<PAGE>
August 31, 1999 Semiannual Report
NUVEEN
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Municipal Bond Funds
Dependable, tax-free income to help you keep more of what you earn.
[PHOTO APPEARS HERE]
Connecticut
Massachusetts
Massachusetts Insured
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
Contents
1 Dear Shareholder
3 From the Portfolio Manager's Perspective
6 Nuveen Flagship Connecticut Municipal Bond
Fund Spotlight
7 From the Portfolio Manager's Perspective
10 Nuveen Massachusetts Municipal Bond Fund Spotlight
11 Nuveen Massachusetts Insured Municipal
Bond Fund Spotlight
12 Portfolio of Investments
26 Statement of Net Assets
27 Statement of Operations
28 Statement of Changes in Net Assets
29 Notes to Financial Statements
33 Financial Highlights
36 Building a Better Portfolio
37 Fund Information
<PAGE>
DEAR
Shareholder
At this writing, we're just months away from the much-talked-about millennium.
Besides trying to decide where we want to be when the clock strikes midnight,
this whole event puts the concept of time in front of us all. We think: "Where
did the time go?"
We think about how old, 25 years ago, we thought we would be when the calendar
turned January 1, 2000. (And we realize, now, it is really not that old at all.)
We think about all the things we thought we would have accomplished before 1999
became 2000.
Most likely, one of your millennium goals was financial. Whether it was to fully
fund your retirement accounts or set up trusts for your grandchildren, the fact
you're working with a financial adviser and reading this report are positive
signs that you're well on your way to achieving your goal.
I'm pleased to report we're meeting our goals, too. In addition to the goals we
have established for each mutual fund we manage, we have had to set goals in
preparation for the millennium. Briefly, the year 2000, or Y2K, problem stems
from concerns that computers and other date-sensitive systems could malfunction
or stop before, on, or after January 1, 2000. Many older systems use a two-digit
number to represent a year. To a computer, "00" may mean the year 1900 instead
of 2000. If this were to happen, some computers might shut down or not work
correctly.
All efforts to safeguard critical systems are right on schedule at Nuveen.
It's a goal we set more than 10 years ago. Nuveen's trading, fund management and
pricing -- systems that affect you and your investments -- have been updated or
replaced to be able to deal accurately with Y2K.
We continue to work closely with our service providers, transfer agent,
custodian and trustee to monitor the readiness of their systems, as well as
address any remaining internal systems issues. We expect January 3, 2000, the
first business day of the year, to be "business as usual."
The Securities and Exchange Commission (SEC), which oversees the securities
industry, is also taking significant steps to ensure that the financial industry
makes a smooth transition. First, the SEC is requiring all public companies,
investment advisers, investment companies and municipal securities issuers to
disclose their ability to comply with the Y2K issue.
In addition, the SEC mandated that tests be conducted on various financial
systems to test the ability of exchanges and broker/dealer firms to handle
transactions effectively. We participated successfully in those tests.
While we cannot anticipate all possibilities, our systems are in place, and
we look forward to helping you achieve your financial goals in the new
millennium.
I want to briefly report on the economic environment in which your Nuveen
investment performed. Read on, as we've conducted an in-depth interview with a
representative from the portfolio management team for your fund, describing how
that team of investment and research professionals directed the portfolio during
the past 12 months, September 1, 1998, through August 31, 1999.
[PHOTO OF TIMOTHY R.
SCHWERTFEGER]
Timothy R. Schwertfeger
Chairman of the Board
"All efforts to
safeguard critical
systems are right
on schedule
at Nuveen."
SEMIANNUAL REPORT page 1
<PAGE>
"Your financial adviser can serve as a valuable resource in helping you
determine if adjustments are needed in your current asset allocation plan."
Over the past 12 months, the U.S. economy has continued to be characterized
by robust growth, generally low interest rates and unemployment levels that
remain among the lowest in three decades.
Concerns, however, about the continued pace of the economy's expansion have
tested the new paradigm that holds that improvements in productivity enable us
to have both economic growth and low inflation at the same time. With investors
and the various markets watching -- and reacting to -- every announcement
concerning economic statistics, volatility has increased, especially in the
equity markets.
We have entered a different economic environment from that of 12 months ago.
This shift has occurred in response to two factors:
. the Asian financial crisis of 1998 did not produce the slowdown that was
widely expected to keep economic growth from becoming overly robust;
. evidence of accelerating prices, most obvious in the sudden spike in the
April 1999 Consumer Price Index, contributed to the reemergence of the
specter of inflation, accompanied by predictions of higher interest rates.
In an effort to pre-empt this inflation threat, the Federal Reserve has twice
moved to raise the federal funds rate by a quarter-point -- to 5.25% -- since
the end of June. And in its October meeting, the group adopted a bias to
tighten, although it took no action at that time. The upward adjustments to this
rate, which represents the amount banks charge one another on overnight loans,
mark the first increases since March 1997 and stand in sharp contrast to the
three reductions made last fall.
At the end of August 1999, the ratio between long-term municipal yields and
30-year Treasury yields stood at 93.1%, compared with the historical average of
89.6% over the period 1979-1999. For investors, this meant that quality long-
term municipal bonds offered yields comparable to those of long Treasury bonds--
even before the tax advantages of municipals were taken into account. On an
after-tax basis, municipal bonds continued to present an exceptionally
attractive investment option relative to Treasuries.
Keeping the Balance. The increased volatility in the markets highlights the
importance of maintaining balance in your investment portfolio. With a properly
balanced portfolio of equities, bonds and cash, your assets are better
positioned to weather the markets' ups and downs. A balanced portfolio can also
help you increase your opportunities for capital growth while reducing risk.
Your financial adviser can serve as a valuable resource in helping you determine
if adjustments are needed in your current asset allocation plan.
For more information on any Nuveen investment, contact your financial adviser
for a prospectus, call Nuveen at (800) 621-7227, or download one from the
internet at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. As we look ahead to a new millennium, we are committed to maintaining
the internet that reputation and finding the best ways to serve your evolving
investment needs. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
- ---------------------------
Timothy R. Schwertfeger
Chairman of the Board
October 18, 1999
SEMIANNUAL REPORT page 2
<PAGE>
NUVEEN FLAGSHIP CONNECTICUT MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
Nuveen Flagship Connecticut Municipal Bond Fund features portfolio management by
Nuveen Investment Advisory Services (NIAS), a team of portfolio managers and
research analysts committed to a disciplined, research-oriented investment
strategy. To help you understand the fund's performance for the one-year period
ended August 31, 1999, James Lumberg, director of income funds at Nuveen, spoke
with Portfolio Manager Paul Brennan of NIAS.
JIM We've been enjoying a healthy stock market for quite some time. How does
the success and growth of the firms that make Wall Street run, that is, the
investment firms, the brokerage houses and all their supporting industries,
affect nearby Connecticut's economy?
PAUL A considerable percentage of Connecticut's population commutes to New York
City, which has benefited greatly from the success of the financial services
industry of Wall Street. That's one reason why Connecticut is a very wealthy
state, with per capita income at 142% of the national average. The state's
unemployment rate is just 2.6%, compared to 4.2% nationwide.
Connecticut's economy continues to diversify. Its fastest growing
industries include financial services, gaming and health care, in addition to
manufacturing and defense-related industries.
JIM We've recently seen interest rates begin to inch up, after a few years of
watching interest rates move lower. How has this shift affected the Connecticut
municipal bond market?
PAUL Typically, in a rising interest rate environment, municipalities are
reluctant to issue long-term debt and pay the higher interest costs. In
addition, refunding activity of older debt is lower in a rising interest rate
environment. Consequently, as of August 31, 1999, Connecticut municipal bond
issuance was down 5% year-to-date compared with last year, but the decline was
not nearly as large as that of the national municipal bond market, which was
down 23% for the same period.
JIM Why is Connecticut's relatively quiet bond market an advantage for Nuveen
investors?
PAUL Unlike New York, Connecticut bond issuance is light and sporadic. It's a
very affluent state with healthy tax revenues and relatively few financing
needs. Rather than active trading in the "secondary" market, most of the trading
activity takes place around the time of a new issuance, so there are peaks and
valleys of activity in the market. Nuveen has an advantage in markets where
there is a lower supply of bonds. Because of our larger market presence, we are
in the market frequently, and we have a large network of contacts in the bond
dealer community.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers/SM/ -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. Nuveen has chosen them for their rigorously disciplined investment
approaches and their focus on consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/SM/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS follows a disciplined, research-driven investment approach
to uncover income securities that combine exceptional relative value with above-
average return potential. Drawing upon 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
.. A commitment to exhaustive research
.. An active, value-oriented investment style
.. The unmatched presence and trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors,
and is a key investment strategy for Nuveen Flagship Connecticut Municipal Bond
Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the one-year period ended August 31, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
SEMIANNUAL REPORT page 3
<PAGE>
"The rising interest rate environment provided the opportunity to buy bonds with
higher yields and better call protection, thus strengthening the fund's
dividend-paying capability."
JIM So, how did you manage the fund during the period, given the rising
interest rate environment and the relative low supply level of bonds?
PAUL To reduce interest-rate risk -- that is, the risk that bond prices will
fall in a rising interest rate environment -- we kept the fund's average
"duration" shorter than normal. By doing so, the portfolio was less sensitive to
rising interest rates.
The rising interest rate environment provided the opportunity to buy
bonds with higher yields and better call protection, thus strengthening the
fund's dividend-paying capability.
Since bond prices fall in a rising interest rate environment, certain
bonds purchased earlier in the period fell in value. We sold some of these
bonds, taking a capital loss that, for tax purposes, can be used to offset any
current gains, or be carried forward for up to eight years to offset future
gains.
JIM How did the low supply of bonds in Connecticut affect how you
managed the fund?
PAUL The low level of Connecticut supply typically requires us to purchase
Puerto Rico bonds, which are also exempt from federal, state and local taxes in
Connecticut. Because of the tax advantage, Puerto Rico bonds are extremely
liquid and in demand. True, the Puerto Rico general obligation debt is only
rated A by Moody's Investors Service and BBB by Standard & Poor's Corp., but
many bonds issued in Puerto Rico are insured and thus AAA rated.
Our management team selects extremely liquid and actively traded Puerto
Rico bonds that can be sold when attractive opportunities in the Connecticut
market reappear. We took advantage of this in the third quarter of 1999, as we
saw some pickup in the state's new issue market.
JIM Tell us about some of those opportunities.
PAUL At the high end of the credit spectrum, the fund purchased insured AAA
bonds issued by Fairfield University and Bushnell Memorial Hall, a performing
arts center in Hartford. Founded in 1930, the Bushnell is a performing arts
center that attracts more than 400,000 people annually. This purchase and others
like it improve the diversification of the fund's Connecticut holdings.
We also purchased healthcare bonds that offer higher yields relative to
other sectors because, as an industry, health care has experienced difficulties.
Nuveen's research capabilities really give us an advantage. Our research
analysts are able to search out good bonds that get unfairly lumped in with a
troubled sector.
NUVEEN FLAGSHIP CONNECTICUT MUNICIPAL BOND FUND
Top Five Sectors
Education and Civic Organizations 16%
Tax Obligation (Limited) 15%
Health Care 13%
U.S. Guaranteed 12%
Utilities 11%
As a percentage of total bond holdings as of August 31, 1999. Holdings are
subject to change.
NUVEEN FLAGSHIP CONNECTICUT MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed 52%
AA 23%
A 14%
BBB/NR 11%
As a percentage of total bond holdings as of August 31, 1999. Holdings are
subject to change.
SEMIANNUAL REPORT page 4
<PAGE>
At August 31, 1999, Nuveen Flagship Connecticut Municipal Bond Fund's
credit breakdown was as shown on the previous page.
JIM How did the fund perform for the one-year period ended August 31,
1999?
PAUL While there are long-term positive implications for how we've
positioned the fund in this interest-rising environment, in the shorter-term,
the one-year period, Nuveen Flagship Connecticut Municipal Bond Fund reported a
loss of 0.36% for the period, measured as total return on net asset value.
Comparatively, the Lipper Connecticut Municipal Bond Fund category reported an
average loss of 0.52%.*
For the five- and 10-year periods, the Nuveen fund returned 5.85% and
6.65%, compared to the Lipper category average of 5.56% and 6.63%, respectively.
Nuveen Flagship Connecticut Municipal Bond Fund shareholders in the
34% combined federal and state income tax bracket would have had to earn 2.20%
on a taxable investment to have the one-year total return be equivalent to their
fund's tax-exempt total return.**
As of August 31, 1999, the fund's SEC 30-day yield was 4.45%. For
investors in the combined 34% federal and state income tax bracket, that is
equivalent to a yield of 6.74% on a taxable investment.
JIM What is your outlook for Nuveen Flagship Connecticut Municipal
Bond Fund?
PAUL We will continue to focus on maintaining a stable dividend that is
exempt from federal and state income taxes.
We believe that the market will continue to be characterized by light
supply and a limited breadth of offerings. As I previously mentioned, Nuveen has
an advantage as our size gives us access to what little new supply becomes
available. Using Nuveen research, we will continue to look for attractively
priced bonds offering higher yields.
In a high tax state such as Connecticut, we believe that municipal
bond funds represent a very attractive option for investors searching for
current income exempt from federal and local income taxes. In other words, for
investors wanting to keep more of what they earn.
* The Lipper Peer Group returns represent the average annualized total return
of the 28 funds in the Lipper Connecticut Municipal Debt Category for the
one-year period ended August 31, 1999, and 16 and 4 funds for the five-year
and 10-year periods, respectively. The returns assume reinvestment of
dividends and does not reflect any applicable sales charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
SEMIANNUAL REPORT page 5
<PAGE>
NUVEEN FLAGSHIP CONNECTICUT MUNICIPAL BOND FUND
Fund Spotlight as of August 31, 1999
Terms To Know
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income
investment portfolio. The longer the duration, the greater a portfolio's
sensitivity to changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by
subtracting the fund's liabilities from its assets and dividing by the number of
shares outstanding.
SEC Yield A standardized calculation that the Securities and Exchange
Commission requires mutual funds to use when advertising rates of income return.
This standardized rate ensures that investors are comparing "apples to apples"
when comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security
to pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share
earned over a specific one-month or 30-day period expressed as a percentage of
the maximum offering price of the fund shares at the end of the period.
Quick Facts
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
A Shares B Shares C Shares R Shares
NAV $10.36 $10.34 $10.34 $10.39
- ----------------------------------------------------------------------
Fund Symbol FCTTX N/A FCTCX N/A
- ----------------------------------------------------------------------
CUSIP 67065N886 67065N878 67065N860 67065N852
- ----------------------------------------------------------------------
Inception Date 7/87 2/97 10/93 2/97
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Returns (Annualized)/1/
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
1-Year -0.36% -4.56% -0.99% -0.82% -0.05%
- -----------------------------------------------------------------------
1-Year TER* 2.20% -2.11% 1.19% 1.45% 2.62%
- -----------------------------------------------------------------------
5-Year 5.85% 4.93% 5.14% 5.27% 6.02%
- -----------------------------------------------------------------------
5-Year TER* 8.66% 7.73% 7.61% 7.80% 8.89%
- -----------------------------------------------------------------------
10-Year 6.65% 6.19% 6.15% 6.05% 6.73%
- -----------------------------------------------------------------------
10-Year TER* 9.69% 9.22% 8.95% 8.79% 9.80%
- -----------------------------------------------------------------------
</TABLE>
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, 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.
* Taxable Equivalent Return (Based on a combined federal and state tax rate
of 34%.)
Tax-Free Yields
<TABLE>
<CAPTION>
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
Distribution Rate 5.10% 4.88% 4.35% 4.53% 5.31%
- ---------------------------------------------------------------------------
SEC 30-Day Yield 4.45% 4.26% 3.70% 3.90% 4.65%
- ---------------------------------------------------------------------------
Taxable Equivalent Yield 6.74% 6.45% 5.61% 5.91% 7.05%
</TABLE>
Morningstar Rating/TM/ ++
****
Overall rating among 1,591
municipal bond funds as
of 8/31/99
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
9/98 .0445
10/98 .0445
11/98 .0445
12/98 .0445
1/99 .0440
2/99 .0440
3/99 .0440
4/99 .0440
5/99 .0440
6/99 .0440
7/99 .0440
8/99 .0440
Portfolio Statistics
Total Net Assets $242.3 million
Average Effective
Maturity 18.44 years
Average Duration 7.29
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
++ The Morningstar rating is an overall rating for the municipal bond category
and relates to Class A Shares only; other classes may vary. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of
8/31/99 and are subject to change every month. Past performance is no
guarantee of future results. Ratings are calculated from the fund's three-,
five-, and 10-year average annual returns (if applicable) in excess of 90-
day Treasury bill returns, with appropriate fee adjustments, and a risk
factor that reflects fund performance below 90-day T-bill returns. Class A
shares of the fund received four, four and three stars for the three, five-
and 10-year periods, respectively. The top 10% of the funds in a broad asset
class receive five stars and the next 22.5% receive four stars and the next
35% receive three stars. The fund was rated among 1,591 funds for the
overall and three-year period, 1,210 for the five-year period and 372 for
the 10-year period.
SEMIANNUAL REPORT page 6
<PAGE>
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND
NUVEEN MASSACHUSETTS INSURED MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
Nuveen Massachusetts Municipal Bond Fund and Nuveen Massachusetts Insured
Municipal Bond Fund feature portfolio management by Nuveen Investment Advisory
Services (NIAS), a team of portfolio managers and research analysts committed to
a disciplined, research-oriented investment strategy. To help you understand the
fund's performance for the one-year period ended August 31, 1999, James Lumberg,
director of income funds at Nuveen, spoke with Portfolio Manager Tom Futrell of
NIAS.
We'd like to point out to shareholders of Nuveen Massachusetts Municipal Bond
Fund and Nuveen Massachusetts Insured Municipal Bond Fund that they received an
increase in their monthly tax-free dividend, which became effective with the
August 9th declaration paid September 1st. The dividend increase, which amounts
to about $0.0005 per share, reflects an increase in the fund's net income, a
result of the portfolio manager's ability to identify yield-enhancing
opportunities in the current market environment.
-- James Lumberg, director, income funds
JIM Massachusetts has so many great colleges and universities. In this
increasingly technology-dominated society, how has all this brainpower affected
the state's economy?
TOM You're absolutely right about the state's excellent educational system.
That's definitely a draw to high-tech firms looking for highly educated
employees. As a result, the state has experienced strong growth in technology-
related industries that offer high-paying employment. Massachusetts is uniquely
capable of attracting and maintaining those kinds of jobs, because its
population has a much higher average level of education than most other states.
The state's unemployment rate is only 3.2%.
JIM There certainly seems to be a lot of construction going on in Boston
these days. How is that construction being financed?
TOM There continues to be major capital investments in the state,
particularly in the Boston area. Examples include:
. the multi-billion dollar Central Artery Project that is designed to
alleviate downtown traffic problems;
. the Boston Harbor cleanup project;
. improvements at the international terminal at Logan Airport designed to
expand capacity.
In addition, a $1 billion development is being planned for the Boston Pier
area that would include offices, hotels, and condominiums on the city's
waterfront. All of these activities bring jobs and money into the economy, as
well as new municipal bond supply.
Because of the sheer size of many of these issues, Massachusetts has sought
municipal bond buyers nationally. To attract investors from states that do not
have an income tax, many of these large issues have been offered at lower prices
and higher yields than otherwise would be the case. Because these out-of-state
investors cannot benefit from the state tax deduction, the issuers need to offer
more attractive prices and higher yields.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers/SM/ -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. Nuveen has chosen them for their rigorously disciplined investment
approaches and their focus on consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/SM/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS follows a disciplined, research-driven investment approach
to uncover income securities that combine exceptional relative value with above-
average return potential. Drawing upon 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
.. A commitment to exhaustive research
.. An active, value-oriented investment style
.. The unmatched presence and trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen Massachusetts Municipal Bond Fund and
Nuveen Massachusetts Insured Municipal Bond Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the one-year period ended August 31, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
SEMIANNUAL REPORT page 7
<PAGE>
"We were able to leverage Nuveen's broad network of dealer relationships to
identify bonds that offered incremental yield..."
These bonds are, of course, available to Massachusetts investors such as Nuveen,
which means that Nuveen investors receive higher yields as well as the federal
and state tax exemption.
JIM What other bonds did you find attractive during the period?
TOM In Nuveen Massachusetts Insured Municipal Bond Fund, we were very
selective in our purchases because many of the bonds coming to market during the
period did not offer yields or structural features that we believe improved on
existing holdings.
However, we were able to leverage Nuveen's broad network of dealer
relationships to identify bonds that offered incremental yield, such as insured
Massachusetts Health and Education Authority Bonds for Northeastern University
due in 2022.
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND
Top Five Sectors
U.S. Guaranteed 30%
Health Care 12%
Education and Civic Organizations 11%
Housing (Multifamily) 11%
Long-Term Care 10%
As a percentage of total bond holdings as of August 31, 1999. Holdings are
subject to change.
NUVEEN MASSACHUSETTS INSURED MUNICIPAL BOND FUND
Top Five Sectors
U.S. Guaranteed 21%
Tax Obligation (General) 21%
Education and Civic Organizations 20%
Health Care 14%
Housing (Multifamily) 9%
As a percentage of total bond holdings as of August 31, 1999. Holdings are
subject to change.
For Nuveen Massachusetts Municipal Bond Fund, we purchased Massachusetts
Development Finance Authority Bonds for Curry College. Located in Milton, this
small liberal arts college is experiencing enrollment growth from traditional
students as well as adult learners.
The bonds are insured by American Capital Access, a relatively new
municipal bond insurer, which provides an A rather than the traditional AAA
rating. The bonds offered an attractive yield over 30 years.
At August 31, 1999, Nuveen Massachusetts Municipal Bond Fund's credit
breakdown was as shown to the right.
Because it is insured, Nuveen Massachusetts Insured Municipal Bond Fund
carries a AAA credit rating.
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed 62%
AA 12%
A 12%
BBB/NR 14%
As a percentage of total bond holdings as of August 31, 1999. Holdings are
subject to change.
JIM We've recently seen interest rates begin to inch up after a few years of
watching interest rates move lower. How has this shift affected the
Massachusetts municipal bond market?
TOM Typically, in a rising interest rate environment, municipalities are
reluctant to issue long-term debt and pay the higher interest costs. In
addition, refunding activity of older debt is lower in a rising interest rate
environment. Consequently, as of August 31, 1999, Massachusetts municipal bond
issuance was down 26% year-to-date compared with last year, which mirrored the
national trend. Despite the drop off, Massachusetts remains one of the nation's
highest issuance states.
SEMIANNUAL REPORT page 8
<PAGE>
JIM In this rising interest rate environment, how did you manage the funds?
TOM In both funds, the rising interest rate environment provided the
opportunity to buy bonds with higher yields and better call protection, thus
strengthening each fund's dividend-paying capability.
Since bond prices fall in a rising interest rate environment, certain
bonds purchased earlier in the fiscal period fell in value. We sold some of
these bonds, taking a capital loss that, for tax purposes, can be used to offset
any current gains, or be carried forward for up to eight years to offset future
gains.
JIM How did the funds perform for the one-year period ended August 31, 1999?
TOM While there are long-term positive implications for how we've positioned
the funds in this interest-rising environment, in the shorter-term, the one-year
period, Nuveen Massachusetts Municipal Bond Fund reported a loss on net asset
value of 0.53%. The Lipper Massachusetts Municipal Bond Fund category reported
an average loss of 1.53%.*
Nuveen Massachusetts Municipal Bond Fund shareholders in the 35% combined
federal and state income tax bracket would have had to earn a total return of
2.14% on a taxable investment to equal the fund's one-year tax-free return.**
As of August 31, 1999, the fund's SEC 30-day yield was 4.32%. For
investors in the combined 35% federal and state income tax bracket, that is
equivalent to a yield of 6.65% on a taxable investment.
Nuveen Massachusetts Insured Municipal Bond Fund reported a loss of 0.64%
for the one-year period. Comparatively, the funds in the Lipper Massachusetts
Municipal Bond Fund category returned an average 1.53% loss for the one-year
period.*
Nuveen Massachusetts Insured Municipal Bond Fund shareholders in the 35%
combined federal and state income tax bracket would have had to earn 1.94% on a
taxable investment for it to be equivalent to the fund's one-year tax-free
return.**
As of August 31, 1999, the fund's SEC 30-day yield was 3.99%. For
investors in the combined 35% federal and state income tax bracket, that is
equivalent to a yield of 6.14% on a taxable investment.
JIM What is your outlook and strategy for Nuveen Massachusetts Municipal Bond
Fund and Nuveen Massachusetts Insured Municipal Bond Fund?
TOM We will continue to focus on maintaining a stable dividend that is exempt
from federal and state income taxes.
Working with our Nuveen research team members, we will continue to look
for attractively priced bonds offering higher yields. We continue to search for
bonds in a variety of sectors, including education, health care, housing, and
utilities, as well as general obligation debt where we can improve the fund's
call protection and dividend distribution.
In a high-tax state such as Massachusetts, we believe that municipal
bond funds represent a very attractive option for investors searching for
current income exempt from federal and local income taxes. In other words, for
investors wanting to keep more of what they earn.
* The Lipper Peer Group returns represent the average annualized total return
of the 55 funds in the Lipper Massachusetts Municipal Debt Category for the
one-year period ended August 31, 1999. The returns assume reinvestment of
dividends and do not reflect any applicable sales charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
SEMIANNUAL REPORT page 9
<PAGE>
Terms To Know
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income investment
portfolio. The longer the duration, the greater a portfolio's sensitivity to
changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by subtracting
the fund's liabilities from its assets and dividing by the number of shares
outstanding.
SEC Yield A standardized calculation that the Securities and Exchange Commission
requires mutual funds to use when advertising rates of income return. This
standardized rate ensures that investors are comparing "apples to apples" when
comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security to
pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share earned
over a specific one-month or 30-day period expressed as a percentage of the
maximum offering price of the fund shares at the end of the period.
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND
Fund Spotlight as of August 31, 1999
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $9.60 $9.62 $9.55 $9.58
- ------------------------------------------------------------------
Fund Symbol NMAAX N/A NMACX NBMAX
- ------------------------------------------------------------------
CUSIP 67065N845 67065N837 67065N829 67065N811
- ------------------------------------------------------------------
Inception Date 9/94 3/97 10/94 12/86
- ------------------------------------------------------------------
</TABLE>
Total Returns (Annualized)+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
1-Year -0.53% -4.67% -1.24% -0.97% -0.25%
- --------------------------------------------------------------------------
1-Year TER* 2.14% -2.10% 1.03% 1.42% 2.53%
- --------------------------------------------------------------------------
5-Year 5.48% 4.57% 4.72% 4.78% 5.67%
- --------------------------------------------------------------------------
5-Year TER* 8.34% 7.41% 7.18% 7.33% 8.67%
- --------------------------------------------------------------------------
10-Year 6.54% 6.08% 5.94% 5.79% 6.77%
- --------------------------------------------------------------------------
10-Year TER* 9.60% 9.13% 8.68% 8.48% 9.97%
- --------------------------------------------------------------------------
</TABLE>
+ Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, 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.
* Taxable Equivalent Return (Based on a combined federal and state tax rate
of 35%.)
Tax-Free Yields
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
Distribution Rate 5.13% 4.91% 4.37% 4.59% 5.32%
- ------------------------------------------------------------------------------
SEC 30-Day Yield 4.32% 4.13% 3.57% 3.76% 4.52%
- ------------------------------------------------------------------------------
Taxable Equivalent Yield 6.65% 6.35% 5.49% 5.78% 6.95%
- ------------------------------------------------------------------------------
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)/./
[BAR CHART APPEARS HERE]
9/98 .0420
10/98 .0420
11/98 .0420
12/98 .0420
1/99 .0405
2/99 .0405
3/99 .0405
4/99 .0405
5/99 .0405
6/99 .0405
7/99 .0405
8/99 .0410
Morningstar Rating/TM/ ++
****
Overall rating among 1,591
municipal bond funds as
of 8/31/99
Portfolio Statistics
Total Net Assets $97 million
- ----------------------------------------
Average Effective
Maturity 17.13 years
- ----------------------------------------
Average Duration 6.66
- ----------------------------------------
/./ The fund also paid shareholders net ordinary income distributions in
November of $0.0017 per share.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
++ The Morningstar rating is an overall rating for the municipal bond
category and relates to Class A Shares only; other classes may vary.
Morningstar proprietary ratings reflect historical risk-adjusted
performance as of 8/31/99 and are subject to change every month. Past
performance is no guarantee of future results. Ratings are calculated from
the fund's three-, five-, and 10-year average annual returns (if
applicable) in excess of 90-day Treasury bill returns, with appropriate
fee adjustments, and a risk factor that reflects fund performance below
90-day T-bill returns. The Class A Shares of the fund received four stars
for the three-year period. The top 10% of the funds in a broad asset class
receive five stars and the next 22.5% receive four stars. The fund was
rated among 1,591 funds overall and for the three-year period.
SEMIANNUAL REPORT page 10
<PAGE>
NUVEEN MASSACHUSETTS INSURED MUNICIPAL BOND FUND
Fund Spotlight as of August 31, 1999
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $10.07 $10.07 $10.05 $10.08
- -------------------------------------------------------------------
Fund Symbol NMAIX N/A NMAKX NIMAX
- -------------------------------------------------------------------
CUSIP 67065N795 67065N787 67065N779 67065N761
- -------------------------------------------------------------------
Inception Date 9/94 3/97 9/94 12/86
- -------------------------------------------------------------------
</TABLE>
Total Returns (Annualized)+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
1-Year -0.64% -4.85% -1.47% -1.12% -0.47%
- -------------------------------------------------------------------------
1-Year TER* 1.94% -2.37% 0.70% 1.16% 2.21%
- -------------------------------------------------------------------------
5-Year 5.19% 4.29% 4.44% 4.52% 5.44%
- -------------------------------------------------------------------------
5-Year TER* 7.93% 7.01% 6.78% 6.93% 8.31%
- -------------------------------------------------------------------------
10-Year 6.32% 5.87% 5.74% 5.59% 6.58%
- -------------------------------------------------------------------------
10-Year TER* 9.21% 8.75% 8.31% 8.10% 9.60%
- -------------------------------------------------------------------------
</TABLE>
+ Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, 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.
