fund, 7.000%, 1/01/11 1/01 at 102 Aaa 1,093,860
- -----------------------------------------------------------------------------------------------------------------------
Non-State General Obligations -- 7.0%
3,000,000 Town of Bridgeport, Connecticut, Series A, 3/07 at 101 AAA 2,946,120
5.250%, 3/01/17
325,000 Town of Canterbury, Connecticut, 7.200%, 5/01/09 No Opt. Call A 389,214
Town of Glastonbury, Connecticut:
200,000 7.200%, 8/15/06 No Opt. Call Aa1 237,152
200,000 7.200%, 8/15/07 No Opt. Call Aa1 239,546
200,000 7.200%, 8/15/06 No Opt. Call Aa1 241,108
Town of Griswold, Connecticut:
200,000 7.500%, 4/01/02 No Opt. Call AAA 226,164
200,000 7.500%, 4/01/03 No Opt. Call AAA 230,680
200,000 7.500%, 4/01/04 No Opt. Call AAA 234,184
150,000 7.500%, 4/01/05 No Opt. Call AAA 177,857
340,000 Town of Middletown, Connecticut, 6.900%, 4/15/06 No Opt. Call AA 392,006
1,000,000 City of New Haven, Connecticut, Series A,
9.250%, 3/01/02 No Opt. Call AAA 1,110,980
1,250,000 City of New Haven, Connecticut, 5.750%, 2/15/14 2/05 at 102 AAA 1,283,913
</TABLE>
14
<PAGE>
Nuveen Flagship Connecticut Municipal Bond Fund
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Non-State General Obligations - continued
City of New London, Connecticut:
$ 120,000 7.300%, 12/01/05 No Opt. Call A+ $ 141,809
100,000 7.300%, 12/01/07 No Opt. Call A+ 120,702
Town of Old Saybrook, Connecticut:
160,000 7.400%, 5/01/08 No Opt. Call A 193,069
160,000 7.400%, 5/01/09 No Opt. Call A 194,424
275,000 6.500%, 2/15/10 No Opt. Call AAA 314,559
270,000 6.500%, 2/15/11 No Opt. Call AAA 309,614
925,000 Town of Oxford, Connecticut, 7.000%, 2/01/09 2/00 at 102 AAA 995,846
Town of Plainfield, Connecticut:
225,000 7.000%, 9/01/00 No Opt. Call A 239,218
100,000 7.000%, 9/01/01 No Opt. Call A 107,817
100,000 7.100%, 9/01/02 9/01 at 102 A 107,619
310,000 7.100%, 9/01/03 9/01 at 102 A 334,289
100,000 7.200%, 9/01/04 9/01 at 102 A 107,815
335,000 7.250%, 9/01/06 9/01 at 102 A 372,071
335,000 7.300%, 9/01/08 9/01 at 102 A 370,989
155,000 7.300%, 9/01/10 9/01 at 102 A 170,458
City of Torrington, Connecticut:
700,000 6.400%, 5/15/11 5/02 at 102 AAA 760,956
680,000 6.400%, 5/15/12 5/02 at 102 AAA 739,214
535,000 City of Waterbury, Connecticut, 7.250%, 3/01/01 No Opt. Call BBB- 578,800
Town of Winchester, Connecticut:
140,000 6.750%, 4/15/06 No Opt. Call A1 160,583
140,000 6.750%, 4/15/07 No Opt. Call A1 161,893
140,000 6.750%, 4/15/08 No Opt. Call A1 162,383
140,000 6.750%, 4/15/09 No Opt. Call A1 163,283
140,000 6.750%, 4/15/10 No Opt. Call A1 163,586
725,000 Town of Woodstock, Connecticut, Special Obligation 3/00 at 103 AAA 786,698
Revenue, 6.900%, 3/01/06
- --------------------------------------------------------------------------------------------------------------------
Pre-refunded - 7.9%***
3,140,000 Connecticut State Health and Educational Facilities 7/03 at 100 AAA 3,503,800
Authority (University of Hartford), Series C,
8.000%, 7/01/18
1,000,000 Connecticut State Health and Educational Facilities 7/00 at 102 N/R 1,098,290
Authority (Taft School), Series A, 7.375%, 7/01/20
5,500,000 Connecticut State Health and Educational Facilities 7/00 at 102 AAA 6,013,040
Authority (Yale/New Haven Hospital), Series F,
7.100%, 7/01/25
</TABLE>
15
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Connecticut -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pre-refunded - continued
$ 180,000 Connecticut State Health and Educational Facilities 1/01 at 102 AAA $ 198,223
Authority, Capital Asset, Series C, 7.000%, 1/01/20
1,605,000 City of New Haven, Connecticut, 7.400%, 8/15/11 8/01 at 102 AAA 1,805,577
1,000,000 City of New Haven, Connecticut, Series A, 7.400%, 3/01/12 3/02 at 102 AAA 1,133,660
1,130,000 Town of Stratford, Connecticut, 7.300%, 3/01/12 3/01 at 102 N/R 1,255,102
City of Waterbury, Connecticut:
535,000 7.250%, 3/01/02 3/01 at 102 N/R 593,369
785,000 7.300%, 3/01/05 3/01 at 102 N/R 871,907
780,000 7.400%, 3/01/06 3/05 at 100 N/R 868,858
- ------------------------------------------------------------------------------------------------------------------
Resource Recovery - 14.1%
8,000,000 Bristol, Connecticut, Resource Recovery Facility, 7/05 at 102 A 8,612,240
Operations Committee, Solid Waste Revenue
Refunding, Ogden Martin System Bristol,
6.500%, 7/01/14
Connecticut State Resource Recovery Authority,
Bridgeport Resco Company, Series A:
170,000 7.500%, 1/01/04 1/03 at 100 A 175,552
3,085,000 7.625%, 1/01/09 1/03 at 100 A 3,208,493
1,180,000 Connecticut State Resource Recovery Authority, 11/97 at 1011/2 AA 1,204,037
Wallingford Resource Recovery Project, Series A,
7.125%, 11/15/08
Connecticut State Resource Recovery Authority,
Wallingford Resource, Series 1:
400,000 6.750%, 11/15/03 11/01 at 102 A 427,308
500,000 6.800%, 11/15/04 11/01 at 102 A 535,065
5,250,000 Connecticut State Resource Recovery Authority, 11/02 at 102 A 5,550,195
American Refunding, Fuel Company Project,
Series A, 6.450%, 11/15/22
11,665,000 Eastern Connecticut Resource Recovery Authority, 1/03 at 102 A- 11,211,931
Solid Waste Revenue, Wheelabrator Lisbon Project,
Series A, 5.500%, 1/01/20
- ------------------------------------------------------------------------------------------------------------------
Special Tax - 0.6%
1,150,000 Connecticut State Special Tax Obligation Revenue, No Opt. Call AA- 1,266,196
Transportation Infrastructure, Series B,
6.125%, 9/01/12
</TABLE>
16
<PAGE>
Nuveen Flagship Connecticut Municipal Bond Fund
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
State/Territorial General Obligations - 1.5%
$ 2,800,000 State of Connecticut, College Savings Plan, Series B, No Opt. Call AA- $ 1,333,024
0.000%, 12/15/11
State of Connecticut, College Savings Plan, Series A:
1,000,000 0.000%, 5/15/09 No Opt. Call AA- 553,820
3,000,000 0.000%, 6/15/11 No Opt. Call AA- 1,465,800
- -------------------------------------------------------------------------------------------------------------------------
Student Loan - 3.7%
Connecticut State Higher Education Supplemental Loan
Authority, Family Education Loan Program, Series A:
420,000 7.000%, 11/15/05 11/01 at 102 A 453,322
4,030,000 7.200%, 11/15/10 11/01 at 102 A 4,352,843
1,800,000 6.300%, 11/15/10 11/04 at 102 A1 1,897,470
1,350,000 6.350%, 11/15/11 11/04 at 102 A1 1,427,922
- -------------------------------------------------------------------------------------------------------------------------
$ 205,775,000 Total Investments - (cost $198,895,011) - 97.1% 213,085,070
=============------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.9% 6,376,289
---------------------------------------------------------------------------------------------------------
Net Assets - 100% $219,461,359
=========================================================================================================
</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.
17
<PAGE>
Statement of Net Assets (Unaudited)
August 31, 1997
<TABLE>
<CAPTION>
Nuveen Flagship
Connecticut
- -----------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $213,085,070
Cash 3,441,312
Receivables:
Interest 3,369,514
Shares sold 732,438
Other assets 6,416
- -----------------------------------------------------------------------------------------
Total assets 220,634,750
- -----------------------------------------------------------------------------------------
Liabilities
Payable for shares redeemed 48,358
Accrued expenses:
Management fees (note 6) 87,671
12b-1 distribution and service fees (notes 1 and 6) 41,670
Other 43,847
Dividends payable 951,845
- -----------------------------------------------------------------------------------------
Total liabilities 1,173,391
- -----------------------------------------------------------------------------------------
Net assets (note 7) $219,461,359
=========================================================================================
Class A Shares (note 1)
Net assets $209,245,948
Shares outstanding 19,707,248
Net asset value and redemption price per share $ 10.62
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 11.09
=========================================================================================
Class B Shares (note 1)
Net assets $ 870,210
Shares outstanding 82,094
Net asset value, offering and redemption price per share $ 10.60
=========================================================================================
Class C Shares (note 1)
Net assets $ 8,917,744
Shares outstanding 841,492
Net asset value, offering and redemption price per share $ 10.60
=========================================================================================
Class R Shares (note 1)
Net assets $ 427,457
Shares outstanding 40,160
Net asset value, offering and redemption price per share $ 10.64
=========================================================================================
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations (Unaudited) Nuveen Flagship Connecticut Municipal Bond Fund
Six months ended August 31, 1997 August 31, 1997 Semiannual Report
Nuveen Flagship
Connecticut
- -------------------------------------------------------------------------------------------
<S> <C>
Investment income
Tax-exempt interest income (note 1) $6,591,301
- -------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 592,285
12b-1 service fees -- Class A (notes 1 and 6) 208,904
12b-1 distribution and service fees -- Class B (notes 1 and 6) 1,867
12b-1 distribution and service fees -- Class C (notes 1 and 6) 30,030
Shareholders' servicing agent fees and expenses 44,789
Custodian's fees and expenses 29,581
Trustees' fees and expenses (note 6) 2,086
Professional fees 11,187
Shareholders' reports -- printing and mailing expenses 13,726
Federal and state registration fees 4,099
Other expenses 5,658
- -------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 944,212
Expense reimbursement (note 6) (67,566)
- -------------------------------------------------------------------------------------------
Net expenses 876,646
- -------------------------------------------------------------------------------------------
Net investment income 5,714,655
- -------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 144,077
Net change in unrealized appreciation or depreciation of investments 1,980,103
- -------------------------------------------------------------------------------------------
Net gain from investments 2,124,180
- -------------------------------------------------------------------------------------------
Net increase in net assets from operations $7,838,835
===========================================================================================
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Flagship
Nuveen Flagship Connecticut Connecticut
---------------------------------------------------------------
Six months ended Nine months ended Year ended
8/31/97 2/28/97* 5/31/96
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income $ 5,714,655 $ 8,632,172 $ 11,632,542
Net realized gain from investment
transactions (notes 1 and 4) 144,077 576,956 951,483
Net change in unrealized appreciation or
depreciation of investments 1,980,103 5,149,171 (3,913,226)
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 7,838,835 14,358,299 8,670,799
- -------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (5,510,039) (8,367,067) (11,371,201)
Class B (8,638) (76) N/A
Class C (187,923) (258,509) (327,137)
Class R (3,545) -- N/A
- -------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions
to shareholders (5,710,145) (8,625,652) (11,698,338)
- -------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 10,943,432 13,422,621 17,698,654
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 2,651,463 4,748,942 6,666,728
- -------------------------------------------------------------------------------------------------------------------
13,594,895 18,171,563 24,365,382
- -------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (13,322,954) (16,305,341) (20,622,363)
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share
transactions 271,941 1,866,222 3,743,019
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets 2,400,631 7,598,869 715,480
Net assets at the beginning of period 217,060,728 209,461,859 208,746,379
- -------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $219,461,359 $217,060,728 $209,461,859
===================================================================================================================
Balance of undistributed net investment
income at end of period $ 11,030 $ 6,520 $ --
===================================================================================================================
</TABLE>
* Information represents eight months of Flagship Connecticut and one month
of Nuveen Flagship Connecticut (see note 1 of the Notes to Financial
Statements).
N/A--Flagship Connecticut was not authorized to issue Class B or Class R
Shares.
- ------ See accompanying notes to financial statements.
20
<PAGE>
Nuveen Flagship Connecticut Municipal Bond Fund
August 31, 1997 Semiannual Report
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust II (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises Nuveen Flagship Connecticut Municipal Bond Fund (the "Fund"),
among others. The Trust was organized as a Massachusetts business trust on July
1, 1996.
The John Nuveen Company, parent of John Nuveen & Co. Incorporated ("Nuveen") 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 Connecticut Double Tax
Exempt Fund ("Flagship Connecticut") was reorganized into the Trust and renamed
Nuveen Flagship Connecticut Municipal Bond Fund. Flagship Connecticut had a May
31 fiscal year end prior to being reorganized into the Trust and now has a
February 28 fiscal year end.
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 its when-issued and delayed delivery purchase commitments. At
August 31, 1997, there were no such purchase commitments.
21
<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 carryovers.
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 Connecticut 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.
22
<PAGE>
Nuveen Flagship Connecticut Municipal Bond Fund
August 31, 1997 Semiannual Report
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 August 31, 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>
Nuveen Flagship Flagship
Connecticut Connecticut
-------------------------------------------------------------------------------------
Six months ended 8/31/97 Nine months ended 2/28/97* Year ended 5/31/96
-------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 730,108 $ 7,769,581 1,140,128 $ 11,872,759 1,453,108 $ 15,066,282
Class B 72,095 760,325 9,669 102,050 N/A N/A
Class C 189,701 1,987,162 139,474 1,447,762 253,267 2,632,372
Class R 40,155 426,364 5 50 N/A N/A
Shares issued to shareholders due to
reinvestment of distributions:
Class A 243,036 2,552,318 442,768 4,597,336 624,317 6,491,833
Class B 330 3,480 -- -- N/A N/A
Class C 9,116 95,664 14,628 151,606 16,838 174,895
Class R -- 1 -- -- N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
1,284,541 13,594,895 1,746,672 18,171,563 2,347,530 24,365,382
- -----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,239,253) (12,979,719) (1,378,317) (14,350,628) (1,889,024) (19,630,307)
Class B -- -- -- -- N/A N/A
Class C (32,668) (343,235) (187,749) (1,954,713) (95,257) (992,056)
Class R -- -- -- -- N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
(1,271,921) (13,322,954) (1,566,066) (16,305,341) (1,984,281) (20,622,363)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase 12,620 $ 271,941 180,606 $ 1,866,222 363,249 $ 3,743,019
===================================================================================================================================
</TABLE>
* Information represents eight months of Flagship Connecticut and one month
of Nuveen Flagship Connecticut (see note 1).
N/A - Flagship Connecticut was not authorized to issue Class B or Class R
Shares.
3. Distributions to Shareholders
On September 9, 1997, the Fund declared a dividend distribution from its tax-
exempt net investment income which was paid on October 1, 1997, to shareholders
of record on September 9, 1997, as follows:
<TABLE>
<CAPTION>
Nuveen Flagship
Connecticut
- --------------------------------------------------------------------------------
<S> <C>
Dividend per share:
Class A $ .0465
Class B .0400
Class C .0415
Class R .0485
- --------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
Nuveen Flagship Connecticut Municipal Bond Fund
August 31, 1997 Semiannual Report
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the six months ended August
31, 1997, were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship
Connecticut
- --------------------------------------------------------------------------------
<S> <C>
Purchases
Investments in municipal securities $ 14,405,935
Temporary municipal investments 1,000,000
Sales
Investments in municipal securities 18,769,915
Temporary municipal investments 1,000,000
- --------------------------------------------------------------------------------
</TABLE>
At August 31, 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 February 28, 1997, the Fund's last fiscal year end, the Fund had unused
capital loss carryforwards of $1,022,275 available for federal income tax
purposes to be applied against future capital gains, if any. If not applied, the
carryovers will expire February 28, 2003.
5. Unrealized Appreciation (Depreciation)
At August 31, 1997, net unrealized appreciation aggregated $14,190,059 of which
$14,314,147 related to appreciated securities and $124,088 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.
25
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
During the six months ended August 31, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $213,800 of which
approximately $185,400 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.
During the six months ended August 31, 1997, the Distributor compensated
authorized dealers directly with approximately $60,100 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 August 31, 1997, the Distributor retained approximately $12,500 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 August 31, 1997, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Nuveen Flagship
Connecticut
- --------------------------------------------------------------------------------
<S> <C>
Capital paid-in $ 206,154,901
Balance of undistributed net investment income 11,030
Accumulated net realized gain (loss) from investment transactions (894,631)
Net unrealized appreciation of investments 14,190,059
- --------------------------------------------------------------------------------
Net assets $ 219,461,359
================================================================================
</TABLE>
26
<PAGE>
Financial Highlights
27
<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 Connecticut** 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
February 28/29, of period income(b) investments income gains period value(a)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (7/87)
1998(f) $ 10.51 $ .28 $ .11 $ (.28) $ -- $ 10.62 3.76%
1997(d) 10.23 .42 .28 (.42) -- 10.51 6.96
1996(e) 10.38 .57 (.14) (.58) -- 10.23 4.18
1995(e) 10.17 .58 .22 (.59) -- 10.38 8.21
1994(e) 10.66 .59 (.39) (.60) (.09) 10.17 1.70
1993(e) 10.05 .61 .61 (.61) -- 10.66 12.48
1992(e) 9.84 .63 .21 (.63) -- 10.05 8.81
1991(e) 9.64 .63 .20 (.63) -- 9.84 8.97
1990(e) 9.78 .63 (.13) (.63) (.01) 9.64 5.34
1989(e) 9.25 .63 .55 (.64) (.01) 9.78 13.36
1988(c) 9.58 .54 (.31) (.56) -- 9.25 3.09*
Class B (2/97)
1998(f) 10.51 .24 .09 (.24) -- 10.60 3.18
1997(c) 10.53 .04 (.02) (.04) -- 10.51 .19
Class C (10/93)
1998(f) 10.49 .25 .11 (.25) -- 10.60 3.48
1997(d) 10.22 .38 .27 (.38) -- 10.49 6.43
1996(e) 10.36 .52 (.14) (.52) -- 10.22 3.71
1995(e) 10.16 .53 .20 (.53) -- 10.36 7.53
1994(c) 11.06 .33 (.84) (.33) (.06) 10.16 (6.48)*
Class R (2/97)
1998(f) 10.51 .29 .13 (.29) -- 10.64 4.06
1997(c) 10.55 .01 (.05) -- -- 10.51 (.38)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the nine months ending February 28,
1997, reflects the financial highlights of Flagship Connecticut.
(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 the Nuveen Advisory or its
predecessor Flagship Financial.
(c) From commencement of class operations as noted through May 31.
(d) For the nine months ending February 28.
(e) For the year ending May 31.
(f) For the six months ending August 31, 1997.
28
<PAGE>
<TABLE>
<CAPTION>
Nuveen Flagship Connecticut Municipal Bond Fund
August 31, 1997 Semiannual Report
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>
$209,246 .85%* 5.21%* .78%* 5.28%* 7%
209,873 1.02* 5.18* .79* 5.41* 20
202,219 1.03 5.23 .74 5.52 24
203,210 1.03 5.54 .73 5.84 25
202,607 1.03 5.14 .65 5.52 30
184,743 1.04 5.50 .66 5.88 19
141,215 1.05 5.90 .65 6.30 18
103,552 1.07 6.09 .67 6.49 19
73,046 1.07 6.08 .60 6.55 31
48,990 1.17 6.15 .70 6.62 33
25,609 .61* 6.47* .54* 6.54* 71
870 1.59* 4.40* 1.53* 4.46* 7
102 1.59* 6.61* 1.12* 7.08* 20
8,918 1.40* 4.65* 1.33* 4.72* 7
7,087 1.57* 4.65* 1.34* 4.88* 20
7,243 1.58 4.67 1.29 4.96 24
5,536 1.58 4.97 1.28 5.27 25
4,360 1.77* 4.22* 1.22* 4.77* 30
427 .64* 5.31* .58* 5.37* 7
-- -- 10.97* -- 10.97* 20
- ----------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
Shareholder Information
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
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-Term
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 Municipal Bond 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.
30
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremmer
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
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
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.]
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 mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
trusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach -- purchasing securities of strong companies and
communities that represent good long-term value -- is the cornerstone of
Nuveen's investment philosophy. It is a careful, long-term strategy that offers
the potential for attractive returns with moderated risk. Successful value
investing begins with in-depth research and a discerning eye for marketplace
opportunity. Nuveen's team of investment professionals is backed by the
discipline, resources and expertise of almost a century of investment
experience, including one of the most recognized research departments in the
industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of equity and fixed-income mutual funds,
unit trusts, exchange-traded funds, individual managed account services, and
cash management products, including many that generate tax-free income.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, 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-CT-8.97
<PAGE>
NUVEEN
Municipal
Bond Funds
August 31, 1997
Semiannual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
New Jersey
New Jersey
Intermediate
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 New Jersey Performance
Overview
8 New Jersey Intermediate
Performance Overview
11 Financial Section
42 Shareholder Information
43 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Wealth takes a lifetime
to build. Once achieved,
it should be preserved.
It is a pleasure to report to you on the performance of the Nuveen New Jersey
Municipal Bond Funds. Both funds performed well over the past six months,
rewarding investors with attractive tax-free income, consistent performance and
capital preservation.
For the 12 months ended August 31, 1997, the long-term New Jersey fund provided
Class A shareholders with a total return on net asset value of 8.41%, outpacing
the average return of 8.18% for its peer group, the Lipper New Jersey Municipal
Bond Fund Category. The intermediate-term New Jersey fund also performed well
over the period, providing Class A shareholders with a total return of 6.89%,
outperforming its Lipper peer group average of 6.70% (the Lipper Other States
Intermediate Municipal Bond Fund Category).
This strong performance was achieved in an environment of periodic interest rate
volatility. Positive news on the inflation front helped soften the effects of a
hike in short-term interest rates by the Federal Reserve Board in late March.
After tightening short-term interest rates by 0.25%, the Federal Reserve
demonstrated its confidence in the economy's path by maintaining the status quo
at subsequent meetings.
1
<PAGE>
"Both funds performed well over the past six months, rewarding investors with
attractive tax-free income, consistent performance and capital preservation."
So far in 1997, investors have focused their attention on fiscal issues such as
the federal budget accord and tax cut measures, including a reduction in the
capital gains tax. The economy continued to experience record expansion and the
lowest unemployment rates in almost two decades, a combination that in the past
has predictably been accompanied by an increase in inflation. Current
conditions, however, give every indication that inflation is under control.
Nuveen's financial products and services continue to evolve as we extend our
commitment to helping prudent investors achieve their investment goals. In
addition to our 35 municipal mutual funds, Nuveen now offers a variety of other
products and services designed for the distinct needs of investors who rely on
their investment portfolios as their principal source of income and financial
security. We recently celebrated the successful first year of our high-
performing Nuveen Growth and Income Stock Fund, as well as two new balanced
stock and bond funds. We have also expanded our private asset management service
by acquiring Rittenhouse Financial Services, a well-respected provider of growth
investment management services.
Nuveen prides itself on helping more than 1.3 million investors achieve their
financial goals by providing quality investment solutions that withstand the
test of time. We thank you for your confidence in Nuveen and our family of
investments, and we look forward to reporting to you again in six months.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
October 1, 1997
2
<PAGE>
Answering Your Questions
Portfolio Managers Rick Huber and Steve Peterson talk about the municipal bond
market and offer insights into the factors that affected fund performance over
the past year.
What key economic and market factors affected the funds' performance over the
past year?
The combination of strong economic growth and low inflation has led to slightly
falling bond yields over the past year. Periodic volatility in the bond market
created a positive environment for the funds, providing us with a number of
opportunities to purchase attractive bonds at discounts during brief declines in
the market. The market also experienced a significant tightening of credit
spreads during the year, meaning that the difference in the yields of high-
quality and low-quality bonds was gradually reduced to the smallest levels we've
seen in many years. This allowed us to purchase very high quality bonds for the
portfolios without sacrificing much yield.
Given these market conditions, how
have the funds performed?
As Tim mentioned in his letter to shareholders, the funds performed well during
the one-year period ended August 31, 1997. Both funds generated excellent total
returns and were ranked favorably among their respective peer groups. The long-
term New Jersey fund's Class R shares also received a five-star rating from
Morningstar, which rates mutual funds on a risk-adjusted basis. In addition to
strong total returns, the funds continued to produce consistent dividends.
Annual tax-free yields as of August 31, 1997, for Class A shares of the long-
term New Jersey fund were 5.07%, and for the intermediate New Jersey
3
<PAGE>
"Both funds generated excellent total returns and were ranked favorably among
their respective peer groups."
fund, were 3.87%. Investors in the 35.5% combined state and federal income tax
bracket would have had to earn at least 7.86% and 6.00%, respectively, on
taxable alternatives to equal these yields on an after-tax basis.
What strategies did you use to add value?
As credit spreads tightened during the year, we focused on taking advantage of
the opportunities to purchase bonds with higher credit quality at yields that
were close to bonds with lower credit ratings. We believe that as credit spreads
widen again, these high-quality issues will appreciate in value relative to
lower-grade bonds. We also focused on extending the call protection of the
funds, which should help increase their dividend stability.
What is your outlook for the municipal market?
As long as interest rates remain relatively stable, we foresee no major supply
changes in the national municipal bond market. New issuance will likely expand
somewhat as the economy continues to grow. However, if the volatility in the
equity market continues at current levels, we expect demand for bonds to grow as
shareholders move some of their assets from stocks into bonds. The New Jersey
municipal bond market should experience stronger supply growth as the economy
continues to recover from
4
<PAGE>
the national and state recessions experienced in the early 1990s. Demand for
municipal bonds should remain strong, given the relatively high state tax rates
and high level of per capita wealth in the state.
What strategies will you employ in the coming year?
We will continue to focus on maintaining the dividend stability of the funds,
while seeking to maximize after-tax total return. We will strive to increase the
call protection of the bonds in the portfolios as long as this remains a low-
cost option. For the long-term New Jersey fund, we plan to take advantage of any
widening of credit spreads to increase the overall yield of the fund. For the
intermediate-term New Jersey fund, we will focus on reducing its maturity and
duration, which will lower the volatility of the fund.
5
<PAGE>
New Jersey
Performance Overview
As of August 31, 1997
<TABLE>
<CAPTION>
Morningstar Rating/1/
* * * * *
<S> <C> <C> <C> <C> <C>
Fund Highlights
=========================================================================================
Share Class A B C R
Inception Date 9/94 2/97 9/94 12/91
.........................................................................................
Net Asset Value (NAV) $10.38 $10.39 $10.37 $10.39
.........................................................................................
CUSIP 67065N753 67065N746 67065N738 67065N720
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Total Net Assets ($000) $80,923
.........................................................................................
Average Weighted Maturity (years) 17.39
.........................................................................................
Average Weighted Duration (years) 6.48
- -----------------------------------------------------------------------------------------
Annualized Total Return/2/
=========================================================================================
Share Class A(NAV) A(Offer) B C R
1-Year 8.41% 3.86% 7.72% 7.85% 8.65%
.........................................................................................
5-Year 6.49% 5.58% 5.78% 5.76% 6.77%
.........................................................................................
Since Inception 7.02% 6.19% 6.30% 6.28% 7.29%
- -----------------------------------------------------------------------------------------
Tax-Free Yields
=========================================================================================
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.38% 5.15% 4.62% 4.86% 5.60%
.........................................................................................
SEC 30-Day Yld 5.07% 4.85% 4.31% 4.51% 5.27%
.........................................................................................
Taxable Equiv Yld/3/ 7.86% 7.52% 6.68% 6.99% 8.17%
- -----------------------------------------------------------------------------------------
</TABLE>
/1/ Overall rating for Class R Shares based on risk-adjusted performance for
the period ending August 31, 1997, by Morningstar Inc., an independent
mutual fund rating service. The fund was compared with 1,354 municipal bond
funds for the three-year period, 654 funds for the five-year period and
316 funds for the 10-year period. The top 10% of funds in the category
receive five stars, and the next 22.5% of funds receive four stars.
/2/ Class R Share returns are actual. Class A, B and C Share returns are actual
for the period since class inception; returns prior to class inception are
Class R Share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service
fees. Class A Shares have a 4.2% maximum sales charge. Class B Shares have
a CDSC that begins at 5% for redemptions during the first year after
purchase and declines periodically to 0% over the following five years,
which is not reflected in the return figures. Class C Shares have a 1% CDSC
for redemptions within one year which is not reflected in the one-year
total return.
/3/ Based on SEC yield and a combined federal and state income tax rate of
35.5%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
6
<PAGE>
Nuveen Flagship New Jersey Municipal Bond Fund
August 31, 1997 Semiannual Report
Credit Quality
[PIE CHART APPEARS HERE]
AAA 48%
AA 8%
A 14%
BBB/NR 30%
Diversification
[PIE CHART APPEARS HERE]
Lease Rental 4%
Other 9%
Health Care 15%
Pollution Control 4%
Industrial Development 8%
Education 4%
General Obligations 16%
Escrowed Bonds 8%
Utilities 4%
Housing 18%
Transportation 10%
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
9/30/1996 0.042
10/31/1996 0.042
11/30/1996 0.042
12/31/1996 0.042
1/31/1997 0.0462
2/28/1997 0.0465
3/31/1997 0.0465
4/30/1997 0.0465
5/31/1997 0.0465
6/30/1997 0.0465
7/31/1997 0.0465
8/31/1997 0.0465
7
<PAGE>
New Jersey Intermediate
Performance Overview
As of August 31, 1997
<TABLE>
<CAPTION>
Fund Highlights
==============================================================================
<S> <C> <C> <C> <C>
Share Class A C R
Inception Date 9/92 3/97 3/97
..............................................................................
Net Asset Value (NAV) $10.35 $10.37 $10.36
..............................................................................
CUSIP 67065N712 67065N696 67065N688
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total Net Assets ($000) $8,444
..............................................................................
Average Weighted Maturity (years) 6.87
..............................................................................
Average Weighted Duration (years) 4.96
- ------------------------------------------------------------------------------
Annualized Total Return/1/
==============================================================================
Share Class A(NAV) A(Offer) C R
1-Year 6.89% 3.69% 6.63% 7.11%
..............................................................................
3-Year 6.15% 5.08% 5.82% 6.22%
..............................................................................
Since Inception 6.44% 5.79% 6.08% 6.48%
- ------------------------------------------------------------------------------
Tax-Free Yields
==============================================================================
Share Class A(NAV) A(Offer) C R
Dist Rate 4.87% 4.72% 4.34% 5.10%
..............................................................................
SEC 30-Day Yld 3.87% 3.75% 3.35% 4.10%
..............................................................................
