<PAGE>
NUVEEN
MUNICIPAL
BOND FUNDS
August 31, 1998
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Semiannual Report
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Dependable, tax-free income to help you keep more of what you earn.
[PHOTO APPEARS HERE]
California
California Insured
<PAGE>
Highlights
As of August 31, 1998
For Class A shares at net asset value
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Credit Quality Performance Highlights
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NUVEEN CALIFORNIA MUNICIPAL BOND FUND
[PIE CHART APPEARS HERE] . Distribution rate of 4.86% and SEC 30-day yield
of 4.28%*
AAA/US Guaranteed 48% . Taxable equivalent yield of 6.84%**
AA 4% . One-year total return of 7.91%
A 16%
BBB/NR 32%
NUVEEN CALIFORNIA INSURED MUNICIPAL BOND FUND
[PIE CHART APPEARS HERE] . Distribution rate of 4.74% and SEC 30-day yield
of 3.80%*
Insured 71% . Taxable-equivalent yield of 6.07%**
. One-year total return of 8.10%
U.S. GUARANTEED 29%
CONTENTS
1 Dear Shareholder
3 Portfolio Manager's Comments
5 California Performance Overview
6 California Insured Performance Overview
7 Portfolio of Investments
15 Statement of Net Assets
16 Statement of Operations
17 Statement of Changes in Net Assets
18 Notes to Financial Statements
22 Financial Highlights
24 Building Better Portfolios
25 Fund Information
* Distribution rate is computed by taking the most recent dividend per share,
multiplying it as needed to annualize it, and dividing by the appropriate
price per share (e.g., net asset value for purchases to be made without a
load such as reinvestments from Nuveen Unit Trusts, or the maximum public
offering price).
SEC yield is computed by dividing the net investment income per share earned
during the specified one month or 30-day period by the maximum offering price
per share on the last day of the period.
The distribution rate differs from yield and total return and therefore is
not intended to be a complete measure of performance. Distribution rate may
sometimes differ from yield because a Fund may be paying out more or less
than it is earning and because it may not include the effect of amortization
on bond premiums to the extent such premiums arise after the bonds were
purchased.
** For investors in the 37.4% federal and state income tax bracket. See your
funds' Performance Overview in this report for more information.
<PAGE>
[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.
Dear Shareholder
I'm pleased to report that over the past 12 months, your Nuveen Municipal Bond
Fund has continued to perform well, meeting its primary objectives of providing
competitive levels of tax-free income and after-tax return. The strong market in
fixed-income securities benefited from investors selecting quality investment
vehicles like municipal bond funds.
THE ECONOMY IN REVIEW
Over the past year, the markets endured bouts of volatility, as the Asian
financial crisis spilled over into emerging markets and affected economies
around the globe. Investors responded by seeking a haven from this market
volatility by choosing more conservative investments, such as municipal bond
funds. As interest rates on municipal bonds continued to trend downward, the
relative after-tax yields offered by these funds stimulated additional investor
interest.
In the coming months, we will continue to watch several key factors affecting
the future of the economy, including the strength of the dollar, employment
figures, corporate earnings reports, and further interest rate indications from
the Federal Reserve. These factors will influence the outlook for fixed-income
markets during the remainder of the year.
MUNICIPAL MARKET REVIEW
During the past 12 months, declining interest rates drove yields on 30-year
Treasuries to their lowest levels ever. The story in the municipal market,
however, was different. As yields on the long Treasury bond reached historic
lows, the yield on the Bond Buyer 40, an unmanaged index of long-term municipal
bonds, fell 42 basis points - from 5.53% to 5.11%. As a result, the ratio
between Treasury yields and municipal yields, as of August 31, stood at 92%,
compared with the more typical range of 80-82%. For investors, this meant that
municipal bonds offered 92% of the yield of a Treasury bond with comparable
characteristics - before taxes were taken into account. As shown in the
accompanying chart, municipal bonds have consistently provided very attractive
taxable-equivalent yields compared with the taxable yield on Treasury bonds.
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"Our expertise provides the key to building a well-balanced portfolio that
achieves your financial goals."
One of the main factors in the steep decline in Treasury yields was the strong
interest in these investments by international investors. As the economic
turmoil in Asia continued to spread to other economies world-wide and the dollar
strengthened against foreign currencies, the demand for U.S.-dollar denominated
Treasury securities increased.
In the municipal market, where foreign investors do not benefit from the tax
advantages of municipal bonds, low interest rates and a strong economy
generated high levels of new issuance and refinancing of existing bonds. The
first six months of 1998 saw $146 billion of new municipal issuance, up 51% over
the same period in 1997, and $42 billion in refunding activity, an increase of
118% over last year. The continued strength of the U.S. economy has brought
about improvements in the fundamental financial health of many municipalities
and boosted the overall credit quality of municipal bonds. During the third
quarter of this year, 3.5 municipal issuers received credit upgrades for every
municipal downgrade. This trend enhanced Nuveen's value oriented investment
approach, as the upgraded bonds increased in value, providing further benefits
to investors.
NUVEEN EXPERTISE IS KEY
The key to taking advantage of the exceptional values currently available in the
municipal market is the expertise of a proven investment manager. At Nuveen, we
recognize the value of time-tested expertise. The high level of recent municipal
issuance, for example, highlights the value of our expertise in the municipal
market, as our portfolio management teams carefully select the securities best
suited to help the funds achieve their investment objectives.
Nuveen has assembled a group of Premier Advisers(SM) that can provide years of
experience and time-tested expertise in a given asset class. In addition to
Nuveen Advisory Corporation, our Premier Adviser for tax-free investing, you can
rely on our growing group of other advisers to provide the expertise that makes
the difference in the equity market, including Institutional Capital Corporation
for value investing and Rittenhouse Financial Services for growth investing. For
more information about our funds managed by other Nuveen Premier Advisers,
including charges and expenses, contact your financial adviser for a prospectus
or Nuveen at (800) 621-7227. Read it carefully before you invest or send money.
We encourage you to talk with your financial adviser about the ways Nuveen's
expanding selection of investments, together with our expertise, can help you
establish the foundation of a diversified portfolio designed to build and
sustain long-term financial security. When seeking quality investment solutions
that withstand the test of time, you can count on Nuveen. Our expertise provides
the key to building a well-balanced portfolio that achieves your financial
goals.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
October 15, 1998
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Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
PORTFOLIO MANAGER'S COMMENTS
Portfolio Manager Bill Fitzgerald discusses fund performance, the municipal
market, and key investment strategies for the California funds for the period
covered by this report.
CALIFORNIA STATE UPDATE
The California economy has continued to expand, as it diversifies away from a
reliance on aerospace and defense spending into a variety of sectors, including
service industries, high technology, and financial services. This
diversification has broadened the state's economic base and strengthened its
position by reducing the risk that a downturn in one industry will result in
recession for the entire state, as happened in the early 1990's. While
California's heavy use of Asian intermediaries in the manufacturing process has
caused recent concern about a potential slowdown in some industries, in light of
Asia's recent financial troubles, the overall picture is strong. Employment has
reached levels unseen since before the recession, and the state government is in
good shape fiscally, with improved cash flows and a positive balance sheet. With
increasing state revenues, California is now trying to remedy some of the
financial stress it placed on cities and counties during the recession when it
took over local revenue and passed along expenses. The state's improving credit
was recently recognized with an upgrade by Moody's to AA3. S&P maintains its A+
rating.
In response to low interest rates, the expanding economy, and California's
continued population growth, the state's municipal bond issuance during the
first eight months of 1998 increased by 65% over the same period in 1997.
Issuance by the land-based financing sector has been particularly strong, as
real estate values in the state continue to improve, and development activity
accelerates in this favorable environment. Supply is expected to remain heavy
over the next few years due to the continuing need for infrastructure financing,
school spending, and new prison construction. In recent months, volatility in
the equity markets, combined with the high level of California taxes, has
boosted demand for municipal bonds. Demand from institutional buyers such as
insurance companies and hedge funds has also increased, as these investors
recognize the exceptionally attractive values currently offered by these bonds.
FUND PERFORMANCE
Despite the declining interest rate environment of the past year, the Nuveen
California Municipal Bond Fund and the Nuveen California Insured Municipal Bond
Fund both provided Class A share investors with attractive taxable-equivalent
yields of 6.84% and 6.07%, respectively, based on net asset value for the
combined federal and state income tax rate of 37.4%.
Over the past year, the change in income earned by these portfolios, due to
declining interest rates, necessitated dividend reductions. For example,
higher-yielding bonds that were called out of the portfolios were replaced with
bonds paying lower interest rates, reflecting current market conditions.
However, as Tim mentioned in his letter to shareholders, these funds still
provide competitive levels of tax-free income, especially when considering their
after-tax yields.
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For the year ended August 31, 1998, the Class A share total return on net asset
value for the California Municipal Bond Fund was 7.91%, which is equivalent to a
taxable return of 11.01% for investors in the combined 37.4% federal and state
income tax bracket. The total return on net asset value for the California
Insured Municipal Bond Fund's Class A shares was 8.10%, which is equivalent to a
taxable return of 11.14% for investors in the combined 37.4% federal and state
income tax bracket.
Those total returns compare to the annual returns of 8.91% and 9.31% posted by
the Lehman Brothers California Municipal Bond and California Insured Municipal
Bond Indexes, respectively. These indexes are comprised of a broad range of
investment-grade or insured municipal bonds and do not reflect any initial or
ongoing expenses.
The performance of the funds was impacted largely by their relatively short
durations. Duration measures a bond fund's price volatility, or reaction to
interest rate movements. The shorter the duration, the less sensitive the fund
is to interest rate changes. When compared to the longer duration for the Lehman
Indexes (7.95 years for the Lehman California Municipal Bond Index and 8.88
years for the Lehman California Insured Municipal Bond Index versus 6.35 years
for the Nuveen California Municipal Bond Fund and 5.81 for the Nuveen California
Insured Municipal Bond Fund), the Nuveen California funds will experience a
smaller impact from a declining interest rate environment because they are
better cushioned against market volatility.
KEY STRATEGIES
Overall, our strategies have been to improve the portfolios' call protection, to
enhance yield, and to identify opportunities to buy bonds that we believe have
significant appreciation potential.
First, we took steps to sell several blocks of securities that had been pre-
refunded and were subject to upcoming calls. Second, a number of our current-
coupon holdings were experiencing high demand in the retail market, which
allowed us to sell those securities at attractive prices and reinvest the
proceeds in similar bonds with attractive yields. Third, Nuveen continued to
implement its value investing approach to select bonds that were undervalued in
the market, which would result in a better chance for capital appreciation.
OUTLOOK FOR THE FUTURE
We will continue to manage the funds with an eye toward undervalued securities
that provide attractive interest income exempt from federal and state income
taxes as is consistent with preservation of capital.
To achieve this goal, we will continue to work with Nuveen's research team,
which is a valuable asset in our search for undervalued securities.
Specifically, we will work to improve the funds' structure, looking for bonds
with better call protection and attractive yields.
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Nuveen California Municipal Bond Fund
PERFORMANCE OVERVIEW
As of August 31, 1998
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
9/97 0.0455
10/97 0.0455
11/97 0.0455
12/97 0.0455
1/98 0.0455
2/98 0.0455
3/98 0.0455
4/98 0.0445
5/98 0.0445
6/98 0.0445
7/98 0.0445
8/98 0.0445
Portfolio Statistics
<TABLE>
SHARE CLASS A B C R
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<S> <C> <C> <C> <C>
Inception Date 9/94 3/97 9/94 7/86
Net Asset Value $10.99 $10.98 $10.99 $11.00
Total Net Assets ($000) $260,382
Average Weighted Maturity (Years) 21.98
Modified Duration (Years) 6.35
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</TABLE>
Annualized Total Return/1/
<TABLE>
SHARE CLASS A(NAV) A(Offer) B C R
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<S> <C> <C> <C> <C> <C>
1-Year 7.91% 3.39% 6.95% 7.32% 8.04%
5-Year 5.60% 4.71% 4.90% 4.93% 5.89%
10-Year 7.88% 7.42% 7.32% 7.14% 8.16%
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</TABLE>
Tax-Free Yields
<TABLE>
SHARE CLASS A(NAV) A(Offer) B C R
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<S> <C> <C> <C> <C> <C>
Distribution Rate 4.86% 4.66% 4.15% 4.31% 5.07%
SEC 30-Day Yield 4.28% 4.10% 3.53% 3.73% 4.48%
Taxable Equivalent Yield/2/ 6.84% 6.55% 5.64% 5.96% 7.16%
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</TABLE>
Top 5 Sectors (as a % of total investments)
<TABLE>
<S> <C>
Tax Obligation (Limited) 33%
U.S. Guaranteed 16%
Housing (Multifamily) 15%
Health Care 10%
Housing (Single Family) 8%
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</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 B shares automatically convert to
Class A shares eight years after purchase. Class C shares have a 1% CDSC
for redemptions within one year which is not reflected in the one-year
total return.
2 Based on SEC yield and a combined federal and state income tax rate of
37.4%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
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Nuveen California Insured Municipal Bond Fund
PERFORMANCE OVERVIEW
As of August 31, 1998
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
9/97 0.045
10/97 0.045
11/97 0.045
12/97 0.045
1/98 0.045
2/98 0.045
3/98 0.045
4/98 0.044
5/98 0.044
6/98 0.044
7/98 0.044
8/98 0.044
Portfolio Statistics
<TABLE>
SHARE CLASS A B C R
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<S> <C> <C> <C> <C>
Inception Date 9/94 3/97 9/94 7/86
Net Asset Value $11.13 $11.14 $11.06 $11.11
Total Net Assets ($000) $237,668
Average Weighted Maturity (Years) 22.36
Modified Duration (Years) 5.81
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</TABLE>
Annualized Total Return/1/
<TABLE>
SHARE CLASS A(NAV) A(Offer) B C R
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<S> <C> <C> <C> <C> <C>
1-Year 8.10% 3.60% 7.38% 7.61% 8.30%
5-Year 5.54% 4.64% 4.77% 4.73% 5.75%
10-Year 8.01% 7.55% 7.39% 7.20% 8.25%
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</TABLE>
Tax-Free Yields
<TABLE>
SHARE CLASS A(NAV) A(Offer) B C R
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<S> <C> <C> <C> <C> <C>
Distribution Rate 4.74% 4.54% 3.99% 4.18% 4.91%
SEC 30-Day Yield 3.80% 3.64% 3.05% 3.25% 4.00%
Taxable Equivalent Yield/2/ 6.07% 5.81% 4.87% 5.19% 6.39%
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</TABLE>
Top 5 Sectors (as a % of total investments)
<TABLE>
<S> <C>
Tax Obligation (Limited) 31%
U.S. Guaranteed 26%
Housing (Multifamily) 8%
Housing (Single Family) 7%
Tax Obligation (General) 7%
</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 B shares automatically convert to
Class A shares eight years after purchase. Class C shares have a 1% CDSC
for redemptions within one year which is not reflected in the one-year
total return.
2 Based on SEC yield and a combined federal and state income tax rate of
37.4%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
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PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
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<S> <C> <C> <C> <C>
EDUCATION AND CIVIC ORGANIZATIONS 4.6%
$ 960,000 California Educational Facilities Authority, Pooled College and 4/07 at 102 Baa2 $1,045,027
University Projects Revenue Bonds, Series 1997B (Southern California
College of Optometry), 6.300%, 4/01/21
905,000 California State Public Works Board, High Technology Facilities Lease, No Opt. Call Aa3 1,014,605
The Regents of the University of California, San Diego Facility,
7.375%, 4/01/06
1,500,000 Certificates of Participation, California Statewide Community 12/06 at 105 N/R 1,670,610
Development Authority,
San Diego Space and Science Foundation, Series 1996, 7.500%, 12/01/26
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 Aa3 3,621,730
4,335,000 6.000%, 11/01/21 11/03 at 102 Aa3 4,634,982
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HEALTH CARE 9.7%
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 3,538,380
3,635,000 7.500%, 4/01/22 4/05 at 102 A 4,307,875
3,750,000 California Health Facilities Financing Authority, Insured Revenue 8/06 at 102 AAA 4,077,038
Bond (Sutter/CHS), 5.875%, 8/15/16
5,080,000 California Health Facilities Financing Authority, Hospital Revenue 5/03 at 102 A- 5,278,272
Bonds (Downey Community Hospital), Series 1993, 5.750%, 5/15/15
3,380,000 California Health Facilities Financing Authority, Kaiser Permanente, 12/00 at 102 A 3,651,042
Revenue Bonds, 1990 Series A, 7.000%, 12/01/10
1,755,000 Central Joint Powers Health Financing Authority, Certificates of 2/03 at 100 Baa1 1,663,722
Participation, Series 1993 (Community Hospitals of Central California),
5.000%, 2/01/23
2,475,000 City of Loma Linda, California, Hospital Revenue Bonds (Loma Linda 12/03 at 102 BBB 2,643,201
University Medical Center Project), Series 1993-A, 6.000%, 12/01/06
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HOUSING/MULTIFAMILY 14.8%
6,570,000 California Housing Finance Agency, Multifamily Housing Revenue Bonds, 8/04 at 100 AAA 6,982,399
1996 Series A, 6.050%, 8/01/27
2,000,000 California Statewide Communities Development Authority, Apartment 7/08 at 101 BBB 2,034,280
Development Revenue Bonds (Irvine Apartments), 5.250%, 5/15/25
2,905,000 California Statewide Communities Development Authority, Senior Lien 9/06 at 100 AAA 3,116,339
Multifamily Housing Revenue Bonds (Monte Vista Terrace), Series
1996A, 6.375%, 9/01/20
3,000,000 City of Duarte, Multifamily Housing Revenue Bonds, 1997 Series A 11/07 at 102 AAA 3,168,960
(Heritage Park Apartments), 5.850%, 5/01/30 (Alternative Minimum Tax)
4,840,000 The Community Redevelopment Agency of the City of Los Angeles, 6/05 at 105 AAA 5,603,607
California, Multifamily Housing Revenue Refunding Bonds, 1995
Series A (Angelus Plaza Project), 7.400%, 6/15/10
4,500,000 The City of Los Angeles, Multifamily Housing Revenue Bonds (Earthquake 7/07 at 102 AAA 4,742,775
Rehabilitation Project), Series 1997C, 5.900%, 1/01/30
(Alternative Minimum Tax)
3,285,000 City of Riverside, California, Multifamily Housing Revenue Bonds (Fannie 7/02 at 100 AAA 3,433,712
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 Revenue Bonds (Fannie 7/02 at 100 AAA 4,186,306
Mae Pass-Through Certificate Program/Palm Shadows Apartments Project),
1992 Series A, 6.500%, 1/01/18
</TABLE>
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PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN CALIFORNIA MUNICIPAL BOND FUND (continued)
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
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<S> <C> <C> <C> <C>
HOUSING/MULTIFAMILY (CONTINUED)
$ 2,080,000 City of Salinas, Housing Facility Refunding Revenue Bonds, Series 7/04 at 102 AAA $2,244,008
1994A (GNMA Collateralized Villa Serra Project), 6.500%, 7/20/17
3,000,000 Housing Authority of the County of Santa Cruz, Multifamily Housing 7/00 at 102 AAA 3,183,150
Refunding Revenue Bonds, Series 1990A (Fannie Mae Collateralized),
7.750%, 7/01/23
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HOUSING/SINGLE FAMILY 8.2%
2,250,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 2/07 at 102 AAA 2,399,985
1997 Series B, 6.100%, 2/01/28 (Alternative Minimum Tax)
4,750,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 8/05 at 102 AAA 5,071,243
1995 Series F, 5.950%, 8/01/14
2,850,000 California Rural Home Mortgage Finance Authority, Single Family No Opt. Call AAA 3,286,079
Mortgage Revenue Bonds (Mortgage-Backed Securities Program),
1997 Series A, 7.000%, 9/01/29 (Alternative Minimum Tax)
1,200,000 City of Corona (California), Single Family Mortgage Revenue Bonds, 11/06 at 102 Aaa 1,229,916
Series 1996A (Senior), 6.050%, 5/01/27
400,000 City of Corona (California), Single Family Mortgage Revenue Bonds, 11/06 at 102 A 430,116
Series 1996B (Subordinate), 6.300%, 11/01/28
5,000,000 County of San Bernardino (California), Single Family Home Mortgage 5/07 at 103 AAA 5,355,900
Revenue Bonds (Mortgage-Backed Securities Program), 1997 Series A,
6.200%, 5/01/21 (Alternative Minimum Tax)
24,670,000 County of San Bernardino (California), Single Family Home Mortgage 5/07 at 22 9/16 AAA 3,472,796
Revenue Bonds (Mortgage-Backed Securities Program), 1997 Series A,
0.000%, 5/01/31 (Alternative Minimum Tax)
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LONG TERM CARE 6.1%
1,500,000 Insured Certificates of Participation (Channing House), Series 1/01 at 102 A+ 1,613,385
1991A, ABAG Finance Authority for Nonprofit Corporations, 7.125%, 1/01/21
9,000,000 Revenue Refunding Certificates of Participation (American Baptist 10/07 at 102 BBB 9,353,070
Homes of the West Facilities Project), Series 1997A, 5.850%, 10/01/27
2,500,000 Certificates of Participation, California Statewide Communities 11/04 at 102 A+ 2,766,600
Development Authority (Solheim Lutheran Home), 6.500%, 11/01/17
2,000,000 Certificates of Participation, Insured Health Facility Revenue 2/01 at 102 A 2,126,620
(Sierra Sunrise Lodge), Series 1991A, 6.750%, 2/01/21
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TAX OBLIGATION/GENERAL 0.7%
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 13/32 AAA 1,196,032
2,080,000 0.000%, 8/01/21 8/04 at 36 1/8 AAA 554,112
- -----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED 32.7%
4,825,000 Certificates of Participation (1991 Financing Project), County of 9/06 at 102 AAA 5,300,697
Alameda, California, Alameda County Public Facilities Corporation,
6.000%, 9/01/21
1,365,000 Brea, California, Community Facilities District Special Tax, Olinda 3/06 at 102 N/R 1,380,042
Heights No. 1997-1, 5.875%, 9/01/28
7,000,000 Brea Redevelopment Agency (Orange County, California), 1993 Tax 8/03 at 102 AAA 7,241,500
Allocation Refunding Bonds (Redevelopment Project AB), 5.500%, 8/01/17
Brentwood, California, Infrastructure Financing Authority, Infrastructure
Revenue:
1,250,000 5.750%, 9/02/18 3/99 at 103 N/R 1,244,850
2,500,000 5.875%, 9/02/28 3/99 at 103 N/R 2,502,450
</TABLE>
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8
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/LIMITED (CONTINUED)
$ 2,000,000 Carson Redevelopment Agency (California), Redevelopment Project 10/03 at 102 BBB+ $ 2,103,960
Area No. 1, Tax Allocation Bonds, Series 1993, 6.000%, 10/01/16
2,500,000 Fontana Public Financing Authority (San Bernardino County, 9/00 at 102 BBB 2,652,325
California), Tax Allocation Revenue Bonds (North Fontana Redevelopment
Project), 1990 Series A, 7.250%, 9/01/20
1,045,000 Irvine, California, Impact Bond Act, Assessment District No. 3/99 at 102 N/R 1,052,315
94-15, 5.800%, 9/02/20
2,000,000 La Mirada, California, Redvelopment Agency, Special Tax, 10/08 at 102 N/R 2,022,360
Community Facilities District No. 89-1, 5.700%, 10/01/20
2,000,000 Los Angeles County Transportation Commission (California), Sales 7/99 at 102 AA 2,098,400
Tax Revenue Refunding Bonds, Series 1989-A, 7.400%, 7/01/15
1,260,000 Marysville Community Development Agency, Marysville Plaza 3/02 at 102 Baa3 1,376,525
Project, 1992 Tax Allocation Refunding Bonds (Bank Qualified),
7.250%, 3/01/21
6,240,000 Milpitas, California, Impact Bond Act, General Obligation Bonds, 3/99 at 103 N/R 6,306,269
Local Impact District No. 20, Series A, 5.700%, 9/02/18
4,300,000 Orange County Development Agency, Santa Ana Heights Project 9/03 at 102 BBB 4,558,043
Area, 1993 Tax Allocation Revenue Bonds (California), 6.125%, 9/01/23
Community Facilities District No. 88-1 of the City of Poway, California
(Parkway BusinessCentre), Special Tax Refunding Bonds, Series 1998:
715,000 6.500%, 8/15/10 8/08 at 102 N/R 777,348
2,000,000 6.750%, 8/15/15 8/08 at 102 N/R 2,193,500
1,645,000 City of Rancho Cucamoga, Assessment District No. 93-1 (Masi 9/98 at 103 N/R 1,697,772
Plaza), Limited Obligation Improvement Bonds, 6.250%, 9/02/22
1,385,000 Redding Joint Powers Financing Authority, Lease Revenue Bonds 6/03 at 102 A 1,486,174
(Capital Improvement Projects), Series 1993, 6.250%, 6/01/23
1,000,000 County of Sacramento, Laguna Creek Ranch Community Facilities 12/07 at 102 N/R 1,010,580
District No. 1, Improvement Area No. 1 Special Tax Refunding Bonds
(Laguna Creek Ranch), 5.700%, 12/01/20
2,300,000 Limited Obligation Refunding Bonds, City of Salinas, 3/99 at 103 N/R 2,390,873
Consolidated Refunding District 94-3,
Series No. A-181, Monterey County, California, 7.400%, 9/02/09
2,000,000 San Dimas Housing Authority, Mobile Home Park Revenue Bonds 7/08 at 102 N/R 1,971,600
(Charter Oak Mobile Home Estates Acquisition Project), Series 1998A,
5.700%, 7/01/28
5,000,000 City and County of San Francisco, Redevelopment Financing 8/03 at 103 A 4,981,250
Authority, 1993 Series C, Tax Allocation Revenue Bonds
(San Francisco Redevelopment Projects), 5.125%, 8/01/18
7,090,000 Redevelopment Agency of the City of San Marcos, Tax Allocation 10/07 at 102 A 7,553,686
Bonds (1997 Affordable Housing Project), Series 1977A, 6.000%,
10/01/27 (Alternative Minimum Tax)
1,000,000 Certificates of Participation, Series 1991, San Mateo County 5/99 at 102 A+ 1,038,820
Board of Education (Administration Building Project), 7.100%, 5/01/21
4,000,000 Shafter Joint Powers Financing Authority, Lease Revenue Bonds, 1/07 at 101 BBB+ 4,274,320
1997 Series A, (Community Correctional Facility Acquisition Project),
6.050%, 1/01/17
City of Stockton, Mello-Roos Revenue Bonds, Series 1997A,
Community Facilities District No. 90-2 (Brookside Estates):
880,000 5.850%, 8/01/09 8/05 at 102 N/R 918,949
1,000,000 6.200%, 8/01/15 8/05 at 102 N/R 1,048,400
4,225,000 Stockton, California, Impact Bond Act, Weber/Sperry Series 232, No Opt. Call N/R 4,227,113
5.650%, 9/02/13
2,000,000 Taft Public Financing Authority, Lease Revenue Bonds, 1997 1/07 at 101 BBB+ 2,137,160
Series A (Community Correctional Facility Acquisition Project),
6.050%, 1/01/17
1,100,000 Certificates of Participation (1992 Financing Project), Series 11/02 at 102 A3 1,195,337
B, County of Tulare, Tulare County Public Facilities Corporation,
6.875%, 11/15/12
4,200,000 Certificates of Participation (Capital Improvement Program), 2/06 at 102 AAA 4,620,294
1996 Series A, County of Tulare, California, 6.000%, 2/15/16
2,000,000 Vallejo Public Financing Authority, 1998 Limited Obligation No Opt. Call N/R 2,035,880
Revenue Bonds (Fairgrounds Drive Assessment District Refinancing),
5.700%, 9/02/11
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-----
9
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN CALIFORNIA MUNICIPAL BOND FUND (continued)
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSPORTATION 4.6%
$ 5,000,000 California Statewide Communities Development Authority, Special 10/07 at 102 Baa3 $ 5,159,400
Facilities Lease Revenue Bonds, 1997 Series A, 5.700%, 10/01/33
(Alternative Minimum Tax)
7,150,000 Foothill/Eastern Transportation Corridor Agency, Toll Road 1/05 at 100 Baa 6,877,585
Revenue Bonds, Series 1995A, 5.000%, 1/01/35
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED 15.6%
2,035,000 Certificates of Participation (1991 Capital Improvement 10/01 at 102 Baa*** 2,289,843
Project), Bella Vista Water District (California), 7.375%, 10/01/17
2,000,000 California Health Facilities Financing Authority, Health 5/00 at 102 Aaa 2,164,740
Facility Revenue Bonds (Health Dimensions, Incorporated), 1990
Series A, 7.500%, 5/01/15 (Pre-refunded to 5/01/00)
2,000,000 California Health Facilities Financing Authority, Health 10/00 at 102 N/R*** 2,189,280
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 9,568,559
Revenue Bonds (The Trustees of The California State University),
1992 Series A (Various California State University Projects),
6.700%, 10/01/17 (Pre-refunded to 10/01/02)
3,000,000 Certificates of Participation, California Statewide Communities 7/04 at 102 AA*** 3,445,200
Development Authority, St. Joseph Health System Obligated Group,
6.500%, 7/01/15 (Pre-refunded to 7/01/04)
2,000,000 Hospital Revenue Certificates of Participation (Desert Hospital 7/00 at 102 AAA 2,198,440
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 Costa 6/00 at 102 AAA 2,117,076
Counties, California), Water System Subordinated Revenue Bonds,
Series 1990, 7.500%, 6/01/18 (Pre-refunded to 6/01/00)
4,000,000 East Bay Municipal Utility District (Alameda and Contra Costa 12/01 at 102 AAA 4,406,600
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 3,254,120
Revenue Bonds, Issue of 1988, 7.600%, 10/01/18
4,595,000 Los Angeles County Public Works Finance Authority, Revenue 10/04 at 102 AA*** 5,217,760
Bonds, Series 1994A (Los Angeles County Regional Park and Open
Space District), 6.125%, 10/01/10 (Pre-refunded to 10/01/04)
1,500,000 Community Facilities District No. 1 of the North City West 9/99 at 102 Aaa 1,594,830
School Facilities Financing Authority, Special Tax Bonds, Series
1989A, 7.850%, 9/01/19 (Pre-refunded to 9/01/99)
2,000,000 Certificates of Participation (1990 Financing Project), Sonoma 7/00 at 102 A+*** 2,172,360
County Office of Education, 7.375%, 7/01/20 (Pre-refunded to 7/01/00)
- -----------------------------------------------------------------------------------------------------------------------------------
UTILITIES 0.7%
1,660,000 Salinas Valley Solid Waste Authority, Revenue Bonds, Series 8/02 at 102 BBB 1,700,337
1997, 5.800%, 8/01/27 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
$264,570,000 Total Investments (cost $234,751,228) 97.7% 254,452,796
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities 2.3% 5,929,053
---------------------------------------------------------------------------------------------------------------
Net Assets 100% $260,381,849
---------------------------------------------------------------------------------------------------------------
</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.