* Taxable Equivalent Return (Based on a combined federal and state tax rate
of 35%.)
Tax-Free Yields
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
Distribution Rate 5.00% 4.80% 4.23% 4.42% 5.18%
- -----------------------------------------------------------------------------
SEC 30-Day Yield 3.99% 3.82% 3.24% 3.44% 4.19%
- -----------------------------------------------------------------------------
Taxable Equivalent Yield 6.14% 5.88% 4.98% 5.29% 6.45%
- -----------------------------------------------------------------------------
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)/[ ]/
[BAR CHART APPEARS HERE]
9/98 .0425
10/98 .0415
11/98 .0415
12/98 .0415
1/99 .0415
2/99 .0415
3/99 .0415
4/99 .0415
5/99 .0415
6/99 .0415
7/99 .0415
8/99 .0420
Portfolio Statistics
Total Net Assets $69.5 million
- -----------------------------------
Average Effective
Maturity 17.83 years
- -----------------------------------
Average Duration 6.71
- -----------------------------------
[ ] The fund also paid shareholders capital gain distributions in November of
$0.009 per share.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Terms To Know
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income investment
portfolio. The longer the duration, the greater a portfolio's sensitivity to
changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by subtracting
the fund's liabilities from its assets and dividing by the number of shares
outstanding.
SEC Yield A standardized calculation that the Securities and Exchange Commission
requires mutual funds to use when advertising rates of income return. This
standardized rate ensures that investors are comparing "apples to apples" when
comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security to
pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share earned
over a specific one-month or 30-day period expressed as a percentage of the
maximum offering price of the fund shares at the end of the period.
SEMIANNUAL REPORT page 11
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Connecticut Municipal Bond Fund
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Basic Materials -- 0.4%
$ 1,000,000 Town of Sprague, Connecticut, Environmental Improvement Revenue 10/07 at 102 A3 $ 962,310
Bonds, 1997 Series A (International Paper Company Project),
5.700%, 10/01/21 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 16.5%
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 1,020,300
2,000,000 5.750%, 3/01/26 3/06 at 101 AAA 2,016,700
1,000,000 State of Connecticut Health and Educational Facilities Authority, 5/02 at 102 AAA 1,010,460
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 4,357,440
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:
370,000 7.000%, 11/15/05 (Alternative Minimum Tax) 11/01 at 102 A 387,927
3,515,000 7.200%, 11/15/10 (Alternative Minimum Tax) 11/01 at 102 A 3,686,391
Connecticut Higher Education Supplemental Loan Authority, Revenue Bonds
(Family Education Loan Program), 1996 Series A:
1,575,000 6.300%, 11/15/10 (Alternative Minimum Tax) 11/04 at 102 A1 1,667,390
1,195,000 6.350%, 11/15/11 (Alternative Minimum Tax) 11/04 at 102 A1 1,255,001
4,400,000 State of Connecticut Health and Educational Facilities Authority, 7/08 at 101 AA 3,873,276
Revenue Bonds, Sacred Heart University Issue, Series E, 5.000%, 7/01/28
2,875,000 State of Connecticut Health and Educational Facilities Authority, 7/03 at 102 BBB- 2,872,901
Revenue Bonds, Quinnipiac College Issue, Series D, 6.000%, 7/01/23
2,000,000 State of Connecticut Health and Educational Facilities Authority, 7/04 at 101 1/2 AAA 2,036,660
Revenue Bonds, The Loomis Chaffee School Issue, Series B,
6.000%, 7/01/25
2,000,000 State of Connecticut Health and Educational Facilities Authority, No Opt. Call AAA 1,996,060
Revenue Bonds, Trinity College Issue, Series F, 5.500%, 7/01/21
2,500,000 State of Connecticut Health and Educational Facilities Authority, 7/05 at 101 AAA 2,426,450
Revenue Bonds, Kent School Issue, Series B, 5.400%, 7/01/23
1,000,000 State of Connecticut Health and Educational Facilities Authority, 11/05 at 102 AAA 976,310
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 1,623,952
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 1,383,268
Revenue Bonds, The Loomis Chaffee School Issue, Series C,
5.500%, 7/01/26
1,490,000 State of Connecticut Health and Educational Facilities Authority, 7/08 at 101 AA 1,340,970
Revenue Bonds, Canterbury School Issue, Series A, 5.000%, 7/01/18
2,000,000 State of Connecticut Health and Educational Facilities Authority, 7/07 at 102 AAA 1,931,460
Revenue Bonds, Suffield Academy Issue, Series A, 5.400%, 7/01/27
2,755,000 State of Connecticut Health and Educational Facilities Authority, 7/09 at 101 AAA 2,713,069
Revenue Bonds, Fairfield University, Series I, 5.500%, 7/01/29 (WI)
1,250,000 State of Connecticut Health and Educational Facilities Authority, 7/09 at 101 Aaa 1,246,300
Revenue Bonds, The Horace Bushnell Memorial Hall Issue,
Series A, 5.625%, 7/01/29 (WI)
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care - 13.4%
$ 2,600,000 State of Connecticut Health and Educational Facilities Authority, Revenue 7/00 at 102 AAA $ 2,708,212
Bonds, Bristol Hospital Issue, Series A, 7.000%, 7/01/20
1,750,000 State of Connecticut Health and Educational Facilities Authority, Revenue 7/00 at 102 AAA 1,822,835
Bonds, Waterbury Hospital Issue, Series B, 7.000%, 7/01/20
900,000 State of Connecticut Health and Educational Facilities Authority, Revenue 7/01 at 102 AAA 948,015
Bonds, Hospital of Raphael Issue, Series D, 6.625%, 7/01/14
2,000,000 State of Connecticut Health and Educational Facilities Authority, Revenue 7/02 at 102 AAA 2,130,140
Bonds, Bridgeport Hospital Issue, Series A, 6.625%, 7/01/18
4,200,000 State of Connecticut Health and Educational Facilities Authority, Revenue 7/04 at 102 AAA 4,264,176
Bonds, New Britain General Hospital Issue, Series B, 6.000%, 7/01/24
2,755,000 State of Connecticut Health and Educational Facilities Authority, Revenue 7/09 at 101 Aaa 2,574,575
Bonds, Stamford Hospital Issue, Series G, 5.000%, 7/01/18
State of Connecticut Health and Educational Facilities Authority, Revenue
Bonds, Hospital for Special Care Issue, Series B:
1,000,000 5.375%, 7/01/17 7/07 at 102 BBB 905,630
3,500,000 5.500%, 7/01/27 7/07 at 102 BBB 3,109,260
1,645,000 State of Connecticut Health and Educational Facilities Authority, Revenue 7/06 at 102 AAA 1,557,799
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 3,029,730
1,500,000 5.800%, 7/01/26 7/06 at 102 AAA 1,496,820
3,000,000 State of Connecticut Health and Educational Facilities Authority, Revenue 7/06 at 102 AAA 2,965,740
Bonds, Yale-New Haven Hospital Issue, Series H, 5.700%, 7/01/25
320,000 State of Connecticut Health and Educational Facilities Authority, Revenue 1/01 at 102 AAA 336,864
Bonds, Capital Asset Issue, Series C, 7.000%, 1/01/20
2,000,000 State of Connecticut Health and Educational Facilities Authority, Revenue 7/07 at 102 AAA 1,982,000
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 2,506,973
Revenue Bonds, Pfizer Inc. Project, 1994 Series, 7.000%, 7/01/25
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 0.6%
1,500,000 New Britain Senior Citizens Housing Development Corporation, Mortgage 1/02 at 102 AAA 1,567,845
Revenue Refunding Bonds, Series 1992A (FHA - Insured Mortgage Loan -
Nathan Hale Apartments Section 8 Assisted Project), 6.875%, 7/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 9.8%
615,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program 11/02 at 102 AA 643,142
Bonds, 1992 Series C2, 6.700%, 11/15/22 (Alternative Minimum Tax)
1,250,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program 5/03 at 102 AA 1,304,650
Bonds, 1993 Series A, 6.200%, 5/15/14
1,205,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program 5/08 at 101 1/2 AA 1,135,713
Bonds, 1997 Series D, Subseries D2, 5.450%, 11/15/24 (Alternative
Minimum Tax)
2,750,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program 5/04 at 102 AA 2,808,768
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 1,535,910
Bonds, 1995 Series A, Subseries A-1, 6.100%, 5/15/17
7,545,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program 11/07 at 102 AA 7,471,210
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 1,037,910
Bonds, 1995 Series F, Subseries F-1, 6.000%, 5/15/17
</TABLE>
13
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Connecticut Municipal Bond Fund (continued)
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 1,500,000 Connecticut Housing Finance Authority, Housing Mortgage Finance 5/06 at 102 AA $ 1,559,475
Program Bonds, 1996 Series B, Subseries B-1, 6.050%, 5/15/18
4,720,000 Connecticut Housing Finance Authority, Housing Mortgage Finance 11/06 at 102 AA 4,815,816
Program Bonds, 1996 Subseries E-2, 6.150%, 11/15/27
(Alternative Minimum Tax)
1,490,000 Connecticut Housing Finance Authority, Housing Mortgage Finance 11/06 at 102 AA 1,511,933
Program Bonds, 1997 Series F, Subseries F-2, 6.000%, 11/15/27
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 9.7%
1,000,000 State of Connecticut Health and Educational Facilities 8/08 at 102 AAA 911,240
Authority, Revenue Bonds, Hebrew Home and Hospital Issue,
Series B (FHA - Insured Mortgage), 5.200%, 8/01/38
2,000,000 State of Connecticut Health and Educational Facilities 11/04 at 102 AAA 2,273,740
Authority, 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 7,668,080
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 1,619,250
2,610,000 5.800%, 4/01/21 4/07 at 102 BBB 2,448,232
1,875,000 Connecticut Development Authority, First Mortgage Gross Revenue 12/06 at 103 BBB+ 1,720,069
Health Care Project Refunding Bonds, Series 1998A (The Elim Park Baptist
Home, Inc. Project), 5.375%, 12/01/18
Connecticut Development Authority, Revenue Refunding Bonds (Duncaster Inc.
Project), Series 1999A:
2,200,000 5.250%, 8/01/19 2/10 at 102 AA 2,061,774
3,910,000 5.375%, 8/01/24 2/10 at 102 AA 3,689,750
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 269,480
995,000 8.875%, 4/01/16 4/01 at 102 N/R 900,953
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 9.5%
3,000,000 City of Bridgeport, Connecticut, General Obligation Bonds, 1997 3/07 at 101 AAA 2,921,340
Series A, 5.250%, 3/01/17
325,000 Town of Canterbury, Connecticut, General Obligation Bonds, No Opt. Call A3 378,544
7.200%, 5/01/09
2,800,000 State of Connecticut, General Obligation Capital Appreciation No Opt. Call AA 1,472,240
Bonds (College Savings Plan), 1991 Series B, 0.000%, 12/15/11
1,000,000 State of Connecticut, General Obligation Capital Appreciation No Opt. Call AA 612,800
Bonds (College Savings Plan), 1990 Series A, 0.000%, 5/15/09
3,000,000 State of Connecticut, General Obligation Capital Appreciation No Opt. Call AA 1,619,220
Bonds (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 230,148
200,000 7.200%, 8/15/07 No Opt. Call Aa1 232,302
200,000 7.200%, 8/15/08 No Opt. Call Aa1 234,142
Town of Griswold, Connecticut, General Obligation Bonds, Issue of 1989:
200,000 7.500%, 4/01/02 No Opt. Call AAA 215,658
200,000 7.500%, 4/01/03 No Opt. Call AAA 220,580
200,000 7.500%, 4/01/04 No Opt. Call AAA 224,810
150,000 7.500%, 4/01/05 No Opt. Call AAA 171,237
340,000 City of Middletown, Connecticut, General Obligation Bonds, No Opt. Call AA 383,625
6.900%, 4/15/06
1,250,000 City of New Haven, Connecticut, General Obligation Bonds, Series 2/05 at 102 AAA 1,278,450
1995, 5.750%, 2/15/14
City of New London, Connecticut, General Obligation Bonds, Water Department
Revenue Bonds, Series 20:
120,000 7.300%, 12/01/05 No Opt. Call A+ 137,477
100,000 7.300%, 12/01/07 No Opt. Call A+ 117,071
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
Town of Old Saybrook, Connecticut, General Obligation Bonds:
$ 160,000 7.400%, 5/01/08 No Opt. Call A2 $ 188,043
160,000 7.400%, 5/01/09 No Opt. Call A2 188,035
Town of Old Saybrook, Connecticut, General Obligation Bonds:
275,000 6.500%, 2/15/10 No Opt. Call AAA 309,458
270,000 6.500%, 2/15/11 No Opt. Call AAA 304,987
925,000 Town of Oxford, Connecticut, General Obligation Bonds, 7.000%, 2/01/09 2/00 at 102 AAA 956,247
Town of Plainfield, Connecticut, General Obligation Bonds:
225,000 7.000%, 9/01/00 No Opt. Call A3 231,174
100,000 7.000%, 9/01/01 No Opt. Call A3 104,517
100,000 7.100%, 9/01/02 9/01 at 102 A3 106,171
310,000 7.100%, 9/01/03 9/01 at 102 A3 331,049
100,000 7.200%, 9/01/04 9/01 at 102 A3 106,979
335,000 7.250%, 9/01/06 9/01 at 102 A3 358,698
335,000 7.300%, 9/01/08 9/01 at 102 A3 359,013
155,000 7.300%, 9/01/10 9/01 at 102 A3 166,110
3,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1998 7/08 at 101 A 2,694,480
(General Obligation Bonds), 5.000%, 7/01/28
4,190,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1999 7/08 at 101 AAA 3,840,470
(General Obligation Bonds), 5.000%, 7/01/28
City of Torrington, Connecticut, General Obligation Bonds:
700,000 6.400%, 5/15/11 5/02 at 102 AAA 744,772
680,000 6.400%, 5/15/12 5/02 at 102 AAA 721,249
Town of Winchester, Connecticut, General Obligation Bonds:
140,000 6.750%, 4/15/06 No Opt. Call A1 156,456
140,000 6.750%, 4/15/07 No Opt. Call A1 157,769
140,000 6.750%, 4/15/08 No Opt. Call A1 158,922
140,000 6.750%, 4/15/09 No Opt. Call A1 158,523
140,000 6.750%, 4/15/10 No Opt. Call A1 159,743
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 14.8%
2,000,000 State of Connecticut Health and Educational Facilities Authority, 11/04 at 102 AA- 2,119,840
Revenue Bonds, Nursing Home Program Issue, Series 1994 (St. Camillus
Health Center Project), 6.250%, 11/01/18
965,000 State of Connecticut Health and Educational Facilities Authority, 7/08 at 102 AAA 856,804
Revenue Bonds, Child Care Facilities Program, Series A, 5.000%, 7/01/28
1,000,000 State of Connecticut Health and Educational Facilities Authority, 11/04 at 102 AAA 1,036,350
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 5,181,750
Revenue Bonds, Nursing Home Program Issue, Series 1994 (Saint Joseph's
Manor Project), 6.250%, 11/01/16
3,695,000 State of Connecticut Health and Educational Facilities Authority, 11/04 at 102 AAA 3,829,313
Revenue Bonds, Nursing Home Program Issue, Series 1994 (St. Camillus
Health Center Project), 6.250%, 11/01/18
3,000,000 State of Connecticut Health and Educational Facilities Authority, 11/04 at 102 AAA 3,109,050
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 1,672,455
4,200,000 7.500%, 11/01/16 (Alternative Minimum Tax) 11/04 at 102 AAA 4,761,246
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 1,226,467
1,000,000 7.500%, 11/01/16 (Alternative Minimum Tax) 11/04 at 102 AAA 1,133,630
</TABLE>
15
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship Connecticut Municipal Bond Fund (continued)
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 4,115,000 State of Connecticut Health and Educational Facilities 11/06 at 102 AA- $ 4,139,361
Authority, 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 11/06 at 102 AA 4,634,975
Authority, 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, No Opt. Call AA- 1,238,884
Transportation Infrastructure Purposes, 1992 Series B, 6.125%, 9/01/12
725,000 Town of Woodstock, Connecticut, Special Obligation Bonds 3/00 at 103 AAA 757,226
(Woodstock Academy-1990 Issue), General Obligation Bonds, 6.900%, 3/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 12.0%
3,010,000 State of Connecticut Health and Educational Facilities 7/03 at 100 AAA 3,346,759
Authority, 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 No Opt. Call AAA 1,534,156
Authority, Revenue Bonds, Lutheran General Health Care System
(Parkside Lodges Projects), 7.375%, 7/01/19
1,000,000 State of Connecticut Health and Educational Facilities 7/00 at 102 N/R*** 1,048,910
Authority, 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 7/00 at 102 Aaa 199,407
Authority, Revenue Bonds, St. Mary's 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 7/00 at 102 AAA 5,759,985
Authority, 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 7/02 at 102 AAA 3,753,225
Authority, 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 7/02 at 102 N/R*** 1,167,144
Authority, Revenue Bonds, The William W. Backus Hospital Issue,
Series C, 6.000%, 7/01/12 (Pre-refunded to 7/01/02)
4,910,000 State of Connecticut Health and Educational Facilities 7/03 at 102 BBB-*** 5,262,587
Authority, Revenue Bonds, Quinnipiac College Issue, Series D,
6.000%, 7/01/23 (Pre-refunded to 7/01/03)
180,000 State of Connecticut, Health and Educational Facilities 1/01 at 102 AAA 190,260
Authority, 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, 8/01 at 102 AAA 1,734,588
Issue of 1991, 7.400%, 8/15/11 (Pre-refunded to 8/15/01)
City of New Haven, Connecticut, General Obligation Bonds, Issue of 1992:
600,000 9.250%, 3/01/02 No Opt. Call AAA 639,828
1,000,000 7.400%, 3/01/12 (Pre-refunded to 3/01/02) 3/02 at 102 AAA 1,093,670
1,130,000 Town of Stratford, Connecticut, General Obligation Bonds, 3/01 at 102 N/R*** 1,202,467
7.300%, 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*** 568,924
785,000 7.300%, 3/01/05 (Pre-refunded to 3/01/01) 3/01 at 102 N/R*** 835,342
780,000 7.400%, 3/01/06 (Pre-refunded to 3/01/01) 3/01 at 102 N/R*** 831,145
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 11.0%
8,000,000 Bristol Resource Recovery Facility Operating Committee, Solid 7/05 at 102 A2 8,422,240
Waste 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 1/00 at 101 1/2 A 173,769
3,085,000 7.625%, 1/01/09 1/00 at 101 1/2 A 3,146,700
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 AA 421,580
500,000 6.800%, 11/15/04 (Alternative Minimum Tax) 11/01 at 102 AA 527,495
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities (continued)
$ 5,250,000 Connecticut Resources Recovery Authority, Corporate Credit 11/02 at 102 BB- $ 5,141,220
Bonds/Tax Exempt Interest (American REF-FUEL Company of Southeastern
Connecticut Project), 1992 Series A, 6.450%, 11/15/22
(Alternative Minimum Tax)
9,665,000 Eastern Connecticut Resource Recovery Authority, Solid 1/03 at 102 BBB 8,835,066
Waste Revenue Bonds (Wheelbrator Lisbon Project), Series 1993A,
5.500%, 1/01/20 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 2.4%
770,000 Connecticut Development Authority, Water Facilities 6/00 at 102 AA- 798,721
Refunding Revenue Bonds (Bridgeport Hydraulic Company Project),
1990 Series, 7.250%, 6/01/20
2,000,000 Connecticut Development Authority, Water Facilities Revenue 12/03 at 102 AAA 2,172,540
Refunding Bonds (The Connecticut Water Company Project), 1993
Series, 6.650%, 12/15/20
1,750,000 Connecticut Development Authority, Water Facilities Revenue 4/07 at 102 AA- 1,816,742
Bonds (Bridgeport Hydraulic Company Project), 1995 Series, 6.150%,
4/01/35 (Alternative Minimum Tax)
1,000,000 State of Connecticut, Clean Water Fund Revenue Bonds, 1991 1/01 at 102 AAA 1,055,190
Series, 7.000%, 1/01/11
- -----------------------------------------------------------------------------------------------------------------------------------
$241,560,000 Total Investments - (cost $234,471,679) - 100.1% 242,407,824
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.1)% (153,801)
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $242,254,023
====================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
17
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Massachusetts Municipal Bond Fund
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Education and Civic Organizations - 10.5%
Massachusetts Educational Loan Authority, Education Loan Revenue Bonds,
Issue C, Series 1985A:
$ 105,000 7.875%, 6/01/03 12/99 at 100 1/2 AAA $ 106,570
720,000 7.875%, 6/01/03 12/99 at 101 AAA 734,328
1,000,000 Massachusetts Development Finance Agency, Revenue Bonds, YMCA 11/08 at 102 BBB+ 899,320
of Greater Boston Issue, Series 1998, 5.450%, 11/01/28
2,000,000 Massachusetts Development Finance Agency, Revenue Bonds, 3/09 at 101 A 1,876,880
Curry College Issue, 1999 Series A, 5.500%, 3/01/29
1,000,000 Massachusetts Health and Educational Facilities Authority, 7/02 at 102 AAA 1,051,660
Revenue Bonds, Suffolk University Issue, Series B, 6.350%, 7/01/22
30,000 Massachusetts Health and Educational Facilities Authority, 7/01 at 102 AAA 31,685
Revenue Bonds, Boston College Issue, Series J, 6.625%, 7/01/21
2,000,000 Massachusetts Health and Educational Facilities Authority, 10/08 at 101 AAA 1,688,020
Revenue Bonds, Brandeis University Issue, Series I, 4.750%, 10/01/28
1,000,000 Massachusetts Industrial Finance Agency, Revenue Bonds 3/06 at 102 AAA 980,140
(College of the Holy Cross-1996 Issue), 5.500%, 3/01/20
500,000 Massachusetts Industrial Finance Agency, Revenue Bonds (Whitehead 7/03 at 102 Aa1 448,385
Institute for Biomedical Research), 1993 Issue, 5.125%, 7/01/26
2,290,000 Massachusetts Industrial Finance Agency, Revenue and Refunding Bonds, 7/05 at 102 AAA 2,394,012
1995 Series A (Lesley College Project), 6.300%, 7/01/25
- ----------------------------------------------------------------------------------------------------------------------- -----------
Health Care - 11.9%
495,000 Massachusetts Health and Educational Facilities Authority, Revenue 1/00 at 100 A 496,564
Bonds, Brockton Hospital Issue, Series B, 8.000%, 7/01/07
500,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/04 at 100 N/R 516,875
Series 1989 (Cardinal Cushing General Hospital), 8.875%, 7/01/18
700,000 Massachusetts Health and Educational Facilities Authority, 7/04 at 102 AA+ 723,394
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 799,838
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 999,910
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 2,506,675
2,000,000 6.000%, 2/15/34 2/04 at 102 Aa 2,002,260
2,000,000 Massachusetts Health and Educational Facilities Authority, 7/08 at 102 AAA 1,780,840
Revenue Bonds, Caregroup Issue, Series A, 5.000%, 7/01/25
1,500,000 Massachusetts Health and Educational Facilities Authority, 7/08 at 101 AAA 1,277,505
Revenue Bonds, Harvard Pilgrim Health Care Issue,
Series A, 4.750%, 7/01/22
385,000 Massachusetts Industrial Finance Agency, Revenue Bonds 12/99 at 102 A 393,859
(Sturdy Memorial Hospital), Series 1989, 7.900%, 6/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 10.5%
940,000 Boston-Mount Pleasant Housing Development Corporation, 8/02 at 102 AAA 985,957
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+ 3,860,839
Bonds, 6.375%, 4/01/21
1,000,000 Massachusetts Housing Finance Agency, Residential Development 11/02 at 102 AAA 1,050,230
Bonds, 6.250%, 11/15/14
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 1,000,000 Massachusetts Housing Finance Agency, Residential Development 5/02 at 102 AAA $ 1,065,870
Bonds, 1992 Series D, 6.875%, 11/15/21
1,000,000 Massachusetts Housing Finance Agency, Rental Housing Mortgage 7/07 at 101 AAA 957,640
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 982,740
Loan), Hudner Associates Projects, 5.650%, 1/01/23
1,250,000 Somerville Housing Authority (Massachusetts), Mortgage Revenue 5/00 at 102 AAA 1,289,713
Bonds, Series 1990 (GNMA Collateralized - Clarendon Hill Towers
Project), 7.950%, 11/20/30
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 0.5%
475,000 Massachusetts Housing Finance Agency, Single Family Housing 6/01 at 102 Aa3 492,960
Revenue Bonds, Series 18, 7.350%, 12/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 9.8%
885,000 Massachusetts Health and Educational Facilities Authority, 7/03 at 102 AAA 896,762
Revenue Bonds, Cable Housing and Health Services Issue,
Series A, 5.625%, 7/01/13
3,285,000 Massachusetts Health and Educational Facilities Authority, 2/07 at 102 Aa2 3,358,945
Revenue Refunding Bonds, Youville Hospital
Issue (FHA-Insured Project), Series A, 6.250%, 2/15/41
1,970,000 Massachusetts Industrial Finance Agency, Assisted Living Facility 12/07 at 102 AAA 1,893,131
Revenue Bonds (The Arbors at Amherst Project), Series 1997
(GNMA Collateralized), 5.950%, 6/20/39 (Alternative Minimum Tax)
400,000 Massachusetts Industrial Finance Agency, Assisted Living Facility 8/08 at 105 AAA 391,784
Revenue Bonds (TNG Draper Place Project), Series 1998 (GNMA
Collateralized), 5.400%, 8/20/12 (Alternative Minimum Tax)
2,040,000 Massachusetts Industrial Finance Agency, Assisted Living Facility 6/09 at 102 AAA 1,874,944
Revenue Bonds (The Arbors at Taunton Project), Series 1999 (GNMA
Collateralized), 5.500%, 6/20/40 (Alternative Minimum Tax)
1,090,000 Massachusetts Industrial Financial Agency, Revenue Bonds, Heights 2/06 at 102 AAA 1,115,942
Crossing Limited Partnership Issue (FHA-Insured Project), Series 1995,
6.000%, 2/01/15 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 9.5%
Town of Barnstable, Massachusetts, General Obligation Bonds:
880,000 5.750%, 9/15/13 9/04 at 102 AA 893,957
490,000 5.750%, 9/15/14 9/04 at 102 AA 496,061
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 446,313
415,000 6.250%, 6/15/10 6/02 at 102 A1 441,021
260,000 City of Holyoke, Massachusetts, General Obligation Bonds, 1991 No Opt. Call BBB+ 270,512
Series A, 8.000%, 6/01/01
500,000 City of Holyoke, Massachusetts, General Obligation Bonds, School 8/01 at 102 Baa2 541,190
Project Loan Act of 1948, 7.650%, 8/01/09
750,000 City of Holyoke, Massachusetts, General Obligation Refunding 11/02 at 102 BBB+ 805,733
Bonds, 7.000%, 11/01/08
545,000 City of Lowell, Massachusetts, General Obligation Qualified 2/01 at 103 A3 589,210
Bonds, 8.300%, 2/15/05
500,000 Town of Palmer, Massachusetts, General Obligation Refunding 10/03 at 102 AAA 511,765
Bonds, 5.500%, 10/01/10
425,000 South Essex Sewerage District, Massachusetts, General Obligation No Opt. Call Baa1 450,564
Bonds, 9.000%, 12/01/00
City of Taunton, Massachusetts, General Obligation
(Electric Loan Act of 1969):
1,465,000 8.000%, 2/01/02 No Opt. Call A3 1,581,262
1,005,000 8.000%, 2/01/03 No Opt. Call A3 1,112,012
1,000,000 City of Worcester, Massachusetts, General Obligation Bonds, 8/02 at 102 BBB+ 1,050,930
6.000%, 8/01/04
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 1.0%
900,000 Massachusetts Industrial Finance Agency, Library Revenue Bonds 1/05 at 102 AAA 1,012,257
(Malden Public Library Project), Series 1994, 7.250%, 1/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 4.7%
1,500,000 Massachusetts Industrial Finance Agency, Parking Facility Revenue 4/03 at 102 AAA 1,449,225
Bonds (Avon Associates LLC Project), Series 1998A, 5.375%, 4/01/20
</TABLE>
19
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Massachusetts Municipal Bond Fund (continued)
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation (continued)
Massachusetts Turnpike Authority, Metropolitan Highway System Revenue
Bonds, 1997 Series C
(Senior):
$10,000,000 0.000%, 1/01/29 No Opt. Call AAA $1,859,500
1,425,000 5.000%, 1/01/37 1/07 at 102 AAA 1,242,857
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 29.0%
City of Attleboro, Massachusetts, General Obligation Bonds:
450,000 6.250%, 1/15/10 (Pre-refunded to 1/15/03) 1/03 at 102 A3*** 484,938
450,000 6.250%, 1/15/11 (Pre-refunded to 1/15/03) 1/03 at 102 A3*** 484,938
1,000,000 City of Boston, Massachusetts, General Obligation Bonds, 1991 7/01 at 102 AAA 1,065,300
Series A, 6.750%, 7/01/11 (Pre-refunded to 7/01/01)
1,500,000 City of Boston, Massachusetts, Revenue Bonds, Boston City 8/00 at 102 Aaa 1,580,325
Hospital (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 11/01 at 102 AAA 539,160
Revenue Bonds, 1991 Series A (Senior Series), 7.000%, 11/01/18
(Pre-refunded to 11/01/01)
400,000 City of Haverhill, Massachusetts, General Obligation Bonds, 10/01 at 102 BBB*** 434,300
Municipal 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, 6/02 at 103 AAA 282,118
8.150%, 6/15/06 (Pre-refunded to 6/15/02)
445,000 City of Lowell, Massachusetts, General Obligation Qualified 1/01 at 102 Aaa 478,758
Bonds, 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 1,117,550
1/15/11 (Pre-refunded to 1/15/02)
1,000,000 Massachusetts Bay Transportation Authority, General Transportation 3/01 at 102 Aaa 1,061,170
System Bonds, 1991 Series A, 7.000%, 3/01/11 (Pre-refunded to 3/01/01)
250,000 Massachusetts Bay Transportation Authority, Certificates of Participation, 12/06 at 100 A*** 296,985
Series 1988, 7.800%, 1/15/14 (Pre-refunded to 12/22/06)
165,000 Massachusetts State General Obligation Bonds, 7.250%, 3/01/09 3/00 at 102 AAA 171,192
(Pre-refunded to 3/01/00)
500,000 Massachusetts Health and Educational Facilities Authority, Revenue 9/02 at 102 AAA 541,520
Refunding Bonds, Worcester Polytechnic Institute Issue, Series E, 6.625%,
9/01/17 (Pre-refunded to 9/01/02)
1,240,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/00 at 102 AAA 1,307,158
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 2,866,260
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*** 1,238,670
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 262,060
Bonds, University Hospital Issue, Series C, 7.250%, 7/01/10
(Pre-refunded to 7/01/00)
2,750,000 Massachusetts Health and Educational Facilities Authority, Revenue 4/02 at 102 AAA 2,974,400
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 1,084,100
Bonds, MetroWest Health, Inc. Issue, Series C, 6.500%, 11/15/18
(Pre-refunded to 11/15/02)
970,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/01 at 102 AAA 1,029,975
Bonds, Boston College Issue, Series J, 6.625%, 7/01/21 (Pre-refunded
to 7/01/01)
635,000 Massachusetts Port Authority, Revenue Bonds, Series 1982, 13.000%, No Opt. Call AAA 1,006,793
7/01/13
500,000 Massachusetts Industrial Finance Agency, Revenue Bonds (Springfield 10/99 at 103 Aaa 516,670
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 the 1/02 at 102 AA-*** 266,695
Holy Cross-1992 Issue), 6.450%, 1/01/12 (Pre-refunded to 1/01/02)
1,145,000 Massachusetts Industrial Finance Agency, Revenue Bonds (Merrimack College 7/02 at 102 AAA 1,253,695
Issue), Series 1992, 7.125%, 7/01/12 (Pre-refunded to 7/01/02)
500,000 Town of Monson, Massachusetts, General Obligation School Bonds, Project 10/00 at 102 AAA 531,075
Loan Act of 1948, 7.700%, 10/15/10 (Pre-refunded to 10/15/00)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed (continued)
$ 500,000 Town of Palmer, Massachusetts, General Obligation Bonds, School 10/00 at 102 AAA $ 530,440
Project Loan 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 8/01 at 102 AAA 1,210,185
Bonds, 6.950%, 8/01/09 (Pre-refunded to 8/01/01)
2,250,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/01 at 102 Aaa 2,411,730
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*** 1,096,280
Bonds Project Loan Act of 1948 Bonds, Series B, 7.100%,
9/01/11 (Pre-refunded to 9/01/02)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 9.2%
2,700,000 Massachusetts Development Finance Agency, Resource Recovery 12/08 at 102 BBB 2,493,639
Revenue Bonds (Ogden Haverhill Project), Series 1998B,
5.500%, 12/01/19 (Alternative Minimum Tax)
1,245,000 Massachusetts Industrial Finance Agency, Resource Recovery 7/01 at 103 N/R 1,353,112
Revenue Bonds (SEMASS Project), Series 1991A, 9.000%, 7/01/15
5,420,000 Massachusetts Industrial Finance Agency, Resource Recovery 12/08 at 102 BBB 5,059,082
Revenue Refunding Bonds (Ogden Haverhill Project),
Series 1998A, 5.600%, 12/01/19 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
$100,565,000 Total Investments - (cost $92,026,481) - 96.6% 93,710,819
============-----------------------------------------------------------------------------------------------------------------------
Short-Term Investments - 2.1%
$ 2,000,000 Massachusetts Health and Educational Facilities Authority, SP-1 2,000,000
============ Capital Asset Program, Variable Rate Demand Bonds, 2.800%, 1/01/35+
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 1,274,247
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $96,985,066
====================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
+ Security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified market index.