Taxable Equiv Yld/2/ 6.00% 5.81% 5.19% 6.36%
- ------------------------------------------------------------------------------
</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 (in the case of Class C) for differences in
sales charges and expenses, which are primarily differences in distribution
and service fees. Class A Shares have a 3.0% 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
35.5%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
8
<PAGE>
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
August 31, 1997 Semiannual Report
Credit Quality
[PIE CHART APPEARS HERE]
AAA 35%
AA 23%
A 9%
BBB/NR 33%
Diversification
[PIE CHART APPEARS HERE]
Transportation 4%
Other 9%
Health Care 14%
Pollution Control 21%
Water & Sewer 8%
General Obligation 29%
Lease Rental 4%
Utilities 3%
Education 8%
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
9/30/1996 0.04139
10/31/1996 0.04277
11/30/1996 0.04139
12/31/1996 0.04277
1/31/1997 0.04289
2/28/1997 0.0421
3/31/1997 0.0421
4/30/1997 0.0421
5/31/1997 0.0421
6/30/1997 0.042
7/31/1997 0.042
8/31/1997 0.042
9
<PAGE>
Financial Section
Contents
12 Portfolio of Investments
25 Statement of Net Assets
26 Statement of Operations
27 Statement of Changes in Net Assets
29 Notes to Financial Statements
37 Financial Highlights
11
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New Jersey
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Educational Facilities - 4.2%
$ 1,000,000 New Jersey Economic Development Authority, No Opt. Call N/R $ 1,212,100
Economic Development Bonds (Yeshiva K'Tana of
Passaic-1992 Project), 8.000%, 9/15/18
925,000 New Jersey Educational Facilities Authority, 10/97 at 100 A+ 927,044
Trenton State College Issue Revenue Bonds,
Series 1976 D, 6.750%, 7/01/08
835,000 New Jersey Educational Facilities Authority, 7/04 at 100 Aaa 876,324
Princeton University Revenue Bonds,
1994 Series A, 5.875%, 7/01/11
410,000 New Jersey Educational Facilities Authority, 7/03 at 102 Baa 399,574
Revenue Refunding Bonds (Monmouth College),
Series 1993-A, 5.625%, 7/01/13
- ---------------------------------------------------------------------------------------------------------------------------
Escrowed Bonds - 8.0%***
1,000,000 New Jersey Economic Development Authority, 10/97 at 101 Baa1 1,012,470
Gas Facilities Revenue Bonds, 1991 Series A
(Elizabethtown Gas Company Project), 6.750%,
10/01/21 (Alternative Minimum Tax)
(Pre-refunded to 10/01/97)
200,000 New Jersey Economic Development Authority, Lease 3/02 at 102 Aaa 222,634
Rental Bonds, 1992 Series (Liberty State Park
Project), 6.800%, 3/15/22 (Pre-refunded to 3/15/02)
1,780,000 New Jersey Health Care Facilities Financing Authority, No Opt. Call Aaa 2,110,208
Revenue Bonds, Hackensack Hospital Issue,
Series A, 8.750%, 7/01/09
335,000 New Jersey Turnpike Authority, Turnpike Revenue No Opt. Call AAA 395,230
Bonds, 1984 Series, 10.375%, 1/01/03
100,000 The Essex County Improvement Authority (Essex 12/04 at 102 Aaa 115,582
County, New Jersey), General Obligation
Lease Revenue Bonds, Series 1994 (County Jail
and Youth House Projects), 6.900%, 12/01/14
(Pre-refunded to 12/01/04)
300,000 The Township of North Bergen (Hudson County, New 8/02 at 102 Aaa 332,280
Jersey), Fiscal Year Adjustment General Obligation
Bonds, Series 1992, 6.500%, 8/15/12
(Pre-refunded to 8/15/02)
60,000 Puerto Rico Highway and Transportation Authority, 7/02 at 101 1/2 AAA 66,778
Highway Revenue Bonds (Series T),
6.625%, 7/01/18 (Pre-refunded to 7/01/02)
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed Bonds - continued
$ 1,875,000 Puerto Rico Electric Power Authority, Power Revenue 7/01 at 102 Aaa $ 2,091,525
Bonds, Series P, 7.000%, 7/01/21
(Pre-refunded to 7/01/01)
100,000 University of Medicine and Dentistry of New Jersey 12/01 at 102 AA- 109,948
Series E, 6.500%, 12/01/18
(Pre-refunded to 12/01/01)
- ---------------------------------------------------------------------------------------------------------------------------
General Obligation Bonds - 15.9%
1,000,000 State of New Jersey, General Obligation Bonds, No Opt. Call Aa1 1,082,420
Series D, 5.800%, 2/15/07
200,000 The City of Atlantic City, In the County of Atlantic, No Opt. Call A- 207,916
New Jersey, General Obligation General
Improvement Bonds, Series 1994, 5.650%, 8/15/04
100,000 County of Atlantic, New Jersey, General 1/04 at 101 Aaa 107,281
Improvement Bonds, 6.000%, 1/01/07
150,000 The County of Bergen Utility Authority, Water 12/02 at 102 Aaa 157,194
Pollution Control System Revenue, Series 1992-B,
6.000%, 12/15/13
250,000 The Camden County Municipal Utilities Authority 7/06 at 102 Aaa 242,260
(Camden County, New Jersey), County Agreement
Sewer Revenue Refunding Bonds,
1996 Series, 5.125%, 7/15/17
250,000 City of East Orange, In the County of Essex, No Opt. Call Aaa 314,393
New Jersey, Fiscal Year Adjustment Bonds,
8.400%, 8/01/06
The Essex County Improvement Authority (Essex
County, New Jersey), City of Newark General
Obligation Lease Revenue Bonds, Series 1994:
300,000 6.350%, 4/01/07 4/04 at 102 Baa1 318,306
450,000 6.600%, 4/01/14 4/04 at 102 Baa1 479,691
500,000 The Essex County Improvement Authority (Essex 12/02 at 102 Baa1 526,475
County, New Jersey), County Guaranteed Pooled
Revenue Bonds, Series 1992A, 6.500%, 12/01/12
500,000 The Board of Education of The Township of No Opt. Call AA 542,955
Hillsborough, Somerset County, New Jersey,
General Obligation School Purpose Bonds,
Series 1992, 5.875%, 8/01/11
</TABLE>
13
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New Jersey - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Obligation Bonds - continued
$ 50,000 The Monmouth County Improvement Authority 7/02 at 102 AA+ $ 54,429
(Monmouth County, New Jersey), Revenue Bonds,
Series 1992 (Howell Township Board of
Education Project), 6.450%, 7/01/08
2,350,000 The Ocean County Utilities Authority (New Jersey), 1/98 at 100 Aaa 2,278,396
Wastewater Revenue Bonds, Refunding Series
1987, 5.000%, 1/01/14
165,000 Parsippany-Troy Hills Township, General Obligation No Opt. Call Aa 103,628
Capital Appreciation Bonds, Series 1992,
0.000%, 4/01/07
2,000,000 Commonwealth of Puerto Rico, Public Improvement 7/05 at 101 1/2 Aaa 2,060,420
Bonds of 1995 (General Obligation Bonds),
5.750%, 7/01/24
550,000 Commonwealth of Puerto Rico, Public Improvement 7/06 at 101 1/2 A 536,047
Bonds of 1996 (General Obligation Bonds),
5.400%, 7/01/25
2,000,000 Commonwealth of Puerto Rico, Public Improvement 7/07 at 101 1/2 Aaa 1,972,080
Refunding Bonds, Series 1997 (General Obligation
Bonds), 5.375%, 7/01/21
170,000 Puerto Rico Aqueduct and Sewer Authority, Refunding 7/06 at 101 1/2 A 161,330
Bonds, Series 1995, Guaranteed by the
Commonwealth of Puerto Rico, 5.000%, 7/01/15
1,100,000 Sparta Township School District, General Obligation 9/06 at 100 Aaa 1,137,389
Bonds (Unlimited Tax), 5.800%, 9/01/18
250,000 The City of Union City, Hudson County, New Jersey, No Opt. Call Aaa 284,415
General Obligation School Purpose Bonds,
Series 1992, 6.375%, 11/01/10
300,000 The Wanaque Borough Sewerage Authority (Passaic 12/02 at 102 Baa1 324,060
County, New Jersey), Sewer Revenue Bonds
(Series 1992), 7.000%, 12/01/21
- ---------------------------------------------------------------------------------------------------------------------------
Health Care Facilities - 15.0%
1,000,000 New Jersey Health Care Facilities Financing Authority, 7/07 at 102 Aaa 933,950
Revenue Refunding Bonds, Series 1997A
(AHS Hospital Corporation), 5.000%, 7/01/27 (WI)
300,000 New Jersey Economic Development Authority, Revenue 7/04 at 102 Aaa 322,491
Bonds (RWJ Health Care Corp. a Hamilton Obligated
Group Project), Series 1994, 6.250%, 7/01/14
</TABLE>
14
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care Facilities - continued
$2,065,000 New Jersey Health Care Facilities Financing Authority, 7/01 at 102 A1 $2,325,727
Revenue Bonds, Series 1990-E (Kennedy Memorial
Hospital), 8.375%, 7/01/10
700,000 New Jersey Health Care Facilities Financing 7/00 at 102 Aaa 758,429
Authority, Revenue Bonds, Community Medical
Center/Kensington Manor Care Center Issue,
Series E, 7.000%, 7/01/20
3,000,000 New Jersey Health Care Facilities Financing 7/99 at 102 A- 3,177,090
Authority, Revenue Bonds, Newton Memorial
Hospital Issue, Series A, 7.500%, 7/01/19
400,000 New Jersey Health Care Facilities Financing 7/02 at 102 A- 439,412
Authority, Refunding Revenue Bonds, Atlantic City
Medical Center Issue, Series C, 6.800%, 7/01/05
700,000 New Jersey Health Care Facilities Financing Authority, 7/02 at 102 Ba1 735,784
Revenue Bonds, Palisades Medical Center,
Obligated Group Issue, Series 1992, 7.500%, 7/01/06
250,000 New Jersey Health Care Facilities Financing 7/04 at 102 Aaa 270,098
Authority, Revenue Bonds, Monmouth Medical
Center Issue, Series C, 6.250%, 7/01/16
200,000 New Jersey Health Care Facilities Financing 7/04 at 102 Aaa 216,198
Authority, Bayonne Hospital Obligated Group,
Revenue Bonds, Series 1994, 6.250%, 7/01/12
200,000 New Jersey Health Care Facilities Financing 7/04 at 102 Aaa 209,044
Authority, Revenue Bonds, Newark Beth Israel
Medical Center Issue, Series 1994, 6.000%, 7/01/16
250,000 New Jersey Health Care Facilities Financing 8/04 at 102 AAA 267,613
Authority, Refunding Revenue Bonds, Irvington
General Hospital Issue (FHA Insured Mortgage),
Series 1994, 6.375%, 8/01/15
1,200,000 New Jersey Health Care Facilities Financing 7/07 at 102 Aaa 1,162,680
Authority, Revenue and Refunding Bonds, Holy
Name Hospital Issue, Series 1997, 5.250%, 7/01/20
1,000,000 Puerto Rico Industrial, Tourist, Educational, Medical 1/05 at 102 Aaa 1,074,520
and Environmental Control Facilities Financing
Authority, Hospital Revenue Bonds, 1995
Series A (Hospital Auxilio Mutuo Obligated
Group Project), 6.250%, 7/01/16
</TABLE>
15
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New Jersey - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care Facilities - continued
$ 250,000 Pollution Control Financing Authority, Union County, No Opt. Call A3 $ 270,475
New Jersey, Pollution Control Revenue
Refunding Bonds, American Cyanamid Company
Issue, Series 1994, 5.800%, 9/01/09
- --------------------------------------------------------------------------------------------------------------------
Housing Facilities - 17.1%
1,750,000 New Jersey Housing Finance Agency, Special 11/97 at 103 A1 1,811,180
Pledge Revenue Obligations, 1975 Series One,
9.000%, 11/01/18
1,500,000 New Jersey Housing Mortgage Finance Agency, 5/06 at 102 Aaa 1,549,515
Multi-Family Housing Revenue Bonds,
1996 Series A, 6.200%, 11/01/18
(Alternative Minimum Tax)
2,000,000 New Jersey Housing and Mortgage Finance Agency, 5/05 at 102 Aaa 2,064,960
Multi-Family Housing Revenue Bonds, 1995
Series A, 6.000%, 11/01/14
700,000 New Jersey Housing and Mortgage Finance Agency, 5/02 at 102 A+ 750,918
Housing Revenue Bonds, 1992 Series A,
6.950%, 11/01/13
500,000 New Jersey Housing and Mortgage Finance Agency, 11/02 at 102 A+ 534,070
Housing Revenue Refunding Bonds, 1992
Series One, 6.600%, 11/01/14
New Jersey Housing and Mortgage Finance Agency,
Home Buyer Revenue Bonds, 1994 Series K:
250,000 6.300%, 10/01/16 (Alternative Minimum Tax) 7/04 at 102 Aaa 260,630
400,000 6.375%, 10/01/26 (Alternative Minimum Tax) 7/04 at 102 Aaa 416,252
4,000,000 New Jersey Housing and Mortgage Finance Agency, 10/07 at 101 1/2 Aaa 4,055,640
Home Buyer Revenue Bonds, 1997 Series U,
5.700%, 10/01/14 (Alternative Minimum Tax)
240,000 Hoboken Housing Finance Corporation, Multifamily No Opt. Call AA+ 243,756
Mortgage Revenue Bonds (Project Uplift-FHA
Section 8), 1995-A Refunding, 6.250%, 2/01/24
400,000 The Hudson County Improvement Authority, 6/04 at 100 AAA 419,932
Multifamily Housing Revenue Bonds, Series
1992 A (Conduit Financing-Observer Park Project),
6.900%, 6/01/22 (Alternative Minimum Tax)
500,000 North Bergen Housing Development Corporation 9/09 at 100 N/R 512,680
(North Bergen, New Jersey), Mortgage Revenue
Bonds, Series 1978 (FHA Insured Mortgage Loan-
Section 8 Assisted Project), 7.400%, 9/01/20
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing Facilities -- continued
$ 1,175,000 Virgin Islands Housing Finance Authority, Single Family 3/05 at 102 AAA $ 1,231,952
Mortgage Revenue Refunding Bonds (GNMA
Mortgage-Backed Securities Program), 1995
Series A, 6.450%, 3/01/16 (Alternative Minimum Tax)
- --------------------------------------------------------------------------------------------------------------------
Industrial Development Revenue -- 8.4%
5,965,000 New Jersey Economic Development Authority, No Opt. Call N/R 6,353,381
Economic Development Bonds (Bridgewater
Resources Inc. Project), 1994 Series A, 8.375%,
11/01/04 (Alternative Minimum Tax)
250,000 New Jersey Economic Development Authority, 4/02 at 102 Aa1 273,005
Solid Waste Disposal Facility Revenue Bonds
(Garden State Paper Company, Inc. Project), Series
1992, 7.125%, 4/01/22 (Alternative Minimum Tax)
180,000 New Jersey Economic Development Authority, 12/02 at 101 1/2 Aa3 192,991
Economic Growth Bonds, Composite Issue --
1992 Second Series A3, 6.550%, 12/01/07
(Alternative Minimum Tax)
- --------------------------------------------------------------------------------------------------------------------
Lease Rental -- 3.6%
300,000 New Jersey Economic Development Authority, 9/02 at 102 Aaa 316,710
State Contract Economic Recovery Bonds,
Series 1992-A, 6.000%, 3/15/21
1,560,000 The Board of Education of the Borough of Little Ferry, No Opt. Call N/R 1,606,566
Bergen County, New Jersey, Certificates of
Participation, 6.300%, 1/15/08
1,000,000 The State of New Jersey, Mercer County Improvement No Opt. Call Aa 1,001,180
Authority, Richard J. Hughes Justice Complex,
6.050%, 1/01/13
- --------------------------------------------------------------------------------------------------------------------
Other Revenue -- 8.0%
650,000 New Jersey Economic Development Authority, 7/04 at 102 Aaa 684,964
Market Transition Facility, Senior Lien Revenue
Bonds, Series 1994A, 5.875%, 7/01/11
250,000 New Jersey Sports and Exposition Authority, 7/02 at 102 Aaa 268,543
Convention Center Luxury Tax Bonds, 1992 Series A,
6.250%, 7/01/20
</TABLE>
17
<PAGE>
Portfolio of Inevestments (Unaudited)
Nuveen Flagship New Jersey - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other Revenue -- continued
$ 1,000,000 Pollution Control Financing Authority, Camden County, No Opt. Call Ba $ 1,011,980
New Jersey, Solid Waste Disposal and Resource
Recovery System Revenue Bonds, Series 1991 C,
7.125%, 12/01/01 (Alternative Minimum Tax)
2,645,000 Pollution Control Financing Authority, Camden County, 12/01 at 102 Ba 2,710,913
New Jersey, Solid Waste Disposal and Resource
Recovery System Revenue Bonds, Series 1991 D,
7.250%, 12/01/10
225,000 Puerto Rico Commonwealth Highway Authority, Highway 7/00 at 100 A 228,785
Revenue Bonds, Series 1990-Q, 6.000%, 7/01/20
270,000 The Union County Utilities Authority (New Jersey), Solid 6/02 at 102 Aaa 292,764
Waste System Revenue Bonds, Series D, 6.850%,
6/15/14 (Alternative Minimum Tax)
The Union County Utilities Authority (New Jersey), Solid
Waste System Revenue Bonds, 1991 Series A:
195,000 7.100%, 6/15/06 (Alternative Minimum Tax) 6/02 at 102 BB 199,101
1,100,000 7.200%, 6/15/14 (Alternative Minimum Tax) 6/02 at 102 BB 1,109,977
- --------------------------------------------------------------------------------------------------------------------
Pollution Control Facilities -- 3.6%
1,215,000 New Jersey Economic Development Authority, Economic 12/03 at 102 Aa3 1,255,824
Growth Bond, Composite Issue, 1992 Second Series H,
5.300%, 12/01/07 (Alternative Minimum Tax)
625,000 New Jersey Economic Development Authority, Insured 5/05 at 102 Aaa 663,688
Revenue Bonds (Educational Testing Service Issue),
Series 1995B, 6.125%, 5/15/15
1,000,000 New Jersey Economic Development Authority, Economic 12/03 at 102 Aa3 1,025,650
Growth Lease Revenue Bonds, Remarketed 1992
Second Series B, 5.300%, 12/01/07 (Alternative
Minimum Tax)
- --------------------------------------------------------------------------------------------------------------------
Transportation -- 10.0%
1,750,000 New Jersey Turnpike Authority, Turnpike Revenue No Opt. Call Baa1 1,959,773
Bonds, Series 1991 C, 6.500%, 1/01/08
1,415,000 The Delaware River and Bay Authority, Revenue Bonds, 1/04 at 102 Aaa 1,339,368
Series 1993, 5.000%, 1/01/17
100,000 Parking Authority of the City of Hoboken, Hudson County, 3/02 at 102 Baa1 105,246
New Jersey, Parking General Revenue Refunding
Bonds, Series 1992A, 6.625%, 3/01/09
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation -- continued
$ 125,000 The Port Authority of New York and New Jersey, 10/04 at 101 Aaa $ 136,749
Consolidated Bonds, Ninety Sixth Series, 6.600%,
10/01/23 (Alternative Minimum Tax)
200,000 The Port Authority of New York and New Jersey, 6/05 at 101 AA- 204,186
Consolidated Bonds, One Hundredth Series, 5.750%,
12/15/20
200,000 The Port Authority of New York and New Jersey, 7/04 at 101 AA- 210,596
Consolidated Bonds, Ninety-Fifth Series, 5.875%,
7/15/09 (Alternative Minimum Tax)
4,100,000 The Port Authority of New York and New Jersey, 12/07 at 100 Aaa 4,153,464
Special Project Bonds, Series 6, JFK International
Air Terminal LLC Project, 5.750%, 12/01/25
(Alternative Minimum Tax)
- --------------------------------------------------------------------------------------------------------------------
Utilities -- 3.5%
790,000 Puerto Rico Electric Power Authority, Power Revenue No Opt. Call Baa1 927,673
Bonds, Series P, 7.000%, 7/01/07
200,000 Puerto Rico Electric Power Authority, Power Revenue 7/02 at 101 1/2 Baa1 211,558
Bonds, Series R, 6.250%, 7/01/17
250,000 Puerto Rico Electric Power Authority, Power Revenue 7/04 at 102 Baa1 272,338
Bonds, Series T, 6.375%, 7/01/24
1,500,000 Puerto Rico Electric Power Authority, Power Revenue 7/05 at 100 Baa1 1,438,875
Refunding Bonds, Series Z, 5.250%, 7/01/21
- --------------------------------------------------------------------------------------------------------------------
Water/Sewer Facilities -- 1.3%
100,000 New Jersey Economic Development Authority, Water 6/03 at 102 Aaa 97,043
Facilities Revenue Refunding Bonds (New Jersey
American Water Company Inc. Project), Series 1993,
5.500%, 6/01/23 (Alternative Minimum Tax)
150,000 New Jersey Economic Development Authority, Water 3/04 at 102 Aaa 152,807
Facilities Revenue Refunding Bonds (Hackensack
Water Company Project, 1994 Series B), 5.900%,
3/01/24 (Alternative Minimum Tax)
200,000 New Jersey Wastewater Treatment Trust, Wastewater 4/04 at 102 Aa 220,731
Treatment Bonds, Series 1994A, 6.500%, 4/01/14
250,000 The Hoboken-Union City-Weehawken Sewerage 8/02 at 102 Aaa 268,217
Authority (New Jersey), Sewer Revenue Bonds
(Refunding Series 1992), 6.200%, 8/01/19
</TABLE>
19
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New Jersey - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Water/Sewer Facilities -- continued
$ 200,000 North Jersey District Water Supply Commission of 7/03 at 102 Aaa $ 209,651
the State of New Jersey, Wanaque South Project,
Revenue Refunding Bonds, Series 1993,
6.000%, 7/01/21
75,000 The Wanaque Valley Regional Sewerage Authority, 9/03 at 102 Baa 75,022
(Passaic County, New Jersey), Sewer Revenue Bonds,
1993 Series A, 6.125%, 9/01/22
- --------------------------------------------------------------------------------------------------------------------
$ 76,520,000 Total Investments -- (cost $76,609,539) -- 98.8% 79,957,097
- --------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities -- 0.5%
$ 400,000 The Port Authority of New York and New Jersey, A-1+ 400,000
================= Versatile Structure Obligations, Series 2, Variable
Rate Demand Bonds, 3.650%, 5/01/19+
------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.7% 566,343
------------------------------------------------------------------------------------------------
Net Assets -- 100% $80,923,440
================================================================================================
* Optional Call Provisions: Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices
at later dates.
** Ratings: Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities, which ensures the timely payment of
principal and interest. Securities are normally
considered to be equivalent to AAA-rated securities.
N/R - Investment is not rated.
(WI) Security purchased on a when-issued basis (see note 1
of the Notes to Financial Statements).
+ The security has a maturity of more than one year, but
has variable rate and demand features which qualify it
as a short-term security. The rate disclosed is that
currently in effect. This rate changes periodically
based on market conditions or a specified market
index.
</TABLE>
20
<PAGE>
[CAPTION]
<TABLE>
Portfolio of Investments (Unaudited) Nuveen Municipal Bond Funds
Nuveen Flagship New Jersey Intermediate August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education -- 7.1%
$ 140,000 New Jersey State Educational Facilities Authority, 7/01 at 102 BBB+ $ 150,038
Seton Hall University Project, Series D,
6.600%, 7/01/02
330,000 New Jersey State Educational Facilities Authority, No Opt. Call BBB+ 339,765
Higher Educational, St. Peters College, Series B,
6.000%, 7/01/99
100,000 New Jersey State Educational Facilities Authority, 7/02 at 102 A- 108,188
Stevens Institute of Tech, Series A,
6.400%, 7/01/03
- --------------------------------------------------------------------------------------------------------------------
Hospitals -- 13.4%
200,000 New Jersey Health Care Facilities Financing 7/04 at 102 AAA 214,404
Authority, Newark Beth Israel Medical Center,
5.800%, 7/01/07
100,000 New Jersey Health Care Facilities Financing Authority, 7/02 at 102 AAA 106,620
Revenue Refunding, West Jersey Health System,
6.000%, 7/01/07
250,000 New Jersey Health Care Facilities Financing Authority, 7/04 at 102 AAA 276,990
Revenue Refunding, Bayonne Hospital Obligation
Group Issue, 6.400%, 7/01/07
250,000 New Jersey Health Care Facilities Financing Authority, No Opt. Call AAA 263,898
Revenue Refunding, Monmouth Medical Center
Issue, Series C, 5.700%, 7/01/02
250,000 New Jersey Health Care Facilities Financing Authority, 7/04 at 102 AAA 269,633
Revenue Refunding, Dover General Hospital and
Medical Center, 5.900%, 7/01/05
- --------------------------------------------------------------------------------------------------------------------
Industrial Development and Pollution Control -- 20.0%
150,000 New Jersey Economic Development Authority, Electric No Opt. Call N/R 153,375
Energy Facility Revenue, Vineland Cogeneration
L.P. Project, 6.750%, 6/01/99
470,000 New Jersey Economic Development Authority, 6/99 at 102 Aa3 489,632
Economic Development Revenue, Series R, 1,
5.800%, 6/01/01
200,000 New Jersey Economic Development Authority, No Opt. Call A1 207,516
Economic Development Revenue Refunding,
Burlington Coat Factory, 5.400%, 9/01/03
480,000 New Jersey Economic Development Authority, No Opt. Call AAA 502,037
Economic Development Revenue, Educational
Testing Service, Series B, 5.500%, 5/15/05
</TABLE>
21
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New Jersey Intermediate -continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
Industrial Development and Pollution Control -- continued
<S> <C> <C> <C> <C>
$ 300,000 Port Authority New York & New Jersey Special No Opt. Call N/R $ 335,085
Obligation Revenue, Special Project, 4,
7.000%, 10/01/07
- --------------------------------------------------------------------------------------------------------------------
Lease Rental -- 4.0%
300,000 New Jersey Economic Development Authority, No Opt. Call AAA 340,308
MKT Transition Facility Revenue, Senior Lien,
Series A, 7.000%, 7/01/04
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Other -- 7.2%
330,000 Hoboken, New Jersey Parking Authority, Parking No Opt. Call Baa1 340,398
Revenue Refunding, Series A, 5.850%, 3/01/00
250,000 New Jersey Economic Development Authority, 12/03 at 102 BBB- 265,135
District Heating & Cooling Revenue, Trigen,
Trenton Project, Series B, 6.100%, 12/01/04
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Transportation -- 3.7%
200,000 Port Authority New York & New Jersey, 7/04 at 101 AA- 209,082
Ninety-Fifth Series, 5.500%, 7/15/05
100,000 South Jersey Transportation Authority, New Jersey 11/02 at 102 AAA 106,971
Transportation System Revenue, Series B,
5.900%, 11/01/06
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Utility -- 3.1%
250,000 Puerto Rico Electric Power Authority, Power Revenue, No Opt. Call BBB+ 262,330
Formerly Puerto Rico Commonwealth Water
Resource Authority Power, Refunding, Series Q,
5.900%, 7/01/01
- --------------------------------------------------------------------------------------------------------------------
Municipal Revenue/Water & Sewer -- 7.9%
250,000 Atlantic City, New Jersey Municipal Utilities 5/02 at 102 A- 256,028
Authority, Revenue Refunding, Water System,
5.650%, 5/01/07
100,000 North Jersey District Water Supply Commission, 7/03 at 102 AAA 106,757
New Jersey, Refunding, Wanaque South Project,
5.700%, 7/01/05
300,000 Ocean County, New Jersey Utilities Authority, 1/07 at 102 Aa2 300,237
Wastewater Revenue Refunding, 5.000%, 1/01/09
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION> Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Non-State General Obligations -- 20.0%
$ 100,000 Atlantic City, New Jersey Board Education, 12/02 at 102 AAA $ 108,085
6.000%, 12/01/06
100,000 Camden County, New Jersey, Refunding, No Opt. Call AAA 104,623
5.500%, 6/01/02
320,000 Essex County, New Jersey, Improvement Authority, 4/04 at 102 BBB+ 339,526
Newark, 6.350%, 4/01/07
400,000 Jersey City, New Jersey, School, No Opt. Call AA 433,008
6.500%, 2/15/02
250,000 Mercer County, New Jersey, Improvement Authority, No Opt. Call Aa 183,960
Revenue Refunding, Guaranteed, Solid Waste,
Site & Disposal Facilities Project, 0.000%, 4/01/04
100,000 Monmouth County, New Jersey, Improvement 7/02 at 102 AA+ 107,673
Authority Revenue, Howell Township Board
Education Project, 6.000%, 7/01/03
100,000 Montclair Township, New Jersey, School, 3/00 at 101 1/2 AAA 103,882
5.800%, 3/01/06
185,000 Perth Amboy, New Jersey, Board of Education, No Opt. Call AAA 202,599
6.200%, 8/01/04
100,000 Woodbridge Township, New Jersey, 8/02 at 102 A1 107,798
6.150%, 8/15/06
- ---------------------------------------------------------------------------------------------------------------------
Special Tax Revenue -- 1.3%
100,000 New Jersey Sports & Exposition Authority, Convention 7/02 at 102 AAA 106,889
Center Luxury Tax Revenue Refunding, Series A,
6.000%, 7/01/07
- ---------------------------------------------------------------------------------------------------------------------
State/Territorial General Obligations -- 7.4%
Guam Government, Series A:
275,000 4.900%, 11/15/04 1 1/03 at 102 BBB 270,817
200,000 5.150%, 11/15/07 11/03 at 102 BBB 199,042
200,000 New Jersey State, Refunding, Series D, No Opt. Call AA+ 155,516
0.000%, 2/15/03
</TABLE>
23
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New Jersey Intermediate -- Continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Student Loan Revenue Bonds -- 1.0%
$ 85,000 New Jersey State Higher Education Assistance 7/02 at 102 A+ $ 86,650
Authority, Student Revenue, Series A,
6.000%, 1/01/06
- --------------------------------------------------------------------------------------------------------------------
$7,815,000 Total Investments -- (cost $7,726,833) -- 96.1% 8,114,495
================----------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities -- 2.4%
$ 200,000 New Jersey Economic Development Authority, Water VMIG-1 200,000
================ Facilities Revenue Refunding Bonds (United Water
New Jersey Inc. Project) 1996 Series A, Variable
Rate Demand Bonds, 3.000%, 11/01/26+
------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.5% 129,600
------------------------------------------------------------------------------------------------
Net Assets -- 100% $ 8,444,095
================================================================================================
</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.
+ The security has a maturity of more than one year, but
has variable rate and demand features which qualify it
as a short-term security. The rate disclosed is that
currently in effect. This rate changes periodically
based on market conditions or a specified market index.
24
<PAGE>
Statement of Net Assets (Unaudited) Nuveen Municipal Bond Funds
August 31, 1997 August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
New Jersey New Jersey Intermediate
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investment in municipal securities,
at market value (note 1) $79,957,097 $ 8,114,495
Temporary investments in short-term
municipal securities, at amortized
cost, which approximates market
value (note 1) 400,000 200,000
Cash 216,043 53,459
Receivables:
Interest 1,286,135 107,971
Shares sold 293,765 --
Fund manager -- 2,106
Other assets 665 1,847
- --------------------------------------------------------------------------------
Total assets 82,153,705 8,479,878
- --------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 932,606 --
Shares redeemed 606 --
Accrued expenses:
Management fees (note 6) 14,040 --
12b-1 distribution and service
fees (notes 1 and 6) 8,586 1,368
Other 45,789 19,701
Dividends payable 228,638 14,714
- --------------------------------------------------------------------------------
Total liabilities 1,230,265 35,783
- --------------------------------------------------------------------------------
Net assets (note 7) $80,923,440 $ 8,444,095
================================================================================
Class A Shares (note 1)
Net assets $31,305,232 $ 8,109,868
Shares outstanding 3,016,170 783,928
Net asset value and redemption price
per share $ 10.38 $ 10.35
Offering price per share (net asset
value per share plus maximum sales
charge of 4.20% and 3.00%,
respectively, of offering price) $ 10.84 $ 10.67
================================================================================
Class B Shares (note 1)
Net assets $ 1,523,544 N/A
Shares outstanding 146,697 N/A
Net asset value, offering and
redemption price per share $ 10.39 N/A
================================================================================
Class C Shares (note 1)
Net assets $ 4,553,262 $ 176,712
Shares outstanding 439,228 17,041
Net asset value, offering and
redemption price per share $ 10.37 $ 10.37
================================================================================
Class R Shares (note 1)
Net assets $43,541,402 $ 157,515
Shares outstanding 4,190,326 15,211
Net asset value, offering and
redemption price per share $ 10.39 $ 10.36
================================================================================
</TABLE>
N/A -- Nuveen Flagship New Jersey Intermediate is not authorized to issue
Class B Shares.