-----
10
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN CALIFORNIA INSURED MUNICIPAL BOND FUND
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION AND CIVIC ORGANIZATIONS - 2.1%
$4,500,000 California Educational Facilities Authority, Revenue Bonds
(University of San Francisco), Series 1996, 6.000%, 10/01/26 10/06 at 102 AAA $ 4,959,270
- ----------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 6.0%
5,000,000 California Health Facilities Authority, Kaiser Permanente
Medical Care Program, Semiannual Tender Revenue Bonds,
Series 1983, 5.450%, 10/01/13 10/01 at 101 A 5,123,950
8,500,000 California Statewide Communities Development Authority,
Sutter Health Obligated Group, Certificates of Participation, 8/02 at 102 AAA 9,246,045
6.125%, 8/15/22
- ----------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 7.9%
6,340,000 California Housing Finance Agency, Housing Revenue Bonds
(Insured), 1991 Series B, 6.850%, 8/01/23 2/02 at 102 AAA 6,763,512
2,545,000 California Housing Finance Agency, Multifamily Housing Revenue
Bonds, 1996 Series A, 6.050%, 8/01/27 8/04 at 100 AAA 2,704,750
3,875,000 The Community Redevelopment Agency of the City of Los Angeles,
California, Multifamily Housing Revenue Refunding Bonds, 1995 6/05 at 105 AAA 4,486,359
Series A (Angelus Plaza Project), 7.400%, 6/15/10
2,555,000 City of Napa Mortgage Revenue Refunding Bonds, Series 1992A
(FHA Insured Mortgage Loan - 7/02 at 102 AAA 2,723,656
Creekside Park Apartments Project), 6.625%, 7/01/24
2,000,000 City of Napa Mortgage Revenue Refunding Bonds, Series 1994A
(FHA Insured Mortgage Loan - 7/04 at 101 AAA 2,151,240
Creekside Park II Apartments Project), 6.625%, 7/01/25
- ----------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 7.3%
4,750,000 California Housing Finance Agency, Single Family Mortgage
Bonds, 1997 Series A, 2/07 at 102 AAA 5,051,673
6.050%, 8/01/26 (Alternative Minimum Tax)
5,000,000 California Housing Finance Agency, Home Mortgage Revenue Bonds,
1997 Series E, 8/07 at 102 AAA 5,345,200
6.100%, 8/01/29 (Alternative Minimum Tax)
5,000,000 California Housing Finance Agency, Home Mortgage Revenue Bonds,
1995 Series F, 8/05 at 102 AAA 5,338,150
5.950%, 8/01/14
1,500,000 California Housing Finance Agency, Home Mortgage Revenue Bonds,
1996 Series E, 2/06 at 102 AAA 1,598,070
6.150%, 8/01/25 (Alternative Minimum Tax)
45,000 Thousand Oaks Redevelopment Agency (Ventura County, California),
Single Family Mortgage 1/99 at 100 AAA 45,272
Revenue Refunding Bonds, Issue of 1986, 7.900%, 1/01/16
- ----------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 6.9%
5,000,000 State of California, Various Purpose General Obligation Bonds,
5.500%, 4/01/19 4/03 at 102 AAA 5,185,350
5,000,000 State of California, Veterans General Obligation Bonds, Series
BH, 5.500%, 12/01/24 12/03 at 102 AAA 5,134,750
(Alternative Minimum Tax)
Golden West Schools Financing Authority, California Revenue
School Refunding Program, Series A:
1,520,000 0.000%, 2/01/18 8/13 at 75 29/32 AAA 534,523
2,560,000 0.000%, 8/01/18 8/13 at 73 3/8 AAA 870,221
1,500,000 0.000%, 2/01/19 8/13 at 70 59/64 AAA 491,460
2,650,000 0.000%, 2/01/19 8/13 at 68 9/16 AAA 839,282
2,755,000 0.000%, 8/01/20 8/13 at 63 27/32 AAA 812,560
1,430,000 0.000%, 2/01/21 8/13 at 61 45/64 AAA 407,007
2,855,000 0.000%, 8/01/21 8/13 at 59 5/8 AAA 785,182
3,040,000 Sulphur Springs Union School District (County of Los Angeles,
California), General Obligation No Opt. Call AAA 1,320,637
Bonds, Election 1991, Series A, 0.000%, 9/01/15
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
----
11
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN CALIFORNIA INSURED MUNICIPAL BOND FUND (continued)
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/LIMITED - 31.4%
$ 4,825,000 Certificates of Participation (1991 Financing Project), County 9/06 at 102A AAA $5,300,697
of Alameda, California, Alameda County Public Facilities Corporation,
6.000%, 9/01/21
3,000,000 Alameda County, California (CTFS Partners), Alameda County 6/03 at 101 AAA 3,051,630
Medical Center Project, 5.300%, 6/01/26
20,000,000 Anaheim Public Financing Authority, Lease Revenue Bonds (Anaheim No Opt. Call AAA 3,627,200
Public Improvements Project), Senior Lease Revenue Bonds, 1997
Series C, 0.000%, 9/01/32
1,225,000 Redevelopment Agency of the City of Barstow, Central Redevelopment No Opt. Call AAA 1,546,575
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 7,946,402
California), 1995 Tax Allocation Refunding Revenue Bonds,
6.300%, 8/01/25
230,000 California Public Capital Improvements Financing Authority (a Joint 3/02 at 100 AAA 235,428
Powers Agency), Revenue Bond (Pooled Project), Series 1988B, 8.100%,
3/01/18
7,000,000 Chino Unified School District, Certificates of Participation (1995 9/05 at 102 AAA 7,767,970
Master Lease Program), 6.125%, 9/01/26
850,000 Redevelopment Agency of the City of Concord, Central Concord 7/00 at 100 AAA 878,781
Redevelopment Project, Tax Allocation Bonds, Series 1988-2,
7.875%, 7/01/07
3,865,000 Fallbrook Sanitary District (San Diego County, California), 2/01 at 100 AAA 4,085,460
1991 Certificates of Participation (Wastewater Facilities Refunding
Project), 6.600%, 2/01/13
2,500,000 Fontana Public Financing Authority (San Bernardino County, 9/00 at 102 AAA 2,695,175
California), Tax Allocation Revenue Bonds (North Fontana
Redevelopment Project), 1990 Series A, 7.000%, 9/01/10
3,000,000 Gilroy Unified School District, Santa Clara County, California, 9/04 at 102 AAA 3,353,820
Certificates of Participation, Series 1994, 6.250%, 9/01/12
1,000,000 La Quinta Redevelopment Agency, Tax Allocation Refunding Bonds, No Opt. Call AAA 1,278,240
Series 1994 (Project Area No. 1), 7.300%, 9/01/12
7,040,000 Norwalk Community Facilities Financing Authority (Los Angeles 9/05 at 102 AAA 7,821,370
County, California), Tax Allocation Refunding Revenue Bonds, 1995
Series A, 6.050%, 9/01/25
8,500,000 County of Orange, California, 1996 Recovery Certificates of 7/06 at 102 AAA 9,349,405
Participation, Series A, 6.000%, 7/01/26
8,000,000 Pomona Public Financing Authority, 1998 Refunding Revenue Bonds, 2/08 at 102 AAA 7,881,200
Series W Pomona Redevelopment Project), 5.000%, 2/01/30
1,750,000 County of Riverside Asset Leasing Corporation, Leasehold Revenue 6/12 at 101 AAA 1,930,163
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 2,583,135
1,000,000 6.750%, 7/01/24 7/04 at 102 AAA 1,145,500
2,250,000 Redevelopment Agency of the City of San Jose, Merged Area 2/04 at 102 AAA 2,156,085
Redevelopment Project, Tax Allocation Bonds, Series 1993, 4.750%,
8/01/24
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 3.8%
1,455,000 City of Palm Springs Financing Authority (California), Airport Revenue 1/08 at 102 AAA 1,508,966
Bonds (Palm Springs Regional Airport), Series 1998, 5.500%, 1/01/28
(Alternative Minimum Tax)
5,000,000 Airports Commission, City and County of San Francisco, California, 5/06 at 101 AAA 5,233,350
San Francisco International Airport, Second Series Revenue Bond,
Issue 13B, 5.625%, 5/01/21 (Alternative Minimum Tax)
2,000,000 Southern California Rapid Transit District, Certificates of 1/01 at 102 1/2 AAA 2,204,640
Participation (Workers Compensation
Funding Program), 7.500%, 7/01/05
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 28.1%
7,000,000 City of Big Bear Lake, California, 1992 Water Revenue Refunding 4/02 at 102 AAA 7,744,240
Bonds, 6.375%, 4/01/22 (Pre-refunded to 4/01/02)
</TABLE>
------
12
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GUARANTEED (continued)
$ 3,525,000 Brea Public Financing Authority (Orange County, California), 1991 Tax
Allocation Revenue Bonds, Series A (Redevelopment Project AB), 7.000%,
8/01/15 (Pre-refunded to 8/01/01) 8/01 at 102 AAA $ 3,915,851
3,000,000 Calaveras County Water District (California), Certificates of Participation
(1991 Ebbetts Pass Water System Improvements Project), 6.900%, 5/01/16
(Pre-refunded to 5/01/01) 5/01 at 102 AAA 3,302,730
1,000,000 California Educational Facilities Authority, Revenue Bonds
(Pepperdine University), Series 1990, 7.200%, 11/01/15
(Pre-refunded to 11/01/00) 11/00 at 102 AAA 1,094,310
5,000,000 State Public Works Board of the State of California, Lease Revenue Bonds
(Department of Corrections), 1990 Series A (State Prison-Madera County),
7.000%, 9/01/09 (Pre-refunded to 9/01/00) 9/00 at 102 AAA 5,427,000
500,000 Cotati-Rohnert Park Unified School District (Sonoma County, California),
General Obligation Bonds, Election 1990, Series B, 9.000%, 8/01/06
(Pre-refunded to 8/01/99) 8/99 at 102 AAA 535,000
2,000,000 East Bay Municipal Utility District (Alameda and Contra Costa Counties,
California), Water System Subordinated Revenue Bonds, Series 1990,
7.500%, 6/01/18 (Pre-refunded to 6/01/00) 6/00 at 102 AAA 2,171,360
2,000,000 Eastern Municipal Water District (Riverside County, California), Water
and Sewer Revenue Certificates of Participation, Series 1991, 6.500%, 7/01/20
(Pre-refunded to 7/01/01) 7/01 at 102 AAA 2,190,080
2,000,000 The City of Los Angeles (California), Los Angeles Convention and Exhibition
Center, Certificates of Participation, 1990 Series, 7.000%, 8/15/21 8/00 at 102 AAA 2,168,060
(Pre-refunded to 8/15/00)
5,000,000 Los Angeles County Transportation Commission (California), Proposition
Sales Tax Revenue Bonds,Second Senior Bonds, Series 1992-A, 6.250%,
7/01/13 (Pre-refunded to 7/01/02) 7/02 at 102 AAA 5,537,400
9,500,000 Modesto Irrigation District Financing Authority, Domestic Water Project
Revenue Bonds, Series 1992A, 6.125%, 9/01/19 (Pre-refunded to 9/01/02) 9/02 at 102 AAA 10,500,254
2,500,000 Mt. Diablo Hospital District, Insured Hospital Revenue Bonds, 1990
Series A, (Pre-refunded to 12/01/00) 8.000%, 12/01/11 12/00 at 102 AAA 2,783,374
2,000,000 Mt. Diablo Unified School District, Community Facilities District No. 1,
Special Tax Bonds, Series 1990 (Contra Costa County, California),
7.050%, 8/01/20 (Pre-refunded to 8/01/00) 8/00 at 102 AAA 2,167,400
2,000,000 Redevelopment Agency of the City of Pittsburg, California, Los Medanos
Community Development Project, Tax Allocation Bonds, Series 1991, 7.150%,
8/01/21 (Pre-refunded to 8/01/01) 8/01 at 103 AAA 2,247,660
3,600,000 County of Riverside,California (1994 Desert Justice Facility Project),
Certificates of Participation, 6.000%, 12/01/17 (Pre-refunded to 12/01/04) 12/04 at 101 AAA 4,051,223
2,500,000 County of Riverside,California (1994 Desert Justice Facility Project),
Certificates of Participation, 6.250%, 12/01/21 (Pre-refunded to 12/01/04) 12/04 at 101 AAA 2,847,750
3,000,000 Sacramento Municipal Utility District (California), Electric Revenue Bonds,
1991 Series Y, 6.500%, 9/01/21 (Pre-refunded to 9/01/01) 9/01 at 102 AAA 3,297,870
2,500,000 San Bernardino County Transportation Authority, Sales Tax Revenue Bonds
(Limited Tax Bonds), 1992 Series A, 6.000%, 3/01/10 3/02 at 102 AAA 2,758,124
2,000,000 San Diego Regional Building Authority (California), Lease Revenue Bonds,
Series 1990A (San Miguel Consolidated Fire Protection District Project), 1/00 at 102 AAA 2,135,060
General Obligation Bonds, 7.250%, 1/01/20 (Pre-refunded to 1/01/00)
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 1.4%
3,000,000 City of Shasta Lake, 1996-2 Certificates of Participation, 6.000%, 4/01/16 4/05 at 102 AAA 3,286,860
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
----
13
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN CALIFORNIA INSURED MUNICIPAL BOND FUND (continued)
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WATER AND SEWER - 2.3%
$ 5,000,000 City of Vallejo Refunding Revenue Bonds, 1996 Series A (Water
Improvement Project), 5.875%, 5/01/26 5/06 at 102 AAA $ 5,412,200
- ------------------------------------------------------------------------------------------------------------------------------------
$ 242,290,000 Total Investments - (cost $209,288,749) - 97.2% 231,073,117
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.8% 6,594,982
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $237,668,099
====================================================================================================================
</TABLE>
All of the bonds in the portfolio are either covered by OriginaI 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.
See accompanying notes to financial statements.
----
14
<PAGE>
STATEMENT OF NET ASSETS (UNAUDITED)
August 31,1998
<TABLE>
<CAPTION>
CALIFORNIA
CALIFORNIA INSURED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $ 254,452,796 $ 231,073,117
Cash 520,215 500,646
Receivables:
Interest 4,101,247 3,476,563
Investments sold 2,247,850 3,250,000
Shares sold 84,983 210,498
Other assets 1,987 1,811
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 261,409,078 238,512,635
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for shares redeemed 193,747 137,138
Accrued expenses:
Management fees (note 6) 119,347 109,061
12b-1 distribution and service fees (notes 1 and 6) 13,300 14,806
Other 47,716 21,241
Dividends payable 653,119 562,290
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,027,229 844,536
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $ 260,381,849 $ 237,668,099
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES (NOTE 1)
Net assets $ 33,328,218 $ 38,224,963
Shares outstanding 3,033,798 3,433,488
Net asset value and redemption price per share $ 10.99 $ 11.13
Offering price per share (net asset value per share plus $ 11.47 $ 11.62
maximun sales charge of 4.20% of offering price)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES (NOTE 1)
Net assets $ 4,466,318 $ 7,104,055
Shares outstanding 406,587 637,783
Net asset value, offering and redemption price per share $ 10.98 $ 11.14
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES (NOTE 1)
Net assets $ 6,960,050 $ 4,856,860
Shares outstanding 633,453 439,237
Net asset value, offering and redemption price per share $ 10.99 $ 11.06
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES (NOTE 1)
Net assets $ 215,627,263 $ 187,482,221
Shares outstanding 19,595,746 16,869,600
Net asset value, offering and redemption price per share $ 11.00 $ 11.11
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
------
15
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
Six Months Ended August 31, 1998
<TABLE>
<CAPTION>
CALIFORNIA
CALIFORNIA INSURED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME (NOTE 1) $ 7,507,122 $ 6,718,096
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees (note 6) 698,606 644,674
12b-1 service fees - Class A (notes 1 and 6) 31,650 37,108
12b-1 distribution and service fees - Class B (notes 1 and 6) 16,037 24,947
12b-1 distribution and service fees - Class C (notes 1 and 6) 20,317 17,397
Shareholders' servicing agent fees and expenses 99,660 100,747
Custodian's fees and expenses 34,191 34,434
Trustees' fees and expenses (note 6) 3,374 2,965
Professional fees 15,191 17,978
Shareholders' reports - printing and mailing expenses 66,574 61,208
Federal and state registration fees 3,663 1,921
Portfolio insurance expense -- 15,034
Other expenses 6,631 5,601
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 995,894 964,014
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 6,511,228 5,754,082
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 4) 613,965 312,594
Net change in unrealized appreciation or depreciation of investments 1,045,696 1,333,335
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 1,659,661 1,645,929
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 8,170,889 $ 7,400,011
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
------
16
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
CALIFORNIA
------------------------------------------
SIX MONTHS ENDED YEAR ENDED
8/31/98 2/28/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 6,511,228 $ 12,708,032
Net realized gain from investment transactions (notes 1 and 4) 613,965 1,652,819
Net change in unrealized appreciation or depreciation
of investments 1,045,696 6,514,334
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 8,170,889 20,875,185
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (763,166) (1,232,871)
Class B (69,083) (42,742)
Class C (116,500) (75,261)
Class A (5,516,086) (11,366,137)
From accumulated net realized gains from investment transactions:
Class A - (87,570)
Class B - (5,059)
Class C - (6,498)
Class A - (740,517)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (6,464,835) (13,556,655)
- -----------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from sale of shares 14,801,251 20,926,474
Net proceeds from shares issued to shareholders due
to reinvestment of distributions 3,922,094 8,485,646
- -----------------------------------------------------------------------------------------------------------------------------------
18,723,345 29,412,120
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (11,866,057) (20,738,805)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 6,857,288 8,673,315
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 8,563,342 15,991,845
Net assets at the beginning of period 251,818,507 235,826,662
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $260,381,849 $251,818,507
- -----------------------------------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end of period $ 93,884 $ 47,491
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CALIFORNIA
------------------------------------------
SIX MONTHS ENDED YEAR ENDED
8/31/98 2/28/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 5,754,082 $ 11,606,206
Net realized gain from investment transactions (notes 1 and 4) 312,594 397,413
Net change in unrealized appreciation or depreciation
of investments 1,333,335 7,234,230
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 7,400,011 19,237,849
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (882,595) (1,598,341)
Class B (102,329) (46,050)
Class C (97,335) (105,246)
Class A (4,693,850) (9,978,502)
From accumulated net realized gains from investment transactions:
Class A - (252)
Class B - (11)
Class C - (22)
Class A - (1,447)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (5,776,109) (11,729,871)
- -----------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from sale of shares 3,474,896 21,520,216
Net proceeds from shares issued to shareholders due
to reinvestment of distributions 3,437,850 6,962,594
- -----------------------------------------------------------------------------------------------------------------------------------
16,912,746 28,482,810
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (14,818,615) (26,910,270)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 2,094,131 1,572,540
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 3,718,033 9,080,518
Net assets at the beginning of period 233,950,066 224,869,548
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $237,668,099 $233,950,066
- -----------------------------------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end of period $ 32,458 $ 54,485
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
------
17
<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.
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 the when-issued and delayed delivery purchase commitments. At
August 31, 1998, the Funds had no such outstanding purchase commitments.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income and 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 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
------
18
<PAGE>
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 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, 1998.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
Actual results could differ from those estimates.
2. FUND SHARES
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
CALIFORNIA
- ---------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED 8/31/98 YEAR ENDED 2/28/98
- ---------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 576,142 $ 6,262,985 915,709 $ 9,841,798
Class B 207,594 2,260,340 212,762 2,283,446
Class C 284,081 3,096,753 296,470 3,221,754
Class R 291,744 3,181,173 518,547 5,579,476
Shares issued to shareholders due to reinvestment of distributions:
Class A 39,789 433,580 69,581 747,090
Class B 2,749 29,962 2,378 25,787
Class C 4,779 52,088 5,538 59,609
Class R 312,047 3,406,464 712,546 7,653,160
- ---------------------------------------------------------------------------------------------------------------------------
1,718,925 18,723,345 2,733,531 29,412,120
- ---------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (250,692) (2,735,096) (260,273) (2,797,462)
Class B (16,566) (179,881) (2,330) (25,080)
Class C (27,430) (299,402) (24,707) (263,332)
Class R (793,229) (8,651,678) (1,648,255) (17,652,931)
- -----------------------------------------------------------------------------------------------------------------------------------
(1,087,917) (11,866,057) (1,935,565) (20,738,805)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase 631,008 $ 6,857,288 797,966 $ 8,673,315
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
------
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
<TABLE>
<CAPTION>
CALIFORNIA INSURED
---------------------------------------------------------------
SIX MONTHS ENDED 8/31/98 YEAR ENDED 2/28/98
---------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 441,187 $ 4,869,849 994,327 $ 10,714,535
Class B 381,178 4,200,239 270,416 2,948,439
Class C 183,506 2,008,423 157,741 1,703,167
Class R 217,782 2,396,385 570,721 6,154,075
Shares issued to shareholders due to reinvestment of distributions:
Class A 42,984 473,951 79,157 857,036
Class B 2,828 31,214 776 8,517
Class C 6,511 71,302 6,626 71,396
Class R 259,978 2,861,383 558,410 6,025,645
- -----------------------------------------------------------------------------------------------------------------------------------
1,535,954 16,912,746 2,638,174 28,482,810
- -----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (324,499) (3,581,743) (378,368) (4,074,693)
Class B (14,378) (157,893) (3,037) (33,002)
Class C (44,562) (488,871) (32,339) (350,263)
Class R (963,099) (10,590,108) (2,084,046) (22,452,312)
- -----------------------------------------------------------------------------------------------------------------------------------
(1,346,538) (14,818,615) (2,497,790) (26,910,270)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase 189,416 $ 2,094,131 140,384 $ 1,572,540
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3. DISTRIBUTIONS TO SHAREHOLDERS
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid October 1, 1998, to shareholders of record on September
9, 1998, as follows:
<TABLE>
<CAPTION>
CALIFORNIA CALIFORNIA INSURED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dividend per share:
Class A $ .0445 $ .0440
Class B .0380 .0370
Class C .0395 .0385
Class R .0465 .0455
- -----------------------------------------------------------------------------------------------------------------------------------
</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, 1998, were as follows:
<TABLE>
<CAPTION>
CALIFORNIA CALIFORNIA INSURED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchases:
Investments in municipal securities $ 53,876,634 $ 35,432,199
Temporary municipal investments 17,900,000 11,150,000
Sales:
Investments in municipal securities 55,493,474 40,144,582
Temporary municipal investments
18,300,000 12,450,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
At August 31, 1998, the identified cost of investments owned for federal income
tax purposes was the same as the cost for financial reporting purposes for each
Fund.
At February 28, 1998, the Funds' last fiscal year end, California Insured had an
unused capital loss carryforward of $128,884 available for federal income tax
purposes to be applied against future capital gains, if any. If not applied, the
carryforward will expire in the year 2005.
------
20
<PAGE>
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of investments
at August 31, 1998, were as follows:
<TABLE>
<CAPTION>
CALIFORNIA CALIFORNIA INSURED
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $ 19,701,568 $ 21,784,368
depreciation -- --
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation $ 19,701,568 $ 21,784,368
- ------------------------------------------------------------------------------------------------------------
</TABLE>
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
- ------------------------------------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The management fee compensates the Advisor for overall investment advisory and
administrative services, and general office facilities. The trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser 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 also voluntarily agree to reimburse
additional expenses from time to time, which may be terminated at any time at
its discretion.
During the six months ended August 31, 1998, the Distributor collected sales
charges on purchases of Class A Shares of approximately $97,700 and $101,200 for
California and California Insured, respectively, of which approximately $84,600
and $84,700, 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, 1998, the Distributor compensated
authorized dealers directly with approximately $121,000 and $134,500 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, 1998, the Distributor retained approximately $19,100 and
$21,800 in such 12b-1 fees for California and California Insured, respectively.
The remaining 12b-1 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained approximately $200 and $2,200 of
CDSC on share redemptions for California and California Insured, respectively,
during the six months ended August 31, 1998.
7. COMPOSITION OF NET ASSETS
At August 31, 1998, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
CALIFORNIA CALIFORNIA INSURED
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital paid-in $ 239,755,222 $ 215,679,924
Balance of undistributed net investment income 93,884 32,458
Accumulated net realized gain from investment transactions 831,175 171,349
Net unrealized appreciation of investments 19,701,568 21,784,368
- --------------------------------------------------------------------------------------------------------------
Net assets $ 260,381,849 $ 237,668,099
- --------------------------------------------------------------------------------------------------------------
</TABLE>
------
21
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
Selected data for a share outstanding throughout each period is as follows:
CLASS (INCEPTION DATE)
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- -------------------------------
CALIFORNIA
NET
BEGINNING REALIZED/ ENDING
NET NET UNREALIZED NET NET
YEAR ENDED ASSET INVESTMENT INVESTMENT INVESTMENT CAPITAL ASSET TOTAL
FEBRUARY 28/29, VALUE INCOME (A) GAIN (LOSS) TOTAL INCOME GAIN TOTAL VALUE RETURN (B)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A (9/94)
1999 (d) $ 10.91 $ .27 $ .08 $ .35 $ (.27) $ -- $ (.27) $ 10.99 3.23%
1998 10.58 .55 .37 .92 (.55) (.04) (.59) 10.91 8.87
1997 10.58 .55 (.01) .54 (.54) -- (.54) 10.58 5.29
1996 10.10 .55 .47 1.02 (.54) -- (.54) 10.58 10.36
1995 (c) 10.21 .27 (.03) .24 (.28) (.07) (.35) 10.10 2.52
CLASS B (3/97)
1999 (d) 10.92 .23 .06 .29 (.23) -- (.23) 10.98 2.68
1998 (c) 10.56 .46 .41 .87 (.47) (.04) (.51) 10.92 8.39
CLASS C (9/94)
1999 (d) 10.92 .24 .07 .31 (.24) -- (.24) 10.99 2.68
1998 10.58 .49 .38 .87 (.49) (.04) (.53) 10.92 8.36
1997 10.58 .47 (.01) .46 (.46) -- (.46) 10.58 4.53
1996 10.10 .47 .47 .94 (.46) -- (.46) 10.58 9.53
1995 (c) 10.04 .22 .13 .35 (.22) (.07) (.29) 10.10 3.71
CLASS R (7/86)
1999 (d) 10.93 .28 .07 .35 (.28) -- (.28) 11.00 3.25
1998 10.61 .57 .36 .93 (.57) (.04) (.61) 10.93 8.99
1997 10.60 .57 .01 .58 (.57) -- (.57) 10.61 5.67
1996 10.13 .58 .46 1.04 (.57) -- (.57) 10.60 10.54
1995 10.74 .58 (.53) .05 (.59) (.07) (.66) 10.13 .78
1994 10.85 .60 (.05) .55 (.60) (.06) (.66) 10.74 5.08
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------- -------------------------------
CALIFORNIA INSURED
NET
BEGINNING REALIZED/ ENDING
NET NET UNREALIZED NET NET
YEAR ENDED ASSET INVESTMENT INVESTMENT INVESTMENT CAPITAL ASSET TOTAL
FEBRUARY 28/29, VALUE INCOME (A) GAIN (LOSS) TOTAL INCOME GAIN TOTAL VALUE RETURN (B)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A (9/94)
1999 (d) $ 11.06 $ .26 $ .08 $ .34 $ (.27) $ -- $ (.27) $ 11.13 3.07%
1998 10.70 .54 .36 .90 (.54) -- (.54) 11.06 8.66
1997 10.76 .55 (.08) .47 (.53) -- (.53) 10.70 4.57
1996 10.25 .53 .51 1.04 (.53) -- (.53) 10.76 10.32
1995 (c) 10.22 .26 .07 .33 (.27) (.03) (.30) 10.25 3.33
CLASS B (3/97)
1999 (d) 11.06 .22 .08 .30 (.22) -- (.22) 11.14 2.77
1998 (c) 10.67 .45 .40 .85 (.46) -- (.46) 11.06 8.13
CLASS C (3/94)
1999 (d) 10.98 .23 .08 .31 (.23) -- (.23) 11.06 2.88
1998 10.63 .47 .35 .82 (.47) -- (.47) 10.98 7.96
1997 10.67 .46 (.05) .41 (.45) -- (.45) 10.63 3.99
1996 10.15 .45 .51 .96 (.44) -- (.44) 10.67 9.67
1995 (c) 10.06 .21 .13 .34 (.22) (.03) (.25) 10.15 3.45
CLASS R (7/86)
1999 (d) 11.04 .27 .07 .34 (.27) -- (.27) 11.11 3.16
1998 10.68 .56 .36 .92 (.56) -- (.56) 11.04 8.86
1997 10.74 .56 (.07) .49 (.55) -- (.55) 10.68 4.81
1996 10.23 .56 .50 1.06 (.55) -- (.55) 10.74 10.63
1995 10.67 .56 (.41) .15 (.56) (.03) (.59) 10.23 1.68
1994 10.85 .56 (.10) .46 (.56) (.08) (.64) 10.67 4.27
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
----
22
<PAGE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
RATIO RATIO
OF NET OF NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
EXPENSES INCOME EXPENSES INCOME
TO AVERAGE TO AVERAGE TO AVERAGE TO AVERAGE
NET ASSET NET ASSETS NET ASSETS NET ASSETS
BEFORE BEFORE AFTER AFTER PORTFOLIO
ENDING NET REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
ASSETS (000) MENT MENT MENT (A) MENT (A) RATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 33,328 .92%* 4.92* .92%* 4.92%* 21%
29,125 .90 5.11 .90 5.11 45
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
4,466 1.67* 4.16* 1.67* 4.16* 21
2,324 1.66* 4.31* 1.66* 4.31* 45
6,960 1.47* 4.35* 1.47* 4.35* 21
4,061 1.45 4.56 1.45 4.56 45
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
215,627 .72* 5.12* .72* 5.12* 21
216,309 .70 5.31 .70 5.31 45
214,253 .70 5.41 .70 5.41 74
218,390 .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
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
(d) For the six months ended August 31, 1998.
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
RATIO RATIO
OF NET OF NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
EXPENSES INCOME EXPENSES INCOME
TO AVERAGE TO AVERAGE TO AVERAGE TO AVERAGE
NET ASSET NET ASSETS NET ASSETS NET ASSETS
BEFORE BEFORE AFTER AFTER PORTFOLIO
ENDING NET REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
ASSETS (000) MENT MENT MENT (A) MENT (A) RATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 38,225 .95%* 4.72%* .95%* 4.72%* 15%
36,203 .90 4.93 .90 4.93 26
27,598 .94 5.05 .94 5.05 51
17,250 .98 4.99 .97 5.00 38
3,146 1.24* 5.26* 1.05* 5.45* 25
7,104 1.69* 3.96* 1.69* 3.96* 15
2,967 1.66* 4.16* 1.66* 4.16* 26
4,857 1.50* 4.17* 1.50* 4.17* 15
3,226 1.45 4.37 1.45 4.37 26
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
187,482 .75* 4.93* .75* 4.93* 15
191,554 .70 5.14 .70 5.14 26
195,553 .69 5.30 .69 5.30 51
205,842 .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
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
(d) For the six months ended August 31, 1998.
-----
23
<PAGE>
BUILDING A BETTER PORTFOLIO
CAN MAKE YOU A SUCCESSFUL INVESTOR
NUVEEN FAMILY OF MUTUAL FUNDS
Nuveen offers a variety of funds designed to help you reach your financial
goals.
GROWTH
Nuveen Rittenhouse Growth Fund
GROWTH AND INCOME
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
NATIONAL FUNDS
Long-Term Insured Intermediate-Term Limited-Term
STATE FUNDS
Arizona California Colorado Connecticut Florida Georgia Kansas Kentucky
Louisiana Maryland Massachusetts Michigan Missouri New Jersey New Mexico New
York North Carolina Ohio Pennsylvania Tennessee Virginia Wisconsin
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
MUTUAL FUNDS
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier AdvisersSM including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
PRIVATE ASSET MANAGEMENT
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income- oriented portfolios are available, all based upon a disciplined
investment philosophy.
DEFINED PORTFOLIOS
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
EXCHANGE-TRADED FUNDS
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MUNIPREFERRED(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
----
24
<PAGE>
Fund Information
BOARD OF TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
FUND MANAGER
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
TRANSFER AGENT AND SHAREHOLDER SERVICES
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP Washington, D.C.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, IL
----
25
<PAGE>
SERVING INVESTORS FOR GENERATIONS
[PHOTO OF JOHN NUVEEN, Sr. APPEARS HERE]
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time. We emphasize quality securities carefully chosen through
in-depth research, and we follow those securities closely over time to ensure
that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
1898
NUVEEN
1998
OUR SECOND CENTURY
helping Nuveen sustain the wealth of a lifetime.
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
<PAGE>
NUVEEN
Municipal
Bond Funds
August 31, 1998
Semiannual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Connecticut
Massachusetts
Massachusetts
Insured
<PAGE>
Highlights
As of August 31, 1998
For Class A shares at net asset value
Credit Quality Performance Highlights
Nuveen Flagship Connecticut Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed 51%
--------------------------
AA 17%
--------------------------
A 18%
--------------------------
BBB/NR 14%
. Distribution rate of 4.89% and SEC 30-day yield of 3.92%*
. Taxable-equivalent yield of 5.95%**
. One-year total return of 8.13%
Nuveen Massachusetts Municipal Bond Fund
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed 66%
--------------------------
AA 15%
--------------------------
A 10%
--------------------------
BBB/NR 9%
. Distribution rate of 4.97% and SEC 30-day yield of 3.79%*
. Taxable-equivalent yield of 6.24%**
. One-year total return of 7.52%
Nuveen Massachusetts Insured Municipal Bond Fund
[PIE CHART APPEARS HERE]
--------------------------
Insured 78%
--------------------------
U.S. Guaranteed 22%
. Distribution rate of 4.80% and SEC 30-day yield of 3.70%*
. Taxable-equivalent yield of 6.10%**
. One-year total return of 7.24%
Contents
1 Dear Shareholder
3 Connecticut Portfolio
Manager's Comments
4 Connecticut Performance Overview
5 Massachusetts Portfolio
Manager's Comments
6 Massachusetts Performance Overview
7 Massachusetts Insured
Performance Overview
8 Portfolio of Investments
22 Statement of Net Assets
23 Statement of Operations
23 Statement of Changes in Net Assets
24 Notes to Financial Statements
28 Financial Highlights
32 Building Better Portfolios
33 Fund Information
* Distribution rate is computed by taking the most recent dividend per share,
multiplying it as needed to annualize it, and dividing by the appropriate
price per share (e.g., net asset value for purchases to be made without a load
such as reinvestments from Nuveen Unit Trusts, or the maximum public offering
price).
SEC yield is computed by dividing the net investment income per share earned
during the specified one month or 30-day period by the maximum offering price
per share on the last day of the period.
The distribution rate differs from yield and total return and therefore is not
intended to be a complete measure of performance. Distribution rate may
sometimes differ from yield because a Fund may be paying out more or less than
it is earning and because it may not include the effect of amortization of
bond premiums to the extent such premiums arise after the bonds were
purchased.
**For investors in the 31% federal and applicable state income tax bracket. See
your funds' Performance Overview in this report for more information.
<PAGE>
Dear Shareholder
I'm pleased to report that over the past 12 months, your Nuveen Municipal Bond
Fund has continued to perform well, meeting its primary objectives of providing
competitive levels of tax-free income and after-tax return. The strong market in
fixed-income securities benefited from investors selecting quality investment
vehicles like municipal bond funds.
The Economy in Review
Over the past year, the markets endured bouts of volatility, as the Asian
financial crisis spilled over into emerging markets and affected economies
around the globe. Investors responded by seeking a haven from this market
volatility by choosing more conservative investments, such as municipal bond
funds. As interest rates on municipal bonds continued to trend downward, the
relative after-tax yields offered by these funds stimulated additional investor
interest.
In the coming months, we will continue to watch several key factors affecting
the future of the economy, including the strength of the dollar, employment
figures, corporate earnings reports, and further interest rate indications from
the Federal Reserve. These factors will influence the outlook for fixed-income
markets during the remainder of the year.
Municipal Market Review
During the past 12 months, declining interest rates drove yields on 30-year
Treasuries to their lowest levels ever. The story in the municipal market,
however, was different. As yields on the long Treasury bond reached historic
lows, the yield on the Bond Buyer 40, an unmanaged index of long-term municipal
bonds, fell 42 basis points -- from 5.53% to 5.11%. As a result, the ratio
between Treasury yields and municipal yields, as of August 31, stood at 92%,
compared with the more typical range of 80-82%. For investors, this meant that
municipal bonds offered 92% of the yield of a Treasury bond with comparable
characteristics -- before taxes were taken into account. As shown in the
accompanying chart, municipal bonds have consistently provided very attractive
taxable-equivalent yields compared with the taxable yield on Treasury bonds.
[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.
1
<PAGE>
"Our expertise provides the key to building a well-balanced portfolio that
achieves your financial goals."
One of the main factors in the steep decline in Treasury yields was the strong
interest in these investments by international investors. As the economic
turmoil in Asia continued to spread to other economies world-wide and the dollar
strengthened against foreign currencies, the demand for U.S.-dollar denominated
Treasury securities increased.
In the municipal market, where foreign investors do not benefit from the tax
advantages of municipal bonds, low interest rates and a strong economy generated
high levels of new issuance and refinancing of existing bonds. The first six
months of 1998 saw $146 billion of new municipal issuance, up 51% over the same
period in 1997, and $42 billion in refunding activity, an increase of 118% over
last year. The continued strength of the U.S. economy has brought about
improvements in the fundamental financial health of many municipalities and
boosted the overall credit quality of municipal bonds. During the third quarter
of this year, 3.5 municipal issuers received credit upgrades for every municipal
downgrade. This trend enhanced Nuveen's value oriented investment approach, as
the upgraded bonds increased in value, providing further benefits to investors.
Nuveen Expertise Is Key
The key to taking advantage of the exceptional values currently available in the
municipal market is the expertise of a proven investment manager. At Nuveen, we
recognize the value of time-tested expertise. The high level of recent municipal
issuance, for example, highlights the value of our expertise in the municipal
market, as our portfolio management teams carefully select the securities best
suited to help the funds achieve their investment objectives.
Nuveen has assembled a group of Premier Advisers(SM) that can provide years of
experience and time-tested expertise in a given asset class. In addition to
Nuveen Advisory Corporation, our Premier Adviser for tax-free investing, you can
rely on our growing group of other advisers to provide the expertise that makes
the difference in the equity market, including Institutional Capital Corporation
for value investing and Rittenhouse Financial Services for growth investing. For
more information about our funds managed by other Nuveen Premier Advisers,
including charges and expenses, contact your financial adviser for a prospectus
or Nuveen at (800) 621-7227. Read it carefully before you invest or send money.
We encourage you to talk with your financial adviser about the ways Nuveen's
expanding selection of investments, together with our expertise, can help you
establish the foundation of a diversified portfolio designed to build and
sustain long-term financial security. When seeking quality investment solutions
that withstand the test of time, you can count on Nuveen. Our expertise provides
the key to building a well-balanced portfolio that achieves your financial
goals.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
October 15, 1998
2
<PAGE>
Nuveen Flagship Connecticut Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Dan Solender discusses fund performance, the municipal market,
and key investment strategies for the Connecticut fund for the period covered by
this report.
State Economic and Market Review
Despite its past economic underperformance, Connecticut remains the nation's
wealthiest state. During the past 12 months, Connecticut's economy has seen
something of a rebound. Much of the state's growth has centered around the
financial services sector and the gaming industry. In fact, gaming is now
Connecticut's largest growth industry.
Municipal bond supply in the state was up 35% since August 1997. Because of the
relative wealth of the state's population, demand for bonds is high, which put a
strain on even 1998's comparatively generous supply levels.
Fund Performance
Despite the declining interest rate environment of the past year, the Nuveen
Flagship Connecticut Municipal Bond Fund provided Class A investors with an
attractive taxable-equivalent yield at net asset value of 5.95%, based on the
combined federal and state income tax rate of 34.1%. The tax-free yield was
3.92% based on Class A shares at net value.
Over the past year, the change in income earned by this portfolio, due to
declining interest rates, necessitated a dividend reduction. The higher-yielding
bonds that were called out of the portfolio were replaced with bonds paying
lower interest rates, reflecting current market conditions. However, as Tim
mentioned in his letter to shareholders, this fund still provided a competitive
level of tax-free income, especially when considering its after-tax yield.
For the one year period ended August 31, 1998, the Class A share total return at
net asset value for the Nuveen Flagship Connecticut Municipal Bond Fund was
8.13%, which is equivalent to a taxable return of 10.85% on Class A shares at
net asset value for investors in the combined 34.1% federal and state income tax
bracket. That total return compares to the annual return of 8.65% posted by the
Lehman Brothers Municipal Bond Index. This index is comprised of a broad range
of investment-grade bonds and does not reflect any initial or ongoing expenses.
The performance of the fund continues to be impacted by its relatively short
duration. Duration measures a bond fund's price volatility, or reaction to
interest rate movements. The shorter the duration, the less sensitive the fund
is to interest rate changes. When compared to its peers, many of which maintain
considerably longer durations, the Connecticut fund may experience a smaller
impact from volatile interest rate due to its current duration positioning.
Key Strategies
The Connecticut municipal market is relatively small. Since the beginning of the
year through August 31, 1998, Connecticut ranks 24th in total issuance. Its
small size generates market dynamics that differ from larger markets, like New
York and New Jersey. Whereas secondary market activity remains fairly robust
throughout the year in larger markets, in Connecticut, secondary market activity
is centered primarily around periods of new issuance. As a result, the
Connecticut market experiences bursts of activity that flood the market with
bonds. That activity cools considerably during off-peak periods. To counteract
the periods of weaker supply, we keep the fund fully invested in municipal bonds
rather than holding cash during off-peak periods.
Overall, supply has been higher this year than prior years, which has
accelerated market activity as investors either purchased the new issues or
unwound existing positions to pay for them. From this supply, we selected bonds
primarily in the education and health care sectors and invested across the
credit spectrum, picking up bonds rated in the AAA through BBB categories with
maturities of 20 to 30 years. In order to provide incremental yield for the
fund, we will continue to have a bias for attractive BBB-rated bonds.
Outlook for the Future
We will continue to manage the fund with an eye toward purchasing undervalued
securities that provide attractive interest income exempt from federal and state
income taxes as is consistent with preservation of capital. To achieve this
goal, we will continue to work with Nuveen's research team, a valued asset in
our search for undervalued securities.
3
<PAGE>
Nuveen Flagship Connecticut Municipal Bond Fund
Performance Overview
As of August 31, 1998
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
9/97 0.0465
10/97 0.0465
11/97 0.0465
12/97 0.0465
1/98 0.045
2/98 0.045
3/98 0.045
4/98 0.045
5/98 0.045
6/98 0.045
7/98 0.0445
8/98 0.0445
</TABLE>
Top 5 Sectors (as a % of total investments)
Education and Civic Organizations 20%
Tax Obligation (Limited) 16%
Utilities 15%
Health Care 12%
U.S. Guaranteed 11%
Portfolio Statistics
<TABLE>
<CAPTION>
Share Class A B C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception Date 7/87 2/97 10/93 2/97
Net Asset Value $10.92 $10.89 $10.89 $10.94
Total Net Assets ($000) $240,479
Average Weighted Maturity (Years) 20.44
Modified Duration (Years) 5.81
- --------------------------------------------------------------------------------
Annualized Total Return/1/
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
1-Year 8.13% 3.55% 7.27% 7.45% 8.35%
5-Year 5.72% 4.81% 5.03% 5.08% 5.82%
10-Year 7.85% 7.39% 7.38% 7.23% 7.90%
- --------------------------------------------------------------------------------
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
Distribution Rate 4.89% 4.68% 4.19% 4.35% 5.10%
SEC 30-Day Yield 3.92% 3.75% 3.18% 3.38% 4.12%
Taxable Equivalent Yield/2/ 5.95% 5.69% 4.83% 5.13% 6.25%
- --------------------------------------------------------------------------------
</TABLE>
1 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class B shares automatically convert to
Class A shares eight years after purchase. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
2 Based on SEC yield and a combined federal and state income tax rate of 34.1%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
4
<PAGE>
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Tom Futrell discusses the funds' performance, the municipal
market, and key investment strategies for the Massachusetts funds for the period
covered by this report.