See accompanying notes to financial statements.
21
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Massachusetts Insured Municipal Bond Fund
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 20.1%
$ 1,600,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 10/02 at 102 AAA $ 1,713,840
Northeastern University Issue, Series E, 6.550%, 10/01/22
1,450,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 10/02 at 100 AAA 1,483,205
Boston University Issue, Series M, 6.000%, 10/01/22
2,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/02 at 102 AAA 2,099,600
Bentley College Issue, Series I, 6.125%, 7/01/17
30,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/01 at 102 AAA 31,685
Boston College Issue, Series J, 6.625%, 7/01/21
3,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 10/08 at 101 AAA 2,532,030
Brandeis University Issue, Series I, 4.750%, 10/01/28
2,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, No Opt. Call AAA 1,777,320
Northeastern University Issue, Series I, 5.000%, 10/01/29
1,000,000 Massachusetts Industrial Finance Agency, Revenue Bonds, College of the 3/06 at 102 AAA 980,140
Holy Cross, 1996 Issue, 5.500%, 3/01/20
420,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Babson College 10/05 at 102 AAA 440,534
Issue, Series 1995A, 5.800%, 10/01/10
1,000,000 Massachusetts Industrial Finance Agency, Revenue Refunding Bonds, Mount 7/01 at 102 AAA 1,050,420
Holyoke College Issue, Series 1992A, 6.300%, 7/01/13
2,000,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Western New 7/08 at 102 AAA 1,765,620
England College Issue, Series 1998, 5.000%, 7/01/28
70,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Brandeis 10/99 at 102 AAA 71,555
University Issue, 1989 Series C, 6.800%, 10/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 13.4%
500,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/00 at 102 AAA 524,120
University Hospital Issue, Series C, 7.250%, 7/01/19
210,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 1/00 at 102 AAA 214,727
Capital Asset Program, Series G2, 7.200%, 7/01/09
1,500,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/02 at 102 AAA 1,599,675
New England Medical Center Hospitals Issue, Series F, 6.625%, 7/01/25
1,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/02 at 102 AAA 1,063,170
South Shore Hospital Issue, Series D, 6.500%, 7/01/22
1,700,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/03 at 102 AAA 1,699,847
Lahey Clinic Medical Center Issue, Series B, 5.625%, 7/01/15
2,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/08 at 102 AAA 1,780,840
Caregroup Issue, Series A, 5.000%, 7/01/25
2,290,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental 1/05 at 102 AAA 2,425,568
Control Facilities Financing Authority, Hospital Revenue Bonds, 1995
Series A (Hospital Auxilio Mutuo Obligated Group Project),
6.250%, 7/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 9.3%
1,500,000 Massachusetts Housing Finance Agency, Housing Development Bonds, 1998 6/08 at 101 AAA 1,460,310
Series A, 5.375%, 6/01/16 (Alternative Minimum Tax)
215,000 Massachusetts Housing Finance Agency, Housing Revenue Bonds, 1989 12/99 at 103 AAA 222,248
Series A, 7.600%, 12/01/16
1,000,000 Massachusetts Housing Finance Agency, Rental Housing Mortgage Revenue 7/07 at 101 AAA 957,640
Bonds, 1997 Series C, 5.625%, 7/01/40 (Alternative Minimum Tax)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 2,940,000 Massachusetts Housing Finance Agency, Rental Housing Mortgage Revenue 1/05 at 102 AAA $ 3,174,024
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 628,954
Hudner Associates Projects, 5.650%, 1/01/23
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 0.7%
480,000 Massachusetts Housing Finance Agency, Single Family Housing Revenue 6/01 at 102 Aa3 498,149
Bonds, Series 18, 7.350%, 12/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 7.2%
4,215,000 Massachusetts Industrial Finance Agency, Assisted Living Facility Revenue 12/07 at 102 AAA 4,050,531
Bonds (The Arbors at Amherst Project), Series 1997 (GNMA
Collateralized), 5.950%, 6/20/39 (Alternative Minimum Tax)
1,000,000 Massachusetts Industrial Finance Agency, Assisted Living Facility Revenue 6/09 at 102 AAA 919,090
Bonds (The Arbors at Taunton Project), Series 1999 (GNMA
Collateralized), 5.500%, 6/20/40 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 20.1%
250,000 Town of Groveland, Massachusetts, General Obligation Bonds, 6/01 at 102 AAA 265,465
6.900%, 6/15/07
1,000,000 City of Haverhill, Massachusetts, General Obligation Bonds, Hospital 9/01 at 102 AAA 1,058,150
Refunding Bonds, Series A, 6.700%, 9/01/10
2,625,000 City of Lowell, Massachusetts, General Obligation State Qualified Bonds, 11/03 at 102 AAA 2,665,058
5.600%, 11/01/12
1,025,000 City of Lynn, Massachusetts, General Obligation Bonds, 6.750%, 1/15/02 No Opt. Call AAA 1,081,303
1,000,000 Town of Mansfield, Massachusetts, General Obligation Bonds, 1/02 at 102 AAA 1,074,020
6.700%, 1/15/11
250,000 Massachusetts Bay Transportation Authority, General Transportation System 3/00 at 102 AAA 259,110
Bonds, 7.250%, 3/01/03
250,000 Town of Methuen, Massachusetts, General Obligation Bonds, 7.400%, 5/15/04 5/00 at 102 AAA 261,335
1,500,000 Town of Monson, Massachusetts, General Obligation Bonds, Bank-Qualified No Opt. Call AAA 1,572,435
Unlimited Tax School Refunding Bonds, 5.500%, 10/15/10
300,000 Town of North Andover, Massachusetts, General Obligation Bonds, 9/00 at 103 AAA 318,672
7.400%, 9/15/10
190,000 Town of Northfield, Massachusetts, General Obligation Bonds, Municipal 10/01 at 102 AAA 201,280
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 1,012,920
Obligation Bonds), 5.750%, 7/01/24
440,000 Quaboag Regional School District, General Obligation Bonds, 6/02 at 102 AAA 468,186
6.250%, 6/15/08
City of Salem, Massachusetts, General Obligation Bonds:
500,000 6.800%, 8/15/09 8/01 at 102 AAA 532,395
900,000 6.000%, 7/15/10 7/02 at 102 AAA 949,779
220,000 Taunton, Massachusetts, General Obligation Bonds, 6.800%, 9/01/09 9/01 at 103 AAA 236,496
455,000 Town of Wareham, Massachusetts, General Obligation School Bonds, 1/01 at 103 AAA 485,189
7.050%, 1/15/07
215,000 Town of Whately, Massachusetts, General Obligation Bonds, 6.350%, 1/15/09 1/02 at 102 AAA 228,160
1,210,000 Town of Winchendon, Massachusetts, Unlimited Tax General Obligation 3/03 at 102 AAA 1,283,846
Bonds, 6.050%, 3/15/10
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 2.4%
1,455,000 Massachusetts Industrial Finance Agency, Library Revenue Bonds (Malden 1/05 at 102 AAA 1,636,482
Public Library Project), Series 1994, 7.250%, 1/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 2.5%
9,500,000 Massachusetts Turnpike Authority, Metropolitan Highway System Revenue No Opt. Call AAA 1,766,525
Bonds, 1997 Series C (Senior), 0.000%, 1/01/29
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 20.4%
1,000,000 City of Boston, Massachusetts, General Obligation Bonds, 1991 7/01 at 102 AAA 1,065,300
Series A, 6.750%, 7/01/11 (Pre-refunded to 7/01/01)
500,000 City of Boston, Massachusetts, Revenue Bonds, Boston City Hospital (FHA- 8/00 at 102 Aaa 526,775
Insured Mortgage), Series A, 7.625%, 2/15/21 (Pre-refunded to 8/15/00)
</TABLE>
23
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Massachusetts Insured Municipal Bond Fund (continued)
August 31, 1999
<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, 6/01 at 102 AAA $ 535,435
7.200%, 6/01/10 (Pre-refunded to 6/01/01)
250,000 City of Holyoke, Massachusetts, General Obligation Bonds, 6/02 at 103 AAA 282,118
8.150%, 6/15/06 (Pre-refunded to 6/15/02)
450,000 City of Leominster, Massachusetts, General Obligation Bonds, 4/00 at 102 AAA 468,743
7.500%, 4/01/09 (Pre-refunded to 4/01/00)
250,000 Lynn, Massachusetts, Water and Sewer Commission, General Revenue Bonds, 12/00 at 102 AAA 264,995
1990 Series A, 7.250%, 12/01/10 (Pre-refunded to 12/01/00)
250,000 Massachusetts Bay Transportation Authority, Certificates of 8/00 at 102 AAA 263,685
Participation, 1990 Series A, 7.650%, 8/01/15 (Pre-refunded to 8/01/00)
250,000 Massachusetts State, General Obligation Bonds, 7.250%, 3/01/09 3/00 at 102 AAA 259,382
(Pre-refunded to 3/01/00)
25,000 Massachusetts State, General Obligation Bonds, 1992 Series A, 6/02 at 101 AAA 26,696
6.500%, 6/01/08 (Pre-refunded to 6/01/02)
1,200,000 Massachusetts State, General Obligation Bonds, Consolidated Loan, 6/02 at 100 AAA 1,255,296
1992 Series A, 6.000%, 6/01/13 (Pre-refunded to 6/01/02)
500,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 10/01 at 102 AAA 536,445
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 Bonds, 7/01 at 102 AAA 1,064,560
Brigham and Women's Hospital Issue, Series D, 6.750%, 7/01/24 (Pre-
refunded to 7/01/01)
250,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/00 at 102 AAA 262,568
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 Bonds, 7/00 at 102 AAA 526,115
(Stonehill College), 7.700%, 7/01/20 (Pre-refunded to 7/01/00)
970,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/01 at 102 AAA 1,029,975
Boston College Issue, Series J, 6.625%, 7/01/21 (Pre-refunded to
7/01/01)
1,000,000 Massachusetts Port Authority, Revenue Bonds, Series 1982, No Opt. Call AAA 1,585,500
13.000%, 7/01/13
430,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Brandeis 10/99 at 102 AAA 439,701
University Issue, 1989 Series C, 6.800%, 10/01/19 (Pre-refunded to
10/01/99)
500,000 Town of Monson, Massachusetts, General Obligation Bonds, School Project 10/00 at 102 AAA 531,075
Loan Act of 1948 Bonds, 7.700%, 10/15/10 (Pre-refunded to 10/15/00)
North Middlesex Regional School District, School Bonds of 1990:
270,000 7.200%, 6/15/08 (Pre-refunded to 6/15/00) 6/00 at 103 AAA 285,279
245,000 7.200%, 6/15/09 (Pre-refunded to 6/15/00) 6/00 at 103 AAA 258,865
270,000 Town of Palmer, Massachusetts, General Obligation School Bonds of 1990, 3/00 at 102 AAA 280,201
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 Project 10/00 at 102 AAA 265,220
Loan Act of 1948, 1990 Series B, 7.700%, 10/01/10 (Pre-refunded to
10/01/00)
Southern Berkshire Regional School District, General Obligation Bonds:
515,000 7.500%, 4/15/07 (Pre-refunded to 4/15/02) 4/02 at 102 AAA 565,918
1,145,000 7.000%, 4/15/11 (Pre-refunded to 4/15/02) 4/02 at 102 AAA 1,246,195
250,000 City of Westfield, Massachusetts, General Obligation Bonds, 12/00 at 102 AAA 265,023
7.100%, 12/15/08 (Pre-refunded to 12/15/00)
160,000 City of Worcester, Massachusetts, General Obligation Bonds, 5/02 at 102 AAA 173,765
6.900%, 5/15/07 (Pre-refunded to 5/15/02)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities - 1.9%
$ 1,300,000 Massachusetts Municipal Wholesale Electric Company, Power Supply 7/03 at 102 AAA $1,291,860
System Revenue Bonds, 1993 Series A, 5.000%, 7/01/10
- ------------------------------------------------------------------------------------------------------------------------------------
$74,275,000 Total Investments - (cost $66,429,916) - 98.0% 68,078,338
===========-------------------------------------------------------------------------------------------------------------------------
Short-Term Investments - 0.7%
$ 500,000 Massachusetts Health and Educational Facilities Authority, Capital SP-1 500,000
=========== Asset Program, Variable Rate Demand Bonds, 2.800%, 1/01/35+
---------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 880,957
---------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 69,459,295
=====================================================================================================================
</TABLE>
All of the bonds in the portfolio, excluding temporary
investments in short-term municipal securities, are either
covered by Original Issue Insurance, Secondary Market Insurance
or Portfolio Insurance, or are backed by an escrow or trust
containing sufficient U.S. Government or U.S. Government agency
securities, any of which ensure the timely payment of principal
and interest.
* Optional Call Provisions: Dates (month and year) and prices of
the earliest optional call or redemption. There may be other call
provisions at varying prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
+ Security has a maturity of more than one year, but has variable
rate and demand features which qualify it as a short-term
security. The rate disclosed is that currently in effect. This
rate changes periodically based on market conditions or a
specified market index.
See accompanying notes to financial statements.
25
<PAGE>
Statement of Net Assets (Unaudited)
August 31, 1999
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $242,407,824 $93,710,819 $68,078,338
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) -- 2,000,000 500,000
Cash -- 346,909 60,020
Receivables:
Interest 3,689,637 1,307,835 1,024,289
Investments sold 2,272,611 35,444 80,972
Shares sold 84,195 22,047 10,071
Other assets 51,321 13,334 16,941
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 248,505,588 97,436,388 69,770,631
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft 1,324,472 -- --
Payables:
Investments purchased 3,956,372 -- --
Shares redeemed 247,413 35,824 33,020
Accrued expenses:
Management fees (note 6) 112,980 43,255 32,275
12b-1 distribution and service fees (notes 1 and 6) 58,937 8,932 4,298
Other 90,746 72,193 39,407
Dividends payable 460,645 291,118 202,336
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,251,565 451,322 311,336
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $242,254,023 $96,985,066 $69,459,295
=================================================================================================================================
Class A Shares (note 1)
Net assets $208,760,401 $16,662,513 $11,884,263
Shares outstanding 20,142,886 1,735,166 1,179,958
Net asset value and redemption price per share $ 10.36 $ 9.60 $ 10.07
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 10.81 $ 10.02 $ 10.51
=================================================================================================================================
Class B Shares (note 1)
Net assets $ 14,533,739 $ 3,749,495 $ 1,578,731
Shares outstanding 1,405,435 389,646 156,699
Net asset value, offering and redemption price per share $ 10.34 $ 9.62 $ 10.07
=================================================================================================================================
Class C Shares (note 1)
Net assets $ 17,762,236 $ 5,364,093 $ 1,565,873
Shares outstanding 1,717,106 561,822 155,859
Net asset value, offering and redemption price per share $ 10.34 $ 9.55 $ 10.05
=================================================================================================================================
Class R Shares (note 1)
Net assets $ 1,197,647 $71,208,965 $54,430,428
Shares outstanding 115,292 7,431,816 5,399,564
Net asset value, offering and redemption price per share $ 10.39 $ 9.58 $ 10.08
=================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended August 31, 1999
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $ 7,237,124 $ 2,918,698 $ 2,083,878
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 679,329 271,175 196,088
12b-1 service fees - Class A (notes 1 and 6) 218,090 15,980 11,710
12b-1 distribution and service fees - Class B (notes 1 and 6) 61,451 17,261 7,819
12b-1 distribution and service fees - Class C (notes 1 and 6) 66,566 18,249 6,311
Shareholders' servicing agent fees and expenses 54,239 41,981 33,262
Custodian's fees and expenses 58,948 39,966 31,287
Trustees' fees and expenses (note 6) 2,519 1,097 736
Professional fees 5,893 4,978 4,418
Shareholders' reports - printing and mailing expenses 28,435 27,344 16,036
Federal and state registration fees 9,029 10,971 2,714
Portfolio insurance expense -- -- 1,825
Other expenses 6,177 1,880 1,182
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 1,190,676 450,882 313,388
Custodian fee credit (note 1) (25,068) (11,666) (5,670)
Expense reimbursement (note 6) -- (17,941) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,165,608 421,275 307,718
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income 6,071,516 2,497,423 1,776,160
- ----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (notes 1 and 4) (433,442) 73,003 58,398
Change in net unrealized appreciation or depreciation of investments (12,141,315) (4,799,113) (3,590,019)
- ----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (12,574,757) (4,726,110) (3,531,621)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ (6,503,241) $(2,228,687) $(1,755,461)
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Connecticut Massachusetts Massachusetts Insured
------------------------------- ------------------------------ -------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended Six Months Ended Year Ended
8/31/99 2/28/99 8/31/99 2/28/99 8/31/99 2/28/99
- -----------------------------------------------------------------------------------------------------------------------------------
Operations
Net investment income $ 6,071,516 $ 11,675,814 $ 2,497,423 $ 4,630,906 $ 1,776,160 $ 3,434,164
Net realized gain (loss) from
investment transactions
(notes 1 and 4) (433,442) 37,313 73,003 9,069 58,398 10,474
Change in net unrealized
appreciation or depreciation
of investments (12,141,315) 1,140,555 (4,799,113) 24,879 (3,590,019) 126,217
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations (6,503,241) 12,853,682 (2,228,687) 4,664,854 (1,755,461) 3,570,855
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
(note 1)
From undistributed net
investment income:
Class A (5,359,620) (10,761,378) (390,620) (600,238) (280,486) (477,517)
Class B (269,269) (300,238) (75,107) (85,561) (33,237) (44,120)
Class C (387,691) (574,135) (105,401) (114,651) (35,924) (59,779)
Class R (27,077) (35,162) (1,889,222) (3,854,276) (1,393,929) (2,835,474)
From accumulated net realized gains
from investment transactions:
Class A -- -- -- -- -- (891)
Class B -- -- -- -- -- (121)
Class C -- -- -- -- -- (131)
Class R -- -- -- -- -- (4,898)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (6,043,657) (11,670,913) (2,460,350) (4,654,726) (1,743,576) (3,422,931)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 17,955,820 37,401,420 8,395,882 19,090,381 3,482,223 8,126,094
Net proceeds from shares issued
to shareholders due to
reinvestment of distributions 2,651,721 5,622,058 1,665,777 3,182,349 1,182,534 2,357,024
- -----------------------------------------------------------------------------------------------------------------------------------
20,607,541 43,023,478 10,061,659 22,272,730 4,664,757 10,483,118
Cost of shares redeemed (14,928,385) (27,408,991) (6,193,821) (9,388,148) (3,520,469) (6,161,130)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
Fund share transactions 5,679,156 15,614,487 3,867,838 12,884,582 1,144,288 4,321,988
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets (6,867,742) 16,797,256 (821,199) 12,894,710 (2,354,749) 4,469,912
Net assets at the beginning of
period 249,121,765 232,324,509 97,806,265 84,911,555 71,814,044 67,344,132
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $242,254,023 $249,121,765 $96,985,066 $97,806,265 $69,459,295 $71,814,044
===================================================================================================================================
Balance of undistributed net
investment income at the end
of period $ 42,915 $ 15,056 $ 94,576 $ 57,503 $ 64,937 $ 32,353
===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust 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, 1999, Connecticut had outstanding when-issued purchase commitments of
$3,956,372. There were no such outstanding purchase commitments in either 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 monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, 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 Insurance.
Such insurance does not guarantee the market value of the municipal securities
or the value of the Fund's shares. Original
29
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
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 contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances, or by specified classes
of investors.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the six months ended August 31, 1999.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Custodian Fee Credit
Each Fund has an agreement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Connecticut Massachusetts
----------------------------------------------------- ----------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
8/31/99 2/28/99 8/31/99 2/28/99
-------------------------- ------------------------ -------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold:
Class A 904,498 $ 9,644,069 1,897,699 $ 20,627,217 306,301 $ 3,023,668 639,103 $ 6,439,208
Class B 410,309 4,372,382 710,277 7,706,793 88,983 885,379 254,134 2,567,554
Class C 341,643 3,660,227 792,638 8,606,155 257,656 2,538,090 227,608 2,284,530
Class R 26,277 279,142 42,278 461,255 198,335 1,948,745 776,075 7,799,089
Shares issued to shareholders
due to reinvestment of distributions:
Class A 213,366 2,290,599 474,626 5,158,453 25,199 249,720 35,262 355,925
Class B 12,376 132,330 13,433 145,945 3,006 29,831 3,924 39,717
Class C 19,711 211,017 27,834 302,045 6,000 59,011 4,780 47,973
Class R 1,653 17,775 1,430 15,615 134,140 1,327,215 272,093 2,738,734
- -----------------------------------------------------------------------------------------------------------------------------------
1,929,833 20,607,541 3,960,215 43,023,478 1,019,620 10,061,659 2,212,979 22,272,730
- -----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,224,145) (12,987,602) (2,078,959) (22,587,955) (98,540) (977,007) (94,086) (949,795)
Class B (49,003) (519,245) (34,851) (379,111) (21,864) (212,786) (14,108) (142,462)
Class C (133,100) (1,397,410) (401,917) (4,351,297) (70,783) (691,923) (55,487) (556,453)
Class R (2,245) (24,128) (8,327) (90,628) (436,469) (4,312,105) (770,575) (7,739,438)
- -----------------------------------------------------------------------------------------------------------------------------------
(1,408,493) (14,928,385) (2,524,054) (27,408,991) (627,656) (6,193,821) (934,256) (9,388,148)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase 521,340 $ 5,679,156 1,436,161 $ 15,614,487 391,964 $ 3,867,838 1,278,723 $12,884,582
===================================================================================================================================
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Massachusetts Insured
---------------------------------------------------
Six Months Ended Year Ended
8/31/99 2/28/99
------------------------- ------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 169,685 $ 1,757,574 306,475 $ 3,240,290
Class B 15,556 161,229 99,734 1,058,079
Class C 20,472 214,561 41,194 436,072
Class R 131,126 1,348,859 320,868 3,391,653
Shares issued to shareholders due to reinvestment of distributions:
Class A 14,836 154,351 25,691 272,136
Class B 650 6,760 740 7,856
Class C 2,350 24,422 4,745 50,126
Class R 95,697 997,001 191,284 2,026,906
- -----------------------------------------------------------------------------------------------------------------------
450,372 4,664,757 990,731 10,483,118
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (63,348) (655,630) (94,783) (1,003,330)
Class B (15,348) (158,628) (7,593) (79,870)
Class C (25,637) (266,410) (9,956) (105,092)
Class R (234,723) (2,439,801) (469,182) (4,972,838)
- -----------------------------------------------------------------------------------------------------------------------
(339,056) (3,520,469) (581,514) (6,161,130)
- -----------------------------------------------------------------------------------------------------------------------
Net increase 111,316 $ 1,144,288 409,217 $ 4,321,988
=======================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid October 1, 1999, to shareholders of record on September
9, 1999, as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $.0440 $.0410 $.0420
Class B .0375 .0350 .0355
Class C .0390 .0365 .0370
Class R .0460 .0425 .0435
========================================================================================================================
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the six months ended August
31, 1999, were as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Long-term municipal securities $30,135,936 $6,490,830 $2,924,380
Short-term municipal securities 2,000,000 2,500,000 500,000
Sales:
Long-term municipal securities 20,080,269 2,616,009 2,174,744
Short-term municipal securities 2,000,000 1,700,000 --
========================================================================================================================
</TABLE>
At August 31, 1999, 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, 1999, 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
- ------------------------------------------------------------------------------------------------------------------------
Expiration year:
<S> <C> <C>
2003 $ 810,300 $ 12,393
2004 -- 507,247
2005 -- 156,261
- ------------------------------------------------------------------------------------------------------------------------
Total $ 810,300 $ 675,901
========================================================================================================================
</TABLE>
31
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at August 31, 1999, were as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $10,568,065 $ 3,548,788 $ 2,856,084
depreciation (2,631,920) (1,864,450) (1,207,662)
- -----------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation $ 7,936,145 $ 1,684,338 $ 1,648,422
===================================================================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trusts' investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of each Fund:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
===================================================================================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
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 assets of Massachusetts and .975 of 1% of the average daily
net assets 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, 1999, 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>
Sales charges collected $ 120,304 $ 27,691 $ 30,746
Paid to authorized dealers 108,752 27,691 26,753
===================================================================================================================================
</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, 1999, 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 $ 238,572 $ 69,673 $ 8,435
===================================================================================================================================
</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, 1999,
the Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 fees retained $ 86,456 $ 26,962 $ 9,045
===================================================================================================================================
</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, 1999, as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CDSC retained $ 24,505 $ 8,611 $ 7,058
===================================================================================================================================
</TABLE>
7. Composition of Net Assets
At August 31, 1999, 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 $235,518,705 $95,809,050 $67,678,261
Balance of undistributed net investment income 42,915 94,576 64,937
Accumulated net realized gain (loss) from investment transactions (1,243,742) (602,898) 67,675
Net unrealized appreciation of investments 7,936,145 1,684,338 1,648,422
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets $242,254,023 $96,985,066 $69,459,295
===================================================================================================================================
</TABLE>
32
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period:
Class (Inception Date)
<TABLE>
<CAPTION>
Investment Operations Less Distributions
------------------------------------- ------------------------------
Net
CONNECTICUT Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
February 28/29, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (7/87)**
2000 (f) $10.90 $.27 $.(55) $(.28) $(.26) $-- $(.26) $10.36 (2.57)%
1999 10.85 .53 .06 .59 (.54) -- (.54) 10.90 5.51
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
Class B (2/97)
2000 (f) 10.88 .22 (.53) (.31) (.23) -- (.23) 10.34 (2.93)
1999 10.83 .46 .05 .51 (.46) -- (.46) 10.88 4.77
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)**
2000 (f) 10.88 .24 (.55) (.31) (.23) -- (.23) 10.34 (2.85)
1999 10.83 .48 .05 .53 (.48) -- (.48) 10.88 4.94
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
Class R (2/97)
2000 (f) 10.93 .28 (.54) (.26) (.28) -- (.28) 10.39 (2.46)
1999 10.87 .56 .06 .62 (.56) -- (.56) 10.93 5.83
1998 10.51 .58 .36 .94 (.58) -- (.58) 10.87 9.17
1997 (e) 10.55 .01 (.05) (.04) -- -- -- 10.51 (.38)
====================================================================================================================================
</TABLE>
<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
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
(000) ment ment ment(a) ment(a) Rate
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (7/87)**
2000 (f) $208,760 .87%* 4.90%* .85%* 4.92%* 8%
1999 220,721 .89 4.89 .86 4.92 7
1998 216,436 .85 5.15 .78 5.22 12
1997 (c) 209,873 1.02* 5.18* .79* 5.41* 20
1996 (d) 202,219 1.03 5.23 .74 5.52 24
1995 (d) 203,210 1.03 5.54 .73 5.84 25
Class B (2/97)
2000 (f) 14,534 1.64* 4.14* 1.60* 4.18* 8
1999 11,223 1.64 4.14 1.61 4.17 7
1998 3,713 1.61 4.34 1.52 4.43 12
1997 (e) 102 1.59* 6.61* 1.12* 7.08* 20
Class C (10/93)**
2000 (f) 17,762 1.43* 4.35* 1.40* 4.38* 8
1999 16,198 1.44 4.34 1.41 4.37 7
1998 11,586 1.41 4.59 1.33 4.67 12
1997 (c) 7,087 1.57* 4.65* 1.34* 4.88* 20
1996 (d) 7,243 1.58 4.67 1.29 4.96 24
1995 (d) 5,536 1.58 4.97 1.28 5.27 25
Class R (2/97)
2000 (f) 1,198 .67* 5.10* .65* 5.12* 8
1999 979 .69 5.10 .66 5.13 7
1998 590 .66 5.29 .57 5.38 12
1997 (e) -- -- 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 Double Tax Exempt.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(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) For the six months ended August 31, 1999.