See accompanying notes to financial statements.
25
<PAGE>
Statement of Operations (Unaudited)
Six months ended August 31, 1997
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
New Jersey New Jersey Intermediate
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Tax-exempt interest income (note 1) $2,304,857 $197,075
- ------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 212,313 19,700
12b-1 service fees -- Class A (notes 1 and 6) 29,737 6,984
12b-1 distribution and service fees -- Class B (notes 1 and 6) 2,855 N/A
12b-1 distribution and service fees -- Class C (notes 1 and 6) 13,359 257
Shareholders' servicing agent fees and expenses 34,506 2,338
Custodian's fees and expenses 23,500 14,531
Trustees' fees and expenses (note 6) 769 70
Professional fees 11,805 7,205
Shareholders' reports -- printing and mailing expenses 19,145 857
Federal and state registration fees 2,116 210
Organizational expenses (note 1) -- 4,490
Other expenses 2,172 487
- ------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 352,277 57,129
Expense reimbursement (note 6) (152,552) (34,194)
- ------------------------------------------------------------------------------------------------------------
Net expenses 199,725 22,935
- ------------------------------------------------------------------------------------------------------------
Net investment income 2,105,132 174,140
- ------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
from Investments
Net realized gain (loss) from investment transactions
(notes 1 and 4) (188,058) 3,620
Net change in unrealized appreciation or depreciation
of investments 1,097,078 25,668
- ------------------------------------------------------------------------------------------------------------
Net gain from investments 909,020 29,288
- ------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $3,014,152 $203,428
============================================================================================================
</TABLE>
N/A -- Nuveen Flagship New Jersey Intermediate is not authorized to issue Class
B Shares.
26 See accompanying notes to financial statements.
<PAGE>
Statement of Changes in Net Assets (Unaudited) Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Nuveen
Nuveen Flagship New Jersey New Jersey*
-----------------------------------------------
Six months ended One month ended Year ended
8/31/97 2/28/97 1/31/97
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income $ 2,105,132 $ 337,937 $ 3,029,152
Net realized gain (loss) from
investment transactions
(notes 1 and 4) (188,058) -- (98,679)
Net change in unrealized
appreciation or depreciation
of investments 1,097,078 328,719 (891,352)
- -------------------------------------------------------------------------------
Net increase in net assets from
operations 3,014,152 666,656 2,039,121
- -------------------------------------------------------------------------------
Distributions to Shareholders
(note 1)
From undistributed net
investment income:
Class A (796,435) (125,569) (704,372)
Class B (12,424) (49) N/A
Class C (85,456) (10,843) (82,289)
Class R (1,210,639) (200,899) (2,250,619)
- -------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (2,104,954) (337,360) (3,037,280)
- -------------------------------------------------------------------------------
Fund Share Transactions
(note 2)
Net proceeds from shares issued
in the reorganization of
Nuveen New Jersey (note 1) -- 62,588,085 --
Net proceeds from shares
issued in the reorganization
of Flagship New Jersey
(note 1) -- 10,797,401 --
Net proceeds from sale of
shares 10,309,501 859,670 14,264,870
Net proceeds from shares
issued to shareholders due to
reinvestment of distributions 1,354,716 -- 2,264,231
- -------------------------------------------------------------------------------
11,664,217 74,245,156 16,529,101
- -------------------------------------------------------------------------------
Cost of shares redeemed (4,966,397) (1,308,030) (7,972,757)
- -------------------------------------------------------------------------------
Net increase (decrease) in
net assets from Fund share
transactions 6,697,820 72,937,126 8,556,344
- -------------------------------------------------------------------------------
Net increase (decrease) in
net assets 7,607,018 73,266,422 7,558,185
Net assets at the beginning
of period 73,316,422 50,000 55,029,900
- -------------------------------------------------------------------------------
Net assets at the end of
period $ 80,923,440 $73,316,422 $ 62,588,085
===============================================================================
Balance of undistributed net
investment income at end of
period $ 755 $ 577 $ --
===============================================================================
</TABLE>
* Nuveen New Jersey was reorganized into Nuveen Flagship New Jersey and
ceased to exist after the close of business on January 31, 1997 (see note
1 of the Notes to Financial Statements).
N/A -- Nuveen New Jersey was not authorized to issue Class B Shares.
27 See accompanying notes to financial statements.
<PAGE>
Statement of Changes in Net Assets (Unaudited)- continued
<TABLE>
<CAPTION>
Nuveen Flagship Flagship New Jersey
New Jersey Intermediate Intermediate
-------------------------------------------------------------------
Six Months ended Nine months ended Year ended
8/31/97 2/28/97* 5/31/96
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income $ 174,140 $ 280,866 $ 447,320
Net realized gain (loss) from investment
transactions (notes 1 and 4) 3,620 35,472 12,478
Net change in unrealized appreciation or
depreciation of investments 25,668 90,246 (98,145)
- --------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 203,428 406,584 361,653
- --------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (168,258) (282,787) (446,648)
Class B N/A N/A N/A
Class C (1,499) -- --
Class R (2,668) N/A N/A
- --------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (172,425) (282,787) (446,648)
- --------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the
reorganization of Nuveen New Jersey
(note 1) -- -- --
Net proceeds from shares issued in the
reorganization of Flagship New Jersey
(note 1) -- -- --
Net proceeds from sale of shares 1,930,623 300,959 1,086,130
Net proceeds from shares issued to
shareholders due to reinvestment
of distributions 99,722 174,134 265,262
- --------------------------------------------------------------------------------------------------------------------
2,030,345 475,093 1,351,392
- --------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (628,171) (1,905,553) (2,165,321)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions 1,402,174 (1,430,460) (813,929)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 1,433,177 (1,306,663) (898,924)
Net assets at the beginning of period 7,010,918 8,317,581 9,216,505
- --------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $8,444,095 $7,010,918 $8,317,581
====================================================================================================================
Balance of undistributed net investment
income at end of period $ 1,748 $ 33 $ 1,954
====================================================================================================================
</TABLE>
* Information represents eight months of Flagship New Jersey Intermediate
and one month of Nuveen Flagship New Jersey Intermediate (see note 1 of
the Notes to Financial Statements).
N/A -- Nuveen Flagship New Jersey Intermediate is not authorized to issue Class
B Shares and prior to February 1, 1997, its predecessor (see note 1 of
the Notes to Financial Statements) did not issue Class C Shares and was
not authorized to issue Class R Shares.
28 See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements (Unaudited)
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust II (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship New Jersey Municipal Bond Fund ("Nuveen
Flagship New Jersey") and the Nuveen Flagship New Jersey Intermediate Municipal
Bond Fund ("Nuveen Flagship New Jersey Intermediate") (collectively 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, Nuveen New Jersey Tax-Free
Value Fund ("Nuveen New Jersey") and Flagship New Jersey Double Tax Exempt Fund
("Flagship New Jersey") reorganized into Nuveen Flagship New Jersey. Flagship's
New Jersey Intermediate Tax Exempt Fund ("Flagship New Jersey Intermediate") was
reorganized into the Trust and renamed Nuveen Flagship New Jersey Intermediate
Municipal Bond Fund. Prior to these reorganizations, Nuveen New Jersey was a
series of the Nuveen Multistate Tax-Free Trust while Flagship New Jersey and
Flagship New Jersey Intermediate were each a sub-trust of the Flagship Tax
Exempt Funds Trust. Nuveen New Jersey had a January 31 fiscal year end and
Flagship New Jersey had a May 31 fiscal year end prior to being reorganized into
Nuveen Flagship New Jersey which has a February 28 fiscal year end. Flagship New
Jersey Intermediate had a May 31 fiscal year end prior to being reorganized into
the Trust and now has a February 28 fiscal year end.
Each Fund seeks 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.
29
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
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 their when-issued and delayed delivery purchase commitments. At
August 31, 1997, Nuveen Flagship New Jersey had such outstanding purchase
commitments of $932,606. Nuveen Flagship New Jersey Intermediate had no such
outstanding purchase commitments.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt
securities when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholders 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 carryovers.
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, each Fund intends to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and New Jersey 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.
30
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Flexible Sales Charge Program
Each Fund offers Class A, C and R Shares. Nuveen Flagship New Jersey 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.
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 August 31, 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 New Jersey
Intermediate (approximately $32,200) will be reimbursed to the Adviser on a
straight-line basis over a period of three years beginning June 1, 1996. As of
August 31, 1997, $12,510 has been reimbursed. In the event that the Adviser's
current investment in the Trust falls below $100,000 prior to the full
reimbursement of the organizational expenses, then it will forego any further
reimbursement.
31
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship New Jersey Nuveen New Jersey*
------------------------------------------------------------------
Six months ended One month ended Year ended
8/31/97 2/28/97 1/31/97
------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------
Shares sold:
<S> <C> <C> <C> <C> <C> <C>
Class A 494,232 $ 5,078,443 39,089 $ 402,796 798,711 $ 8,132,760
Class B 139,324 1,436,233 6,006 61,899 N/A N/A
Class C 190,644 1,959,733 8,563 88,093 182,286 1,861,710
Class R 178,115 1,835,092 29,727 306,882 418,474 4,270,400
Shares issued in the reorganization
of Nuveen New Jersey:
Class A -- -- 1,671,230 17,071,934 -- --
Class B -- -- -- -- N/A N/A
Class C -- -- 255,888 2,610,879 -- --
Class R -- -- 4,195,136 42,905,272 -- --
Shares issued in the reorganization
of Flagship New Jersey:
Class A -- -- 1,056,994 10,797,401 -- --
Class B -- -- -- -- N/A N/A
Class C -- -- -- -- -- --
Class R -- -- -- -- -- --
Shares issued to shareholders due
to reinvestment of distributions:
Class A 43,870 450,797 -- -- 49,041 499,709
Class B 287 2,979 -- -- N/A N/A
Class C 4,807 49,404 -- -- 4,353 44,287
Class R 82,792 851,536 -- -- 168,605 1,720,235
- -------------------------------------------------------------------------------------
1,134,071 11,664,217 7,262,633 74,245,156 1,621,470 16,529,101
- -------------------------------------------------------------------------------------
Shares redeemed:
Class A (238,932) (2,462,417) (51,537) (530,506) (201,249) (2,042,963)
Class B (144) (1,459) -- -- N/A N/A
Class C (20,837) (215,199) (1,062) (10,935) (33,320) (335,344)
Class R (222,281) (2,287,322) (74,385) (766,589) (550,089) (5,594,450)
- -------------------------------------------------------------------------------------
(482,194) (4,966,397) (126,984) (1,308,030) (784,658) (7,972,757)
- -------------------------------------------------------------------------------------
Net increase 651,877 $ 6,697,820 7,135,649 $72,937,126 836,812 $ 8,556,344
=====================================================================================
</TABLE>
* Nuveen New Jersey was reorganized into Nuveen Flagship New Jersey and ceased
to exist after the close of business on January 31, 1997 (see note 1).
N/A - Nuveen New Jersey was not authorized to issue Class B Shares.
32
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Nuveen Flagship Flagship New Jersey
New Jersey Intermediate Intermediate
-----------------------------------------------------------------
Six months ended Nine months ended Year ended
8/31/97 2/28/97* 5/31/96
-----------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------
Shares sold:
<S> <C> <C> <C> <C> <C> <C>
Class A 154,825 $ 1,600,693 29,384 $ 300,959 105,150 $ 1,086,130
Class B N/A N/A N/A N/A N/A N/A
Class C 16,969 175,830 -- -- -- --
Class R 15,210 154,100 -- -- N/A N/A
Shares issued to shareholders due
to reinvestment of distributions:
Class A 9,646 98,965 17,041 174,134 25,702 265,262
Class B N/A N/A N/A N/A N/A N/A
Class C 72 750 -- -- -- --
Class R 1 7 -- -- N/A N/A
- -----------------------------------------------------------------------------------------
196,723 2,030,345 46,425 475,093 130,852 1,351,392
- -----------------------------------------------------------------------------------------
Shares redeemed:
Class A (61,245) (628,171) (185,962) (1,905,553) (209,872) (2,165,321)
Class B N/A N/A N/A N/A N/A N/A
Class C -- -- -- -- -- --
Class R -- -- -- -- N/A N/A
- -----------------------------------------------------------------------------------------
(61,245) (628,171) (185,962) (1,905,553) (209,872) (2,165,321)
- -----------------------------------------------------------------------------------------
Net increase (decrease) 135,478 $ 1,402,174 (139,537) $(1,430,460) (79,020) $ (813,929)
=========================================================================================
</TABLE>
* Information represents eight months of Flagship New Jersey Intermediate
and one month of Nuveen Flagship New Jersey Intermediate (see note 1).
N/A - Nuveen Flagship New Jersey Intermediate is not authorized to issue Class B
Shares and prior to February 1, 1997, its predecessor (see note 1) did
not issue Class C Shares and was not authorized to issue Class R Shares.
33
<PAGE>
Notes to Financial Statements -- continued
3. Distributions to Shareholders
On September 9, 1997, the Funds declared dividend distributions from their tax-
exempt net investment income which were paid on October 1, 1997, to
shareholders of record on September 9, 1997, as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
New Jersey New Jersey Intermediate
- -------------------------------------------------------------------------------
Dividend per share:
<S> <C> <C>
Class A $ .0465 $ .0420
Class B .0400 N/A
Class C .0420 .0375
Class R .0485 .0440
===============================================================================
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the six months ended August
31, 1997, were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
New Jersey New Jersey Intermediate
- -------------------------------------------------------------------------------
<S> <C> <C>
Purchases
Investments in municipal securities $ 16,929,034 $ 1,618,712
Temporary municipal investments 7,600,000 1,300,000
Sales
Investments in municipal securities 8,931,815 740,694
Temporary municipal investments 8,800,000 1,100,000
===============================================================================
</TABLE>
At August 31, 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 February 28, 1997, the Funds' last fiscal year end, the Funds had
unused capital loss carryforwards available for federal income tax purposes to
be applied against future capital gains, if any. If not applied, the carryovers
will expire as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
New Jersey* New Jersey Intermediate
- -------------------------------------------------------------------------------
Expiration year:
<S> <C> <C>
2002 $ 170,150 $ --
2003 424,626 198,683
2004 116,050 --
- -------------------------------------------------------------------------------
Total $ 710,826 $ 198,683
===============================================================================
</TABLE>
* Due to the reorganization of Nuveen New Jersey and Flagship New Jersey into
Nuveen Flagship New Jersey (see note 1), Nuveen New Jersey and Flagship New
Jersey had net capital losses from investment transactions of $576,597 and
$134,229, respectively, which were carried forward into Nuveen Flagship New
Jersey, as permitted under applicable tax regulations.
34
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at August 31, 1997, were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
New Jersey New Jersey Intermediate
- -------------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $ 3,564,676 $ 394,751
depreciation (217,118) (7,089)
- -------------------------------------------------------------------------------
Net unrealized appreciation $ 3,347,558 $ 387,662
===============================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trusts' investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Average daily net asset value Management fee
- -------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
- -------------------------------------------------------------------------------
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to 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 August 31, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $114,200 and $6,000 for
Nuveen Flagship New Jersey and Nuveen Flagship New Jersey Intermediate,
respectively, of which approximately $97,600 and $4,800, 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 August 31, 1997, the Distributor compensated
authorized dealers directly with approximately $76,400 and $1,800 in commission
advances at the time of purchase for Nuveen Flagship New Jersey and Nuveen
Flagship New Jersey Intermediate, respectively. To compensate for commissions
advanced to authorized dealers, all 12b-1 service fees collected on Class B
Shares for Nuveen Flagship New Jersey during the first year following a
purchase, all 12b-1 distribution fees on
35
<PAGE>
Notes to Financial Statements -- continued
Class B Shares for Nuveen Flagship New Jersey, 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 August 31, 1997,
the Distributor retained approximately $12,300 and $300 in such 12b-1 fees for
Nuveen Flagship New Jersey and Nuveen Flagship New Jersey Intermediate,
respectively. The remaining 12b-1 fees charged to the Funds were paid to
compensate authorized dealers for providing services to shareholders relating to
their investments. The Distributor also collected and retained approximately
$100 of CDSC on Nuveen Flagship New Jersey share redemptions during the six
months ended August 31, 1997.
7. Composition of Net Assets
At August 31, 1997, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
New Jersey New Jersey Intermediate
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in $ 78,479,265 $ 8,249,748
Balance of undistributed net
investment income 755 1,748
Accumulated net realized gain (loss) from
investment transactions (904,138) (195,063)
Net unrealized appreciation
of investments 3,347,558 387,662
- -----------------------------------------------------------------------------------------
Net assets $ 80,923,440 $ 8,444,095
=========================================================================================
</TABLE>
36
<PAGE>
Financial Highlights
37
<PAGE>
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Selected data for a common share outstanding throughout each period is as follows:
Class (Inception date) Operating performance Less distributions
------------------------ ------------------------
NUVEEN FLAGSHIP Net
NEW JERSEY** 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
February 28/29, of period income(b) investments income gains period value(a)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1998(f) $ 10.26 $ .28 $ .12 $ (.28) $ -- $ 10.38 3.94%
1997(d) 10.22 .05 .04 (.05) -- 10.26 .85
1997(e) 10.40 .48 (.15) (.51) -- 10.22 3.31
1996(e) 9.73 .51 .69 (.53) -- 10.40 12.63
1995(c) 10.03 .21 (.21) (.21) (.09) 9.73 .02
Class B (2/97)
1998(f) 10.26 .24 .13 (.24) -- 10.39 3.65
1997(d) 10.22 .05 .03 (.04) -- 10.26 .78
Class C (9/94)
1998(f) 10.25 .25 .12 (.25) -- 10.37 3.67
1997(d) 10.20 .04 .05 (.04) -- 10.25 .90
1997(e) 10.38 .41 (.16) (.43) -- 10.20 2.53
1996(e) 9.71 .44 .68 (.45) -- 10.38 11.80
1995(c) 9.77 .16 (.05) (.17) -- 9.71 1.16
Class R (12/91)
1998(f) 10.27 .29 .12 (.29) -- 10.39 4.05
1997(d) 10.23 .05 .04 (.05) -- 10.27 .86
1997(e) 10.41 .49 (.14) (.53) -- 10.23 3.55
1996(e) 9.74 .55 .68 (.56) -- 10.41 12.88
1995(e) 10.71 .52 (.88) (.52) (.09) 9.74 (3.27)
1994(e) 9.96 .51 .81 (.51) (.06) 10.71 13.60
1993(e) 9.53 .45 .42 (.44) -- 9.96 9.36
1992(c) 9.53 -- -- -- -- 9.53 --
============================================================================================================
</TABLE>
* Annualized.
** Information included prior to the one month ending February 28, 1997,
reflects the financial highlights of Nuveen New Jersey.
(a) Total returns are calculated on net asset value without any
sales charge and are not annualized.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(c) From commencement of class operations as noted through January 31.
(d) For the one month ending February 28.
(e) For the year ending January 31.
(f) For the six months ending August 31, 1997.
38
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<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>
$ 31,305 .99%* 4.98%* .60%* 5.37%* 12%
27,879 1.01* 5.43* .55* 5.89* --
17,072 1.13 4.85 1.00 4.98 10
10,661 1.25 4.85 1.00 5.10 39
2,741 1.31* 5.03* 1.00* 5.34* 32
1,524 1.74* 4.17* 1.37* 4.54* 12
74 1.77* 5.71* 1.27* 6.21* --
4,553 1.54* 4.42* 1.15* 4.81* 12
2,712 1.56* 4.89* 1.10* 5.35* --
2,611 1.88 4.09 1.75 4.22 10
1,065 1.96 4.16 1.75 4.37 39
464 2.00* 4.37* 1.75* 4.62* 32
43,541 .79* 5.18* .40* 5.57* 12
42,651 .81* 5.63* .35* 6.09* --
42,905 .89 5.10 .75 5.24 10
43,304 .98 5.20 .75 5.43 39
39,582 .89 5.18 .75 5.32 32
36,462 .98 4.61 .75 4.84 52
16,208 1.43* 4.28* .75* 4.96* 9
15 -- -- -- -- --
==============================================================================
</TABLE>
39
<PAGE>
Financial Highlights (Unaudited) -- continued
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
--------------------- ------------------
NUVEEN FLAGSHIP Net
NEW JERSEY Net realized and Dividends Net Total
INTERMEDIATE** 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
February 28/29, of Period income(b) investments income gains period value(a)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/92)
1998(g) $ 10.30 $ .25 $ .05 $ (.25) $ -- $ 10.35 2.98%
1997(e) 10.14 .38 .16 (.38) -- 10.30 5.41
1996(f) 10.25 .51 (.11) (.51) -- 10.14 3.89
1995(f) 10.04 .50 .22 (.51) -- 10.25 7.42
1994(f) 10.15 .53 (.10) (.52) (.02)*** 10.04 4.27
1993(d) 9.70 .34 .45 (.34) -- 10.15 11.07*
Class C (3/97)
1998(c) 10.28 .21 .10 (.22) -- 10.37 3.10
Class R (3/97)
1998(c) 10.28 .25 .09 (.26) -- 10.36 3.39
============================================================================================================
</TABLE>
* Annualized.
** Information included prior to the nine months ending February 28,
1997, reflects the financial highlights of Flagship New Jersey
Intermediate.
*** The amount shown reflects a distribution in excess on capital
gains.
(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 through August 31,
1997.
(d) From commencement of class operations as noted through May 31.
(e) For the nine months ending February 28.
(f) For the year ending May 31.
(g) For the six months ending August 31, 1997.
40
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<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> <C>
$ 8,110 1.59%* 3.92%* .64%* 4.87%* 11%
7,011 1.93* 3.69* .68* 4.94* 11
8,318 1.71 3.79 .60 4.90 17
9,217 1.81 3.92 .69 5.04 35
9,321 1.81 3.45 .16 5.10 27
5,649 2.70* 2.54* .40* 4.84* 29
177 2.13* 3.22* 1.23* 4.12* 11
158 1.40* 4.06* .49* 4.97* 11
===============================================================================
</TABLE>
41
<PAGE>
Shareholder Information
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
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-Term
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 Municipal Bond 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) 621-7227.
42
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremmer
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
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
Shareholder Services, Inc.
Nuveen Investor Services
P.O. Box 5330
Denver, CO 80217-5330
(800) 621-7227
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Independent Public
Accountants
Arthur Andersen LLP
Chicago, Illinois
43
<PAGE>
Serving Investors
for Generations
[PHOTO OF 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 mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
trusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach -- purchasing securities of strong companies and
communities that represent good long-term value -- is the cornerstone of
Nuveen's investment philosophy. It is a careful, long-term strategy that offers
the potential for attractive returns with moderated risk. Successful value
investing begins with in-depth research and a discerning eye for marketplace
opportunity. Nuveen's team of investment professionals is backed by the
discipline, resources and expertise of almost a century of investment
experience, including one of the most recognized research departments in the
industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of equity and fixed-income mutual funds,
unit trusts, exchange-traded funds, individual managed account services, and
cash management products, including many that generate tax-free income.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, or call us
at (800) 621-7227 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) 621-7227
www.nuveen.com
VSA-NJ-8.97
<PAGE>
NUVEEN
Municipal
Bond Funds
August 31, 1997
Semiannual Report
Dependable, tax-free income to help you keep more of what you earn.
[PHOTO APPEARS HERE]
New York
New York
Insured
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 New York Performance
Overview
8 New York Insured
Performance Overview
11 Financial Section
54 Shareholder Information
55 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 is a pleasure to report to you on the performance of the Nuveen New York
Municipal Bond Funds. Both funds performed well over the past six months,
rewarding investors with attractive tax-free income, consistent performance and
capital preservation.
For the 12 months ended August 31, 1997, the uninsured New York fund provided
Class A shareholders with a total return on net asset value of 9.68%,
surpassing the 9.25% return generated by the unmanaged Lehman Brothers Municipal
Bond Index. The fund also outpaced the average return of 8.93% for its peer
group, the Lipper New York Municipal Bond Fund Category. The insured New York
fund also performed well, providing Class A shareholders with an annual total
return of 7.56%, which compares with its peer group average of 7.72% for the
Lipper New York Insured Municipal Bond Fund Category.
This strong performance was achieved in an environment of periodic interest rate
volatility. Positive news on the inflation front helped soften the effects of a
hike in short-term interest rates by the Federal Reserve Board in late March.
After tightening short-term interest rates by 0.25%, the Federal Reserve
demonstrated its confidence in the economy's path by maintaining the status quo
at subsequent meetings.
1
<PAGE>
"Both funds performed well over the past six months, rewarding investors with
attractive tax-free income, consistent performance and capital preservation."
So far in 1997, investors have focused their attention on fiscal issues such as
the federal budget accord and tax cut measures, including a reduction in the
capital gains tax. The economy continued to experience record expansion and the
lowest unemployment rates in almost two decades, a combination that in the past
has predictably been accompanied by an increase in inflation. Current
conditions, however, give every indication that inflation is under control.
Nuveen's financial products and services continue to evolve as we extend our
commitment to helping prudent investors achieve their investment goals. In
addition to our 35 municipal mutual funds, Nuveen now offers a variety of other
products and services designed for the distinct needs of investors who rely on
their investment portfolios as their principal source of income and financial
security. We recently celebrated the successful first year of our high-
performing Nuveen Growth and Income Stock Fund, as well as two new balanced
stock and bond funds. We have also expanded our private asset management
service by acquiring Rittenhouse Financial Services, a well-respected provider
of growth investment management services.
Nuveen prides itself on helping more than 1.3 million investors achieve their
financial goals by providing quality investment solutions that withstand the
test of time. We thank you for your confidence in Nuveen and our family of
investments, and we look forward to reporting to you again in six months.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
October 1, 1997
2
<PAGE>
Answering Your Questions
Portfolio Manager Dan Solender talks about the municipal bond market and offers
insights into the factors that affected fund performance over the past year.
What key economic and market factors affected the funds' performance over the
past year?
The combination of strong economic growth and low inflation has led to slightly
falling bond yields over the past year. Periodic volatility in the bond market
created a positive environment for the funds, providing us with a number of
opportunities to purchase attractive bonds at discounts during brief declines
in the market. The market also experienced a significant tightening of credit
spreads during the year, meaning that the difference in the yields of high-
quality and low-quality bonds was gradually reduced to the smallest levels
we've seen in many years. This allowed us to purchase very high quality bonds
for the portfolios without sacrificing much yield.
The supply of new bond issuance increased a modest seven percent nationally,
while municipal supply in New York increased 23 percent. The impact of this
dramatic increase in supply was softened by the improving economy in New York
City and New York state, as both ended their fiscal years with budget surpluses
due to higher-than-expected tax revenues from the financial services industry.
Given these market conditions, how have the funds performed?
As Tim mentioned in his letter to shareholders, both funds performed well during
the one-year period ended August 31, 1997. The uninsured New York fund's Class A
shares were rated among the top 25 percent of New York
3
<PAGE>
"New York promises to be one of the most exciting areas of the municipal bond
market in the coming months."
municipal bond funds by Lipper Analytical Services. The fund's Class R shares
also received a five-star rating from Morningstar, which rates mutual funds on a
risk-adjusted basis.
In addition to strong total returns, the funds continued to produce consistent
dividends and annual tax-free yields. Class A shareholders received 4.54% for
the uninsured New York fund and 3.97% for the insured New York fund. Investors
in the 35.5% combined state and federal income tax bracket would have had to
earn at least 7.04% and 6.16%, respectively, on taxable alternatives to equal
these yields on an after-tax basis.
What strategies did you use to add value?
Earlier in the year, we found good values in bonds supported by appropriations
from the New York state government that offered excellent yields relative to
higher-rated bonds. We took advantage of the high yields on these investment-
grade quality bonds, which our research indicated would be a good addition to
the funds.
As credit spreads tightened during the year, we focused on taking advantage of
opportunities to purchase bonds with higher credit quality at yields that were
similar to bonds that were rated much lower. We believe that as credit spreads
widen again, these high-quality issues will appreciate in value relative to
lower-grade bonds. Since credit quality does not really affect the insured fund
(in which 99% of the bonds are AAA-rated), we focused on extending the call
protection of the fund, which should increase its dividend stability.
4
<PAGE>
What is your outlook for the municipal market?
As long as interest rates remain relatively stable, we foresee no major supply
changes in the national municipal bond market. New issuance will likely expand
somewhat as the economy continues to grow. However, if the volatility in the
equity market continues at current levels, we expect demand for bonds to grow
as shareholders move some of their assets from stocks into bonds.
New York promises to be one of the most exciting areas of the municipal bond
market in the coming months. In early October, New York City is expected to
bring bonds to market through its new venue, the Transitional Finance Authority.
An even larger potential new issuer would be the Long Island Power Authority,
which could bring to market the largest municipal bond issuance ever, if its
transaction with the Long Island Lighting Company is approved. In addition, we
are still keeping a watchful eye on the utility sector as the results of
deregulation begin to take shape.
What strategies will you employ in the coming year?
We plan to take advantage of supply and demand imbalances as new issues come to
market, as well as to find bonds trading in the secondary market that may be
overlooked as attention focuses on new issues. In addition, we will strive to
increase the call protection of the bonds in the portfolios as long as this
remains a low-cost option. For the uninsured fund, we will try also to take
advantage of any widening of credit spreads to increase the overall yield of the
fund.
5
<PAGE>
Morningstar Rating/1/
* * * * *
New York
Performance Overview
As of August 31, 1997
<TABLE>
<CAPTION>
Fund Highlights
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Share Class A B C R
- -------------------------------------------------------------------------------
Inception Date 9/94 2/97 9/94 12/86
- -------------------------------------------------------------------------------
Net Asset Value (NAV) $10.74 $10.75 $10.77 $10.77
- -------------------------------------------------------------------------------
CUSIP 6706N670 67065N662 67065N654 67065N647
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Net Assets ($000) $234,352
- -------------------------------------------------------------------------------
Average Weighted Maturity (years) 21.35
- -------------------------------------------------------------------------------
Average Weighted Duration (years) 6.85
- -------------------------------------------------------------------------------
Annualized Total Return/2/
- -------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
1-Year 9.68% 5.08% 8.88% 8.97% 9.91%
- -------------------------------------------------------------------------------
5-Year 6.89% 5.97% 6.21% 6.22% 7.21%
- -------------------------------------------------------------------------------
10-Year 8.15% 7.68% 7.58% 7.41% 8.45%
- -------------------------------------------------------------------------------
Tax-Free Yields
- -------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.31% 5.08% 4.52% 4.74% 5.46%
- -------------------------------------------------------------------------------
SEC 30-Day Yld 4.54% 4.35% 3.79% 3.99% 4.74%
- -------------------------------------------------------------------------------
Taxable Equiv Yld/3/ 7.04% 6.74% 5.88% 6.19% 7.35%
- -------------------------------------------------------------------------------
</TABLE>
1 Overall rating for Class R Shares based on risk-adjusted performance for the
period ending August 31, 1997, by Morningstar Inc., an independent mutual
fund rating service. The fund was compared with 1,354 municipal bond
funds for the three-year period, 654 funds for the five-year period and 316
funds for the 10-year period. The top 10% of funds in the category receive
five stars, and the next 22.5% of funds receive four stars.