State Economic and Market Review
Although one of the smaller states in terms of geographic size, Massachusetts is
the nation's seventh largest municipal market. A large and wealthy population, a
healthy economy, and an aging infrastructure system have all fueled considerable
demand for municipal projects statewide. Among these major capital projects is
the multi-billion dollar Central Artery Project.
Long known as a high tax state, Massachusetts is slowly losing that reputation,
in large part due to a number of recent tax cuts enabled by state budget
surpluses. A strong economy has contributed to those budget surpluses. Today,
Massachusetts is the Northeast's strongest economy, with much of its growth
coming from the high-technology and financial sectors.
The state's municipal bond supply reflected that strength, rising 59% for the
12-month period ending August 31, 1998. Nonetheless, narrow spreads between the
yields on high and low quality bonds intensified the challenge of identifying
value in the markets. Attractive buy opportunities came from health care and
higher education bonds as well as selected lower-rated issues.
Fund Performance
Despite the declining interest rate environment of the past year, the Nuveen
Massachusetts Municipal Bond Fund and the Nuveen Massachusetts Insured Municipal
Bond Fund both provided Class A investors with attractive taxable-equivalent
yields at net asset value of 6.24% and 6.10%, respectively, based on the
combined federal and Massachusetts state income tax rate of 39.3%. The tax-free
yields for the funds were 3.79% and 3.70%, respectively, on Class A Shares at
net asset value.
Over the past year, the change in income earned by these portfolios, due to a
decline in interest rates, necessitated a dividend reduction. The higher-
yielding bonds that were called out of the portfolios were replaced with bonds
paying lower interest rates, reflecting current market conditions. However, as
Tim mentioned in his letter to shareholders, these funds still provided
competitive levels of tax-free income, especially when considering their after-
tax yields.
For the one year period ended August 31, 1998, the Class A share total return on
net asset value for the Nuveen Massachusetts Municipal Bond Fund was 7.52%,
which is equivalent to a taxable return of 10.98% for investors in the combined
39.3% federal and Massachusetts state income tax bracket. The Class A share
total return on net asset value for the Nuveen Massachusetts Insured Municipal
Bond Fund was 7.24%, which is equivalent to a taxable return of 10.53% for
investors in the combined 39.3% federal and state income tax bracket. Those
total returns compare to the annual returns of 8.65% and 9.19% posted by the
Lehman Brothers Municipal Bond and Insured Municipal Bond Indexes, respectively.
These indexes are comprised of a broad range of investment-grade or insured
municipal bonds and do not reflect any initial or ongoing expenses.
The performance of the funds continues to be impacted by the fund's relatively
short durations. Duration measures a bond fund's price volatility, or reaction
to interest rate movements. The shorter the duration, the less sensitive the
fund is to interest rate changes. When compared to their peers, many of which
maintain considerably longer durations, the Massachusetts funds may experience a
smaller impact from changes in interest rates.
Key Strategies
In terms of the funds' specific holdings, there were several success stories
last year. For example, we added a number of attractive, lower-rated bonds to
the portfolio, which were discovered by Nuveen research. These issues
compensated for their lower credit ratings with better yields than many other
available issues. In addition, we found value among certain health care and
higher education issues, and in the general obligation debt of some of the
state's smaller communities.
Outlook for the Future
We will continue to manage the funds with an eye toward purchasing undervalued
securities that provide attractive interest income exempt from federal and state
income taxes as is consistent with preservation of capital.
To achieve this goal, we will continue to work with Nuveen's research team, a
valuable asset in our search for undervalued securities. Specifically, we will
work to improve the funds' structure, looking for bonds with better call
protection, attractive yields, and longer maturities. Buying bonds with longer
maturities will extend the portfolios' durations, allowing us to participate
more actively in healthy municipal market conditions.
5
<PAGE>
Nuveen Massachusetts Municipal Bond Fund
Performance Overview
As of August 31, 1998
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
9/97 0.0465
10/97 0.0465
11/97 0.0465
12/97 0.0465
1/98 0.045
2/98 0.045
3/98 0.045
4/98 0.045
5/98 0.045
6/98 0.045
7/98 0.0445
8/98 0.0445
<TABLE>
<CAPTION>
Top 5 Sectors (as a % of total investments)
<S> <C>
U.S. Guaranteed 35%
..........................................
Housing (Multifamily) 14%
..........................................
Health Care 12%
..........................................
Tax Obligation (General) 11%
..........................................
Education and Civic Organizations 8%
- ------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inception Date 9/94 3/97 10/94 12/86
.........................................................................
Net Asset Value $10.14 $10.16 $10.08 $ 10.11
.........................................................................
Total Net Assets ($000) $90,474
.........................................................................
Average Weighted Maturity (Years) 20.54
.........................................................................
Modified Duration (Years) 5.39
- -------------------------------------------------------------------------
Annualized Total Return/1/
Share Class A(NAV) A(Offer) B C R
- -------------------------------------------------------------------------
1-Year 7.52% 2.95% 6.74% 6.88% 7.73%
.........................................................................
5-Year 5.44% 4.55% 4.68% 4.68% 5.63%
.........................................................................
10-Year 7.72% 7.26% 7.09% 6.93% 7.95%
- -------------------------------------------------------------------------
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
- -------------------------------------------------------------------------
Distribution Rate 4.97% 4.76% 4.25% 4.46% 5.16%
.........................................................................
SEC 30-Day Yield 3.79% 3.63% 3.05% 3.25% 3.99%
.........................................................................
Taxable Equivalent Yield/2/ 6.24% 5.98% 5.02% 5.35% 6.57%
- -------------------------------------------------------------------------
</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 B shares automatically convert to Class A shares
eight years after purchase. Class C shares have a 1% CDSC for redemptions
within one year which is not reflected in the one-year total return.
2 Based on SEC yield and a combined federal and state income tax rate of 39.3%.
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 Insured Municipal Bond Fund
Performance Overview
As of August 31, 1998
================================================================================
Monthly Tax-Free Dividends (Class A Shares)
================================================================================
[BAR CHART APPEARS HERE]
9/97 0.0435
10/97 0.0435
11/97 0.0435
12/97 0.0435
1/98 0.0435
2/98 0.0435
3/98 0.0435
4/98 0.0425
5/98 0.0425
6/98 0.0425
7/98 0.0425
8/98 0.0425
===========================================
Top 5 Sectors (as a % of total investments)
===========================================
U.S. Guaranteed 22%
- -------------------------------------------
Tax Obligation (General) 22%
- -------------------------------------------
Education and Civic Organizations 17%
- -------------------------------------------
Health Care 15%
- -------------------------------------------
Housing (Multifamily) 14%
===========================================
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 B shares automatically convert to
Class A shares eight years after purchase. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
2 Based on SEC yield and a combined federal and state income tax rate of 39.3%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
<TABLE>
<CAPTION>
================================================================================
Portfolio Statistics
================================================================================
<S> <C> <C> <C> <C>
Share Class A B C R
- --------------------------------------------------------------------------------
Inception Date 9/94 3/97 9/94 12/86
- --------------------------------------------------------------------------------
Net Asset Value $10.63 $10.64 $10.60 $ 10.64
- --------------------------------------------------------------------------------
Total Net Assets ($000) $70,339
- --------------------------------------------------------------------------------
Average Weighted Maturity (Years) 20.17
- --------------------------------------------------------------------------------
Modified Duration (Years) 5.56
================================================================================
================================================================================
Annualized Total Return/1/
================================================================================
Share Class A(NAV) A(Offer) B C R
================================================================================
1-Year 7.24% 2.70% 6.45% 6.65% 7.52%
- --------------------------------------------------------------------------------
5-Year 5.09% 4.19% 4.37% 4.37% 5.36%
- --------------------------------------------------------------------------------
10-Year 7.47% 7.01% 6.88% 6.71% 7.74%
================================================================================
================================================================================
Tax-Free Yields
================================================================================
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
Distribution Rate 4.80% 4.59% 4.06% 4.25% 4.96%
- --------------------------------------------------------------------------------
SEC 30-Day Yield 3.70% 3.55% 2.96% 3.16% 3.90%
- --------------------------------------------------------------------------------
Taxable Equivalent Yield/2/ 6.10% 5.85% 4.88% 5.21% 6.43%
================================================================================
</TABLE>
7
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Connecticut Municipal Bond Fund
August 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations -- 20.1%
State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Greenwich Academy Issue, Series A:
$1,000,000 5.700%, 3/01/16 3/06 at 101 AAA $1,069,980
2,000,000 5.750%, 3/01/26 3/06 at 101 AAA 2,133,160
8,285,000 State of Connecticut Health and Educational Facilities Authority, 7/03 at 103 BBB- 8,524,685
Revenue Bonds, Quinnipiac College Issue, Series D, 6.000%, 7/01/23
State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Sacred Heart University Issue, Series B:
500,000 5.700%, 7/01/16 7/03 at 102 BBB- 507,435
2,200,000 5.800%, 7/01/23 7/03 at 102 BBB- 2,226,378
1,000,000 State of Connecticut Health and Educational Facilities Authority, 5/02 at 102 AAA 1,072,190
Revenue Bonds, Yale University, 5.929%, 6/10/30
4,000,000 State of Connecticut Health and Educational Facilities Authority 7/04 at 102 AAA 4,507,160
Revenue Bonds, Trinity College Issue, Series D, 6.125%, 7/01/24
Connecticut Higher Education Supplemental Loan Authority Revenue
Bonds (Family Education Loan Program), 1991 Series A:
400,000 7.000%, 11/15/05 (Alternative Minimum Tax) 11/01 at 102 A 430,520
3,820,000 7.200%, 11/15/10 (Alternative Minimum Tax) 11/01 at 102 A 4,113,796
Connecticut Higher Education Supplemental Loan Authority, Revenue
Bonds (Family Education Loan Program), 1996 Series A:
1,705,000 6.300%, 11/15/10 (Alternative Minimum Tax) 11/04 at 102 A1 1,826,618
1,285,000 6.350%, 11/15/11 (Alternative Minimum Tax) 11/04 at 102 A1 1,380,026
2,000,000 State of Connecticut, Health and Educational Facilities Authority, 7/04 at 101 1/2 AAA 2,172,720
Revenue Bonds, The Loomis Chaffee School Issue, Series B, 6.000%,
7/01/25
State of Connecticut, Health and Educational Facilities Authority,
Revenue Bonds, Trinity College Issue, Series F:
2,000,000 5.500%, 7/01/21 No Opt. Call AAA 2,173,800
2,000,000 5.000%, 7/01/28 7/08 at 102 AAA 1,989,120
2,500,000 State of Connecticut, Health and Educational Facilities Authority, 7/05 at 101 AAA 2,582,250
Revenue Bonds, Kent School Issue, Series B, 5.400%, 7/01/23
2,240,000 State of Connecticut, Health and Educational Facilities Authority, 11/05 at 102 AAA 2,286,502
Revenue Bonds, Connecticut State University System Issue, Series A,
5.125%, 11/01/15
1,600,000 State of Connecticut, Health and Educational Facilities Authority, 7/06 at 102 AAA 1,723,696
Revenue Bonds, Trinity College Issue, Series E, 5.875%, 7/01/26
1,435,000 State of Connecticut, Health and Educational Facilities Authority, 7/06 at 101 AAA 1,496,834
Revenue Bonds, The Loomis Chaffee School Issue, Series C, 5.500%,
7/01/26
2,500,000 Connecticut State Health and Educational Facilities Authority Revenue, 7/08 at 102 AAA 2,478,750
Fairfield University, Series H, 5.00%, 7/01/28
1,490,000 Connecticut State Health and Educational Facilities Authority Revenue 7/08 at 101 AA 1,465,057
(Canterbury School), Series A, 5.00%, 7/01/18
2,000,000 State of Connecticut Health and Educational Facilities Authority 7/07 at 102 AAA 2,077,180
Revenue Bonds, Suffield Academy Issue, Series A, 5.400%, 7/01/27
- ----------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products -- 0.4%
1,000,000 Town of Sprague, Connecticut Environmental Improvement Revenue Bonds, 10/07 at 102 A3 1,042,530
1997 Series A (International Paper Company Project), 5.700%, 10/01/21
(Alternative Minimum Tax)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care -- 12.2%
$ 2,600,000 State of Connecticut Health and Educational Facilities Authority, 7/00 at 102 AAA $ 2,781,376
Revenue Bonds, Bristol Hospital Issue, Series A, 7.000%, 7/01/20
1,750,000 State of Connecticut Health and Educational Facilities Authority, 7/00 at 102 AAA 1,872,080
Revenue Bonds, Waterbury Hospital Issue, Series B, 7.000%, 7/01/20
900,000 State of Connecticut Health and Educational Facilities Authority 7/01 at 102 AAA 972,027
Revenue Bonds, Hospital of Raphael Issue, Series D, 6.625%, 7/01/14
2,000,000 State of Connecticut, Health and Educational Facilities Authority, 7/02 at 102 AAA 2,195,440
Revenue Bonds, Bridgeport Hospital Issue, Series A, 6.625%, 7/01/18
4,200,000 State of Connecticut Health and Educational Facilities Authority, 7/04 at 102 AAA 4,547,340
Revenue Bonds, New Britain General Hospital Issue, Series B,
6.000%, 7/01/24
State of Connecticut Health and Educational Facilities Authority
Revenue Bonds, Hospital for Special Care Issues, Series B:
1,000,000 5.375%, 7/01/17 7/07 at 102 BBB 1,006,700
1,000,000 5.500%, 7/01/27 7/07 at 102 BBB 1,006,000
1,645,000 State of Connecticut Health and Educational Facilities Authority, 7/06 at 102 AAA 1,690,402
Revenue Bonds, Day Kimball Hospital Issue, Series A, 5.375%, 7/01/26
State of Connecticut Health and Educational Facilities Authority Revenue
Bonds, Greenwich Hospital Issue, Series A:
3,000,000 5.750%, 7/01/16 7/06 at 102 AAA 3,222,330
1,500,000 5.800%, 7/01/26 7/06 at 102 AAA 1,613,325
3,000,000 State of Connecticut, Health and Educational Facilities Authority, 7/06 at 102 AAA 3,193,710
Revenue Bonds, Yale-New Haven Hospital Issue, Series H, 5.700%,
7/01/25
320,000 State of Connecticut, Health and Educational Facilities Authority, 1/01 at 102 AAA 346,883
Revenue Bonds, Capital Asset Issue, Series C, 7.000%, 1/01/20
2,000,000 State of Connecticut Health and Educational Facilities Authority, 7/07 at 102 AAA 2,152,760
Revenue Bonds, The William W. Backus Hospital Issue, Series D,
5.750%, 7/01/27
2,250,000 Connecticut Development Authority, Solid Waste Disposal Facilities 7/05 at 102 AAA 2,637,675
Revenue Bonds, Pfizer Inc. Project, 1994 Series, 7.000% 7/01/25
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 0.9%
540,000 Connecticut Housing Finance Authority, Housing Mortgage Finance 11/01 at 102 AA 568,804
Program Bonds, 1991 Series A, Subseries A2, 7.200%, 11/15/08
(Alternative Minimum Tax)
1,500,000 New Britain Senior Citizens Housing Development Corporation, Mortgage 1/02 at 102 AAA 1,599,705
Revenue Refunding Bonds, Series 1992A (FHA Insured Mortgage Loan --
Nathan Hale Apartments Section 8 Assisted Project), 6.875%, 7/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 8.5%
695,000 Connecticut Housing Finance Authority, Alternative Minimum Tax, 11/02 at 102 AA 745,874
6.700%, 11/15/22
1,250,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program 5/03 at 102 AA 1,333,538
Bonds, 1993 Series A, 6.200%, 5/15/14
2,750,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program 5/04 at 102 AA 2,905,238
Bonds, 1994 Series A, 6.100%, 5/15/17
1,500,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program 5/05 at 102 AA 1,593,420
Bonds, 1995 Series A, Subseries A-1, 6.100%, 5/15/17
4,160,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program 11/07 at 102 AA 4,361,843
Bonds, 1997 Series B, Subseries B-2, 5.850%, 11/15/28
(Alternative Minimum Tax)
1,000,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program 11/05 at 102 AA 1,067,650
Bonds, 1995 Series F, Subseries F-1, 6.000%, 5/15/17
1,500,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program 5/06 at 102 AA 1,605,510
Bonds, 1996 Series B, Subseries B-1, 6.050%, 5/15/18
4,940,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program 11/06 at 102 AA 5,279,279
Bonds, 1996 Subseries E-2, 6.150%, 11/15/27 (Alternative Minimum Tax)
</TABLE>
9
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Connecticut Municipal Bond Fund (continued)
August 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Housing/Single Family (continued)
$ 1,495,000 Connecticut Housing Finance Authority, Housing Mortgage Finance 11/06 at 102 AA $ 1,580,155
Program Bonds, 1997 Series F, Subseries F-2, 6.000%, 11/15/27
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long Term Care -- 7.3%
2,000,000 State of Connecticut Health and Educational Facilities Authority, 11/04 at 102 AAA 2,308,460
Revenue Bonds, Nursing Home Program Issue, Series 1994,
AHF/Hartford, Inc. Project, 7.125%, 11/01/24
7,000,000 Connecticut Development Authority, Health Care Project Refunding 9/02 at 102 A2 7,603,260
Bonds (Duncaster, Inc. Project -- 1992 Series), 6.750%, 9/01/15
Connecticut Development Authority, First Mortgage Gross Revenue
Health Care Project Refunding Bonds (Church Homes, Inc.,
Congregational Avery Heights Project), 1997 Series:
1,700,000 5.700%, 4/01/12 4/07 at 102 BBB 1,759,466
2,610,000 5.800%, 4/01/21 4/07 at 102 BBB 2,703,830
1,875,000 Connecticut State Development Authority, First Mortgage Gross 12/06 at 103 BBB+ 1,879,538
Revenue Health Care Project, Elim Park Baptist Home, Series A,
5.375%, 12/01/18
City of New Haven, Connecticut, Facility Revenue Bonds (Easter
Seal Goodwill Industries Rehabilitation Center Project --
1991 Series):
280,000 8.500%, 4/01/01 No Opt. Call N/R 267,646
995,000 8.875%, 4/01/16 4/01 at 102 N/R 950,255
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 7.1%
3,000,000 City of Bridgeport, Connecticut, General Obligation Bonds, 1997 3/07 at 101 AAA 3,089,100
Series A, 5.250%, 3/01/17
325,000 Town of Canterbury, Connecticut, General Obligation Bonds, 7.200%, No Opt. Call A 402,097
5/01/09
2,800,000 State of Connecticut, General Obligation Capital Appreciation Bonds No Opt. Call AA- 1,514,156
(College Savings Plan, 1991 Series B), 0.000%, 12/15/11
1,000,000 State of Connecticut, General Obligation Capital Appreciation Bonds No Opt. Call AA- 621,010
(College Savings Plan, 1990 Series A), 0.000%, 5/15/09
3,000,000 State of Connecticut, General Obligation Capital Appreciation Bonds No Opt. Call AA- 1,660,290
(College Savings Plan, 1993 Series A), 0.000%, 6/15/11
Town of Glastonbury, Connecticut, General Obligation Bonds,
Issue of 1988:
200,000 7.200%, 8/15/06 No Opt. Call Aa1 240,682
200,000 7.200%, 8/15/07 No Opt. Call Aa1 244,078
200,000 7.200%, 8/15/08 No Opt. Call Aa1 247,502
Town of Griswold, Connecticut, General Obligation Bonds,
Issue of 1989:
200,000 7.500%, 4/01/02 No Opt. Call AAA 223,746
200,000 7.500%, 4/01/03 No Opt. Call AAA 229,266
200,000 7.500%, 4/01/04 No Opt. Call AAA 234,216
150,000 7.500%, 4/01/05 No Opt. Call AAA 178,920
340,000 City of Middletown, Connecticut, General Obligation Bonds, No Opt. Call AA 401,054
6.900%, 4/15/06
1,250,000 City of New Haven, Connecticut, General Obligation Bonds, Series 1995, 2/05 at 102 AAA 1,343,388
5.750%, 2/15/14
City of New London, Connecticut, General Obligation Bonds, Water
Department Revenue, Series 20:
120,000 7.300%, 12/01/05 No Opt. Call A+ 143,688
100,000 7.300%, 12/01/07 No Opt. Call A+ 123,196
Town of Old Saybrook, Connecticut, General Obligation Bonds:
160,000 7.400%, 5/01/08 No Opt. Call A 198,837
160,000 7.400%, 5/01/09 No Opt. Call A 200,656
275,000 6.500%, 2/15/10 No Opt. Call AAA 327,069
270,000 6.500%, 2/15/11 No Opt. Call AAA 322,483
925,000 Town of Oxford, Connecticut, General Obligation Bonds, 7.000%, 2/00 at 102 AAA 985,773
2/01/09
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/General (continued)
Town of Plainfield, Connecticut, General Obligation Bonds:
$ 225,000 7.000%, 9/01/00 No Opt. Call A $ 237,744
100,000 7.000%, 9/01/01 No Opt. Call A 107,991
100,000 7.100%, 9/01/02 9/01 at 102 A 109,765
310,000 7.100%, 9/01/03 9/01 at 102 A 341,493
100,000 7.200%, 9/01/04 9/01 at 102 A 110,438
335,000 7.250%, 9/01/06 9/01 at 102 A 369,884
335,000 7.300%, 9/01/08 9/01 at 102 A 369,853
155,000 7.300%, 9/01/10 9/01 at 102 A 170,756
City of Torrington, Connecticut, General Obligation Bonds:
700,000 6.400%, 5/15/11 5/02 at 102 AAA 766,437
680,000 6.400%, 5/15/12 5/02 at 102 AAA 744,539
Town of Winchester, Connecticut, General Obligation Bonds:
140,000 6.750%, 4/15/06 No Opt. Call A1 163,220
140,000 6.750%, 4/15/07 No Opt. Call A1 165,315
140,000 6.750%, 4/15/08 No Opt. Call A1 167,581
140,000 6.750%, 4/15/09 No Opt. Call A1 168,861
140,000 6.750%, 4/15/10 No Opt. Call A1 169,817
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 16.1%
1,000,000 State of Connecticut Health and Educational Facilities Authority 11/04 at 102 AAA 1,113,330
Revenue Bonds, Nursing Home Program Issue, Series 1994 (Sharon
Health Care Project), 6.250%, 11/01/21
5,000,000 State of Connecticut Health and Educational Facilities Authority 11/04 at 102 AAA 5,566,650
Revenue Bonds, Nursing Home Program Issue, Series 1994 (Saint
Josephs Manor Project), 6.250%, 11/01/16
State of Connecticut Health and Educational Facilities Authority
Revenue Bonds, Nursing Home Program Issue, Series 1994
(St. Camillus Health Center Project):
3,695,000 6.250%, 11/01/18 11/04 at 102 AAA 4,113,754
2,000,000 6.250%, 11/01/18 11/04 at 102 AA- 2,208,340
3,000,000 State of Connecticut Health and Educational Facilities Authority 11/04 at 102 AAA 3,339,990
Revenue Bonds, Nursing Home Program Issue, Series 1994 (The
Jewish Home for the Elderly of Fairfield County Project),
6.250%, 11/01/20
State of Connecticut Health and Educational Facilities Authority
Revenue Bonds, Nursing Home Program Issue, Series 1994 (Highland
View Manor, Inc. Project):
1,500,000 7.200%, 11/01/10 (Alternative Minimum Tax) 11/04 at 102 AAA 1,738,665
4,200,000 7.500%, 11/01/16 (Alternative Minimum Tax) 11/04 at 102 AAA 4,919,292
State of Connecticut Health and Educational Facilities Authority
Revenue Bonds, Nursing Home Program Issue, Series 1994 (Wadsworth
Glen Health Care Center Project):
1,100,000 7.200%, 11/01/10 (Alternative Minimum Tax) 11/04 at 102 AAA 1,275,021
1,000,000 7.500%, 11/01/16 (Alternative Minimum Tax) 11/04 at 102 AAA 1,171,260
4,115,000 State of Connecticut Health and Educational Facilities Authority 11/06 at 102 AA- 4,404,038
Revenue Bonds, Nursing Home Program Issue, Series 1996 (Abbott
Terrace Health Center Project), 5.750%, 11/01/13
4,365,000 State of Connecticut Health and Educational Facilities Authority, 11/06 at 102 AA- 4,870,991
Revenue Bonds, Nursing Home Program Issue, Series 1996 (3030 Park
Fairfield Health Center Project), 6.250%, 11/01/21
1,150,000 State of Connecticut, Special Tax Obligation Bonds, Transportation No Opt. Call AA- 1,328,906
Infrastructure Purposes, 1992 Series B, 6.125%, 9/01/12
2,000,000 Puerto Rico Aqueduct and Sewer Authority, Refunding Bonds, Series 7/06 at 101 1/2 A 1,975,640
1995, Guaranteed by the Commonwealth of Puerto Rico, 5.000%,
7/01/19
725,000 Town of Woodstock, Connecticut, Special Obligation Bonds (Woodstock 3/00 at 103 AAA 777,990
Academy -- 1990 Issue) (General Obligation Bonds), 6.900%, 3/01/06
</TABLE>
11
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Connecticut Municipal Bond Fund (continued)
August 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed -- 10.5%
$ 3,080,000 State of Connecticut Health and Educational Facilities Authority, 7/03 at 100 AAA $ 3,558,755
Revenue Bonds, University of Hartford Issue, Series C, 8.000%,
7/01/18 (Pre-refunded to 7/01/03)
1,300,000 State of Connecticut Health and Educational Facilities Authority No Opt. Call AAA 1,654,484
Revenue Bonds, Lutheran General Health Care System (Parkside Lodges
Projects), 7.375%, 7/01/19
250,000 State of Connecticut Health and Educational Facilities Authority, 7/99 at 102 BBB+*** 261,815
Revenue Bonds, Fairfield University Issue, Series F, 6.900%, 7/01/14
(Pre-refunded to 7/01/99)
1,000,000 State of Connecticut Health and Educational Facilities Authority, 7/00 at 102 N/R*** 1,083,000
Revenue Bonds, The Taft School Issue, Series A, 7.375%, 7/01/20
(Pre-refunded to 7/01/00)
190,000 State of Connecticut Health and Educational Facilities Authority 7/00 at 102 Aaa 206,019
Revenue Bonds, St. Marys Hospital Issue, Series C, 7.375%, 7/01/20
(Pre-refunded to 7/01/00)
5,500,000 State of Connecticut Health and Educational Facilities Authority, 7/00 at 102 AAA 5,938,240
Revenue Bonds, Yale-New Haven Hospital Issue, Series F, 7.100%, 7/01/25
(Pre-refunded to 7/01/00)
3,500,000 State of Connecticut Health and Educational Facilities Authority, 7/02 at 102 AAA 3,862,915
Revenue Bonds, Middlesex Hospital Issue, Series G, 6.250%, 7/01/12
(Pre-refunded to 7/01/02)
1,100,000 State of Connecticut Health and Educational Facilities Authority 7/02 at 102 N/R*** 1,198,560
Revenue Bonds, The William W. Backus Hospital Issue, Series C,
6.000%, 7/01/12 (Pre-refunded to 7/01/02)
180,000 State of Connecticut, Health and Educational Facilities Authority, 1/01 at 102 AAA 196,391
Revenue Bonds, Capital Asset Issue, Series C, 7.000%, 1/01/20
(Pre-refunded to 1/01/01)
1,605,000 City of New Haven, Connecticut, General Obligation Bonds, Issue of 8/01 at 102 AAA 1,793,732
1991, 7.400%, 8/15/11 (Pre-refunded to 8/15/01)
City of New Haven, Connecticut, General Obligation Bonds, Issue of 1992:
800,000 9.250%, 3/01/02 No Opt. Call AAA 882,008
1,000,000 7.400%, 3/01/12 (Pre-refunded to 3/01/02) 3/02 at 102 AAA 1,131,270
1,130,000 Town of Stratford, Connecticut General Obligation Bonds, 7.300%, 3/01 at 102 N/R*** 1,243,565
3/01/12 (Pre-refunded to 3/01/01)
City of Waterbury, Connecticut, General Obligation Bonds:
535,000 7.250%, 3/01/02 (Pre-refunded to 3/01/01) 3/01 at 102 N/R*** 588,163
785,000 7.300%, 3/01/05 (Pre-refunded to 3/01/01) 3/01 at 102 N/R*** 863,893
780,000 7.400%, 3/01/06 (Pre-refunded to 3/01/01) 3/01 at 102 N/R*** 860,153
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities -- 14.5%
8,000,000 Bristol Resource Recovery Facility Operating Committee, Solid Waste 7/05 at 102 A 8,900,880
Revenue Refunding Bonds (Ogden Martin Systems of Bristol, Inc.
Project -- 1995 Series), 6.500%, 7/01/14
Connecticut Resources Recovery Authority, Bridgeport Resco Company, L.P.
Project Bonds, Series A:
170,000 7.500%, 1/01/04 1/03 at 100 A 174,792
3,085,000 7.625%, 1/01/09 1/03 at 100 A 3,195,752
1,180,000 Connecticut Resources Recovery Authority, Resource Recovery Revenue 11/00 at 100 AA 1,204,732
Bonds (Wallingsford Resource Recovery Project, 1986 Series A),
7.125%, 11/15/08
Connecticut Resources Recovery Authority, 1991 Series One Subordinated
(Wallingsford Resource Recovery Project):
400,000 6.750%, 11/15/03 (Alternative Minimum Tax) 11/01 at 102 A3 433,300
500,000 6.800%, 11/15/04 (Alternative Minimum Tax) 11/01 at 102 A3 540,710
5,250,000 Connecticut Resources Recovery Authority Corporate Credit Bonds/Tax 11/02 at 102 A- 5,654,617
Exempt Interest (American REF-FUEL Company of Southeastern Connecticut
Project), 1992 Series A, 6.450%, 11/15/22 (Alternative Minimum Tax)
770,000 Connecticut Development Authority, Water Facilities Refunding Revenue 6/00 at 102 A+ 820,811
Bonds (Bridgeport Hydraulic Company Project -- 1990 Series),
7.250%, 6/01/20
1,750,000 Connecticut Development Authority, Water Facilities Revenue Bonds 4/07 at 102 A+ 1,909,950
(Bridgeport Hydraulic Company Project -- 1995 Series), 6.150%, 4/01/35
(Alternative Minimum Tax)
9,665,000 Eastern Connecticut Resource Recovery Authority, Solid Waste Revenue 1/03 at 102 BBB+ 9,684,716
Bonds (Wheelbrator Lisbon Project), Series 1993A, 5.500%, 1/01/20
(Alternative Minimum Tax)
2,500,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series DD, 7/08 at 101 BBB+ 2,459,823
5.000%, 7/01/28
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer -- 1.4%
$ 2,000,000 Connecticut Development Authority, Water Facilities Revenue 12/03 at 102 AAA $ 2,266,780
Refunding Bonds (The Connecticut Water Company Project-1993 Series),
6.650%, 12/15/20
1,000,000 State of Connecticut Clean Water Fund Revenue Bonds, 1991 Series, 1/01 at 102 AAA 1,089,881
7.000%, 1/01/11
- -----------------------------------------------------------------------------------------------------------------------------------
$224,585,000 Total Investments -- (cost $217,638,346) -- 99.0% 238,190,381
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.0% 2,288,438
--------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $240,478,819
====================================================================================================================
</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.