33
<PAGE>
Financial Highlights (Unaudited) (continued)
Selected data for a share outstanding throughout each period:
Class (Inception Date)
<TABLE>
<CAPTION>
Investment Operations Less Distributions
------------------------------------- ------------------------------
Net
MASSACHUSETTS Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
February 28/29, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 (d) $10.07 $.25 $(.48) $(.23) $(.24) $-- $(.24) $ 9.60 (2.28)%
1999 10.08 .51 (.01) .50 (.51) -- (.51) 10.07 5.05
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)
2000 (d) 10.10 .21 (.48) (.27) (.21) -- (.21) 9.62 (2.73)
1999 10.10 .43 .01 .44 (.44) -- (.44) 10.10 4.40
1998 (c) 9.88 .45 .22 .67 (.45) -- (.45) 10.10 6.93
Class C (10/94)
2000 (d) 10.02 .22 (.47) (.25) (.22) -- (.22) 9.55 (2.56)
1999 10.02 .45 -- .45 (.45) -- (.45) 10.02 4.62
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)
2000 (d) 10.05 .26 (.48) (.22) (.25) -- (.25) 9.58 (2.20)
1999 10.05 .52 .01 .53 (.53) -- (.53) 10.05 5.36
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
===================================================================================================================================
</TABLE>
<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
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
(000) ment ment ment(a) ment(a) Rate
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 (d) $16,663 1.01%* 4.90%* .95%* 4.96%* 3%
1999 15,134 1.02 4.94 .95 5.01 10
1998 9,291 1.00 5.20 .95 5.25 17
1997 7,200 1.01 5.22 .99 5.24 10
1996 4,290 1.17 5.04 1.00 5.21 6
1995 (c) 1,067 1.87* 4.88* 1.00* 5.75* 17
Class B (3/97)
2000 (d) 3,749 1.78* 4.13* 1.70* 4.21* 3
1999 3,226 1.77 4.23 1.71 4.29 10
1998 (c) 763 1.77* 4.41* 1.70* 4.48* 17
Class C (10/94)
2000 (d) 5,364 1.57* 4.35* 1.50* 4.42* 3
1999 3,696 1.57 4.41 1.50 4.48 10
1998 1,924 1.55 4.64 1.50 4.69 17
1997 913 1.74 4.50 1.73 4.51 10
1996 638 2.24 3.96 1.75 4.45 6
1995 (c) 147 3.40* 3.46* 1.75* 5.11* 17
Class R (12/86)
2000 (d) 71,209 .81* 5.09* .75* 5.15* 3
1999 75,750 .82 5.12 .75 5.19 10
1998 72,934 .80 5.40 .75 5.45 17
1997 72,912 .77 5.46 .75 5.48 10
1996 76,773 .82 5.42 .75 5.49 6
1995 71,568 .77 5.75 .75 5.77 17
=========================================================================================================================
</TABLE>
* Annualized.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(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, 1999.
34
<PAGE>
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------------ ---------------------------------
Net
MASSACHUSETTS INSURED Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
February 28/29, Value Income (a) (Loss) Total Income Gains Total Value Return(b)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 (d) $10.59 $.25 $(.52) $(.27) $(.25) $-- $(.25) $10.07 (2.59)%
1999 10.57 .51 .02 .53 (.51) -- (.51) 10.59 5.09
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)
2000 (d) 10.59 .21 (.52) (.31) (.21) -- (.21) 10.07 (2.96)
1999 10.57 .43 .02 .45 (.43) -- (.43) 10.59 4.32
1998 (c) 10.36 .44 .21 .65 (.44) -- (.44) 10.57 6.45
Class C (9/94)
2000 (d) 10.56 .22 (.51) (.29) (.22) -- (.22) 10.05 (2.78)
1999 10.54 .45 .02 .47 (.45) -- (.45) 10.56 4.51
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)
2000 (d) 10.59 .26 (.51) (.25) (.26) -- (.26) 10.08 (2.41)
1999 10.57 .53 .01 .54 (.52) -- (.52) 10.59 5.26
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
==================================================================================================================================
</TABLE>
<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
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
(000) ment ment ment(a) ment(a) Rate
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 (d) $11,884 1.01%* 4.82%* .99%* 4.84%* 3%
1999 11,208 1.01 4.77 1.01 4.77 11
1998 8,679 1.03 4.98 1.03 4.98 23
1997 7,459 1.04 5.02 1.04 5.02 10
1996 5,291 1.09 4.92 1.07 4.94 1
1995 (c) 1,956 1.36* 5.13* 1.15* 5.34* 10
Class B (3/97)
2000 (d) 1,579 1.77* 4.06* 1.74* 4.09* 3
1999 1,650 1.75 4.03 1.75 4.03 11
1998 (c) 666 1.80* 4.20* 1.80* 4.20* 23
Class C (9/94)
2000 (d) 1,566 1.57* 4.27* 1.54* 4.30* 3
1999 1,675 1.56 4.22 1.56 4.22 11
1998 1,293 1.58 4.43 1.58 4.43 23
1997 957 1.78 4.29 1.78 4.29 10
1996 706 1.81 4.20 1.81 4.20 1
1995 (c) 338 2.07* 4.41* 1.90* 4.58* 10
Class R (12/86)
2000 (d) 54,430 .80* 5.03* .79* 5.04* 3
1999 57,281 .81 4.97 .81 4.97 11
1998 56,707 .83 5.18 .83 5.18 23
1997 57,076 .80 5.26 .80 5.26 10
1996 60,102 .81 5.21 .81 5.21 1
1995 57,137 .79 5.54 .79 5.54 10
=================================================================================================================
</TABLE>
* Annualized.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(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, 1999.
35
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family
of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Dividend and Growth Fund
Income
Income 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 Advisers/SM/ including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
quality municipal bonds. The fund shares are listed and traded on the New York
and American stock exchanges. Exchange-traded funds provide the investment
convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
36
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
Chase Global Fund Services Company
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public
Accountants
Arthur Andersen LLP
Chicago, IL
37
<PAGE>
SERVING
Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive performance over time -- with moderated risk. We emphasize quality
securities carefully chosen through in-depth research, and we follow those
securities closely over time to ensure that they continue to meet our exacting
standards.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
[Photo of John Nuveen, Sr.
appears here]
John Nuveen, Sr.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
VSA-1-8-99
<PAGE>
August 31, 1999 Semiannual Report
NUVEEN
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Municipal Bond Funds
[Picture Appears Here]
Dependable, tax-free income to help you keep more of what you earn.
California
California Insured
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
Contents
1 Dear Shareholder
3 From the Portfolio Manager's Perspective
6 Nuveen California Municipal Bond Fund
Spotlight
7 Nuveen California Insured Municipal Bond
Fund Spotlight
8 Portfolio of Investments
16 Statement of Net Assets
17 Statement of Operations
18 Statement of Changes in Net Assets
19 Notes to Financial Statements
24 Financial Highlights
<PAGE>
DEAR
Shareholder
At this writing, we're just months away from the much-talked-about millennium.
Besides trying to decide where we want to be when the clock strikes midnight,
this whole event puts the concept of time in front of us all. We think: "Where
did the time go?"
We think about how old, 25 years ago, we thought we would be when the calendar
turned January 1, 2000. (And we realize, now, it is really not that old at all.)
We think about all the things we thought we would have accomplished before 1999
became 2000.
Most likely, one of your millennium goals was financial. Whether it was to fully
fund your retirement accounts or set up trusts for your grandchildren, the fact
you're working with a financial adviser and reading this report are positive
signs that you're well on your way to achieving your goal.
I'm pleased to report we're meeting our goals, too. In addition to the goals we
have established for each mutual fund we manage, we have had to set goals in
preparation for the millennium. Briefly, the year 2000, or Y2K, problem stems
from concerns that computers and other date-sensitive systems could malfunction
or stop before, on, or after January 1, 2000. Many older systems use a two-digit
number to represent a year. To a computer, "00" may mean the year 1900 instead
of 2000. If this were to happen, some computers might shut down or not work
correctly.
All efforts to safeguard critical systems are right on schedule at Nuveen.
It's a goal we set more than 10 years ago. Nuveen's trading, fund management and
pricing -- systems that affect you and your investments -- have been updated or
replaced to be able to deal accurately with Y2K.
We continue to work closely with our service providers, transfer agent,
custodian and trustee to monitor the readiness of their systems, as well as
address any remaining internal systems issues. We expect January 3, 2000, the
first business day of the year, to be "business as usual."
The Securities and Exchange Commission (SEC), which oversees the securities
industry, is also taking significant steps to ensure that the financial industry
makes a smooth transition. First, the SEC is requiring all public companies,
investment advisers, investment companies and municipal securities issuers to
disclose their ability to comply with the Y2K issue.
In addition, the SEC mandated that tests be conducted on various financial
systems to test the ability of exchanges and broker/dealer firms to handle
transactions effectively. We participated successfully in those tests.
While we cannot anticipate all possibilities, our systems are in place, and
we look forward to helping you achieve your financial goals in the new
millennium.
I want to briefly report on the economic environment in which your Nuveen
investment performed. Read on, as we've conducted an in-depth interview with a
representative from the portfolio management team for your fund, describing how
that team of investment and research professionals directed the portfolio during
the last 12 months, September 1, 1998, through August 31, 1999.
[Picture Appears Here]
Timothy R. Schwertfeger
Chairman of the Board
"All efforts to safeguard critical systems are right on schedule at Nuveen."
SEMIANNUAL REPORT page 1
<PAGE>
"Your financial adviser can serve as a valuable resource in helping you
determine if adjustments are needed in your current asset allocation plan."
Over the past 12 months, the U.S. economy has continued to be characterized
by robust growth, generally low interest rates and unemployment levels that
remain among the lowest in three decades.
Concerns, however, about the continued pace of the economy's expansion have
tested the new paradigm that holds that improvements in productivity enable us
to have both economic growth and low inflation at the same time. With investors
and the various markets watching -- and reacting to -- every announcement
concerning economic statistics, volatility has increased, especially in the
equity markets.
We have entered a different economic environment from that of 12 months
ago. This shift has occurred in response to two factors:
. the Asian financial crisis of 1998 did not produce the slowdown that was
widely expected to keep economic growth from becoming overly robust;
. evidence of accelerating prices, most obvious in the sudden spike in the
April 1999 Consumer Price Index, contributed to the reemergence of the
specter of inflation, accompanied by predictions of higher interest
rates.
In an effort to pre-empt this inflation threat, the Federal Reserve has
twice moved to raise the federal funds rate by a quarter-point -- to 5.25% --
since the end of June. And in its October meeting, the group adopted a bias to
tighten, although it took no action at that time. The upward adjustments to this
rate, which represent the amount banks charge one another on overnight loans,
mark the first increases since March 1997 and stand in sharp contrast to the
three reductions made last fall.
At the end of August 1999, the ratio between long-term municipal yields and
30-year Treasury yields stood at 93.1%, compared with the historical average of
89.6% over the period 1979-1999. For investors, this meant that quality
long-term municipal bonds offered yields comparable to those of long Treasury
bonds -- even before the tax advantages of municipals were taken into account.
On an after-tax basis, municipal bonds continued to present an exceptionally
attractive investment option relative to Treasuries.
Keeping the Balance. The increased volatility in the markets highlights the
importance of maintaining balance in your investment portfolio. With a properly
balanced portfolio of equities, bonds and cash, your assets are better
positioned to weather the markets' ups and downs. A balanced portfolio can also
help you increase your opportunities for capital growth while reducing risk.
Your financial adviser can serve as a valuable resource in helping you determine
if adjustments are needed in your current asset allocation plan.
For more information on any Nuveen investment, contact your financial
adviser for a prospectus, call Nuveen at (800) 621-7227, or download one from
the internet at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. As we look ahead to a new millennium, we are committed to maintaining
that reputation and finding the best ways to serve your evolving investment
needs. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
October 18, 1999
SEMIANNUAL REPORT page 2
<PAGE>
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
NUVEEN CALIFORNIA INSURED MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
Nuveen California Municipal Bond Fund and Nuveen California Insured Municipal
Bond Fund feature portfolio management by Nuveen Investment Advisory Services
(NIAS), a team of portfolio managers and research analysts committed to a
disciplined, research-oriented investment strategy. To help you understand the
funds' performance for the one-year period ended August 31, 1999, James Lumberg,
director of income funds at Nuveen, spoke with Portfolio Manager Bill Fitzgerald
of NIAS.
We'd like to point out to shareholders of Nuveen California Insured Municipal
Bond Fund that they received an increase in their monthly tax-free dividend,
which became effective with the August 9th declaration paid September 1st. The
dividend increase, which amounts to about $0.0010 per share, reflects an
increase in the fund's net income, a result of the portfolio manager's ability
to identify yield-enhancing opportunities in the current market environment.
-- James Lumberg, director, income funds
JIM Everybody's talking about the new Internet Age and how the economy is going
to be forever transformed. Since California's Silicon Valley is generally
considered to be at the center of all this activity, what does that mean for
California's economy?
BILL There's no question that Northern California's economy is increasingly
driven by the booming Silicon Valley and the "dot.com" Internet companies that
are making multi-millionaires out of college kids and sending the Bay Area real
estate market into the stratosphere. But there are other good things about
California as well. Southern California is now broadly diversified and no
longer reliant on aerospace. Despite the Asian economic crisis in 1998 and the
state's reliance on the export market, statewide employment grew by 4% in 1998.
Reflecting the strengthening business climate, Standard & Poor's Corp.
increased the state's credit rating in August from A+ to AA-, following similar
moves by Moody's Investors Service and Fitch IBCA. In addition, the state has
established a "rainy-day" fund in case the economy does slow down.
Another pleasant surprise was that next year's budget was adopted on time
this year, which typically doesn't happen.
JIM We've recently seen interest rates begin to inch up after a few years of
watching interest rates move lower. How has this shift affected the California
municipal bond market?
BILL Typically, in a rising interest rate environment, municipalities are
reluctant to issue long-term debt and pay the higher interest costs. In
addition, refunding activity of older debt is lower in a rising interest rate
environment. Consequently, California municipal bond issuance was down 17.7%
compared with last year, which mirrored the national trend. Nationally,
municipal bond issuance was down 23%.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers/sm/ -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. Nuveen has chosen them for their rigorously disciplined investment
approaches and their focus on consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/sm/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS follows a disciplined, research-driven investment approach
to uncover income securities that combine exceptional relative value with above-
average return potential. Drawing upon 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
.. A commitment to exhaustive research
.. An active, value-oriented investment style
.. The unmatched presence and trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen California Municipal Bond and Nuveen
California Insured Municipal Bond Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the one-year period ended August 31, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
SEMIANNUAL REPORT page 3
<PAGE>
"The rising interest rate environment provided the opportunity to buy bonds with
higher yields and better call protection, thus strengthening the funds'
dividend-paying capability."
JIM Given the varying credit quality in the state, how did you manage the fund
during the period?
BILL California is one of the largest and most liquid bond markets in the
country providing a wide selection of lower quality bonds that offer higher
yields. We depend on our research team members to determine which bonds have an
acceptable risk/return trade-off for our funds.
The improving California economy and credit rating has boosted the prospects for
lower rated bonds in Nuveen California Municipal Bond Fund. As a result, we
purchased $8.9 million Foothill Eastern Transportation Corridor Agency bonds,
the proceeds of which will be used to build a toll road in Orange County. The
bonds, which are rated BBB- by S&P, have outperformed the market during the
period.
Other investments include non-rated tax assessment bonds that are issued to
develop residential communities as well as public power projects. These types of
bonds, which comprise 15% of the assets of Nuveen California Insured Municipal
Bond Fund, outperformed the general California bond market. It is typical for
lower-quality bonds to outperform when the general economy is improving.
An example of a non-rated tax assessment bond purchased for Nuveen
California Municipal Bond Fund during the period is the California Statewide
Communities Development Authority for the Rio Bravo Fresno Project due in 2018.
In addition, the rising interest rate environment provided the opportunity
to buy bonds with higher yields and better call protection, thus strengthening
the funds' dividend-paying capability.
Since bond prices fall in a rising interest rate environment, certain bonds
purchased earlier in the year fell in value. We sold some of these bonds, taking
a capital loss that, for tax purposes, can be used to offset any current gains,
or be carried forward for up to eight years to offset future gains.
At August 31, 1999, Nuveen California Municipal Bond Fund's credit
breakdown was as shown to the right.
Because it is insured, Nuveen California Insured Municipal Bond Fund
carries a AAA credit rating.
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
Top Five Sectors
Tax Obligation (Limited) 28%
----------------------------
Housing (Multifamily) 18%
----------------------------
U.S. Guaranteed 16%
----------------------------
Health Care 9%
----------------------------
Utilities 8%
----------------------------
As a percentage of total bond holdings as of August 31, 1999. Holdings are
subject to change.
NUVEEN CALIFORNIA INSURED MUNICIPAL BOND FUND
Top Five Sectors
Tax Obligation (Limited) 28%
----------------------------
U.S. Guaranteed 27%
----------------------------
Tax Obligation (General) 9%
----------------------------
Housing (Single family) 9%
----------------------------
Housing (Multifamily) 8%
----------------------------
As a percentage of total bond holdings as of August 31, 1999. Holdings are
subject to change.
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
Bond Credit Quality
[Pie Chart Appears Here]
AAA/U.S. Guaranteed..42%
AA................... 7%
A....................11%
BBB/NR...............40%
As a percentage of total bond holdings as of August 31, 1999. Holdings are
subject to change.
SEMIANNUAL REPORT page 4
<PAGE>
JIM How did the funds perform for the one-year period ended August 31, 1999?
BILL While there are long-term positive implications for how we've positioned
the funds in this rising interest-rate environment, in the short-term, the
one-year period, Nuveen California Municipal Bond Fund reported a loss of 0.21%
for the period, measured as total return on net asset value. Comparatively, the
Lipper California Municipal Bond Fund category reported an average loss of
1.49%.*
Nuveen California Municipal Bond Fund shareholders in the 37.5% combined
federal and state income tax bracket would have had to earn a total return of
2.80% on a taxable investment to have earned the equivalent of their fund's
one-year tax-exempt total return. As of August 31, 1999, the fund's SEC 30-day
yield was 4.72%. For investors in the combined 37.5% federal and state income
tax bracket, that is equivalent to a yield of 7.55% on a taxable investment.
Nuveen California Insured Municipal Bond Fund reported a loss of 0.92% for
the one-year period and a gain of 5.06% for the three-year period. The funds in
the Lipper California Insured Municipal Bond Fund category returned an average
loss of 1.45% for the same period.**
Nuveen California Insured Municipal Bond Fund shareholders in the 37.5%
combined federal and state income tax bracket would have had to earn 1.95% on a
taxable investment to have earned the equivalent of their fund's one-year tax-
exempt return. As of August 31, 1999, the fund's SEC 30-day yield was 4.13%. For
investors in the combined 37.5% federal and state income tax bracket, that is
equivalent to a yield of 6.61% on a taxable investment.
JIM What is your outlook and strategy for Nuveen California Municipal Bond Fund
and Nuveen California Insured Municipal Bond Fund?
BILL Relying on our Nuveen research team members, we will continue to look for
attractively priced bonds offering higher yields for Nuveen California Municipal
Bond Fund. We will also search for areas of the market that have been out of
favor such as municipal bonds issued by real estate investment trusts. Also, we
will sell positions such as non-rated bonds backed by assessment districts for
real estate development that have performed well.
As for Nuveen California Insured Municipal Bond Fund, we will continue to
invest in California's large supply of insured long-term municipal bond funds
and focus on maintaining a stable dividend that is exempt from federal and state
income taxes.
In a high tax state such as California, we believe that municipal bonds
represent a very attractive option for investors searching for current income
exempt from federal and local income taxes. In other words, for investors
wanting to keep more of what they earn.
"We will search for areas of the market that have been out of favor such as
municipal bonds issued by real estate investment trusts."
* The Lipper Peer Group return represents the average annualized total return
of the 106 funds in the Lipper California Municipal Debt Category for the
one-year period ended August 31, 1999. The return assumes reinvestment of
dividends and does not reflect any applicable sales charges.
** The Lipper Peer Group return represents the average annualized total return
of the 23 funds in the Lipper California Insured Municipal Debt Category for
the one-year period ended August 31, 1999. The return assumes reinvestment of
dividends and does not reflect any applicable sales charges.
SEMIANNUAL REPORT page 5
<PAGE>
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
Fund Spotlight as of August 31, 1999
Terms To Know
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income
investment portfolio. The longer the duration, the greater a portfolio's
sensitivity to changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by
subtracting the fund's liabilities from its assets and dividing by the number of
shares outstanding.
SEC Yield A standardized calculation that the Securities and Exchange
Commission requires mutual funds to use when advertising rates of income return.
This standardized rate ensures that investors are comparing "apples to apples"
when comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security
to pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share earned
over a specific one-month or 30-day period expressed as a percentage of the
maximum offering price of the fund shares at the end of the period.
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $10.39 $10.38 $10.39 $10.41
- -------------------------------------------------------------------------------
Fund Symbol NCAAX N/A NCACX NCSPX
- -------------------------------------------------------------------------------
CUSIP 67065N100 67065N209 67065N308 67065N407
- -------------------------------------------------------------------------------
Inception Date 9/94 3/97 9/94 7/86
- -------------------------------------------------------------------------------
</TABLE>
Total Returns (Annualized)+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
1-Year -0.21% -4.39% -0.93% -0.76% 0.10%
- -------------------------------------------------------------------------------
1-Year TER* 2.80% -1.50% 1.64% 1.91% 3.25%
- -------------------------------------------------------------------------------
5-Year 5.98% 5.07% 5.27% 5.35% 6.29%
- -------------------------------------------------------------------------------
5-Year TER* 9.16% 8.22% 8.01% 8.15% 9.62%
- -------------------------------------------------------------------------------
10-Year 6.52% 6.06% 5.96% 5.81% 6.80%
- -------------------------------------------------------------------------------
10-Year TER* 9.93% 9.46% 9.02% 8.79% 10.37%
- -------------------------------------------------------------------------------
</TABLE>
+ Class R shares 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.
* Taxable Equivalent Return (Based on a combined federal and state tax rate of
37.5%.)
Tax-Free Yields
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
Distribution Rate 5.20% 4.98% 4.45% 4.62% 5.42%
- -------------------------------------------------------------------------------
SEC 30-Day Yield 4.72% 4.52% 3.97% 4.17% 4.92%
- -------------------------------------------------------------------------------
Taxable Equivalent Yield 7.55% 7.23% 6.35% 6.67% 7.87%
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)/./
[BAR CHART APPEARS HERE]
9/98 .4450
10/98 .4450
11/98 .4450
12/98 .4450
-----
1/99 .0450
2/99 .0450
3/99 .0450
4/99 .0450
5/99 .0450
6/99 .0450
7/99 .0450
8/99 .0450
****
Morningstar Rating/TM/++
Overall rating among 1,591
municipal bond funds as
of 8/31/99
Portfolio Statistics
Total Net Assets $270.7 million
- -----------------------------------
Average Effective
Maturity 18.83 years
- -----------------------------------
Average Duration 8.08
- -----------------------------------
/./ The fund also paid shareholders capital gains in November of $0.0482 per
share.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
++ The Morningstar rating is an overall rating for the municipal bond category
and relates to Class A shares only; other classes may vary. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of
8/31/99 and are subject to change every month. Past performance is no
guarantee of future results. Ratings are calculated from the fund's three-,
five-, and 10-year average annual returns (if applicable) in excess of 90-day
Treasury bill returns, with appropriate fee adjustments, and a risk factor
that reflects fund performance below 90-day T-bill returns. Class A shares of
the fund received four stars for the three-year period. The top 10% of the
funds in a broad asset class receive five stars and the next 22.5% receives
four stars. The fund was rated among 1,591 funds for the three-year period.
SEMIANNUAL REPORT page 6
<PAGE>
NUVEEN CALIFORNIA INSURED MUNICIPAL BOND FUND
Fund Spotlight as of August 31, 1999
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $10.51 $10.52 $10.44 $10.50
- -------------------------------------------------------------------------------
Fund Symbol NCAIX N/A NCAKX NCIBX
- -------------------------------------------------------------------------------
CUSIP 67065N506 67065N605 67065N704 67065N803
- -------------------------------------------------------------------------------
Inception Date 9/94 3/97 9/94 7/86
- -------------------------------------------------------------------------------
</TABLE>
Total Returns (Annualized)+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
1-Year -0.92% -5.10% -1.67% -1.52% -0.67%
1-Year TER* 1.95% -2.35% 0.73% 1.00% 2.31%
5-Year 5.77% 4.86% 4.99% 5.00% 5.99%
5-Year TER* 8.84% 7.91% 7.60% 7.68% 9.20%
10-Year 6.64% 6.18% 6.02% 5.85% 6.88%
10-Year TER* 9.91% 9.43% 8.94% 8.69% 10.29%
</TABLE>
+ Class R shares 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.
* Taxable Equivalent Return (Based on a combined federal and state tax rate of
37.5%.)
Tax-Free Yields
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
Distribution Rate 5.02% 4.81% 4.22% 4.43% 5.20%
SEC 30-Day Yield 4.13% 3.96% 3.38% 3.58% 4.33%
Taxable Equivalent Yield 6.61% 6.34% 5.41% 5.73% 6.93%
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)/./
[BAR CHART APPEARS HERE]
10/98 .0440
11/98 .0440
12/98 .0440
1/99 .0440
-----
2/99 .0430
3/99 .0430
4/99 .0430
5/99 .0430
6/99 .0430
7/99 .0430
8/99 .0430
-----
9/99 .0445
/./ The fund also paid shareholders capital gains in November of $0.0079 per
share.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Portfolio Statistics
Total Net Assets $238.1 million
- ----------------------------------
Average Effective
Maturity 17.61 years
- ----------------------------------
Average Duration 7.41
- ----------------------------------
Terms To Know
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income
investment portfolio. The longer the duration, the greater a portfolio's
sensitivity to changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by
subtracting the fund's liabilities from its assets and dividing by the number of
shares outstanding.
SEC Yield A standardized calculation that the Securities and Exchange
Commission requires mutual funds to use when advertising rates of income return.
This standardized rate ensures that investors are comparing "apples to apples"
when comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security
to pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share earned
over a specific one-month or 30-day period expressed as a percentage of the
maximum offering price of the fund shares at the end of the period.