2 Class R Share returns are actual. Class A, B and C Share returns are actual
for the period since class inception; returns prior to class inception are
Class R Share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
Shares have a 4.2% maximum sales charge. Class B Shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C Shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
3 Based on SEC yield and a combined federal and state income tax rate of 35.5%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
6
<PAGE>
Nuveen Flagship New York Municipal Bond Fund
August 31, 1997 Semiannual Report
Credit Quality
[PIE CHART APPEARS HERE]
AA 11%
A 10%
BBB/NR 44%
AAA 35%
Diversification
[PIE CHART APPEARS HERE]
Education 13%
Health Care 8%
Lease Rental 20%
Transportation 7%
General Obligation 11%
Housing 17%
Escrowed Bonds 11%
Other 13%
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
Open End Dividends
Capital Gains
9/30/1996 0.046
10/31/1996 0.046
11/30/1996 0.046 0.0432
12/31/1996 0.046
1/31/1997 0.0489
2/28/1997 0.0473
3/31/1997 0.0473
4/30/1997 0.0473
5/31/1997 0.0473
6/30/1997 0.0475
7/31/1997 0.0475
8/31/1997 0.0475
<PAGE>
New York Insured
Performance Overview
As of August 31, 1997
<TABLE>
<CAPTION>
Fund Highlights
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Share Class A B C R
Inception Date 9/94 2/97 9/94 12/86
- -------------------------------------------------------------------------------
Net Asset Value (NAV) $10.57 $10.57 $10.56 $10.57
- -------------------------------------------------------------------------------
CUSIP 67065N639 67065N621 67065N613 67065N597
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Net Assets ($000) $357,934
- -------------------------------------------------------------------------------
Average Weighted Maturity (years) 21.38
- -------------------------------------------------------------------------------
Average Weighted Duration (years) 6.04
- -------------------------------------------------------------------------------
Annualized Total Return/1/
- -------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
1-Year 7.56% 3.04% 6.67% 6.78% 7.77%
- -------------------------------------------------------------------------------
5-Year 6.39% 5.48% 5.64% 5.65% 6.66%
- -------------------------------------------------------------------------------
10-Year 7.79% 7.33% 7.20% 7.01% 8.06%
- -------------------------------------------------------------------------------
Tax-Free Yields
- -------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- -------------------------------------------------------------------------------
Dist Rate 5.05% 4.84% 4.31% 4.49% 5.22%
- -------------------------------------------------------------------------------
SEC 30-Day Yld 3.97% 3.81% 3.22% 3.42% 4.17%
- -------------------------------------------------------------------------------
Taxable Equiv Yld2 6.16% 5.91% 4.99% 5.30% 6.47%
- -------------------------------------------------------------------------------
</TABLE>
1 Class R Share returns are actual. Class A, B and C Share returns are actual
for the period since class inception; returns prior to class inception are
Class R Share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
Shares have a 4.2% maximum sales charge. Class B Shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C Shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
2 Based on SEC yield and a combined federal and state income tax rate of 35.5%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
8
<PAGE>
Nuveen New York Insured Municipal Bond Fund
August 31, 1997 Semiannual Report
Credit Quality
[PIE CHART APPEARS HERE]
AA 1%
AAA 99%
Diversification
[PIE CHART APPEARS HERE]
Transportation 7%
Escrowed Bonds 21%
General Obligation 14%
Housing 21%
Education 10%
Health Care 9%
Other 9%
Water & Sewer 9%
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
Open End Dividends
9/30/1996 0.043
10/31/1996 0.043
11/30/1996 0.043
12/31/1996 0.043
1/31/1997 0.043
2/28/1997 0.0435
3/31/1997 0.0435
4/30/1997 0.0445
5/31/1997 0.0445
6/30/1997 0.0445
7/31/1997 0.0445
8/31/1997 0.0445
9
<PAGE>
Financial Section
Contents
12 Portfolio of Investments
38 Statement of Net Assets
39 Statement of Operations
40 Statement of Changes in Net Assets
41 Notes to Financial Statements
49 Financial Highlights
11
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New York
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Educational Facilities - 12.8%
$ 500,000 Dormitory Authority of the State of New York, City 7/98 at 102 Baa1 $ 525,330
University Refunding Bonds, 1988B Issue,
8.200%, 7/01/13
2,000,000 Dormitory Authority of the State of New York, State 5/00 at 102 Baa1 2,173,420
University Educational Facilities Revenue Bonds,
Series 1990A, 7.400%, 5/15/01
750,000 Dormitory Authority of the State of New York, City No Opt. Call Baa1 899,850
University System Consolidated, Second General
Resolution Revenue Bonds, Series 1990C,
7.500%, 7/01/10
500,000 Dormitory Authority of the State of New York, 7/01 at 102 Baa1 548,370
Revenue Bonds, State University Athletic Facility
Issue, Series 1991, 7.250%, 7/01/21
2,000,000 Dormitory Authority of the State of New York, State No Opt. Call Baa1 2,052,760
University Educational Facilities, Revenue Bonds,
Series 1993A, 5.500%, 5/15/08
1,500,000 Dormitory Authority of the State of New York, City No Opt. Call Baa1 1,580,520
University System Consolidated, Second General
Resolution Revenue Bonds, Series 1993A,
5.750%, 7/01/07
Dormitory Authority of the State of New York, State
University Educational Facilities, Revenue Bonds,
Series 1993B:
1,125,000 5.250%, 5/15/09 No Opt. Call Baa1 1,129,309
1,000,000 5.250%, 5/15/19 No Opt. Call Baa1 970,920
2,100,000 Dormitory Authority of the State of New York, 7/04 at 102 A1 2,298,807
University of Rochester, Revenue Bonds, Series
1994A, 6.500%, 7/01/19
Dormitory Authority of the State of New York,
Revenue Bonds, Upstate Community Colleges,
Series 1995A:
2,195,000 6.500%, 7/01/07 No Opt. Call Baa1 2,408,947
1,000,000 6.250%, 7/01/25 7/05 at 102 Baa1 1,061,000
1,750,000 New York State Dormitory Authority, City University 7/05 at 102 Aaa 1,711,553
System Consolidated 3rd General Resolution
Revenue Bonds 1995-1, 5.375%, 7/01/25
1,750,000 Town of Brookhaven, Industrial Development Agency, 3/03 at 102 BBB 1,861,265
1993 Civic Facility Revenue Bonds, (Dowling
College/The National Aviation and Transportation
Center Civic Facility), 6.750%, 3/01/23
</TABLE>
12
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education Facilities - continued
$2,470,000 Dutchess County Industrial Development Agency, 11/03 at 102 A $2,730,733
Civic Facility Revenue Bonds, (The Bard College
Project), Series 1992, 7.000%, 11/01/17
1,000,000 City of Rochelle, Industrial Development Agency, 7/02 at 102 Baa2 1,066,920
Civic Facility Revenue Bonds, (College of New
Rochelle Project-1992 Series), 6.625%, 7/01/12
New York City Industrial Development Agency,
Civic Facility Revenue Bonds, (College of New
Rochelle Project), Series 1995:
1,000,000 6.200%, 9/01/10 9/05 at 102 Baa2 1,060,420
1,000,000 6.300%, 9/01/15 9/05 at 102 Baa2 1,023,830
3,515,000 Suffolk County Industrial Development Agency, 6/04 at 102 BBB 3,767,553
Civic Facility Revenue Bonds, (Dowling College
Civic Facility), Series 1994, 6.625%, 6/01/24
1,000,000 Suffolk County Industrial Development Agency, 12/06 at 102 BBB 1,084,720
Civic Facility Revenue Refunding Bonds,
(Dowling College Civic Facility), Series 1996,
6.700%, 12/01/20
- --------------------------------------------------------------------------------------------------------------------
Escrowed Bonds - 10.7%***
1,000,000 Dormitory Authority of the State of New York, City 7/00 at 102 Aaa 1,109,160
University System Consolidated Revenue Bonds,
Series 1990A, 7.625%, 7/01/20 (Pre-refunded
to 7/01/00)
400,000 Dormitory Authority of the State of New York, 8/01 at 102 AA 450,836
Menorah Campus, Inc., FHA-Insured Mortgage
Revenue Bonds, Series 1991, 7.400%, 2/01/31
(Pre-refunded to 8/01/01)
250,000 Dormitory Authority of the State of New York, 7/01 at 102 Baa1 279,173
Department of Health Revenue Bonds, Veterans
Home, Series 1990, 7.250%, 7/01/21
(Pre-refunded to 7/01/01)
300,000 Dormitory Authority of the State of New York, State 7/01 at 102 Baa1 340,251
of New York Department of Education, Revenue
Bonds, Series 1991, 7.750%, 7/01/21
(Pre-refunded to 7/01/01)
985,000 Dormitory Authority of the State of New York, 7/04 at 102 Aaa 1,162,477
Dormitory Revenue Bonds, State University Issue,
Series X, 7.400%, 7/01/24 (Pre-refunded to 7/01/04)
</TABLE>
13
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New York - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed Bonds - continued
$ 200,000 New York State Housing Finance Agency, State No Opt. Call Aaa $ 251,156
University Construction Refunding Bonds, 1986
Series A, 8.000%, 5/01/11
1,660,000 New York State Housing Finance Agency, Health 11/00 at 102 Aaa 1,874,738
Facilities Revenue Bonds (New York City), 1990
Series A, 8.000%, 11/01/08 (Pre-refunded to 11/01/00)
1,000,000 New York State Medical Care Facilities Finance 8/98 at 102 AAA 1,055,950
Agency, Hospital and Nursing Home FHA-Insured
Mortgage Revenue Bonds, 1988 Series C, 7.700%,
2/15/22 (Pre-refunded to 8/15/98)
1,250,000 New York State Medical Care Facilities Finance 2/98 at 102 AAA 1,300,563
Agency, Hospital and Nursing Home FHA-Insured
Mortgage Revenue Bonds, 1987 Series A, 8.300%,
2/15/22 (Pre-refunded to 2/15/98)
1,460,000 New York State Medical Care Facilities Finance 2/01 at 102 Aaa 1,636,032
Agency, Mental Health Services Facilities
Improvement Revenue Bonds, 1991 Series A,
7.500%, 2/15/21 (Pre-refunded to 2/15/01)
50,000 New York State Medical Care Facilities Finance 2/00 at 102 Aaa 55,062
Agency, Mental Health Services Facilities Improvement
Revenue Bonds, 1990 Series A, 7.750%, 2/15/20
(Pre-refunded to 2/15/00)
1,100,000 New York State Urban Development Corporation, 1/98 at 102 Baa1 1,136,806
Project Revenue Bonds (Syracuse University Center
for Science and Technology), Series 1987, 7.875%,
1/01/17 (Pre-refunded to 1/01/98)
1,000,000 New York State Urban Development Corporation, 1/00 at 102 Aaa 1,092,380
Correctional Capital Facilities Revenue Bonds,
Series 1, 7.500%, 1/01/20 (Pre-refunded to 1/01/00)
2,000,000 New York State Urban Development Corporation, 1/01 at 102 Baa1 2,248,420
Project Revenue Bonds, (Clarkson Center for
Advanced Materials Processing Loan), Series 1990,
7.800%, 1/01/20 (Pre-refunded to 1/01/01)
2,900,000 New York State Urban Development Corporation, 4/01 at 102 Aaa 3,260,383
State Facilities Revenue Bonds, Series 1991, 7.500%,
4/01/20 (Pre-refunded to 4/01/01)
300,000 State of New York, Serial Bonds, Series 1991, 7.300%, 3/01 at 102 A2 334,563
3/01/12 (Pre-refunded to 3/01/01)
</TABLE>
14
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed Bonds - continued
$2,100,000 Town of Babylon Industrial Development Agency 7/98 at 103 Aaa $2,242,065
(New York), Resource Recovery Revenue Bonds,
Series 1985, (Ogden Martin Systems of Babylon, Inc.
Project), 8.500%, 1/01/19 (Pre-refunded to 7/01/98)
1,000,000 Metropolitan Transportation Authority (New York), 7/00 at 102 Aaa 1,105,850
Commuter Facilities, 1987 Service Contract Bonds,
Series 3, 7.500%, 7/01/16 (Pre-refunded to 7/01/00)
1,025,000 Metropolitan Transportation Authority, Transit 7/02 at 102 Aaa 1,134,665
Facilities Revenue Bonds, Series J, 6.500%,
7/01/18 (Pre-refunded to 7/01/02)
140,000 The City of New York, General Obligation Bonds, 8/04 at 101 Baa1 161,244
Fiscal 1995 Series B, 7.000%, 8/15/16
(Pre-refunded to 8/15/04)
1,500,000 New York City Municipal Water Finance Authority 6/01 at 101 1/2 Aaa 1,698,690
(New York), Water and Sewer System Revenue
Bonds, Fiscal 1991, Series C, 7.750%, 6/15/20
(Pre-refunded to 6/15/01)
1,000,000 Orangetown Housing Authority (Rockland County, 10/00 at 102 A 1,118,630
New York), Housing Facilities Revenue Bonds
(Orangetown Senior Housing Center-1990 Series),
7.600%, 4/01/30 (Pre-refunded to 10/01/00)
- --------------------------------------------------------------------------------------------------------------------
General Obligation Bonds - 10.5%
2,500,000 Dormitory Authority of the State of New York, 2/07 at 102 Baa1 2,482,225
Mental Health Services Facilities Improvement,
Revenue Bonds, Series 1997B, 5.625%, 2/15/21
1,500,000 New York State Dormitory Authority, Mental Health 2/06 at 102 Aaa 1,435,845
Services Facilities Improvement Revenue Bonds,
Series 1996-C, 5.125%, 2/15/21
2,000,000 New York Medical Care Facilities Finance Agency, 2/02 at 100 Aaa 1,965,980
Mental Health Services Facilities Improvement
Revenue Bonds, 1992 Series A, 5.500%, 8/15/21
110,000 New York State Medical Care Facilities Finance 2/98 at 102 Baa1 113,981
Agency, Mental Health Services Facilities
Improvement Revenue Bonds, 1988 Series A,
7.700%, 2/15/18
1,500,000 New York State Medical Care Facilities Finance 8/04 at 102 Baa1 1,627,200
Agency, Mental Health Services Facilities
Improvement Revenue Bonds, 1994 Series E,
6.500%, 8/15/24
</TABLE>
15
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New York - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Obligation Bonds - continued
$1,250,000 New York State Medical Care Facilities Agency, 2/05 at 102 Baa $1,370,488
New York Downtown Hospital Secured Hospital
Revenue Bonds, 1995 Series A, 6.700%, 2/15/12
New York State Medical Care Facilities Finance
Agency, Brookdale Hospital Medical Center, Secured
Hospital Revenue Bonds, 1995 Series A:
1,000,000 6.400%, 2/15/01 No Opt. Call Baa 1,047,840
2,700,000 6.800%, 8/15/12 2/05 at 102 Baa 2,944,053
2,000,000 The City of New York, General Obligation Bonds, 2/02 at 101 1/2 Baa1 2,232,000
Fiscal 1992, Series B, 7.500%, 2/01/06
45,000 The City of New York, General Obligation Bonds, 8/02 at 101 1/2 Aaa 49,344
Fiscal 1992, Series C, Fixed Rate Bonds, Subseries
C1, 6.625%, 8/01/13
40,000 The City of New York, General Obligation Bonds, 11/01 at 101 1/2 Baa1 45,725
Fiscal 1991 Series F, Tax-Exempt Bonds,
8.250%, 11/15/19
The City of New York, General Obligation Bonds,
Fiscal 1996, Series G:
2,000,000 5.750%, 2/01/17 2/06 at 101 1/2 Baa1 2,007,680
2,500,000 5.750%, 2/01/20 2/06 at 101 1/2 Baa1 2,493,625
1,000,000 The City of New York, General Obligation Bonds, 2/06 at 101 1/2 Baa1 998,720
Fiscal 1996, Series F, 5.750%, 2/01/19
1,750,000 The City of New York, General Obligation Bonds, 11/06 at 101 1/2 Baa1 1,807,033
Fiscal 1997, Series D, Tax-Exempt Bonds,
5.875%, 11/01/11
860,000 The City of New York, General Obligation Bonds, 8/04 at 101 Baa1 966,141
Fiscal 1995, Series B, 7.000%, 8/15/16
South Orangetown Central School District, Rockland
County, New York, Serial General Obligation Bonds,
Series 1990:
390,000 6.875%, 10/01/08 No Opt. Call A 456,004
390,000 6.875%, 10/01/09 No Opt. Call A 458,051
- --------------------------------------------------------------------------------------------------------------------
Health Care Facilities - 18.1%
500,000 Dormitory Authority of the State of New York, 2/98 at 102 AAA 516,405
Hospital Revenue Bonds, Long Island Jewish
Medical Center (FHA Insured Mortgage), Series
1988, 7.750%, 8/15/27
</TABLE>
16
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care Facilities - continued
$2,135,000 Dormitory Authority of the State of New York, 2/00 at 102 AAA $2,278,301
United Health Services, Inc., FHA-Insured Mortgage
Revenue Bonds, Series 1989, 7.350%, 8/01/29
245,000 Dormitory Authority of the State of New York, 2/01 at 102 AA- 263,400
Iroquois Nursing, Insured Revenue Bonds, Series
1991, 7.000%, 2/01/15
2,500,000 Dormitory Authority of the State of New York, W.K. 8/06 at 102 AAA 2,635,450
Nursing Home Corporation, FHA-Insured Mortgage
Revenue Bonds, Series 1996, 5.950%, 2/01/16
2,000,000 Dormitory Authority of the State of New York, 7/06 at 102 Aa2 2,095,640
Bishop Henry R. Hucles Nursing Home, Inc.,
Revenue Bonds, Series 1996, 6.000%, 7/01/24
1,000,000 Dormitory Authority of the State of New York, No Opt. Call Baa 1,051,330
NYACK Hospital, Revenue Bonds, Series 1996,
6.000%, 7/01/06
3,300,000 Dormitory Authority of the State of New York, 2/07 at 102 AAA 3,473,217
Menorah Campus, Inc., FHA-Insured Mortgage
Nursing Home Revenue Bonds, Series 1997,
5.950%, 2/01/17
2,000,000 Dormitory Authority of the State of New York, 8/04 at 105 Aaa 1,967,960
Millard Fillmore Hospitals FHA-Insured Mortgage
Hospital Revenue Bonds, Series 1997, 5.375%, 2/01/17
415,000 New York State Medical Care Facilities Finance 9/97 at 102 Aa 424,591
Agency, Hospital and Nursing Home Insured
Mortgage Revenue Bonds, 1987 Series A,
8.000%, 2/15/27
995,000 New York State Medical Care Facilities Finance 8/98 at 102 AAA 1,053,725
Agency, Albany Medical Center Hospital Project
Revenue Bonds, 1987 Series A, 8.000%, 2/15/28
975,000 New York State Medical Care Facilities Finance 8/99 at 102 AA 1,034,543
Agency, Hospital and Nursing Home Insured
Mortgage Revenue Bonds, 1989 Series B,
7.350%, 2/15/29
</TABLE>
17
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New York - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care Facilities - continued
$ 500,000 New York State Medical Care Facilities Finance 8/01 at 102 AA $ 548,515
Agency, Hospital and Nursing Home Insured
Mortgage Revenue Bonds, 1991 Series A,
7.450%, 8/15/31
2,000,000 New York State Medical Care Facilities Finance 8/02 at 102 AAA 2,110,740
Agency, Hospital and Nursing Home FHA-Insured
Mortgage Revenue Bonds, 1992 Series B,
6.200%, 8/15/22
1,455,000 New York State Medical Care Facilities Finance 2/03 at 102 AAA 1,589,355
Agency, Hospital and Nursing Home FHA-Insured
Mortgage Revenue Bonds, 1992 Series D,
6.450%, 2/15/09
2,500,000 New York State Medical Care Facilities Finance 2/04 at 102 AAA 2,667,550
Agency, Hospital and Nursing Home FHA-Insured
Mortgage Revenue Bonds, 1994 Series A,
6.200%, 2/15/21
1,000,000 New York State Medical Care Facilities Finance 11/05 at 102 Aa 1,091,440
Agency, Health Center Projects Revenue Bonds
(Secured Mortgage Program), 1995 Series A,
6.375%, 11/15/19
1,000,000 New York State Medical Care Facilities Finance 2/05 at 102 AA 1,062,720
Agency, FHA-Insured Mortgage Project Revenue
Bonds, 1995 Series B, 6.100%, 2/15/15
2,435,000 New York State Medical Care Facilities Finance 8/04 at 102 AAA 2,639,321
Agency, FHA-Insured Mortgage Revenue Bonds,
1994 Series C, 6.400%, 8/15/14
New York State Medical Care Facilities Finance
Agency, New York Hospital FHA-Insured Mortgage
Revenue Bonds, 1994 Series A (AMBAC Insured Series):
1,000,000 6.750%, 8/15/14 2/05 at 102 Aaa 1,113,720
1,000,000 6.800%, 8/15/24 2/05 at 102 Aaa 1,116,790
700,000 Town of Hempstead Industrial Development Agency, 10/99 at 102 Aa2 743,407
Civic Facility Revenue Bonds, (United Cerebral
Palsy Association of Nassau County, Inc. Civic
Facility Project-1989 Series), 7.500%, 10/01/09
1,000,000 New York City, Health and Hospitals Corporation, 2/03 at 102 BBB- 1,017,680
Health System Bonds, 1993 Series A,
6.300%, 2/15/20
</TABLE>
18
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care Facilities - continued
$5,345,000 New York City Industrial Development Agency, Civic 7/02 at 102 AA $5,734,437
Facility Revenue Bonds, (1992 The Lighthouse, Inc.
Project), 6.500%, 7/01/22
2,285,000 Newark-Wayne Community Hospital, Inc., Hospital 9/03 at 102 N/R 2,373,589
Revenue Improvement and Refunding Bonds,
Series 1993A, 7.600%, 9/01/15
2,100,000 UFA Development Corporation, Utica, New York, 7/04 at 102 Aa2 2,154,033
FHA-Insured Mortgage Revenue Bonds, Series
1993, (Loretto-Utica Project), 5.950%, 7/01/35
- --------------------------------------------------------------------------------------------------------------------
Housing Facilities - 6.8%
750,000 Dormitory Authority of the State of New York, GNMA 2/99 at 102 AAA 794,955
Collateralized Revenue Bonds, (Park Ridge Housing,
Inc. Project), Series 1989, 7.850%, 2/01/29
2,250,000 New York State Finance Agency, Housing Project 5/06 at 102 Aaa 2,338,223
Mortgage Revenue Bonds, 1996 Series A,
6.125%, 11/01/20
1,650,000 New York State Housing Finance Agency, Insured 8/02 at 102 Aa 1,768,140
Multi-Family Mortgage Housing Revenue Bonds,
1992 Series A, 6.950%, 8/15/12
500,000 New York State Housing Finance Agency, Insured 8/02 at 102 Aa 532,390
Multi-Family Mortgage Housing Revenue Bonds,
1992 Series A, 7.000%, 8/15/22
1,000,000 New York State Housing Finance Agency, Multi- 2/04 at 102 Aa 1,051,130
Family Housing Revenue Bonds, (Secured Mortgage
Program), 1994 Series C, 6.450%, 8/15/14
1,000,000 New York State Urban Development Corporation, 1/02 at 102 Aaa 1,096,720
Section 236 Revenue Bonds, Series 1992A,
6.750%, 1/01/26
380,000 State of New York Mortgage Agency, Mortgage 4/98 at 102 Aa 391,446
Revenue Bonds, Ninth Series E, 8.100%, 10/01/17
250,000 State of New York Mortgage Agency, Homeowner 2/01 at 102 Aa 265,380
Mortgage Revenue Bonds, Series MM-1, 7.950%,
10/01/21 (Alternative Minimum Tax)
1,500,000 State of New York Mortgage Agency, Homeowner 9/04 at 102 Aa2 1,603,440
Mortgage Revenue Bonds, Series 43,
6.450%, 10/01/17
</TABLE>
19
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New York - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing Facilities--continued
$ 595,000 State of New York Mortgage Agency, Homeowner 4/01 at 102 Aa2 $ 631,212
Mortgage Revenue Bonds, 1991 Series UU, 7.750%,
10/01/23 (Alternative Minimum Tax)
1,000,000 State of New York Mortgage Agency, Homeowner 3/05 at 102 Aa2 1,071,780
Mortgage Revenue Bonds, 1995 Series 46, 6.600%,
10/01/19 (Alternative Minimum Tax)
1,000,000 City of Batavia Housing Authority, Tax-Exempt 7/01 at 102 Aaa 1,037,660
Mortgage Revenue Refunding Bonds, Series 1994A,
(Washington Towers-FHA Insured Mortgage),
6.500%, 1/01/23
2,000,000 New York City Housing Development Corporation, 4/03 at 102 AAA 2,118,560
Multi-Family Mortgage Revenue Bonds, (FHA
Insured Mortgage Loan), 1993 Series A,
6.550%, 10/01/15
1,250,000 New York City Housing Development Corporation, 6/01 at 102 AAA 1,333,250
Multi-Unit Mortgage Refunding Bonds, (FHA
Insured Mortgage Loans), 1991 Series A,
7.350%, 6/01/19
- --------------------------------------------------------------------------------------------------------------------
Industrial Development Revenue--0.4%
750,000 Jefferson County Industrial Development Agency, 11/02 at 102 Baa1 822,270
Multi-Modal Interchangeable Rate, Solid Waste
Disposal Revenue Bonds, (Champion International
Corporation Project), Series 1990, 7.200%,
12/01/20 (Alternative Minimum Tax)
- --------------------------------------------------------------------------------------------------------------------
Lease Rental--19.4%
2,250,000 Dormitory Authority of the State of New York, 11/97 at 116 8/32 Baa1 2,626,380
Judicial Facilities Lease Revenue Bonds,
(Suffolk County Issue),
Series 1991A, 9.500%, 4/15/14
2,225,000 Dormitory Authority of the State of New York, 5/03 at 101 1/2 Baa1 2,213,096
Court Facilities Lease Revenue Bonds, (The
City of New York Issue), Series 1993A,
5.700%, 5/15/22
1,000,000 Dormitory Authority of the State of New York, 7/04 at 102 Baa1 1,056,150
State University Educational Facilities,
Revenue Bonds, Series 1994B, 6.250%, 7/01/24
2,900,000 Dormitory Authority of the State of New York, 7/04 at 102 Baa1 2,814,189
Department of Health of the State of New York,
Revenue Bonds, Series 1994, 5.500%, 7/01/23
</TABLE>
20
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lease Rental -- continued
$ 1,500,000 Dormitory Authority of the State of New York, 7/05 at 102 Baa1 $ 1,659,180
Department of Health of the State of New York,
Revenue Bonds, Series 1995, 6.625%, 7/01/24
1,545,000 New York State Environmental Facilities Corporation, 3/03 at 101 Baa1 1,560,867
State Park Infrastructure Special Obligation Bonds,
Series 1993A, 5.750%, 3/15/13
340,000 New York State Housing Finance Agency, Health 11/00 at 102 BBB+ 378,971
Facilities Revenue Bonds (New York City), 1990
Series A, 8.000%, 11/01/08
1,000,000 New York State Housing Finance Agency, Health 5/06 at 101 1/2 BBB+ 1,066,250
Facilities Revenue Bonds, (New York City), 1996
Series A, 6.000%, 11/01/08
2,990,000 New York State Housing Finance Agency, Service 9/03 at 102 Baa1 3,050,338
Contract Obligation Revenue Bonds, 1993 Series C,
5.875%, 9/15/14
2,000,000 New York State Housing Finance Agency, Service 9/05 at 102 Baa1 2,149,600
Contract Obligation Revenue Bonds, 1995 Series A,
6.375%, 9/15/15
5,090,000 New York State Urban Development Corporation, 1/03 at 102 Baa1 4,994,868
Correctional Capital Facilities Revenue Bonds, 1993
Refunding Series, 5.500%, 1/01/15
7,500,000 New York State Urban Development Corporation, 1/04 at 102 Baa1 7,066,800
Correctional Capital Facilities Revenue Bonds,
1993A Series, 5.250%, 1/01/21
1,000,000 New York State Urban Development Corporation, 1/06 at 102 Baa1 1,043,220
Project Revenue Bonds, (Onondaga County
Convention Center), Series 1995, 6.250%, 1/01/20
300,000 Albany Housing Authority, City of Albany, New York, 10/05 at 102 Baa1 303,972
Limited Obligation Bonds, Series 1995,
5.850%, 10/01/07
495,000 City of Albany Industrial Development Agency, Lease No Opt. Call N/R 558,875
Revenue Bonds, (The New York State Assembly
Building Project), 1991 Series A-1, 7.750%, 1/01/10
1,500,000 Albany Parking Authority, Aggregate Principal Amount, No Opt. Call Baa1 491,340
Parking Revenue Refunding Bonds, Series 1992A,
0.000%, 11/01/17
1,600,000 County of Franklin Industrial Development Agency, 11/02 at 102 BBB- 1,730,288
Lease Revenue Bonds, (County Correctional Facility
Project), Series 1992, 6.750%, 11/01/12
</TABLE>
21
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New York - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lease Rental -- continued
$ 2,500,000 Housing New York Corporation, Senior Revenue 11/03 at 102 AA $ 2,398,050
Refunding Bonds, Series 1993, 5.000%, 11/01/13
4,000,000 Metropolitan Transportation Authority (New York), 7/03 at 101 1/2 Baa1 4,037,320
Transit Facilities Service Contract Bonds, Series P,
5.250%, 7/01/15
500,000 Triborough Bridge and Tunnel Authority, Convention No Opt. Call Baa1 580,615
Center Project Bonds, Series E, 7.250%, 1/01/10
1,500,000 United Nations Development Corporation, 1997 7/99 at 100 A2 1,495,620
Refunding Bonds, Series B (Senior Lien),
5.600%, 7/01/26
2,000,000 New York City Industrial Development Agency, Civic 12/02 at 102 BBB 2,112,460
Facility Revenue Bonds, (1992 Jewish Board of Family
and Children's Services, Inc. Project), 6.750%, 12/15/12
- --------------------------------------------------------------------------------------------------------------------
Other Revenue -- 8.1%
2,225,000 Dormitory Authority of the State of New York, City No Opt. Call Baa1 2,329,130
University Refunding Bonds, 1993C Issue,
5.750%, 7/01/12
3,000,000 New York Local Government Assistance Corporation, 4/04 at 100 A 2,768,100
Series 1993 B, Refunding Bonds, 5.000%, 4/01/23
6,250,000 New York Local Government Assistance Corporation (A 4/03 at 102 Aaa 5,855,188
Public Benefit Corporation of the State of New York),
Series 1993C Refunding Bonds, 5.000%, 4/01/21
250,000 State of New York Municipal Bond Bank Agency, 9/01 at 102 BBB+ 270,200
Special Program Bonds, (City of Buffalo), 1991
Series A, 6.875%, 3/15/06
250,000 State of New York Municipal Bond Bank Agency, 9/01 at 102 A+ 271,560
Special Program Revenue Bonds, (City of Rochester),
1991 Series A, 6.750%, 3/15/11
220,000 New York City Industrial Development Agency, Civic 11/01 at 102 AAA 237,873
Facility Revenue Bonds, (Federation Protestant
Welfare), Series 1991, 6.950%, 11/01/11
750,000 Onondaga County Resource Recovery Agency, System 5/02 at 102 Baa 803,444
Revenue Bonds, (Development Costs -- 1992 Series),
7.000%, 5/01/15 (Alternative Minimum Tax)
</TABLE>
22
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other Revenue -- continued
$ 2,000,000 34th Street Partnership, Inc., 34th Street Business 1/03 at 102 A1 $ 1,962,320
Improvement District, Capital Improvement Bonds,
Series 1993, 5.500%, 1/01/23
2,000,000 Triborough Bridge and Tunnel Authority (New York), 1/01 at 102 A1 2,190,580
Special Obligation Refunding Bonds, Series 1991B,
7.100%, 1/01/10
2,000,000 Triborough Bridge and Tunnel Authority, Special 1/01 at 102 Aaa 2,189,280
Obligation Refunding Bonds, Series 1991B,
7.100%, 1/01/10
- --------------------------------------------------------------------------------------------------------------------
Pollution Control Facilities -- 1.9%
350,000 New York State Energy Research and Development 1/00 at 101 A1 374,198
Authority, Electric Facilities Revenue Bonds, Series
1991 A, (Consolidated Edison Company of New York,
Inc. Project), 7.500%, 1/01/26 (Alternative Minimum Tax)
2,435,000 New York State Energy Research and Development 7/05 at 102 Aaa 2,538,780
Authority, Adjustable Rate Pollution Control Revenue
Bonds, (New York State Electric and Gas Corporation
Project), 1987 Series A, 6.150%,7/01/26
(Alternative Minimum Tax)
1,500,000 New York State Energy Research and Development 7/05 at 102 Aaa 1,585,064
Authority, Facilities Refunding Revenue Bonds,
Series 1995, (Consolidated Edison Company of New
York, Inc. Project), 6.100%, 8/15/20
- --------------------------------------------------------------------------------------------------------------------
Transportation -- 6.4%
1,500,000 Albany County Airport Authority, Airport Revenue 12/07 at 102 Aaa 1,479,014
Bonds, Series 1997, 5.500%, 12/15/19
(Alternative Minimum Tax)
500,000 Albany Parking Authority, Aggregate Principal Amount, 9/01 at 102 A 548,254
(Green and Hudson Garage Project), Parking
Revenue Refunding Bonds, (Letter of Credit
Secured), Series 1991A, 7.150%, 9/15/16
1,000,000 Metropolitan Transportation Authority, Commuter 7/02 at 102 Aaa 1,074,170
Facilities Revenue Bonds, Series 1992B,
6.250%, 7/01/17
1,000,000 Metropolitan Transportation Authority, Commuter 7/04 at 101 1/2 Aaa 1,116,870
Facilities Revenue Bonds, Series 1994A,
6.375%, 7/01/18
</TABLE>
23
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New York - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Transportation -- continued
$ 4,000,000 Metropolitan Transportation Authority, 7/07 at 101 1/2 Aaa $4,096,320
Commuter Facilities Revenue Bonds,
Series 1997A, 5.750%, 7/01/21
1,960,000 Metropolitan Transportation Authority, Commuter 7/07 at 101 Aaa 1,918,506
Facilities Revenue Bonds, Series 1997C,
5.375%, 7/01/27
1,000,000 Metropolitan Transportation Authority, Transit 7/06 at 102 Aaa 1,057,620
Facilities Revenue Bonds, Series A, 6.100%,
7/01/21
2,000,000 New York City Industrial Development Agency, 1/04 at 102 A 2,083,880
Special Facility Revenue Bonds, Series 1994,
(Terminal One Group Association, L.P. Project),
6.125%, 1/01/24 (Alternative Minimum Tax)
1,500,000 The Port Authority of New York and New Jersey, 12/07 at 100 Aaa 1,519,560
Special Project Bonds, Series 6,
JFK International Air Terminal LLC Project,
5.750%, 12/01/25 (Alternative Minimum Tax)
- --------------------------------------------------------------------------------------------------------------------
Utilities -- 1.2%
1,250,000 New York State Energy Research and Development 6/02 at 102 BB+ 1,348,700
Authority, Electric Facilities Revenue Bonds,
(Long Island Lighting Company Project),
1989 Series A, 7.150%, 9/01/19
(Alternative Minimum Tax)
500,000 New York State Energy Research and Development 1/03 at 102 BB+ 536,924
Authority, Electric Facilities Revenue Bonds,
(Long Island Lighting Company Project),
1992 Series D, 6.900%, 8/01/22
(Alternative Minimum Tax)
1,000,000 Puerto Rico Electric Power Authority, Power Revenue 7/05 at 102 Baa1 997,590
Refunding Bonds, Series Z, 5.500%, 7/01/16
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water/Sewer Facilities - 1.1%
New York City, New York, Municipal Water Finance
Authority, Water and Sewer System Revenue Bonds,
Fiscal 1996 Series A:
$ 1,000,000 5.500%, 6/15/23 6/05 at 100 A2 $ 990,390
1,500,000 6.000%, 6/15/25 6/05 at 101 A2 1,561,545
- -----------------------------------------------------------------------------------------------------------------------
$ 219,245,000 Total Investments - (cost $211,403,083) - 97.4% 228,215,180
=====================--------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities - 0.8%
$ 2,000,000 The City of New York, General Obligation Bonds, Fiscal VMIG-1 2,000,000
===================== 1995 Series B, Variable Rate Demand Bonds
3.750%, 8/15/22+
----------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.8% 4,136,379
----------------------------------------------------------------------------------------------
Net Assets - 100% $234,351,559
==============================================================================================
</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. Pre-
refunded securities are normally considered to be
equivalent to AAA rated securities.