13
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Massachusetts Municipal Bond Fund
August 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Education and Civic Organizations - 8.2%
$ 1,100,000 Massachusetts Education Loan Authority, Education Loan Revenue 6/00 at 100 AAA $ 1,131,618
Bonds, Issue C, Series 1985A, 7.875%, 6/01/03
1,000,000 Massachusetts Health and Educational Facilities Authority, 7/01 at 102 AAA 1,087,040
Revenue Bonds, Boston College Issue, Series J,
6.625%, 7/01/21
1,000,000 Massachusetts Health and Educational Facilities Authority, 7/02 at 102 AAA 1,088,100
Revenue Bonds, Suffolk University Issue, Series B,
6.350%, 7/01/22
1,000,000 Massachusetts Industrial Finance Agency, Revenue Bonds 3/06 at 102 AAA 1,047,070
(College of the Holy Cross-1996 Issue), 5.500%, 3/01/20
500,000 Massachusetts Industrial Finance Agency, Revenue Bonds 7/03 at 102 Aa1 499,230
(Whitehead Institute for Biomedical Research-1993 Issue),
5.125%, 7/01/26
2,290,000 Massachusetts Industrial Finance Agency, Revenue and Refunding 7/05 at 102 AAA 2,590,585
Bonds, 1995 Series A (Lesley College Project),
6.300%, 7/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 11.9%
495,000 Massachusetts Health and Educational Facilities Authority, 7/99 at 100 A 501,618
Revenue Bonds, Brockton Hospital Issue, Series B,
8.000%, 7/01/07
500,000 Massachusetts Health and Educational Facilities Authority, 7/99 at 102 1/2 N/R 526,865
Revenue Bonds, Series 1989 (Cardinal Cushing General
Hospital), 8.875%, 7/01/18
700,000 Massachusetts Health and Educational Facilities Authority, 7/04 at 102 AA+ 761,432
Revenue Bonds (Daughters of Charity National Health
System-The Carney Hospital), Series D, 6.100%, 7/01/14
750,000 Massachusetts Health and Educational Facilities Authority, 7/02 at 102 AAA 824,693
Revenue Bonds, New England Medical Center Hospitals Issue,
Series F, 6.625%, 7/01/25
1,000,000 Massachusetts Health and Educational Facilities Authority, 7/03 at 102 AAA 1,046,030
Revenue Bonds, Lahey Clinic Medical Center Issue, Series B,
5.625%, 7/01/15
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 2,613,750
2,000,000 6.000%, 2/15/34 2/04 at 102 Aa 2,087,360
2,000,000 Massachusetts Health and Educational Facilities Authority, 7/08 at 102 AAA 1,963,620
Revenue Bonds, Caregroup Issue, Series A, 5.000% 7/01/25
415,000 Massachusetts Industrial Finance Agency, Revenue Bonds 6/99 at 102 A 434,970
(Sturdy Memorial Hospital), Series 1989, 7.900%, 6/01/09
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 13.9%
955,000 Boston-Mount Pleasant Housing Development Corporation, 8/02 at 102 AAA 1,017,858
Multifamily Housing Refunding Revenue Bonds, Series 1992 A,
6.750%, 8/01/23
3,700,000 Massachusetts Housing Finance Agency, Housing Project Revenue 4/03 at 102 A+ 3,938,243
Bonds, 6.375%, 4/01/21
1,000,000 Massachusetts Housing Finance Agency, Residential Development 11/02 at 102 AAA 1,068,160
Bonds, 6.250%, 11/15/14
1,000,000 Massachusetts Housing Finance Agency, Residential Development 5/02 at 102 AAA 1,092,790
Bonds, 1992 Series D, 6.875%, 11/15/21
2,000,000 Massachusetts Industrial Finance Agency, Assisted Living 12/07 at 102 AAA 2,080,800
Facility Revenue Bonds (Arbors at Living Amherst Project),
GNMA Collateralized Series 1997, 5.950%, 6/20/39
(Alternative Minimum Tax)
1,000,000 Massachusetts Housing Finance Agency, Rental Housing Mortgage 7/07 at 101 AAA 1,023,130
Revenue Bonds, 1997 Series C, 5.625%, 7/01/40
(Alternative Minimum Tax)
1,000,000 Massachusetts Industrial Finance Agency (FHA-Insured Mortgage 1/08 at 102 AAA 1,058,750
Loan), Hudner Associates Projects, 5.650%, 1/01/23
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$1,250,000 Somerville Housing Authority (Massachusetts), 5/00 at 102 AAA $1,316,925
Mortgage Revenue Bonds, Series 1990
(GNMA Collateralized - Clarendon Hill
Towers Project), 7.950% 11/20/30
- -------------------------------------------------------------------------------------------------------
Housing/Single Family - 2.0%
500,000 Massachusetts Housing Finance Agency, Single 6/01 at 102 Aa 530,020
Family Housing Revenue Bonds, Series 18,
7.350%, 12/01/16
1,250,000 Massachusetts Housing Finance Agency, Single 6/00 at 100 Aa 1,279,100
Family Housing Revenue, 7.700%, 6/01/17
- -------------------------------------------------------------------------------------------------------
Long Term Care - 6.7%
885,000 Massachusetts Health and Educational Facilities 7/03 at 102 AAA 946,623
Authority, Revenue Bonds, Cable Housing and
Health Services Issue, Series A, 5.625%, 7/01/13
3,285,000 Massachusetts Health and Educational Facilities 2/07 at 102 Aa2 3,542,511
Authority, Revenue Refunding Bonds, Youville
Hospital Issue (FHA Insured Project),
Series A, 6.250%, 2/15/41
400,000 Massachusetts State Industrial Financing 8/08 at 105 AAA 410,872
Agency, Assisted Living Facilities
Revenue, 5.400%, 8/20/12
1,125,000 Massachusetts Industrial Financial Agency, 2/06 at 102 AAA 1,184,434
Revenue Bonds, Heights Crossing Limited
Partnership Issue (FHA Insured Project), Series
1995, 6.000% 2/01/15 (Alternative Minimum Tax)
- -------------------------------------------------------------------------------------------------------
Tax Obligation/General - 10.7%
Town of Barnstable, Massachusetts, General
Obligation Bonds:
880,000 5.750%, 9/15/13 9/04 at 102 Aa3 940,940
490,000 5.750%, 9/15/14 9/04 at 102 Aa3 522,247
Town of Deerfield, Massachusetts, General
Obligation School 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 458,640
415,000 6.250%, 6/15/10 6/02 at 102 A1 450,275
375,000 City of Holyoke, Massachusetts, General Obligation No. Opt. Call BBB+ 396,225
Bonds, 1991 Series A, 8.000%, 6/01/01
500,000 City of Holyoke, Massachusetts, General Obligation 8/01 at 102 Baa2 561,240
School Project Loan, Act of 1948, 7.650%, 8/01/09
750,000 City of Holyoke, Massachusetts, General Obligation 11/02 at 102 BBB+ 829,740
Refunding Bonds, 7.000%, 11/01/08
545,000 City of Lowell, Massachusetts, General Obligation 12/01 at 103 A3 606,667
Qualified Bonds, 8.300%, 2/15/05
500,000 Town of Palmer, Massachusetts, General Obligation 10/03 at 102 AAA 532,685
Refunding Bonds, 5.500%, 10/01/10
425,000 South Essex Sewerage District, Massachusetts, No. Opt. Call Baa1 472,264
General Obligation Bonds, 9.000%, 12/01/00
City of Taunton, Massachusetts, General Obligation
Bonds (Electric Loan, Act of 1969):
1,465,000 8.000%, 2/01/02 No. Opt. Call A3 1,647,100
1,005,000 8.000%, 2/01/03 No. Opt. Call A3 1,160,293
1,000,000 City of Worcester, Massachusetts, General 8/02 at 102 BBB+ 1,080,390
Obligation Bonds, 6.000%, 8/01/04
- -------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 1.2%
930,000 Massachusetts Industrial Finance Agency, Library 1/05 at 102 AAA 1,093,978
Revenue Bonds (Malden Public Library Project),
Series 1994, 7.250%, 1/01/15
- -------------------------------------------------------------------------------------------------------
Transportation - 4.2%
1,500,000 Massachusetts State Industrial Finance Agency 4/03 at 102 AAA 1,534,110
(Avon Associates LLC), Series A, 5.375%, 4/01/20
10,000,000 Massachusetts Turnpike Authority, Metropolitan No. Opt. Call AAA 2,227,800
Highway System Revenue Bonds, 1997 Series C
(Senior), 0.00%, 1/01/29
- -------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 34.0%
City of Attleboro, Massachusetts, General Obligation
Bonds, 6.250%:
450,000 1/15/10 (Pre-refunded to 1/15/03) 1/03 at 102 A3*** 500,382
450,000 1/15/11 (Pre-refunded to 1/15/03) 1/03 at 102 A3*** 500,382
</TABLE>
15
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Massachusetts Municipal Bond Fund (continued)
August 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 250,000 City of Boston, Massachusetts, General Obligation Bonds, 1989 2/99 at 102 A+*** $ 259,285
Series A, 7.700%, 2/01/09 (Pre-refunded to 2/01/99)
1,000,000 City of Boston, Massachusetts, General Obligation Bonds, 1991 7/01 at 102 AAA 1,098,290
Series A, 6.750%, 7/01/11 (Pre-refunded to 7/01/01)
1,500,000 City of Boston, Massachusetts, Revenue Bonds, Boston City Hospital 8/00 at 102 Aaa 1,636,680
(FHA Insured Mortgage), Series A, 7.625%, 2/15/21
(Pre-refunded to 8/15/00)
500,000 Boston Water and Sewer Commission (Massachusetts), General Revenue 11/01 at 102 AAA 557,190
Bonds, 1991 Series A (Senior Series), 7.000%, 11/01/18
(Pre-refunded to 11/01/01)
440,000 City of Haverhill, Massachusetts, General Obligation, Municipal 10/01 at 102 BBB*** 494,956
Purpose Loan of 1991 Bonds, 7.500%, 10/15/11
(Pre-refunded to 10/15/01)
250,000 City of Holyoke, Massachusetts, General Obligation Bonds, 8.150%, 6/02 at 103 AAA 294,080
6/15/06 (Pre-refunded to 6/15/02)
445,000 City of Lowell, Massachusetts, General Obligation Qualified Bonds, 1/01 at 102 Aaa 499,615
8.400%, 1/15/09 (Pre-refunded to 1/15/01)
1,000,000 City of Lynn, Massachusetts, General Obligation Bonds, 7.850%, 1/02 at 104 Aaa 1,160,650
1/15/11 (Pre-refunded to 1/15/02)
1,000,000 Massachusetts Bay Transportation Authority, General Transportation 3/01 at 102 Aaa 1,095,480
System Bonds, 1991 Series A, 7.000%, 3/01/11 (Pre-refunded to 3/01/01)
250,000 The Massachusetts Bay Transportation Authority, Certificates of 12/06 at 100 A*** 313,810
Participation, Series 1988, 7.800%, 1/15/14 (Pre-refunded to 12/22/06)
165,000 Commonwealth of Massachusetts General Obligation, 7.250%, 3/01/09 3/00 at 102 AAA 176,791
(Pre-refunded to 3/01/00)
500,000 Massachusetts Health and Educational Facilities Authority, Revenue 9/02 at 102 AAA 558,680
Refunding Bonds, Worcester Polytechnic Institute Issue, Series E,
6.625%, 9/01/17 (Pre-refunded to 9/01/02)
750,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/99 at 102 A+*** 789,045
Bonds, Baystate Medical Center Issue, Series C, 7.500%, 7/01/20
(Pre-refunded to 7/01/99)
1,270,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/00 at 102 AAA 1,390,421
Bonds, Emerson Hospital Issue, Series C, 8.000%, 7/01/18
(Pre-refunded to 7/01/00)
3,000,000 Massachusetts Health and Educational Facilities Authority, Revenue No. Opt. Call AAA 3,066,000
Bonds, Malden Hospital Issue (FHA Insured Project), Series A,
5.000%, 8/01/16
1,180,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/00 at 101 1/2 N/R*** 1,287,415
Bonds, Suffolk University Issue, Series A, 8.125%, 7/01/20
(Pre-refunded to 7/01/00)
250,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/00 at 102 AAA 270,458
Bonds, University Hospital Issue, Series C, 7.250%, 7/01/10
(Pre-refunded to 7/01/00)
1,270,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/01 at 102 A1*** 1,410,284
Bonds, Charlton Memorial Hospital Issue, Series B, 7.250%, 7/01/13
(Pre-refunded to 7/01/01)
2,750,000 Massachusetts Health and Educational Facilities Authority, Revenue 4/02 at 102 AAA*** 3,073,318
Bonds, New England Deaconess Hospital Issue, Series D, 6.875%,
4/01/22 (Pre-refunded to 4/01/02)
1,000,000 Massachusetts Health and Educational Facilities Authority, Revenue 11/02 at 102 Aaa 1,118,750
Bonds, MetroWest Health, Inc. Issue, Series C, 6.500%, 11/15/18
(Pre-refunded to 11/15/02)
635,000 Massachusetts Port Authority, Revenue Bonds, Series 1982, 13.000%, No Opt. Call AAA 1,091,895
7/01/13
500,000 Massachusetts Industrial Finance Agency, Revenue Bonds 10/99 at 103 Aaa 537,195
(Springfield College Project -- 1989 Issue), 7.800%, 10/01/09
(Pre-refunded to 10/01/99)
250,000 Massachusetts Industrial Finance Agency Revenue Bonds, College of 1/02 at 102 AA-*** 274,498
the Holy Cross -- 1992 Issue, 6.450%, 1/01/12
(Pre-refunded to 1/01/02)
1,185,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Merrimack 7/02 at 102 AAA 1,343,387
College Issue, Series 1992, 7.125%, 7/01/12 (Pre-refunded to 7/01/02)
500,000 Town of Monson, Massachusetts, General Obligation School Project Loan, 10/00 at 102 AAA 550,095
Act of 1948 Bonds, 7.700%, 10/15/10 (Pre-refunded to 10/15/00)
500,000 Town of Palmer, Massachusetts, General Obligation, School Project Loan, 10/00 at 102 AAA 549,415
Act of 1948, 1990 Series B, 7.700%, 10/01/10 (Pre-refunded to 10/01/00)
1,130,000 City of Peabody, Massachusetts, General Obligation Electric Bonds, 8/01 at 102 AAA 1,249,757
6.950%, 8/01/09 (Pre-refunded to 8/01/01)
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 2,250,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/01 at 102 Aaa $ 2,490,007
Series P, 7.000%, 7/01/21 (Pre-refunded to 7/01/01)
1,000,000 City of Springfield, Massachusetts, General Obligation School 9/02 at 102 Baa3*** 1,134,640
Project Loan, Act of 1948 Bonds, Series B, 7.100%, 9/01/11
(Pre-refunded to 9/01/02)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 4.9%
1,245,000 Massachusetts Industrial Finance Agency, Resource Recovery 7/01 at 103 N/R 1,392,382
Revenue Bonds (SEMASS Project), Series 1991A, 9.000%, 7/01/15
3,000,000 Massachusetts State Industrial Finance Agency, Resource 12/08 at 102 BBB 3,034,470
Recovery Revenue, Ogden Haverhill Project - A, 5.600%, 12/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
$89,665,000 Total Investments--(cost $81,358,708) - 97.7% 88,408,494
- -----------------------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities - 1.1%
$ 1,000,000 Massachusetts State Health and Educational Facilities, Capital Asset Program,
Series B, Variable Rate Demand Bonds, 3.200%, 7/01/05+ 1,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.2% 1,065,877
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 90,474,371
====================================================================================================================
</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>
Portfolio of Investments (Unaudited)
Nuveen Massachusetts Insured Municipal Bond Fund
August 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations -- 16.9%
$1,000,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/01 at 102 AAA $1,087,040
Bonds, Boston College Issue, Series J, 6.625%, 7/01/21
250,000 Massachusetts Health and Educational Facilities Authority Revenue 10/98 at 102 AAA 255,770
Bonds, Northeastern University Issue, Series B, 7.600%, 10/01/10
1,600,000 Massachusetts Health and Educational Facilities Authority, Revenue 10/02 at 102 AAA 1,772,096
Bonds, Northeastern University Issue, Series E, 6.550%, 10/01/22
1,450,000 Massachusetts Health and Educational Facilities Authority, Revenue 10/02 at 100 AAA 1,543,308
Bonds, Boston University Issue, Series M, 6.000%, 10/01/22
2,000,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/02 at 102 AAA 2,175,300
Bonds, Bentley College Issue, Series I, 6.125%, 7/01/17
1,000,000 Massachusetts Industrial Finance Agency, Revenue Bonds (College of the 3/06 at 102 AAA 1,047,070
Holy Cross -- 1996 Issue), 5.500%, 3/01/20
500,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Brandeis 10/99 at 102 AAA 525,050
University Issue, 1989 Series C, 6.800%, 10/01/19
420,000 Massachusetts Industrial Finance Agency Revenue Bonds, Babson College 10/05 at 102 AAA 460,391
Issue, Series 1995A, 5.800%, 10/01/10
1,000,000 Massachusetts Industrial Finance Agency, Revenue Refunding Bonds, 7/01 at 102 AAA 1,078,420
Mount Holyoke College Issue, Series 1992A, 6.300%, 7/01/13
2,000,000 Massachusetts State Industrial Finance Agency, Western New England 7/08 at 102 AAA 1,961,560
College, 5.000%, 7/01/28
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care -- 14.3%
500,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/00 at 102 AAA 540,915
Bonds, University Hospital Issue, Series C, 7.250%, 7/01/19
250,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/99 at 102 AAA 261,820
Bonds, Capital Asset Program, 7.200%, 7/01/09
1,500,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/02 at 102 AAA 1,649,385
Bonds, New England Medical Center Hospitals Issue, Series F,
6.625%, 7/01/25
1,000,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/02 at 102 AAA 1,095,210
Bonds, South Shore Hospital Issue, Series D, 6.500%, 7/01/22
1,700,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/03 at 102 AAA 1,778,251
Bonds, Lahey Clinic Medical Center Issue, Series B, 5.625%, 7/01/15
2,000,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/08 at 102 AAA 1,963,620
Bonds, Caregroup Issue, Series A, 5.000%, 7/01/25
200,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Harvard 10/98 at 102 AAA 204,690
Community Health Plan, Inc., Issue 1988 Series B (Refunding Bonds),
7.750%, 10/01/08
2,290,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental 1/05 at 102 AAA 2,568,075
Control Facilities Financing Authority, Hospital Revenue Bonds, 1995
Series A (Hospital Auxilio Mutuo Obligated Group Project), 6.250%, 7/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 13.7%
4,290,000 Massachusetts Industrial Finance Agency, Assisted Living Facility 12/07 at 102 AAA 4,463,316
Revenue Bonds (Arbors at Living Amherst Project), GNMA Collateralized
Series 1997, 5,950%, 6/20/39 (Alternative Minimum Tax)
220,000 Massachusetts Housing Finance Agency, Housing Revenue Bonds, 1989 Series 12/99 at 103 AAA 232,118
A, 7.600%, 12/01/16
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Housing/Multifamily (continued)
$ 1,000,000 Massachusetts Housing Finance Agency, Rental Housing Mortgage Revenue 7/07 at 101 AAA $1,023,130
Bonds, 1997 Series C, 5.625%, 7/01/40 (Alternative Minimum Tax)
2,965,000 Massachusetts Housing Finance Agency, Rental Housing Mortgage Revenue 1/05 at 102 AAA 3,258,268
Bonds, 1995 Series A, (FHA-Insured Mortgage Loans), 7.350%, 1/01/35
(Alternative Minimum Tax)
640,000 Massachusetts Industrial Finance Agency (FHA-Insured Mortgage Loan), 1/08 at 102 AAA 677,600
Hudner Associates Projects, 5.650%, 1/01/23
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 1.1%
500,000 Massachusetts Housing Finance Agency, Single Family Housing Revenue 6/01 at 102 Aa 530,020
Bonds, Series 18, 7.350%, 12/01/16
250,000 Massachusetts Housing Finance Agency, Single Family Housing Revenue, 6/00 at 100 Aa 255,820
7.700%, 6/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 21.5%
250,000 Town of Groveland, Massachusetts, General Obligation Bonds, 6.900%, 6/01 at 102 AAA 273,758
6/15/07
1,000,000 City of Haverhill, Massachusetts, General Obligation, Hospital Refunding 9/01 at 102 AAA 1,087,440
Bonds, Series A, 6.700%, 9/01/10
500,000 City of Lawrence, Massachusetts, General Obligation Bonds, 9.750%, 3/15/04 No Opt. Call AAA 635,910
2,625,000 City of Lowell, Massachusetts, General Obligation State Qualified Bonds, 11/03 at 102 AAA 2,823,949
5.600%, 11/01/12
1,025,000 City of Lynn, Massachusetts, General Obligation Bonds, 6.750%, 1/15/02 No Opt. Call AAA 1,116,584
1,000,000 Town of Mansfield, Massachusetts, General Obligation Bonds, 6.700%, 1/02 at 102 AAA 1,107,690
1/15/11
250,000 Massachusetts Bay Transportation Authority, General Transportation System, 3/00 at 102 AAA 267,365
7.250%, 3/01/03
250,000 Town of Methuen, Massachusetts, General Obligation Bonds, 7.400%, 5/15/04 5/00 at 102 AAA 269,548
1,500,000 Town of Monson, Massachusetts, General Obligation Bonds, Bank-Qualified No Opt. Call AAA 1,652,175
Unlimited Tax, School Refunding Bonds, 5.500%, 10/15/10
300,000 Town of North Andover, Massachusetts, General Obligation Bonds, 7.400%, 9/00 at 103 AAA 328,524
9/15/10
190,000 Town of Northfield, Massachusetts, General Obligation Bonds, Municipal 10/01 at 102 AAA 206,918
Purpose Loan of 1992, Bank-Qualified, 6.350%, 10/15/09
1,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1995 (General 7/05 at 101 1/2 AAA 1,068,880
Obligation Bonds), 5.750%, 7/01/24
440,000 Quaboag Regional School District General Obligation Bonds, 6.250%, 6/02 at 102 AAA 481,246
6/15/08
City of Salem, Massachusetts, General Obligation Bonds:
500,000 6.800%, 8/15/09 8/01 at 102 AAA 549,020
900,000 6.000%, 7/15/10 7/02 at 102 AAA 974,295
220,000 Taunton, Massachusetts, General Obligation Bonds, 6.800%, 9/01/09 9/01 at 103 AAA 243,778
455,000 Town of Wareham, Massachusetts, General Obligation School Bonds, 1/01 at 103 AAA 500,404
7.050%, 1/15/07
215,000 Town of Whately, Massachusetts, General Obligation Bonds, 6.350%, 1/15/09 1/02 at 102 AAA 234,612
1,210,000 Town of Winchendon, Massachusetts, Unlimited Tax, General Obligation Bonds, 3/03 at 102 AAA 1,321,647
6.050%, 3/15/10
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 2.5%
1,500,000 Massachusetts Industrial Finance Agency, Library Revenue Bonds (Malden 1/05 at 102 AAA 1,764,480
Public Library Project), Series 1994, 7.250%, 1/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation -- 3.0%
9,500,000 Massachusetts Turnpike Authority, Metropolitan Highway System Revenue No Opt. Call AAA 2,116,410
Bonds, 1997 Series C (Senior), 0.000%, 1/01/29
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 21.8%
1,000,000 City of Boston, Massachusetts, General Obligation Bonds, 1991 Series A, 7/01 at 102 AAA 1,098,290
6.750%, 7/01/11 (Pre-refunded to 7/01/01)
500,000 City of Boston, Massachusetts, Revenue Bonds, Boston City Hospital 8/00 at 102 Aaa 545,560
(FHA Insured Mortgage), Series A, 7.625%, 2/15/21
(Pre-refunded to 8/15/00)
</TABLE>
19
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Massachusetts Insured Municipal Bond Fund (continued)
August 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 500,000 City of Fall River, Massachusetts General Obligation Bonds, 7.200%, 6/01 at 102 AAA $ 553,760
6/01/10 (Pre-refunded to 6/01/01)
250,000 City of Holyoke, Massachusetts, General Obligation Bonds, 8.150%, 6/02 at 103 AAA 294,080
6/15/06 (Pre-refunded to 6/15/02)
450,000 City of Leominster, Massachusetts, General Obligation Bonds, 7.500%, 4/00 at 102 AAA 485,006
4/01/09 (Pre-refunded to 4/01/00)
250,000 Lynn, Massachusetts, Water and Sewer Commission, General Revenue 12/00 at 102 AAA 273,463
Bonds, 1990 Series A, 7.250%, 12/01/10 (Pre-refunded to 12/01/00)
250,000 Massachusetts Bay Transportation Authority, General Transportation 3/99 at 102 AAA 259,433
System, 1989 Series A, 7.100%, 3/01/13 (Pre-refunded to 3/01/99)
250,000 Massachusetts Bay Transportation Authority, Certificates of 8/00 at 102 AAA 273,003
Participation, 1990 Series A, 7.650%, 8/01/15 (Pre-refunded to 8/01/00)
250,000 Commonwealth of Massachusetts General Obligation, 7.250%, 3/01/09 3/00 at 102 AAA 267,865
(Pre-refunded to 3/01/00)
25,000 The Commonwealth of Massachusetts, General Obligation Bonds, 6/02 at 101 AAA 27,531
Consolidated Loan of 1992, Series A, 6.500%, 6/01/08 (Pre-refunded
to 6/01/02)
340,000 Massachusetts State, General Obligation Bonds, Consolidated Loan 6/02 at 100 AAA 365,582
Series 1992-A, 6.000%, 6/01/13 (Pre-refunded to 6/01/02)
860,000 The Commonwealth of Massachusetts, General Obligation Bonds, 6/02 at 100 AAA 924,706
Consolidated Loan of 1992, Series A, 6.000%, 6/01/13 (Pre-refunded
to 6/01/02)
500,000 Massachusetts Health and Educational Facilities Authority, Revenue 10/01 at 102 AAA 554,225
Bonds, Berklee College of Music Issue, Series C, 6.875%, 10/01/21
(Pre-refunded to 10/01/01)
1,000,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/01 at 102 AAA 1,097,440
Bonds, Brigham and Womens Hospital Issue, Series D, 6.750%, 7/01/24
(Pre-refunded to 7/01/01)
500,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/99 at 102 A+*** 526,030
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, Revenue 7/00 at 102 AAA 271,510
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, Revenue 7/00 at 102 AAA 544,965
(Stonehill College), 7.700%, 7/01/20 (Pre-refunded to 7/01/00)
250,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/99 at 102 AAA 262,668
Bonds, Beverly Hospital Issue, Series D, 7.300%, 7/01/19
(Pre-refunded to 7/01/99)
1,000,000 Massachusetts Port Authority, Revenue Bonds, Series 1982, 13.000%, No Opt. Call AAA 1,719,520
7/01/13
250,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Milton Academy 9/99 at 102 AAA 264,060
Issue, Series A, 7.250%, 9/01/19 (Pre-refunded to 9/01/99)
375,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Museum of 11/99 at 102 AAA 398,340
Science Issue, Series 1989, 7.300%, 11/01/09 (Pre-refunded to 11/01/99)
500,000 Town of Monson, Massachusetts, General Obligation School Project Loan, 10/00 at 102 AAA 550,095
Act of 1948 Bonds, 7.700%, 10/15/10 (Pre-refunded to 10/15/00)
North Middlesex Regional School District, School Bonds of 1990, 7.200%,
6/15/08:
270,000 7.200%, 6/15/08 (Pre-refunded to 6/15/00) 6/00 at 103 AAA 294,219
245,000 7.200%, 6/15/09 (Pre-refunded to 6/15/00) 6/00 at 103 AAA 266,977
270,000 Town of Palmer, Massachusetts, General Obligation School Bonds of 3/00 at 102 AAA 289,480
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 Bonds, School 10/00 at 102 AAA 274,706
Project Loan, Act of 1948, 1990 Series B, 7.700%, 10/01/10
(Pre-refunded to 10/01/00)
515,000 Southern Berkshire Regional School District, General Obligation Bonds, 4/02 at 102 AAA 587,022
7.500%, 4/15/07 (Pre-refunded to 4/15/02)
1,145,000 Southern Berkshire Regional School District, Massachusetts, General 4/02 at 102 AAA 1,294,513
Obligation School Bonds, 7.000%, 4/15/11 (Pre-refunded to 4/15/02)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed (continued)
$ 250,000 City of Springfield, Massachusetts, Municipal Purpose Loan of 1998 11/98 at 103 AAA $ 258,910
(General Obligation Bonds), 7.000%, 11/01/07 (Pre-refunded to 11/01/98)
250,000 City of Westfield, Massachusetts, General Obligation Bonds, 7.100%, 12/00 at 102 AAA 273,324
12/15/08 (Pre-refunded to 12/15/00)
160,000 City of Worcester, Massachusetts, General Obligation Bonds, 6.900%, 5/02 at 102 AAA 179,617
5/15/07 (Pre-refunded to 5/15/02)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities -- 1.9%
1,300,000 Massachusetts Municipal Wholesale Electric Company, Power Supply 7/03 at 102 AAA 1,329,730
System Revenue Bonds, 1993 Series A, 5.000%, 7/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer -- 0.7%
500,000 Boston Water and Sewer Commission (A Public Instrumentality of 11/98 at 100 AAA 502,950
The Commonwealth of Massachusetts), General Revenue Bonds,
1988 Series A (Subordinated Series), 7.250%, 11/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
$70,560,000 Total Investments -- (cost $62,951,007) -- 97.4% 68,541,456
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 2.6% 1,798,001
--------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $70,339,457
====================================================================================================================
</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.
See accompanying notes to financial statements.
21
<PAGE>
Statement of Net Assets (Unaudited)
August 31, 1998
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $ 238,190,381 $ 88,408,494 $ 68,541,457
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) -- 1,000,000 --
Cash -- -- 1,066,603
Receivables:
Interest 3,605,918 1,080,753 981,254
Shares sold 417,436 1,114,658 24,439
Other assets 6,681 569 579
- --------------------------------------------------------------------------------------------------------------------------
Total assets 242,220,416 91,604,474 70,614,332
- --------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft 935,265 817,690 --
Payable for shares redeemed 208,580 -- 29,228
Accrued expenses:
Management fees (note 6) 109,823 40,128 32,460
12b-1 distribution and service fees (notes 1 and 6) 50,389 4,843 6,228
Other 24,992 8,486 10,256
Dividends payable 412,548 258,956 196,703
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,741,597 1,130,103 274,875
- --------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $ 240,478,819 $ 90,474,371 $ 70,339,457
==========================================================================================================================
Class A Shares (note 1)
Net assets $ 220,316,040 $ 11,877,051 $ 10,271,040
Shares outstanding 20,184,314 1,171,674 966,134
Net asset value and redemption price per share $ 10.92 $ 10.14 $ 10.63
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% on offering price) $ 11.40 $ 10.58 $ 11.10
==========================================================================================================================
Class B Shares (note 1)
Net assets $ 6,986,814 $ 2,152,750 $ 883,585
Shares outstanding 641,336 211,955 83,065
Net asset value, offering and redemption price per share $ 10.89 $ 10.16 $ 10.64
==========================================================================================================================
Class C Shares (note 1)
Net assets $ 12,516,536 $ 2,672,837 $ 1,348,039
Shares outstanding 1,148,908 265,250 127,129
Net asset value, offering and redemption price per share $ 10.89 $ 10.08 $ 10.60
==========================================================================================================================
Class R Shares (note 1)
Net assets $ 659,429 $ 73,771,733 $ 57,836,793
Shares outstanding 60,277 7,298,552 5,437,081
Net asset value, offering and redemption price per share $ 10.94 $ 10.11 $ 10.64
==========================================================================================================================
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended August 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Massachusetts
Connecticut Massachusetts Insured
- --------------------------------------------------------------------------------------------------------------------
Investment Income (note 1) $6,822,279 $2,567,156 $1,988,331
- --------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 643,200 239,919 188,572
12b-1 service fees -- Class A (notes 1 and 6) 217,877 10,508 9,352
12b-1 distribution and service fees -- Class B (notes 1 and 6) 26,126 6,879 3,480
12b-1 distribution and service fees -- Class C (notes 1 and 6) 46,571 8,429 4,943
Shareholders' servicing agent fees and expenses 81,215 54,883 37,455
Custodian's fees and expenses 34,740 29,309 25,346
Trustees' fees and expenses (note 6) 2,434 1,544 1,344
Professional fees 14,509 5,123 4,769
Shareholders' reports -- printing and mailing expenses 57,925 26,608 26,440
Federal and state registration fees 2,264 5,245 1,051
Portfolio insurance expense -- -- 1,815
Other expenses 8,031 3,354 2,660
- --------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 1,134,892 391,801 307,227
Expense reimbursement (note 6) (89,266) (38,821) --
- --------------------------------------------------------------------------------------------------------------------
Net expenses 1,045,626 352,980 307,227
- --------------------------------------------------------------------------------------------------------------------
Net investment income 5,776,653 2,214,176 1,681,104
- --------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (notes 1 and 4) (75,068) 3,054 (21,673)
Net change in unrealized appreciation or depreciation of investments 1,615,129 591,214 478,225
- --------------------------------------------------------------------------------------------------------------------
Net gain from investments 1,540,061 594,268 456,552
- --------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $7,316,714 $2,808,444 $2,137,656
====================================================================================================================
</TABLE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Connecticut Massachusetts Massachusetts Insured
------------------------------- ------------------------------ ------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended Six Months Ended Year Ended
8/31/98 2/28/98 8/31/98 2/28/98 8/31/98 2/28/98
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 5,776,653 $ 11,489,859 $ 2,214,176 $ 4,455,881 $ 1,681,104 $ 3,372,157
Net realized gain (loss) from
investment transactions
(notes 1 and 4) (75,068) 189,964 3,054 270,739 (21,673) 221,510
Net change in unrealized
appreciation or depreciation
of investments 1,615,129 6,726,949 591,214 1,315,343 478,225 960,239
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from operations 7,316,714 18,406,772 2,808,444 6,041,963 2,137,656 4,553,906
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
(note 1)
From undistributed net
investment income:
Class A (5,374,314) (10,989,264) (264,154) (420,405) (224,351) (394,204)
Class B (114,486) (59,967) (30,305) (12,202) (14,718) (7,953)
Class C (270,943) (419,099) (49,943) (65,022) (28,058) (44,444)
Class R (15,262) (17,894) (1,925,961) (3,950,179) (1,423,713) (2,925,848)
- ----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (5,775,005) (11,486,224) (2,270,363) (4,447,808) (1,690,840) (3,372,449)
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 17,847,537 25,394,964 9,552,320 8,022,615 3,928,497 4,862,078
Net proceeds from shares
issued to shareholders
due to reinvestment of
distributions 3,079,926 6,417,815 1,570,772 3,144,288 1,170,957 2,388,253
- ----------------------------------------------------------------------------------------------------------------------------------
20,927,463 31,812,779 11,123,092 11,166,903 5,099,454 7,250,331
- ----------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (14,314,862) (23,469,546) (6,098,357) (8,874,610) (2,550,945) (6,580,186)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
Fund share transactions 6,612,601 8,343,233 5,024,735 2,292,293 2,548,509 670,145
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 8,154,310 15,263,781 5,562,816 3,886,448 2,995,325 1,851,602
Net assets at the beginning of
period 232,324,509 217,060,728 84,911,555 81,025,107 67,344,132 65,492,530
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $240,478,819 $232,324,509 $90,474,371 $84,911,555 $70,339,457 $67,344,132
==================================================================================================================================
Balance of undistributed net
investment income at the end
of period $ 11,803 $ 10,155 $ 25,136 $ 81,323 $ 5,343 $ 15,079
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
23
<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 Flagship Connecticut Municipal Bond Fund
("Connecticut"), 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.
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 the when-issued and delayed delivery purchase commitments. At
August 31, 1998, there were no such outstanding purchase commitments in any of
the Funds.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
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 designated state income taxes, to retain such
tax-exempt status when distributed to the shareholders of the Funds. Net
realized capital gains 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
24
<PAGE>
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 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, 1998.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION> Connecticut Massachusetts
-------------------------------------------------- ------------------------------------------------
Six Months Year Ended Six Months Year Ended
Ended 8/31/98 2/28/98 Ended 8/31/98 2/28/98
------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 961,953 $ 10,406,356 1,537,629 $ 16,474,829 268,322 $ 2,696,533 292,755 $ 2,911,172
Class B 295,081 3,181,930 339,187 3,623,542 143,806 1,449,026 75,039 748,530
Class C 382,933 4,134,636 444,025 4,723,004 83,786 836,726 104,408 1,031,535
Class R 11,503 124,615 53,941 573,589 349,698 4,570,035 336,646 3,331,378
Shares issued to shareholder
due to reinvestment of distributions:
Class A 264,273 2,859,328 578,075 6,132,935 15,993 160,787 26,383 262,341
Class B 5,599 60,491 2,614 28,078 1,495 15,059 533 5,354
Class C 14,311 154,510 23,910 253,777 2,169 21,687 3,865 38,216
Class R 516 5,597 280 3,025 136,960 1,373,239 286,472 2,838,377
- -----------------------------------------------------------------------------------------------------------------------------------
1,936,169 20,927,463 2,979,661 31,812,779 1,002,229 11,123,092 1,126,101 11,166,903
- -----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (997,713) (10,782,418) (2,133,260) (22,598,891) (34,568) (347,222) (125,362) (1,245,649)
Class B (2,238) (24,206) (8,576) (93,295) (8,917) (89,956) (1) (10)
Class C (318,633) (3,443,449) (72,981) (777,360) (12,753) (127,512) (9,048) (89,159)
Class R (5,968) (64,789) - - (446,323) (5,533,667) (760,819) (7,539,792)
- -----------------------------------------------------------------------------------------------------------------------------------
(1,324,552) (14,314,862) (2,214,817) (23,469,546) (502,561) (6,098,357) (895,230) (8,874,610)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase 611,617 $ 6,612,601 764,844 $ 8,343,233 499,668 $ 5,024,735 230,871 $ 2,292,293
===================================================================================================================================
</TABLE>
25
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
<TABLE>
<CAPTION>
Massachusetts Insured
-----------------------------------------------
Six Months Year Ended
Ended 8/31/98 2/28/98
-----------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 169,509 $1,786,188 173,848 $1,817,609
Class B 27,079 285,701 62,675 658,125
Class C 6,404 67,490 37,089 389,926
Class R 169,835 1,789,118 192,043 1,996,418
Shares issued to shareholders due to reinvestment of distributions:
Class A 12,227 128,791 23,296 242,741
Class B 233 2,456 285 2,989
Class C 2,389 25,098 3,712 38,566
Class R 96,263 1,014,612 201,982 2,103,957
- ----------------------------------------------------------------------------------------------------------------------
483,939 5,099,454 694,930 7,250,331
- ----------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (37,004) (389,972) (94,300) (984,085)
Class B (7,207) (75,755) -- --
Class C (4,355) (45,766) (10,565) (109,299)
Class R (193,511) (2,039,452) (526,802) (5,486,802)
- ----------------------------------------------------------------------------------------------------------------------
(242,077) (2,550,945) (631,667) (6,580,186)
- ----------------------------------------------------------------------------------------------------------------------
Net increase 241,862 $ 2,548,509 63,263 $ 670,145
======================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid October 1, 1998, to shareholders of record on September
9, 1998, as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $.0445 $.0420 $.0425
Class B .0380 .0360 .0360
Class C .0395 .0375 .0375
Class R .0465 .0435 .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, 1998, were as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Investments in municipal securities $12,188,978 $8,875,981 $5,553,645
Temporary municipal investments 11,900,000 8,800,000 5,550,000
Sales:
Investments in municipal securities 5,185,600 5,429,133 5,598,077
Temporary municipal investments 11,900,000 7,800,000 5,550,000
================================================================================================
</TABLE>
At August 31, 1998, the identified cost of investments owned for federal income
tax purposes was the same as the cost for financial reporting purposes for each
Fund.
At February 28, 1998, the Funds' last fiscal year end, Connecticut and
Massachusetts had unused capital loss carryforwards available for federal income
tax purposes to be applied against future capital gains, if any. If not applied,
the carryforwards will expire as follows:
<TABLE>
<CAPTION>
Connecticut Massachusetts
- -------------------------------------------------------------------------------
<S> <C> <C>
Expiration year:
2003 $848,744 $ 22,054
2004 -- 507,247
2005 -- 156,261
- -------------------------------------------------------------------------------
Total $848,744 $685,562
===============================================================================
</TABLE>
26
<PAGE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at August 31, 1998, were as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $ 20,609,134 $ 7,049,786 $ 5,590,449
depreciation (57,099) -- --
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation $ 20,552,035 $ 7,049,786 $ 5,590,449
===============================================================================================================
</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 those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser 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 also voluntarily agree to
reimburse additional expenses from time to time, which may be terminated at any
time at its discretion.