SEMIANNUAL REPORT page 7
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen California Municipal Bond Fund
August 31,1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 3.8%
$ 960,000 California Educational Facilities Authority, Pooled College and 4/07 at 102 Baa2 $ 982,454
University Projects Revenue Bonds, Series 1997B (Southern California
College of Optometry), 6.300%, 4/01/21
1,500,000 Certificates of Participation, California Statewide Community 12/06 at 105 N/R 1,586,370
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 3,442,180
4,335,000 6.000%, 11/01/21 11/03 at 102 Aa3 4,393,566
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 9.0%
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 AA- 3,338,730
3,635,000 7.500%, 4/01/22 4/05 at 102 AA- 4,115,547
3,750,000 California Health Facilities Financing Authority, Insured Revenue 8/06 at 102 AAA 3,841,613
Bond (Sutter/CHS), 5.875%, 8/15/16
5,370,000 California Health Facilities Financing Authority, Hospital 5/03 at 102 A- 5,339,284
Revenue Bonds (Downey Community Hospital), Series 1993, 5.750%, 5/15/15
3,380,000 California Health Facilities Financing Authority, Kaiser 12/00 at 102 A 3,576,040
Permanente 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 1,523,779
Participation, Series 1993 Community Hospital of Central California),
5.000%, 2/01/23
2,475,000 City of Loma Linda, California, Hospital Revenue Bonds (Loma 12/03 at 102 N/R 2,493,414
Linda University Medical Center Project), Series 1993-A,
6.000%, 12/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 17.7%
6,570,000 California Housing Finance Agency, Multifamily Housing Revenue 8/06 at 102 AAA 6,770,254
Bonds II, 1996 Series A, 6.050%, 8/01/27
California Statewide Communities Development Authority, Apartment
Development Revenue Refunding Bonds (Irvine Apartment Communities,
L.P.), Series 1998A:
7,950,000 5.250%, 5/15/25 (Mandatory put 5/15/13) 7/08 at 101 BBB 7,648,695
1,500,000 5.100%, 5/15/25 (Mandatory put 5/15/10) 7/08 at 101 BBB 1,440,060
2,905,000 California Statewide Communities Development Authority, Senior 6/06 at 100 AAA 3,029,799
Lien 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 2,999,730
(Heritage Park Apartments), 5.850%, 5/01/30 (Alternative Minimum Tax)
4,605,000 The Community Redevelopment Agency of the City of Los Angeles, 6/05 at 105 AAA 5,137,476
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 7/07 at 102 AAA 4,509,540
(Earthquake Rehabilitation Project), Series 1997C, 5.900%,
1/01/30 (Alternative Minimum Tax)
3,285,000 City of Riverside, California, Multifamily Housing Revenue Bonds 7/02 at 100 AAA 3,366,337
(Fannie Mae Pass-through Certificate Program/Birchwood Park Apartment
Project), Series 1992A, 6.500%, 1/01/18
4,005,000 City of Riverside, California, Multifamily Housing Revenue Bonds 7/02 at 100 AAA 4,104,164
(Fannie Mae Pass-through Certificate Program/Palm Shadows Apartments
Project), 1992 Series A, 6.500%, 1/01/18
2,000,000 County of Riverside (California), Mobile Home Park Revenue Bonds 3/09 at 102 N/R 1,895,280
(Bravo Mobile Home Park Project), Series 1999B, 5.900%, 3/20/29
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$2,080,000 City of Salinas, California, Housing Facility Refunding Revenue Bonds, 7/04 at 102 AAA $2,188,014
Series 1994A (GNMA Collateralized - Villa Serra Project), 6.500%, 7/20/17
2,000,000 San Dimas Housing Authority, Mobile Home Park Revenue Bonds 7/08 at 102 N/R 1,881,540
(Charter Oak Mobile Home Estates Acquisition Project),
Series 1998A, 5.700%, 7/01/28
3,000,000 Housing Authority of the County of Santa Cruz, Multifamily 7/00 at 102 AAA 3,108,270
Housing Refunding Revenue Bonds, Series 1990A (Fannie Mae
Collateralized), 7.750%, 7/01/23
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 6.0%
2,250,000 California Housing Finance Agency, Home Mortgage Revenue 2/07 at 102 AAA 2,272,320
Bonds, 1997 Series B, 6.100%, 2/01/28 (Alternative Minimum Tax)
4,750,000 California Housing Finance Agency, Home Mortgage Revenue 8/05 at 102 AAA 4,916,250
Bonds, 1995 Series F, 5.950%, 8/01/14
33,500,000 California Housing Finance Agency, Home Mortgage Revenue 8/09 at 100 AAA 5,564,015
Bonds, 1999 Series F, 0.000%, 2/01/30 (Alternative Minimum Tax)
2,850,000 California Rural Home Mortgage Finance Authority, Single No Opt. Call AAA 3,145,488
Family Mortgage Revenue Bonds (Mortgage-Backed Securities Program),
1997 Series A, 7.000%, 9/01/29 (Alternative Minimum Tax)
1,950,000 County of San Bernardino (California), Single Family Home 5/07 at 22 9/16 AAA 278,226
Mortgage Revenue Bonds (Mortgage-Backed Securities Program),
1997 Series A, 0.000%, 5/01/31 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 4.9%
9,000,000 Revenue Refunding Certificates of Participation (American 10/07 at 102 BBB 8,435,520
Baptist Homes of the West Facilities Project), Series 1997A,
5.850%, 10/01/27
2,500,000 California Statewide Communities Development Authority, 11/04 at 102 AA- 2,659,700
Certificates of Participation (Solheim Lutheran Home), 6.500%, 11/01/17
2,000,000 Chico (California), Redevelopment Agency, Insured 2/01 at 102 AA- 2,073,180
Certificates of Participation (Sierra Sunrise Lodge), Series 1991A,
Walker Senior Housing Corporation VII, 6.750%, 2/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 0.7%
Petaluma Joint High School District (Sonoma County, California), General
Obligation Bonds, Election of 1992, Series C:
4,220,000 0.000%, 8/01/20 8/04 at 38 13/32 AAA 1,207,511
2,080,000 0.000%, 8/01/21 8/04 at 36 1/8 AAA 559,042
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 28.1%
4,825,000 Certificates of Participation (1991 Financing Project), County of Alameda, 9/06 at 102 AAA 4,971,921
California, Alameda County Public Facilities Corporation, 6.000%, 9/01/21
1,365,000 City of Brea (California), Community Facilities District No. 1997-1, Olinda 3/06 at 102 N/R 1,308,284
Heights Public Improvements), 1998 Special Tax Bonds, 5.875%, 9/01/28
7,000,000 Brea Redevelopment Agency (Orange County, California), 1993 Tax Allocation 8/03 at 102 AAA 6,940,640
Refunding Bonds (Redevelopment Project AB), 5.500%, 8/01/17
Brentwood Infrastructure Financing Authority, CIFP 98-1 Infrastructure Revenue
Bonds, Series 1998 (Contra Costa County, California):
1,225,000 5.750%, 9/02/18 9/99 at 103 N/R 1,172,509
2,440,000 5.875%, 9/02/28 9/99 at 103 N/R 2,338,594
Brentwood Infrastructure Financing Authority, CIFP 99-1 Infrastructure Revenue
Bonds, Series 1999 (Contra Costa County, California):
1,675,000 6.000%, 9/02/22 9/00 at 103 N/R 1,637,229
1,500,000 6.000%, 9/02/29 9/00 at 103 N/R 1,452,420
2,000,000 Carson Redevelopment Agency (California), Redevelopment 10/03 at 102 BBB+ 2,017,600
Project 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 2,589,750
California), Tax Allocation Revenue Bonds (North Fontana Redevelopment
Project), 1990 Series A, 7.250%, 9/01/20
</TABLE>
9
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen California Municipal Bond Fund (continued)
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$2,250,000 Grossmont Union High School District (California), Certificates 9/08 at 102 AAA $2,258,190
of Participation (1997 Facility Bridge Funding Program), 5.750%,
9/01/26 (WI)
2,000,000 La Mirada Redevelopment Agency (California), Community Facilities 10/08 at 102 N/R 1,882,880
District No.89-1 (Civic Theatre Project), 1998 Refunding Special
Tax Bonds (Tax Increment Contribution), 5.700%, 10/01/20
1,260,000 Marysville Community Development Agency (California), Marysville 3/02 at 102 Baa3 1,334,529
Plaza Project, 1992 Tax Allocation Refunding Bonds, 7.250%, 3/01/21
6,240,000 City of Milpitas, Limited Obligation Improvement Bonds, Local 9/99 at 103 N/R 5,873,899
Improvement District No. 20, 1998 Series A (Santa Clara County,
California), 5.700%, 9/02/18
1,590,000 City of Ontario (San Bernardino County, California), Limited 9/99 at 103 N/R 1,651,692
Obligation Improvement Bonds, Assessment District No. 100C
(California Commerce Center Phase III), 8.000%, 9/02/11
4,300,000 Orange County Development Agency, Santa Ana Heights Project Area, 9/03 at 102 BBB 4,340,721
1993 Tax Allocation Revenue Bonds (California), 6.125%, 9/01/23
2,000,000 Community Facilities District No. 88-1 of the City of Poway, 8/08 at 102 N/R 2,113,340
California (Parkway Business Centre), Special Tax Refunding Bonds,
Series 1998, 6.750%, 8/15/15
1,645,000 City of Rancho Cucamonga, Assessment District No. 93-1 (Masi 9/99 at 103 N/R 1,635,081
Plaza), Limited Obligation Improvement Bonds, 6.250%, 9/02/22
1,360,000 Redding Joint Powers Financing Authority, Lease Revenue Bonds 6/03 at 102 A 1,399,780
(Capital Improvement Projects), Series 1993, 6.250%, 6/01/23
1,000,000 County of Sacramento (California), Laguna Creek Ranch/Elliott 12/07 at 102 N/R 946,810
Ranch Community Facilities 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, Consolidated 9/99 at 103 N/R 2,384,686
Refunding District 94-3, Series No. A-181, Monterey County, California,
7.400%, 9/02/09
5,000,000 City and County of San Francisco, Redevelopment Financing 8/03 at 103 A 4,617,850
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- 7,027,750
Bonds (1997 Affordable Housing Project), Series 1977A, 6.000%, 10/01/27
(Alternative Minimum Tax)
4,000,000 Shafter Joint Powers Financing Authority, Lease Revenue Bonds, 1/07 at 101 A2 4,072,360
1997 Series A (Community Correctional Facility Acquisition Project),
6.050%, 1/01/17
1,000,000 City of Stockton, Mello-Roos Revenue Bonds, Series 1997A, 8/05 at 102 N/R 1,005,830
Community Facilities District No. 90-2 (Brookside Estates),
6.200%, 8/01/15
4,225,000 City of Stockton (California), Limited Obligation Refunding No Opt. Call N/R 4,026,679
Improvement Bonds, Weber/Sperry Ranches Assessment District, Series 22,
5.650%, 9/02/13
2,000,000 Taft Public Financing Authority, Lease Revenue Bonds, 1997 Series 1/07 at 101 A2 2,036,180
A (Community Correctional Facility Acquisition Project), 6.050%, 1/01/17
1,100,000 County of Tulare (California), Certificates of Participation 11/02 at 102 A3 1,211,727
(1992 Financing Project), Series B, Tulare County Public Facilities
Corporation, 6.875%, 11/15/12
2,000,000 Vallejo Public Financing Authority, 1998 Limited Obligation No Opt. Call N/R 1,945,860
Revenue Bonds (Fairgrounds Drive Assessment District Refinancing),
5.700%, 9/02/11
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 5.7%
5,000,000 California Statewide Communities Development Authority, Special 10/07 at 102 Baa3 4,650,100
Facilities Lease Revenue Bonds, 1997 Series A, 5.700%, 10/01/33
(Alternative Minimum Tax)
7,150,000 Foothill/Eastern Transportation Corridor Agency (California), 1/05 at 100 BBB- 6,165,660
Toll Road Revenue Bonds, Series 1995A, 5.000%, 1/01/35
8,900,000 Foothill/Eastern Transportation Corridor Agency (California), 1/14 at 101 BBB- 4,699,645
Toll Road Refunding Revenue Bonds, Series 1999, 0.000%, 1/15/28
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - 15.5%
$1,500,000 Insured Certificates of Participation (Channing House), 1/01 at 102 N/R*** $1,588,725
Series 1991A, ABAG Finance Authority for Nonprofit Corporations,
7.125%, 1/01/21 (Pre-refunded to 1/01/01)
2,035,000 Certificates of Participation (1991 Capital Improvement 10/01 at 102 Baa*** 2,207,710
Project), Bella Vista Water District (California), 7.375%, 10/01/17
(Pre-refunded to 10/01/01)
2,000,000 California Health Facilities Financing Authority, Health Facility Revenue 10/00 at 102 N/R*** 2,117,880
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 9,274,142
Revenue Bonds (The Trustees of the California State University), 1992
Series A (Various California State University Projects), 6.700%,
10/01/71 (Pre-refunded to 10/01/02)
3,000,000 California Statewide Communities Development Authority, Certificates of 7/04 at 102 AA*** 3,337,380
Participation, 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 2,112,840
Corporation Project), Series 1990 (California), 8.100%, 7/01/20
(Pre-refunded to 7/01/00)
1,950,000 East Bay Municipal Utility District (Alameda and Contra Costa Counties, 6/00 at 102 AAA 2,044,751
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 Counties, 12/01 at 102 AAA 4,283,880
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 3,079,547
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*** 5,053,627
Bonds, Series 1994A (Los Angeles County Regional Park and Open Space
District), 6.125%, 10/01/10 (Pre-refunded to 10/01/04)
2,000,000 Certificates of Participation (1990 Financing Project), Sonoma County 7/00 at 102 A+*** 2,100,720
Office of Education, 7.375%, 7/01/20 (Pre-refunded to 7/01/00)
4,200,000 Certificates of Participation (Capital Improvement Program), 1996 Series A, 2/06 at 102 AAA 4,623,691
County of Tulare, California, 6.000%, 2/15/16 (Pre-refunded to 2/15/06)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 7.5%
9,000,000 California Pollution Control Financing Authority, Solid Waste 7/07 at 102 N/R 9,363,960
Disposal Revenue Bonds (CanFibre of Riverside Project), Tax-Exempt Series
1997A, 9.000%, 7/01/19 (Alternative Minimum Tax)
3,000,000 California Statewide Communities Development Authority, Certificates of 12/04 at 102 N/R 2,916,960
Participation Refunding (Rio Bravo Fresno Project), 1999 Series A, 6.300%,
12/01/18
6,645,000 Merced Irrigation District (California), 1998 Revenue Certificates of 3/03 at 102 N/R 6,376,941
Participation (1998 Electric System Project), 5.800%, 3/01/15
1,660,000 Salinas Valley Solid Waste Authority, Revenue Bonds, Series 1997, 5.800%, 8/02 at 102 BBB 1,581,781
8/01/27 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
$302,660,000 Total Investments - (cost $261,702,294) - 98.9% 267,598,119
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.1% 3,064,796
---------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $270,662,915
=====================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
11
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen California Insured Municipal Bond Fund
August 31,1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 1.9%
$4,500,000 California Educational Facilities Authority, Revenue Bonds 10/06 at 102 AAA $4,621,725
(University of San Francisco), Series 1996, 6.000%, 10/01/26
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 5.7%
5,000,000 California Health Facilities Authority, Kaiser Permanente 10/01 at 101 A 4,953,750
Medical Care Program, Semiannual Tender Revenue Bonds,
1983 Tender Bonds, 5.450%, 10/01/13
8,500,000 California Statewide Communities Development Authority, 8/02 at 102 AAA 8,710,800
Sutter Health Obligated Group, Certificates of Participation,
6.125%, 8/15/22
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 7.6%
6,340,000 California Housing Finance Agency, Housing Revenue Bonds 2/02 at 102 AAA 6,625,871
(Insured), 1991 Series B, 6.850%, 8/01/23
2,545,000 California Housing Finance Agency, Multifamily Housing 8/06 at 102 AAA 2,622,572
Revenue Bonds II, 1996 Series A, 6.050%, 8/01/27
3,685,000 The Community Redevelopment Agency of the City of Los 6/05 at 105 AAA 4,111,097
Angeles, California, Multifamily Housing
Revenue Refunding Bonds, 1995 Series A (Angelus Plaza
Project), 7.400%, 6/15/10
2,555,000 City of Napa, Mortgage Revenue Refunding Bonds, Series 1992A 7/02 at 102 AAA 2,668,698
(FHA-Insured Mortgage Loan - Creekside Park Apartments Project),
6.625%, 7/01/24
2,000,000 City of Napa, Mortgage Revenue Refunding Bonds, Series 1994A 7/04 at 101 AAA 2,097,580
(FHA-Insured Mortgage Loan - Creekside Park II Apartments
Project), 6.625%, 7/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 8.6%
4,750,000 California Housing Finance Agency, Single Family Mortgage 2/07 at 102 Aaa 4,845,333
Bonds II, 1997 Series A, 6.050%, 8/01/26 (Alternative Minimum Tax)
5,000,000 California Housing Finance Agency, Home Mortgage Revenue 8/07 at 102 AAA 5,092,750
Bonds, 1997 Series E, 6.100%, 8/01/29 (Alternative Minimum Tax)
5,000,000 California Housing Finance Agency, Home Mortgage Revenue 8/05 at 102 AAA 5,175,000
Bonds, 1995 Series F, 5.950%, 8/01/14
1,500,000 California Housing Finance Agency, Home Mortgage Revenue 2/06 at 102 AAA 1,533,480
Bonds, 1996 Series E, 6.150%, 8/01/25 (Alternative Minimum Tax)
22,755,000 California Housing Finance Agency, Home Mortgage Revenue 8/09 at 100 AAA 3,779,378
Bonds, 1999 Series F, 0.000%, 2/01/30 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 8.6%
5,000,000 State of California, Various Purpose General Obligation 4/03 at 102 AAA 4,978,950
Bonds, 5.500%, 4/01/19
2,000,000 State of California, General Obligation Bonds, 4.750%, 2/01/24 2/09 at 101 AAA 1,742,760
5,000,000 State of California, Veterans General Obligation Bonds, 12/03 at 102 AAA 4,852,850
Series BH, 5.500%, 12/01/24 (Alternative Minimum Tax)
Golden West Schools Financing Authority (California),
1998 Revenue Bonds, Series A (School District General
Obligation Refunding Program):
1,520,000 0.000%, 2/01/18 8/13 at 75 29/32 AAA 523,108
2,560,000 0.000%, 8/01/18 8/13 at 73 3/8 AAA 851,661
1,500,000 0.000%, 2/01/19 8/13 at 70 15/16 AAA 479,775
2,650,000 0.000%, 8/01/19 8/13 at 68 9/16 AAA 819,327
2,755,000 0.000%, 8/01/20 8/13 at 63 27/32 AAA 791,098
1,430,000 0.000%, 2/01/21 8/13 at 61 11/16 AAA 395,710
2,855,000 0.000%, 8/01/21 8/13 at 59 5/8 AAA 763,284
</TABLE>
______
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 3,000,000 Sanger Unified School District (Fresno, California), 1999 No Opt. Call AAA $ 3,021,540
General Obligation Refunding Bonds, 5.600%, 8/01/23
3,040,000 Sulphur Springs Union School District (County of Los Angeles, No Opt. Call AAA 1,259,229
California), General Obligation Bonds, Election of 1991
Series A, 0.000%, 9/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 28.1%
4,825,000 Certificates of Participation (1991 Financing Project), County 9/06 at 102 AAA 4,971,921
of Alameda, California, Alameda County Public Facilities Corporation,
6.000%, 9/01/21
2,000,000 County of Alameda, California, 1998 Certificates of Participation, Alameda 6/03 at 101 AAA 1,905,160
County Medical Center Project, 5.300%, 6/01/26
20,000,000 Anaheim Public Financing Authority, Lease Revenue Bonds No Opt. Call AAA 2,978,200
(Anaheim Public Improvements Project), Subordinate Lease Revenue
Bonds, 1997 Series C, 0.000%, 9/01/32
1,225,000 Redevelopment Agency of the City of Barstow, Central No Opt. Call AAA 1,440,735
Redevelopment Project Tax Allocation Bonds, 1994 Series A,
7.000%, 9/01/14
7,005,000 Big Bear Lake Financing Authority (San Bernardino County, 8/05 at 102 AAA 7,483,231
California), 1995 Tax Allocation Refunding Revenue Bonds,
6.300%, 8/01/25
6,990,000 Chino Unified School District, Certificates of Participation 9/05 at 102 AAA 7,249,119
(1995 Master Lease Program), 6.125%, 9/01/26
850,000 Redevelopment Agency of the City of Concord, Central Concord 1/00 at 101 AAA 869,567
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 3,976,969
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 2,620,225
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, 9/04 at 102 AAA 3,217,170
California, Certificates of Participation, Series of 1994,
6.250%, 9/01/12
1,000,000 La Quinta Redevelopment Agency, La Quinta Redevelopment No Opt. Call AAA 1,200,020
Project, Tax Allocation Refunding Bonds, 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 7,266,477
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 8,724,655
Participation, Series A, 6.000%, 7/01/26
8,000,000 Pomona Public Financing Authority (California), 1998 Refunding 2/08 at 102 AAA 7,242,960
Revenue Bonds, Series W (Southwest Pomona Redevelopment Project),
5.000%, 2/01/30
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 2,469,150
1,000,000 6.750%, 7/01/24 7/04 at 102 AAA 1,094,280
2,250,000 Redevelopment Agency of the City of San Jose, Merged Area 2/04 at 102 AAA 1,963,283
Redevelopment Project, Tax Allocation Bonds, Series 1993, 4.750%,
8/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 6.2%
5,000,000 Airports Commission, City and County of San Francisco, 5/06 at 101 AAA 4,944,050
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 13B, 5.625%, 5/01/21 (Alternative Minimum Tax)
35,355,000 San Joaquin Hills Transportation Corridor Agency, Toll Road No Opt. Call AAA 7,697,844
Refunding Revenue Bonds, Series 1997 A, 0.000%, 1/15/26
2,000,000 Southern California Rapid Transit District, Certificates of 1/01 at 102 1/2 AAA 2,131,300
Participation (Workers Compensation Funding Program), 7.500%, 7/01/05
</TABLE>
13
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen California Insured Municipal Bond Fund (continued)
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - 27.0%
$ 7,000,000 City of Big Bear Lake, California, 1992 Water Revenue Refunding 4/02 at 102 AAA $ 7,529,410
Bonds, 6.375%, 4/01/22 (Pre-refunded to 4/01/02)
3,525,000 Brea Public Financing Authority (Orange County, California), 8/01 at 102 AAA 3,789,904
1991 Tax Allocation Revenue Bonds, Series A (Redevelopment Project AB),
7.000%, 8/01/15 (Pre-refunded to 8/01/01)
3,000,000 Calaveras County Water District (California), Certificates of 5/01 at 102 AAA 3,200,010
Participation (1991 Ebbetts Pass Water System Improvements Project),
6.900%, 5/01/16 (Pre-refunded to 5/01/01)
1,000,000 California Educational Facilities Authority, Revenue Bonds 11/00 at 102 AAA 1,059,420
(Pepperdine University), Series 1990, 7.200%, 11/01/15 (Pre-refunded
to 11/01/00)
5,000,000 State Public Works Board of the State of California, Lease 9/00 at 102 AAA 5,262,900
Revenue Bonds (Department of Corrections), 1990 Series A (State
Prison - Madera County), 7.000%, 9/01/09 (Pre-refunded to 9/01/00)
2,000,000 East Bay Municipal Utility District (Alameda and Contra Costa 6/00 at 102 AAA 2,097,180
Counties, California), Water System Subordinated Revenue Bonds,
Series 1990, 7.500%, 6/01/18 (Pre-refunded to 6/01/00)
2,000,000 Eastern Municipal Water District (Riverside County, California), 7/01 at 102 AAA 2,128,100
Water and Sewer Revenue Bonds, Certificates of Participation, Series
1991, 6.500%, 7/01/20 (Pre-refunded to 7/01/01)
2,000,000 The City of Los Angeles (California), Los Angeles Convention 8/00 at 102 AAA 2,102,560
and Exhibition Center, Certificates of Participation, 1990 Series,
7.000%, 8/15/21 (Pre-refunded to 8/15/00)
5,000,000 Los Angeles County Transportation Commission (California), Proposition C 7/02 at 102 AAA 5,386,900
Sales Tax Revenue Bonds, Second Senior Bonds, Series 1992-A, 6.250%,
7/01/13 (Pre-refunded to 7/01/02)
9,500,000 Modesto Irrigation District Financing Authority, Domestic Water 9/02 at 102 AAA 10,220,670
Project Revenue Bonds, Series 1992A, 6.125%, 9/01/19
(Pre-refunded to 9/01/02)
2,500,000 Mt. Diablo Hospital District, Insured Hospital Revenue Bonds, 12/00 at 102 AAA 2,676,800
1990 Series A, 8.000%, 12/01/11 (Pre-refunded to 12/01/00)
2,000,000 Mt. Diablo Unified School District, Community Facilities 8/00 at 102 AAA 2,101,160
District No. 1, Special Tax Bonds, Series 1990 (Contra Costa County,
California), 7.050%, 8/01/20 (Pre-refunded to 8/01/00)
2,000,000 Redevelopment Agency of the City of Pittsburgh, California, Los 8/01 at 103 AAA 2,174,360
Medanos Community Development Project, Tax Allocation Bonds, Series 1991,
7.150%, 8/01/21 (Pre-refunded to 8/01/01)
County of Riverside, California (1994 Desert Justice Facility Project),
Certificates of Participation:
3,600,000 6.000%, 12/01/17 (Pre-refunded to 12/01/04) 12/04 at 101 AAA 3,924,936
2,500,000 6.250%, 12/01/21 (Pre-refunded to 12/01/04) 12/04 at 101 AAA 2,754,775
3,000,000 Sacramento Municipal Utility District (California), Electric 9/01 at 102 AAA 3,203,910
Revenue Bonds, 1991 Series Y, 6.500%, 9/01/21 (Pre-refunded to 9/01/01)
2,500,000 San Bernardino County Transportation Authority, Sales Tax 3/02 at 102 AAA 2,628,400
Revenue Bonds (Limited Tax Bonds), 1992 Series A, 6.000%, 3/01/10
2,000,000 San Diego Regional Building Authority (California), Lease 1/00 at 102 AAA 2,064,360
Revenue Bonds, Series 1990A (San Miguel Consolidated Fire Protection
District Project), General Obligation Bonds, 7.250%, 1/01/20
(Pre-refunded to 1/01/00)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 2.9%
3,805,000 City of Lodi, California, Electric System Revenue Bonds 1/09 at 101 AAA 3,737,081
Certificates of Participation, 1999 Series A, Installment Purchase
Contract with the Lodi Public Improvement Corporation, 5.500%, 1/15/24 (WI)
3,000,000 City of Shasta Lake, 1996-2 Certificates of Participation, 6.000%, 4/01/16 4/05 at 102 AAA 3,096,510
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer - 3.6%
$ 2,500,000 The Metropolitan Water District of Southern California, 7/06 at 100 AAA $ 2,201,022
Water Revenue Refunding Bonds, 1996 Series B, 4.750%, 7/01/21
1,500,000 Public Facilities Financing Authority of the City of San 5/09 at 101 AAA 1,357,290
Diego (California), Sewer Revenue Bonds, Series 1999B, 5.000%, 5/15/29
5,000,000 City of Vallejo Refunding Revenue Bonds, 1996 Series A 5/06 at 102 AAA 5,080,950
(Water Improvement Project), 5.875%, 5/01/26
- -----------------------------------------------------------------------------------------------------------------------------------
$308,025,000 Total Investments - (cost $230,015,979) - 100.2% 238,542,250
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.2)% (473,794)
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $238,068,456
====================================================================================================================
</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.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
15
<PAGE>
Statement of Net Assets (Unaudited)
August 31, 1999
<TABLE>
<CAPTION>
California
California Insured
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $267,598,119 $238,542,250
Cash 1,644,699 815,487
Receivables:
Interest 4,611,274 3,427,109
Investments sold 87,550 --
Shares sold 155,918 82,259
Other assets 24,055 27,253
- -------------------------------------------------------------------------------------------
Total assets 274,121,615 242,894,358
- -------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 2,250,000 3,723,721
Shares redeemed 221,397 230,335
Accrued expenses:
Management fees (note 6) 124,575 109,905
12b-1 distribution and service fees (notes 1 and 6) 22,440 21,365
Other 136,847 149,467
Dividends payable 703,441 591,109
- -------------------------------------------------------------------------------------------
Total liabilities 3,458,700 4,825,902
- -------------------------------------------------------------------------------------------
Net assets (note 7) $270,662,915 $238,068,456
===========================================================================================
Class A Shares (note 1)
Net assets $ 42,860,810 $ 48,487,924
Shares outstanding 4,125,041 4,612,572
Net asset value and redemption price per share $ 10.39 $ 10.51
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 10.85 $ 10.97
===========================================================================================
Class B Shares (note 1)
Net assets $ 9,790,853 $ 11,729,048
Shares outstanding 943,060 1,115,005
Net asset value, offering and redemption price per share $ 10.38 $ 10.52
===========================================================================================
Class C Shares (note 1)
Net assets $ 11,813,759 $ 6,812,464
Shares outstanding 1,136,705 652,248
Net asset value, offering and redemption price per share $ 10.39 $ 10.44
===========================================================================================
Class R Shares (note 1)
Net assets $206,197,493 $171,039,020
Shares outstanding 19,817,133 16,293,074
Net asset value, offering and redemption price per share $ 10.41 $ 10.50
===========================================================================================
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended August 31, 1999
<TABLE>
<CAPTION>
California
California Insured
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Investment Income (note 1) $ 8,205,525 $ 7,053,508
- --------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 753,477 671,101
12b-1 service fees -- Class A (notes 1 and 6) 41,489 48,888
12b-1 distribution and service fees -- Class B (notes 1 and 6) 43,362 49,981
12b-1 distribution and service fees -- Class C (notes 1 and 6) 42,408 27,040
Shareholders' servicing agent fees and expenses 78,264 61,849
Custodian's fees and expenses 41,709 42,091
Trustees' fees and expenses (note 6) 2,733 2,518
Professional fees 6,804 5,918
Shareholders' reports -- printing and mailing expenses 34,989 49,214
Federal and state registration fees 12,780 9,991
Portfolio insurance expense -- 13,065
Other expenses 4,664 4,052
- --------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit 1,062,679 985,708
Custodian fee credit (note 1) (4,926) (5,905)
- --------------------------------------------------------------------------------------------------------
Net expenses 1,057,753 979,803
- --------------------------------------------------------------------------------------------------------
Net investment income 7,147,772 6,073,705
- --------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (notes 1 and 4) (917,874) (590,760)
Change in net unrealized appreciation or depreciation of investments (12,159,888) (12,772,631)
- --------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (13,077,762) (13,363,391)
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ (5,929,990) $ (7,289,686)
========================================================================================================
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
California California Insured
---------------------------------- ----------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
8/31/99 2/28/99 8/31/99 2/28/99
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 7,147,772 $ 13,330,413 $ 6,073,705 $ 11,643,242
Net realized gain (loss) from investment transactions
(notes 1 and 4) (917,874) 1,031,974 (590,760) 258,361
Change in net unrealized appreciation or depreciation
of investments (12,159,888) (600,160) (12,772,631) 847,868
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (5,929,990) 13,762,227 (7,289,686) 12,749,471
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,032,396) (1,620,887) (1,159,478) (1,920,349)
Class B (196,206) (200,523) (207,776) (263,828)
Class C (250,408) (290,569) (150,331) (221,918)
Class R (5,660,952) (11,079,070) (4,437,123) (9,255,409)
From accumulated net realized gains from investment
transactions:
Class A -- (153,240) -- (20,898)
Class B -- (28,610) -- (3,919)
Class C -- (32,763) -- (2,848)
Class R -- (951,059) -- (89,451)
In excess of net realized gains from investment transactions:
Class A -- -- -- (10,300)
Class B -- -- -- (1,931)
Class C -- -- -- (1,404)
Class R -- -- -- (44,092)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (7,139,962) (14,356,721) (5,954,708) (11,836,347)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 21,089,664 35,479,670 14,821,817 32,926,505
Net proceeds from shares issued to shareholders due
to reinvestment of distributions 4,156,773 8,761,391 3,402,007 6,965,808
- -----------------------------------------------------------------------------------------------------------------------------------
25,246,437 44,241,061 18,223,824 39,892,313
Cost of shares redeemed (15,897,280) (21,081,364) (15,457,943) (26,208,534)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 9,349,157 23,159,697 2,765,881 13,683,779
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (3,720,795) 22,565,203 (10,478,513) 14,596,903
Net assets at the beginning of period 274,383,710 251,818,507 248,546,969 233,950,066
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $270,662,915 $274,383,710 $238,068,456 $248,546,969
===================================================================================================================================
Balance of undistributed net investment income at the
end of period $ 194,665 $ 186,855 $ 153,488 $ 34,491
===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
18
<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, 1999, California and California Insured had when-issued purchase
commitments of $2,250,000 and $3,723,721, respectively.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income 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.