N/R - Investment is not rated.
+ The security has a maturity of more than one year,
but has variable rate and demand features which
qualify it as a short term security. The rate
disclosed is that currently in effect. This rate
changes periodically based on market conditions or
a specified market index.
See accompanying notes to financial statements.
25
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen New York Insured
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Educational Facilities - 10.1%
$ 5,000,000 Dormitory Authority of the State of New York, State 7/05 at 102 Aaa $ 4,853,350
University Dormitory Facilities, Lease Revenue
Bonds, Series 1995A, 5.300%, 7/01/24
1,265,000 Dormitory Authority of the State of New York, 12/98 at 102 Aaa 1,344,670
College and University Revenue (Pooled Capital
Program), Series 1985, 7.800%, 12/01/05
2,500,000 Dormitory Authority of the State of New York, City 7/00 at 102 Aaa 2,714,275
University System Consolidated Second General
Resolution Revenue Bonds, Series 1990C,
7.000%, 7/01/14
5,000,000 Dormitory Authority of the State of New York, New 7/01 at 102 Aaa 5,365,400
York University Insured Revenue Bonds, Series
1991, 6.250%, 7/01/09
4,640,000 Dormitory Authority of the State of New York, 7/04 at 102 Aaa 4,327,728
Mount Sinai School of Medicine, Insured
Revenue Bonds, Series 1994A, 5.000%, 7/01/21
4,000,000 Dormitory Authority of the State of New York, City 7/03 at 100 Aaa 3,756,240
University System Consolidated Revenue Bonds,
Series 1993F, 5.000%, 7/01/20
1,500,000 Dormitory Authority of the State of New York, 7/05 at 102 Aaa 1,569,030
Sarah Lawrence College, Revenue Bonds, Series
1995, 6.000%, 7/01/24
2,500,000 Dormitory Authority of the State of New York, Siena 7/07 at 102 Aaa 2,560,200
College, Insured Revenue Bonds, Series 1997,
5.750%, 7/01/26
2,000,000 New York State Authority, City University System 7/05 at 102 Aaa 1,956,060
Consolidated 3rd General Resolution Revenue
Bonds 1995-1, 5.375%, 7/01/25
1,350,000 Town of Hempstead Industrial Development Agency, 7/06 at 102 Aaa 1,404,999
Civic Facility Revenue Bonds, (Hofstra University
Project-Series 1996), 5.800%, 7/01/15
4,840,000 Nassau County Industrial Development Agency, 8/01 at 102 Aaa 5,295,831
Civic Facility Revenue Bonds, (Hofstra University
Project-Series 1991), 6.750%, 8/01/11
1,000,000 New York City Industrial Development Agency, 9/05 at 102 Aaa 1,032,240
Civic Facility Revenue Bonds, (New School For
Social Research Project), Series 1995A,
5.750%, 9/01/15
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed Bonds -- 21.5%***
$ 1,490,000 Dormitory Authority of the State of New York, Iona 7/98 at 102 Aaa $ 1,566,154
College Insured Revenue Bonds, Series 1988,
7.625%, 7/01/09 (Pre-refunded to 7/01/98)
1,200,000 Dormitory Authority of the State of New York, State 5/00 at 102 Aaa 1,315,008
University Educational Facilities, Revenue Bonds,
Series 1989B, 7.250%, 5/15/15 (Pre-refunded to
5/15/00)
1,000,000 Dormitory Authority of the State of New York, 7/00 at 102 Aaa 1,105,850
Manhattanville College, Insured Revenue Bonds,
Series 1990, 7.500%, 7/01/22 (Pre-refunded to
7/01/00)
6,295,000 Dormitory Authority of the State of New York, City 7/00 at 102 Aaa 6,961,326
University System Consolidated Second General
Resolution Revenue Bonds, Series 1990F,
7.500%, 7/01/20 (Pre-refunded to 7/01/00)
2,500,000 Dormitory Authority of the State of New York, 7/01 at 102 Aaa 2,796,800
Cooper Union, Insured Revenue Bonds, Series
1990, 7.200%, 7/01/20 (Pre-refunded to 7/01/01)
1,200,000 Dormitory Authority of the State of New York, State 5/00 at 102 Aaa 1,307,400
University Educational Facilities Revenue Bonds,
Series 1990C, 7.000%, 5/15/18 (Pre-refunded to
5/15/00)
2,000,000 Dormitory Authority of the State of New York, State 5/00 at 100 Aaa 2,117,880
University Educational Facilities, Revenue Bonds
Series 1990A, 6.500%, 5/15/19 (Pre-refunded
to 5/15/00)
1,000,000 Dormitory Authority of the State of New York, 7/00 at 102 Aaa 1,097,900
Fordham University, Insured Revenue Bonds, Series
1990, 7.200%, 7/01/15 (Pre-refunded to 7/01/00)
5,000 New York Care Facilities Finance Agency, Mental 2/02 at 102 Aaa 5,475
Health Services Facilities Improvement Revenue
Bonds, 1992 Series A, 6.375%, 8/15/17
(Pre-refunded to 2/15/02)
1,500,000 New York State Medical Care Facilities Finance 2/98 at 102 AAA 1,560,675
Agency, Hospital and Nursing Home
FHA-Insured Mortgage Revenue Bonds, 1987
Series A, 8.300%, 2/15/22 (Pre-refunded to
2/15/98)
</TABLE>
27
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen New York Insured -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed Bonds -- continued
$ 1,500,000 New York State Medical Care Facilities Finance 2/99 at 102 AA $ 1,597,110
Agency, Hospital and Nursing Home FHA-Insured
Mortgage Revenue Bonds, 1989 Series A,
7.250%, 2/15/24 (Pre-refunded to 2/15/99)
1,300,000 New York State Medical Care Facilities Finance 2/00 at 102 Aaa 1,422,564
Agency, St. Luke's-Roosevelt Hospital Center
FHA-Insured Mortgage Revenue Bonds, 1989
Series B, 7.450%, 2/15/29, (Pre-refunded to
2/15/00)
1,500,000 New York State Urban Development Corporation, 1/00 at 102 Aaa 1,630,290
Correctional Facilities Revenue Bonds, Series G,
7.250%, 1/01/14 (Pre-refunded to 1/01/00)
2,000,000 New York State Urban Development Corporation, 1/00 at 102 Aaa 2,184,760
Correctional Capital Facilities Revenue Bonds,
Series 1, 7.500%, 1/01/20 (Pre-refunded to
1/01/00)
575,000 New York State Urban Development Corporation, 1/00 at 102 Aaa 621,776
Correctional Facilities Revenue Bonds, Series G,
7.000%, 1/01/17 (Pre-refunded to 1/01/00)
1,000,000 Erie County Water Authority, (New York), Water 12/09 at 100 Aaa 1,106,430
Works System Revenue Bonds, Series 1990B,
6.750%, 12/01/14
10,340,000 Metropolitan Transportation Authority, Transit 7/02 at 102 Aaa 11,446,277
Facilities Revenue Bonds, Series J, 6.500%,
7/01/18 (Pre-refunded to 7/01/02)
Public Improvement Serial Bonds 1992, County of Monroe,
New York, General Obligation Bonds:
375,000 6.500%, 6/01/15 (Pre-refunded to 6/01/01) 6/01 at 102 Aaa 409,759
375,000 6.500%, 6/01/16 (Pre-refunded to 6/01/01) 6/01 at 102 Aaa 409,759
350,000 6.500%, 6/01/17 (Pre-refunded to 6/01/01) 6/01 at 102 Aaa 382,442
3,725,000 Montgomery, Otsego, Schoharie, Solid Waste 1/00 at 103 Aaa 4,082,414
Management Authority, Solid Waste System
Revenue Bonds, Series 1990, 7.250%, 1/01/14
(Pre-refunded to 1/01/00)
Mount Sinai Union Free School District, Suffolk
County, New York, School District (Serial) Bonds,
1989:
1,000,000 7.250%, 2/15/15 (Pre-refunded to 2/15/00) 2/00 at 102 Aaa 1,090,140
1,000,000 7.250%, 2/15/17 (Pre-refunded to 2/15/00) 2/00 at 102 Aaa 1,090,140
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------
Escrowed Bonds--continued
<S> <C> <C> <C> <C>
$ 3,000,000 The City of New York, General Obligation Bonds, 8/02 at 101 1/2 Aaa $ 3,280,110
Fiscal 1992 Series C, Fixed Rate Bonds,
Subseries C-1, 6.250%, 8/01/10 (Pre-refunded
to 8/01/02)
The City of New York General Obligation Bonds,
Fiscal 1990, Series B:
1,300,000 7.000%, 10/01/15 No Opt. Call Aaa 1,368,809
2,000,000 7.000%, 10/01/16 10/99 at 100 Aaa 2,403,680
1,025,000 7.000%, 10/01/17 No Opt. Call Aaa 1,079,253
310,000 7.000%, 10/01/18 No Opt. Call Aaa 326,408
500,000 The City of New York, General Obligation Bonds, 11/97 at 101 1/2 Aaa 511,285
Fiscal 1988 Series A, 8.250%, 11/01/02
(Pre-refunded to 11/01/97)
1,000,000 New York City Municipal Water Finance Authority, 6/00 at 101 1/2 Aaa 1,093,590
Water and Sewer System Revenue Bonds, Fiscal
1991 Series A, 7.250%, 6/15/15 (Pre-refunded to
6/15/00)
2,000,000 New York City, Municipal Water Finance Authority, 6/01 at 101 Aaa 2,187,080
Water and Sewer Revenue Bonds, Fiscal 1992
Series A, 6.750%, 6/15/16 (Pre-refunded to
6/15/01)
1,000,000 New York City Transit Authority, Transit Facilities 1/00 at 102 Aaa 1,092,380
Revenue Bonds, Series 1990 (Livingston Plaza
Project), 7.500%, 1/01/20 (Pre-refunded to
1/01/00)
2,200,000 The Trust for Cultural Resources of The City of New 4/01 at 102 Aaa 2,428,338
York, Revenue Refunding Bonds, Series 1991A,
(The American Museum of Natural History),
6.900%, 4/01/21 (Pre-refunded to 4/01/01)
5,725,000 Niagara Falls Bridge Commission, Toll Bridge 10/02 at 102 Aaa 6,263,780
System Revenue Bonds, Series 1992, 6.125%,
10/01/19 (Pre-refunded to 10/01/02)
Town of North Hampstead, Nassau County, New
York, Public Improvement (Serial) Bonds, 1991
Series B, Unlimited Tax:
425,000 6.800%, 6/01/10 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 461,304
425,000 6.800%, 6/01/11 (Pre-refunded to 6/01/00) 6/00 at 102 Aaa 461,304
</TABLE>
29
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen New York Insured - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed Bonds -- continued
$ 1,000,000 County of Suffolk, New York, General Obligation 4/00 at 102 Aaa $1,084,960
Refunding (Serial) Bonds, Public Improvement
Refunding Bonds, 1993 Series B, 6.900%,
4/01/01 (Pre-refunded to 4/01/00)
2,000,000 Triborough Bridge and Tunnel Authority, General 1/01 at 102 Aaa 2,205,780
Purpose Revenue Bonds, Series T, 7.000%, 1/01/20
(Pre-refunded to 1/01/01)
1,175,000 Triborough Bridge and Tunnel Authority, General 1/01 at 101 1/2 Aaa 1,290,785
Purpose Revenue Bonds, Series S, 7.000%,
1/01/21 (Pre-refunded to 1/01/01)
1,750,000 City of Yonkers, New York, General Obligation 12/00 at 102 Aaa 1,949,255
School Bonds-1990-C, 7.375%, 12/01/09
(Pre-refunded to 12/01/00)
- --------------------------------------------------------------------------------------------------------------------
General Obligation Bonds -- 13.6%
2,370,000 New York State Dormitory Authority, Mental Health 2/06 at 102 Aaa 2,268,635
Services Facilities Improvement Revenue Bonds,
Series 1996-C, 5.125%, 2/15/21
6,145,000 New York Medical Care Facilities Finance Agency, 12/02 at 102 Aaa 6,634,019
Mental Health Services Facilities Improvement
Revenue Bonds, 1992 Series A, 6.375%, 8/15/17
4,765,000 New York State Medical Care Facilities Finance 2/99 at 100 Aaa 4,872,355
Agency, Secured Hospital Revenue Bonds, 1987
Series A, 7.100%, 2/15/27
2,815,000 New York State Medical Care Facilities Finance 2/02 at 102 Aaa 2,962,759
Agency, Mental Health Services Facilities
Improvement Revenue Bonds, 1992 Series B,
6.250%, 8/15/18
1,000,000 New York State Medical Care Facilities Finance 8/04 at 102 Aaa 1,049,510
Agency, Mental Health Services Facilities
Improvement Revenue Bonds, 1994 Series D,
6.150%, 2/15/15
2,000,000 New York Medical Care Facilities Finance Agency, 2/04 at 102 Aaa 1,922,800
Mental Health Services Facilities Improvement
Revenue Bonds, 1993 Series F Refunding,
5.250%, 2/15/19
1,000,000 City of Buffalo, New York, Refunding Serial 1/01 at 101 Aaa 1,058,060
Bonds-1991, 6.150%, 2/01/04
</TABLE>
30
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Obligation Bonds -- continued
Camden Central School District, Oneida County, New York,
School District (Serial) Bonds, 1991:
$ 500,000 7.100%, 6/15/07 No Opt. Call Aaa $ 590,780
600,000 7.100%, 6/15/08 No Opt. Call Aaa 714,582
600,000 7.100%, 6/15/09 No Opt. Call Aaa 718,920
275,000 7.100%, 6/15/10 No Opt. Call Aaa 330,811
500,000 Greece Central School District, Monroe County No Opt. Call Aaa 550,200
New York, General Obligation Bonds, School
District (Serial) Bonds, 1992, 6.000%, 6/15/09
Town of Halfmoon, Saratoga County, New York,
Public Improvement (Serial) Bonds, 1991:
385,000 6.500%, 6/01/09 No Opt. Call Aaa 442,496
395,000 6.500%, 6/01/10 No Opt. Call Aaa 454,384
395,000 6.500%, 6/01/11 No Opt. Call Aaa 455,522
Middle County Central School, District at
Center each in the Town of Brookhaven, Suffolk Co.,
N.Y., School District (Serial) Bonds, 1991:
475,000 6.900%, 12/15/07 No Opt. Call Aaa 562,462
475,000 6.900%, 12/15/08 No Opt. Call Aaa 563,887
Mount Sinai Union Free School District, County of
Suffolk, New York, School District Refunding
(Serial) Bonds, 1992:
500,000 6.200%, 2/15/15 No Opt. Call Aaa 557,210
1,035,000 6.200%, 2/15/16 No Opt. Call Aaa 1,152,266
1,500,000 County of Nassau, New York, General Obligation
Serial Bonds, Serial General Improvement Bonds,
Series O, 5.700%, 8/01/13 8/04 at 103 Aaa 1,571,190
1,020,000 City of New Rochelle, Westchester County, New 8/04 at 102 Aaa 1,095,317
York, General Obligations, Public Improvement
Bonds, 1994 Series B, 6.200%, 8/15/22
1,000,000 The City of New York, General Obligation Bonds, 8/02 at 101 1/2 Aaa 1,072,910
Fiscal 1992 Series C, Fixed Rate Bonds,
Subseries C-1, 6.250%, 8/01/10
75,000 The City of New York, General Obligation Bonds, 8/02 at 101 1/2 Aaa 82,240
Fiscal 1992 Series C, 6.625%, 8/01/12
2,520,000 The City of New York, General Obligation Bonds, 5/03 at 101 1/2 Aaa 2,597,213
Fiscal 1993 Series E, 5.750%, 5/15/12
1,590,000 City of Niagara Falls, Niagara County, New York, 3/04 at 102 Aaa 1,791,374
Public Improvement (Serial) Bonds, 1994,
6.900%, 3/01/21
</TABLE>
31
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen New York Insured - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Obligation Bonds -- continued
Town of North Hempstead, Nassau County, New
York, General Obligation Refunding Serial Bonds,
Refunding Serial Bonds-1992, Series B:
$ 1,500,000 6.375%, 4/01/09 No Opt. Call Aaa $1,698,045
1,505,000 6.400%, 4/01/14 No Opt. Call Aaa 1,713,969
NAYACK Union Free School District, Rockland County, New
York, School District Serial Bonds 1992:
625,000 6.500%, 4/01/12 4/02 at 102 Aaa 681,563
625,000 6.500%, 4/01/13 4/02 at 102 Aaa 681,563
625,000 6.500%, 4/01/14 4/02 at 102 Aaa 681,563
Rensselaer County, New York, General Obligation Serial
Bonds, Series 1991:
960,000 6.700%, 2/15/13 No Opt. Call Aaa 1,123,459
960,000 6.700%, 2/15/14 No Opt. Call Aaa 1,124,381
960,000 6.700%, 2/15/15 No Opt. Call Aaa 1,124,506
Rondout Valley Central School District at Accord, Ulster
County, New York, General Obligation, School District
(Serial) Bonds, 1991:
550,000 6.800%, 6/15/06 No Opt. Call Aaa 632,368
550,000 6.850%, 6/15/07 No Opt. Call Aaa 639,573
550,000 6.850%, 6/15/08 No Opt. Call Aaa 643,566
550,000 6.850%, 6/15/09 No Opt. Call Aaa 646,784
550,000 6.850%, 6/15/10 No Opt. Call Aaa 648,698
600,000 County of Suffolk, New York, General Obligation 5/03 at 102 Aaa 636,156
Refunding (Serial) Bonds, Public Improvement
Refunding Bonds, 1993 Series B, 6.150%,
5/01/10
- --------------------------------------------------------------------------------------------------------------------
Health Care Facilities -- 19.7%
1,490,000 Dormitory Authority of the State of New York, 2/00 at 102 AAA 1,590,009
United Health Services, Inc., FHA-Insured
Mortgage Revenue Bonds, Series 1989, 7.350%,
8/01/29
1,000,000 Dormitory Authority of the State of New York, 7/02 at 102 Aaa 1,073,390
United Cerebral Palsy Association of Westchester
County, Inc., Insured Revenue Bonds, Series 1992,
6.200%, 7/01/12
6,460,000 Dormitory Authority of the State of New York, 8/05 at 102 Aaa 6,596,435
St. Vincent's Hospital and Medical Center of New
York, FHA-Insured Mortgage Revenue Bonds,
Series 1995, 5.800%, 8/01/25
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care Facilities -- continued
$ 3,730,000 Dormitory Authority of the State of New York, 2/06 at 102 Aaa $3,797,103
Maimonides Medical Center, FHA - Insured
Mortgage Hospital Revenue Bonds, Series
1996A, 5.750%, 8/01/24
3,000,000 Dormitory Authority of the State of New York, 8/04 at 105 Aaa 2,951,940
Millard Fillmore Hospitals, FHA-Insured
Mortgage Hospital Revenue Bonds, Series 1997,
5.375%, 2/01/17
995,000 New York State Medical Care Facilities Finance 8/98 at 102 AAA 1,053,725
Agency, Albany Medical Center Hospital Project
Revenue Bonds, 1987 Series A, 8.000%, 2/15/28
895,000 New York State Medical Care Facilities Finance 11/98 at 102 Aaa 947,107
Agency, St. Francis Hospital Project Revenue
Bonds, 1988 Series A, 7.625%, 11/01/21
1,960,000 New York State Medical Care Facilities Finance 8/99 at 102 AA 2,079,697
Agency, Hospital and Nursing Home Mortgage
Revenue Bonds, 1989 Series B, 7.350%, 2/15/29
3,200,000 New York State Medical Care Facilities Finance 11/00 at 102 Aaa 3,508,064
Agency, North Shore University Hospital,
Mortgage Project Revenue Bonds, 1990 Series A,
7.200%, 11/01/20
2,000,000 New York State Medical Care Facilities Finance 2/99 at 102 Aaa 2,117,580
Agency, Hospital and Nursing Home FHA-Insured
Mortgage Revenue Bonds, 1989 Series A,
7.250%, 2/15/24
1,670,000 New York State Medical Care Facilities Finance 11/01 at 102 Aaa 1,824,542
Agency, Our Lady of Victory Hospital Project
Revenue Bonds, 1991 Series A, 6.625%,
11/01/16
New York State Medical Care Facilities Finance
Agency, Sisters of Charity Hospital of Buffalo Project
Revenue Bonds, 1991 Series A:
500,000 6.600%, 11/01/10 11/01 at 102 Aaa 545,800
1,550,000 6.625%, 11/01/18 11/01 at 102 Aaa 1,693,437
1,000,000 New York State Medical Care Facilities Finance 11/01 at 102 Aaa 1,085,660
Agency, Aurelia Osborn Fox Memorial Hospital
Project Revenue Bonds, 1992 Series A, 6.500%,
11/01/19
</TABLE>
33
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen New York Insured - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care Facilities -- continued
$ 3,000,000 New York State Medical Care Facilities Finance 11/02 at 102 Aaa $ 3,166,860
Agency, South Nassau Communities Hospital
Project Revenue Bonds, 1992 Series A, 6.125%,
11/01/11
2,500,000 New York State Medical Care Facilities Finance 11/03 at 102 Aaa 2,652,550
Agency, St. Mary's Hospital (Rochester) Mortgage
Project Revenue Bonds, 1994 Series A Refunding,
6.200%, 11/01/14
7,000,000 New York State Medical Care Facilities Finance 2/05 at 102 Aaa 7,817,530
Agency, New York Hospital FHA-Insured
Mortgage Revenue Bonds, 1994 Series A
(AMBAC Insured Series), 6.800%, 8/15/24
7,890,000 New York State Medical Care Facilities Finance Agency, 2/05 at 102 Aaa 8,098,138
Montefiore Medical Center FHA-Insured
Mortgage Revenue Bonds, 1995 Series A,
5.750%, 2/15/15
New York City Health and Hospitals Corporation,
Health System Bonds, 1993 Series A:
2,500,000 5.625%, 2/15/13 2/03 at 102 Aaa 2,544,550
14,980,000 5.750%, 2/15/22 2/03 at 102 Aaa 5,187,922
- --------------------------------------------------------------------------------------------------------------------
Housing Facilities -- 10.2%
New York State Finance Agency, Housing Project
Mortgage Revenue Bonds, 1996 Series A Refunding:
5,750,000 6.100%, 11/01/15 5/06 at 102 Aaa 6,010,993
5,000,000 6.125%, 11/01/20 5/06 at 102 Aaa 5,196,050
645,000 New York State Housing Finance Agency, 11/99 at 102 Aaa 680,320
Multi-Family Housing Revenue Bonds, (AMBAC
Insured Programs), 1989 Series A, 7.450%,
11/02/28
New York State Urban Development Corporation,
Section 236 Revenue Bonds, Series 1992A:
3,850,000 6.700%, 1/01/12 1/02 at 102 Aaa 4,214,865
9,650,000 6.750%, 1/01/26 1/02 at 102 Aaa 10,583,348
60,000 State of New York Mortgage Agency, Mortgage 1/98 at 102 Aa 60,526
Revenue Bonds, Eighth Series D, 8.375%, 10/01/17
390,000 State of New York Mortgage Agency, Mortgage 4/98 at 102 Aa 401,747
Revenue Bonds, Ninth Series E, 8.100%, 10/01/17
3,500,000 State of New York Mortgage Agency, Homeowner 10/03 at 102 Aaa 3,568,040
Mortgage Revenue Bonds, Series 29-C-1,
5.650%, 4/01/15
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing Facilities -- continued
$ 5,000,000 Pass-Through Certificates of New York City HDC 11/03 at 100 Aaa $ 5,927,050
Multi-family Housing, Limited Obligation Bonds,
Series 1991A, 6.500%, 2/20/19
- --------------------------------------------------------------------------------------------------------------------
Lease Rental -- 2.1%
4,000,000 New York State Urban Development Corporation 4/06 at 102 Aaa 3,989,760
Revenue Bonds, (Sports Facility Assistance
Program), 1996 Series A, 5.500%, 4/01/19
2,500,000 Battery Park City Authority, Senior Revenue 11/03 at 102 Aaa 2,418,275
Refunding Bonds, Series 1993A, 5.250%, 11/01/17
1,000,000 Metropolitan Transportation Authority, Transit 7/98 at 102 Aaa 1,046,490
Facilities Service Contract Bonds, Series L,
7.500%, 7/01/17
- --------------------------------------------------------------------------------------------------------------------
Other Revenue -- 4.9%
3,280,000 New York Local Government Assistance Corporation, 4/04 at 100 Aaa 3,064,570
Series 1993B, Refunding Bonds, 5.000%, 4/01/23
3,000,000 New York Local Government Assistance Corporation (A 4/03 at 102 Aaa 2,810,490
Public Benefit Corporation of the State of New York),
Series 1993C Refunding Bonds, 5.000%, 4/01/21
1,000,000 New York City Industrial Development Agency, Civic 11/04 at 102 Aaa 1,093,750
Facility Revenue Bonds, (USTA National Tennis
Center Incorporated Project), 6.375%, 11/15/14
1,145,000 New York City Industrial Development Agency, Civic 6/07 at 102 Aaa 1,158,271
Facility Revenue Bonds, (Anti-Defamation League
Foundation Project) Series 1997A, 5.600%, 6/01/17
8,650,000 Triborough Bridge and Tunnel Authority, Special 1/01 at 102 Aaa 9,409,038
Obligation Refunding Bonds, Series 1991B,
6.875%, 1/01/15
- --------------------------------------------------------------------------------------------------------------------
Pollution Control Facilities -- 0.8%
2,500,000 New York State Energy Research and Development 10/99 at 103 Aaa 2,713,874
Authority, Pollution Control Revenue Bonds (Central
Hudson Gas & Electric Corporation Project), 1984
Series B, 7.375%, 10/01/14
- --------------------------------------------------------------------------------------------------------------------
Transportation -- 6.7%
7,300,000 New York State Thruway Authority, General Revenue 1/02 at 102 Aaa 7,407,674
Bonds, Series A, 5.750%, 1/01/19
2,250,000 Buffalo and Fort Erie Public Bridge Authority, Toll 1/05 at 101 Aaa 2,295,404
Bridge System Revenue Bonds, Series 1995,
5.750%, 1/01/25
</TABLE>
35
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen New York Insured - continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Transportation -- continued
$ 4,000,000 Metropolitan Transportation Authority, Commuter 7/05 at 101 Aaa $ 4,063,480
Facilities Subordinated Revenue Bonds, Series
1995-1, (Grand Central Terminal Redevelopment
Project), 5.700%, 7/01/24
3,000,000 Metropolitan Transportation Authority, Commuter 7/07 at 101 1/2 Aaa 3,072,240
Facilities Revenue Bonds, Series 1997A,
5.750%, 7/01/21
1,160,000 Metropolitan Transportation Authority, Commuter 7/07 at 101 Aaa 1,135,442
Facilities Revenue Bonds, Series 1997C,
5.375%, 7/01/27
3,000,000 The Port Authority of New York and New Jersey, 12/07 at 100 Aaa 3,039,120
Special Project Bonds, Series 6, JFK
International Air Terminal LLC Project,
5.750%, 12/01/25 (Alternative Minimum Tax)
2,750,000 Triborough Bridge and Tunnel Authority, 1/02 at 101 1/2 Aaa 2,978,002
General Purpose Revenue Bonds, Series X,
6.500%, 1/01/19
- --------------------------------------------------------------------------------------------------------------------
Utilities -- 1.0%
1,500,000 New York State Energy Research and Development 1/06 at 102 Aaa 1,494,014
Authority, Gas Facilities Revenue Bonds, 1996
Series (The Brooklyn Union Gas Company
Project), 5.500%, 1/01/21
2,000,000 Power Authority of the State of New York, General 1/02 at 102 Aaa 2,174,000
Purpose Bonds, Series Z, 6.500%, 1/01/19
- --------------------------------------------------------------------------------------------------------------------
Water/Sewer Facilities -- 8.6%
1,450,000 New York State Environmental Facilities 6/00 at 102 Aaa 1,568,334
Corporation, State Water Pollution Control,
Revolving Fund Revenue Bonds, Series 1990 C,
(Pooled Loan Issue), 7.200%, 3/15/11
280,000 Albany, New York, Municipal Water Finance 12/98 at 102 Aaa 296,617
Authority, Water and Sewer System Revenue Bonds,
Series 1988A, 7.500%, 12/01/17
8,385,000 Buffalo Municipal Water Finance Authority, Water 7/03 at 102 Aaa 8,532,323
System Revenue Bonds, Series 1992,
5.750%, 7/01/19
1,250,000 New York City Municipal Water Finance Authority, 6/01 at 101 Aaa 1,354,362
Water and Sewer System Revenue Bonds, Fiscal
1992 Series A, 6.750%, 6/15/16
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION> Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water/Sewer Facilities -- continued
New York City Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, Fiscal 1993
Series A:
$ 2,765,000 5.750%, 6/15/18 6/02 at 101 1/2 Aaa $ 2,825,470
4,650,000 5.500%, 6/15/20 6/02 at 100 Aaa 4,631,632
7,000,000 New York City Municipal Water Finance Authority, 6/06 at 101 Aaa 7,146,440
Water and Sewer System Revenue Bonds, Fiscal
1996 Series B, 5.750%, 6/15/26
1,000,000 Suffolk County Industrial Development Agency, 2/04 at 101 Aaa 964,070
(Suffolk Country, New York), Suffolk County
Southwest Sewer System Revenue Bonds, Series
1994, 4.750%, 2/01/09
3,700,000 Suffolk County Water Authority, New York, Water 6/03 at 102 Aaa 3,516,962
System Revenue Bonds, Series 1994, 5.000%, 6/01/17
- --------------------------------------------------------------------------------------------------------------------
$ 336,385,000 Total Investments -- (cost $329,404,974) -- 99.2% 354,899,631
- --------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities -- 0.7%
700,000 The City of New York, General Obligation Bonds, VMIG-1 700,000
Fiscal 1995 Series B, Variable Rate Demand Bonds,
3.750%, 8/15/22+
2,000,000 Dormitory Authority of the State of New York, Cornell VMIG-1 2,000,000
University Revenue Bonds, Series 1990B, Variable
Rate Demand Bonds, 3.650%, 7/01/25+
- --------------------------------------------------------------------------------------------------------------------
$ 2,700,000 Total Temporary Investments -- 0.7% 2,700,000
=========================-------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.1% 334,673
-------------------------------------------------------------------------------------------
Net Assets -- 100% $357,934,304
===========================================================================================
All of the bonds in the portfolio, excluding temporary investments in short-term municipal
securities, are either covered by Original Issue Insurance, Secondary Market Insurance or
Portfolio Insurance, or are backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities, any of which ensure the timely payment of
principal and interest.