During the six months ended August 31, 1998, the Distributor collected sales
charges on purchases of Class A Shares, the majority of which were paid out as
concessions to authorized dealers as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross sales charges collected $ 166,109 $ 53,262 $ 36,241
Paid to authorized dealers $ 143,757 $ 46,560 $ 30,224
===============================================================================================================
</TABLE>
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the six months ended August 31, 1998, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commission advances $ 199,310 $ 38,868 $ 29,262
===============================================================================================================
</TABLE>
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees on Class B Shares, and all 12b-1 service and
distribution fees on Class C Shares during the first year following a purchase
are retained by the Distributor. During the six months ended August 31, 1998,
the Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 fees retained $ 39,641 $ 7,572 $ 3,303
===============================================================================================================
</TABLE>
The remaining 12b-1 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions for during
the six months ended August 31, 1998, as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CDSC retained $ 1,797 $ 7,858 $ 40
===============================================================================================================
</TABLE>
7. Composition of Net Assets
At August 31, 1998, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $220,837,662 $84,081,365 $64,760,494
Balance of undistributed net investment income 11,803 25,136 5,343
Accumulated net realized gain (loss) from investment transactions (922,681) (681,916) (16,829)
Net unrealized appreciation of investments 20,552,035 7,049,786 5,590,449
- ---------------------------------------------------------------------------------------------------------------
Net assets $240,478,819 $90,474,371 $70,339,457
===============================================================================================================
</TABLE>
27
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
CONNECTICUT --------------------------------- -----------------------------
Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
February 28/29, Value Income (a) Gain (Loss) Total Income Gains Total Value Return (b)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (7/87)**
1999 (g) $10.85 $.27 $ .07 $ .34 $(.27) $ -- $(.27) $10.92 3.17%
1998 10.51 .56 .34 .90 (.56) -- (.56) 10.85 8.75
1997 (c) 10.23 .42 .28 .70 (.42) -- (.42) 10.51 6.96
1996 (d) 10.38 .57 (.14) .43 (.58) -- (.58) 10.23 4.18
1995 (d) 10.17 .58 .22 .80 (.59) -- (.59) 10.38 8.21
1994 (d) 10.66 .59 (.39) .20 (.60) (.09) (.69) 10.17 1.70
1993 (d) 10.05 .61 .61 1.22 (.61) -- (.61) 10.66 12.48
Class B (2/97)
1999 (g) 10.83 .23 .06 .29 (.23) -- (.23) 10.89 2.71
1998 10.51 .48 .32 .80 (.48) -- (.48) 10.83 7.76
1997 (e) 10.53 .04 (.02) .02 (.04) -- (.04) 10.51 .19
Class C (10/93)**
1999 (g) 10.83 .24 .06 .30 (.24) -- (.24) 10.89 2.80
1998 10.49 .50 .34 .84 (.50) -- (.50) 10.83 8.17
1997 (c) 10.22 .38 .27 .65 (.38) -- (.38) 10.49 6.43
1996 (d) 10.36 .52 (.14) .38 (.52) -- (.52) 10.22 3.71
1995 (d) 10.16 .53 .20 .73 (.53) -- (.53) 10.36 7.53
1994 (f) 11.06 .33 (.84) (.51) (.33) (.06) (.39) 10.16 (6.48)*
Class R (2/97)
1999 (g) 10.87 .28 .07 .35 (.28) -- (.28) 10.94 3.28
1998 10.51 .58 .36 .94 (.58) -- (.58) 10.87 9.17
1997 (e) 10.55 .01 (.05) (.04) -- -- -- 10.51 (.38)
===============================================================================================================================
<CAPTION>
Investment Operations Less Distributions
MASSACHUSETTS --------------------------------- -----------------------------
Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
February 28/29, Value Income (a) Gain (Loss) Total Income Gains Total Value Return (b)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1999 (d) $10.08 $.25 $ .07 $ .32 $(.26) $ -- $(.26) $10.14 3.20%
1998 9.89 .52 .19 .71 (.52) -- (.52) 10.08 7.38
1997 9.94 .53 (.07) .46 (.51) -- (.51) 9.89 4.73
1996 9.56 .51 .39 .90 (.52) -- (.52) 9.94 9.62
1995 (c) 9.54 .25 .03 .28 (.26) -- (.26) 9.56 3.05
Class B (3/97)
1999 (d) 10.10 .21 .07 .28 (.22) -- (.22) 10.16 2.83
1998 (c) 9.88 .45 .22 .67 (.45) -- (.45) 10.10 6.93
Class C (10/94)
1999 (d) 10.02 .22 .07 .29 (.23) -- (.23) 10.08 2.94
1998 9.83 .47 .19 .66 (.47) -- (.47) 10.02 6.85
1997 9.89 .45 (.08) .37 (.43) -- (.43) 9.83 3.90
1996 9.51 .44 .39 .83 (.45) -- (.45) 9.89 8.87
1995 (c) 9.28 .19 .25 .44 (.21) -- (.21) 9.51 4.86
Class R (12/86)
1999 (d) 10.05 .26 .07 .33 (.27) -- (.27) 10.11 3.30
1998 9.86 .54 .19 .73 (.54) -- (.54) 10.05 7.60
1997 9.91 .54 (.06) .48 (.53) -- (.53) 9.86 4.99
1996 9.54 .54 .38 .92 (.55) -- (.55) 9.91 9.80
1995 9.94 .54 (.40) .14 (.54) -- (.54) 9.54 1.64
1994 9.91 .54 .04 .58 (.54) (.01) (.55) 9.94 5.96
===============================================================================================================================
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets(000) ment ment ment(a) ment(a) Rate
- --------------------------------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$220,316 .91%* 4.86%* .84%* 4.93%* 2%
216,436 .85 5.15 .78 5.22 12
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
6,987 1.66* 4.11* 1.60* 4.17* 2
3,713 1.61 4.34 1.52 4.43 12
102 1.59* 6.61* 1.12* 7.08* 20
12,517 1.46* 4.31* 1.39* 4.38* 2
11,586 1.41 4.59 1.33 4.67 12
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
659 .71* 5.06* .64* 5.13* 2
590 .66 5.29 .57 5.38 12
- - 10.97* - 10.97* 20
================================================================================================
</TABLE>
* Annualized.
** Information included prior to the nine months ended February 28, 1997,
reflects the financial highlights of Flagship Connecticut.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized except where noted.
(c) For the nine months ended February 28.
(d) For the fiscal year ended May 31.
(e) From commencement of class operations as noted.
(f) From commencement of class operations as noted through May 31.
(g) For the six months ended August 31, 1998.
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets(000) ment ment ment(a) ment(a) Rate
- --------------------------------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11,877 1.04%* 4.84%* .95%* 4.93%* 6%
9,291 1.00 5.20 .95 5.25 17
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
2,153 1.78* 4.07* 1.70* 4.15* 6
763 1.77* 4.41* 1.70* 4.48* 17
2,673 1.59* 4.28* 1.50* 4.37* 6
1,924 1.55 4.64 1.50 4.69 17
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
73,772 .84* 5.05* .75* 5.14* 6
72,934 .80 5.40 .75 5.45 17
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
===================================================================================================
</TABLE>
* Annualized.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(c) From commencement of class operations as noted.
(d) For the six months ended August 31, 1998.
29
<PAGE>
Financial Highlights (Unaudited) (continued)
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------- ----------------------------
MASSACHUSETTS INSURED
Net
Beginning Realized/ Ending
Net Net Unrealized Net Net
Year Ended Asset Investment Investment Investment Capital Asset Total
February 28/29, Value Income (a) Gain (Loss) Total Income Gains Total Value Return (b)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
1999 (d) $10.57 $.25 $ .07 $.32 $(.26) $-- $(.26) $10.63 3.03%
1998 10.38 .52 .19 .71 (.52) -- (.52) 10.57 7.04
1997 10.49 .53 (.12) .41 (.52) -- (.52) 10.38 4.02
1996 10.06 .51 .44 .95 (.52) -- (.52) 10.49 9.59
1995 (c) 10.03 .25 .04 .29 (.26) -- (.26) 10.06 2.99
Class B (3/97)
1999 (d) 10.57 .21 .08 .29 (.22) -- (.22) 10.64 2.75
1998 (c) 10.36 .44 .21 .65 (.44) -- (.44) 10.57 6.45
Class C (9/94)
1999 (d) 10.54 .22 .07 .29 (.23) -- (.23) 10.60 2.75
1998 10.35 .46 .19 .65 (.46) -- (.46) 10.54 6.45
1997 10.47 .45 (.13) .32 (.44) -- (.44) 10.35 3.17
1996 10.04 .43 .44 .87 (.44) -- (.44) 10.47 8.80
1995 (c) 9.91 .20 .14 .34 (.21) -- (.21) 10.04 3.52
Class R (12/86)
1999 (d) 10.57 .26 .08 .34 (.27) -- (.27) 10.64 3.22
1998 10.38 .54 .19 .73 (.54) -- (.54) 10.57 7.23
1997 10.50 .54 (.12) .42 (.54) -- (.54) 10.38 4.16
1996 10.06 .54 .44 .98 (.54) -- (.54) 10.50 9.99
1995 10.45 .55 (.39) .16 (.55) -- (.55) 10.06 1.77
1994 10.44 .54 -- .54 (.53) -- (.53) 10.45 5.22
===========================================================================================================================
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets (000) ment ment ment (a) ment (a) Rate
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$10,271 1.04%* 4.75%* 1.04%* 4.75%* 8%
8,679 1.03 4.98 1.03 4.98 23
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
884 1.79* 4.00* 1.79* 4.00* 8
666 1.80* 4.20* 1.80* 4.20* 23
1,348 1.59* 4.20* 1.59* 4.20* 8
1,293 1.58 4.43 1.58 4.43 23
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
57,837 .84* 4.96* .84* 4.96* 8
56,707 .83 5.18 .83 5.18 23
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
==============================================================================================
</TABLE>
* Annualized.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(c) From commencement of class operations as noted.
(d) For the six months ended August 31, 1998.
31
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk, and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced, and municipal bond funds featuring
Premier Advisors/SM/ including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies, and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced, and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred/(R)/
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
32
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremmer
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawyers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
33
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time. We emphasize quality securities carefully chosen through
in-depth research, and we follow those securities closely over time to ensure
that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
1898
NUVEEN 1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime./SM/
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com VSA-1-8-98
<PAGE>
NUVEEN
MUNICIPAL
BONDS FUNDS
August 31, 1998
- ------------------------
Semiannual Report
- ------------------------
Dependable, tax-free income to help you keep more of what you earn.
[PHOTO APPEARS HERE]
New Jersey
New Jersey
Intermediate
New York
New York
Insured
<PAGE>
Highlights
As of August 31, 1998
For Class A shares at net asset value
- ---------------------------------------------------------------------
Credit Quality Performance Highlights
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND
[PIE CHART APPEARS HERE]
AAA/US Guaranteed 60% . Distribution rate of 4.97% and SEC 30-day yield of 4.54%*
AA 9% . Taxable-equivalent yield of 7.03%**
A 8% . One-year total return of 7.82%
BBB/NR 22%
NUVEEN FLAGSHIP NEW JERSEY INTERMEDIATE MUNICIPAL BOND FUND
[PIE CHART APPEARS HERE]
AAA/US Guaranteed 46% . Distribution rate of 4.61% and SEC 30-day yield of 3.68%*
AA 21% . One-year total return of 6.89%
A 6% . Taxable-equivalent total return of 9.59%
BBB/NR 27%
NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND FUND
[PIE CHART APPEARS HERE]
AAA/US Guaranteed 36% . Distribution rate of 4.95% and SEC 30-day yield of 4.14%*
AA 13% . Taxable-equivalent yield of 6.44%**
A 23% . One-year total return of 8.25%
BBB/NR 28%
NUVEEN NEW YORK INSURED MUNICIPAL BOND FUND
[PIE CHART APPEARS HERE]
INSURED 76% . Distribution rate of 4.83% and SEC 30-day yield of 3.77%*
US Guaranteed 24% . Taxable-equivalent yield of 5.86%**
. One-year total return of 7.34%
</TABLE>
Contents
1 Dear Shareholder
3 New Jersey Portfolio
Manager's Comments
4 New Jersey Performance Overview
5 New Jersey Intermediate
Performance Overview
6 New York Portfolio
Manager's Comments
7 New York Performance Overview
8 New York Insured Performance Overview
9 Portfolio of Investments
30 Statement of Net Assets
31 Statement of Operations
32 Statement of Changes in Net Assets
34 Notes to Financial Statements
40 Financial Highlights
44 Building Better Portfolios
45 Fund Information
* Distribution rate is computed by taking the most recent dividend per share,
multiplying it as needed to annualize it, and dividing by the appropriate price
per share (e.g., net asset value for purchases to be made without a load such as
reinvestments from Nuveen Unit Trusts, or the maximum public offering price).
SEC yield is computed by dividing the net investment income per share earned
during the specified one month or 30-day period by the maximum offering price
per share on the last day of the period.
The distribution rate differs from yield and total return and therefore is not
intended to be a complete measure of performance. Distribution rate may
sometimes differ from yield because a Fund may be paying out more or less than
it is earning and because it may not include the effect of amortization of bond
premiums to the extent such premiums arise after the bonds were purchased.
** For investors in the 31% federal and applicable state income tax bracket.
See your funds' Performance Overview in this report for more information.
<PAGE>
[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.
Dear Shareholder
I'm pleased to report that over the past 12 months, your Nuveen Municipal Bond
Fund has continued to perform well, meeting its primary objectives of providing
competitive levels of tax-free income and after-tax return. The strong market in
fixed-income securities benefited from investors selecting quality investment
vehicles like municipal bond funds.
THE ECONOMY IN REVIEW
Over the past year, the markets endured bouts of volatility, as the Asian
financial crisis spilled over into emerging markets and affected economies
around the globe. Investors responded by seeking a haven from this market
volatility by choosing more conservative investments, such as municipal bond
funds. As interest rates on municipal bonds continued to trend downward, the
relative after-tax yields offered by these funds stimulated additional investor
interest.
In the coming months, we will continue to watch several key factors affecting
the future of the economy, including the strength of the dollar, employment
figures, corporate earnings reports, and further interest rate indications from
the Federal Reserve. These factors will influence the outlook for fixed-income
markets during the remainder of the year.
MUNICIPAL MARKET REVIEW
During the past 12 months, declining interest rates drove yields on 30-year
Treasuries to their lowest levels ever. The story in the municipal market,
however, was different. As yields on the long Treasury bond reached historic
lows, the yield on the Bond Buyer 40, an unmanaged index of long-term municipal
bonds, fell 42 basis points - from 5.53% to 5.11%. As a result, the ratio
between Treasury yields and municipal yields, as of August 31, stood at 92%,
compared with the more typical range of 80-82%. For investors, this meant that
municipal bonds offered 92% of the yield of a Treasury bond with comparable
characteristics - before taxes were taken into account. As shown in the
accompanying chart, municipal bonds have consistently provided very attractive
taxable-equivalent yields compared with the taxable yield on Treasury bonds.
-----
1
<PAGE>
"Our expertise provides the key to building a well-balanced portfolio that
achieves your financial goals."
One of the main factors in the steep decline in Treasury yields was the strong
interest in these investments by international investors. As the economic
turmoil in Asia continued to spread to other economies world-wide and the dollar
strengthened against foreign currencies, the demand for U.S.-dollar denominated
Treasury securities increased.
In the municipal market, where foreign investors do not benefit from the tax
advantages of municipal bonds, low interest rates and a strong economy
generated high levels of new issuance and refinancing of existing bonds. The
first six months of 1998 saw $146 billion of new municipal issuance, up 51% over
the same period in 1997, and $42 billion in refunding activity, an increase of
118% over last year. The continued strength of the U.S. economy has brought
about improvements in the fundamental financial health of many municipalities
and boosted the overall credit quality of municipal bonds. During the third
quarter of this year, 3.5 municipal issuers received credit upgrades for every
municipal downgrade. This trend enhanced Nuveen's value oriented investment
approach, as the upgraded bonds increased in value, providing further benefits
to investors.
NUVEEN EXPERTISE IS KEY
The key to taking advantage of the exceptional values currently available in the
municipal market is the expertise of a proven investment manager. At Nuveen, we
recognize the value of time-tested expertise. The high level of recent municipal
issuance, for example, highlights the value of our expertise in the municipal
market, as our portfolio management teams carefully select the securities best
suited to help the funds achieve their investment objectives.
Nuveen has assembled a group of Premier Advisers (SM) that can provide years of
experience and time-tested expertise in a given asset class. In addition to
Nuveen Advisory Corporation, our Premier Adviser for tax-free investing, you can
rely on our growing group of other advisers to provide the expertise that makes
the difference in the equity market, including Institutional Capital Corporation
for value investing and Rittenhouse Financial Services for growth investing. For
more information about our funds managed by other Nuveen Premier Advisers,
including charges and expenses, contact your financial adviser for a prospectus
or Nuveen at (800) 621-7227. Read it carefully before you invest or send money.
We encourage you to talk with your financial adviser about the ways Nuveen's
expanding selection of investments, together with our expertise, can help you
establish the foundation of a diversified portfolio designed to build and
sustain long-term financial security. When seeking quality investment solutions
that withstand the test of time, you can count on Nuveen. Our expertise provides
the key to building a well-balanced portfolio that achieves your financial
goals.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
October 15, 1998
-----
2
<PAGE>
Nuveen Flagship New Jersey Municipal Bond Fund
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
PORTFOLIO MANAGER'S COMMENTS
Portfolio Manager Tom Futrell discusses fund performance, the municipal market,
and key investment strategies for the New Jersey funds for the period covered by
this report.
STATE ECONOMIC AND MARKET REVIEW
Over the past 6 months, New Jersey's steady economic improvement has aided many
of its battered municipalities. Certain indicators in the state, however, still
lag those of the national economy, notably the unemployment rate, which has been
impacted by high labor costs and a large number of regulations. Growth in the
science and technology sectors has played a part in the state's recent economic
performance. Many of these high tech companies are attracted to New Jersey by
the state's existing base of large communications firms and drug companies.
Nonetheless, the health of New Jersey's economy did not translate into an
increase in municipal bond supply. In a year that saw increased issuance in
almost every state, New Jersey's was down 10% for the year. Furthermore, narrow
spreads between the yields on higher- and lower-quality bonds intensified the
challenge of identifying value in the markets.
FUND PERFORMANCE
Despite the declining interest rate environment of the past year, the Nuveen
Flagship New Jersey Municipal Bond Fund and the Nuveen Flagship New Jersey
Intermediate Municipal Bond Fund both provided investors with attractive
taxable-equivalent yields on Class A shares at net value of 7.03% and 5.70%,
respectively, based on the combined federal and state income tax rate of 35.4%.
The tax-free yields for the funds were 4.54% and 3.68%, respectively, on Class A
shares at net asset value.
Over the past year, the change in income earned by these portfolios, due to a
decline in interest rates, necessitated a dividend reduction. The higher-
yielding bonds that were called out of these portfolios were replaced with bonds
paying lower interest rates, reflecting current market conditions.
For the one year period ended August 31, 1998, the Class A share total return at
net asset value for the Nuveen Flagship New Jersey Municipal Bond Fund was
7.82%, which is equivalent to a taxable return of 10.76% on Class A shares at
net asset value for investors in the combined 35.4% federal and state income tax
bracket. The total return on net asset value for the New Jersey Intermediate
Fund was 6.89% on Class A shares at net asset value, which is equivalent to a
taxable return of 9.59% on Class A shares at net asset value for investors in
the combined 35.4% federal and state income tax bracket. Those total returns
compare to the annual returns of 8.65% and 7.62% posted by the Lehman Brothers
Municipal Bond Index and the Lehman Brothers 7 Year Municipal Bond Index,
respectively. These indexes are comprised of a broad range of investment grade
municipal bonds and do not reflect any initial or ongoing expenses.
The performance of the funds continues to be impacted by the funds' relatively
short durations. Duration measures a bond fund's price volatility, or reaction
to interest rate movements. The shorter the duration, the less sensitive the
fund is to interest rate changes. When compared to their peers, many of which
maintain considerably longer durations, the New Jersey funds may experience a
smaller impact from changes in the interest rate environment.
KEY STRATEGIES
In terms of the funds' specific holdings, there were several success stories
last year. Among them were the acquisition of a number of higher-yielding
alternative minimum tax bonds and insured health care issues, all of which were
discovered by Nuveen's experienced bond research team. In addition, we were able
to enhance the predictability of the funds' income streams by selling a number
of bonds that were subject to be called away by their issuers.
OUTLOOK FOR THE FUTURE
As previously announced, the merger of the Nuveen Flagship New Jersey Municipal
Bond Fund and the Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
was completed September 11, 1998. We view this as an opportunity for
shareholders in both funds to benefit from increased operating efficiencies. We
will continue to manage the merged portfolio with an eye toward purchasing
undervalued securities that provide attractive interest income exempt from
federal and state income taxes as is consistent with preservation of capital.
To achieve this goal, we will continue to work with Nuveen's research team, a
valuable asset in our search for undervalued securities. Specifically, we will
work to improve the fund's structure, looking for bonds with better call
protection, attractive yields, and those selling at a discount to their par
value. We will also take steps to extend the portfolio's duration,allowing us to
participate more actively in healthy municipal market conditions.
----
3
<PAGE>
Nuveen Flagship New Jersey Municipal Bond Fund
PERFORMANCE OVERVIEW
As of August 31, 1998
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
9/97 0.0465
10/97 0.0465
11/97 0.0465
12/97 0.0465
1/98 0.045
2/98 0.045
3/98 0.045
4/98 0.045
5/98 0.045
6/98 0.045
7/98 0.044
8/98 0.044
Portfolio Statistics
<TABLE>
<CAPTION>
SHARE CLASS A B C R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 9/94 2/97 9/94 12/91
Net Asset Value $10.63 $10.63 $10.61 $ 10.64
Total Net Assets ($000) $102,621
Average Weighted Maturity (Years) 18.24
Average Weighted Duration (Years) 6.72
- ------------------------------------------------------------------------------------------------
</TABLE>
Annualized Total Return/1/
<TABLE>
<CAPTION>
SHARE CLASS A(NAV) A(OFFER) B C R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 7.82% 3.24% 6.92% 7.18% 8.05%
5-Year 5.80% 4.90% 5.07% 5.10% 6.07%
Since Inception 7.14% 6.44% 6.40% 6.41% 7.41%
- ------------------------------------------------------------------------------------------------
</TABLE>
Tax-Free Yields
<TABLE>
<CAPTION>
SHARE CLASS A(NAV) A(OFFER) B C R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Distribution Rate 4.97% 4.76% 4.23% 4.47% 5.19%
SEC 30-Day Yield 4.54% 4.35% 3.80% 4.00% 4.75%
Taxable Equivalent Yield/2/ 7.03% 6.73% 5.88% 6.19% 7.35%
- ------------------------------------------------------------------------------------------------
</TABLE>
Top 5 Sectors (as a % of total investments)
<TABLE>
<S> <C>
Transportation 15%
Tax Obligation (General) 13%
Tax Obligation (Limited) 13%
U.S. Guaranteed 12%
Health Care 9%
- --------------------------------------------------
</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 B shares automatically convert to
Class A shares eight years after purchase. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
2 Based on SEC yield and a combined federal and state income tax rate of 35.4%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
-----
4
<PAGE>
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
PERFORMANCE OVERVIEW
As of August 31, 1998
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
9/97 0.042
10/97 0.042
11/97 0.042
12/97 0.042
1/98 0.0415
2/98 0.0415
3/98 0.0415
4/98 0.0415
5/98 0.0415
6/98 0.0415
7/98 0.0405
8/98 0.0405
Portfolio Statistics
<TABLE>
<CAPTION>
SHARE CLASS A C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Inception Date 9/92 3/97 3/97
Net Asset Value $10.55 $10.57 $ 10.55
Fund Net Assets ($000) $10,673
Average Weighted Maturity (Years) 7.84
Average Weighted Duration (Years) 5.21
- --------------------------------------------------------------------------------
</TABLE>
Annualized Total Return/1/
<TABLE>
<CAPTION>
SHARE CLASS A(NAV) A(Offer) C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1-Year 6.89% 3.69% 6.33% 7.03%
5-Year 5.24% 4.61% 4.86% 5.31%
Since Inception 6.52% 5.97% 6.13% 6.58%
- --------------------------------------------------------------------------------
</TABLE>
Tax-Free Yields
<TABLE>
<CAPTION>
SHARE CLASS A(NAV) A(Offer) C R
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Distribution Rate 4.61% 4.47% 4.09% 4.83%
SEC 30-Day Yield 3.68% 3.57% 3.14% 3.89%
Taxable Equivalent Yield/2/ 5.70% 5.53% 4.86% 6.02%
- --------------------------------------------------------------------------------
</TABLE>
Top 5 Sectors (as a % of total investments)
<TABLE>
<S> <C>
Tax Obligation (General) 28%
Tax Obligation (Limited) 25%
Health Care 11%
Education and Civic Organizations 8%
Industrial (Other) 8%
- -------------------------------------------------
</TABLE>
1 Class A share returns are actual. Class C and R share returns are actual for
the period since class inception; returns prior to class inception are Class
A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 3.0% maximum sales charge. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
2 Based on SEC yield and a combined federal and state income tax rate of
35.4%. Represents the yield on a taxable investment necessary to equal the
yield of the Nuveen fund on an after-tax basis.
-----
5
<PAGE>
Nuveen Flagship New York MUnicipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
PORTFOLIO MANAGER'S COMMENTS
Portfolio Manager Dan Solender discusses fund performance, the municipal market,
and key investment strategies for the New York funds for the period covered by
this report.
STATE ECONOMIC AND MARKET REVIEW
New York state turned in an improved economic performance in the last 6 months.
Job growth picked up, leading to improved unemployment figures in many areas. In
particular, the New York City metro area showed continued strength, driven in
part by the performance of the securities industry. Growth in this region of the
state more than offset continued sluggishness in many upstate economies.
Activity in the state's municipal bond market was strong during the last 12
months. New York was responsible for the nation's greatest volume of municipal
issuance, increasing 64% from August 1997, particularly from New York City and
in sectors financed by state authorities. One event of particular note was a
$3.5 billion issue by the Long Island Power Authority, the largest municipal
deal ever. In addition, New York City saw its debt upgraded by Standard &
Poor's, attracting many new buyers.
FUND PERFORMANCE
Despite the declining interest rate environment of the past year, the Nuveen
Flagship New York Municipal Bond Fund and the Nuveen New York Insured Municipal
Bond Fund both provided investors with attractive taxable-equivalent yields of
6.44% and 5.86% on Class A shares at net asset value respectively, based on the
combined federal and state income tax rate of 35.7%. The tax-free distribution
rates for the funds were 4.95% and 4.83% respectively, and the SEC 30-day yields
were 4.14% and 3.77% respectively, on Class A shares at net asset value.
Over the past year, the change in income level earned by these portfolios, due
to interest rate volatility in the municipal bond market, necessitated dividend
reductions. The higher-yielding bonds that were called or sold out of the
portfolios were replaced with bonds paying lower interest rates, reflecting
current market conditions. However, as Tim mentioned in his letter to
shareholders, these funds still provide competitive levels of tax-free income,
especially when considering their after-tax yields.
For the one year period ended August 31, 1998, the total return for Class A
shares on net asset value for the Nuveen Flagship New York Municipal Bond Fund
was 8.25%, which is equivalent to a taxable return of 11.25% for investors in
the combined 35.7% federal and state income tax bracket. The total return for
Class A shares at net asset value for the Nuveen New York Insured Municipal Bond
Fund was 7.34%, which is equivalent to a taxable return of 10.18% for Class A
shares at net asset value for investors in the combined 35.7% federal and state
income tax bracket.
Those total returns compare to the annual returns of 9.07% and 9.21% posted by
the Lehman Brothers New York Municipal Bond Index and New York Insured Municipal
Bond Index, respectively. These indexes are comprised of a broad range of
investment-grade or insured municipal bonds and do not reflect any initial or
ongoing expenses.
The performance of the funds continues to be impacted by the funds' relatively
short durations. Duration measures a bond fund's price volatility, or reaction
to interest rate movements. The shorter the duration, the less sensitive the
fund is to interest rate changes. When compared to their peers, many of which
maintain considerably longer durations, the New York funds will experience a
smaller impact from a declining interest rate environment because they are well-
cushioned from market volatility.
KEY STRATEGIES
Due to the abundance of new issues in the primary market, there were many
attractive opportunities over the past 6 months, especially in smaller deals.
Despite the minimal difference in yield between insured and uninsured paper, new
investments for the Nuveen Flagship New York Municipal Bond Fund focused on A-
rated or Flagship bonds. There are two main reasons for this strategy. First,
the credit quality for both the state and city levels has improved dramatically,
thereby increasing the attractiveness of many of the bonds currently available.
Second, with an active market for lower investment grade bonds in New York,
liquidity in the market is good and compensates for the lower than usual yield
difference between AAA-rated and investment grade bonds. As for the Nuveen New
York Insured Municipal Bond Fund, new investments for the portfolio were made in
a range of sectors, including education (Fordham University), airports (Niagra
Frontier Airport), and health care (North Shore Hospital).
OUTLOOK FOR THE FUTURE
We will continue to manage the funds with an eye toward purchasing undervalued
securities that provide attractive interest income exempt from federal and state
income taxes as is consistent with preservation of capital. To achieve this
goal, we will continue to work with Nuveen's research team, a valuable asset in
our search for undervalued securities.
Both funds will focus on bonds with similar long-term maturities to take
advantage of the higher yields available. The Nuveen Flagship New York Municipal
Bond Fund will strive to find more attractively priced , lower investment grade
bonds while the Nuveen New York Insured Municipal Bond Fund will continue to
take advantage of the big supply of insured long term bonds.
-----
6
<PAGE>
Nuveen Flagship New York Municipal Bond Fund
PERFORMANCE OVERVIEW
As of August 31, 1998
Monthly Tax-Free Dividends (Class A shares)
[BAR CHART APPEARS HERE]
9/97 0.0475
10/97 0.0475
11/97 0.0475
12/97 0.0475
1/98 0.0475
2/98 0.0475
3/98 0.0475
4/98 0.0475
5/98 0.0475
6/98 0.0475
7/98 0.0455
8/98 0.0455
Portfolio Statistics
<TABLE>
<CAPTION>
SHARE CLASS A B C R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 9/94 2/97 9/94 12/86
Net Asset Value $11.04 $11.05 $11.08 $ 11.08
Total Net Assets ($000) $252,900
Average Weighted Maturity (Years) 21.26
Average Weighted Duration (Years) 6.32
- -----------------------------------------------------------------------------------------------
</TABLE>
Annualized Total Return/1/
<TABLE>
<CAPTION>
SHARE CLASS A(NAV) A(Offer) B C R
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 8.25% 3.71% 7.42% 7.73% 8.51%
5-Year 6.04% 5.13% 5.35% 5.44% 6.36%
10-Year 8.24% 7.77% 7.67% 7.52% 8.53%
- ----------------------------------------------------------------------------------------------
</TABLE>
Tax-Free Yields
<TABLE>
<CAPTION>
SHARE CLASS A(NAV) A(Offer) B C R
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Distribution Rate 4.95% 4.74% 4.18% 4.39% 5.14%
SEC 30-Day Yield 4.14% 3.97% 3.40% 3.59% 4.34%
Taxable Equivalent Yield/2/ 6.44% 6.17% 5.29% 5.58% 6.75%
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Top 5 Sectors (as a % of total investments)
Tax Obligation (Limited) 27%
U.S. Guaranteed 17%
Education and Civic Organizations 12%
Health Care 12%
Tax Obligation (General) 8%
- ------------------------------------------------------------
</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 B shares automatically convert to
Class A shares eight years after purchase. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
2 Based on SEC yield and a combined federal and state income tax rate of 35.7%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
-----
7
<PAGE>
Nuveen New York Insured Municipal Bond Fund
PERFORMANCE OVERVIEW
As of August 31, 1998
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
9/97 0.0445
10/97 0.0445
11/97 0.0445
12/97 0.0445
1/98 0.0445
2/98 0.0445
3/98 0.0445
4/98 0.0435
5/98 0.0435
6/98 0.0435
7/98 0.0435
8/98 0.0435
Portfolio Statistics
<TABLE>
<CAPTION>
SHARE CLASS A B C R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 9/94 2/97 9/94 12/86
Net Asset Value $10.80 $10.81 $10.79 $ 10.81
Total Net Assets ($000) $365,341
Average Weighted Maturity (Years) 20.68
Average Weighted Duration (Years) 5.65
- -----------------------------------------------------------------------------------------------
</TABLE>
Annualized Total Return/1/
<TABLE>
<CAPTION>
SHARE CLASS A(NAV) A(OFFER) B C R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 7.34% 2.86% 6.62% 6.75% 7.62%
5-Year 5.14% 4.24% 4.40% 4.46% 5.41%
10-Year 7.85% 7.38% 7.26% 7.10% 8.12%
- -----------------------------------------------------------------------------------------------
</TABLE>
Tax-Free Yields
<TABLE>
<CAPTION>
SHARE CLASS A(NAV) A(OFFER) B C R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Distribution Rate 4.83% 4.63% 4.05% 4.28% 5.00%
SEC 30-Day Yield 3.77% 3.61% 3.02% 3.22% 3.96%
Taxable Equivalent Yield/2/ 5.86% 5.61% 4.70% 5.01% 6.16%
- -----------------------------------------------------------------------------------------------
</TABLE>
Top 5 Sectors (as a % of total investments)
<TABLE>
<S> <C>
U.S. Guaranteed 24%
Health Care 16%
Education and Civic Organizations 13%
Tax Obligation (General) 10%
Housing (Multifamily) 9%
- --------------------------------------------------
</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 B shares automatically convert to
Class A shares eight years after purchase. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
2 Based on SEC yield and a combined federal and state income tax rate of 35.7%.
Represents the yield on a taxable investment necessary to equal the yield of
the Nuveen fund on an after-tax basis.