19
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
Insurance
California Insured invests in municipal securities which are either covered by
insurance or backed by an escrow or trust account containing sufficient U.S.
government or U.S. government agency securities, both of which ensure the timely
payment of principal and interest. Each insured municipal security is covered by
Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance.
Such insurance does not guarantee the market value of the municipal securities
or the value of the Fund's shares. Original Issue Insurance and Secondary Market
Insurance remain in effect as long as the municipal securities covered thereby
remain outstanding and the insurer remains in business, regardless of whether
the Fund ultimately disposes of such municipal securities. Consequently, the
market value of the municipal securities covered by Original Issue Insurance or
Secondary Market Insurance may reflect value attributable to the insurance.
Portfolio Insurance is effective only while the municipal securities are held by
the Fund. Accordingly, neither the prices used in determining 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 contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances, or by specified classes
of investors.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, 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, 1999.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
20
<PAGE>
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
California
--------------------------------------------------------
Six Months Ended 8/31/99 Year Ended 2/28/99
------------------------ -------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,135,044 $ 12,147,542 1,071,388 $ 11,687,908
Class B 334,791 3,588,398 501,459 5,481,597
Class C 224,703 2,408,204 623,022 6,803,964
Class R 275,986 2,945,520 1,052,596 11,506,201
Shares issued to shareholders due to reinvestment of distributions:
Class A 49,246 528,330 91,191 997,733
Class B 6,247 66,981 7,826 85,655
Class C 9,502 102,043 12,131 132,788
Class R 321,369 3,459,419 688,652 7,545,215
- --------------------------------------------------------------------------------------------------------------------------------
2,356,888 25,246,437 4,048,265 44,241,061
- --------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (416,050) (4,397,854) (474,337) (5,180,644)
Class B (73,411) (770,026) (46,662) (508,896)
Class C (47,676) (511,093) (57,000) (622,658)
Class R (955,456) (10,218,307) (1,351,198) (14,769,166)
- --------------------------------------------------------------------------------------------------------------------------------
(1,492,593) (15,897,280) (1,929,197) (21,081,364)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase 864,295 $ 9,349,157 2,119,068 $ 23,159,697
================================================================================================================================
California Insured
--------------------------------------------------------
Six Months Ended 8/31/99 Year Ended 2/28/99
------------------------ -------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------------
Shares sold:
Class A 616,012 $ 6,703,745 1,478,042 $ 16,416,739
Class B 354,850 3,847,531 559,676 6,191,761
Class C 132,394 1,431,851 396,536 4,367,453
Class R 263,428 2,838,690 537,388 5,950,552
Shares issued to shareholders due to reinvestment of distributions:
Class A 53,206 579,761 92,518 1,026,442
Class B 6,335 69,050 7,358 81,754
Class C 8,100 87,784 14,226 156,701
Class R 244,799 2,665,412 514,952 5,700,911
- --------------------------------------------------------------------------------------------------------------------------------
1,679,124 18,223,824 3,600,696 39,892,313
- --------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (318,231) (3,443,010) (582,791) (6,459,540)
Class B (40,843) (446,404) (40,526) (449,360)
Class C (122,523) (1,315,717) (70,267) (773,501)
Class R (947,164) (10,252,812) (1,675,268) (18,526,133)
- --------------------------------------------------------------------------------------------------------------------------------
(1,428,761) (15,457,943) (2,368,852) (26,208,534)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase 250,363 $ 2,765,881 1,231,844 $ 13,683,779
================================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid October 1, 1999, to shareholders of record on September
9, 1999, as follows:
<TABLE>
<CAPTION>
California California Insured
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dividend per share:
Class A $.0450 $.0440
Class B .0385 .0370
Class C .0400 .0385
Class R .0470 .0455
================================================================================================================================
</TABLE>
21
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the six months ended August
31, 1999, were as follows:
<TABLE>
<CAPTION>
California California Insured
- -------------------------------------------------------------------
<S> <C> <C>
Purchases:
Long-term municipal securities $42,965,874 $36,224,659
Short-term municipal securities 1,000,000 1,000,000
Sales:
Long-term municipal securities 34,271,164 31,550,605
Short-term municipal securities 1,000,000 3,100,000
====================================================================
</TABLE>
At August 31, 1999, the identified cost of investments owned for federal income
tax purposes was $261,702,294 for California and $230,028,050 for California
Insured.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at August 31, 1999, were as follows:
<TABLE>
<CAPTION>
California California Insured
- ---------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $ 9,613,193 $11,460,596
depreciation (3,717,368) (2,946,396)
- ----------------------------------------------------------------
Net unrealized appreciation $ 5,895,825 $ 8,514,200
================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of each Fund:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
- ------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
================================================
</TABLE>
The management fee compensates the 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 assets of California and .975 of 1% of the average daily net
assets 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, 1999, the Distributor collected sales
charges on purchases of Class A Shares of approximately $126,600 and $68,700 for
California and California Insured, respectively, of which approximately $126,600
and $59,400, 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, 1999, the Distributor compensated
authorized dealers directly with approximately $219,000 and $157,400 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, 1999, the Distributor retained approximately $59,700 and
$58,500 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.
22
<PAGE>
The Distributor also collected and retained approximately $13,100 and $22,100 of
CDSC on share redemptions for California and California Insured, respectively,
during the six months ended August 31, 1999.
7. Composition of Net Assets
At August 31, 1999, 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 $265,406,787 $230,037,184
Balance of undistributed net investment income 194,665 153,488
Accumulated net realized gain (loss) from investment transactions (834,362) (637,122)
Distributions in excess of net realized gains from investment transactions -- (11,365)
Net unrealized appreciation of investments 5,895,825 8,526,271
- ------------------------------------------------------------------------------------------------------------------
Net assets $270,662,915 $238,068,456
==================================================================================================================
</TABLE>
23
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
--------------------- -------------------
Net
CALIFORNIA Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
February 28/29, Value Income(a) (Loss) Total Income Gains Total Value Return(b)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 (d) $10.89 $.27 $(.50) $(.23) $(.27) $ -- $(.27) $10.39 (2.15)%
1999 10.91 .54 .03 .57 (.54) (.05) (.59) 10.89 5.28
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)
2000 (d) 10.89 .23 (.51) (.28) (.23) -- (.23) 10.38 (2.60)
1999 10.92 .47 .01 .48 (.46) (.05) (.51) 10.89 4.44
1998 (c) 10.56 .46 .41 .87 (.47) (.04) (.51) 10.92 8.39
Class C (9/94)
2000 (d) 10.90 .24 (.51) (.27) (.24) -- (.24) 10.39 (2.51)
1999 10.92 .49 .02 .51 (.48) (.05) (.53) 10.90 4.70
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)
2000 (d) 10.91 .28 (.50) (.22) (.28) -- (.28) 10.41 (2.04)
1999 10.93 .56 .03 .59 (.56) (.05) (.61) 10.91 5.50
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
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
CALIFORNIA Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Year Ended Asset Reimburse- Reimburse- Reimburse- Reimburse- Turnover
February 28/29, (000) ment ment ment (a) ment (a) Rate
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 (d) $ 42,861 .87%* 5.02%* .87%* 5.02%* 12%
1999 36,568 .90 4.97 .90 4.97 34
1998 29,125 .90 5.11 .90 5.11 45
1997 20,571 .94 5.16 .94 5.16 74
1996 12,709 1.00 5.23 .96 5.27 36
1995 (c) 3,146 1.41* 5.40* 1.00* 5.81* 32
Class B (3/97)
2000 (d) 9,791 1.62* 4.28* 1.62* 4.28* 12
1999 7,353 1.65 4.23 1.65 4.23 34
1998 (c) 2,324 1.66* 4.31* 1.66* 4.31* 45
Class C (9/94)
2000 (d) 11,814 1.42* 4.47* 1.42* 4.47* 12
1999 10,353 1.45 4.43 1.45 4.43 34
1998 4,061 1.45 4.56 1.45 4.56 45
1997 1,003 1.67 4.44 1.67 4.44 74
1996 684 1.84 4.39 1.71 4.52 36
1995 (c) 200 2.41* 4.37* 1.75* 5.03* 32
Class R (7/86)
2000 (d) 206,197 .67* 5.22* .67* 5.22* 12
1999 220,109 .71 5.16 .71 5.16 34
1998 216,309 .70 5.31 .70 5.31 45
1997 214,253 .70 5.41 .70 5.41 74
1996 216,390 .71 5.53 .71 5.53 36
1995 208,080 .71 5.83 .71 5.83 32
====================================================================================================================
</TABLE>
* Annualized.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(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, 1999.
24
<PAGE>
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
--------------------- -------------------
Net
CALIFORNIA INSURED Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
February 28/29, Value Income(a) (Loss) Total Income Gains Total Value Return(b)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 (d) $11.10 $.26 $(.59) $(.33) $(.26) $ -- $(.26) $10.51 (3.02)%
1999 11.06 .52 .06 .58 (.53) (.01)** (.54) 11.10 5.31
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)
2000 (d) 11.11 .22 (.59) (.37) (.22) -- (.22) 10.52 (3.39)
1999 11.06 .44 .06 .50 (.44) (.01)** (.45) 11.11 4.61
1998 (c) 10.67 .45 .40 .85 (.46) -- (.46) 11.06 8.13
Class C (9/94)
2000 (d) 11.03 .23 (.59) (.36) (.23) -- (.23) 10.44 (3.34)
1999 10.98 .46 .06 .52 (.46) (.01)** (.47) 11.03 4.81
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)
2000 (d) 11.08 .27 (.58) (.31) (.27) -- (.27) 10.50 (2.86)
1999 11.04 .54 .06 .60 (.55) (.01)** (.56) 11.08 5.49
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
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
CALIFORNIA INSURED Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Year Ended Asset Reimburse- Reimburse- Reimburse- Reimburse- Turnover
February 28/29, (000) ment ment ment (a) ment (a) Rate
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 (d) $ 48,488 .89%* 4.81%* .89%* 4.81%* 13%
1999 47,300 .93 4.72 .93 4.72 25
1998 36,203 .90 4.93 .90 4.93 26
1997 27,598 .94 5.05 .94 5.05 51
1996 17,250 .98 4.99 .97 5.00 38
1995 (c) 4,753 1.24* 5.26* 1.05* 5.45* 25
Class B (3/97)
2000 (d) 11,729 1.65* 4.06* 1.64* 4.07* 13
1999 8,825 1.68 3.96 1.68 3.96 25
1998 (c) 2,967 1.66* 4.16* 1.66* 4.16* 26
Class C (9/94)
2000 (d) 6,812 1.45* 4.25* 1.44* 4.26* 13
1999 6,994 1.48 4.17 1.48 4.17 25
1998 3,226 1.45 4.37 1.45 4.37 26
1997 1,719 1.67 4.32 1.67 4.32 51
1996 1,040 1.74 4.23 1.71 4.26 38
1995 (c) 222 2.44* 4.05* 1.80* 4.69* 25
Class R (7/86)
2000 (d) 171,039 .69* 5.01* .69* 5.01* 13
1999 185,428 .74 4.92 .74 4.92 25
1998 191,554 .70 5.14 .70 5.14 26
1997 195,553 .69 5.30 .69 5.30 51
1996 205,642 .70 5.29 .70 5.29 38
1995 198,928 .70 5.60 .70 5.60 25
=======================================================================================================================
</TABLE>
* Annualized.
** The amounts shown include distributions in excess of capital
gains of $.003 per share.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(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, 1999.
25
<PAGE>
SERVING
Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive performance over time -- with moderated risk. We emphasize quality
securities carefully chosen through in-depth research, and we follow those
securities closely over time to ensure that they continue to meet our exacting
standards.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
[Picture Appears Here]
John Nuveen, Sr.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com VSA-3-8-99
<PAGE>
August 31, 1999 Semiannual Report
NUVEEN
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Municipal Bond Funds
Dependable, tax-free
income to help
you keep more
of what you earn.
[PHOTO APPEARS HERE]
New Jersey
New York
New York Insured
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
Contents
1 Dear Shareholder
3 Nuveen Flagship New Jersey Municipal Bond Fund Portfolio Manager's
Perspective
6 Nuveen Flagship New Jersey Municipal
Bond Fund Spotlight
7 Nuveen Flagship New York Municipal Bond Fund and
Nuveen New York Insured Municipal Bond Fund Portfolio
Manager's Perspective
10 Nuveen Flagship New York Municipal
Bond Fund Spotlight
11 Nuveen New York Insured Municipal Bond
Fund Spotlight
12 Portfolio of Investments
31 Statement of Net Assets
32 Statement of Operations
33 Statement of Changes in Net Assets
35 Notes to Financial Statements
41 Financial Highlights
44 Building a Better Portfolio
45 Fund Information
<PAGE>
DEAR
Shareholder
At this writing, we're just months away from the much-talked-about millennium.
Besides trying to decide where we want to be when the clock strikes midnight,
this whole event puts the concept of time in front of us all. We think: "Where
did the time go?"
We think about how old, 25 years ago, we thought we would be when the calendar
turned January 1, 2000. (And we realize, now, it is really not that old at all.)
We think about all the things we thought we would have accomplished before 1999
became 2000.
Most likely, one of your millennium goals was financial. Whether it was to fully
fund your retirement accounts or set up trusts for your grandchildren, the fact
you're working with a financial adviser and reading this report are positive
signs that you're well on your way to achieving your goal.
I'm pleased to report we're meeting our goals, too. In addition to the goals we
have established for each mutual fund we manage, we have had to set goals in
preparation for the millennium. Briefly, the year 2000, or Y2K, problem stems
from concerns that computers and other date-sensitive systems could malfunction
or stop before, on, or after January 1, 2000. Many older systems use a two-digit
number to represent a year. To a computer, "00" may mean the year 1900 instead
of 2000. If this were to happen, some computers might shut down or not work
correctly.
All efforts to safeguard critical systems are right on schedule at Nuveen.
It's a goal we set more than 10 years ago. Nuveen's trading, fund management and
pricing -- systems that affect you and your investments -- have been updated or
replaced to be able to deal accurately with Y2K.
We continue to work closely with our service providers, transfer agent,
custodian and trustee to monitor the readiness of their systems, as well as
address any remaining internal systems issues. We expect January 3, 2000, the
first business day of the year, to be "business as usual."
The Securities and Exchange Commission (SEC), which oversees the securities
industry, is also taking significant steps to ensure that the financial industry
makes a smooth transition. First, the SEC is requiring all public companies,
investment advisers, investment companies and municipal securities issuers to
disclose their ability to comply with the Y2K issue.
In addition, the SEC mandated that tests be conducted on various financial
systems to test the ability of exchanges and broker/dealer firms to handle
transactions effectively. We participated successfully in those tests.
While we cannot anticipate all possibilities, our systems are in place, and
we look forward to helping you achieve your financial goals in the new
millennium.
I want to briefly report on the economic environment in which your Nuveen
investment performed. Read on, as we've conducted an in-depth interview with a
representative from the portfolio management team for your fund, describing how
that team of investment and research professionals directed the portfolio during
the past 12 months, September 1, 1998, through August 31, 1999.
[PHOTO OF TIMOTHY SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger Chairman of the Board
"All efforts to
safeguard critical
systems are right
on schedule
at Nuveen."
ANNUAL REPORT page 1
<PAGE>
"Your financial
adviser can serve
as a valuable
resource in helping
you determine if
adjustments are
needed in your
current asset
allocation plan."
Over the past 12 months, the U.S. economy has continued to be characterized
by robust growth, generally low interest rates and unemployment levels that
remain among the lowest in three decades.
Concerns, however, about the continued pace of the economy's expansion have
tested the new paradigm that holds that improvements in productivity enable us
to have both economic growth and low inflation at the same time. With investors
and the various markets watching -- and reacting to -- every announcement
concerning economic statistics, volatility has increased, especially in the
equity markets.
We have entered a different economic environment from that of 12 months
ago. This shift has occurred in response to two factors:
. the Asian financial crisis of 1998 did not produce the slowdown that
was widely expected to keep economic growth from becoming overly
robust;
. evidence of accelerating prices, most obvious in the sudden spike in
the April 1999 Consumer Price Index, contributed to the reemergence of
the specter of inflation, accompanied by predictions of higher
interest rates.
In an effort to pre-empt this inflation threat, the Federal Reserve has
twice moved to raise the federal funds rate by a quarter-point -- to 5.25% --
since the end of June. And in its October meeting, the group adopted a bias to
tighten, although it took no action at that time. The upward adjustments to this
rate, which represents the amount banks charge one another on overnight loans,
mark the first increases since March 1997 and stand in sharp contrast to the
three reductions made last fall.
At the end of August 1999, the ratio between long-term municipal yields and
30-year Treasury yields stood at 93.1%, compared with the historical average of
89.6% over the period 1979-1999. For investors, this meant that quality long-
term municipal bonds offered yields comparable to those of long Treasury
bonds -- even before the tax advantages of municipals were taken into account.
On an after-tax basis, municipal bonds continued to present an exceptionally
attractive investment option relative to Treasuries.
Keeping the Balance. The increased volatility in the markets highlights the
importance of maintaining balance in your investment portfolio. With a properly
balanced portfolio of equities, bonds and cash, your assets are better
positioned to weather the markets' ups and downs. A balanced portfolio can also
help you increase your opportunities for capital growth while reducing risk.
Your financial adviser can serve as a valuable resource in helping you determine
if adjustments are needed in your current asset allocation plan.
For more information on any Nuveen investment, contact your financial
adviser for a prospectus, call Nuveen at (800) 621-7227, or download one from
the internet at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. As we look ahead to a new millennium, we are committed to maintaining
that reputation and finding the best ways to serve your evolving investment
needs. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
- ---------------------------
Timothy R. Schwertfeger
Chairman of the Board
October 18, 1999
ANNUAL REPORT page 2
<PAGE>
NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
Nuveen Flagship New Jersey Municipal Bond Fund features portfolio management by
Nuveen Investment Advisory Services (NIAS), a team of portfolio managers and
research analysts committed to a disciplined, research-oriented investment
strategy. To help you understand the fund's performance for the one-year period
ended August 31, 1999, James Lumberg, director of income funds at Nuveen, spoke
with Portfolio Manager Tom Futrell of NIAS.
JIM We've been enjoying a healthy stock market for quite some time. How does
the success and growth of the firms that make Wall Street run, that is, the
investment firms, the brokerage houses and all their supporting industries,
affect nearby New Jersey's economy?
TOM As you know, some of New Jersey's population commutes to New York City,
which has benefited greatly from the success of the financial services industry
of Wall Street. That's one reason why New Jersey is a fairly wealthy state,
thus driving the demand for tax-free bonds. But the state's economy is also
among the most diverse in the nation, with significant growth in the science and
technology sectors.
JIM I understand that we had to reduce the dividend slightly in the fund. Why
was that necessary?
TOM A number of years ago, we acquired some very high-paying coupon bonds that
eventually went into default. As part of its restructuring plan to reduce its
financial stress, the issuer retired the bonds, which had been paying 8.375%
coupons. In addition to returning 100% of our principal investment in the bonds,
the issuer also paid us all overdue interest. Then, we had to turn around and
reinvest the money at this year's lower rates -- about 5%. Since we're not
earning as much on that money as we were, we can't pay out the same dividend. As
a result, effective August 9th, the fund's tax-free dividend was reduced
slightly, by $0.0020 per share.
JIM We've recently seen interest rates begin to inch up after a few years of
watching interest rates move lower. How has this shift affected the New Jersey
municipal bond market?
TOM Typically, in a rising interest rate environment, municipalities are
reluctant to issue long-term debt and pay the higher interest costs. In
addition, refunding activity of older debt is lower in a rising interest rate
environment. However, New Jersey municipal bond issuance was actually up 9%
year-to-date compared with the same period in 1998.
The rise in long-term interest rates provided several attractive
opportunities for the fund. Even though most of the bonds sold in the primary
market were either insured or carried high credit ratings, many of the bonds
represented relatively good values because they improved the fund's overall call
protection and total return potential.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers(SM) -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. Nuveen has chosen them for their rigorously disciplined investment
approaches and their focus on consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser(SM) for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS follows a disciplined, research-driven investment approach
to uncover income securities that combine exceptional relative value with above-
average return potential. Drawing upon 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
.. A commitment to exhaustive research
.. An active, value-oriented investment style
.. The unmatched presence and trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors,
and is a key investment strategy for Nuveen Flagship New Jersey Municipal Bond
Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the one-year period ended August 31, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
ANNUAL REPORT page 3
<PAGE>
JIM How did you manage the fund during the period, given the rising
interest rate environment?
TOM To reduce interest-rate risk -- that is, the risk that bond prices will
fall in a rising interest rate environment -- we kept the fund's average
"duration" shorter than the average of our peers. By doing so, the portfolio was
less sensitive to rising interest rates.
The rising interest rate environment provided the opportunity to buy bonds
with higher yields and better call protection, thus strengthening the fund's
dividend-paying capability.
Since bond prices fall in a rising interest rate environment, certain bonds
purchased earlier in the fiscal period fell in value. We sold some of these
bonds, taking a capital loss that, for tax purposes, can be used to offset any
current gains, or be carried forward for up to eight years to offset future
gains.
JIM Where did you find value with the low supply of bonds in New Jersey?
TOM To find the very best values, we looked beyond the New Jersey municipal
market to Puerto Rico bonds. Because of their triple tax exemption, Puerto Rico
bonds can be attractive purchases for state municipal bond funds, as they are
extremely liquid and in demand. True, the economy of Puerto Rico is only rated
A by Moody's Investors Service and BBB by Standard & Poor's Corp., but many
bonds issued in Puerto Rico are insured and thus AAA-rated.
During the period, we purchased insured Puerto Rico Public Finance
Corporation Commonwealth Appropriation Bonds due in 2024. In addition to their
excellent credit quality and relatively high yield, the bonds are non-callable,
which helps the fund's overall call protection.
JIM While it's great to buy insured bonds, they typically don't offer the
highest yields. Where did you look for bonds with higher yields?
TOM We purchased healthcare bonds that offer higher yields relative to other
sectors because, as an industry, healthcare has experienced difficulties.
Nuveen's research capabilities give us an advantage here. Our research analysts
search out good bonds that get unfairly lumped in with a troubled sector.
NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND
Top Five Sectors
Tax Obligation (Limited) 19%
- -----------------------------------------------
Tax Obligation (General) 12%
- -----------------------------------------------
Transportation 12%
- -----------------------------------------------
U.S. Guaranteed 12%
- -----------------------------------------------
Health Care 10%
- -----------------------------------------------
As a percentage of total bond holdings as of August 31, 1999. Holdings are
subject to change.
"The rising interest rate environment provided the opportunity to buy bonds with
higher yields and better call protection, thus strengthening the fund's
dividend-paying capability."
ANNUAL REPORT page 4
<PAGE>
The fund's overall credit quality is strong. At August 31, 1999, Nuveen
Flagship New Jersey Municipal Bond Fund's credit breakdown was as shown to the
right.
The below investment-grade credits are both issued by the Pollution Control
Financing Authority of Camden County for a solid waste facility, which received
the rating because of a regulatory dispute that we think will be resolved in the
company's, and therefore the fund's, favor. In the meantime, the bonds were
bought at very attractive yields several years ago, and we are comfortable with
the credit as it currently stands.
JIM How did the fund perform for the one-year period ended August 31, 1999?
TOM While there are long-term positive implications for how we've positioned
the fund in this interest-rising environment, in the shorter-term, the one-year
period, Nuveen Flagship New Jersey Municipal Bond Fund had a 0.07% loss. The
Lipper New Jersey Municipal Bond Fund category reported an average loss of 1.13%
for the period.*
Nuveen Flagship New Jersey Municipal Bond Fund shareholders in the
35.5% combined federal and state income tax bracket would have had to earn
2.62%** on a taxable investment to have an equivalent one-year total return to
their fund's. As of August 31, 1999, the fund's SEC 30-day yield was 4.45%. For
investors in the combined 35.5% federal and state income tax bracket, that is
equivalent to a yield of 6.90% on a taxable investment.
JIM What is your outlook and strategy for the fund?
TOM We continue to search for bonds in a variety of sectors, including
education, health care, housing, and utilities, as well as general obligation
debt where we can improve the fund's call protection and dividend distribution.
Relying on our Nuveen research team members, we will keep looking for attractive
lower-rated long-term bonds to improve the fund's incremental yield and dividend
income as well as insured long-term municipal bonds for credit quality.
NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed....62%
AA.....................11%
A...................... 9%
BBB/NR.................15%
Below Investment Grade..3%
As a percentage of total bond holdings as of August 31, 1999. Holdings are
subject to change.
* The Lipper Peer Group return represents the average annualized total return
of the 57 funds in the Lipper New Jersey Municipal Debt Category for the
one-year period ended August 31, 1999, and 48 funds for the three-year
period. The return assumes reinvestment of dividends and does not reflect
any applicable sales charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
ANNUAL REPORT page 5
<PAGE>
NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND
Fund Spotlight as of August 31, 1999
Terms To Know
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income
investment portfolio. The longer the duration, the greater a portfolio's
sensitivity to changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by
subtracting the fund's liabilities from its assets and dividing by the number of
shares outstanding.
SEC Yield A standardized calculation that the Securities and Exchange
Commission requires mutual funds to use when advertising rates of income return.
This standardized rate ensures that investors are comparing "apples to apples"
when comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a
security to pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share
earned over a specific one-month or 30-day period expressed as a percentage of
the maximum offering price of the fund shares at the end of the period.
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $10.12 $10.11 $10.09 $10.12
- ----------------------------------------------------------------------------------
Fund Symbol NNJAX N/A NNJCX NMNJX
- ----------------------------------------------------------------------------------
CUSIP 67065N753 67065N746 67065N738 67065N720
- ----------------------------------------------------------------------------------
Inception Date 9/94 2/97 9/94 12/91
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
1-Year -0.07% -4.31% -0.91% -0.68% 0.06%
- ------------------------------------------------------------------------------------
1-Year TER* 2.62% -1.72% 1.37% 1.73% 2.88%
- ------------------------------------------------------------------------------------
5-Year 5.64% 4.74% 4.88% 4.97% 5.88%
- ------------------------------------------------------------------------------------
5-Year TER* 8.54% 7.61% 7.36% 7.54% 8.92%
- ------------------------------------------------------------------------------------
Since Inception 6.15% 5.55% 5.40% 5.44% 6.40%
- ------------------------------------------------------------------------------------
Since Inception TER* 8.99% 8.36% 7.81% 7.90% 9.37%
</TABLE>
+ Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, 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.
* Taxable Equivalent Return (Based on a combined federal and state tax rate
of 35.5%.)
<TABLE>
<CAPTION>
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
Distribution Rate 4.74% 4.55% 3.98% 4.22% 4.98%
- --------------------------------------------------------------------
SEC 30-Day Yield 4.45% 4.26% 3.70% 3.90% 4.65%
- --------------------------------------------------------------------
Taxable
Equivalent Yield 6.90% 6.60% 5.74% 6.05% 7.21%
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)
[Bar Chart Appears Here]
9/98 .0440
10/98 .0440
11/98 .0440
12/98 .0440
1/99 .0420
2/99 .0420
3/99 .0420
4/99 .0420
5/99 .0420
6/99 .0420
7/99 .0420
8/99 .0400
Morningstar Rating/TM/++
****
Overall rating among 1,591
municipal bond funds as
of 8/31/99
Portfolio Statistics
Total Net Assets $122 million
- ---------------------------------------
Average Effective
Maturity 17.58 years
- ---------------------------------------
Average Duration 8.45
- ---------------------------------------
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
++ The Morningstar rating is an overall rating for the municipal bond category
and relates to Class A shares only; other classes may vary. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of
8/31/99 and are subject to change every month. Past performance is no
guarantee of future results. Ratings are calculated from the fund's three-,
five-, and 10-year average annual returns (if applicable) in excess of 90-day
Treasury bill returns, with appropriate fee adjustments, and a risk factor
that reflects fund performance below 90-day T-bill returns. Class A shares of
the fund received four stars for the three-year period. The top 10% of the
funds in a broad asset class receive five stars and the next 22.5% receive
four stars. The fund was rated among 1,591 funds.
ANNUAL REPORT page 6
<PAGE>
NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND FUND
NUVEEN NEW YORK INSURED MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
- --------------------------------------------------------------------------------
Nuveen Flagship New York Municipal Bond Fund and Nuveen New York Insured
Municipal Bond Fund feature portfolio management by Nuveen Investment Advisory
Services (NIAS), a team of portfolio managers and research analysts committed to
a disciplined, research-oriented investment strategy. To help you understand the
funds' performance for the one-year period ended August 31, 1999, James Lumberg,
director of income funds at Nuveen, spoke with Portfolio Manager Paul Brennan of
NIAS.