* 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.
+ The security has a maturity of more than one year, but has a variable rate and demand
features which qualify it as a short-term security. The rate disclosed is that
currently in effect. This rate changes periodically based on market conditions or a
specified market index.
</TABLE>
37 See accompanying notes to financial statements.
<PAGE>
Statement of Net Assets (Unaudited)
August 31, 1997
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen New York
New York Insured
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $ 228,215,180 $ 354,899,631
Temporary investments in short-term municipal securities, at
amortized cost, which approximates market value (note 1) 2,000,000 2,700,000
Cash 1,403,237 --
Receivables:
Interest 2,979,706 4,064,457
Investments sold 2,101,165 1,531,165
Shares sold 211,344 29,037
Other assets 1,759 109,605
- ------------------------------------------------------------------------------------------------------------
Total assets 236,912,391 363,333,895
- ------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 1,874,022
Payables:
Investments purchased 1,720,472 1,966,254
Shares redeemed 69,697 253,651
Accrued expenses:
Management fees (note 6) 90,012 163,953
12b-1 distribution and service fees (notes 1 and 6) 16,808 10,039
Other 34,579 61,767
Dividends payable 629,264 1,069,905
- ------------------------------------------------------------------------------------------------------------
Total liabilities 2,560,832 5,399,591
- ------------------------------------------------------------------------------------------------------------
Net assets (note 7) $ 234,351,559 $ 357,934,304
============================================================================================================
Class A Shares (note 1)
Net assets $ 72,922,819 $ 40,081,236
Shares outstanding 6,789,898 3,792,074
Net asset value and redemption price per share $ 10.74 $ 10.57
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 11.21 $ 11.03
============================================================================================================
Class B Shares (note 1)
Net assets $ 1,631,530 $ 2,470,999
Shares outstanding 151,766 233,709
Net asset value, offering and redemption price per share $ 10.75 $ 10.57
============================================================================================================
Class C Shares (note 1)
Net assets $ 5,230,165 $ 2,293,965
Shares outstanding 485,511 217,277
Net asset value, offering and redemption price per share $ 10.77 $ 10.56
============================================================================================================
Class R Shares (note 1)
Net assets $ 154,567,045 $ 313,088,104
Shares outstanding 14,353,551 29,622,312
Net asset value, offering and redemption price per share $ 10.77 $ 10.57
============================================================================================================
See accompanying notes to financial statements.
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations (Unaudited) Nuveen Municipal Bond Funds
Six months ended August 31, 1997 August 31, 1997 Semiannual Report
Nuveen Flagship Nuveen New York
New York Insured
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Tax-exempt interest income (note 1) $ 7,060,755 $10,560,826
- ---------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 628,955 964,705
12b-1 service fees -- Class A (notes 1 and 6) 72,395 38,196
12b-1 distribution and service fees -- Class B (notes 1 and 6) 4,041 9,137
12b-1 distribution and service fees -- Class C (notes 1 and 6) 16,859 8,200
Shareholders' servicing agent fees and expenses 74,632 119,992
Custodian's fees and expenses 31,695 36,739
Trustees' fees and expenses (note 6) 2,234 3,528
Professional fees 8,017 8,254
Shareholders' reports -- printing and mailing expenses 41,659 41,294
Federal and state registration fees 787 630
Portfolio insurance expense -- 5,411
Other expenses 5,171 13,313
- ---------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 886,445 1,249,399
Expense reimbursement (note 6) (114,927) --
- ---------------------------------------------------------------------------------------------------------
Net expenses 771,518 1,249,399
- ---------------------------------------------------------------------------------------------------------
Net investment income 6,289,237 9,311,427
- ---------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions
(notes 1 and 4) 214,949 (146,664)
Net change in unrealized appreciation or depreciation
of investments 4,397,765 2,614,543
- ---------------------------------------------------------------------------------------------------------
Net gain from investments 4,612,714 2,467,879
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $10,901,951 $11,779,306
=========================================================================================================
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (Unaudited)
Nuveen Flagship Nuveen
New York New York Insured
-----------------------------------------------------------------------------
Six months ended Year ended Six months ended Year ended
8/31/97 2/28/97* 8/31/97 2/28/97
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 6,289,237 $ 9,771,158 $ 9,311,427 $ 18,870,727
Net realized gain (loss) from investment
transactions (notes 1 and 4) 214,949 (1,010,261) (146,664) (1,461,177)
Net change in unrealized appreciation or
depreciation of investments 4,397,765 692,933 2,614,543 (2,674,004)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 10,901,951 9,453,830 11,779,306 14,735,546
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,933,457) (1,237,906) (959,121) (1,495,702)
Class B (18,266) (239) (40,294) (4,068)
Class C (106,560) (45,573) (48,793) (88,657)
Class R (4,229,986) (8,581,033) (8,250,729) (17,106,737)
From accumulated net realized gains
from investment transactions:
Class A -- (75,072) -- --
Class B -- -- -- --
Class C -- (3,076) -- --
Class R -- (571,338) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions
to shareholders (6,288,269) (10,514,237) (9,298,937) (18,695,164)
- ------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the
reorganization of Flagship New York (note 1) -- 52,756,095 -- --
Net proceeds from sale of shares 13,044,629 17,906,845 13,511,125 27,322,062
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 3,835,703 7,344,275 6,523,627 13,233,860
- ------------------------------------------------------------------------------------------------------------------------------
16,880,332 78,007,215 20,034,752 40,555,922
- ------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (15,504,621) (19,737,885) (23,039,532) (47,601,839)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions 1,375,711 58,269,330 (3,004,780) (7,045,917)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 5,989,393 57,208,923 (524,411) (11,005,535)
Net assets at the beginning of period 228,362,166 171,153,243 358,458,715 369,464,250
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $ 234,351,559 $ 228,362,166 $ 357,934,304 $ 358,458,715
- ------------------------------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income
at end of period $ 34,193 $ 33,225 $ 247,501 $ 235,011
==============================================================================================================================
* Information represents 11 months of Nuveen New York and one month of Nuveen
Flagship New York (see note 1 of the Notes to Financial Statements).
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
Notes to Financial Statements (Unaudited) Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust II (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship New York Municipal Bond Fund ("Nuveen
Flagship New York") and the Nuveen New York Insured Municipal Bond Fund ("Nuveen
New York Insured") (collectively, 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, Nuveen New York Tax-Free Value
Fund ("Nuveen New York") and Flagship New York Tax-Exempt Fund ("Flagship New
York") reorganized into Nuveen Flagship New York. Nuveen New York Insured Tax-
Free Value Fund was reorganized into the Trust and renamed Nuveen New York
Insured Municipal Bond Fund. Prior to these reorganizations, Nuveen New York was
a series of the Nuveen Tax-Free Bond Fund, Inc., Flagship New York was a sub-
trust of Flagship Tax Exempt Funds Trust, and Nuveen New York Insured Tax-Free
Value Fund was a series of Nuveen Insured Tax-Free Bond Fund, Inc., each an
open-end management investment company.
Each Fund seeks 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 and supervised 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 their when-issued and delayed delivery purchase commitments. At
August 31, 1997, the Funds had no such outstanding purchase commitments.
41
<PAGE>
Note 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 carryovers.
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, each Fund intends to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and New York 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.
Insurance
Nuveen New York Insured invests in municipal securities which are either covered
by insurance or backed by an escrow or trust account containing sufficient U.S.
Government or U.S. Government agency securities, both of which ensure the timely
payment of principal and interest. Each insured municipal security is covered by
Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance.
Such insurance does not guarantee the market value of the municipal securities
or the value of the Fund's shares. Original Issue Insurance and Secondary Market
Insurance remain in effect as long as the municipal securities covered thereby
remain outstanding and the insurer remains in business, regardless of whether
the Fund ultimately disposes of such municipal securities. Consequently, the
market value of the municipal securities covered by Original Issue Insurance or
Secondary Market Insurance may reflect value attributable to the insurance.
Portfolio Insurance is effective only while the municipal securities are held by
the Fund. Accordingly, neither the prices used in determining the market value
of the underlying municipal securities nor the net asset value of the Fund's
shares include value, if any, attributable to the Portfolio Insurance. Each
policy
42
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
of the Portfolio Insurance does, however, give the Fund the right to obtain
permanent insurance with respect to the municipal security covered by the
Portfolio Insurance policy at the time of its sale.
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Funds are authorized to invest in such
financial instruments, and may do so in the future, they did not make any such
investments during the six months year ended August 31, 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.
43
<PAGE>
Notes to Financial Statements (Unaudited) - continued
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship New York
--------------------------------------------------------------------
Six months ended Year ended
8/31/97 2/28/97*
--------------------------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 514,451 $ 5,423,903 800,235 $ 8,359,824
Class B 139,696 1,473,464 12,680 134,014
Class C 133,882 1,422,917 98,523 1,037,778
Class R 444,163 4,724,345 801,691 8,375,229
Shares issued in the reorganization
of Flagship New York:
Class A -- -- 4,801,915 50,302,455
Class B -- -- -- --
Class C -- -- 233,553 2,453,640
Class R -- -- -- --
Shares issued to shareholders due
to reinvestment of distributions:
Class A 74,988 790,824 65,006 681,196
Class B 501 5,341 -- --
Class C 4,121 43,643 2,391 25,145
Class R 283,418 2,995,895 632,056 6,637,934
- --------------------------------------------------------------------------------------------------------------
1,595,220 16,880,332 7,448,050 78,007,215
- --------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (607,517) (6,404,095) (342,219) (3,580,581)
Class B (168) (1,771) (943) (9,996)
Class C (27,999) (296,719) (19,687) (205,801)
Class R (831,504) (8,802,036) (1,525,270) (15,941,507)
- --------------------------------------------------------------------------------------------------------------
(1,467,188) (15,504,621) (1,888,119) (19,737,885)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) 128,032 $ 1,375,711 5,559,931 $ 58,269,330
==============================================================================================================
*Information represents 11 months of Nuveen New York and one month of Nuveen Flagship New York (see note 1).
</TABLE>
44
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Nuveen New York Insured
--------------------------------------------------------------------
Six months ended Year ended
8/31/97 2/28/97
--------------------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 684,793 $ 7,175,608 1,504,805 $ 15,621,977
Class B 116,730 1,222,021 121,801 1,283,684
Class C 28,685 298,654 132,904 1,375,391
Class R 459,277 4,814,842 871,126 9,041,010
Shares issued to shareholders due
to reinvestment of distributions:
Class A 60,303 630,693 100,648 1,049,380
Class B 467 4,904 -- --
Class C 3,588 37,493 6,232 64,963
Class R 559,578 5,850,537 1,163,086 12,119,517
- -----------------------------------------------------------------------------------------------------------------
1,913,421 20,034,752 3,900,602 40,555,922
- -----------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (378,510) (3,942,269) (512,407) (5,315,448)
Class B (5,289) (55,905) -- --
Class C (7,219) (75,840) (76,002) (797,045)
Class R (1,813,322) (18,965,518) (3,991,732) (41,489,346)
- -----------------------------------------------------------------------------------------------------------------
(2,204,340) (23,039,532) (4,580,141) (47,601,839)
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) (290,919) $ (3,004,780) (679,539) $ (7,045,917)
=================================================================================================================
</TABLE>
3. Distribution to Shareholders
On September 9, 1997, the Funds declared dividend distributions from their tax-
exempt net investment income which were paid on October 1, 1997, to shareholders
of record on September 9, 1997, as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen
New York New York Insured
- -------------------------------------------------------------------------------
<S> <C> <C>
Dividend per share:
Class A $.0475 $.0445
Class B .0405 .0380
Class C .0425 .0395
Class R .0490 .0460
===============================================================================
</TABLE>
45
<PAGE>
Notes to Financial Statements (Unaudited) - continued
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the six mon ths ended August
31, 1997, were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship New York Nuveen New York Insured
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchases
Investments in municipal securities $45,722,603 $36,759,327
Temporary municipal investments 15,000,000 17,900,000
Sales
Investments in municipal securities 48,802,624 37,537,574
Temporary municipal investments 13,000,000 16,800,000
================================================================================================
</TABLE>
At August 31, 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 February 28, 1997, the Funds' last fiscal year end, the Funds had unused
capital loss carryforwards available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, the carryovers
will expire as follows:
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen
New York* New York Insured
- -------------------------------------------------------------------
<S> <C> <C>
Expiration year:
2004 $1,895,237 $ --
2005 -- 1,543,769
- -------------------------------------------------------------------
Total $1,895,237 $1,543,769
===================================================================
</TABLE>
* Due to the reorganization of Nuveen New York and Flagship New York (note 1),
Nuveen New York and Flagship New York had net realized losses from investment
transactions of $1,010,262 and $884,975, respectively, which were carried
forward by Nuveen Flagship New York, as permitted under applicable tax
regulations.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at August 31, 1997, were as follows:
<TABLE>
<CAPTION>
Nuveen Flagship New York Nuveen New York Insured
- -------------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $16,814,027 $25,520,219
depreciation (1,930) (25,562)
- -------------------------------------------------------------------------------
Net unrealized appreciation $16,812,097 $25,494,657
===============================================================================
</TABLE>
46
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
6. Management Fee and Other Transactions with Affiliates
Under the Trusts' investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
Average daily net asset value Management fee
- --------------------------------------------------------------------------------
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
- --------------------------------------------------------------------------------
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to 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 each Fund in order to limit total expenses to .75 of 1% of the
average daily net asset value of Nuveen Flagship New York and .975 of 1% of the
average daily net asset value of Nuveen New York Insured, excluding any 12b-1
fees applicable to Class A, B and C Shares. The Adviser may voluntarily
reimburse additional expenses from time to time, which may be terminated at any
time at its discretion.
During the six months ended August 31, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $117,100 and $139,200
for Nuveen Flagship New York and Nuveen New York Insured, respectively, of which
approximately $94,700 and $108,100, 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 August 31, 1997, the Distributor compensated
authorized dealers directly with approximately $63,800 and $52,100 in
commission advances at the time of purchase for Nuveen Flagship New York and
Nuveen New York Insured, respectively. 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 August 31, 1997, the Distributor retained approximately $16,900 and
$12,800 in such 12b-1 fees for Nuveen Flagship New York and Nuveen New York
Insured, respectively. The remaining 12b-1 fees charged to the Funds were paid
to compensate authorized dealers for providing services to shareholders relating
to their investments. The Distributor also collected and retained approximately
$2,600 and $2,900 of CDSC on share redemptions for Nuveen Flagship New York and
Nuveen New York Insured, respectively, during the six months ended August 31,
1997.
47
<PAGE>
Notes to Financial Statements (Unaudited) - continued
7. Composition of Net Assets
At August 31, 1997, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Nuveen Flagship New York Nuveen New York Insured
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in $219,185,598 $333,882,579
Balance of undistributed net
investment income 34,193 247,501
Accumulated net realized gain (loss)
from investment transactions (1,680,329) (1,690,433)
Net unrealized appreciation
of investments 16,812,097 25,494,657
- ---------------------------------------------------------------------------------------------
Net assets $234,351,559 $357,934,304
=============================================================================================
</TABLE>
48
<PAGE>
Financial Highlights
49
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding is as follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
------------------------- --------------------------
Net
Nuveen Flagship New York** Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
beginning investment from investment from capital end of asset
Year ending February 28/29, of period income(b) investments income gains period value(a)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1998 (h) $10.53 $.28 $ .21 $ (.28) $ -- $ 10.74 4.77%
1997 (c) 10.61 .59 (.07) (.56) (.04) 10.53 5.07
1996 10.12 .56 .48 (.55) -- 10.61 10.52
1995 (d) 10.23 .28 (.07) (.27) (.05) 10.12 2.21
Class B (2/97)
1998 (h) 10.53 .24 .22 (.24) -- 10.75 4.47
1997 (g) 10.48 .05 .04 (.04) -- 10.53 .87
Class C (9/94)
1998 (h) 10.56 .25 .22 (.26) -- 10.77 4.47
1997 (c) 10.64 .55 (.11) (.48) (.04) 10.56 4.31
1996 10.11 .48 .53 (.48) -- 10.64 10.13
1995 (d) 10.11 .23 .04 (.22) (.05) 10.11 2.80
Class R (12/86)
1998 (h) 10.55 .29 .22 (.29) -- 10.77 4.95
1997 (c) 10.64 .59 (.05) (.59) (.04) 10.55 5.26
1996 10.15 .58 .49 (.58) -- 10.64 10.80
1995 10.72 .58 (.53) (.57) (.05) 10.15 .75
1994 10.61 .58 .16 (.58) (.05) 10.72 7.10
1993 9.88 .60 .81 (.60) (.08) 10.61 14.79
1992 (e) 9.82 .16 .06 (.16) -- 9.88 2.21
1991 (f) 9.38 .63 .44 (.63) -- 9.82 11.79
1990 (f) 9.56 .63 (.18) (.63) -- 9.38 4.92
1989 (f) 9.18 .63 .38 (.63) -- 9.56 11.34
1988 (f) 8.76 .63 .42 (.63) -- 9.18 12.20
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the year ending February 28, 1997, reflects
the financial highlights of Nuveen New York.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(c) Information represents 11 months of Nuveen New York and one month of
Nuveen Flagship New York.
(d) From commencement of class operations as noted.
(e) For the three months ending February 29.
(f) For the year ending November 30.
(g) For the one month ending February 28.
(h) For the six months ending August 31, 1997.
50
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<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>
$ 72,923 .89%* 5.22%* .79%* 5.32%* 20%
71,676 .95 5.39 .89 5.45 37
15,732 1.02 5.28 .99 5.31 47
3,189 1.56* 5.31* 1.00* 5.87* 29
1,632 1.63* 4.41* 1.55* 4.49* 20
124 1.65* 5.86* 1.44* 6.07* 37
5,230 1.44* 4.66* 1.34* 4.76* 20
3,965 1.64 4.73 1.57 4.80 37
646 1.99 4.29 1.73 4.55 47
86 7.97* (1.06)* 1.75* 5.16* 29
154,567 .69* 5.42* .59* 5.52* 20
152,598 .71 5.55 .69 5.57 37
154,776 .76 5.55 .74 5.57 47
149,454 .74 5.79 .74 5.79 29
146,297 .78 5.30 .75 5.33 15
107,146 .84 5.75 .75 5.84 12
66,491 .75* 6.27* .75* 6.27* 16
59,351 .79 6.46 .75 6.50 19
44,347 .81 6.59 .75 6.65 51
29,040 .98 6.40 .75 6.63 85
14,975 1.09 6.55 .75 6.89 71
- ------------------------------------------------------------------------------
</TABLE>
51
51
<PAGE>
Financial Highlights (Unaudited)--continued
Selected data for a share outstanding is as follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
- --------------------- ------------------------- --------------------------
Net
Nuveen New York Insured Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
beginning investment from investment from capital end of asset
Year ending February 28/29, of period income(b) investments income gains period value(a)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1998 (d) $10.50 $.27 $ .07 $(.27) $ -- $10.57 3.25%
1997 10.61 .55 (.14) (.52) -- 10.50 4.02
1996 10.15 .52 .49 (.52) (.03)** 10.61 10.19
1995 (c) 10.16 .25 .04 (.26) (.04) 10.15 3.01
Class B (2/97)
1998 (d) 10.50 .23 .07 (.23) -- 10.57 2.87
1997 (c) 10.53 .03 (.02) (.04) -- 10.50 .07
Class C (9/94)
1998 (d) 10.48 .24 .08 (.24) -- 10.56 3.06
1997 10.61 .47 (.16) (.44) -- 10.48 3.06
1996 10.12 .44 .53 (.45) (.03)** 10.61 9.71
1995 (c) 10.03 .21 .13 (.21) (.04) 10.12 3.53
Class R (12/86)
1998 (d) 10.49 .28 .08 (.28) -- 10.57 3.44
1997 10.61 .55 (.13) (.54) -- 10.49 4.15
1996 10.15 .55 .49 (.55) (.03)** 10.61 10.51
1995 10.63 .56 (.44) (.56) (.04) 10.15 1.37
1994 10.62 .55 .03 (.54) (.03) 10.63 5.57
1993 9.78 .57 .84 (.56) (.01) 10.62 14.96
1992 9.32 .59 .47 (.60) -- 9.78 11.66
1991 9.25 .60 .07 (.60) -- 9.32 7.61
1990 9.06 .60 .19 (.60) -- 9.25 8.75
1989 9.10 .59 (.04) (.59) -- 9.06 6.37
1988 9.83 .61 (.73) (.61) -- 9.10 (.85)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** The amounts shown include distributions in excess of capital gains of
$.0024 per share.
(a) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(b) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(c) From commencement of class operations as noted.
(d) For the six months ending August 31, 1997.
52
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<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>
$ 40,081 .87%* 5.02%* .87%* 5.02%* 10%
24,747 .92 5.04 .92 5.04 29
7,258 .93 4.97 .93 4.97 17
1,279 1.13* 5.33* 1.05* 5.41* 11
2,471 1.61* 4.26* 1.61* 4.26* 10
1,279 1.64* 5.17* 1.64* 5.17* 29
2,294 1.42* 4.47* 1.42* 4.47* 10
2,015 1.67 4.28 1.67 4.28 29
1,369 1.69 4.21 1.69 4.21 17
285 2.32* 4.13* 1.80* 4.65* 11
313,088 .67* 5.23* .67* 5.23* 10
319,208 .68 5.28 .68 5.28 29
343,348 .67 5.26 .67 5.26 17
345,121 .65 5.57 .65 5.57 11
388,176 .68 5.11 .68 5.11 5
314,877 .73 5.56 .73 5.56 6
167,048 .69 6.08 .69 6.08 4
80,484 .73 6.46 .73 6.46 13
40,372 .85 6.35 .85 6.35 30
20,206 1.05 6.50 .97 6.58 62
14,078 1.12 6.22 .61 6.73 36
- ------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
Shareholder Information
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
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-Term
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 Municipal Bond 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) 621-7227.
54
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremmer
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
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
Shareholder Services, Inc.
Nuveen Investor Services
P.O. Box 5330
Denver, CO 80217-5330
(800) 621-7227
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, Illinois
55
<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 mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
trusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach - purchasing securities of strong companies and
communities that represent good long-term value - is the cornerstone of
Nuveen's investment philosophy. It is a careful, long-term strategy that offers
the potential for attractive returns with moderated risk. Successful value
investing begins with in-depth research and a discerning eye for marketplace
opportunity. Nuveen's team of investment professionals is backed by the
discipline, resources and expertise of almost a century of investment
experience, including one of the most recognized research departments in the
industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of equity and fixed-income mutual funds,
unit trusts, exchange-traded funds, individual managed account services, and
cash management products, including many that generate tax-free income.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, or call us
at (800) 621-7227 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) 621-7227
www.nuveen.com
<PAGE>
NUVEEN
Municipal
Bond Funds
August 31, 1997
Semiannual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Massachusetts
Massachusetts
Insured
<PAGE>
Contents
1 Dear Shareholder
3 Answering Your Questions
6 Massachusetts Performance
Overview
8 Massachusetts Insured
Performance Overview
11 Financial Section
42 Shareholder Information
43 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 is a pleasure to report to you on the performance of the Nuveen Massachusetts
Municipal Bond Funds. Both funds performed well over the past six months,
rewarding investors with attractive tax-free income, consistent performance and
capital preservation.
For the 12 months ended August 31, 1997, the uninsured Massachusetts fund
provided Class A shareholders with a total return on net asset value of 7.04%.
Class A shareholders in the insured Massachusetts fund received an annual total
return of 6.77%. Both funds continued to provide consistent income, and each
fund experienced a slight increase in its monthly dividend last February.
This performance was achieved in an environment of periodic interest rate
volatility. Positive news on the inflation front helped soften the effects of a
hike in short-term interest rates by the Federal Reserve Board in late March.
After tightening short-term interest rates by 0.25%, the Federal Reserve
demonstrated its confidence in the economy's path by maintaining the status quo
at subsequent meetings.
So far in 1997, investors have focused their attention on fiscal issues such as
the federal budget accord and tax cut measures, including a reduction in the
capital gains tax. The economy continued to experience record expansion and the
lowest unemployment rates in almost two decades, a combination that in the past
has predictably been accompanied by an increase in inflation. Current
conditions, however, give every indication that inflation is under control.
1
<PAGE>
"Both funds performed well over the past six months, rewarding investors with
attractive tax-free income, consistent performance and capital preservation."
Nuveen's financial products and services continue to evolve as we extend our
commitment to helping prudent investors achieve their investment goals. In
addition to our 35 municipal mutual funds, Nuveen now offers a variety of other
products and services designed for the distinct needs of investors who rely on
their investment portfolios as their principal source of income and financial
security. We recently celebrated the successful first year of our high-
performing Nuveen Growth and Income Stock Fund, as well as two new balanced
stock and bond funds. We have also expanded our private asset management service
by acquiring Rittenhouse Financial Services, a well-respected provider of growth
investment management services.
Nuveen prides itself on helping more than 1.3 million investors achieve their
financial goals by providing quality investment solutions that withstand the
test of time. We thank you for your confidence in Nuveen and our family of
investments, and we look forward to reporting to you again in six months.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
October 1, 1997
2
<PAGE>
Answering Your Questions
Portfolio Manager Steve Peterson talks about the municipal bond market and
offers insights into the factors that affected fund performance over the past
year.
What key economic and market factors affected the funds' performance over the
past year?
The combination of strong economic growth and low inflation has led to slightly
falling bond yields over the past year. Periodic volatility in the bond market
created a positive environment for the funds, providing a number of
opportunities to purchase attractive bonds at discounts during brief declines in
the market. The market also experienced a significant tightening of credit
spreads during the year, meaning that the difference in the yields of high-
quality and low-quality bonds was gradually reduced to the smallest levels we've
seen in many years. This allowed us to purchase very high quality bonds for the
portfolios without sacrificing much yield. The supply of new bond issuance
remained low, increasing a modest seven percent nationwide.
Given these market conditions, how have the funds performed?
The funds turned in relatively solid total return performance for the period
ended August 31, 1997, but fell below peer averages due to the funds' shorter
duration. Duration is a measure of a bond fund's interest rate sensitivity; the
shorter the duration, the less a fund's value fluctuates for a given change in
interest rates. Shorter duration bonds experience subdued performance in
declining interest rate environments and enhanced performance in rising rate
environments.
3
<PAGE>
"The funds continued to produce stable dividends and attractive tax-free
yields."
During this volatile period in the bond market, the funds continued to produce
stable dividends and attractive tax-free yields. In addition, they performed
very well on a risk-adjusted basis, as is evidenced by both funds' four-star
rating by Morningstar (for Class R shares), which rates mutual funds on a risk-
adjusted basis.
What strategies did you use to add value?
As credit spreads tightened during the year, we focused on taking advantage of
the opportunities to purchase bonds with higher credit quality at yields that
were similar to bonds with lower credit ratings. We believe that as credit
spreads widen again, these high-quality issues will appreciate in value relative
to lower-grade bonds. In addition, our diligent research helped us find
undervalued bonds in the housing and education sectors that proved to be
excellent values for the funds.
We also took advantage of the volatile interest rate environment to buy and sell
bonds with embedded calls. The call feature of a bond, which allows an issuer to
retire a bond at par, or a slight premium, will change in value based on
interest rate levels and changes in the market. As opportunities arose, we
purchased bonds with calls we felt were mispriced and waited for the market to
recognize their value - resulting in price appreciation for the funds.
4
<PAGE>
What is your outlook for the municipal market?
As long as interest rates remain relatively stable, we foresee no major supply
changes in the national municipal bond market. New issuance will likely expand
somewhat as the economy continues to grow. However, if the volatility in the
equity market continues at current levels, we expect demand for bonds to grow as
shareholders move some of their assets from stocks into bonds. In addition, we
expect a number of good opportunities to arise as credit spreads widen and a
larger number of higher-yielding bonds come to market.