-----
8
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CAPITAL GOODS - 6.2%
$5,955,000 New Jersey Economic Development Authority, Economic Development Bonds No Opt. Call N/R $ 6,133,650
(Bridgewater Resources Inc. Project), 1994 Series A, 8.375%, 11/01/04
(Alternative Minimum Tax)
180,000 New Jersey Economic Development Authority, Economic Growth Bonds, 12/02 at 101 1/2 Aa3 195,329
Composite Issue-1992 Second Series A3, 6.550%, 12/01/07 (Alternative
Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 5.3%
1,000,000 New Jersey Economic Development Authority, Economic Development Bonds No Opt. Call N/R 1,276,580
(Yeshiva KTana of Passaic-1992 Project), 8.000%, 9/15/18
870,000 New Jersey Educational Facilities Authority, Trenton State College Issue, No Opt. Call A+ 872,018
Revenue Bonds, Series 1976 D, 6.750%, 7/01/08
410,000 New Jersey Educational Facilities Authority, Revenue Refunding Bonds 7/03 at 102 BBB 419,053
(Monmouth College), Series 1993-A, 5.625%, 7/01/13
835,000 New Jersey Educational Facilities Authority, Princeton University Revenue 7/04 at 100 AAA 907,319
Bonds, 1994 Series A, 5.875%, 7/01/11
2,000,000 New Jersey Educational Facilities Authority, Revenue Bonds, Trenton State 7/06 at 101 AAA 2,002,920
College Issue, Series 1996 A, 5.125%, 7/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
FOREST AND PAPER PRODUCTS - 0.3%
250,000 New Jersey Economic Development Authority, Solid Waste Disposal Facility 4/02 at 102 Aa1 275,613
Revenue Bonds (Garden State Paper Company, Inc. Project), Series 1992,
7.125%, 4/01/22 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 8.5%
700,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/00 at 102 AAA 748,832
Community Medical Center/Kensington Manor Care Center Issue, Series E,
7.000%, 7/01/20
945,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/00 at 100 A 965,365
Intercare Health Systems, Inc.,
J.F.K. Medical Center Issue, Series 1988, 7.625%, 7/01/18
1,200,000 New Jersey Health Care Facilities Financing Authority, Revenue And 7/07 at 102 AAA 1,219,248
Refunding Bonds, Holy Name Hospital Issue, Series 1997, 5.250%, 7/01/20
200,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/04 at 102 AAA 217,290
Newark Beth Israel Medical Center Issue, Series 1994, 6.000%, 7/01/16
250,000 New Jersey Health Care Facilities Financing Authority, Refunding Revenue 8/04 at 102 AAA 277,738
Bonds, Irvington General Hospital Issue (FHA Insured Mortgage), Series
1994, 6.375%, 8/01/15
650,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/02 at 102 N/R 698,555
Palisades Medical Center, Obligated Group Issue, Series 1992, 7.500%,
7/01/06
400,000 New Jersey Health Care Facilities Financing Authority, Refunding Revenue 7/02 at 102 A- 442,584
Bonds, Atlantic City Medical Center Issue, Series C, 6.800%, 7/01/05
250,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/04 at 102 AAA 277,223
Monmouth Medical Center Issue, Series C, 6.250%, 7/01/16
1,000,000 New Jersey Health Care Facilities Financing Authority, Revenue and 7/07 at 102 AAA 991,630
Refunding Bonds, AHS Hospital Corporation Issue, Series 1997 A, 5.000%,
7/01/27
175,000 New Jersey Health Care Facilities Financing Authority, Bayonne Hospital 7/04 at 102 AAA 194,535
Obligated Group, Revenue Bonds, Series 1994, 6.250%, 7/01/12
935,000 New Jersey Economic Development Authority, Economic Growth Lease Revenue 12/03 at 102 Aa3 989,959
Bonds, Remarketed 1992 Second Series B, 5.300%, 12/01/07 (Alternative
Minimum Tax)
300,000 New Jersey Economic Development Authority, Revenue Bonds (RWJ Health Care 7/04 at 102 AAA 332,667
Corporation at Hamilton Obligated Group Project), Series 1994, 6.250%, 7/01/14
</TABLE>
-----
9
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND (Continued)
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH CARE (CONTINUED)
$1,000,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental 1/05 at 102 AAA $ 1,121,430
Control Facilities Financing Authority, Hospital Revenue Bonds, 1995
Series A (Hospital Auxilio Mutuo Obligated Group Project), 6.250%,
7/01/16
250,000 Pollution Control Financing Authority of Union County (New Jersey), No Opt. Call A3 280,728
Pollution Control Revenue Refunding Bonds, American Cyanamid Company
Issue, Series 1994, 5.800%, 9/01/09
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 7.8%
235,000 Hoboken Housing Finance Corporation, Multifamily Mortgage Revenue Bonds No Opt. Call AA 242,292
(Project Uplift-FHA Section 8), 1995-A Refunding, 6.250%, 2/01/24
400,000 The Hudson County Improvement Authority, Multifamily Housing Revenue 6/04 at 100 AAA 430,912
Bonds, Series 1992 A (Conduit Financing- Observer Park Project), 6.900%,
6/01/22 (Alternative Minimum Tax)
2,000,000 New Jersey Housing and Mortgage Finance Agency, Multi-Family Housing 5/05 at 102 AAA 2,143,480
Revenue Bonds, 1995 Series A, 6.000%, 11/01/14
1,500,000 New Jersey Housing Mortgage Finance Agency, Multi-Family Housing Revenue 5/06 at 102 AAA 1,616,250
Bonds, 1996 Series A, 6.200%, 11/01/18 (Alternative Minimum Tax)
1,750,000 New Jersey Housing Finance Agency, Special Pledge Revenue Obligations, 11/98 at 102 A+ 1,794,258
1975 Series One, 9.000%, 11/01/18
700,000 New Jersey Housing and Mortgage Finance Agency, Housing Revenue Bonds, 5/02 at 102 A+ 755,363
1992 Series A, 6.950%, 11/01/13
500,000 New Jersey Housing and Mortgage Finance Agency, Housing Revenue Refunding 11/02 at 102 A+ 537,850
Series One, 6.600%, 11/01/14 Bonds, 1992
500,000 North Bergen Housing Development Corporation (North Bergen, New Jersey), 9/09 at 100 N/R 513,445
Mortgage Revenue Bonds, Series 1978 (FHA Insured Mortgage Loan-Section
8 Assisted Project), 7.400%, 9/01/20
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 5.3%
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 268,418
400,000 6.375%, 10/01/26 (Alternative Minimum Tax) 7/04 at 102 AAA 429,912
4,000,000 New Jersey Housing and Mortgage Finance Agency, Home Buyer Revenue 10/07 at 101 1/2 AAA 4,208,000
Bonds, 1997 Series U, 5.700%, 10/01/14 (Alternative Minimum Tax)
505,000 Virgin Islands Housing Finance Authority, Single Family Mortgage 3/05 at 102 AAA 541,461
(GNMA Mortgage-Backed Securities Program), 1995 Series A, 6.450%,
3/01/16 Revenue Refunding Bonds (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL/OTHER - 1.8%
1,135,000 New Jersey Economic Development Authority, Economic Growth Bond, 12/03 at 102 Aa3 1,203,883
Composite Issue-1992 Second Series H, 5.300%, 12/01/07 (Alternative
Minimum Tax)
625,000 New Jersey Economic Development Authority, Insured Revenue Bonds 5/05 at 102 AAA 691,113
(Educational Testing Service Issue), Series 1995B, 6.125%, 5/15/15
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM CARE - 1.3%
1,300,000 New Jersey Economic Development Authority, Revenue Bonds, First 7/08 at 102 A 1,338,103
Mtg-Cadbury Corporation PJ-A, 5.500%, 7/01/18
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 13.3%
200,000 The City of Atlantic City, In the County of Atlantic, New Jersey, No Opt. Call A 214,484
General Obligation General Improvement Bonds, Series 1994, 5.650%,
8/15/04
100,000 County of Atlantic, New Jersey, General Improvement Bonds, 6.000%, 1/04 at 101 AAA 109,566
1/01/07
250,000 City of East Orange, In the County of Essex, New Jersey, Fiscal Year No Opt. Call AAA 318,825
Adjustment Bonds (Qualified under the Municipal Qualified Bond Act
P.L. 1976, c. 38, as Amended), 8.400%, 8/01/06
500,000 The Board of Education of The Township of Hillsborough, In the County No Opt. Call AA 566,770
of Somerset, State of New Jersey, General Obligation School Purpose
Bonds, Series 1992, 5.875%, 8/01/11
</TABLE>
------
10
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/GENERAL (continued)
$ 2,645,000 The Board of Education of the Township of Middletown, In the 8/07 at 100 AAA $ 2,821,078
County of Monmouth, New Jersey, School Bonds, 5.800%, 8/01/21
50,000 The Monmouth County Improvement Authority (Monmouth County, New 7/02 at 102 AA+ 55,425
Jersey), Revenue Bonds, Series 1992 (Howell Township Board of
Education Project), 6.450%, 7/01/08
1,000,000 State of New Jersey, General Obligation Bonds, Series D, 5.800%, No Opt. Call AA+ 1,116,260
2/15/07
165,000 Parsippany-Troy Hills Township, General Obligation Capital No Opt. Call AA- 114,715
Appreciation Bonds, Series 1992, 0.000%, 4/01/07
1,950,000 Pleasantville, New Jersey, School District, 5.000%, 2/15/20 2/08 at 100 AAA 1,943,604
550,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1996 7/06 at 101 1/2 A 566,242
(General Obligation Bonds), 5.400%, 7/01/25
2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 7/07 at 101 1/2 AAA 2,084,960
5.375%, 7/01/21
2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1995 7/05 at 101 1/2 AAA 2,137,760
(General Obligation Bonds), 5.750%, 7/01/24
1,100,000 Sparta Township School District, General Obligation Bonds 9/06 at 100 AAA 1,176,813
(Unlimited Tax), 5.800%, 9/01/18
250,000 The City of Union City, In the County of Hudson, State of New No Opt. Call AAA 295,595
Jersey, General Obligation School Purpose Bonds, Series 1992,
6.375%, 11/01/10
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 12.9%
150,000 The Bergen County Utilities Authority (New Jersey), 1992 Water 12/02 at 102 AAA 163,521
Pollution Control System Revenue Bonds, Series B, 6.000%,
12/15/13
250,000 The Camden County Municipal Utilities Authority (Camden County, 7/06 at 102 AAA 252,703
New Jersey), County Agreement Sewer Revenue Refunding Bonds,
1996 Series, 5.125%, 7/15/17
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 BBB+ 326,280
450,000 6.600%, 4/01/14 4/04 at 102 BBB+ 494,168
500,000 The Essex County Improvement Authority (Essex County, New Jersey), 12/02 at 102 Baa1 538,350
County Guaranteed Pooled Revenue Bonds, Series 1992A, 6.500%,
12/01/12
1,460,000 The Board of Education of the Borough of Little Ferry, Bergen No Opt. Call N/R 1,549,469
County, New Jersey, Certificates of Participation, 6.300%,
1/15/08
1,000,000 The State of New Jersey, as Lessee, and The Mercer County No Opt. Call Aa 1,001,590
Relating to the Richard J. Hughes Justice Complex, 6.050%,
1/01/13 Improvement Authority, as Lessor,
300,000 New Jersey Economic Development Authority, State Contract 9/02 at 102 AAA 324,762
Economic Recovery Bonds, Series 1992-A, 6.000%, 3/15/21
650,000 New Jersey Economic Development Authority, Market Transition 7/04 at 102 AAA 712,602
Facility Senior Lien Revenue Bonds, Series 1994A, 5.875%,
7/01/11
250,000 New Jersey Sports and Exposition Authority, Convention Center 7/02 at 102 AAA 273,010
Luxury Tax Bonds, 1992 Series A, 6.250%, 7/01/20
200,000 North Jersey District Water Supply Commission of the State of 7/03 at 102 AAA 217,344
New Jersey, Wanaque South Project, Revenue Refunding Bonds,
Series 1993, 6.000%, 7/01/21
2,350,000 The Ocean County Utilities Authority (New Jersey), Wastewater No Opt. Call AAA 2,350,235
Revenue Bonds, Refunding Series 1987, 5.000%, 1/01/14
170,000 Puerto Rico Aqueduct and Sewer Authority, Refunding Bonds, 7/06 at 101 1/2 A 169,318
Series 1995, Guaranteed by the Commonwealth of Puerto Rico,
5.000%, 7/01/15
5,000,000 Union County, New Jersey, Utilities Authority, Solid Waste 6/08 at 102 Aaa 4,912,150
Revenue Bonds, County Deficiency-Series A1, 5.000%, 6/15/28
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 15.3%
2,150,000 Delaware River Port Authority, Pennsylvania and New Jersey, 1/08 at 101 AAA 2,135,595
Port District Project, Series B, 5.000%, 1/01/26 (WI)
</TABLE>
---
11
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND (continued)
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSPORTATION (continued)
$ 750,000 Essex County, New Jersey, Improvement Authority, Parking Facilities 10/08 at 101 AAA $ 747,368
Revenue Refunding Bonds, 5.000% 12/01/22
100,000 Parking Authority of the City of Hoboken, County of Hudson, New Jersey, 3/02 at 102 Baa1 106,991
Parking General Revenue Refunding Bonds, Series 1992A, 6.625%, 3/01/09
1,750,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds, Series 1991C, No Opt. Call BBB+ 2,019,273
6.500%, 1/01/08
125,000 The Port Authority of New York and New Jersey, Consolidated Bonds, 10/04 at 101 AAA 139,323
Ninety-Sixth Series, 6.600%, 10/01/23 (Alternative Minimum Tax)
200,000 The Port Authority of New York and New Jersey, Consolidated Bonds, 6/05 at 101 AA- 211,676
One Hundredth Series, 5.750%, 12/15/20
200,000 The Port Authority of New York and New Jersey Consolidated Bonds, 7/04 at 101 AA- 216,388
Ninety-Fifth Series, 5.875%, 7/15/09 (Alternative Minimum Tax)
The Port Authority of New York and New Jersey, Consolidated Bonds,
One Hundred Ninth Series,
1,500,000 5.375%, 7/15/22 1/07 at 102 AA- 1,545,630
2,000,000 5.375%, 7/15/27 1/07 at 101 AAA 2,070,660
2,000,000 The Port Authority of New York and New Jersey, Consolidated Bonds, 6/05 at 101 AA- 2,064,280
One Hundred Twelfth Series-Second Installment, 5.250%, 12/01/13
4,100,000 The Port Authority of New York and New Jersey, Special Project Bonds, 12/07 at 100 AAA 4,351,658
Series 6, JFK International Air Terminal LLC Project, 5.750%,
12/01/25 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 11.8%
100,000 The Essex County Improvement Authority (Essex County, New Jersey), 12/04 at 102 AAA 117,481
General Obligation Lease Revenue Bonds, Series 1994 (County Jail
and Youth House Projects), 6.900%, 12/01/14 (Pre-refunded to
12/01/04)
200,000 New Jersey Economic Development Authority, Lease Rental Bonds, 1992 3/02 at 102 AAA 222,942
Series (Liberty State Park Project), 6.800%, 3/15/22 (Pre-refunded
to 3/15/02)
1,630,000 New Jersey Health Care Facilities Financing Authority (Hackensack No Opt. Call AAA 1,973,278
Hospital), 8.750%, 7/01/09
2,065,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/01 at 102 A1*** 2,350,156
Series 1990-E (Kennedy Memorial Hospital), 8.375%, 7/01/10
(Pre-refunded to 7/01/01)
3,000,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/99 at 102 A-*** 3,156,180
Newton Memorial Hospital Issue, Series A, 7.500%, 7/01/19 (Pre-
refunded to 7/01/99)
25,000 New Jersey Health Care Facilities Financing Authority, Bayonne 7/04 at 102 AAA 28,261
Hospital Obligated Group, Revenue Bonds, Series 1994, 6.250%,
7/01/12 (Pre-refunded to 7/01/04)
290,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds, 1984 Series, No Opt. Call AAA 332,769
10.375%, 1/01/03
200,000 New Jersey Wastewater Treatment Trust, Wastewater Treatment Bonds, 4/04 at 102 Aa1*** 227,726
Series 1994A, 6.500%, 4/01/14 (Pre-refunded to 4/01/04)
300,000 The Township of North Bergen (Hudson County, New Jersey), Fiscal Year 8/02 at 102 AAA 334,242
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, Highway Revenue 7/02 at 101 1/2 AAA 66,848
Bonds (Series T), 6.625%, 7/01/18 (Pre-refunded to 7/01/02)
225,000 Puerto Rico Commonwealth Highway Authority, Highway Revenue Bonds, 7/00 at 100 A*** 234,261
Series 1990-Q, 6.000%, 7/01/20 (Pre-refunded to 7/01/00)
1,875,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series P, 7/01 at 102 Aaa 2,075,006
7.000%, 7/01/21 (Pre-refunded to 7/01/01)
200,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 7/02 at 101 1/2 BBB+*** 219,496
R, 6.250%, 7/01/17 (Pre-refunded to 7/01/02)
250,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 7/04 at 102 BB+*** 285,205
1994-T, 6.375%, 7/01/24 (Pre-refunded to 7/01/04)
100,000 University of Medicine and Dentistry of New Jersey Bonds, Series E, 12/01 at 102 AA-*** 110,025
6.500%, 12/01/18 (Pre-refunded to 12/01/01)
</TABLE>
----
12
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GUARANTEED (continued)
$ 300,000 The Wanaque Borough Sewerage Authority (Passaic County, New Jersey), 12/02 at 102 A3*** $ 341,610
Sewer Revenue Bonds (Series 1992), (Bank Qualified), 7.000%, 12/01/21
(Pre-refunded to 12/01/02)
75,000 The Wanaque Valley Regional Sewerage Authority 9/03 at 102 Baa1*** 83,432
(Passaic County, New Jersey), Sewer Revenue Bonds (1993 Series A),
6.125%, 9/01/22 (Pre-refunded to 9/01/03)
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 8.0%
1,000,000 Pollution Control Financing Authority of Camden County No Opt. Call B2 1,001,360
(Camden County, 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 of Camden County 12/01 at 102 B2 2,669,889
(Camden County, New Jersey), Solid Waste Disposal and Resource
Recovery System Revenue Bonds, Series 1991 D, 7.250%, 12/01/10
790,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series P, No Opt. Call BBB+ 941,806
7.000%, 7/01/07
2,000,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T, 7/04 at 100 BBB+ 2,046,359
5.500%, 7/01/20
1,500,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, 7/05 at 100 BBB+ 1,507,154
Series Z, 5.250%, 7/01/21
- ------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 0.5%
250,000 The Hoboken-Union City-Weehawken Sewerage Authority (New Jersey), Sewer 8/02 at 102 AAA 272,929
Revenue Bonds (Refunding Series 1992), 6.200%, 8/01/19
100,000 New Jersey Economic Development Authority, Water Facilities Revenue 6/03 at 102 AAA 102,796
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 Facilities Revenue 3/04 at 102 AAA 159,368
Refunding Bonds (Hackensack Water Company Project-1994 Series B),
5.900%, 3/01/24 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
$95,550,000 Total Investments - (cost $95,314,514) - 98.3% 100,832,026
- ------------------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES - 3.9%
The Port Authority of New York and New Jersey, Special Obligation Revenue
Bonds, Variable Rate Demand Bonds:
200,000 3.300%, 12/01/17 + VMIG-1 200,000
800,000 3.350%, 6/01/20 + VMIG-1 800,000
2,000,000 3.350%, 8/01/24 + VMIG-1 2,000,000
1,000,000 Union County, New Jersey, Pollution Control Financing Authority, Pollution P-1 1,000,000
Control Revenue Refunding Bonds, Exxon Project, Variable Rate Demand Bonds,
2.500%, 10/01/24 +
-----------------------------------------------------------------------------------------------------------------------------------
$ 4,000,000 Total Temporary Investments - 3.9% 4,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (2.2%) (2,210,537)
------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 102,621,489
------------------------------------------------------------------------------------------------------------------
</TABLE>
---
13
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP NEW JERSEY INTERMEDIATE MUNICIPAL BOND FUND
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSUMER CYCLICAL - 2.0%
$ 200,000 New Jersey Economic Development Authority, Economic Development Refunding No Opt. Call Aa3 $ 212,622
Bonds (Burlington Coat Factory Warehouse of New Jersey, Inc. - 1995
Project), 5.400%, 9/01/03
- ------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 8.0%
140,000 New Jersey Educational Facilities Authority, Seton Hall University Project, 7/01 at 102 A- 150,430
Revenue Bonds, 1991 Series, Project D, 6.600%, 7/01/02
330,000 New Jersey Higher Educational Facilities Authority, Higher Educational No Opt. Call BBB 336,768
Facilities Revenue Bonds, Saint Peters College Issue, 1992 Series B,
6.000%, 7/01/99
270,000 New Jersey Educational Facilities Authority, Revenue Bonds, Saint Peters 7/08 at 102 BBB 280,166
College Issue, 1998 Series B, 5.375%, 7/01/12
80,000 Higher Education Assistance Authority (State of New Jersey), Student Loan 7/02 at 102 A+ 85,262
Revenue Bonds, 1992 Series A, NJ Class Loan Program, 6.000%, 1/01/06
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 10.4%
200,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/04 at 102 AAA 219,640
Newark Beth Israel Medical Center Issue, Series 1994, 5.800%, 7/01/07
100,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, West 7/02 at 102 AAA 108,717
Jersey Health System, Series 1992, 6.000%, 7/01/07
250,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, No Opt. Call AAA 266,185
Monmouth Medical Center Issue, Series C, 5.700%, 7/01/02
250,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, Dover 7/04 at 102 AAA 276,645
General Hospital and Medical Center Issue, Series 1994, 5.900%, 7/01/05
215,000 New Jersey Health Care Facilities Financing Authority, Bayonne Hospital 7/04 at 102 AAA 242,010
Obligated Group, Revenue Bonds, Series 1994, 6.400%, 7/01/07
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL/OTHER - 7.4%
250,000 New Jersey Economic Development Authority, District Heating and Cooling 12/03 at 102 BBB- 270,783
Revenue Bonds (Trigen-Trenton Project), 1993 Series B, 6.100%, 12/01/04
(Alternative Minimum Tax)
480,000 New Jersey Economic Development Authority, Insured Revenue Bonds No Opt. Call AAA 516,542
(Educational Testing Service Issue), Series 1995B, 5.500%, 5/15/05
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 26.8%
100,000 The Board of Education of the City of Atlantic City, Atlantic County, New 12/02 at 102 AAA 110,111
Jersey, School Bonds, Series 1992, 6.000%, 12/01/06
100,000 County of Camden, New Jersey, General Obligation Refunding Bonds, Series No Opt. Call AAA 105,650
1992, 5.500%, 6/01/02
275,000 Government of Guam, General Obligation Bonds, Series 1993A, 4.900%, 11/03 at 102 BBB 282,530
11/15/04
200,000 Government of Guam, General Obligation Bonds, Series 1993A, 5.150%, 11/03 at 102 BBB 206,110
11/15/07
500,000 Hackensack, New Jersey, General Obligation Bonds, 4.900%, 3/15/09 3/08 at 102 AA- 523,255
400,000 Jersey City, New Jersey, General Obligation Bonds, 6.500%, 2/15/02 No Opt. Call AA 433,240
100,000 The Monmouth County Improvement Authority (Monmouth County, New Jersey), 7/02 at 102 AA+ 109,260
Revenue Bonds, Series 1992 (Howell Township Board of Education Project),
6.000%, 7/01/03
100,000 Township of Montclair in the County of Essex, New Jersey, General 3/00 at 101 1/2 AAA 103,779
Obligation School Bonds, 5.800%, 3/01/06
500,000 The Board of Education of the Township of Mount Olive in the County of 1/07 at 100 AAA 508,805
Morris, New Jersey, School Bonds, 4.900%, 1/15/12
</TABLE>
----
14
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/GENERAL (continued)
$ 200,000 State of New Jersey, General Obligation Refunding Bonds (Series D), 0.000%, No Opt. Call AA+ $ 167,500
2/15/03
185,000 The Board of Education of the City of Perth Amboy in the County of Middlesex, No Opt. Call AAA 205,909
New Jersey, School Bonds, 6.200%, 8/01/04
100,000 The Township of Woodbridge in the County of Middlesex, State of New Jersey, 8/02 at 102 A1 109,270
Fiscal Year Adjustment Bonds, Series 1992, 6.150%, 8/15/06
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 24.1%
250,000 The City of Atlantic City, New Jersey, Municipal Utilities Authority Water 5/02 at 102 A- 264,198
System, Revenue Refunding Bonds, Series 1993, 5.650%, 5/01/07
320,000 The Essex County Improvement Authority (Essex County, New Jersey), City of 4/04 at 102 BBB+ 348,032
Newark, General Obligation Lease Revenue Bonds, Series 1994, 6.350%,
4/01/07
250,000 Mercer County Improvement Authority, Solid Waste Revenue Bonds, 0.000%, No Opt. Call Aa 199,638
4/01/04
300,000 Middlesex County Utilities Authority (In the County of Middlesex, New 12/07 at 101 AAA 309,495
Jersey), Sewer Revenue Refunding Bonds, Series 1997A, 5.000%, 12/01/12
550,000 Monmouth County Improvement Authority, Governmental Loan Revenue Bonds, 12/08 at 101 AAA 569,360
Series 1993, 5.000%, 12/01/11
300,000 New Jersey Economic Development Authority, Market Transition Facility Senior No Opt. Call AAA 344,457
Lien Revenue Bonds, Series 1994A, 7.000%, 7/01/04
100,000 New Jersey Sports and Exposition Authority, Convention Center Luxury Tax 7/02 at 102 AAA 108,717
Bonds, 1992 Series A, 6.000%, 7/01/07
100,000 North Jersey District Water Supply Commission of the State of New Jersey, 7/03 at 102 AAA 108,796
Wanaque South Project, Revenue Refunding Bonds, Series 1993, 5.700%,
7/01/05
300,000 The Ocean County Utilities Authority (New Jersey), Wastewater Revenue Bonds, 1/07 at 102 Aa2 315,435
Refunding Series 1997, 5.000%, 1/01/09
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 6.2%
330,000 Parking Authority of the City of Hoboken, County of Hudson, New Jersey, No Opt. Call Baa1 339,702
Parking General Revenue Refunding Bonds, Series 1992A, 5.850%, 3/01/00
200,000 The Port Authority of New York and New Jersey, Consolidated Bonds, 7/04 at 101 AA- 215,018
Ninety-Fifth Series, 5.500%, 7/15/05 (Alternative Minimum Tax)
100,000 South Jersey Transportation Authority, Transportation System Revenue 11/02 at 102 AAA 108,292
Bonds, 1992 Series B (Tax Exempt), 5.900%, 11/01/06
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 1.4%
35,000 New Jersey Health Care Facilities Financing Authority, Bayonne Hospital 7/04 at 102 AAA 39,836
Obligated Group, Revenue Bonds, Series 1994, 6.400%, 7/01/07
(Pre-refunded to 7/01/04)
100,000 New Jersey Educational Facilities Authority, Stevens Institute of 7/02 at 102 A*** 110,672
Technology Issue, Revenue Bonds, 1992 Series A, 6.400%, 7/01/03
(Pre-refunded to 7/01/02)
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 6.4%
75,000 New Jersey Economic Development Authority, Electric Energy Facility No Opt. Call N/R 76,031
Revenue Bonds (Vineland Cogeneration Limited Partnership Project),
Series 1992, 6.750%, 6/01/99 (Alternative Minimum Tax)
300,000 The Port Authority of New York and New Jersey, Special Project Bonds, No Opt. Call N/R 341,244
Series 4, KIAC Partners Project, 7.000%, 10/01/07 (Alternative
Minimum Tax)
250,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, No Opt. Call BBB+ 263,444
Series Q, 5.900%, 7/01/01
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
----
15
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP NEW JERSEY INTERMEDIATE MUNICIPAL BOND FUND
(continued)
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WATER AND SEWER - 3.4%
$ 350,000 New Jersey Environmental Infrastructure Trust, Wastewater Treatment 5/08 at 102 AAA $ 361,388
Refunding Bonds, Series 1998E (1992B Financing Progam), (MBIA Insured),
5.000%, 5/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
$9,735,000 Total Investments - (cost $9,663,107) - 96.1% 10,254,944
- ------------------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES - 4.7%
$ 500,000 The Port Authority of New York and New Jersey, Special Obligation VMIG-1 500,000
- ------------
Variable Rate Demand Bonds, 3.300%, 12/01/17 +
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.8%) (82,397)
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $10,672,547
--------------------------------------------------------------------------------------------------------------------
</TABLE>
----
16
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND FUND
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION AND CIVIC ORGANIZATIONS - 12.2%
$1,750,000 Town of Brookhaven, Industrial Development Agency, 1993 Civic Facility 3/03 at 102 BBB- $ 1,885,380
Revenue Bonds (Dowling College/The National Aviation and Transportation
Center Civic Facility), 6.750%, 3/01/23
2,470,000 Dutchess County Industrial Development Agency, Civic Facility Revenue 11/03 at 102 A 2,770,574
Bonds (The Bard College Project), Series 1992, 7.000%, 11/01/17
1,000,000 City of Rochelle, Industrial Development Agency, Civic Facility Revenue 7/02 at 102 Baa2 1,079,980
Bonds (College of New Rochelle Project-1992 Series), 6.625%, 7/01/12
215,000 New York City Industrial Development Agency, Civic Facility Revenue 11/01 at 102 AA+ 234,604
Bonds (Federation Protestant Welfare), Series 1991, 6.950%, 11/01/11
New York City Industrial Development Agency, Civic Facility Revenue Bonds
Rochelle Project), Series 1995: (College of New
1,000,000 6.200%, 9/01/10 9/05 at 102 Baa2 1,101,790
1,000,000 6.300%, 9/01/15 9/05 at 102 Baa2 1,066,060
2,000,000 Dormitory Authority of the State of New York, State University Educational 5/00 at 102 A- 2,151,600
Facilities Revenue Bonds, Series 1990A, 7.400%, 5/15/01
750,000 Dormitory Authority of the State of New York, City University System No Opt. Call BBB+ 919,590
Consolidated, Second General Resolution Revenue Bonds, Series 1990C,
7.500%, 7/01/10
500,000 Dormitory Authority of the State of New York, Revenue Bonds, State 7/01 at 102 BBB+ 546,720
University Athletic Facility Issue, Series 1991, 7.250%, 7/01/21
2,100,000 Dormitory Authority of the State of New York, University of Rochester, 7/04 at 102 A+ 2,349,648
Revenue Bonds, Series 1994A, 6.500%, 7/01/19
1,500,000 Dormitory Authority of the State of New York, City University System No Opt. Call BBB+ 1,638,750
Consolidated Second General Resolution Revenue Bonds, Series 1993A,
5.750%, 7/01/07
Dormitory Authority of the State of New York, State University
Education Facilities, Revenue Bonds, Series 1993B:
1,125,000 5.250%, 5/15/09 No Opt. Call A- 1,196,966
1,000,000 5.250%, 5/15/19 5/14 at 100 A- 1,039,170
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 BBB+ 2,518,806
1,000,000 6.250%, 7/01/25 7/05 at 102 BBB+ 1,087,310
3,515,000 Suffolk County, Industrial Development Agency, Civic Facility Revenue 6/04 at 102 BBB- 3,742,034
Bonds (Dowling College Civic Facility), Series 1994, 6.625%, 6/01/24
1,000,000 Suffolk County Industrial Development Agency, Civic Facility Revenue 12/06 at 102 BBB- 1,082,720
Refunding Bonds (Dowling College Civic Facility), Series 1996, 6.700%,
12/01/20
Utica, New York, Industrial Development Agency, Civic Facilities Revenue
Bonds, Utica College Project-Series A:
900,000 5.300%, 8/1/08 No Opt. Call N/R 911,529
1,000,000 5.750%, 8/1/28 8/08 at 102 N/R 1,010,690
2,225,000 Dormitory Authority of the State of New York, City University Refunding No Opt. Call BBB+ 2,447,389
Bonds, 1993C Issue, 5.750%, 7/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
FOREST AND PAPER PRODUCTS - 0.3%
750,000 Jefferson County Industrial Development Agency, Multi-Modal Interchangeable 11/02 at 102 Baa1 832,808
Rate, Solid Waste Disposal Revenue Bonds (Champion International
Corporation Project), Series 1990, 7.200%, 12/01/20 (Alternative Minimum
Tax)
</TABLE>
---
17
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND FUND (continued)
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH CARE - 11.6%
$2,000,000 Cattaraugus County, New York, Industrial Development Agency, Civic 8/08 at 102 A+ $ 2,009,580
Facilities Revenue Bonds, Olean General Hospital Project-Series A,
5.250%, 8/01/23
1,000,000 New York City Health and Hospitals Corporation, Health System Bonds, 2/03 at 102 BBB- 1,053,760
1993 Series A, 6.300%, 2/15/20
500,000 Dormitory Authority of the State of New York, Hospital Revenue Bonds, 2/00 at 100 AAA 511,560
Long Island Jewish Medical Center (FHA Insured Mortgage), Series 1988,
7.750%, 8/15/27
3,300,000 Dormitory Authority of the State of New York, Menorah Campus, Inc., 2/07 at 102 AAA 3,561,723
FHA-Insured Mortgage Nursing Home Revenue Bonds, Series 1997, 5.950%,
2/01/17
1,000,000 Dormitory Authority of the State of New York, NYACK Hospital, Revenue 7/06 at 102 Baa 1,094,230
Bonds, Series 1996, 6.000%, 7/01/06
2,250,000 Dormitory Authority of the State of New York, The Rosalind and Joseph 2/07 at 102 AAA 2,381,265
Gurwin Jewish Geriatric Center of Long Island, Inc., FHA-Insured
Mortgage Nursing Home Revenue Bonds, Series 1997, 5.700%, 2/01/37
2,000,000 Dormitory Authority of the State of New York, The New York and 2/08 at 101 AAA 1,966,220
Presbyterian Hospital, FHA-Insured Mortgage Hospital Revenue Bonds,
Series 1998, 5.000%, 8/01/32
370,000 New York State Medical Care Facilities Finance Agency, Hospital and 8/99 at 100 AA 374,906
Nursing Home Insured Mortgage Revenue Bonds, 1987 Series A, 8.000%,
2/15/27
50,000 New York State Medical Care Facilities Finance Agency, Albany Medical 8/00 at 100 AAA 51,162
Center Hospital Project, Revenue Bonds, 1987 Series A, 8.000%, 2/15/28
490,000 New York State Medical Care Facilities Finance Agency, Hospital and 8/01 at 102 AA 538,094
Nursing Home Insured Mortgage Revenue Bonds, 1991 Series A, 7.450%,
8/15/31
1,420,000 New York State Medical Care Facilities Finance Agency, Hospital and 2/03 at 102 AAA 1,571,855
Nursing Home FHA-Insured Mortgage Revenue Bonds, 1992 Series D, 6.450%,
2/15/09
2,000,000 New York State Medical Care Facilities Finance Agency, Hospital and 8/02 at 102 AAA 2,139,260
Nursing Home FHA-Insured Mortgage Revenue Bonds, 1992 Series B, 6.200%,
8/15/22
2,380,000 New York State Medical Care Facilities Finance Agency, Hospital and 8/04 at 102 AAA 2,622,117
Nursing Home FHA-Insured Mortgage Revenue Bonds, 1994 Series C, 6.400%,
8/15/14
1,000,000 New York State Medical Care Facilities Finance Agency, Brookdale Hospital No Opt. Call AAA 1,061,470
Medical Center Secured Hospital Revenue Bonds, 1995 Series A, 6.400%,
2/15/01
325,000 New York State Medical Care Facilities Finance Agency, Hospital and 8/99 at 102 AA 341,419
Nursing Home Revenue Bonds, Series B, 7.350%, 2/15/29
1,000,000 New York State Medical Care Facilities Finance Agency, FHA-Insured 2/05 at 102 AA 1,081,200
Mortgage Project Revenue Bonds, 1995 Series B, 6.100%, 2/15/15
1,000,000 New York State Medical Care Facilities Finance Agency, Health Center 11/05 at 102 Aa1 1,125,100
Mortgage Projects Revenue Bonds (Secured Mortgage Program), 1995
Series A, 6.375%, 11/15/19
1,020,000 New York State Medical Care Facilities Finance Agency, Hospital and 2/04 at 102 AAA 1,125,040
Nursing Home Insured Mortgage Refunding Revenue Bonds, Series A,
6.200%, 2/15/21
2,285,000 Newark-Wayne Community Hospital, Inc., Hospital Revenue Improvement 9/03 at 102 N/R 2,486,834
and Refunding Bonds, Series 1993A, 7.600%, 9/01/15
2,000,000 New York City Industrial Development Agency, Civic Facility Revenue 12/02 at 102 BBB 2,157,160
Bonds (1992 Jewish Board of Family and Childrens' Services, Inc.