We'd like to point out to shareholders of Nuveen Flagship New York Municipal
Bond Fund an increase in their monthly tax-free dividend, which became effective
with the August 9th declaration paid September 1st. The dividend increase, which
amounts to about $0.0050 per share, reflects a decrease in fund operating
expenses due to expense reimbursements made by Nuveen as the fund's investment
manager. This change was made in our effort to provide shareholders with stable
dividends and competitive performance potential over time.
-- James Lumberg, director, Nuveen income funds
JIM | We've been enjoying a healthy stock market for quite some time. How does
the success and growth of the firms that make Wall Street run, that is, the
investment firms, the brokerage houses and their supporting industries, affect
New York's economy?
PAUL | The state's overall economic performance continues to be driven by New
York City, which represents 50% of the state's population. So certainly the
state benefits from the success of the financial services industry on Wall
Street.
The city and state are financially healthy. In fact, one rating agency, Fitch
IBCA, Inc., upgraded New York City's credit rating to A from A- during the
period, citing the city's strengthening financial position and more conservative
budgeting procedures.
However, other areas of New York have continued to lag economically,
including Buffalo and Rochester. Overall, the state's unemployment rate of 5.2%
as of August 31, 1999, is still above the national average of 4.3%, although it
is down from 5.5% a year ago.
JIM | We have recently seen interest rates begin to inch up, after a few years
of watching interest rates move lower. Has this shift affected the New York
municipal bond market?
PAUL | Yes. Typically, in a rising interest rate environment, municipalities are
reluctant to issue long-term debt and pay the higher interest costs. In
addition, refunding activity of older debt is lower in a rising interest rate
environment. Consequently, New York municipal bond issuance through August 31,
1999, was down 55% compared with last year, significantly greater than issuance
nationally, which was down 23% year-to-date through August 31, 1999.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers/sm/ -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. Nuveen has chosen them for their rigorously disciplined investment
approaches and their focus on consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/SM/ for income investing is Nuveen Investment Advisory
Services (NIAS). NIAS follows a disciplined, research-driven investment approach
to uncover income securities that combine exceptional relative value with above-
average return potential. Drawing upon 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
.. A commitment to exhaustive research
.. An active, value-oriented investment style
.. The unmatched presence and trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen Flagship New York Municipal Bond Fund and
Nuveen New York Insured Municipal Bond Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the one-year period ended August 31, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
ANNUAL REPORT page 7
<PAGE>
The decline can also be partially explained by one unusually large non-
recurring transaction in 1998. A $3.5 billion issue by the Long Island Power
Authority was the largest municipal issue in history.
JIM Even though New York City received a rating upgrade from Fitch during the
period, the state still carries only an A rating, compared with many other
states that carry higher quality ratings, such as AA or AAA. How does that
affect the municipal bond market in the state?
PAUL New York is one of the largest and most liquid bond markets in the
country. Because of the relative lower quality, investors tend to receive higher
yields than in other states. We depend on Nuveen's research team members to
determine which bonds have an acceptable risk/return trade-off for our funds.
For instance, a municipality's credit rating depends on many factors. Nassau
County, an affluent suburb of New York City, sustained ratings downgrades from
Moody's Investors Service, Inc. and Standard & Poor's Corporation. Even though
it has a very high income profile and low unemployment, the market's concern is
the county's fiscal management, including its reliance on a number of one-time
revenue sources and its inability to sell a major hospital in a timely manner.
JIM So, how did you manage the fund during the period given the varying credit
quality of issuers in the state, and with interest rates rising?
PAUL Our research led us to be somewhat uncomfortable about Nassau County's
credit position, and we have avoided investing in uninsured Nassau County bonds
over the past few years. That was a good decision, since we also avoided losses
that some of our competitors sustained on those bonds.
Our acquisition of bonds issued by the New York City Transitional Finance
Authority, New York City Municipal Water Finance Authority (AAA insured) and the
AAA insured New York Metropolitan Transit Authority bonds represent very strong
credits.
The rising interest rate environment provided the opportunity to buy bonds
with higher yields and better call protection, thus strengthening the fund's
dividend-paying capability.
Since bond prices fall in a rising interest rate environment, certain bonds
purchased earlier in the fiscal period fell in value. We sold some of these
bonds, taking a capital loss that, for tax purposes, can be used to offset any
current gains, or be carried forward for up to eight years to offset future
gains.
Of course, because of its insured nature, Nuveen New York Insured Municipal
Bond Fund carries a AAA credit rating.
"The rising interest rate environment
provided the
opportunity to buy bonds with higher yields and better
call protection,
thus strengthening
the fund's
dividend-paying
capability."
NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND FUND
Top Five Sectors
Tax Obligation (Limited) 23%
- -------------------------------------------------------
U.S. Guaranteed 18%
- -------------------------------------------------------
Education and Civic Organizations 13%
- -------------------------------------------------------
Health Care 9%
- -------------------------------------------------------
Utilities 9%
- -------------------------------------------------------
As a percentage of total bond holdings as of August 31, 1999. Holdings are
subject to change.
NUVEEN NEW YORK INSURED MUNICIPAL BOND FUND
Top Five Sectors
U.S. Guaranteed 28%
- -------------------------------------------------------
Health Care 16%
- -------------------------------------------------------
Education and Civic Organizations 10%
- -------------------------------------------------------
Tax Obligation (General) 9%
- -------------------------------------------------------
Housing (Multifamily) 9%
- -------------------------------------------------------
As a percentage of total bond holdings as of August 31, 1999. Holdings are
subject to change.
ANNUAL REPORT page 8
<PAGE>
At August 31, 1999, Nuveen Flagship New York Municipal Bond Fund's credit
breakdown was as shown to the right.
NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed 38%
AA 12%
A 17%
BBB/NR 33%
As a percentage of total bond holdings as of August 31, 1999. Holdings are
subject to change.
JIM How did the funds perform for the one-year period ended August 31, 1999?
PAUL Nuveen Flagship New York Municipal Bond Fund generated a total return on
net asset value of 0.48%, outperforming the Lipper New York Municipal Bond Fund
category, which reported an average loss of 1.64%.*
Nuveen Flagship New York Municipal Bond Fund shareholders in the 35.5%
combined federal and state income tax bracket would have had to earn 3.23%
on a taxable investment to have an equivalent one-year total return to their
fund's.*** As of August 31, 1999, the fund's SEC 30-day yield was 5.02%. For
investors in the combined 35.5% federal and state income tax bracket, that is
equivalent to a yield of 7.78% on a taxable investment.
While there are long-term positive implications for how we've positioned the
fund in this interest-rising environment, in the shorter-term, the one-year
period, Nuveen New York Insured Municipal Bond Fund had a 0.16% loss.
Comparatively, the funds in the Lipper New York Insured Municipal Bond Fund
category reported an average 0.65% loss for the one-year period.**
Nuveen New York Insured Municipal Bond Fund shareholders in the 35.5%
combined federal and state income tax bracket would have had to earn 2.50% on a
taxable investment to have an equivalent one-year total return to their
fund's.*** As of August 31, 1999, the fund's SEC 30-day yield was 3.99%. For
investors in the combined 35.5% federal and state income tax bracket, that is
equivalent to a yield of 6.19% on a taxable investment.
JIM What is your outlook for Nuveen Flagship New York Municipal Bond Fund and
Nuveen New York Insured Municipal Bond Fund?
PAUL In a high tax state such as New York, we believe that municipal bonds
represent a very attractive option for investors searching for current income
exempt from federal and local income taxes. We will continue to focus on
maintaining a stable dividend that is exempt from federal and state income
taxes.
Relying on the assistance of Nuveen's research, we will continue to look for
attractively priced and attractively yielding bonds for both funds. We will also
continue to invest in New York's large supply of insured long-term municipal
bonds.
At current rates, we believe that municipal bonds represent a very attractive
option for investors searching for current income exempt from federal and local
income taxes. In other words, for investors wanting to keep more of what they
can earn.
* The Lipper Peer Group return represents the average annualized total return
of the 97 funds in the Lipper New York Municipal Debt Category for the one-
year period ended August 31, 1999. The return assumes reinvestment of
dividends and does not reflect any applicable sales charges.
** The Lipper Peer Group return represents the average annualized total return
of the 12 funds in the Lipper New York Insured Municipal Debt Category for
the one-year period ended August 31, 1999. The return assumes reinvestment of
dividends and does not reflect any applicable sales charges.
***Taxable equivalent total return equals a fund's taxable equivalente income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
ANNUAL REPORT page 9
<PAGE>
NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND FUND
Fund Spotlight as of August 31, 1999
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $10.56 $10.57 $10.59 $10.59
- --------------------------------------------------------------------------------------------
Fund Symbol NNYAX NNYBX NNYCX NTNYX
- --------------------------------------------------------------------------------------------
CUSIP 67065N670 67065N662 67065N654 67065N647
- --------------------------------------------------------------------------------------------
Inception Date 9/94 2/97 9/94 12/86
- --------------------------------------------------------------------------------------------
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
1-Year 0.48% -3.70% -0.28% -0.16% 0.61%
- ---------------------------------------------------------------------------------------------
1-Year TER* 3.23% -1.07% 2.03% 2.27% 3.47%
- ---------------------------------------------------------------------------------------------
5-Year 6.23% 5.32% 5.52% 5.65% 6.53%
- ---------------------------------------------------------------------------------------------
5-Year TER* 9.20% 8.26% 8.07% 8.27% 9.63%
- ---------------------------------------------------------------------------------------------
10-Year 7.04% 6.58% 6.48% 6.35% 7.32%
- ---------------------------------------------------------------------------------------------
10-Year TER* 10.20% 9.72% 9.31% 9.11% 10.62%
- ---------------------------------------------------------------------------------------------
</TABLE>
+ Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, 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.
* Taxable Equivalent Return (Based on a combined federal and state tax rate
of 35.5%.)
<TABLE>
<CAPTION>
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
Distribution Rate 5.68% 5.44% 4.88% 5.10% 5.89%
- ----------------------------------------------------------------------
SEC 30-Day Yield 5.02% 4.81% 4.27% 4.47% 5.22%
- ----------------------------------------------------------------------
Taxable
Equivalent Yield 7.78% 7.46% 6.62% 6.93% 8.09%
</TABLE>
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
9/98 .0455
10/98 .0455
11/98 .0455
12/98 .0455
1/99 .0435
2/99 .0435
3/99 .0435
4/99 .0435
5/99 .0435
6/99 .0450
7/99 .0450
8/99 .0500
Morningstar Rating/TM/++
****
Overall rating among 1,591
municipal bond funds as
of 8/31/99
<TABLE>
<CAPTION>
Portfolio Statistics
<S> <C>
Total Net Assets $258.5 million
- -----------------------------------------
Average Effective
Maturity 17.88 years
- -----------------------------------------
Average Duration 7.50
- -----------------------------------------
</TABLE>
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
++ The Morningstar rating is an overall rating for the municipal bond category
and relates to Class A shares only; other classes may vary. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of
8/31/99 and are subject to change every month. Past performance is no
guarantee of future results. Ratings are calculated from the fund's three-,
five-, and 10-year average annual returns (if applicable) in excess of 90-day
Treasury bill returns, with appropriate fee adjustments, and a risk factor
that reflects fund performance below 90-day T-bill returns. Class A shares of
the fund received four stars for the three-year period. The top 10% of the
funds in a broad asset class receive five stars and the next 22.5% receive
four stars. The fund was rated among 1,591 funds.
Terms To Know
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income investment
or portfolio. The longer the duration, the greater a portfolio's sensitivity to
changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by subtracting
the fund's liabilities from its assets and dividing by the number of shares
outstanding.
SEC Yield A standardized calculation that the Securities and Exchange Commission
requires mutual funds to use when advertising rates of income return. This
standardized rate ensures that investors are comparing "apples to apples" when
comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security to
pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share earned
over a specific one-month or 30-day period expressed as a percentage of the
maximum offering price of the fund shares at the end of the period.
ANNUAL REPORT page 10
<PAGE>
NUVEEN NEW YORK INSURED MUNICIPAL BOND FUND
Fund Spotlight as of August 31, 1999
Quick Facts
A Shares B Shares C Shares R Shares
NAV $10.25 $10.26 $10.25 $10.26
- ---------------------------------------------------------------
Fund Symbol NNYIX NNIMX NNYKX NINYX
- ---------------------------------------------------------------
CUSIP 67065N639 67065N621 67065N613 67065N597
- ---------------------------------------------------------------
Inception Date 9/94 2/97 9/94 12/86
- ---------------------------------------------------------------
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
1-Year -0.16% -4.33% -0.93% -0.63% 0.01%
- ----------------------------------------------------------
1-Year TER* 2.50% -1.77% 1.29% 1.72% 2.77%
- ----------------------------------------------------------
5-Year 5.51% 4.62% 4.76% 4.88% 5.77%
- ----------------------------------------------------------
5-Year TER* 8.33% 7.41% 7.16% 7.36% 8.72%
- ----------------------------------------------------------
10-Year 6.62% 6.16% 6.02% 5.90% 6.88%
- ----------------------------------------------------------
10-Year TER* 9.62% 9.15% 8.70% 8.52% 10.02%
- ----------------------------------------------------------
+ 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.
* Taxable Equivalent Return (Based on a combined federal and state tax rate
of 35.5%.)
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
Distribution Rate 4.98% 4.77% 4.21% 4.39% 5.15%
- ----------------------------------------------------------------
SEC 30-Day Yield 3.99% 3.82% 3.24% 3.44% 4.19%
- ----------------------------------------------------------------
Taxable
Equivalent Yield 6.19% 5.92% 5.02% 5.33% 6.50%
Monthly Tax-Free Dividends (Class A Shares)/./
[Bar Chart appears here]
9/98 .0435
10/98 .0425
11/98 .0425
12/98 .0425
1/99 .0425
2/99 .0425
3/99 .0425
4/99 .0425
5/99 .0425
6/99 .0425
7/99 .0425
8/99 .0435
/./ The fund also paid shareholders capital gains distributions in November of
$0.0291 per share.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Portfolio Statistics
Total Net Assets $358.6 million
- --------------------------------------------
Average Effective Maturity 15.41 years
- --------------------------------------------
Average Duration 5.95
- --------------------------------------------
Terms To Know
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income
investment or portfolio. The longer the duration, the greater a portfolio's
sensitivity to changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by
subtracting the fund's liabilities from its assets and dividing by the number of
shares outstanding.
SEC Yield A standardized calculation that the Securities and Exchange
Commission requires mutual funds to use when advertising rates of income return.
This standardized rate ensures that investors are comparing "apples to apples"
when comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security
to pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share
earned over a specific one-month or 30-day period expressed as a percentage of
the maximum offering price of the fund shares at the end of the period.
ANNUAL REPORT page 11
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New Jersey Municipal Bond Fund
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 0.2%
$ 250,000 New Jersey Economic Development Authority, Solid Waste Disposal Facility 4/02 at 102 Aa1 $ 267,080
Revenue Bonds (Garden State Paper Company, Inc. Project), Series 1992,
7.125%, 4/01/22 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Goods - 0.2%
180,000 New Jersey Economic Development Authority, Economic Growth Bonds, 12/02 at 101 1/2 Aa3 190,166
Composite Issue, 1992 Second Series A3, 6.550%, 12/01/07 (Alternative
Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals - 0.2%
200,000 New Jersey Economic Development Authority, Economic Development Refunding No Opt. Call Aa3 205,748
Bonds (Burlington Coat Factory Warehouse of New Jersey, Inc. - 1995
Project), 5.400%, 9/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 5.1%
960,000 New Jersey Economic Development Authority, Economic Development Bonds No Opt. Call N/R 1,119,552
(Yeshiva Ktana of Passaic - 1992 Project), 8.000%, 9/15/18
420,000 New Jersey Economic Development Authority, Insured Revenue Bonds No Opt. Call AAA 436,720
(Educational Testing Service Issue), Series 1995B, 5.500%, 5/15/05
2,230,000 New Jersey Economic Development Authority, School Revenue Bonds 2/08 at 101 N/R 2,097,337
(Gill/St. Bernard School), Series 1998, 6.000%, 2/01/25
805,000 New Jersey Educational Facilities Authority, Trenton State College 1/00 at 100 A+ 806,723
Issue Revenue Bonds, Series 1976 D, 6.750%, 7/01/08
140,000 New Jersey Educational Facilities Authority, Seton Hall University 7/01 at 102 A- 148,492
Project Revenue Bonds, 1991 Series, Project D, 6.600%, 7/01/02
270,000 New Jersey Educational Facilities Authority, Revenue Bonds, Saint Peters 7/08 at 102 BBB 260,639
College Issue, 1998 Series B, 5.375%, 7/01/12
410,000 New Jersey Educational Facilities Authority, Revenue Refunding Bonds 7/03 at 102 BBB 396,958
(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 862,889
Bonds, 1994 Series A, 5.875%, 7/01/11
75,000 Higher Education Assistance Authority (State of New Jersey), Student Loan 7/02 at 102 A+ 77,659
Revenue Bonds, 1992 Series A, New Jersey Class Loan Program,
6.000%, 1/01/06 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 9.7%
700,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/00 at 102 AAA 729,134
Community Medical Center/Kensington Manor Care Center Issue, Series E,
7.000%, 7/01/20
1,200,000 New Jersey Health Care Facilities Financing Authority, Revenue and 7/07 at 102 AAA 1,153,632
Refunding Bonds, Holy Name Hospital Issue, Series 1997, 5.250%, 7/01/20
New Jersey Health Care Facilities Financing Authority, Revenue Bonds,
Newark Beth Israel Medical Center Issue, Series 1994:
200,000 5.800%, 7/01/07 7/04 at 102 AAA 214,710
200,000 6.000%, 7/01/16 7/04 at 102 AAA 216,432
250,000 New Jersey Health Care Facilities Financing Authority, Refunding Revenue 8/04 at 102 AAA 274,883
Bonds, Irvington General Hospital Issue (FHA - Insured Mortgage),
Series 1994, 6.375%, 8/01/15
400,000 New Jersey Health Care Facilities Financing Authority, Refunding Revenue 7/02 at 102 A- 428,908
Bonds, Atlantic City Medical Center Issue, Series C, 6.800%, 7/01/05
100,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/02 at 102 AAA 106,435
West Jersey Health System, Series 1992, 6.000%, 7/01/07
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$ New Jersey Health Care Facilities Financing Authority, Revenue Bonds,
Monmouth Medical Center Issue, Series C:
250,000 5.700%, 7/01/02 No Opt. Call AAA $ 259,665
250,000 6.250%, 7/01/16 7/04 at 102 AAA 273,228
250,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/04 at 102 AAA 266,905
Dover General Hospital and Medical Center Issue, Series 1994,
5.900%, 7/01/05
1,000,000 New Jersey Health Care Facilities Financing Authority, Revenue and 7/07 at 102 AAA 916,470
Refunding Bonds, AHS Hospital Corporation Issue, Series 1997 A,
5.000%, 7/01/27
New Jersey Health Care Facilities Financing Authority, Bayonne Hospital
Obligated Group Revenue Bonds, Series 1994:
215,000 6.400%, 7/01/07 7/04 at 102 AAA 233,180
175,000 6.250%, 7/01/12 7/04 at 102 AAA 186,526
4,150,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/09 at 101 A 3,785,962
Palisades Medical Center of New York Presbyterian Healthcare System
Obligated Group Issue, Series 1999, 5.250%, 7/01/28
230,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/02 at 102 Baa3 244,276
Palisades Medical Center Obligated Group Issue, Series 1992,
7.500%, 7/01/06
865,000 New Jersey Economic Development Authority, Economic Growth Lease Revenue 12/03 at 102 Aa3 877,093
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 319,758
Corp. at Hamilton Obligated Group Project), Series 1994,
6.250%, 7/01/14
1,000,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental 1/05 at 102 AAA 1,059,200
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 266,298
Pollution Control Revenue Refunding Bonds, American Cyanamid Company
Issue, Series 1994, 5.800%, 9/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 6.4%
235,000 Hoboken Housing Finance Corporation, Multifamily Mortgage Revenue Bonds 4/04 at 100 AA 237,522
(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 AA+ 419,852
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 2,066,740
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 1,559,940
Bonds, 1996 Series A, 6.200%, 11/01/18 (Alternative Minimum Tax)
1,750,000 New Jersey Housing Finance Agency, Special Pledge Revenue Obligations, 11/99 at 100 A+ 1,758,978
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+ 746,977
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+ 527,445
Bonds, 1992 Series One, 6.600%, 11/01/14
500,000 North Bergen Housing Development Corporation (North Bergen, New Jersey), 9/99 at 101 1/2 N/R 510,075
Mortgage Revenue Bonds, Series 1978 (FHA - Insured Mortgage Loan -
Section 8 Assisted Project), 7.400%, 9/01/20
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 6.0%
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 259,513
400,000 6.375%, 10/01/26 (Alternative Minimum Tax) 7/04 at 102 AAA 416,904
4,000,000 New Jersey Housing and Mortgage Finance Agency, Home Buyer Revenue Bonds, 10/07 at 101 1/2 AAA 4,042,560
1997 Series U, 5.700%, 10/01/14 (Alternative Minimum Tax)
2,450,000 Puerto Rico Housing Finance Corporation, Homeownership Mortgage Revenue 12/08 at 101 AAA 2,178,467
Bonds (GNMA - Guaranteed Mortgage Loans) 1998 Series A,
5.200%, 12/01/32 (Alternative Minimum Tax)
</TABLE>
13
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New Jersey Municipal Bond Fund (continued)
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 455,000 Virgin Islands Housing Finance Authority, Single Family Mortgage Revenue 3/05 at 102 AAA $ 471,944
Refunding Bonds (GNMA Mortgage-Backed Securities Program), 1995
Series A, 6.450%, 3/01/16 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial/Other - 1.1%
240,000 New Jersey Economic Development Authority, District Heating and Cooling 12/03 at 102 BBB- 247,843
Revenue Bonds (Trigen - Trenton Project), 1993 Series B,
6.100%, 12/01/04 (Alternative Minimum Tax)
1,055,000 New Jersey Economic Development Authority, Economic Growth Bond, 12/03 at 102 Aa3 1,074,275
Composite Issue - 1992, Second Series H, 5.300%, 12/01/07 (Alternative
Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 4.6%
New Jersey Economic Development Authority, Economic Development Revenue
Bonds (United Methodist Homes of New Jersey Obligated Group Issue),
Series 1998:
1,500,000 5.125%, 7/01/18 7/08 at 102 BBB- 1,310,085
3,610,000 5.125%, 7/01/25 7/08 at 102 BBB- 3,047,779
1,300,000 New Jersey Economic Development Authority, First Mortgage Revenue Fixed 7/08 at 102 A 1,259,167
Rate Bonds (Cadbury Corporation Project), Series 1998A, 5.500%, 7/01/18
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 12.3%
200,000 The City of Atlantic City, In the County of Atlantic, New Jersey, General No Opt. Call A 207,816
Obligation General Improvement Bonds, Series 1994, 5.650%, 8/15/04
100,000 The Board of Education of Atlantic City, Atlantic County, New Jersey, 12/02 at 102 AAA 107,145
School Bonds, Series 1992, 6.000%, 12/01/06
100,000 County of Atlantic, New Jersey, General Improvement Bonds, 1/04 at 101 AAA 105,813
6.000%, 1/01/07
100,000 County of Camden, New Jersey, General Obligation Refunding Bonds, Series No Opt. Call AAA 103,271
1992, 5.500%, 6/01/02
250,000 City of East Orange, In the County of Essex, New Jersey, Fiscal Year No Opt. Call AAA 303,525
Adjustment Bonds, Series 1992, 8.400%, 8/01/06
200,000 Government of Guam, General Obligation Bonds, Series 1993A, 11/03 at 102 BBB- 199,760
5.150%, 11/15/07
500,000 The Board of Education of the Township of Hillsborough, In the County of No Opt. Call AA 533,110
Somerset, State of New Jersey, General Obligation School Purpose Bonds,
Series 1992, 5.875%, 8/01/11
400,000 Jersey City, General Obligation Bonds, 6.500%, 2/15/02 No Opt. Call AA 420,384
2,645,000 The Board of Education of the Township of Middletown, In the County of 8/07 at 100 AAA 2,690,653
Monmouth, New Jersey, School Bonds, 5.800%, 8/01/21
100,000 Township of Montclair, In the County of Essex, New Jersey, General 3/00 at 101 1/2 AAA 102,436
Obligation School Bonds, 5.800%, 3/01/06
2,000,000 State of New Jersey, General Obligation Refunding Bonds, Series F, 8/09 at 100 AA+ 2,011,420
5.250%, 8/01/12
1,000,000 State of New Jersey, General Obligation Bonds, Series D, 5.800%, 2/15/07 No Opt. Call AA+ 1,067,510
200,000 State of New Jersey, General Obligation Refunding Bonds, Series D, No Opt. Call AA+ 171,550
0.000%, 2/15/03
165,000 Parsippany - Troy Hills Township, General Obligation Bonds, Capital No Opt. Call AA- 113,880
Appreciation Bonds, Series 1992, 0.000%, 4/01/07
185,000 The Board of Education of the City of Perth Amboy, In the County of No Opt. Call AAA 199,376
Middlesex, New Jersey, School Bonds, 6.200%, 8/01/04
1,950,000 The Board of Education of the City of Pleasantville, in the County of 2/08 at 100 AAA 1,825,415
Atlantic, New Jersey, School District Bonds, 5.000%, 2/15/20
550,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1996 (General 7/06 at 101 1/2 A 527,423
Obligation Bonds), 5.400%, 7/01/25
2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997 (General 7/07 at 101 1/2 AAA 1,959,580
Obligation Bonds), 5.400%, 7/01/21
2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1995 (General 7/05 at 101 1/2 AAA 2,025,840
Obligation Bonds), 5.750%, 7/01/24
250,000 The City of Union City, In the County of Hudson, State of New Jersey, No Opt. Call AAA 278,555
General Obligation School Purpose Bonds, Series 1992, 6.375%, 11/01/10
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited - 18.6%
$ 250,000 The City of Atlantic City, New Jersey, Municipal Utilities Authority, 5/02 at 102 A- $ 255,575
Water System Revenue Refunding Bonds, Series 1993, 5.650%, 5/01/07
150,000 The Bergen County Utilities Authority (New Jersey), 1992 Water Pollution 12/02 at 102 AAA 157,202
Control System Revenue Bonds, Series B, 6.000%, 12/15/13
250,000 The Camden County Municipal Utilities Authority (Camden County, New 7/06 at 102 AAA 240,088
Jersey), County Agreement Sewer Revenue Refunding Bonds, 1996 Series,
5.125%, 7/15/17
750,000 The Essex County Improvement Authority (Essex County, New Jersey), 10/08 at 101 AAA 699,878
Parking Facility Revenue Refunding Bonds, Series 1998, 5.000%, 10/01/22
500,000 The Essex County Improvement Authority (Essex County, New Jersey), 12/02 at 102 Baa1 519,135
County Guaranteed Pooled Revenue Bonds, Series 1992A, 6.500%, 12/01/12
1,380,000 The Board of Education of the Borough of Little Ferry, Bergen County, New No Opt. Call N/R 1,401,376
Jersey, Certificates of Participation, 6.300%, 1/15/08
1,000,000 The State of New Jersey, as Lessee, and the Mercer County Improvement 2/00 at 100 Aa 1,001,740
Authority, as Lessor, Relating to the Richard J. Hughes Justice
Complex, 6.050%, 1/01/13
250,000 Mercer County Improvement Authority, Solid Waste, 0.000%, 4/01/04 No Opt. Call Aa 202,508
5,280,000 New Jersey Economic Development Authority, Lease Revenue Bonds, Series 11/08 at 101 Aaa 4,613,347