The Massachusetts municipal bond market should experience somewhat stronger
supply growth as the economy continues to recover from the national and state
recessions experienced in the early 1990s. Demand for municipal bonds should
remain strong, given the relatively high state tax rates and increasing levels
of per capita wealth in the state.
What strategies will you employ in the coming year?
We will continue to focus on maximizing after-tax total return, working to
minimize the potentially adverse effect of realized capital gains on investors'
tax liabilities and trying to offset capital gains with realized capital losses.
We will also try to take advantage of any widening of credit spreads to increase
the overall yield of the uninsured fund as more investment-grade quality bonds
with higher yields become available.
5
<PAGE>
Massachusetts
Performance Overview
As of August 31, 1997
Morningstar Rating/1/
* * * *
Fund Highlights
- --------------------------------------------------------------------------------
Share Class A B C R
Inception Date 9/94 3/97 10/94 12/86
Net Asset Value (NAV) $9.93 $9.95 $9.88 $9.90
CUSIP 67065N845 67065N837 67065N829 67065N811
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Net Assets ($000) $81,896
Average Weighted Maturity (years) 20.09
Average Weighted Duration (years) 4.87
- --------------------------------------------------------------------------------
Annualized Total Return/2/
- --------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
1-Year 7.04% 2.54% 6.50% 6.41% 7.28%
5-Year 6.37% 5.46% 5.61% 5.57% 6.57%
10-Year 7.58% 7.12% 6.96% 6.78% 7.82%
- --------------------------------------------------------------------------------
Tax-Free Yields
- --------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
Dist Rate 5.26% 5.03% 4.52% 4.74% 5.45%
SEC 30-Day Yld 4.19% 4.01% 3.43% 3.63% 4.39%
Taxable Equiv Yld/3/ 6.93% 6.63% 5.67% 6.00% 7.26%
- --------------------------------------------------------------------------------
1 Overall rating for Class R Shares based on risk-adjusted performance for the
period ending August 31, 1997, by Morningstar Inc., an independent mutual fund
rating service. The fund was compared with 1,354 municipal bond funds for the
three-year period, 654 funds for the five-year period and 316 funds for the
10-year period. The top 10% of funds in the category receive five stars, and
the next 22.5% of funds receive four stars.
2 Class R Share returns are actual. Class A, B and C Share returns are actual
for the period since class inception; returns prior to class inception are
Class R Share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
Shares have a 4.2% maximum sales charge. Class B Shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and declines
periodically to 0% over the following five years, which is not reflected in
the return figures. Class C Shares have a 1% CDSC for redemptions within one
year which is not reflected in the one-year total return.
3 Based on SEC yield and a combined federal and state income tax rate of 39.5%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
6
<PAGE>
Nuveen Massachusetts Municipal Bond Fund
August 31, 1997 Semiannual Report
Credit Quality
[PIE CHART APPEARS HERE]
AAA 47%
AA 16%
A 23%
BBB/NR 14%
Diversification
[PIE CHART APPEARS HERE]
Escrowed Bonds 27%
Housing 23%
Health Care 21%
General Obligation 17%
Education 9%
Other 3%
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
Open End Dividends
9/30/1996 0.042
10/31/1996 0.042
11/30/1996 0.042
12/31/1996 0.042
1/31/1997 0.042
2/28/1997 0.0425
3/31/1997 0.0425
4/30/1997 0.0435
5/31/1997 0.0435
6/30/1997 0.0435
7/31/1997 0.0435
8/31/1997 0.0435
7
<PAGE>
Massachusetts Insured
Performance Overview
As of August 31, 1997
Morningstar Rating/1/
* * * *
<TABLE>
<CAPTION>
Fund Highlights
- ----------------------------------------------------------------
Share Class A B C R
<S> <C> <C> <C> <C>
Inception Date 9/94 3/97 9/94 12/86
................................................................
Net Asset Value (NAV) $10.41 $10.42 $10.38 $10.41
................................................................
CUSIP 67065N795 67065N787 67065N779 67065N761
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Total Net Assets ($000) $65,159
................................................................
Average Weighted Maturity (years) 18.92
................................................................
Average Weighted Duration (years) 5.15
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/2/
- ----------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
1-Year 6.77% 2.29% 6.09% 6.10% 6.98%
................................................................
5-Year 6.02% 5.12% 5.30% 5.25% 6.28%
................................................................
10-Year 7.45% 6.99% 6.86% 6.66% 7.72%
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Tax-Free Yields
- ----------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
Dist Rate 5.01% 4.80% 4.26% 4.45% 5.19%
................................................................
SEC 30-Day Yld 3.85% 3.68% 3.09% 3.30% 4.05%
................................................................
Taxable Equiv Yld/3/ 6.36% 6.08% 5.11% 5.45% 6.69%
- ----------------------------------------------------------------
</TABLE>
1 Overall rating for Class R Shares based on risk-adjusted performance for the
period ending August 31, 1997, by Morningstar Inc., an independent mutual fund
rating service. The fund was compared with 1,354 municipal bond funds for the
three-year period, 654 funds for the five-year period and 316 funds for the
10-year period. The top 10% of funds in the category receive five stars, and
the next 22.5% of funds receive four stars.
2 Class R Share returns are actual. Class A, B and C Share returns are actual
for the period since class inception; returns prior to class inception are
Class R Share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
Shares have a 4.2% maximum sales charge. Class B Shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and declines
periodically to 0% over the following five years, which is not reflected in
the return figures. Class C Shares have a 1% CDSC for redemptions within one
year which is not reflected in the one-year total return.
3 Based on SEC yield and a combined federal and state income tax rate of 39.5%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
8
<PAGE>
Nuveen Massachusetts Insured Municipal Bond Fund
August 31, 1997 Semiannual Report
Credit Quality
[PIE CHART APPEARS HERE]
A 3%
AA 1%
AAA 96%
Diversification
[PIE CHART APPEARS HERE]
Escrowed Bonds 26%
Health Care 19%
Education 18%
Housing 7%
Other 3%
General Obligation 27%
Dividend History (A Shares)
[BAR CHART APPEARS HERE]
Open End Dividends
9/30/1996 0.043
10/31/1996 0.043
11/30/1996 0.043
12/31/1996 0.043
1/31/1997 0.043
2/28/1997 0.0435
3/31/1997 0.0435
4/30/1997 0.0435
5/31/1997 0.0435
6/30/1997 0.0435
7/31/1997 0.0435
8/31/1997 0.0435
9
<PAGE>
Financial Section
Contents
12 Portfolio of Investments
25 Statement of Net Assets
26 Statement of Operations
27 Statement of Changes in Net Assets
29 Notes to Financial Statements
37 Financial Highlights
11
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Massachusetts
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------
Educational Facilities--9.0%
<S> <C> <C> <C> <C>
$ 1,270,000 Massachusetts Educational Loan Authority, 6/00 at 100 AAA $ 1,317,943
Education Loan Revenue Bonds, Issue C,
Series 1985A, 7.875%, 6/01/03
1,000,000 Massachusetts Health and Educational Facilities 7/01 at 102 Aaa 1,088,340
Authority, Revenue Bonds, Boston College Issue,
Series J, 6.625%, 7/01/21
1,000,000 Massachusetts Health and Educational Facilities 7/02 at 102 AAA 1,058,320
Authority, Revenue Bonds, Suffolk University Issue,
Series B, 6.350%, 7/01/22
500,000 Massachusetts Industrial Finance Agency, Revenue 7/03 at 102 Aa2 474,385
Bonds (Whitehead Institute for Biomedical
Research--1993 Issue), 5.125%, 7/01/26
2,290,000 Massachusetts Industrial Finance Agency, Revenue and 7/05 at 102 AAA 2,450,918
Refunding Bonds, 1995 Series A (Lesley College
Project), 6.300%, 7/01/25
1,000,000 Massachusetts Industrial Finance Agency, Revenue Bonds 3/06 at 102 Aaa 998,720
(College of the Holy Cross--1996 Issue), 5.500%,
3/01/20
- ----------------------------------------------------------------------------------------------------------------------
Escrowed Bonds--26.2%
1,000,000 Massachusetts Bay Transportation Authority, General 3/01 at 102 Aaa 1,104,500
Transportation System Bonds, 1991 Series A, 7.000%,
3/01/11 (Pre-refunded to 3/01/01)
1,300,000 Massachusetts Health and Educational Facilities 7/00 at 102 AAA 1,452,230
Authority, Revenue Bonds, Emerson Hospital Issue,
Series C, 8.000%, 7/01/18 (Pre-refunded to 7/01/00)
250,000 Massachusetts Health and Educational Facilities 7/98 at 102 Aaa 263,140
Authority, Revenue Bonds, Mount Auburn Hospital
Issue, Series A, 7.875%, 7/01/18 (Pre-refunded to
7/01/98)
1,180,000 Massachusetts Health and Educational Facilities 7/00 at 101 1/2 N/R 1,314,024
Authority, Revenue Bonds, Suffolk University
Issue, Series A, 8.125%, 7/01/20 (Pre-refunded
to 7/01/00)
500,000 Massachusetts Health and Educational Facilities 7/98 at 102 Aaa 526,790
Authority, Revenue Bonds, Newton-Wellesley Hospital
Issue, Series C, 8.000%, 7/01/18 (Pre-refunded to
7/01/98)
750,000 Massachusetts Health and Educational Facilities 7/99 at 102 A+ 808,658
Authority, Revenue Bonds, Baystate Medical Center
Issue, Series C, 7.500%, 7/01/20 (Pre-refunded
to 7/01/99)
500,000 Massachusetts Health and Educational Facilities 9/02 at 102 A2 555,270
Authority, Revenue Refunding Bonds, Worcester
Polytechnic Institute Issue, Series E, 6.625%,
9/01/17 (Pre-refunded to 9/01/02)
</TABLE>
12
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Escrowed Bonds -- continued
$ 1,000,000 Massachusetts Health and Educational Facilities 11/02 at 102 Aaa $1,109,490
Authority, Revenue Bonds, MetroWest Health, Inc.
Issue, Series C, 6.500%, 11/15/18 (Pre-refunded
to 11/15/02)
250,000 Massachusetts Industrial Finance Agency, Revenue 1/02 at 102 A1 273,178
Bonds, College of the Holy Cross--1992 Issue,
6.450%, 1/01/12 (Pre-refunded to 1/01/02)
500,000 Massachusetts Industrial Finance Agency, Revenue 10/99 at 103 Aaa 550,695
Bonds (Springfield College Project--1989 Issue),
7.800%, 10/01/09 (Pre-refunded to 10/01/99)
1,235,000 Massachusetts Industrial Finance Agency, Revenue 7/02 at 102 BBB- 1,391,783
Bonds, Merrimack College Issue, Series 1992,
7.125%, 7/01/12 (Pre-refunded to 7/01/02)
635,000 Massachusetts Port Authority, Revenue Bonds, No Opt. Call Aaa 1,071,543
Series 1982, 13.000%, 7/01/13
165,000 Massachusetts General Obligation Bonds, 3/00 at 102 Aaa 179,862
Consolidated Loan of 1990 Series A, 7.250%,
3/01/09 (Pre-refunded to 3/01/00)
250,000 The Massachusetts Bay Transportation Authority, 12/06 at 100 A- 306,935
Certificates of Participation, Series 1988,
7.800%, 1/15/14 (Pre-refunded to 12/22/06)
250,000 City of Boston, Massachusetts, General Obligation 2/99 at 102 A+ 267,383
Bonds, 1989 Series A, 7.700%, 2/01/09 (Pre-
refunded to 2/01/99)
1,000,000 City of Boston, Massachusetts, General Obligation 7/01 at 102 Aaa 1,101,080
Bonds, 1991 Series A, 6.750%, 7/01/11 (Pre-
refunded to 7/01/01)
1,500,000 City of Boston, Massachusetts, Revenue Bonds, 8/00 at 102 Aaa 1,659,495
Boston City Hospital (FHA Insured Mortgage),
Series A, 7.625%, 2/15/21 (Pre-refunded to 8/15/00)
500,000 Boston Water and Sewer Commission, General Revenue 11/01 at 102 Aaa 558,475
Bonds, 1991 Series A (Senior Series), 7.000%,
11/01/18 (Pre-refunded to 11/01/01)
250,000 City of Holyoke, Massachusetts, General Obligation 6/02 at 103 Aaa 295,590
Bonds, 8.150%, 6/15/06 (Pre-refunded to 6/15/02)
445,000 City of Lowell, Massachusetts, General Obligation 1/01 at 102 Aaa 509,605
Qualified Bonds, 8.400%, 1/15/09 (Pre-refunded
to 1/15/01)
</TABLE>
13
<PAGE>
Portfolio of Investments (Unaudited)
Massachusetts -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed Bonds -- continued
$ 1,000,000 City of Lynn, Massachusetts, General Obligation 1/02 at 104 Aaa $1,167,030
Bonds, 7.850%, 1/15/11 (Pre-refunded to 1/15/02)
500,000 Town of Monson, Massachusetts, General Obligation 10/00 at 102 Aaa 559,145
School Project Loan Act of 1948 Bonds,
7.700%, 10/15/10 (Pre-refunded to 10/15/00)
500,000 Town of Palmer, Massachusetts, General Obligation, 10/00 at 102 Aaa 558,585
School Project Loan Act of 1948, 1990 Series B,
7.700%, 10/01/10 (Pre-refunded to 10/01/00)
2,250,000 Puerto Rico Electric Power Authority, Power Revenue 7/01 at 102 Aaa 2,509,830
Bonds, Series P, 7.000%, 7/01/21
(Pre-refunded to 7/01/01)
250,000 Town of Sandwich, Massachusetts, Unlimited Tax, 11/98 at 102 1/2 Aaa 265,043
General Obligation Bonds, 7.100%, 11/01/07
(Pre-refunded to 11/01/98)
1,000,000 City of Springfield, Massachusetts, General 9/02 at 102 Baa 1,131,620
Obligation School Project Loan Act of 1948 Bonds,
Series B, 7.100%, 9/01/11 (Pre-refunded to 9/01/02)
- --------------------------------------------------------------------------------------------------------------------
General Obligation Bonds -- 16.6%
955,000 Massachusetts Industrial Finance Agency, Library 1/05 at 102 Aaa 1,105,250
Revenue Bonds (Malden Public Library Project),
Series 1994, 7.250%, 1/01/15
City of Attleboro, Massachusetts, General Obligation Bonds:
450,000 6.250%, 1/15/10 1/03 at 102 A 474,107
450,000 6.250%, 1/15/11 1/03 at 102 A 471,875
Town of Barnstable, Massachusetts, General Obligation Bonds:
880,000 5.750%, 9/15/13 9/04 at 102 Aa3 910,694
490,000 5.750%, 9/15/14 9/04 at 102 Aa3 505,665
Town of Deerfield, Massachusetts, General Obligation
Bonds of 1992, School Project Loan Act of 1948, Bank-
Qualified Unlimited Tax:
420,000 6.200%, 6/15/09 6/02 at 102 A1 450,635
415,000 6.250%, 6/15/10 6/02 at 102 A1 444,855
485,000 City of Haverhill, Massachusetts, General Obligation, 10/01 at 102 Baa 538,937
Municipal Purpose Loan of 1991 Bonds,
7.500%, 10/15/11
485,000 City of Holyoke, Massachusetts, General Obligation No Opt. Call Baa 516,399
Bonds, 1991 Series A, 8.000%, 6/01/01
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Obligation Bonds -- continued
$ 500,000 City of Holyoke, Massachusetts, General Obligation 8/01 at 102 Baa $ 559,245
School Project Loan Act of 1948, 7.650%, 8/01/09
750,000 City of Holyoke, Massachusetts, General Obligation 11/02 at 102 Baa 825,203
Refunding Bonds, 7.000%, 11/01/08
545,000 City of Lowell, Massachusetts, General Obligation No Opt. Call Baa1 654,338
Qualified Bonds, 8.300%, 2/15/05
500,000 Town of Palmer, Massachusetts, General Obligation 10/03 at 102 Aaa 514,095
Refunding Bonds, 5.500%, 10/01/10
1,130,000 City of Peabody, Massachusetts, General Obligation 8/00 at 100 Aaa 1,254,153
Electric Bonds, 6.950%, 8/01/09
425,000 South Essex Sewerage District, Massachusetts, No Opt. Call Baa1 484,062
General Obligation Bonds, 9.000%, 12/01/00
City of Taunton, Massachusetts, General Obligation
(Electric Loan Act of 1969) Bonds:
1,465,000 8.000%, 2/01/02 No Opt. Call A 1,658,116
1,005,000 8.000%, 2/01/03 No Opt. Call A 1,155,589
1,000,000 City of Worcester, Massachusetts, General Obligation 8/02 at 102 BBB+ 1,062,630
Bonds, 6.000%, 8/01/04
- --------------------------------------------------------------------------------------------------------------------
Health Care Facilities -- 29.6%
3,000,000 Massachusetts Health and Educational Facilities No Opt. Call AAA 2,799,420
Authority, Malden Hospital (FHA Insured), Series
A Revenue Bonds, 5.000%, 8/01/16
3,285,000 Massachusetts Health and Educational Facilities 2/07 at 102 Aa2 3,396,296
Authority, Revenue Refunding Bonds, Youville
Hospital Issue (FHA Insured Project), Series A,
6.250%, 2/15/41
500,000 Massachusetts Health and Educational Facilities 7/99 at 102 1/2 N/R 539,660
Authority, Revenue Bonds, Series 1989 (Cardinal
Cushing General Hospital), 8.875%, 7/01/18
495,000 Massachusetts Health and Educational Facilities 7/99 at 100 A 506,207
Authority, Revenue Bonds, Brockton Hospital Issue,
Series B, 8.000%, 7/01/07
250,000 Massachusetts Health and Educational Facilities 7/00 at 102 Aaa 272,515
Authority, Revenue Bonds, University Hospital Issue,
Series C, 7.250%, 7/01/10
3,270,000 Massachusetts Health and Educational Facilities 7/01 at 102 A 3,574,306
Authority, Revenue Bonds, Charlton Memorial Hospital
Issue, Series B, 7.250%, 7/01/13
</TABLE>
15
<PAGE>
Portfolio of Investments
Massachusetts -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care Facilities -- continued
$ 750,000 Massachusetts Health and Educational Facilities 7/02 at 102 Aaa $ 823,763
Authority, Revenue Bonds, New England Medical Center
Hospitals Issue, Series F, 6.625%, 7/01/25
2,750,000 Massachusetts Health and Educational Facilities 4/02 at 102 A 2,980,368
Authority, Revenue Bonds, New England Deaconess
Hospital Issue, Series D, 6.875%, 4/01/22
885,000 Massachusetts Health and Educational Facilities 7/03 at 102 Aaa 904,320
Authority, Revenue Bonds, Cable Housing and Health
Services Issue, Series A, 5.625%, 7/01/13
1,000,000 Massachusetts Health and Educational Facilities 7/03 at 102 Aaa 1,008,420
Authority, Revenue Bonds, Lahey Clinic Medical
Center Issue, Series B, 5.625%, 7/01/15
500,000 Massachusetts Health and Educational Facilities 7/04 at 102 Aaa 482,415
Authority, Revenue Bonds, New England Medical Center
Hospitals, Series 1993-G1, 5.375%, 7/01/24
700,000 Massachusetts Health and Educational Facilities 7/04 at 102 Aa 737,037
Authority, Revenue Bonds (Daughters of Charity
National Health System--The Carney Hospital),
Series D, 6.100%, 7/01/14
Massachusetts Health and Educational Facilities
Authority, Revenue Refunding Bonds, Youville
Hospital Issue (FHA Insured Project), Series B:
2,500,000 6.000%, 2/15/25 2/04 at 102 Aa 2,566,750
2,000,000 6.000%, 2/15/34 2/04 at 102 Aa 2,049,480
1,125,000 Massachusetts Industrial Financial Agency, Revenue 2/06 at 102 AAA 1,156,534
Bonds, Heights Crossing Limited Partnership Issue
(FHA Insured Project), Series 1995, 6.000%, 2/01/15
(Alternative Minimum Tax)
435,000 Massachusetts Industrial Finance Agency, Revenue 6/99 at 102 A- 463,118
Bonds (Sturdy Memorial Hospital), Series 1989,
7.900%, 6/01/09
- --------------------------------------------------------------------------------------------------------------------
Housing Facilities -- 13.6%
3,700,000 Massachusetts Housing Finance Agency, Housing Project 4/03 at 102 A1 3,868,091
Revenue Bonds, 6.375%, 4/01/21
1,000,000 Massachusetts Housing Finance Agency, Residential 11/02 at 102 Aaa 1,039,230
Development Bonds, 6.250%, 11/15/14
1,000,000 Massachusetts Housing Finance Agency, Residential 5/02 at 102 Aaa 1,070,900
Development Bonds, 1992 Series D, 6.875%, 11/15/21
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing Facilities -- continued
$ 500,000 Massachusetts Housing Finance Agency, Single Family 6/01 at 102 Aa $ 529,820
Housing Revenue Bonds, Series 18, 7.350%, 12/01/16
1,250,000 Massachusetts Housing Finance Agency, Single Family 6/98 at 102 Aa 1,291,863
Housing Revenue Bonds, Series 8, 7.700%, 6/01/17
970,000 Boston -- Mount Pleasant Housing Development 8/02 at 102 AAA 1,017,363
Corporation, Multifamily Housing Refunding Revenue
Bonds, Series 1992 A, 6.750%, 8/01/23
1,000,000 Dartmouth Housing Development Corporation, Multifamily 1/98 at 103 AAA 1,033,250
Housing Refunding Revenue Bonds, Series 1989
(Crossroads Apartments), FNMA Collateral,
7.375%, 7/01/24
1,250,000 Somerville Housing Authority, Mortgage Revenue Bonds, 5/00 at 102 Aaa 1,322,800
Series 1990 (GNMA Collateralized -- Clarendon Hill
Towers Project), 7.950%, 11/20/30
- ---------------------------------------------------------------------------------------------------------------------------------
Other Revenue -- 1.4%
1,000,000 Massachusetts Industrial Finance Agency, Resource 7/01 at 103 N/R 1,127,240
Recovery Revenue Bonds (SEMASS Project),
Series 1991A, 9.000%, 7/01/15
- ---------------------------------------------------------------------------------------------------------------------------------
Pollution Control Facilities -- 1.8%
1,440,000 Massachusetts Industrial Finance Agency, Pollution 8/03 at 102 Baa2 1,448,251
Control Revenue Bonds, 1993 Series (Eastern Edison
Company Project), 5.875%, 8/01/08
- ---------------------------------------------------------------------------------------------------------------------------------
Transportation -- 0.6%
500,000 Massachusetts Port Authority, Revenue Refunding Bonds, 7/98 at 100 Aa 503,730
Series 1978, 7.125%, 7/01/12
- ---------------------------------------------------------------------------------------------------------------------------------
$75,425,000 Total Investments -- (cost $75,523,245) -- 98.8% 80,978,600
=====================------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.2% 917,869
--------------------------------------------------------------------------------------------------------
Net Assets -- 100% $ 81,896,469
========================================================================================================
</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.
N/R -- Investment is not rated.
See accompanying notes to financial statements.