Project), 6.750%, 12/15/12
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 4.8%
1,000,000 City of Batavia Housing Authority, Tax-Exempt Mortgage Revenue Refunding 7/01 at 102 Aaa 1,051,040
Bonds, Series 1994A, (Washington Towers-FHA Insured Mortgage), 6.500%,
1/01/23
2,000,000 New York City Housing Development Corporation, Multi-Family 4/03 at 102 AAA 2,136,980
Mortgage Revenue Bonds, (FHA Insured Mortgage Loan), 1993 Series A,
6.550%, 10/01/15
1,250,000 New York City Housing Development Corporation, Multi-Unit Mortgage 6/01 at 102 AAA 1,340,275
Refunding Bonds, (FHA Insured Mortgage Loans), 1991 Series A,
7.350%, 6/01/19
</TABLE>
---
18
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING/MULTIFAMILY (CONTINUED)
$ 750,000 Dormitory Authority of the State of New York, GNMA Collateralized 2/99 at 102 AAA $ 775,913
Revenue Bonds (Park Ridge Housing, Inc. Project), Series 1989,
7.850%, 2/01/29
2,240,000 New York State Finance Agency, Housing Project Mortgage Revenue 5/06 at 102 AAA 2,439,830
Bonds, 1996 Series A Refunding, 6.125%, 11/01/20
1,650,000 New York State Housing Finance Agency, Insured Multi-Family Mortgage 8/02 at 102 AA 1,794,375
Housing Revenue Bonds, 1992 Series A, 6.950%, 8/15/12
500,000 New York State Housing Finance Agency, Insured Multi-Family Mortgage 8/02 at 102 AA 541,820
Housing Revenue Bonds, 1992 Series A, 7.000%, 8/15/22
1,000,000 New York State Housing Finance Agency, Multi-Family Housing Revenue 2/04 at 102 Aa2 1,085,240
Bonds (Secured Mortgage Program), 1994 Series C, 6.450%, 8/15/14
1,000,000 New York State Urban Development Corporation, Section 236 Revenue Bonds, 1/02 at 102 AAA 1,098,680
Series 1992A, 6.750%, 1/01/26
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 3.1%
380,000 State of New York Mortgage Agency, Mortgage Revenue Bonds, Ninth Series 4/00 at 100 Aaa 388,200
E, 8.100%, 10/01/17
1,500,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 9/04 at 102 Aa2 1,626,540
Series 43, 6.450%, 10/01/17
80,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 2/01 at 102 Aa2 85,847
Series MM-1, 7.950%, 10/01/21 (Alternative Minimum Tax)
595,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 4/01 at 102 Aa2 631,729
1991 Series UU, 7.750%, 10/01/23 (Alternative Minimum Tax)
1,000,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 3/05 at 102 Aa2 1,089,000
1995 Series 46, 6.600%, 10/01/19 (Alternative Minimum Tax)
4,000,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 3/08 at 101 Aa2 4,078,600
Series 69, 5.500%, 10/01/28 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM CARE - 6.1%
2,000,000 East Rochester, New York, Housing Authority, Linden Knoll Incorporated, 2/08 at 102 AA 2,018,620
Insured Mortgage Revenue Bonds, 5.350%, 2/01/38
650,000 Town of Hempstead Industrial Development Agency, Civic Facility Revenue 10/99 at 102 Aa 681,564
Bonds (United Cerebral Palsy Association of Nassau County, Inc. Civic
Facility Project-1989 Series), 7.500%, 10/01/09
245,000 Dormitory Authority of the State of New York, Iroquois Nursing, Insured 2/01 at 102 AA- 263,588
Revenue Bonds, Series 1991, 7.000%, 2/01/15
2,000,000 Dormitory Authority of the State of New York, Bishop Henry R. Hucles 7/06 at 102 Aa 12,180,540
Nursing Home, Inc., Revenue Bonds, Series 1996, 6.000%, 7/01/24
2,500,000 Dormitory Authority of the State of New York, W.K. Nursing Home 8/06 at 102 AAA 2,682,800
Corporation, FHA-Insured Mortgage Revenue Bonds, Series 1996, 5.950%,
2/01/16
5,000,000 Syracuse Housing Authority (Syracuse, New York), FHA-Insured Mortgage 2/08 at 102 AAA 5,355,750
Revenue Bonds (Loretto Rest Residential Health Care Facility Project),
Series 1997A, 5.800%, 8/01/37
2,100,000 UFA Development Corporation, Utica, New York, FHA-Insured Mortgage 7/04 at 102 Aa2 2,238,327
Revenue Bonds, Series 1993 (Loretto-Utica Project), 5.950%, 7/01/35
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 8.1%
10,000 The City of New York, General Obligation Bonds, Fiscal 1992 Series C, 8/02 at 101 1/2 AAA 11,038
Subseries C1, 6.625%, 8/01/13
1,000,000 The City of New York, General Obligation Bonds, Fiscal 1996 Series F, 2/06 at 101 1/2 A- 1,058,430
5.750%, 2/01/19 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 A- 2,121,020
2,500,000 5.750%, 2/01/20 2/06 at 101 1/2 A- 2,646,075
1,750,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series D, 11/06 at 101 1/2 A- 1,906,573
Tax Exempt Bonds, 5.875%, 11/01/11
1,450,000 The City of New York, General Obligation Bonds, Fiscal 1992 Series B, 2/02 at 101 1/2 A- 1,622,086
7.500%, 2/01/06
</TABLE>
------
19
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND FUND (continued)
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/GENERAL (continued)
$5,000,000 The City of New York, New York, General Obligation Refunding Bonds, 8/08 at 101 A- $ 4,884,900
Series J, 5.000%, 8/01/23
5,440,000 The City of New York, New York, General Obligation Bonds, Series C, 8/08 at 101 A- 5,317,274
5.000%, 8/15/22
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 469,498
390,000 6.875%, 10/01/09 No Opt. Call A 474,505
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 27.3%
300,000 Albany Housing Authority, City of Albany, New York, Limited Obligation 10/05 at 102 Baa1 312,087
Bonds, Series 1995, 5.850%, 10/01/07
1,500,000 Albany Parking Authority, Aggregate Principal Amount, Parking Revenue No Opt. Call Baa1 573,480
Refunding Bonds, Series 1992A, 0.000%, 11/01/17
4,400,000 Dutchess County, New York, Water and Wastewater Authority Services 6/08 at 101 A 4,478,276
Agreement, Revenue Bonds, Series 1, 5.300%, 6/01/15
1,600,000 County of Franklin Industrial Development Agency, Lease Revenue Bonds 11/02 at 102 BBB- 1,751,280
(County Correctional Facility Project), Series 1992, 6.750%, 11/01/12
2,500,000 Housing New York Corporation, Senior Revenue Refunding Bonds, 11/03 at 102 AA 2,486,700
Series 1993, 5.000%, 11/01/13
4,000,000 Metropolitan Transportation Authority (New York), Transit Facilities 7/03 at 101 1/2 BBB+ 4,169,200
Service Contract Bonds, Series P, 5.750%, 7/01/15
3,000,000 New York City Transitional Finance Authority, Future Tax Secured Bonds, 5/08 at 101 AA 2,879,790
Fiscal 1998 Series C, 4.750%, 5/01/23
2,250,000 Dormitory Authority of the State of New York, Judicial Facilities Lease No Opt. Call Baa1 2,625,863
Revenue Bonds (Suffolk County Issue), Series 1991A, 9.500%, 4/15/14
1,000,000 Dormitory Authority of the State of New York, Revenue Bonds 7/04 at 102 BBB+ 1,080,920
(Department of Education of the State of New York Issue), Series 1994a,
6.250%, 7/01/24
2,900,000 Dormitory Authority of the State of New York, Department of 7/04 at 102 BBB+ 2,982,418
Health of the State of New York, Revenue Bonds, Series 1994, 5.500%,
7/01/23
2,225,000 Dormitory Authority of the State of New York, Court Facilities Lease 5/03 at 101 1/2 A3 2,320,987
Revenue Bonds (The City of New York Issue), Series 1993A, 5.700%,
5/15/22
2,500,000 Dormitory Authority of the State of New York, Mental Health Services 2/07 at 102 A- 2,614,550
Facilities Improvement, Revenue Bonds, Series 1997B, 5.625%, 2/15/21
1,545,000 New York State Environmental Facilities Corporation, State Park 3/03 at 101 BBB+ 1,615,236
Infrastructure, Special Obligation Bonds, Series 1993 A, 5.750%,
3/15/13
1,000,000 New York State Housing Finance Agency, Health Facilities Revenue Bonds 5/06 at 101 1/2 BBB+ 1,104,890
(New York City), 1996 Series A Refunding, 6.000%, 11/01/08
340,000 New York State Housing Finance Agency, Health Facilities Revenue Bonds 11/00 at 102 BBB+ 370,552
(New York City), 1990 Series A Refunding, 8.000%, 11/01/08
3,000,000 New York Local Government Assistance Corporation, Series 1993 B, 4/04 at 100 A+ 2,935,470
Refunding Bonds, 5.000%, 4/01/23
2,990,000 New York State Housing Finance Agency, Service Contract Obligation 9/03 at 102 BBB+ 3,151,729
Revenue Bonds, 1993 Series C Refunding, 5.875%, 9/15/14
2,000,000 New York State Housing Finance Agency, Service Contract Obligation 9/05 at 102 BBB+ 2,215,500
Revenue Bonds, 1995 Series A, 6.375%, 9/15/15
1,500,000 New York State Medical Care Facilities Finance Agency, Mental Health 8/04 at 102 A- 1,702,230
Services Facilities Improvement Revenue Bonds, 1994 Series E, 6.500%,
8/15/24
110,000 New York State Medical Care Facilities Finance Agency, Mental Health 2/00 at 100 A- 112,527
Services Facilities Improvement Revenue Bonds, 1988 Series A, 7.700%,
2/15/18
2,000,000 New York Medical Care Facilities Finance Agency, Mental Health Services 2/02 at 100 AAA 2,035,440
Facilities Improvement Revenue Bonds, 1992 Series A, 5.500%, 8/15/21
7,500,000 New York State Urban Development Corporation, Correctional Capital 1/04 at 102 BBB+ 7,510,725
Facilities Revenue Bonds, 1993A Refunding Series, 5.250%, 1/01/21
</TABLE>
----
20
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/LIMITED (continued)
$1,000,000 New York State Urban Development Corporation, Project Revenue 1/06 at 102 BBB+ $ 1,096,590
Bonds (Onondaga County Convention Center), Refunding
Series 1995, 6.250%, 1/01/20
5,090,000 New York State Urban Development Corporation, Correctional Capital 1/03 at 102 AAA 5,212,465
Facilities Revenue Bonds, 1993 Refunding Series, 5.500%, 1/01/15
2,500,000 New York State Urban Development Corporation, Correctional 1/08 at 102 BBB+ 2,423,175
Facilities Service Contract, Revenue Bonds, Series A, 5.000%,
1/01/28
2,000,000 Niagara Falls, New York, City School District, CTFS Partnership, 6/08 at 101 BBB- 2,020,720
High School Facilities Revenue Bonds, 5.375%, 6/15/28
2,000,000 34th Street Partnership, Inc., 34th Street Business Improvement 1/03 at 102 A1 2,037,800
District, Capital Improvement Bonds, Series 1993, 5.500%, 1/01/23
500,000 Triborough Bridge and Tunnel Authority (New York), No Opt. Call BBB+ 596,775
Convention Center Project Bonds, Series E, 7.250%, 1/01/10
Triborough Bridge and Tunnel Authority (New York), Special
Obligation Refunding Bonds, Series 1991B:
2,000,000 7.100%, 1/01/10 1/01 at 102 A1 2,176,660
2,000,000 7.100%, 1/01/10 1/01 at 102 AAA 2,173,140
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 3.4%
500,000 Albany Parking Authority, Aggregate Principal Amount 9/01 at 102 A 540,395
(Green and Hudson Garage Project), Parking Revenue Refunding
Bonds (Letter of Credit Secured), Series 1991A, 7.150%, 9/15/16
4,000,000 Metropolitan Transportation Authority, Commuter Facilities 7/07 at 101 1/2 AAA 4,311,640
Revenue Bonds, Series 1997A, 5.750%, 7/01/21
2,000,000 New York City Industrial Development Agency, Special Facility 1/04 at 102 A 2,144,020
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, Special Project 12/07 at 100 AAA 1,592,070
Bonds, Series 6, JFK International Air Terminal LLC Project,
5.750%, 12/01/25 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 16.7%
1,000,000 Metropolitan Transportation Authority (New York), 7/02 at 102 AAA 1,103,310
Commuter Facilities Revenue Bonds, Series 1992B, 6.250%,
7/01/17 (Pre-refunded to 7/01/02)
1,000,000 Metropolitan Transportation Authority, Commuter Facilities 7/04 at 101 1/2 AAA 1,135,720
Revenue Bonds, Series 1994A, 6.375%, 7/01/18
(Pre-refunded to 7/01/04)
1,000,000 Metropolitan Transportation Authority (New York), 7/00 at 102 AAA 1,086,600
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 Facilities 7/02 at 102 AAA 1,139,954
Revenue Bonds, Series J, 6.500%, 7/01/18
(Pre-refunded to 7/01/02)
1,000,000 Metropolitan Transportation Authority, Transit Facilities 7/06 at 102 AAA 1,149,150
Revenue Bonds, Series A, 6.100%, 7/01/21 (Pre-refunded
to 7/01/06)
35,000 New York City, General Obligation Bonds, 1992 Series C, 8/02 at 101 1/2 AAA 38,998
6.625%, 8/01/13 (Pre-refunded to 8/01/02)
40,000 The City of New York, General Obligation Bonds, 11/01 at 101 1/2 AAA 45,925
Fiscal 1991 Series F, Tax-Exempt Bonds, 8.250%,
11/15/19 (Pre-refunded to 11/15/01)
1,000,000 The City of New York, General Obligation Bonds, 8/04 at 101 Aaa 1,166,910
Fiscal 1995 Series B, 7.000%, 8/15/16
(Pre-refunded to 8/15/04)
550,000 The City of New York, General Obligation Bonds, Fiscal 2/02 at 101 1/2 A-*** 620,631
1992 Series B, 7.500%, 2/01/06 (Pre-refunded to
2/01/02)
1,500,000 New York City, Municipal Water Finance Authority 6/01 at 101 1/2 Aaa 1,677,855
(New York), Water and Sewer System Revenue Bonds, Fiscal
1991 Series C, 7.750%, 6/15/20 (Pre-refunded to 6/15/01)
300,000 State of New York, Serial Bonds, Series 1991, 7.300%, 3/01 at 102 A*** 330,528
3/01/12 (Pre-refunded to 3/01/01)
2,135,000 Dormitory Authority of the State of New York, 2/00 at 102 AAA 2,284,130
United Health Services, Inc., FHA-Insured Mortgage
Revenue Bonds, Series 1989, 7.350%, 8/01/29
(Pre-refunded to 2/01/00)
1,000,000 Dormitory Authority of the State of New York, City 7/00 at 102 Aaa 1,088,800
University System Consolidated Revenue Bonds, Series
1990A, 7.625%, 7/01/20 (Pre-refunded to 7/01/00)
</TABLE>
----
21
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND FUND (continued)
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GUARANTEED (continued)
$ 300,000 Dormitory Authority of the State of New York, State of New York 7/01 at 102 Baa1*** $ 336,615
Department of Education, Revenue Bonds, Series 1991, 7.750%,
7/01/21 (Pre-refunded to 7/01/01)
400,000 Dormitory Authority of the State of New York, Menorah Campus, Inc., 8/01 at 102 AA*** 446,896
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, Department of Health 7/01 at 102 BBB+*** 277,258
Revenue Bonds, Veterans Home, Series 1990, 7.250%, 7/01/21
(Pre-refunded to 7/01/01)
985,000 Dormitory Authority of the State of New York, Dormitory Revenue 7/04 at 102 AAA 1,173,785
Bonds, State University Issue, Series X, 7.400%, 7/01/24
(Pre-refunded to 7/01/04)
1,500,000 Dormitory Authority of the State of New York, Department of Health 7/05 at 102 BBB+*** 1,745,865
of the State of New York, Revenue Bonds, Series 1995, 6.625%,
7/01/24 (Pre-refunded to 7/01/05)
200,000 New York State Housing Finance Agency, State University Construction No Opt. Call AAA 261,230
Refunding Bonds, 1986 Series A, 8.000%, 5/01/11
1,660,000 New York State Housing Finance Agency, Health Facilities Revenue 11/00 at 102 AAA 1,838,765
Bonds (New York City), 1990 Series A Refunding, 8.000%, 11/01/08
(Pre-refunded to 11/01/00)
250,000 State of New York Municipal Bond Bank Agency, Special Program 9/01 at 102 BBB+*** 276,208
Bonds (City of Buffalo), 1991 Series A, 6.875%, 3/15/06
(Pre-refunded to 9/15/01)
250,000 State of New York Municipal Bond Bank Agency, Special Program 9/01 at 102 AAA 276,003
Revenue Bonds (City of Rochester), 1991 Series A, 6.750%,
3/15/11 (Pre-refunded to 9/15/01)
50,000 New York State Medical Care Facilities Finance Agency, Mental 2/00 at 102 AAA 53,835
Health Services Facilities Improvement Revenue Bonds, 1990
Series A, 7.750%, 2/15/20 (Pre-refunded to 2/15/00)
1,460,000 New York State Medical Care Facilities Finance Agency, Mental 2/01 at 102 AAA 1,613,008
Health Services Facilities Improvement Revenue Bonds, 1991
Series A, 7.500%, 2/15/21 (Pre-refunded to 2/15/01)
1,000,000 New York State Medical Care Facilities Finance Agency, New 2/05 at 102 AAA 1,166,510
York Hospital FHA-Insured Mortgage Revenue Bonds, 1994 Series
A, 6.750%, 8/15/14 (Pre-refunded to 2/15/05)
1,000,000 New York State Medical Care Facilities Finance Agency, New York 2/05 at 102 AAA 1,169,330
Hospital FHA-Insured Mortgage Revenue Bonds, 1994 Series A, 6.800%,
8/15/24 (Pre-refunded to 2/15/05)
2,700,000 New York State Medical Care Facilities Finance Agency, Hospital 2/05 at 102 AAA 3,157,191
Medical Center Secured Hospital, Revenue Bonds, Series 1995-A,
6.800%, 8/15/12 (Pre-refunded to 2/15/05)
630,000 New York State Medical Care Facilities Finance Agency, Hospital 8/99 at 102 AA*** 664,921
and Nursing Home Revenue Bonds, Series B, 7.350%, 2/15/29
1,480,000 New York State Medical Care Facilities Finance Agency, Hospital 2/04 at 102 AAA 1,663,934
and Nursing Home Insured Mortgage Refunding Revenue Bonds,
Series A, 6.200%, 2/15/21
1,000,000 New York State Urban Development Corporation, Correctional 1/00 at 102 AAA 1,069,120
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, Project Revenue 1/01 at 102 BBB+*** 2,211,840
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, State Facilities 4/01 at 102 Aaa 3,218,333
Revenue Bonds, 7.500%, 4/01/20 (Pre-refunded to 4/01/01)
1,000,000 Orangetown Housing Authority (Rockland County, New York), 10/00 at 102 A*** 1,097,690
Housing Facilities Revenue Bonds (Orangetown Senior Housing
Center-1990 Series), 7.600%, 4/01/30 (Pre-refunded to 10/01/00)
5,345,000 New York City Industrial Development Agency, Civic Facility Revenue 7/02 at 102 AA 5,765,010
Bonds (1992 - The Lighthouse, Inc. Project), 6.500%, 7/01/22
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 4.5%
4,000,000 New York City Industrial Development Agency, Industrial Development 10/08 at 102 BBB- 4,077,720
Revenue Bonds (Brooklyn Navy Yard Cogeneration Partners, L.P.
Project), Series 1997, 5.650%, 10/01/28 (Alternative Minimum Tax)
350,000 New York State Energy Research and Development Authority, Electric 1/00 at 101 A+ 368,130
Facilities Revenue Bonds, Series 1991 A (Consolidated Edison Company
of New York, Inc. Project), 7.500%, 1/01/26
(Alternative Minimum Tax)
</TABLE>
----
22
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITIES (continued)
$1,250,000 New York State Energy Research and Development Authority, Electric 6/02 at 102 A- $ 1,373,025
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 Authority, Electric 1/03 at 102 A- 549,930
Facilities Revenue Bonds (Long Island Lighting Company Project),
1992 Series D, 6.900%, 8/01/22 (Alternative Minimum Tax)
2,435,000 New York State Energy Research and Development Authority, Adjustable 7/05 at 102 AAA 2,663,354
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 Authority, Facilities 7/05 at 102 AAA 1,642,139
Refunding Revenue Bonds, Series 1995 A (Consolidated Edison Company
of New York, Inc. Project), 6.100%, 8/15/20
750,000 Onondaga County Resource Recovery Agency, System Revenue Bonds 5/02 at 102 Baa1 812,474
(Development Costs- 1992 Series), 7.000%, 5/01/15 (Alternative Minimum
Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 1.3%
10,000,000 New York City, Municipal Water Finance Authority, Water and Sewer System No Opt. Call A2 3,316,499
Revenue Bonds, Fiscal 1998 Series D, 0.000%, 6/15/20
- ------------------------------------------------------------------------------------------------------------------------------------
$243,735,000 Total Investments - (cost $229,363,188) - 99.4% 251,475,159
- ------------------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES - 0.4%
$1,100,000 New York State Energy Research and Development Authority, Niagara P-1 1,100,000
- -------------
Mohawk Corporation PJ-A, Pollution Control Revenue Bonds, Variable
Rate Demand Bonds, 3.200%, 3/1/27 +
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.2% 325,311
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $252,900,470
--------------------------------------------------------------------------------------------------------------------
</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 AA A 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. The rate changes periodically based on market
conditions or a specified market index.
----
23
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN NEW YORK INSURED MUNICIPAL BOND FUND
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION AND CIVIC ORGANIZATIONS - 12.8%
$1,000,000 Allegany County, New York, Industrial Development Agency, Alfred 2/08 at 102 Aaa $ 983,940
University Civic Facility, Civic Facilities Revenue Bonds, 5.000%,
8/01/28
1,350,000 Town of Hempstead, Industrial Development Agency, Civic Facility 7/06 at 102 AAA 1,469,597
Revenue Bonds (Hofstra University Project-Series 1996), 5.800%,
7/01/15
4,840,000 Nassau County Industrial Development Agency, Civic Facility Revenue 8/01 at 102 AAA 5,327,824
Bonds (Hofstra University Project-Series 1991), 6.750%, 8/01/11
1,000,000 New York City Industrial Development Agency, Civic Facility Revenue 11/04 at 102 AAA 1,120,550
Bonds (USTA National Tennis Center Incorporated Project), 6.375%,
11/15/14
1,000,000 New York City Industrial Development Agency, Civic Facility Revenue 9/05 at 102 AAA 1,079,900
Bonds (New School for Social Research Project), Series 1995A, 5.750%,
9/01/15
1,145,000 New York City Industrial Development Agency, Civic Facility Revenue 6/07 at 102 Aaa 1,213,723
Bonds (Anti-Defamation League Foundation Project) Series 1997A, 5.600%,
6/01/17
5,000,000 Dormitory Authority of the State of New York, State University Dormitory 7/05 at 102 AAA 5,111,050
Facilities, Lease Revenue Bonds, Series 1995A, 5.300%, 7/01/24
1,100,000 Dormitory Authority of the State of New York, College and University 12/98 at 102 AAA 1,131,350
Revenue (Pooled Capital Program), Series 1985, 7.800%, 12/01/05
5,000,000 Dormitory Authority of the State of New York, New York University 7/01 at 102 AAA 5,408,650
Insured Revenue Bonds, Series 1991, 6.250%, 7/01/09
1,000,000 Dormitory Authority of the State of New York, City University System 7/03 at 100 AAA 987,500
Consolidated Revenue Bonds, Series 1993F, 5.000%, 7/01/20
4,640,000 Dormitory Authority of the State of New York, Mount Sinai School of 7/04 at 102 AAA 4,549,891
Medicine, Insured Revenue Bonds, Series 1994A, 5.000%, 7/01/21
1,500,000 Dormitory Authority of the State of New York, Sarah Lawrence College, 7/05 at 102 AAA 1,647,075
Revenue Bonds, Series 1995, 6.000%, 7/01/24
2,500,000 Dormitory Authority of the State of New York, Siena College, Insured 7/07 at 102 AAA 2,699,725
Revenue Bonds, Series 1997, 5.750%, 7/01/26
4,000,000 New York State Dormitory Authority, Fordham University, Refunding 7/08 at 101 AAA 3,941,760
Revenue Bonds, 5.000%, 7/01/28
2,530,000 New York State Dormitory Authority, City University Construction System, 7/08 at 101 AAA 2,496,174
Third Generation, Series 2, 5.000%, 7/01/23
3,000,000 New York State Dormitory Authority, State University Educational 5/08 at 100 AAA 2,892,030
Facilities, Revenue Bonds, Series A, 4.750%, 5/15/25
1,760,000 New York State Dormitory Authority, City University, Revenue Bonds, 7/00 at 102 AAA 1,884,397
Series C, 7.000%, 7/01/14
3,000,000 Dormitory Authority of the State of New York, Ithaca College Insured 7/08 at 101 Aaa 2,961,600
Revenue Bonds, Series 1998, 5.000%, 7/01/21
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 16.2%
2,500,000 New York City Health and Hospitals Corporation, Health System Bonds, 2/03 at 102 AAA 2,668,550
1993 Series A, 5.625%, 2/15/13
14,980,000 New York City Health and Hospitals Corporation, Health System Bonds, 2/03 at 102 AAA 15,740,385
1993 Series A, 5.750%, 2/15/22
6,460,000 Dormitory Authority of the State of New York, St. Vincent's Hospital and 8/05 at 102 AAA 6,868,466
Medical Center of New York, FHA-Insured Mortgage Revenue Bonds, Series
1995, 5.800%, 8/01/25
3,730,000 Dormitory Authority of the State of New York, Maimonides Medical Center, 2/06 at 102 AAA 3,965,251
FHA-Insured Mortgage Hospital Revenue Bonds, Series 1996A, 5.750%,
8/01/24
</TABLE>
----
24
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH CARE (continued)
$2,500,000 New York State Dormitory Authority, Southside Hospital, Second 2/08 at 101 1/2 AAA $ 2,454,950
Hospital Insured Revenue Bonds, 5.000%, 2/15/25
3,000,000 New York State Dormitory Authority, North Shore University Hospital, 11/08 at 101 AAA 2,947,080
Refunding Revenue Bonds, 5.000%, 11/01/23
895,000 New York State Medical Care Facilities Finance Agency, St. Francis 11/98 at 102 AAA 918,512
Hospital Project, Revenue Bonds, 1988 Series A, 7.625%, 11/01/21
45,000 New York State Medical Care Facilities Finance Agency, Albany 8/00 at 100 AAA 46,045
Medical Center Hospital Project, Revenue Bonds, 1987 Series A,
8.000%, 2/15/28
3,000,000 New York State Medical Care Facilities Finance Agency, South Nassau 11/02 at 102 AAA 3,282,810
Communities Hospital Project, Revenue Bonds, 1992 Series A, 6.125%,
11/01/11
3,200,000 New York State Medical Care Facilities Finance Agency, North Shore 11/00 at 102 AAA 3,462,944
University Hospital, Mortgage Project Revenue Bonds, 1990 Series A,
7.200%, 11/01/20
1,670,000 New York State Medical Care Facilities Finance Agency, Our Lady of 11/01 at 102 AAA 1,817,294
Victory Hospital Project, Revenue Bonds, 1991 Series A, 6.625%,
11/01/16
500,000 New York State Medical Care Facilities Finance Agency, Sisters of 11/01 at 102 AAA 545,525
Charity Hospital of Buffalo Project, Revenue Bonds, 1991 Series A,
6.600%, 11/01/10
1,550,000 New York State Medical Care Facilities Finance Agency, Sisters of 11/01 at 102 AAA 1,686,710
Charity Hospital of Buffalo Project, Revenue Bonds, 1991 Series A,
6.625%, 11/01/18
1,000,000 New York State Medical Care Facilities Finance Agency, Aurelia Osborn 11/01 at 102 AAA 1,084,530
Fox Memorial Hospital Project, Revenue Bonds, 1992 Series A, 6.500%,
11/01/19
2,500,000 New York State Medical Care Facilities Finance Agency, St. Marys 11/03 at 102 AAA 2,757,325
Hospital (Rochester), Mortgage Project Revenue Bonds, 1994 Series
A Refunding, 6.200%, 11/01/14
660,000 New York State Medical Care Facilities Finance Agency, Hospital and 8/99 at 102 AA 693,343
Nursing Home Revenue Bonds, Series B, 7.350%, 2/15/29
7,890,000 New York State Medical Care Facilities Finance Agency, Montefiore 2/05 at 102 AAA 8,425,494
Medical Center, FHA-Insured Mortgage Revenue Bonds, 1995 Series A,
5.750%, 2/15/15
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 9.1%
5,000,000 Pass-Through Certificates of New York City, HDC Multifamily Housing, 11/03 at 100 AAA 6,106,600
Limited Obligation Bonds, Series 1991A, 6.500%, 2/20/19
New York State Finance Agency, Housing Project Mortgage Revenue
Bonds, 1996 Series A Refunding:
5,650,000 6.100%, 11/01/15 5/06 at 102 AAA 6,164,094
4,980,000 6.125%, 11/01/20 5/06 at 102 AAA 5,424,266
640,000 New York State Housing Finance Agency, Multi-Family Housing Revenue 11/99 at 102 AAA 667,194
Bonds (AMBAC Insured Program), 1989 Series A, 7.450%, 11/01/28
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 4,227,801
9,650,000 6.750%, 1/01/26 1/02 at 102 AAA 10,602,262
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 1.1%
60,000 State of New York Mortgage Agency, Mortgage Revenue Bonds, Eighth 1/00 at 100 Aaa 62,385
Series D, 8.375%, 10/01/17
390,000 State of New York Mortgage Agency, Mortgage Revenue Bonds, Ninth Series 4/00 at 100 Aaa 398,416
E, 8.100%, 10/01/17
3,500,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 10/03 at 102 AAA 3,651,095
Series 29-C-1, 5.650%, 4/01/15
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM CARE - 0.6%
1,000,000 Dormitory Authority of the State of New York, United Cerebral Palsy 7/02 at 102 AAA 1,091,410
Association of Westchester County, Inc., Insured Revenue Bonds, Series
1992, 6.200%, 7/01/12
1,000,000 Dormitory Authority of the State of New York, Sarah Neuman Nursing Home, 8/07 at 102 AAA 1,037,030
FHA-Insured Mortgage Nursing Home Revenue Bonds, Series 1997, 5.450%,
8/01/27
</TABLE>
----
25
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN NEW YORK INSURED MUNICIPAL BOND FUND (continued)
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/GENERAL - 9.6%
$1,000,000 City of Buffalo, New York, Refunding Serial Bonds-1991, 6.150%, 2/01/04 1/01 at 101 AAA $ 1,060,480
Camden Central School District, Oneida County, New York, School District
Serial Bonds, 1991:
500,000 7.100%, 6/15/07 No Opt. Call AAA 602,500
600,000 7.100%, 6/15/08 No Opt. Call AAA 731,094
600,000 7.100%, 6/15/09 No Opt. Call AAA 740,826
275,000 7.100%, 6/15/10 No Opt. Call AAA 342,128
500,000 Greece Central School District, Monroe County, New York, General No Opt. Call AAA 571,330
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 458,731
395,000 6.500%, 6/01/10 No Opt. Call AAA 472,448
395,000 6.500%, 6/01/11 No Opt. Call AAA 474,395
Middle County Central School, District at Centereach 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 571,910
475,000 6.900%, 12/15/08 No Opt. Call AAA 576,113
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 586,210
1,035,000 6.200%, 2/15/16 No Opt. Call AAA 1,213,724
1,500,000 County of Nassau, New York, General Obligation Serial Bonds, 8/04 at 103 AAA 1,619,190
Serial General Improvement Bonds, Series O, 5.700%, 8/01/13
1,020,000 City of New Rochelle, Westchester County, New York, General Obligation 8/04 at 102 AAA 1,132,975
Public Improvement Bonds, 1994 Series B, 6.200%, 8/15/22
135,000 The City of New York, General Obligation Bonds, Fiscal 1992 Series C, 8/02 at 101 1/2 AAA 147,126
Fixed Rate Bonds, Subseries C-1, 6.250%, 8/01/10
20,000 The City of New York, General Obligation Bonds, Fiscal 1992 Series C, 8/02 at 101 1/2 AAA 22,077
6.625%, 8/01/12
The City of New York, General Obligation Bonds, Fiscal 1990 Series B:
1,300,000 7.000%, 10/01/15 10/99 at 100 AAA 1,346,423
2,000,000 7.000%, 10/01/16 10/99 at 100 AAA 2,071,420
1,025,000 7.000%, 10/01/17 10/99 at 100 AAA 1,061,603
310,000 7.000%, 10/01/18 10/99 at 100 AAA 321,070
5,000,000 The City of New York, General Obligation Bonds, Fiscal 1998 Series H, 8/08 at 101 AAA 4,999,800
5.125%, 8/01/25
1,590,000 City of Niagara Falls, Niagara County, New York, Public Improvement 3/04 at 102 AAA 1,818,690
Serial Bonds, 1994, 6.900%, 3/01/21
1,505,000 Town of North Hempstead, Nassau County, New York, General Obligation No Opt. Call AAA 1,797,406
Refunding Serial Bonds, 1992 Series B, 6.400%, 4/01/14
3,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1998, 7/08 at 101 AAA 2,953,080
4.875%, 7/01/23
Rensselaer County, New York, General Obligation Serial Bonds, Series 1991:
960,000 6.700%, 2/15/13 No Opt. Call AAA 1,170,787
960,000 6.700%, 2/15/14 No Opt. Call AAA 1,176,058
960,000 6.700%, 2/15/15 No Opt. Call AAA 1,179,158
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 644,397
550,000 6.850%, 6/15/07 No Opt. Call AAA 653,879
550,000 6.850%, 6/15/08 No Opt. Call AAA 660,809
550,000 6.850%, 6/15/09 No Opt. Call AAA 667,673
550,000 6.850%, 6/15/10 No Opt. Call AAA 672,067
600,000 County of Suffolk, New York, General Obligation Refunding Serial Bonds, 5/03 at 102 AAA 651,930
Public Improvement Refunding Bonds, 1993 Series B, 6.150%, 5/01/10
</TABLE>
----
26
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/LIMITED - 8.8%
$2,500,000 Dormitory Authority of the State of New York, Mental Health Services 8/07 at 101 AAA $ 2,502,000
Facilities Improvement Revenue Bonds, Series 1997D, 5.125%, 8/15/27
3,280,000 New York Local Government Assistance Corporation, Series 1993 B, Refunding 4/04 at 100 AAA 3,231,915
Bonds, 5.000%, 4/01/23
2,815,000 New York State Medical Care Facilities Finance Agency, Mental Health 2/02 at 102 AAA 3,046,112
Services Facilities Improvement Revenue Bonds, 1992 Series B, 6.250%,
8/15/18
1,000,000 New York State Medical Care Facilities Finance Agency, Mental Health 8/04 at 102 AAA 1,096,000
Services Facilities Improvement Revenue Bonds, 1994 Series D, 6.150%,
2/15/15
6,145,000 New York Medical Care Facilities Finance Agency, Mental Health Services 12/02 at 102 AAA 6,694,732
Facilities Improvement Revenue Bonds, 1992 Series A, 6.375%, 8/15/17
2,000,000 New York State Medical Care Facilities Finance Agency, Mental Health 2/04 at 102 AAA 2,021,440
Services Facilities Improvement Revenue Bonds, 1993 Series F Refunding,
5.250%, 2/15/19
4,000,000 New York State Urban Development Corporation, Revenue Bonds (Sports
Facility Assistance Program), 1996 Series A, 5.500%, 4/01/19 4/06 at 102 AAA 4,198,800
8,650,000 Triborough Bridge and Tunnel Authority, Special Obligation Refunding
Bonds, Series 1991B, 6.875%, 1/01/15 1/01 at 102 AAA 9,352,813
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 7.5%
2,500,000 Albany County Airport Authority, Airport Revenue Bonds, Series 1997, 12/07 at 102 AAA 2,607,725
5.500%, 12/15/19 (Alternative Minimum Tax)
2,250,000 Buffalo and Fort Erie Public Bridge Authority, Toll Bridge System 1/05 at 101 AAA 2,382,683
Revenue Bonds, Series 1995, 5.750%, 1/01/25
4,000,000 Metropolitan Transportation Authority (New York), Commuter Facilities 7/05 at 101 AAA 4,228,440
Subordinated Revenue Bonds, Series 1995-2 (Grand Central Terminal
Redevelopment Project), 5.700%, 7/01/24
3,000,000 Metropolitan Transportation Authority, Commuter Facilities Revenue 7/07 at 101 1/2 AAA 3,233,730
Bonds, Series 1997A, 5.750%, 7/01/21
3,000,000 Metropolitan Transportation Authority, (New York), Commuter 7/07 at 102 AAA 3,002,250
Facilities Revenue Bonds, Series 1997B, 5.125%, 7/01/24
3,500,000 Metropolitan Transportation Authority Commuter Facilities Revenue 7/07 at 101 AAA 3,455,200
Bonds, Series 1997E, 5.000%, 7/01/21
Niagara, New York, Frontier Transportation Authority, Buffalo Niagara
International Airport, Airport Revenue Bonds:
1,000,000 5.000%, 4/01/18 4/08 at 101 AAA 991,940
1,500,000 5.000%, 4/01/28 4/08 at 101 AAA 1,462,620
3,000,000 The Port Authority of New York and New Jersey, Special Project Bonds, 12/07 at 100 AAA 3,184,140
Series 6, JFK International Air Terminal LLC Project, 5.750%,
12/01/25 (Alternative Minimum Tax)
2,750,000 Triborough Bridge and Tunnel Authority, General Purpose Revenue Bonds, 1/02 at 101 1/2 AAA 2,988,178
Series X, 6.500%, 1/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 23.5%
3,385,000 Buffalo Municipal Water Finance Authority, Water System Revenue Bonds, 7/03 at 102 AAA 3,718,355
Series 1992, 5.750%, 7/01/19 (Pre-refunded to 7/01/03)
1,000,000 Erie County Water Authority (New York), Water Works System Revenue Bonds, 12/09 at 100 AAA 1,198,430
Series 1990B, 6.750%, 12/01/14
10,340,000 Metropolitan Transportation Authority, Transit Facilities Revenue Bonds, 7/02 at 102 AAA 11,499,631
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 408,709
375,000 6.500%, 6/01/16 (Pre-refunded to 6/01/01) 6/01 at 102 AAA 408,709
350,000 6.500%, 6/01/17 (Pre-refunded to 6/01/01) 6/01 at 102 AAA 381,462
3,725,000 Montgomery, Otsego, Schoharie, Solid Waste Management Authority, Solid 1/00 at 103 AAA 4,006,498
Waste System Revenue Bonds, Series 1990, 7.250%, 1/01/14
(Pre-refunded to 1/01/00)
</TABLE>
----
27
<PAGE>
PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN NEW YORK INSURED MUNICIPAL BOND FUND (continued)
August 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GUARANTEED (continued)
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 $ 1,070,120
1,000,000 7.250%, 2/15/17 (Pre-refunded to 2/15/00) 2/00 at 102 AAA 1,070,120
The City of New York, General Obligation Bonds, Fiscal 1992 Series
C, Fixed Rate Bonds, Subseries C-1:
3,865,000 6.250%, 8/01/10 (Pre-refunded to 8/01/02) 8/02 at 101 1/2 AAA 4,254,244
55,000 6.625%, 8/01/12 (Pre-refunded to 8/01/02) 8/02 at 101 1/2 AAA 61,283
2,000,000 New York City Municipal Water Finance Authority, Water and Sewer 6/01 at 101 AAA 2,176,760
Revenue Bonds, Fiscal 1992 Series A, 6.750%, 6/15/16 (Pre-refunded
to 6/15/01)
1,000,000 New York City Municipal Water Finance Authority, Water and Sewer 6/00 at 101 1/2 AAA 1,076,270
System Revenue Bonds, Fiscal 1991 Series A, 7.250%, 6/15/15
(Pre-refunded to 6/15/00)
1,000,000 New York City Transit Authority, Transit Facilities Revenue Bonds, 1/00 at 102 AAA 1,069,120
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 York, Revenue 4/01 at 102 AAA 2,410,430
Refunding Bonds, Series 1991A (The American Museum of Natural
History), 6.900%, 4/01/21 (Pre-refunded to 4/01/01)
1,490,000 Dormitory Authority of the State of New York, United Health 2/00 at 102 AAA 1,594,077
Services, Inc., FHA Insured Mortgage Revenue Bonds, Series 1989,
7.350%, 8/01/29 (Pre-refunded to 2/01/00)
1,200,000 Dormitory Authority of the State of New York, State University 5/00 at 102 AAA 1,293,900
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, Manhattanville College, 7/00 at 102 AAA 1,086,600
Insured Revenue Bonds, Series 1990, 7.500%, 7/01/22 (Pre-refunded
to 7/01/00)
2,000,000 Dormitory Authority of the State of New York, State University 5/00 at 100 AAA 2,094,640
Educational Facilities, Revenue Bonds, Series 1990A, 6.500%,
(Pre-refunded to 5/15/00)
1,200,000 Dormitory Authority of the State of New York, State University 5/00 at 102 AAA 1,289,196
Educational Facilities Revenue Bonds, Series 1990C, 7.000%,
5/15/18 (Pre-refunded to 5/15/00)
6,295,000 Dormitory Authority of the State of New York, City University System 7/00 at 102 AAA 6,840,147
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, Cooper Union, Insured 7/01 at 102 AAA 2,775,850
Revenue Bonds, Series 1990, 7.200%, 7/01/20 (Pre-refunded to 7/01/01)
1,000,000 Dormitory Authority of the State of New York, Fordham University, 7/00 at 102 AAA 1,081,550
Insured Revenue Bonds, Series 1990, 7.200%, 7/01/15 (Pre-refunded
to 7/01/00)
740,000 New York State Dormitory Authority, City University, Revenue Bonds, 7/00 at 102 AAA 797,861
Series C, 7.000%, 7/01/14
7,000,000 New York State Medical Care Facilities Finance Agency, New York 2/05 at 102 AAA 8,185,310
Hospital FHA-Insured Mortgage Revenue Bonds, 1994 Series A, 6.800%,
8/15/24 (Pre-refunded to 2/15/05)
5,000 New York Medical Care Facilities Finance Agency, Mental Health 2/02 at 102 AAA 5,493
Services Facilities Improvement Revenue Bonds, 1992 Series A,
6.375%, 8/15/17 (Pre-refunded to 2/15/02)
2,000,000 Power Authority of the State of New York, General Purpose Bonds, 1/02 at 102 AAA 2,201,740
Series Z, 6.500%, 1/01/19 (Pre-refunded to 1/01/02)
7,300,000 New York State Thruway Authority, General Revenue Bonds, Series A, 1/02 at 102 AAA 7,866,480
5.750%, 1/01/19 (Pre-refunded to 1/01/02)
New York State Urban Development Corporation, Correctional Facilities
Revenue Bonds, Series G:
1,500,000 7.250%, 1/01/14 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 1,599,060
575,000 7.000%, 1/01/17 (Pre-refunded to 1/01/00) 1/00 at 102 AAA 611,196
2,000,000 New York State Urban Development Corporation, Correctional Capital 1/00 at 102 AAA 2,138,240
Facilities Revenue Bonds, Series 1, 7.500%, 1/01/20 (Pre-refunded to
1/01/00)
Town of North Hempstead, 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 455,732
425,000 6.800%, 6/01/11 (Pre-refunded to 6/01/00) 6/00 at 102 AAA 455,732
</TABLE>
----
28
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GUARANTEED (continued)
NYACK Union Free School District, Rockland County, New York,
School District Serial Bonds 1992:
$ 625,000 6.500%, 4/01/12 (Pre-refunded to 4/01/02) 4/02 at 102 AAA $ 691,600
625,000 6.500%, 4/01/13 (Pre-refunded to 4/01/02) 4/02 at 102 AAA 691,600
625,000 6.500%, 4/01/14 (Pre-refunded to 4/01/02) 4/02 at 102 AAA 691,600
1,000,000 County of Suffolk, New York, General Obligation Refunding 4/00 at 102 AAA 1,069,130
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, New York, General Purpose 1/01 at 102 AAA 2,181,640
Revenue Bonds, Series T, 7.000%, 1/01/20 (Pre-refunded to 1/01/01)
1,175,000 Triborough Bridge and Tunnel Authority, General Purpose Revenue Bonds, 1/01 at 101 1/2 AAA 1,276,332
Series S, 7.000%, 1/01/21 (Pre-refunded to 1/01/01)
1,750,000 City of Yonkers, New York, General Obligation School Bonds-1990-C, 12/00 at 102 AAA 1,921,518
7.375%, 12/01/09 (Pre-refunded to 12/01/00)
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 2.4%
6,000,000 Long Island Power Authority, Electric System General Revenue Bonds, 6/08 at 101 AAA 6,004,740
Series 1998A, 5.125%, 12/01/22
2,500,000 New York State Energy Research and Development Authority, Pollution 10/99 at 103 AAA 2,660,174
Control Revenue Bonds (Central Hudson Gas & Electric Corporation
Project), 1984 Series B, 7.375%, 10/01/14
- ------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 7.4%
280,000 Albany, New York, Municipal Water Finance 12/98 at 102 AAA 288,189
Authority, Water and Sewer System Revenue Bonds, Series 1988A,
7.500%, 12/01/17
2,930,000 Buffalo Municipal Water Finance Authority, Water System Revenue 7/08 at 101 AAA 2,891,763
Bonds, Series 1998-A, 5.000%, 7/01/28
7,000,000 New York City (New York), Municipal Water Finance Authority, Water 6/06 at 101 AAA 7,479,499
and Sewer System Revenue Bonds, Fiscal 1996 Series B, 5.750%, 6/15/26
1,250,000 New York City (New York), Municipal Water Finance Authority, Water 6/01 at 101 AAA 1,349,749
and Sewer System Revenue Bonds, Fiscal 1992 Series A, 6.750%, 6/15/16
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 2,891,885
4,650,000 5.500%, 6/15/20 6/02 at 100 AAA 4,760,390
1,000,000 New York, New York, City Municipal Water Finance Authority, Water 6/08 at 101 AAA 962,529
and Sewer System Revenue Bonds, Series D-MBIA IBC, 4.750%, 6/15/25
1,450,000 New York State Environmental Facilities Corporation, State Water 6/00 at 102 AAA 1,543,974
Pollution Control, Revolving Fund Revenue Bonds, Series 1990 C
(Pooled Loan Issue), 7.200%, 3/15/11
1,000,000 Suffolk County Industrial Development Agency (Suffolk County, New 2/04 at 101 AAA 1,018,419
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 System Revenue Bonds, 6/03 at 102 AAA 3,697,483
Series 1994, 5.000%, 6/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
$338,475,000 Total Investments - (cost $330,826,527) - 99.0% 361,809,887
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.0% 3,530,697
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $365,340,584
--------------------------------------------------------------------------------------------------------------------
</TABLE>
All of the bonds in the portfolio 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.