17
<PAGE>
Portfolio of Investments (Unaudited)
Massachusetts Insured
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Educational Facilities -- 18.0%
$ 250,000 Massachusetts Health and Educational Facilities 10/98 at 102 Aaa $ 263,830
Authority, Revenue Bonds, Northeastern University
Issue, Series B, 7.600%, 10/01/10
1,000,000 Massachusetts Health and Educational Facilities 7/01 at 102 Aaa 1,088,340
Authority, Revenue Bonds, Boston College Issue,
Series J, 6.625%, 7/01/21
1,450,000 Massachusetts Health and Educational Facilities 10/02 at 102 Aaa 1,503,824
Authority, Revenue Bonds, Boston University Issue,
Series M, 6.000%, 10/01/22
1,600,000 Massachusetts Health and Educational Facilities 10/02 at 102 Aaa 1,758,528
Authority, Revenue Bonds, Northeastern University
Issue, Series E, 6.550%, 10/01/22
1,850,000 Massachusetts Health and Educational Facilities 7/02 at 102 AAA 1,957,892
Authority, Revenue Bonds, Suffolk University Issue,
Series B, 6.350%, 7/01/22
2,000,000 Massachusetts Health and Educational Facilities 7/02 at 102 Aaa 2,106,340
Authority, Revenue Bonds, Bentley College Issue,
Series I, 6.125%, 7/01/17
500,000 Massachusetts Industrial Finance Agency, Revenue 10/99 at 102 Aaa 533,635
Bonds, Brandeis University Issue, 1989 Series C,
6.800%, 10/01/19
1,000,000 Massachusetts Industrial Finance Agency, Revenue 7/01 at 102 Aaa 1,075,550
Refunding Bonds, Mount Holyoke College Issue,
Series 1992A, 6.300%, 7/01/13
420,000 Massachusetts Industrial Finance Agency, Revenue 10/05 at 102 Aaa 443,621
Bonds, Babson College Issue, Series 1995A, 5.800%,
10/01/10
1,000,000 Massachusetts Industrial Finance Agency, Revenue 3/06 at 102 Aaa 998,720
Bonds (College of the Holy Cross--1996 Issue),
5.500%, 3/01/20
- --------------------------------------------------------------------------------------------------------------------
Escrowed Bonds -- 25.4%
250,000 Massachusetts Bay Transportation Authority, General 3/99 at 102 Aaa 265,955
Transportation System, 1989 Series A,
7.100%, 3/01/13 (Pre-refunded to 3/01/99)
250,000 Massachusetts Bay Transportation Authority, 8/00 at 102 Aaa 277,720
Certificates of Participation, 1990 Series A,
7.650%, 8/01/15 (Pre-refunded to 8/01/00)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Escrowed Bonds -- continued
$ 300,000 Massachusetts Health and Educational Facilities Authority, 7/98 at 102 Aaa $ 315,768
Revenue Bonds, Mount Auburn Hospital Issue, Series A,
7.875%, 7/01/18 (Pre-refunded to 7/01/98)
750,000 Massachusetts Health and Educational Facilities Authority, 7/98 at 102 Aaa 787,733
Revenue Bonds, Lahey Clinic Medical Center Issue,
Series A, 7.600%, 7/01/08 (Pre-refunded to 7/01/98)
800,000 Massachusetts Health and Educational Facilities Authority, 10/98 at 102 Aaa 846,720
Revenue Bonds, Berkshire Health Systems Issue,
Series A, 7.600%, 10/01/14 (Pre-refunded to 10/01/98)
250,000 Massachusetts Health and Educational Facilities Authority, 7/98 at 102 Aaa 263,395
Revenue Bonds, Newton-Wellesley Hospital Issue,
Series C, 8.000%, 7/01/18 (Pre-refunded to 7/01/98)
500,000 Massachusetts Health and Educational Facilities Authority, 7/99 at 102 A+ 539,105
Revenue Bonds, Baystate Medical Center Issue,
Series C, 7.500%, 7/01/20 (Pre-refunded to 7/01/99)
250,000 Massachusetts Health and Educational Facilities Authority, 7/00 at 102 Aaa 275,965
Revenue Bonds, South Shore Hospital Issue, Series C,
7.500%, 7/01/20 (Pre-refunded to 7/01/00)
500,000 Massachusetts Health and Educational Facilities Authority, 7/00 at 102 Aaa 554,865
Revenue Bonds, Stonehill College Issue, Series D,
7.700%, 7/01/20 (Pre-refunded to 7/01/00)
500,000 Massachusetts Health and Educational Facilities Authority, 10/01 at 102 Aaa 555,285
Revenue Bonds, Berklee College of Music Issue,
Series C, 6.875%, 10/01/21 (Pre-refunded to 10/01/01)
250,000 Massachusetts Health and Educational Facilities Authority, 7/99 at 102 Aaa 268,815
Revenue Bonds, Beverly Hospital Issue, Series D,
7.300%, 7/01/19 (Pre-refunded to 7/01/99)
250,000 Massachusetts Industrial Finance Agency, Revenue Bonds, 9/99 at 102 Aaa 269,900
Milton Academy Issue, Series A, 7.250%, 9/01/19
(Pre-refunded to 9/01/99)
375,000 Massachusetts Industrial Finance Agency, Revenue Bonds, 11/99 at 102 Aaa 406,575
Museum of Science Issue, Series 1989,
7.300%, 11/01/09 (Pre-refunded to 11/01/99)
1,000,000 Massachusetts Port Authority, Revenue Bonds, No Opt. Call Aaa 1,687,470
Series 1982, 13.000%, 7/01/13
250,000 Massachusetts General Obligation Bonds, 3/00 at 102 Aaa 272,518
Consolidated Loan of 1990 Series A, 7.250%, 3/01/09
(Pre-refunded to 3/01/00)
</TABLE>
19
<PAGE>
Portfolio of Investments (Unaudited)
Massachusetts Insured -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Escrowed Bonds -- continued
The Commonwealth of Massachusetts, General Obligation
Bonds, Consolidated Loan of 1992, Series A:
$ 25,000 6.500%, 6/01/08 (Pre-refunded to 6/01/02) 6/02 at 101 Aaa $ 27,381
1,200,000 6.000%, 6/01/13 (Pre-refunded to 6/01/02) 6/02 at 100 Aaa 1,279,104
1,000,000 City of Boston, Massachusetts, General Obligation 7/01 at 102 Aaa 1,101,080
Bonds, 1991 Series A, 6.750%, 7/01/11
(Pre-refunded to 7/01/01)
500,000 City of Boston, Massachusetts, Revenue Bonds, Boston 8/00 at 102 Aaa 553,165
City Hospital (FHA Insured Mortgage), Series A,
7.625%, 2/15/21 (Pre-refunded to 8/15/00)
500,000 City of Fall River, Massachusetts, General Obligation 6/01 at 102 Aaa 557,440
Bonds, 7.200%, 6/01/10 (Pre-refunded to 6/01/01)
250,000 City of Holyoke, Massachusetts, General Obligation 6/02 at 103 Aaa 295,590
Bonds, 8.150%, 6/15/06 (Pre-refunded to 6/15/02)
450,000 City of Leominster, Massachusetts, General Obligation 4/00 at 102 Aaa 494,208
Bonds, 7.500%, 4/01/09 (Pre-refunded to 4/01/00)
250,000 Lynn, Massachusetts, Water and Sewer Commission, 12/00 at 102 Aaa 277,118
General Revenue Bonds, 1990 Series A,
7.250%, 12/01/10 (Pre-refunded to 12/01/00)
500,000 Town of Monson, Massachusetts, General Obligation 10/00 at 102 Aaa 559,145
School Project Loan Act of 1948 Bonds,
7.700%, 10/15/10 (Pre-refunded to 10/15/00)
North Middlesex Regional School District,
School Bonds of 1990:
270,000 7.200%, 6/15/08 (Pre-refunded to 6/15/00) 6/00 at 103 Aaa 298,299
245,000 7.200%, 6/15/09 (Pre-refunded to 6/15/00) 6/00 at 103 Aaa 270,678
270,000 Town of Palmer, Massachusetts, General Obligation 3/00 at 102 Aaa 294,635
School Bonds of 1990, Series A, School Project Loan
of 1948, 7.300%, 3/01/10 (Pre-refunded to 3/01/00)
250,000 Town of Palmer, Massachusetts, General Obligation, 10/00 at 102 Aaa 279,293
School Project Loan Act of 1948, 1990 Series B,
7.700%, 10/01/10 (Pre-refunded to 10/01/00)
250,000 Town of Sandwich, Massachusetts, Unlimited Tax, 11/98 at 102 1/2 Aaa 265,043
General Obligation Bonds, 7.100%, 11/01/07
(Pre-refunded to 11/01/98)
515,000 Southern Berkshire Regional School District, 4/02 at 102 Aaa 588,521
General Obligation School Bonds, Unlimited Tax,
7.500%, 4/15/07 (Pre-refunded to 4/15/02)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed Bonds -- continued
$ 1,145,000 Southern Berkshire Regional School District, 4/02 at 102 Aaa $ 1,284,930
Massachusetts, General Obligation School Bonds,
7.000%, 4/15/11 (Pre-refunded to 4/15/02)
250,000 City of Springfield, Massachusetts, Municipal 11/98 at 103 Aaa 265,955
Purpose Loan of 1988 (General Obligation Bonds),
7.000%, 11/01/07 (Pre-refunded to 11/01/98)
250,000 City of Westfield, Massachusetts, General Obligation 12/00 at 102 Aaa 276,225
Bonds, 7.100%, 12/15/08 (Pre-refunded to 12/15/00)
- --------------------------------------------------------------------------------------------------------------------
General Obligation Bonds -- 26.4%
250,000 Massachusetts Bay Transportation Authority, General 3/00 at 102 Aaa 271,460
Transportation System Revenue, 1990 Series A,
7.250%, 3/01/03
1,545,000 Massachusetts Industrial Finance Agency, Library 1/05 at 102 Aaa 1,788,075
Revenue Bonds (Malden Public Library Project),
Series 1994, 7.250%, 1/01/15
250,000 Town of Groveland, Massachusetts, General Obligation 6/01 at 102 Aaa 274,273
Bonds, 6.900%, 6/15/07
1,000,000 City of Haverhill, Massachusetts, General Obligation, 9/01 at 102 Aaa 1,092,690
Hospital Refunding Bonds, Series A, 6.700%, 9/01/10
2,625,000 City of Lowell, Massachusetts, General Obligation 11/03 at 102 Aaa 2,675,768
State Qualified Bonds, 5.600%, 11/01/12
1,025,000 City of Lynn, Massachusetts, General Obligation No Opt. Call Aaa 1,116,922
Bonds, 6.750%, 1/15/02
1,000,000 Town of Mansfield, Massachusetts, General Obligation 1/02 at 102 Aaa 1,095,390
Bonds, 6.700%, 1/15/11
250,000 Town of Methuen, Massachusetts, General Obligation 5/00 at 102 Aaa 273,255
Bonds, 7.400%, 5/15/04
1,500,000 Town of Monson, Massachusetts, General Obligation, No Opt. Call Aaa 1,580,340
Bank-Qualified Unlimited Tax, School Refunding
Bonds, 5.500%, 10/15/10
300,000 Town of North Andover, Massachusetts, 9/00 at 103 Aaa 333,075
General Obligation Bonds, 7.400%, 9/15/10
190,000 Town of Northfield, Massachusetts, General 10/01 at 102 Aaa 205,434
Obligation Bonds, Municipal Purpose Loan of 1992,
Bank-Qualified, 6.350%, 10/15/09
1,000,000 Town of Palmer, Massachusetts, General Obligation 10/03 at 102 Aaa 1,028,190
Refunding Bonds, 5.500%, 10/01/10
</TABLE>
21
<PAGE>
Portfolio of Investments (Unaudited)
Massachusetts Insured -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Obligation Bonds -- continued
$ 1,000,000 Commonwealth of Puerto Rico, Public Improvement 7/05 at 101 1/2 Aaa $ 1,030,210
Bonds of 1995 (General Obligation Bonds),
5.750%, 7/01/24
440,000 Quaboag Regional School District, General Obligation 6/02 at 102 Aaa 475,583
School Bonds of 1991, Bank-Qualified,
6.250%, 6/15/08
City of Salem, Massachusetts, General Obligation Bonds:
500,000 6.800%, 8/15/09 8/01 at 102 Aaa 548,330
900,000 6.000%, 7/15/10 7/02 at 102 Aaa 950,166
220,000 Taunton, Massachusetts, General Obligation Bonds, 9/01 at 103 Aaa 243,280
6.800%, 9/01/09
455,000 Town of Wareham, Massachusetts, General Obligation 1/01 at 103 Aaa 501,638
School Bonds, 7.050%, 1/15/07
215,000 Town of Whately, Massachusetts, General Obligation 1/02 at 102 Aaa 232,206
Bonds, 6.350%, 1/15/09
1,210,000 Town of Winchendon, Massachusetts, Unlimited Tax, 3/03 at 102 Aaa 1,286,968
General Obligation Bonds, 6.050%, 3/15/10
160,000 City of Worcester, Massachusetts, General 5/02 at 102 Aaa 179,118
Obligation Bonds, 6.900%, 5/15/07
- --------------------------------------------------------------------------------------------------------------------
Health Care Facilities -- 18.4%
500,000 Massachusetts Health and Educational Facilities 7/00 at 102 Aaa 545,030
Authority, Revenue Bonds, University Hospital
Issue, Series C, 7.250%, 7/01/19
1,000,000 Massachusetts Health and Educational Facilities 7/01 at 102 A1 1,080,910
Authority, Revenue Bonds, Brigham and Women's
Hospital Issue, Series D, 6.750%, 7/01/24
1,500,000 Massachusetts Health and Educational Facilities 7/02 at 102 Aaa 1,647,525
Authority, Revenue Bonds, New England Medical
Center Hospitals Issue, Series F, 6.625%, 7/01/25
1,000,000 Massachusetts Health and Educational Facilities 7/02 at 102 Aaa 1,092,990
Authority, Revenue Bonds, South Shore Hospital
Center Series D, 6.500%, 7/01/22
1,700,000 Massachusetts Health and Educational Facilities 7/03 at 102 Aaa 1,714,314
Authority, Revenue Bonds, Lahey Clinic Medical
Center Issue, Series B, 5.625%, 7/01/15
3,375,000 Massachusetts Health and Educational Facilities 7/04 at 102 Aaa 3,256,301
Authority, Revenue Bonds, New England Medical
Center Hospitals, Series 1993--G1, 5.375%, 7/01/24
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care Facilities -- continued
$ 200,000 Massachusetts Industrial Finance Agency, Revenue 10/98 at 102 Aaa $ 211,380
Bonds, Harvard Community Health Plan, Inc., Issue
1988 Series B (Refunding Bonds), 7.750%, 10/01/08
2,290,000 Puerto Rico Industrial, Tourist, Educational, Medical 1/05 at 102 Aaa 2,460,651
and Environmental Control Facilities Financing
Authority, Hospital Revenue Bonds, 1995 Series A
(Hospital Auxilio Mutuo Obligated Group Project),
6.250%, 7/01/16
- --------------------------------------------------------------------------------------------------------------------
Housing Facilities -- 6.7%
340,000 Massachusetts Housing Finance Agency, Housing 12/99 at 103 Aaa 356,874
Revenue Bonds, 1989 Series A, 7.600%, 12/01/16
500,000 Massachusetts Housing Finance Agency, Single Family 6/01 at 102 Aa 529,820
Housing Revenue Bonds, Series 18, 7.350%, 12/01/16
250,000 Massachusetts Housing Finance Agency, Single Family 6/98 at 102 Aa 258,373
Housing Revenue Bonds, Series 8, 7.700%, 6/01/17
2,985,000 Massachusetts Housing Finance Agency, Rental Housing 1/05 at 102 Aaa 3,228,247
Mortgage Revenue Bonds, 1995 Series A
(FHA Insured Mortgage Loans), 7.350%, 1/01/35
(Alternative Minimum Tax)
- --------------------------------------------------------------------------------------------------------------------
Other Revenue -- 0.4%
250,000 Massachusetts Health & Educational Facilities 7/99 at 102 Aaa 266,877
Authority, Revenue Bonds, Capital Asset Program,
7.200%, 7/01/09
- --------------------------------------------------------------------------------------------------------------------
Utilities -- 2.0%
1,300,000 Massachusetts Municipal Wholesale Electric Company, 7/03 at 102 Aaa 1,272,205
Power Supply System Revenue Bonds, 1993 Series A,
5.000%, 7/01/10
- --------------------------------------------------------------------------------------------------------------------
Water/Sewer Facilities -- 0.8%
500,000 Boston Water and Sewer Commission (A Public 11/98 at 100 Aaa 517,454
Instrumentality of The Commonwealth of
Massachusetts), General Revenue Bonds, 1988
Series A (Subordinated Series), 7.250%, 11/01/06
- --------------------------------------------------------------------------------------------------------------------
$ 59,390,000 Total Investments -- (cost $59,506,942) -- 98.1% 63,907,201
=====================-----------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
Portfolio of Investments (Unaudited)
Massachusetts Insured -- continued
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Temporary Investments in Short-Term Municipal Securities -- 0.3%
-------------------------------------------------------------------------------------------
$ 200,000 The Commonwealth of Massachusetts, Dedicated Income VMIG-1 $ 200,000
===================== Tax Bonds, Fiscal Recovery Loan Act of 1990, Series E,
Variable Rate Demand Bonds, 3.650%, 12/01/97
-------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.6% 1,051,749
-------------------------------------------------------------------------------------------
Net Assets -- 100% $ 65,158,950
===========================================================================================
All of the bonds in the portfolio, excluding temporary investments in short-term municipal
securities, are either covered by Original Issue Insurance, Secondary Market Insurance or
Portfolio Insurance, or are backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities, any of which ensure the timely payment of
principal and interest.
* 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.
</TABLE>
24 See accompanying notes to financial statements.
<PAGE>
Statement of Net Assets (Unaudited)
August 31, 1997
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<TABLE>
<CAPTION>
Massachusetts
Massachusetts Insured
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investment in municipal securities, at market value (note 1) $ 80,978,600 $ 63,907,201
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) -- 200,000
Cash 170,564 302,031
Receivables:
Interest 1,054,262 984,109
Shares sold 59,139 24,419
Other assets 487 805
- ----------------------------------------------------------------------------------------------------------
Total assets 82,263,052 65,418,565
- ----------------------------------------------------------------------------------------------------------
Liabilities
Payable for shares redeemed 48,842 13,566
Accrued expenses:
Management fees (note 6) 36,513 30,519
12b-1 distribution and service fees (notes 1 and 6) 2,050 2,063
Other 19,119 17,576
Dividends payable 260,059 195,891
- ----------------------------------------------------------------------------------------------------------
Total liabilities 366,583 259,615
- ----------------------------------------------------------------------------------------------------------
Net assets (note 7) $ 81,896,469 $ 65,158,950
==========================================================================================================
Class A Shares (note 1)
Net assets $ 7,781,708 $ 7,740,594
Shares outstanding 783,496 743,499
Net asset value and redemption price per share $ 9.93 $ 10.41
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 10.37 $ 10.87
==========================================================================================================
Class B Shares (note 1)
Net assets $ 266,152 $ 139,298
Shares outstanding 26,747 13,374
Net asset value, offering and redemption price per share $ 9.95 $ 10.42
==========================================================================================================
Class C Shares (note 1)
Net assets $ 1,550,668 $ 959,488
Shares outstanding 157,009 92,407
Net asset value, offering and redemption price per share $ 9.88 $ 10.38
==========================================================================================================
Class R Shares (note 1)
Net assets $ 72,297,941 $ 56,319,570
Shares outstanding 7,301,404 5,407,967
Net asset value, offering and redemption price per share $ 9.90 $ 10.41
==========================================================================================================
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
Statement of Operations (Unaudited)
Six months ended August 31, 1997
<TABLE>
<CAPTION>
Massachusetts
Massachusetts Insured
- -----------------------------------------------------------------------------------------------------------------
Investment Income
Tax-exempt interest income (note 1) $ 2,526,988 $ 1,969,307
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Expenses
Management fees (note 6) 224,927 179,886
12b-1 service fees -- Class A (notes 1 and 6) 7,577 7,643
12b-1 distribution and service fees -- Class B (notes 1 and 6) 389 185
12b-1 distribution and service fees -- Class C (notes 1 and 6) 3,968 3,540
Shareholders' servicing agent fees and expenses 32,970 26,619
Custodian's fees and expenses 24,145 23,554
Trustees' fees and expenses (note 6) 772 607
Professional fees 8,314 6,239
Shareholders' reports -- printing and mailing expenses 20,893 21,943
Federal and state registration fees 3,536 3,800
Portfolio insurance expense -- 2,359
Other expenses 3,236 2,425
- -----------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 330,727 278,800
Expense reimbursement (note 6) (12,046) --
- -----------------------------------------------------------------------------------------------------------------
Net expenses 318,681 278,800
- -----------------------------------------------------------------------------------------------------------------
Net investment income 2,208,307 1,690,507
- -----------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions
(notes 1 and 4) 52,060 (55,082)
Net change in unrealized appreciation or depreciation
of investments 312,126 248,274
- -----------------------------------------------------------------------------------------------------------------
Net gain from investments 364,186 193,192
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 2,572,493 $ 1,883,699
=================================================================================================================
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (Unaudited) Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Massachusetts
--------------------------------------------
Six months ended Year ended
8/31/97 2/28/97
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 2,208,307 $ 4,406,388
Net realized gain (loss) from investment transactions
(notes 1 and 4) 52,060 (167,777)
Net change in unrealized appreciation or depreciation
of investments 312,126 (361,379)
- ------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 2,572,493 3,877,232
- ------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (196,820) (288,715)
Class B (1,543) --
Class C (24,108) (34,686)
Class R (1,982,487) (4,012,721)
- ------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (2,204,958) (4,336,122)
- ------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 3,680,406 8,611,315
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 1,564,123 3,046,553
- ------------------------------------------------------------------------------------------------------------
5,244,529 11,657,868
- ------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (4,740,702) (11,875,027)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions 503,827 (217,159)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 871,362 (676,049)
Net assets at the beginning of period 81,025,107 81,701,156
- ------------------------------------------------------------------------------------------------------------
Net assets at the end of period $ 81,896,469 $ 81,025,107
============================================================================================================
Balance of undistributed net investment income at end of period $ 76,599 $ $ 73,250
============================================================================================================
</TABLE>
27 See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (Unaudited) -- continued
Massachusetts Insured
---------------------------------------
Six months ended Year ended
8/31/97 2/28/97
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 1,690,507 $ 3,389,195
Net realized gain (loss) from investment transactions
(notes 1 and 4) (55,082) 60,733
Net change in unrealized appreciation or depreciation
of investments 248,274 (798,332)
- ------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 1,883,699 2,651,596
- ------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (190,989) (315,950)
Class B (863) --
Class C (21,013) (36,606)
Class R (1,473,176) (3,022,773)
- ------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (1,686,041) (3,375,329)
- ------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 1,862,168 5,375,981
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 1,201,697 2,394,008
- ------------------------------------------------------------------------------------------------------------------
3,063,865 7,769,989
- ------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (3,595,103) (7,653,434)
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions (531,238) 116,555
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (333,580) (607,178)
Net assets at the beginning of period 65,492,530 66,099,708
- ------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $65,158,950 $ 65,492,530
==================================================================================================================
Balance of undistributed net investment income at end of period $ 19,837 $ 15,371
==================================================================================================================
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
Notes to Financial Statements (Unaudited) Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
1. General Information and Significant Accounting Policies
Nuveen Flagship Multistate Trust II (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Massachusetts Municipal Bond Fund ("Massachusetts")
and the Nuveen Massachusetts Insured Municipal Bond Fund ("Massachusetts
Insured") (collectively, 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, Massachusetts and Massachusetts
Insured were renamed and reorganized into the Trust. Prior to the
reorganization, Massachusetts (formerly Nuveen Massachusetts Tax-Free Value
Fund) was a series of the Nuveen Tax-Free Bond Fund, Inc., and Massachusetts
Insured (formerly Nuveen Massachusetts Insured Tax-Free Value Fund) was a series
of the Nuveen Insured Tax-Free Bond Fund, Inc., each an open-end diversified
management investment company.
Each Fund seeks 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 their when-issued and delayed delivery purchase
commitments. At August 31, 1997, there were no such purchase commitments in
either Fund.
29
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt
securities when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and /or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to
the extent they exceed available capital loss carryovers.
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, each Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal and Massachusetts 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.
Insurance
Massachusetts Insured invests in municipal securities which are either covered
by insurance or backed by an escrow or trust account containing sufficient U.S.
Government or U.S. Government agency securities, both of which ensure the timely
payment of principal and interest. Each insured municipal security is covered by
Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance.
Such insurance does not guarantee the market value of the municipal securities
or the value of the Fund's shares. Original Issue Insurance and Secondary Market
Insurance remain in effect as long as the municipal securities covered thereby
remain outstanding and the insurer remains in business, regardless of whether
the Fund ultimately disposes of such municipal securities. Consequently, the
market value of the municipal securities covered by Original Issue Insurance or
Secondary Market Insurance may reflect value attributable to the insurance.
Portfolio Insurance is effective only while the municipal securities are held by
the Fund. Accordingly, neither the prices used in determining the market value
of the underlying municipal securities nor the net asset value of the Fund's
shares include value, if any, attributable to the Portfolio Insurance. Each
policy
30
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
of the Portfolio Insurance does, however, give the Fund the right to obtain
permanent insurance with respect to the municipal security covered by the
Portfolio Insurance policy at the time of its sale.
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a 1% contingent deferred sales charge ("CDSC") if
redeemed within 18 months of purchase. Class B Shares are sold without a sales
charge but incur annual 12b-1 distribution and service fees. An investor
purchasing Class B Shares agrees to pay a CDSC of up to 5% depending upon the
length of time the shares are held by the investor (CDSC is reduced to 0% at the
end of six years). Class B Shares convert to Class A Shares eight years after
purchase. Class C Shares are sold without a sales charge but incur annual 12b-1
distribution and service fees. An investor purchasing Class C Shares agrees to
pay a CDSC of 1% if Class C Shares are redeemed within one year of purchase.
Class R Shares are not subject to any sales charge or 12b-1 distribution or
service fees. Class R Shares are available for purchases of over $1 million and
in other limited circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Funds are authorized to invest in such
financial instruments, and may do so in the future, they did not make any such
investments during the six months ended August 31, 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.
31
<PAGE>
Notes to Financial Statements (Unaudited) - continued
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Massachusetts
-------------------------------------------------------------------------------
Six months ended Year ended
8/31/97 2/28/97
-------------------------------------------------------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 109,826 $ 1,081,887 323,756 $ 3,174,573
Class B 26,686 264,025 -- --
Class C 67,123 661,200 32,272 315,377
Class R 170,409 1,673,294 525,051 5,121,365
Shares issued to shareholders due to
reinvestment of distributions:
Class A 12,569 124,017 17,984 176,955
Class B 61 607 -- --
Class C 1,816 17,826 2,778 27,179
Class R 144,531 1,421,673 289,935 2,842,419
- ---------------------------------------------------------------------------------------------------------------------------------
533,021 5,244,529 1,191,776 11,657,868
- ---------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (67,050) (662,997) (45,026) (439,590)
Class B -- -- -- --
Class C (4,753) (46,460) (6,752) (65,787)
Class R (409,454) (4,031,245) (1,162,473) (11,369,650)
- ---------------------------------------------------------------------------------------------------------------------------------
(481,257) (4,740,702) (1,214,251) (11,875,027)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) 51,764 $ 503,827 (22,475) $ (217,159)
=================================================================================================================================
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
Massachusetts Insured
--------------------------------------------------------
Six months ended Year ended
8/31/97 2/28/97
--------------------------------------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------
Shares sold:
<S> <C> <C> <C> <C>
Class A 61,131 $ 631,514 288,422 $ 2,958,175
Class B 13,348 139,100 -- --
Class C 3,344 34,340 26,046 266,579
Class R 102,463 1,057,214 209,279 2,151,227
Shares issued to shareholders due to
reinvestment of distributions:
Class A 11,304 116,796 17,939 185,295
Class B 26 273 -- --
Class C 1,810 18,642 3,250 33,462
Class R 103,156 1,065,986 210,641 2,175,251
- -------------------------------------------------------------------------------------------
296,582 3,063,865 755,577 7,769,989
- -------------------------------------------------------------------------------------------
Shares redeemed:
Class A (47,494) (491,786) (91,941) (944,427)
Class B -- -- -- --
Class C (5,202) (53,232) (4,296) (43,930)
Class R (294,923) (3,050,085) (646,782) (6,665,077)
- -------------------------------------------------------------------------------------------
(347,619) (3,595,103) (743,019) (7,653,434)
- -------------------------------------------------------------------------------------------
Net increase (decrease) (51,037) $ (531,238) 12,558 $ 116,555
===========================================================================================
</TABLE>
3. Distributions to Shareholders
On September 9, 1997, the Funds declared dividend distributions from their tax-
exempt net investment income which were paid on October 1, 1997, to
shareholders of record on September 9, 1997, as follows:
<TABLE>
<CAPTION>
Massachusetts Massachusetts Insured
- -------------------------------------------------------------------------------------------
Dividend per share:
<S> <C> <C>
Class A $ .0435 $.0435
Class B .0375 .0370
Class C .0390 .0385
Class R .0450 .0450
- -------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the six months ended August
31, 1997, were as follows:
<TABLE>
<CAPTION>
Massachusetts Massachusetts Insured
- -------------------------------------------------------------------------------
<S> <C> <C>
Purchases
Investments in municipal securities $ 7,242,225 $ 5,135,472
Temporary municipal investments 3,900,000 2,500,000
Sales
Investments in municipal securities 6,531,682 6,014,898
Temporary municipal investments 3,900,000 2,300,000
- -------------------------------------------------------------------------------
</TABLE>
At August 31, 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 February 28, 1997, the Funds' last fiscal year end, the Funds had unused
capital loss carryforwards available for federal income tax purposes to be
applied against future capital gains, if any. If not applied, the carryovers
will expire as follows:
<TABLE>
<CAPTION>
Massachusetts Massachusetts Insured
- -------------------------------------------------------------------------------
<S> <C> <C>
Expiration year:
1999 $ -- $ 17,645
2003 275,030 172,689
2004 507,247 27,409
2005 156,261 --
- -------------------------------------------------------------------------------
Total $938,538 $ 217,743
===============================================================================
</TABLE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at August 31, 1997, were as follows:
<TABLE>
<CAPTION>
Massachusetts Massachusetts Insured
- -------------------------------------------------------------------------------
Gross unrealized:
<S> <C> <C>
appreciation $ 5,480,793 $ 4,411,010
depreciation (25,438) (10,751)
- -------------------------------------------------------------------------------
Net unrealized appreciation $ 5,455,355 $ 4,400,259
===============================================================================
</TABLE>
34
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
6. Management Fee and Other Transactions with Affiliates
Under the Trusts' investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Average daily net asset value Management fee
- ------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
- ------------------------------------------------------------------------------
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to 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 each Fund in order to limit total expenses to .75 of 1% of the
average daily net asset value of Massachusetts and .975 of 1% of the average
daily net asset value of Massachusetts Insured, excluding any 12b-1 fees
applicable to Class A, B and C Shares. The Adviser may voluntarily reimburse
additional expenses from time to time, which may be terminated at any time at
its discretion.
During the six months ended August 31, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $30,600 and $14,700 for
Massachusetts and Massachusetts Insured, respectively, of which approximately
$26,600 and $12,800, 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 August 31, 1997, the Distributor compensated
authorized dealers directly with approximately $16,000 and $4,900 in commission
advances at the time of purchase for Massachusetts and Massachusetts Insured,
respectively. 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 August 31,
1997, the Distributor retained approximately $1,800 and $800 in such 12b-1 fees
for Massachusetts and Massachusetts Insured, respectively. The remaining 12b-1
fees charged to the Funds were paid to compensate authorized dealers for
providing services to shareholders relating to their investments. The
Distributor also collected and retained approximately $7,600 of CDSC on
Massachusetts share redemptions during the six months ended August 31, 1997.
35
<PAGE>
Notes to Financial Statements -- continued
7. Composition of Net Assets
At August 31, 1997, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Massachusetts Massachusetts Insured
- -------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in $ 77,268,757 $ 61,010,602
Balance of undistributed net
investment income 76,599 19,837
Accumulated net realized gain (loss)
from investment transactions (904,242) (271,748)
Net unrealized appreciation
of investments 5,455,355 4,400,259
- -------------------------------------------------------------------------------
Net assets $ 81,896,469 $ 65,158,950
===============================================================================
</TABLE>
36
<PAGE>
Financial Highlights
37
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding is as follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
--------------------- ------------------
Net
Massachusetts Net realized and Dividends Net Total
Asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
beginning investment from investment from capital end of asset
Year ending February 28/29, of period income(b) investments income gains period value(a)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1998 (g) $ 9.89 $ .26 $ .04 $ (.26) $--- $ 9.93 3.08%
1997 9.94 .53 (.07) (.51) --- 9.89 4.73
1996 9.56 .51 .39 (.52) --- 9.94 9.62
1995 (c) 9.54 .25 .03 (.26) --- 9.56 3.05
Class B (3/97)
1998 (f) 9.88 .21 .08 (.22) --- 9.95 3.01
Class C (10/94)
1998 (g) 9.83 .23 .05 (.23) --- 9.88 2.92
1997 9.89 .45 (.08) (.43) --- 9.83 3.90
1996 9.51 .44 .39 (.45) --- 9.89 8.87
1995 (c) 9.28 .19 .25 (.21) --- 9.51 4.86
Class R (12/86)
1998 (g) 9.86 .27 .04 (.27) --- 9.90 3.18
1997 9.91 .54 (.06) (.53) --- 9.86 4.99
1996 9.54 .54 .38 (.55) --- 9.91 9.80
1995 9.94 .54 (.40) (.54) --- 9.54 1.64
1994 9.91 .54 .04 (.54) (.01) 9.94 5.96
1993 9.21 .56 .70 (.56) --- 9.91 14.21
1992 (d) 9.13 .15 .07 (.14) --- 9.21 2.44
1991 (e) 8.76 .58 .37 (.58) --- 9.13 11.19
1990 (e) 8.90 .59 (.15) (.58) --- 8.76 5.21
1989 (e) 8.60 .59 .30 (.59) --- 8.90 10.62
1988 (e) 8.25 .58 .35 (.58) --- 8.60 11.56
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales
charge and are not annualized.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(c) From commencement of class operations as noted.
(d) For the three months ending February 29.
(e) For the year ending November 30.
(f) From the commencement of class operations as noted through August
31, 1997.
(g) For the six months ending August 31, 1997.
38
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<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 asets 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>
$ 7,782 .98%* 5.20%* .95%* 5.23%* 8%
7,200 1.01 5.22 .99 5.24 10
4,290 1.17 5.04 1.00 5.21 6
1,067 1.87* 4.88* 1.00* 5.75* 17
266 1.72* 4.37* 1.70* 4.39* 8
1,551 1.53* 4.63* 1.50* 4.66* 8
913 1.74 4.50 1.73 4.51 10
638 2.24 3.96 1.75 4.45 6
147 3.40* 3.46* 1.75* 5.11* 17
72,298 .78* 5.40* .75* 5.43* 8
72,912 .77 5.46 .75 5.48 10
76,773 .82 5.42 .75 5.49 6
71,568 .77 5.75 .75 5.77 17
71,942 .81 5.32 .75 5.38 3
53,231 .87 5.79 .75 5.91 5
34,470 .71* 6.31* .71* 6.31* 5
31,150 .77 6.37 .75 6.39 19
20,829 .85 6.58 .75 6.68 23
15,513 1.09 6.30 .75 6.64 31
9,485 1.24 6.25 .75 6.74 55
- ----------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
Financial Highlights (Unaudited) -- continued
Selected data for a share outstanding is as follows.
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
-------------------------- ---------------------------
Net
Massachusetts Insured Net realized and Dividends Net Total
asset unrealized from tax- asset return
value Net gain (loss) exempt net Distributions value on net
beginning investment from investment from capital end of asset
Year ending February 28/29, of period income(b) investments income gains period value(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1998 (e) $ 10.38 $.26 $ .03 $ (.26) $ --- $10.41 2.85%
1997 10.49 .53 (.12) (.52) --- 10.38 4.02
1996 10.06 .51 .44 (.52) --- 10.49 9.59
1995 (c) 10.03 .25 .04 (.26) --- 10.06 2.99
Class B (3/97)
1997 (d) 10.36 .21 .07 (.22) --- 10.42 2.76
Class C (9/94)
1998 (e) 10.35 .23 .03 (.23) --- 10.38 2.56
1997 10.47 .45 (.13) (.44) --- 10.35 3.17
1996 10.04 .43 .44 (.44) --- 10.47 8.80
1995 (c) 9.91 .20 .14 (.21) --- 10.04 3.52
Class R (12/86)
1998 (e) 10.38 .27 .03 (.27) --- 10.41 2.94
1997 10.50 .54 (.12) (.54) --- 10.38 4.16
1996 10.06 .54 .44 (.54) --- 10.50 9.99
1995 10.45 .55 (.39) (.55) --- 10.06 1.77
1994 10.44 .54 -- (.53) --- 10.45 5.22
1993 9.65 .55 .79 (.55) --- 10.44 14.28
1992 9.36 .57 .30 (.58) --- 9.65 9.57
1991 9.14 .57 .22 (.57) --- 9.36 8.95
1990 8.96 .57 .18 (.57) --- 9.14 8.52
1989 9.03 .58 (.07) (.58) --- 8.96 5.84
1988 9.54 .58 (.51) (.58) --- 9.03 1.14
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any
sales charge and are not annualized.
(b) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(c) From commencement of class operations as noted.
(d) From the commencement of class operations as noted through
August 31, 1997.
(e) For the six months ending August 31, 1997.
40
<PAGE>
Nuveen Municipal Bond Funds
August 31, 1997 Semiannual Report
<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>
$ 7,741 1.02%* 5.00%* 1.02%* 5.00%* 8%
7,459 1.04 5.02 1.04 5.02 10
5,291 1.09 4.92 1.07 4.94 1
1,956 1.36* 5.13* 1.15* 5.34* 10
139 1.76* 4.16* 1.76* 4.16* 8
959 1.57* 4.45* 1.57* 4.45* 8
957 1.78 4.29 1.78 4.29 10
706 1.81 4.20 1.81 4.20 1
338 2.07* 4.41* 1.90* 4.58* 10
56,320 .82* 5.20* .82* 5.20* 8
57,076 .80 5.26 .80 5.26 10
60,102 .81 5.21 .81 5.21 1
57,137 .79 5.54 .79 5.54 10
58,255 .84 5.09 .84 5.09 3
47,098 .86 5.47 .86 5.47 2
28,189 .72 5.93 .72 5.93 5
15,625 .85 6.19 .85 6.19 6
8,649 1.20 5.94 .97 6.17 15
5,404 1.87 5.54 .97 6.44 41
4,895 1.75 5.37 .59 6.53 42
- --------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
Shareholder Information
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
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-Term
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 Municipal Bond 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) 621-7227.
42
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremmer
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
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
Shareholder Services, Inc.
Nuveen Investor Services
P.O. Box 5330
Denver, CO 80217-5330
(800) 621-7227
Legal Counsel
Fried, Frank, Harris,
Shriver & Jacobson
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, Illinois
43
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
trusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach--purchasing securities of strong companies and
communities that represent good long-term value--is the cornerstone of Nuveen's
investment philosophy. It is a careful, long-term strategy that offers the
potential for attractive returns with moderated risk. Successful value investing
begins with in-depth research and a discerning eye for marketplace opportunity.
Nuveen's team of investment professionals is backed by the discipline, resources
and expertise of almost a century of investment experience, including one of the
most recognized research departments in the industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of equity and fixed-income mutual funds,
unit trusts, exchange-traded funds, individual managed account services, and
cash management products, including many that generate tax-free income.
To find out more about how Nuveen investment products and services can help you
preserve your financial security, talk with your financial adviser, or call us
at (800) 621-7227 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) 621-7227
www.nuveen.com