----
29
<PAGE>
STATEMENT OF NET ASSETS (UNAUDITED)
August 31, 1998
<TABLE>
<CAPTION>
NEW JERSEY NEW YORK
NEW JERSEY INTERMEDIATE NEW YORK INSURED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $100,832,026 $10,754,944 $251,475,159 $361,809,887
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) 4,000,000 -- 1,100,000 --
Cash -- -- -- 610,573
Receivables:
Fund manager (note 6) -- -- -- --
Interest 1,588,009 135,368 3,050,322 3,921,743
Shares sold 210,645 -- 151,644 284,213
Other assets 624 196 2,081 133,520
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 106,631,304 10,890,507 255,779,206 366,759,936
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft 1,399,504 167,772 1,595,461 --
Payables:
Investments purchased 2,123,407 -- -- --
Shares redeemed 177,075 -- 485,041 145,649
Accrued expenses:
Management fees (note 6) 28,509 553 100,141 165,392
12b-1 distribution and service fees (notes 1 and 6) 16,565 2,279 23,620 16,567
Other 7,014 23,794 29,923 45,660
Dividends payable 257,741 23,562 644,550 1,046,084
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 4,009,815 217,960 2,878,736 1,419,352
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $102,621,489 $10,672,547 $252,900,470 $365,340,584
====================================================================================================================================
CLASS A SHARES (NOTE 1)
Net assets $ 41,642,009 $ 9,281,780 $ 79,512,016 $ 47,897,379
Shares outstanding 3,916,700 880,095 7,199,222 4,433,457
Net asset value and redemption price per share $ 10.63 $ 10.55 $ 11.04 $ 10.80
Offering price per share (net asset value per share plus
maximum sales charge of 4.20%, 3.00%, 4.20% and 4.20%
respectively, of offering price) $ 11.10 $ 10.88 $ 11.52 $ 11.27
====================================================================================================================================
CLASS B SHARES (NOTE 1)
Net assets $ 6,847,890 N/A $ 7,134,235 $ 9,080,614
Shares outstanding 644,079 N/A 645,439 840,124
Net asset value, offering and redemption price per share $ 10.63 N/A $ 11.05 $ 10.81
====================================================================================================================================
CLASS C SHARES (NOTE 1)
Net assets $ 7,780,326 $ 1,190,209 $ 7,589,681 $ 2,738,790
Shares outstanding 732,970 112,612 684,917 253,782
Net asset value, offering and redemption price per share $ 10.61 $ 10.57 $ 11.08 $ 10.79
====================================================================================================================================
CLASS R SHARES (NOTE 1)
Net assets $ 46,351,264 $ 200,558 $158,664,538 $305,623,801
Shares outstanding 4,355,921 19,004 14,322,066 28,282,327
Net asset value, offering and redemption price per share $ 10.64 $ 10.55 $ 11.08 $ 10.81
====================================================================================================================================
</TABLE>
N/A - New Jersey Intermediate is not authorized to issue Class B Shares.
----
30
<PAGE>
STATEMENT OF OPERATIONS (UNAUDITED)
Six Months Ended August 31, 1998
<TABLE>
<CAPTION>
NEW JERSEY NEW YORK
NEW JERSEY INTERMEDIATE NEW YORK INSURED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 1) $2,702,316 $281,500 $7,287,674 $10,392,398
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees (note 6) 263,287 29,668 683,878 982,070
12b-1 service fees - Class A (notes 1 and 6) 38,720 9,441 79,969 46,206
12b-1 distribution and service fees - Class B (notes 1 and 6) 23,174 N/A 27,046 34,672
12b-1 distribution and service fees - Class C (notes 1 and 6) 25,523 4,320 24,596 8,963
Shareholders' servicing agent fees and expenses 74,413 2,139 152,132 183,957
Custodian's fees and expenses 26,560 12,643 35,935 41,538
Trustees' fees and expenses (note 6) 1,577 700 3,329 4,703
Professional fees 939 3,854 13,503 31,673
Shareholders' reports - printing and mailing expenses 35,006 6,176 40,361 57,577
Federal and state registration fees 4,274 374 2,496 776
Portfolio insurance expense -- -- -- 4,629
Other expenses 2,147 575 8,113 8,729
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 494,620 69,890 1,074,651 1,405,491
Expense reimbursement (note 6) (161,681) (32,681) (275,997) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses 332,939 37,209 798,654 1,405,491
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 2,369,377 244,291 6,489,020 8,986,907
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investment
transactions (notes 1 and 4) 22,643 (21,621) 1,085,085 1,937,169
Net change in unrealized appreciation or
depreciation of investments 333,683 79,433 646,524 (187,053)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 356,326 57,812 1,731,609 1,750,116
Net increase in net assets from operations $2,725,703 $302,103 $8,220,629 $10,737,023
====================================================================================================================================
</TABLE>
N/A - New Jersey Intermediate is not authorized to issue Class B Shares.
----
31
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
NEW JERSEY NEW JERSEY INTERMEDIATE
------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
8/31/98 2/28/98 8/31/98 2/28/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 2,369,377 $ 4,336,199 $ 244,291 $ 384,509
Net realized gain (loss) from investment transactions
(notes 1 and 4) 22,643 (222,985) (21,621) 3,620
Net change in unrealized appreciation or depreciation
of investments 333,683 2,933,349 79,433 150,409
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 2,725,703 7,046,563 302,103 538,538
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (973,429) (1,643,900) (221,901) (369,157)
Class B (102,506) (60,466) N/A N/A
Class C (151,769) (207,627) (24,005) (8,122)
Class R (1,191,795) (2,422,933) (4,773) (7,005)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (2,419,499) (4,334,926) (250,679) (384,284)
- ------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from sale of shares 17,063,425 20,831,468 526,775 4,229,931
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 1,516,664 2,802,902 139,312 229,957
- ------------------------------------------------------------------------------------------------------------------------------------
18,580,089 23,634,370 666,087 4,459,888
- ------------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (5,578,595) (10,348,638) (593,218) (1,076,806)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund
share transactions 13,001,494 13,285,732 72,869 3,383,082
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 13,307,698 15,997,369 124,293 3,537,336
Net assets at the beginning of period 89,313,791 73,316,422 10,548,254 7,010,918
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $102,621,489 $ 89,313,791 $10,672,547 $10,548,254
- ------------------------------------------------------------------------------------------------------------------------------------
Balance of undistributed (overdistributed) net
investment income at end of period $ (48,272) $ 1,850 $ (6,130) $ 258
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
N/A - New Jersey Intermediate is not authorized to issue Class B Shares.
------
32
<PAGE>
<TABLE>
<CAPTION>
NEW YORK NEW YORK INSURED
-------------------------------- --------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
8/31/98 2/28/98 8/31/98 2/28/98
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 6,489,020 $ 12,613,469 $ 8,986,907 $ 18,457,075
Net realized gain (loss) from investment
transactions (notes 1 and 4) 1,085,085 661,126 1,937,169 619,011
Net change in unrealized appreciation or depreciation
of investments 646,524 9,051,117 (187,053) 8,290,299
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 8,220,629 22,325,712 10,737,023 27,366,385
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Class A (2,036,334) (3,875,640) (1,117,740) (2,006,721)
Class B (122,692) (83,036) (146,730) (123,259)
Class C (148,312) (239,478) (51,392) (99,554)
Class R (4,197,162) (8,443,262) (7,766,460) (16,348,358)
- -------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (6,504,500) (12,641,416) (9,082,322) (18,577,892)
- -------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 2)
Net proceeds from sale of shares 16,869,926 30,298,985 13,816,988 28,258,045
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 4,040,738 7,761,760 6,370,163 13,010,796
- -------------------------------------------------------------------------------------------------------------------------------
20,910,664 38,060,745 20,187,151 41,268,841
- -------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (18,450,674) (27,382,856) (23,161,246) (41,856,071)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund
share transactions 2,459,990 10,677,889 (2,974,095) (587,230)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 4,176,119 20,362,185 (1,319,394) 8,201,263
Net assets at the beginning of period 248,724,351 228,362,166 366,659,978 358,458,715
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $252,900,470 $248,724,351 $365,340,584 $366,659,978
- -------------------------------------------------------------------------------------------------------------------------------
Balance of undistributed (overdistributed) net investment
income at end of period $ (10,202) $ 5,278 $ 18,779 $ 114,194
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
----
33
<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 Flagship New Jersey Municipal Bond Fund ("New
Jersey"), Nuveen Flagship New Jersey Intermediate Municipal Bond Fund ("New
Jersey Intermediate"), Nuveen Flagship New York Municipal Bond Fund ("New York")
and the Nuveen New York Insured Municipal Bond Fund ("New York Insured")
(collectively "the Funds"), among others. The Trust was organized as a
Massachusetts business trust on July 1, 1996.
After the close of business on September 11, 1998, New Jersey Intermediate
reorganized into New Jersey as approved by the shareholders of New Jersey
Intermediate on August 13, 1998.
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 the when-issued and delayed delivery purchase commitments. At
August 31, 1998, New Jersey had an outstanding when-issued purchase commitment
of $2,123,407. There were no such outstanding purchase commitments in any of the
other Funds.
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 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 carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, each Fund intends to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and
-----
34
<PAGE>
designated state income taxes, to retain such tax-exempt status when distributed
to the shareholders of the Funds. Net realized capital gains and market discount
distributions are subject to federal taxation.
Insurance
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 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 except New Jersey Intermediate,
which does not offer Class B Shares. Class A Shares are sold with a sales charge
and incur an annual 12b-1 service fee. Class A Share purchases of $1 million or
more are sold at net asset value without an up-front sales charge but may be
subject to a 1% contingent deferred sales charge ("CDSC") if redeemed within 18
months of purchase. Class B Shares are sold without a sales charge but incur
annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Funds are authorized to invest in such
financial instruments, and may do so in the future, they did not make any such
investments during the six months ended August 31, 1998.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class. Actual results could differ from these estimates.
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.
-----
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
2. FUND SHARES
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
NEW JERSEY NEW JERSEY INTERMEDIATE
- ------------------------------------------------------------------------------------ ---------------------------------------------
SIX MONTHS ENDED 8/31/98 YEAR ENDED 2/28/98 SIX MONTHS ENDED 8/31/98 YEAR ENDED 2/28/98
- ------------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 740,531 $ 7,801,362 1,075,954 $ 11,229,962 30,106 $ 313,165 294,336 $ 3,066,576
Class B 372,140 3,924,921 272,258 2,840,031 N/A N/A N/A N/A
Class C 207,550 2,181,676 312,192 3,236,991 20,406 213,233 92,688 970,924
Class R 299,528 3,155,466 338,039 3,524,484 40 377 18,865 192,431
Shares issued to shareholders due to
reinvestment of distributions:
Class A 51,248 540,639 91,399 950,346 12,017 125,638 21,672 224,545
Class B 4,242 44,736 1,672 17,562 N/A N/A N/A N/A
Class C 9,089 95,743 12,365 128,765 1,226 12,836 494 5,171
Class R 79,137 835,546 164,047 1,706,229 80 838 23 241
- ------------------------------------------------------------------------------------------------------------------------------------
1,763,465 18,580,089 2,267,926 23,634,370 63,875 666,087 428,078 4,459,888
- ------------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (247,842) (2,613,072) (511,590) (5,328,382) (54,600) (570,206) (104,138) (1,076,777)
Class B (13,283) (140,405) (180) (1,846) N/A N/A N/A N/A
Class C (24,842) (261,713) (47,998) (501,403) (2,202) (22,996) -- --
Class R (243,111) (2,563,405) (433,419) (4,517,007) (1) (16) (3) (29)
- ------------------------------------------------------------------------------------------------------------------------------------
(529,078) (5,578,595) (993,187) (10,348,638) (56,803) (593,218) (104,141) (1,076,806)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase 1,234,387 $ 13,001,494 1,274,739 $ 13,285,732 7,072 $ 72,869 323,937 $ 3,383,082
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
N/A - New Jersey Intermediate is not authorized to issue Class B Shares.
<TABLE>
<CAPTION>
NEW YORK NEW YORK INSURED
- ----------------------------------------------------------------------------------- ----------------------------------------------
SIX MONTHS ENDED 8/31/98 YEAR ENDED 2/28/98 SIX MONTHS ENDED 8/31/98 YEAR ENDED 2/28/98
- ------------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 702,973 $ 7,677,483 1,192,340 $ 12,830,429 492,018 $ 5,267,652 1,218,422 $12,894,251
Class B 283,273 3,097,218 400,533 4,306,773 297,167 3,184,097 440,390 4,686,122
Class C 204,532 2,244,924 254,474 2,741,394 61,082 654,195 36,490 382,197
Class R 351,283 3,850,301 963,440 10,420,389 439,817 4,711,044 970,440 10,295,475
Shares issued to shareholders due to
reinvestment of distributions:
Class A 84,204 920,041 152,051 1,627,414 68,911 738,265 124,699 1,317,874
Class B 5,753 62,899 3,386 36,761 7,494 80,335 2,936 31,367
Class C 6,745 73,951 9,491 102,142 3,246 34,734 6,978 73,631
Class R 272,221 2,983,847 558,993 5,995,443 514,793 5,516,829 1,097,334 11,587,924
- ------------------------------------------------------------------------------------------------------------------------------------
1,910,984 20,910,664 3,534,708 38,060,745 1,884,528 20,187,151 3,897,689 41,268,841
- ------------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (701,498) (7,648,033) (1,038,824) (11,085,975) (285,521) (3,060,344) (610,560) (6,423,983)
Class B (36,272) (396,597) (22,971) (250,548) (20,579) (220,448) (9,085) (96,502)
Class C (92,679) (1,013,315) (73,153) (789,011) (25,535) (272,904) (20,702) (219,749)
Class R (856,933) (9,392,729) (1,424,412) (15,257,322) (1,832,099) (19,607,550) (3,324,737) (35,115,837)
- ------------------------------------------------------------------------------------------------------------------------------------
(1,687,382) (18,450,674) (2,559,360) (27,382,856) (2,163,734) (23,161,246) (3,965,084) (41,856,071)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) 223,602 $ 2,459,990 975,348 $ 10,677,889 (279,206) $ (2,974,095) (67,395) $ (587,230)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
----
36
<PAGE>
3. DISTRIBUTIONS TO SHAREHOLDERS
Prior to the merger of New Jersey and New Jersey Intermediate, the Funds'
declared dividend distributions from their tax-exempt net investment income
which were paid on September 10, 1998, to shareholders of record on September 9,
1998. In addition, New Jersey declared dividend distributions from its tax-
exempt net investment income which were paid on September 15, 1998, to
shareholders of record as of September 14, 1998. New York and New York Insured
declared dividend distributions from their tax-exempt net investment income
which were paid on October 1, 1998, to shareholders of record on September 9,
1998, as follows:
<TABLE>
<CAPTION>
NEW JERSEY NEW YORK
NEW JERSEY INTERMEDIATE NEW YORK INSURED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $.0440 $.0086 $.0455 $.0435
Class B .0375 N/A .0385 .0365
Class C .0395 .0069 .0405 .0385
Class R .0460 .0093 .0475 .0450
- --------------------------------------------------------------------------------
</TABLE>
N/A - New Jersey Intermediate is not authorized to issue Class B Shares.
4. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the six months ended August
31, 1998, were as follows:
<TABLE>
<CAPTION>
NEW JERSEY NEW YORK
NEW JERSEY INTERMEDIATE NEW YORK INSURED
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases:
Investments in municipal securities $20,812,644 $1,698,731 $58,439,373 $47,930,811
Temporary municipal investments 13,600,000 1,000,000 8,900,000 12,400,000
Sales:
Investments in municipal securities 5,895,211 1,600,426 53,941,935 48,913,765
Temporary municipal investments 12,700,000 500,000 8,800,000 15,600,000
- -----------------------------------------------------------------------------------------------------
</TABLE>
At August 31, 1998, the identified cost of investments owned for federal income
tax purposes was the same as the cost for financial reporting purposes for each
Fund.
At February 28, 1998, 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 carryforwards
will expire as follows:
<TABLE>
<CAPTION>
NEW JERSEY NEW YORK
NEW JERSEY INTERMEDIATE NEW YORK INSURED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expiration Year:
2002 $ 170,409 $ -- $ -- $ --
2003 424,626 195,063 -- --
2004 116,050 -- 1,234,100 --
2005 -- -- -- 924,758
2006 216,928 -- -- --
- --------------------------------------------------------------------------------
Total $ 928,013 $195,063 $1,234,100 $924,758
- --------------------------------------------------------------------------------
</TABLE>
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of investments
at August 31, 1998, were as follows:
<TABLE>
<CAPTION>
NEW JERSEY NEW YORK
NEW JERSEY INTERMEDIATE NEW YORK INSURED
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
appreciation $5,688,271 $591,837 $22,148,205 $30,983,360
depreciation (170,759) -- (36,233) --
- --------------------------------------------------------------------------------------
Net unrealized appreciation $5,517,512 $591,837 $22,111,972 $30,983,360
- --------------------------------------------------------------------------------------
</TABLE>
----
37
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Trust's investment management agreement with the Adviser, 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 $125,000,000 .5500 of 1%
For the next $125,000,000 .5375 of 1
For the next $250,000,000 .5250 of 1
For the next $500,000,000 .5125 of 1
For the next $1,000,000,000 .5000 of 1
For net assets over $2,000,000,000 .4750 of 1
- --------------------------------------------------------------------------------
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser.
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 New York and .975 of 1% of the average daily
net asset value of New York Insured, excluding any 12b-1 fees applicable to
Class A, B and C Shares. The adviser may also voluntarily agree to reimburse
additional expenses in any of the Funds from time to time, which may be
terminated at any time at its discretion.
During the six months ended August 31, 1998, the Distributor collected sales
charges on purchases of Class A Shares, the majority of which were paid out as
concessions to authorized dealers as follows:
<TABLE>
<CAPTION>
NEW JERSEY NEW YORK
NEW JERSEY INTERMEDIATE NEW YORK INSURED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross sales charges collected $125,557 $6,338 $83,771 $113,201
Paid to authorized dealers 108,949 5,044 69,091 100,501
- --------------------------------------------------------------------------------
</TABLE>
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the six months ended August 31, 1998, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
NEW JERSEY NEW YORK
NEW JERSEY INTERMEDIATE NEW YORK INSURED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commission advances $ 154,737 $ 19,870 $184,832 $ 191,530
- --------------------------------------------------------------------------------
</TABLE>
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees on Class B Shares, and all 12b-1 service and
distribution fees on Class C Shares during the first year following a purchase
are retained by the Distributor. During the six months ended August 31, 1998,
the Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
NEW JERSEY NEW YORK
NEW JERSEY INTERMEDIATE NEW YORK INSURED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12b-1 fees retained $ 36,104 $ 1,522 $ 42,531 $ 33,479
- --------------------------------------------------------------------------------
</TABLE>
The remaining 12b-1 fees charged to the Funds were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
six months ended August 31, 1998, as follows:
<TABLE>
<CAPTION>
NEW JERSEY NEW YORK
NEW JERSEY INTERMEDIATE NEW YORK INSURED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CDSC retained $ 443 $ -- $ 13,370 $ 3,562
- --------------------------------------------------------------------------------
</TABLE>
----
38
<PAGE>
7. COMPOSITION OF NET ASSETS
At August 31, 1998, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
NEW JERSEY NEW YORK
NEW JERSEY INTERMEDIATE NEW YORK INSURED
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $ 98,068,670 $ 10,303,525 $ 230,947,684 $ 333,325,275
Balance of undistributed
(overdistributed) net investment income (48,272) (6,130) (10,202) 18,779
Accumulated net realized gain (loss) from
investment transactions (916,421) (216,685) (148,984) 1,013,170
Net unrealized appreciation of
investments 5,517,512 591,837 22,111,972 30,983,360
- ---------------------------------------------------------------------------------------------------------------------------
Net assets $ 102,621,489 $ 10,672,547 $ 252,900,470 $ 365,340,584
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
----
39
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
CLASS (INCEPTION DATE)
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
----------------------------- -------------------------
NEW JERSEY
NET
BEGINNING REALIZED/ ENDING
NET NET UNREALIZED NET NET
YEAR ENDED ASSET INVESTMENT INVESTMENT INVESTMENT CAPITAL ASSET TOTAL
FEBRUARY 28/29, VALUE INCOME (A) GAIN (LOSS) TOTAL INCOME GAINS TOTAL VALUE RETURN (B)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A (9/94)**
1999 (c) $10.61 $.26 $ .03 $ .29 $(.27) $ -- $(.27) $10.63 2.76%
1998 10.26 .55 .36 .91 (.56) -- (.56) 10.61 9.06
1997 (d) 10.22 .05 .04 .09 (.05) -- (.05) 10.26 .85
1997 (e) 10.40 .48 (.15) .33 (.51) -- (.51) 10.22 3.31
1996 (e) 9.73 .51 .69 1.20 (.53) -- (.53) 10.40 12.63
1995 (f) 10.03 .21 (.21) -- (.21) (.09) (.30) 9.73 .02
CLASS B (2/97)
1999 (c) 10.61 .22 .03 .25 (.23) -- (.23) 10.63 2.38
1998 10.26 .48 .35 .83 (.48) -- (.48) 10.61 8.25
1997 (d) 10.22 .05 .03 .08 (.04) -- (.04) 10.26 .78
CLASS C (9/94)**
1999 (c) 10.59 .23 .03 .26 (.24) -- (.24) 10.61 2.50
1998 10.25 .50 .34 .84 (.50) -- (.50) 10.59 8.40
1997 (d) 10.20 .04 .05 .09 (.04) -- (.04) 10.25 .90
1997 (e) 10.38 .41 (.16) .25 (.43) -- (.43) 10.20 2.53
1996 (e) 9.71 .44 .68 1.12 (.45) -- (.45) 10.38 11.80
1995 (f) 9.77 .16 (.05) .11 (.17) -- (.17) 9.71 1.16
CLASS R (12/91)**
1999 (c) 10.62 .27 .03 .30 (.28) -- (.28) 10.64 2.87
1998 10.27 .58 .35 .93 (.58) -- (.58) 10.62 9.29
1997 (d) 10.23 .05 .04 .09 (.05) -- (.05) 10.27 .86
1997 (e) 10.41 .49 (.14) .35 (.53) -- (.53) 10.23 3.55
1996 (e) 9.74 .55 .68 1.23 (.56) -- (.56) 10.41 12.88
1995 (e) 10.71 .52 (.88) (.36) (.52) (.09) (.61) 9.74 (3.27)
1994 (e) 9.96 .51 .81 1.32 (.51) (.06) (.57) 10.71 13.60
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
----------------------------- -------------------------
NEW JERSEY INTERMEDIATE
NET
BEGINNING REALIZED/ ENDING
NET NET UNREALIZED NET NET
YEAR ENDED ASSET INVESTMENT INVESTMENT INVESTMENT CAPITAL ASSET TOTAL
FEBRUARY 28/29, VALUE INCOME (A) GAIN (LOSS) TOTAL INCOME GAINS TOTAL VALUE RETURN (B)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A (9/92)**
1999 (c) $10.50 $.24 $ .06 $ .30 $(.25) $ -- $(.25) $10.55 2.87%
1998 10.30 .50 .20 .70 (.50) -- (.50) 10.50 7.00
1997 (d) 10.14 .38 .16 .54 (.38) -- (.38) 10.30 5.41
1996 (e) 10.25 .51 (.11) .40 (.51) -- (.51) 10.14 3.89
1995 (e) 10.04 .50 .22 .72 (.51) -- (.51) 10.25 7.42
1994 (e) 10.15 .53 (.10) .43 (.52) (.02)*** (.54) 10.04 4.27
CLASS C (3/97)
1999 (c) 10.52 .21 .06 .27 (.22) -- (.22) 10.57 2.60
1998 (f) 10.28 .45 .24 .69 (.45) -- (.45) 10.52 6.84
CLASS R (3/97)
1999 (c) 10.51 .25 .05 .30 (.26) -- (.26) 10.55 2.89
1998 (f) 10.28 .52 .24 .76 (.53) -- (.53) 10.51 7.55
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
----
40
<PAGE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
RATIO RATIO
OF NET OF NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
EXPENSES INCOME TO EXPENSES INCOME TO
TO AVERAGE AVERAGE TO AVERAGE AVERAGE
NET ASSETS NET ASSETS NET ASSETS NET ASSETS
ENDING NET BEFORE BEFORE AFTER AFTER PORTFOLIO
ASSETS (000) REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
MENT MENT MENT(A) MENT(A) RATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$41,642 1.05%* 4.59%* .71%* 4.93%* 6%
35,782 1.01 4.92 .60 5.33 16
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
6,848 1.80* 3.83* 1.47* 4.16* 6
2,981 1.77 4.16 1.36 4.57 16
74 1.77* 5.71* 1.27* 6.21* --
7,780 1.60* 4.04* 1.26* 4.38* 6
5,733 1.56 4.37 1.16 4.77 16
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
46,351 .85* 4.80* .51* 5.14* 6
44,817 .81 5.12 .40 5.53 16
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
- --------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the one month ended February 28, 1997,
reflects the financial highlights of Nuveen New Jersey.
(a) After waiver of certain management fees or reimbursement of expenses, if
any, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) For the six months ended August 31.
(d) For the one month ended February 28.
(e) For the fiscal year ended January 31.
(f) From commencement of class operations as noted through January 31.
<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
ENDING NET BEFORE BEFORE AFTER AFTER PORTFOLIO
ASSETS (000) REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
MENT MENT MENT(A) MENT(A) RATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 9,282 1.24%* 3.97%* .63%* 4.58%* 16%
9,369 1.54 3.93 .64 4.83 9
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
1,190 1.79* 3.43* 1.19* 4.03* 16
980 2.03* 3.45* 1.19* 4.29* 9
201 1.04* 4.18* .44* 4.78* 16
198 1.33* 4.12* .46* 4.99* 9
- --------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Information included prior to the nine months ended February 28, 1997,
reflects the financial highlights of Flagship New Jersey Intermediate.
*** The amount shown reflects a distribution in excess of capital gains.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) For the six months ended August 31.
(d) For the nine months ended February 28.
(e) For the fiscal year ended May 31.
(f) From commencement of class operations as noted.
----
41
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED) (continued)
Selected data for a share outstanding throughout each period is as follows:
CLASS (INCEPTION DATE)
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------------- ------------------------
NEW YORK
NET
BEGINNING REALIZED/
NET NET UNREALIZED NET
YEAR ENDED ASSET INVESTMENT INVESTMENT INVESTMENT
FEBRUARY 28/29, VALUE INCOME (A) GAIN (LOSS) TOTAL INCOME
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A (9/94)**
1999 (c) $10.97 $.28 $ .07 $ .35 $(.28)
1998 10.53 .57 .44 1.01 (.57)
1997 10.61 .59 (.07) .52 (.56)
1996 10.12 .56 .48 1.04 (.55)
1995 (d) 10.23 .28 (.07) .21 (.27)
CLASS B (2/97)
1999 (c) 10.98 .24 .07 .31 (.24)
1998 10.53 .49 .45 .94 (.49)
1997 (d) 10.48 .05 .04 .09 (.04)
CLASS C (9/94)**
1999 (c) 11.01 .25 .07 .32 (.25)
1998 10.56 .51 .45 .96 (.51)
1997 10.64 .55 (.11) .44 (.48)
1996 10.11 .48 .53 1.01 (.48)
1995 (d) 10.11 .23 .04 .27 (.22)
CLASS R (12/86)**
1999 (c) 11.00 .29 .08 .37 (.29)
1998 10.55 .59 .45 1.04 (.59)
1997 10.64 .59 (.05) .54 (.59)
1996 10.15 .58 .49 1.07 (.58)
1995 10.72 .58 (.53) .05 (.57)
1994 10.61 .58 .16 .74 (.58)
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS (INCEPTION DATE)
LESS DISTRIBUTIONS
-----------------------------------
NEW YORK
ENDING
NET
YEAR ENDED CAPITAL ASSET TOTAL
FEBRUARY 28/29, GAINS TOTAL VALUE RETURN (B)
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (9/94)**
1999 (c) $ -- $(.28) $11.04 3.25%
1998 -- (.57) 10.97 9.84
1997 (.04) (.60) 10.53 5.07
1996 -- (.55) 10.61 10.52
1995 (d) (.05) (.32) 10.12 2.21
CLASS B (2/97)
1999 (c) -- (.24) 11.05 2.85
1998 -- (.49) 10.98 9.10
1997 (d) -- (.04) 10.53 .87
CLASS C (9/94)**
1999 (c) -- (.25) 11.08 2.96
1998 -- (.51) 11.01 9.31
1997 (.04) (.52) 10.56 4.31
1996 -- (.48) 10.64 10.13
1995 (d) (.05) (.27) 10.11 2.80
CLASS R (12/86)**
1999 (c) -- (.29) 11.08 3.43
1998 -- (.59) 11.00 10.11
1997 (.04) (.63) 10.55 5.26
1996 -- (.58) 10.64 10.80
1995 (.05) (.62) 10.15 .75
1994 (.05) (.63) 10.72 7.10
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------------- ------------------------
NEW YORK INSURED
NET
BEGINNING REALIZED/
NET NET UNREALIZED NET
YEAR ENDED ASSET INVESTMENT INVESTMENT INVESTMENT
FEBRUARY 28/29, VALUE INCOME (A) GAIN (LOSS) TOTAL INCOME
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A (9/94) $10.76 $.26 $ .04 $ .30 $(.26)
1999 (c) 10.50 .53 .26 .79 (.53)
1998 10.61 .55 (.14) .41 (.52)
1997 10.15 .52 .49 1.01 (.52)
1996 10.16 .25 .04 .29 (.26)
1995 (d)
CLASS B (2/97) 10.76 .22 .05 .27 (.22)
1999 (c) 10.50 .45 .26 .71 (.45)
1998 10.53 .03 (.02) .01 (.04)
1997 (d)
CLASS C (9/94) 10.74 .23 .05 .28 (.23)
1999 (c) 10.48 .47 .26 .73 (.47)
1998 10.61 .47 (.16) .31 (.44)
1997 10.12 .44 .53 .97 (.45)
1996 10.03 .21 .13 .34 (.21)
1995 (d)
CLASS R (12/86) 10.76 .27 .05 .32 (.27)
1999 (c) 10.49 .55 .27 .82 (.55)
1998 10.61 .55 (.13) .42 (.54)
1997 10.15 .55 .49 1.04 (.55)
1996 10.63 .56 (.44) .12 (.56)
1995 10.62 .55 .03 .58 (.54)
1994
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LESS DISTRIBUTIONS
-----------------------------------
NEW YORK INSURED
ENDING
NET
YEAR ENDED CAPITAL ASSET TOTAL
FEBRUARY 28/29, GAINS TOTAL VALUE RETURN (B)
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A (9/94)**
1999 (c) $ -- $(.26) $10.80 2.85%
1998 -- (.53) 10.76 7.76
1997 -- (.52) 10.50 4.02
1996 (.03)** (.55) 10.61 10.19
1995 (d) (.04) (.30) 10.15 3.01
CLASS B (2/97)
1999 (c) -- (.22) 10.81 2.54
1998 -- (.45) 10.76 6.96
1997 (d) -- (.04) 10.50 .07
CLASS C (9/94)**
1999 (c) -- (.23) 10.79 2.66
1998 -- (.47) 10.74 7.16
1997 -- (.44) 10.48 3.06
1996 (.03)** (.48) 10.61 9.71
1995 (d) (.04) (.25) 10.12 3.53
CLASS R (12/86)**
1999 (c) -- (.27) 10.81 3.03
1998 -- (.55) 10.76 8.04
1997 -- (.54) 10.49 4.15
1996 (.03)** (.58) 10.61 10.51
1995 (.04) (.60) 10.15 1.37
1994 (.03) (.57) 10.63 5.57
- -----------------------------------------------------------------
</TABLE>
----
42
<PAGE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
RATIO RATIO
OF NET OF NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
EXPENSES INCOME TO EXPENSES INCOME TO
TO AVERAGE AVERAGE TO AVERAGE AVERAGE
NET ASSETS NET ASSETS NET ASSETS NET ASSETS
ENDING NET BEFORE BEFORE AFTER AFTER PORTFOLIO
ASSETS (000) REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
MENT MENT MENT(A) MENT(A) RATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 79,512 .95%* 4.85%* .73%* 5.07%* 22%
78,038 .90 5.14 .77 5.27 30
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
7,134 1.70* 4.09* 1.49* 4.30* 22
4,311 1.67 4.32 1.50 4.49 30
124 1.65* 5.86* 1.44* 6.07* 37
7,590 1.50* 4.28* 1.28* 4.50* 22
6,233 1.46 4.57 1.32 4.71 30
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
158,665 .75* 5.04* .53* 5.26* 22
160,142 .70 5.34 .57 5.47 30
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
================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended February 28, 1997,
reflects the financial highlights of Nuveen New York.
(a) After waiver of certain management fees or reimbursement of
expenses, if applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) For the six months ended August 31.
(d) From commencement of class operations as noted.
<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
ENDING NET BEFORE BEFORE AFTER AFTER PORTFOLIO
ASSETS (000) REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
MENT MENT MENT(A) MENT(A) RATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 47,897 .92%* 4.77%* .92%* 4.77%* 13%
44,721 .88 4.98 .88 4.98 17
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
9,081 1.67* 4.02* 1.67* 4.02* 13
5,982 1.65 4.24 1.65 4.24 17
1,279 1.64* 5.17* 1.64* 5.17* 29
2,739 1.47* 4.22* 1.47* 4.22* 13
2,310 1.43 4.43 1.43 4.43 17
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
305,624 .72* 4.97* .72* 4.97* 13
313,647 .68 5.18 .68 5.18 17
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
================================================================================
</TABLE>
* Annualized.
** The amounts shown include distributions in excess of capital gains of
$.0024 per share.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) For the six months ended August 31.
(d) From commencement of class operations as noted.
-----
43
<PAGE>
NUVEEN FAMILY OF MUTUAL FUNDS
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goals.
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Can Make You a Successful Investor
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
MUTUAL FUNDS
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier AdvisersSM including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
PRIVATE ASSET MANAGEMENT
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
DEFINED PORTFOLIOS
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
EXCHANGE-TRADED FUNDS
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MUNIPREFERRED(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
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FUND INFORMATION
BOARD OF TRUSTEES TRANSFER AGENT AND SHAREHOLDER SERVICES
Robert P. Bremner The Chase Manhattan Bank
Lawrence H. Brown 4 New York Plaza
Anthony T. Dean New York, NY 10004-2413
Anne E. Impellizzeri (800) 257-8787
Peter R. Sawers
William J. Schneider LEGAL COUNSEL
Timothy R. Schwertfeger
Judith M. Stockdale Morgan, Lewis &
Bockius LLP
Washington, D.C.
FUND MANAGER INDEPENDENT PUBLIC ACCOUNTANTS
Nuveen Advisory Corp. Arthur Andersen LLP
333 West Wacker Drive Chicago, IL
Chicago, IL 60606
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SERVING INVESTORS FOR GENERATIONS
[Photo of John Nuveen, Sr. appears here]
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time. We emphasize quality securities carefully chosen through
in-depth research, and we follow those securities closely over time to ensure
that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
1898
NUVEEN 1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime.(TM)
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606- 1286
www.nuveen.com