1998 (Bergen County Administration Complex), 4.750%, 11/15/26
300,000 New Jersey Economic Development Authority, State Contract Economic 9/02 at 102 AAA 308,307
Recovery Bonds, Series 1992-A, 6.000%, 3/15/21
New Jersey Economic Development Authority, Market Transition Facility
Senior Lien Revenue Bonds, Series 1994A:
300,000 7.000%, 7/01/04 No Opt. Call AAA 332,022
650,000 5.875%, 7/01/11 7/04 at 102 AAA 680,999
New Jersey Sports and Exposition Authority, Convention Center Luxury Tax
Bonds, 1992 Series A:
100,000 6.000%, 7/01/07 7/02 at 102 AAA 106,546
250,000 6.250%, 7/01/20 7/02 at 102 AAA 268,018
North Jersey District Water Supply Commission of the State of New Jersey,
Wanaque South Project Revenue Refunding Bonds, Series 1993:
100,000 5.700%, 7/01/05 7/03 at 102 AAA 105,807
200,000 6.000%, 7/01/21 7/03 at 102 AAA 205,266
2,350,000 The Ocean County Utilities Authority (New Jersey), Wastewater Revenue 1/00 at 100 AAA 2,278,513
Bonds, Refunding Series 1987, 5.000%, 1/01/14
170,000 Puerto Rico Aqueduct and Sewer Authority, Refunding Bonds, Series 1995, 7/06 at 101 1/2 A 160,478
Guaranteed by the Commonwealth of Puerto Rico, 5.000%, 7/01/15
5,000,000 Puerto Rico Public Finance Corporation, 1998 Series A Bonds (Commonwealth No Opt. Call AAA 4,680,400
Appropriation Bonds), 5.125%, 6/01/24
5,000,000 The Union County Utilities Authority (Union County, New Jersey), Solid 6/08 at 102 Aaa 4,530,150
Waste Bonds, County Deficiency Agreement, Series 1998A1,
5.000%, 6/15/28 (Alternative Minimum Tax)
Transportation - 12.0%
2,150,000 Delaware River Port Authority (New Jersey), Port District Project Bonds, 1/08 at 101 AAA 1,985,783
Series B of 1998, 5.000%, 1/01/26
Parking Authority of the City of Hoboken, County of Hudson, New Jersey,
Parking General Revenue Refunding Bonds, Series 1992A:
330,000 5.850%, 3/01/00 No Opt. Call Baa1 333,257
100,000 6.625%, 3/01/09 3/02 at 102 Baa1 103,646
1,750,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds, Series 1991C, No Opt. Call BBB+ 1,911,385
6.500%, 1/01/08
125,000 The Port Authority of New York and New Jersey, Consolidated Bonds, 10/04 at 101 AAA 134,061
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- 201,540
One Hundredth Series, 5.750%, 12/15/20
</TABLE>
15
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New Jersey Municipal Bond Fund (continued)
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation (continued)
The Port Authority of New York and New Jersey, Consolidated Bonds,
Ninety - Fifth Series:
$ 200,000 5.500%, 7/15/05 (Alternative Minimum Tax) 7/04 at 101 AA- $ 207,856
200,000 5.875%, 7/15/09 (Alternative Minimum Tax) 7/04 at 101 AA- 209,132
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 101 AA- 1,453,845
2,000,000 5.375%, 7/15/27 1/07 at 101 AAA 1,935,380
2,000,000 The Port Authority of New York and New Jersey, Consolidated Bonds, One 6/05 at 101 AA- 1,951,840
Hundred Twelfth Series, 5.250%, 12/01/13 (Alternative Minimum Tax)
4,100,000 The Port Authority of New York and New Jersey, Special Project Bonds, 12/07 at 100 AAA 4,151,947
Series 6, JFK International Air Terminal LLC Project, 5.750%, 12/01/25
(Alternative Minimum Tax)
45,000 South Jersey Transportation Authority, Transportation System Revenue 11/02 at 102 AAA 47,693
Bonds, 1992 Series B (Tax Exempt), 5.900%, 11/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 11.7%
The Essex County Improvement Authority (Essex County, New Jersey), City
of Newark General Obligation Lease Revenue Bonds, Series 1994:
620,000 6.350%, 4/01/07 (Pre-refunded to 4/01/04) 4/04 at 102 BBB+*** 676,166
450,000 6.600%, 4/01/14 (Pre-refunded to 4/01/04) 4/04 at 102 BBB+*** 495,374
100,000 The Essex County Improvement Authority (Essex County, New Jersey), County 12/04 at 102 AAA 113,062
of Essex, General Obligation Lease Revenue Bonds, Series 1994 (County
Jail and Youth House Projects), 6.900%, 12/01/14 (Pre-refunded to
12/01/04)
The Monmouth County Improvement Authority (Monmouth County, New Jersey),
Revenue Bonds, Series 1992 (Howell Township Board of Education Project):
100,000 6.000%, 7/01/03 (Pre-refunded to 7/01/02) 7/02 at 102 AAA 106,546
50,000 6.450%, 7/01/08 (Pre-refunded to 7/01/02) 7/02 at 102 AAA 53,868
200,000 New Jersey Economic Development Authority, Lease Rental Bonds, 1992 3/02 at 102 AAA 216,030
Series (Liberty State Park Project), 6.800%, 3/15/22 (Pre-refunded to
3/15/02)
1,480,000 New Jersey Health Care Facilities Financing Authority (Hackensack No Opt. Call AAA 1,726,124
Hospital), 8.750%, 7/01/09
2,065,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/01 at 102 A2*** 2,253,225
Series 1990-E (Kennedy Memorial Hospital), 8.375%, 7/01/10 (Pre-
refunded to 7/01/01)
New Jersey Health Care Facilities Financing Authority, Bayonne Hospital
Obligated Group Revenue Bonds, Series 1994:
35,000 6.400%, 7/01/07 (Pre-refunded to 7/01/04) 7/04 at 102 AAA 38,478
25,000 6.250%, 7/01/12 (Pre-refunded to 7/01/04) 7/04 at 102 AAA 27,323
365,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/02 at 102 Baa3*** 392,251
Palisades Medical Center Obligated Group Issue, Series 1992,
7.500%, 7/01/06 (Pre-refunded to 7/01/02)
625,000 New Jersey Economic Development Authority, Insured Revenue Bonds 5/05 at 102 AAA 684,094
(Educational Testing Service Issue), Series 1995B, 6.125%, 5/15/15
(Pre-refunded to 5/15/05)
100,000 New Jersey Educational Facilities Authority, Stevens Institute of 7/02 at 102 A*** 107,492
Technology Issue Revenue Bonds, 1992 Series A, 6.400%, 7/01/03
(Pre-refunded to 7/01/02)
2,000,000 New Jersey Educational Facilities Authority, Revenue Bonds, Trenton State 7/06 at 101 AAA 2,071,340
College Issue, Series 1996 A, 5.125%, 7/01/24 (Pre-refunded to 7/01/06)
245,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds, 1984 Series, No Opt. Call AAA 272,104
10.375%, 1/01/03
200,000 New Jersey Wastewater Treatment Trust, Wastewater Treatment Bonds, Series 4/04 at 102 Aa1*** 219,958
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 324,315
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 Bonds, 7/02 at 101 1/2 AAA 64,837
Series T, 6.625%, 7/01/18 (Pre-refunded to 7/01/02)
225,000 Puerto Rico Commonwealth Highway Authority, Highway Revenue Bonds, Series 7/00 at 100 A*** 229,241
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 2,009,775
7.000%, 7/01/21 (Pre-refunded to 7/01/01)
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 200,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series R, 7/02 at 101 1/2 BBB+*** $ 213,914
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 BBB+*** 275,725
1994-T, 6.375%, 7/01/24 (Pre-refunded to 7/01/04)
55,000 South Jersey Transportation Authority, Transportation System Revenue 11/02 at 102 AAA 58,703
Bonds, 1992 Series B (Tax Exempt), 5.900%, 11/01/06 (Pre-refunded to
11/01/02)
1,100,000 Sparta Township School District, General Obligation Bonds (Unlimited 9/06 at 100 AAA 1,175,867
Tax), 5.800%, 9/01/18 (Pre-refunded to 9/01/06)
100,000 University of Medicine and Dentistry of New Jersey, Series E, 12/01 at 102 AA-*** 106,892
6.500%, 12/01/18 (Pre-refunded to 12/01/01)
300,000 The Wanaque Borough Sewerage Authority (Passaic County, New Jersey), 12/02 at 102 A3*** 330,072
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 (Passaic County New 9/03 at 102 Baa1*** 80,858
Jersey), Sewer Revenue Bonds, 1993 Series A, 6.125%, 9/01/22 (Pre-
refunded to 9/01/03)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 6.9%
1,000,000 Pollution Control Financing Authority of Camden County (Camden County, No Opt. Call B2 977,920
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 (Camden County, 12/01 at 102 B2 2,587,471
New Jersey), Solid Waste Disposal and Resource Recovery System Revenue
Bonds, Series 1991 D, 7.250%, 12/01/10
300,000 The Port Authority of New York and New Jersey, Special Project Bonds, No Opt. Call N/R 323,190
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+ 257,430
Series Q, 5.900%, 7/01/01
790,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series P, No Opt. Call BBB+ 895,402
7.000%, 7/01/07
2,000,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T, 7/04 at 100 BBB+ 1,954,980
5.500%, 7/01/20
1,500,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, 7/05 at 100 BBB+ 1,413,495
Series Z, 5.250%, 7/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 3.9%
250,000 The Hoboken - Union City - Weehawken Sewerage Authority (New Jersey), 8/02 at 102 AAA 260,108
Sewer 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 98,490
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 152,790
Refunding Bonds (Hackensack Water Company Project), 1994 Series B,
5.900%, 3/01/24 (Alternative Minimum Tax)
4,450,000 The North Hudson Sewerage Authority (New Jersey), Sewer Revenue Bonds, 8/06 at 101 AAA 4,231,100
Series 1996, 5.125%, 8/01/22
- -----------------------------------------------------------------------------------------------------------------------------------
$122,065,000 Total Investments - (cost $120,762,378) - 98.9% 120,623,916
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.1% 1,396,528
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $122,020,444
===================================================================================================================
</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 Flagship New York Municipal Bond Fund
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 0.3%
$ 750,000 Jefferson County Industrial Development Agency, Multi-Modal 11/02 at 102 Baa1 $ 798,578
Interchangeable Rate, Solid Waste Disposal Revenue Bonds (Champion
International Corporation Project), Series 1990, 7.200%, 12/01/20
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 13.0%
1,750,000 Town of Brookhaven Industrial Development Agency, 1993 Civic Facility 3/03 at 102 BBB- 1,813,945
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 2,652,904
Bonds (Bard College Project), Series 1992, 7.000%, 11/01/17
205,000 New York City Industrial Development Agency, Civic Facility Revenue Bonds 11/01 at 102 AA+ 217,431
(Federation Protestant Welfare), Series 1991, 6.950%, 11/01/11
New York City Industrial Development Agency, Civic Facility Revenue Bonds
(College of New Rochelle Project), Series 1995:
1,000,000 6.200%, 9/01/10 9/05 at 102 Baa2 1,049,760
1,000,000 6.300%, 9/01/15 9/05 at 102 Baa2 1,021,070
2,000,000 Dormitory Authority of the State of New York, State University 5/00 at 102 A 2,082,220
Educational 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+ 862,583
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+ 536,005
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+ 2,261,511
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+ 1,558,770
Consolidated Second General Resolution Revenue Bonds, Series 1993A,
5.750%, 7/01/07
2,225,000 Dormitory Authority of the State of New York, City University Refunding No Opt. Call BBB+ 2,301,028
Bonds, 1993C Issue, 5.750%, 7/01/12
1,000,000 Dormitory Authority of the State of New York, State University 5/14 at 100 A- 954,440
Educational Facilities Revenue Bonds, Series 1993B, 5.250%, 5/15/19
Dormitory Authority of the State of New York, Revenue Bonds, Upstate
Community Colleges, Series 1995A:
2,195,000 6.500%, 7/01/07 No Opt. Call BBB+ 2,397,884
1,000,000 6.250%, 7/01/25 7/05 at 102 AAA 1,102,360
4,925,000 Dormitory Authority of the State of New York, City University System 7/05 at 102 AAA 4,712,733
Consolidated Third General Resolution Revenue Bonds, 1995 Series 1,
5.375%, 7/01/25
1,750,000 Dormitory Authority of the State of New York, University of Rochester 7/09 at 101 A+ 1,715,438
Revenue Bonds, Series 1999A and 1999B, 5.625%, 7/01/24 (WI)
3,515,000 Suffolk County Industrial Development Agency, Civic Facility Revenue 6/04 at 102 BBB- 3,589,167
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- 1,032,900
Refunding Bonds (Dowling College Civic Facility), Series 1996,
6.700%, 12/01/20
City of Utica Industrial Development Agency (New York), Civic Facility
Revenue Bonds (Utica College Project), Series 1998A:
900,000 5.300%, 8/01/08 No Opt. Call N/R 888,831
1,000,000 5.750%, 8/01/28 8/08 at 102 N/R 961,180
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
....................................................................................................................................
<S> <C> <C> <C> <C>
Health Care - 9.0%
$ 3,300,000 Dormitory Authority of the State of New York, Menorah Campus, Inc., 2/07 at 102 AAA $ 3,350,886
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 1,021,680
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 2,200,523
Gurwin Jewish Geriatric Center of Long Island, Inc., FHA-Insured
Mortgage Nursing Home Revenue Bonds, Series 1997, 5.700%, 2/01/37
2,500,000 Dormitory Authority of the State of New York, Brooklyn Hospital Center, 2/09 at 101 Aaa 2,296,500
Revenue Bonds, Series 1999C, 5.150%, 2/01/29
485,000 New York State Medical Care Facilities Finance Agency, Hospital and 8/01 at 102 AA 513,751
Nursing Home Insured Mortgage Revenue Bonds, 1991 Series A,
7.450%, 8/15/31
1,990,000 New York State Medical Care Facilities Finance Agency, Hospital and 8/02 at 102 AAA 2,055,292
Nursing Home FHA-Insured Mortgage Revenue Bonds, 1992 Series B,
6.200%, 8/15/22
595,000 New York State Medical Care Facilities Finance Agency, Mental Health 2/03 at 102 AAA 634,925
Services Facilities Improvement Revenue Bonds, 1992 Series F,
6.450%, 2/15/03
2,305,000 New York State Medical Care Facilities Finance Agency, Hospital and 8/04 at 102 AAA 2,436,431
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 1,031,720
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 2/00 at 102 AA 332,348
Nursing Home Insured Mortgage Revenue Bonds, 1989 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 1,037,190
Mortgage Project Revenue Bonds, 1995 Series B, 6.100%, 2/15/15
960,000 New York State Medical Care Facilities Finance Agency, Health Center 11/05 at 102 Aa1 1,019,002
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 AA 1,048,570
Nursing Home FHA-Insured Mortgage Revenue Bonds, 1994 Series A,
6.200%, 2/15/21
2,150,000 Newark-Wayne Community Hospital, Inc., Hospital Revenue Improvement and 9/03 at 102 N/R 2,286,848
Refunding Bonds, Series 1993A, 7.600%, 9/01/15
2,000,000 New York City Industrial Development Agency, Civic Facility Revenue Bonds 12/02 at 102 BBB 2,073,560
(1992 Jewish Board of Family and Children's Services, Inc. Project),
6.750%, 12/15/12
....................................................................................................................................
Housing/Multifamily - 5.4%
1,000,000 City of Batavia Housing Authority, Tax-Exempt Mortgage Revenue Refunding 7/01 at 102 Aaa 1,031,960
Bonds, Series 1994A (Washington Towers - FHA Insured Mortgage),
6.500%, 1/01/23
2,000,000 Village of East Rochester Housing Authority, FHA-Insured Mortgage Revenue 2/08 at 102 AA 1,918,280
Bonds (Linden Knoll Inc. Project), Series 1998, 5.350%, 2/01/38
2,000,000 New York City Housing Development Corporation, Multi-Family Mortgage 4/03 at 102 AAA 2,110,980
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 1,327,950
Refunding Bonds (FHA-Insured Mortgage Loans), 1991 Series A,
7.350%, 6/01/19
750,000 Dormitory Authority of the State of New York, GNMA Collateralized Revenue 2/00 at 101 AAA 766,695
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 Bonds, 5/06 at 102 AAA 2,341,562
1996 Series A Refunding, 6.125%, 11/01/20
New York State Housing Finance Agency, Insured Multi-Family Mortgage
Housing Revenue Bonds, 1992 Series A:
1,650,000 6.950%, 8/15/12 8/02 at 102 AA 1,756,458
500,000 7.000%, 8/15/22 8/02 at 102 AA 530,815
1,000,000 New York State Housing Finance Agency, Multi-Family Housing Revenue Bonds 2/04 at 102 Aa1 1,060,100
(Secured Mortgage Program), 1994 Series C, 6.450%, 8/15/14
</TABLE>
19
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New York Municipal Bond Fund (continued)
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
....................................................................................................................................
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 1,000,000 New York State Urban Development Corporation, Section 236 Revenue Bonds, 1/02 at 102 AAA $ 1,063,700
Series 1992A, 6.750%, 1/01/26
....................................................................................................................................
Housing/Single Family - 2.7%
1,500,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 9/04 at 102 Aa2 1,574,775
Series 43, 6.450%, 10/01/17
480,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 4/01 at 102 Aa2 497,395
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 1,052,170
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 3,757,480
Series 69, 5.500%, 10/01/28 (Alternative Minimum Tax)
....................................................................................................................................
Long-Term Care - 4.8%
600,000 Town of Hempstead Industrial Development Agency, Civic Facility Revenue 10/99 at 102 Aa2 613,242
Bonds (United Cerebral Palsy Association of Nassau County, Inc. Civic
Facility Project), 1989 Series, 7.500%, 10/01/09
2,000,000 Dormitory Authority of the State of New York, Bishop Henry R. Hucles 7/06 at 102 Aa1 2,031,980
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 2,549,200
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 5,005,500
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 2,126,208
Revenue Bonds, Series 1993 (Loretto-Utica Project), 5.950%, 7/01/35
....................................................................................................................................
Tax Obligation/General - 7.1%
5,000 The City of New York, General Obligation Bonds, Fiscal 1992 Series C 8/02 at 101 1/2 AAA 5,331
Fixed Rate Bonds, Subseries C1, 6.625%, 8/01/13
1,000,000 The City of New York (New York), General Obligation Bonds, Fiscal 1996, 2/06 at 101 1/2 A- 1,000,930
Series F, 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- 2,013,800
2,500,000 5.750%, 2/01/20 2/06 at 101 1/2 A- 2,477,625
1,750,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series D, 11/06 at 101 1/2 A- 1,817,655
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- 1,564,550
7.500%, 2/01/06
5,000,000 The City of New York, General Obligation Bonds, Fiscal 1998 Series J, 8/08 at 101 A- 4,482,800
5.000%, 8/01/23
4,440,000 The City of New York, General Obligation Bonds, Fiscal 1999 Series C, 8/08 at 101 A- 3,989,695
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 A2 444,982
390,000 6.875%, 10/01/09 No Opt. Call A2 447,509
....................................................................................................................................
Tax Obligation/Limited - 23.1%
300,000 Albany Housing Authority, City of Albany, New York, Limited Obligation 10/05 at 102 Baa1 304,320
Bonds, Series 1995, 5.850%, 10/01/07
1,500,000 Albany Parking Authority, Aggregate Principal Amount, Parking Revenue No Opt. Call Baa1 533,700
Refunding Bonds, Series 1992A, 0.000%, 11/01/17
1,600,000 County of Franklin (New York), Industrial Development Agency, Lease 11/02 at 102 BBB- 1,694,016
Revenue Bonds (County Correctional Facility Project), Series 1992,
6.750%, 11/01/12
2,500,000 New York Housing Corporation, Senior Revenue Refunding Bonds, Series 1993, 11/03 at 102 AA 2,401,675
5.000%, 11/01/13
4,000,000 Metropolitan Transportation Authority (New York), Transit Facilities 7/03 at 101 1/2 BBB+ 4,012,400
Service Contract Bonds, Series P, 5.750%, 7/01/15
5,750,000 New York City Transitional Finance Authority (New York), Future 5/09 at 101 AA 5,591,645
Tax Secured Bonds, Fiscal 1999 Series C, 5.500%, 5/01/25
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 2,250,000 Dormitory Authority of the State of New York, Judicial 10/99 at 116 9/32 Baa1 $ 2,587,500
Facilities Lease 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+ 1,039,550
(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+ 2,775,532
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 5/03 at 101 1/2 A3 2,190,001
Facilities Lease 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 2/07 at 102 A- 2,442,125
Services Facilities Improvement
Revenue Bonds, Series 1997B, 5.625%, 2/15/21
1,545,000 New York State Environmental Facilities Corporation, State 3/03 at 101 BBB+ 1,552,601
Park Infrastructure Special Obligation
Bonds, Series 1993 A, 5.750%, 3/15/13
1,000,000 New York State Housing Finance Agency, Health Facilities 5/06 at 101 1/2 A- 1,057,180
Revenue Bonds (New York City), 1996
Series A Refunding, 6.000%, 11/01/08
340,000 New York State Housing Finance Agency, Health Facilities 11/00 at 102 BBB+ 357,109
Revenue Bonds (New York City), 1990 Series
A Refunding, 8.000%, 11/01/08
2,990,000 New York State Housing Finance Agency, Service Contract 9/03 at 102 BBB+ 3,056,886
Obligation Revenue Bonds, 1993 Series C
Refunding, 5.875%, 9/15/14
2,000,000 New York State Housing Finance Agency, Service Contract 9/05 at 102 BBB+ 2,102,480
Obligation Revenue Bonds, 1995 Series A, 6.375%, 9/15/15
250,000 State of New York Municipal Bond Bank Agency, Special 9/01 at 102 BBB+ 264,445
Program Bonds (City of Buffalo), 1991 Series
A, 6.875%, 3/15/06
110,000 New York State Medical Care Facilities Finance Agency, 2/00 at 100 A- 111,403
Mental Health Services Facilities
Improvement Revenue Bonds, 1988 Series A, 7.700%, 2/15/18
15,000 New York State Medical Care Facilities Finance Agency, 8/04 at 102 A- 15,949
Mental Health Services Facilities
Improvement Revenue Bonds, 1994 Series E, 6.500%, 8/15/24
2,000,000 New York State Medical Care Facilities Financing Agency, 2/02 at 100 AAA 1,956,320
Mental Health Services Facilities
Improvement Revenue Bonds, 1992 Series A, 5.500%, 8/15/21
7,500,000 New York State Urban Development Corporation, Correctional 1/04 at 102 BBB+ 6,967,875
Capital Facilities Revenue Bonds,
1993A Refunding Series, 5.250%, 1/01/21
1,000,000 New York State Urban Development Corporation, Project 1/06 at 102 BBB+ 1,034,980
Revenue Bonds (Onondaga County
Convention Center), Refunding Series 1995, 6.250%, 1/01/20
5,090,000 New York State Urban Development Corporation, Correctional 1/03 at 102 BBB+ 4,999,144
Capital 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+ 2,215,325
Facilities Service Contract Revenue
Bonds, Series A, 5.000%, 1/01/28
2,000,000 City School District of the City of Niagara Falls (New 6/08 at 101 BBB- 1,846,140
York), Certificates of Participation (High
School Facility), Series 1998, 5.375%, 6/15/28
2,000,000 34th Street Partnership, Inc., 34th Street Business 1/03 at 102 A1 1,939,780
Improvement District (New York), Capital
Improvement Bonds, Series 1993, 5.500%, 1/01/23
500,000 Triborough Bridge and Tunnel Authority (New York), No Opt. Call BBB+ 563,340
Convention Center Project Bonds, Series E, 7.250%, 1/01/10
2,000,000 Triborough Bridge and Tunnel Authority (New York), Special 1/01 at 102 A1 2,104,900
Obligation Refunding Bonds, Series 1991B, 7.100%, 1/01/10
2,000,000 Triborough Bridge and Tunnel Authority, Special Obligation 1/01 at 102 AAA 2,106,240
Refunding Bonds, Series 1991B, 7.100%, 1/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 6.0%
500,000 Albany Parking Authority, Aggregate Principal Amount (Green 9/01 at 102 A 523,705
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 4,019,040
Revenue Bonds, Series 1997A, 5.750%, 7/01/21
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited)
Nuveen Flagship New York Municipal Bond Fund (continued)
August 31, 1999
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation (continued)
$2,000,000 Metropolitan Transportation Authority, Commuter Facilities Revenue Bonds, 7/07 at 101 AAA $1,911,000
Series 1997C, 5.375%, 7/01/27
2,000,000 New York City Industrial Development Agency, Special Facility Revenue 8/07 at 102 Baa1 1,849,240
Bonds (1990 American Airlines, Inc. Project), Remarketed, 5.400%,
7/01/20 (Alternative Minimum Tax)
2,000,000 New York City Industrial Development Agency, Special Facility 1/04 at 102 A 2,038,620
Revenue Bonds, Series 1994 (Terminal One Group Association, L.P.
Project), 6.125%, 1/01/24 (Alternative Minimum Tax)
500,000 New York City Industrial Development Agency, Special Facility Revenue 12/08 at 102 A 440,050
Bonds, Series 1998 (1998 British Airways PLC Project),
5.250%, 12/01/32 (Alternative Minimum Tax)
2,000,000 New York State Thruway Authority, General Revenue Refunding Bonds, 1/08 at 101 AA- 1,797,340
Series E, 5.000%, 1/01/25
1,500,000 The Port Authority of New York and New Jersey, Special Project Bonds, 12/07 at 100 AAA 1,519,005
Series 6, JFK International Air Terminal LLC Project, 5.750%,
12/01/25 (Alternative Minimum Tax)
1,500,000 Triborough Bridge and Tunnel Authority (New York), General Purpose Revenue 1/07 at 101 Aa3 1,392,660
Bonds, Series 1997A, 5.250%, 1/01/28
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 17.5%
1,000,000 Metropolitan Transportation Authority, Commuter Facilities Revenue Bonds, 7/02 at 102 AAA 1,071,790
Series 1992B, 6.250%, 7/01/17 (Pre-refunded to 7/01/02)
1,000,000 Metropolitan Transportation Authority, Commuter Facilities Revenue Bonds, 7/04 at 101 1/2 AAA 1,096,080
Series 1994A, 6.375%, 7/01/18 (Pre-refunded to 7/01/04)
1,000,000 Metropolitan Transportation Authority, Commuter Facilities 1987 Service 7/00 at 102 AAA 1,050,690
Contract Bonds, Series 3, 7.500%, 7/01/16 (Pre-refunded to 7/01/00)
1,025,000 Metropolitan Transportation Authority, Transit Facilities Revenue Bonds, 7/02 at 102 AAA 1,105,360
Series J, 6.500%, 7/01/18 (Pre-refunded to 7/01/02)
1,000,000 Metropolitan Transportation Authority, Transit Facilities Revenue Bonds, 7/06 at 102 AAA 1,099,520
Series 1996A, 6.100%, 7/01/21 (Pre-refunded to 7/01/06)
1,000,000 City of Rochelle Industrial Development Agency, Civic Facility Revenue 7/02 at 102 Baa2*** 1,078,630
Bonds (College of New Rochelle Project), 1992 Series, 6.625%, 7/01/12
(Pre-refunded to 7/01/02)
40,000 The City of New York, General Obligation Bonds, Fiscal 1992 Series C, 8/02 at 101 1/2 AAA 43,158
6.625%, 8/01/13 (Pre-refunded to 8/01/02)
40,000 The City of New York, General Obligation Bonds, Fiscal 1991 Series F, 11/01 at 101 1/2 AAA 44,011
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, Fiscal 1995 Series B, 8/04 at 101 Aaa 1,121,010
7.000%, 8/15/16 (Pre-refunded to 8/15/04)
550,000 The City of New York, General Obligation Bonds, Fiscal 1992 Series B, 2/02 at 101 1/2 A-*** 598,230
7.500%, 2/01/06 (Pre-refunded to 2/01/02)
1,000,000 New York City Health and Hospitals Corporation, Health System Bonds, 1993 2/03 at 102 AAA 1,078,480
Series A, 6.300%, 2/15/20 (Pre-refunded to 2/15/03)
1,500,000 New York City Municipal Water Finance Authority (New York), Water and 6/01 at 101 1/2 Aaa 1,615,020
Sewer System Revenue Bonds, Fiscal 1991 Series C, 7.750%, 6/15/20
(Pre-refunded to 6/15/01)
5,345,000 New York City Industrial Development Agency, Civic Facility Revenue Bonds 7/02 at 102 Aa2*** 5,753,625
(1992 - The Lighthouse, Inc. Project), 6.500%, 7/01/22 (Pre-refunded
to 7/01/02)
300,000 State of New York, Serial Bonds, Series 1991, 7.300%, 3/01/12 (Pre-refunded 3/01 at 102 A*** 319,467
to 3/01/01)
2,135,000 Dormitory Authority of the State of New York, United Health Services, Inc., 2/00 at 102 N/R*** 2,208,444
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 University System 7/00 at 102 Aaa 1,051,710
Consolidated Revenue Bonds, Series 1990A, 7.625%, 7/01/20 (Pre-refunded
to 7/01/00)
300,000 Dormitory Authority of the State of New York, State of New York 7/01 at 102 Baa1*** 324,222
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*** 431,360
FHA-Insured Mortgage Revenue Bonds, Series 1991, 7.400%, 2/01/31
(Pre-refunded to 8/01/01)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$250,000 Dormitory Authority of the State of New York, Department of Health Revenue 7/01 at 102 BBB+*** $ 268,003
Bonds, Veterans Home, Series 1990, 7.250%, 7/01/21 (Pre-refunded to
7/01/01)
240,000 Dormitory Authority of the State of New York, Iroquois Nursing Insured 2/01 at 102 AA-*** 254,011
Revenue Bonds, Series 1991, 7.000%, 2/01/15 (Pre-refunded to 2/01/01)
985,000 Dormitory Authority of the State of New York, Dormitory Revenue Bonds, 7/04 at 102 AAA 1,126,190
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 of 7/05 at 102 AAA 1,676,340
the State of New York Revenue Bonds, Series 1995, 6.625%, 7/01/24
(Pre-refunded to 7/01/05)
215,000 New York State Energy Research and Development Authority, Electric 1/03 at 102 A-*** 234,827
Facilities Revenue Bonds (Long Island Lighting Company Project), 1992
Series D, 6.900%, 8/01/22 (Alternative Minimum Tax) (Pre-refunded to
1/21/03)
200,000 New York State Housing Finance Agency, State University Construction No Opt. Call AAA 246,506
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 1,770,091
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 AAA 267,558
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 51,906
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 1,556,929
Health Services Facilities Improvement Revenue Bonds, 1991
Series A, 7.500%, 2/15/21 (Pre-refunded to 2/15/01)
785,000 New York State Medical Care Facilities Finance Agency, Mental 2/03 at 102 AAA 848,766
Health Services Facilities Improvement Revenue Bonds, 1992
Series F, 6.450%, 2/15/09 (Pre-refunded to 2/15/03)
New York State Medical Care Facilities Finance Agency, New York Hospital, FHA-
Insured Mortgage Revenue Bonds, 1994 Series A:
1,000,000 6.750%, 8/15/14 (Pre-refunded to 2/15/05) 2/05 at 102 AAA 1,119,560
1,000,000 6.800%, 8/15/24 (Pre-refunded to 2/15/05) 2/05 at 102 AAA 1,121,950
2,700,000 New York State Medical Care Facilities Finance Agency, Hospital Medical 2/05 at 102 AAA 3,025,080
Center, Secured Hospital Revenue Bonds, Series 1995-A, 6.800%, 8/15/12
(Pre-refunded to 2/15/05)
1,480,000 New York State Medical Care Facilities Finance Agency, Hospital and Nursing 2/04 at 102 AA*** 1,605,104
Home FHA-Insured Mortgage Revenue Bonds, 1994 Series A, 6.200%, 2/15/21
(Pre-refunded to 2/15/04)
1,485,000 New York State Medical Care Facilities Finance Agency, Mental Health 8/04 at 102 A-*** 1,636,960
Services Facilities Improvement Revenue Bonds, 1994 Series E, 6.500%,
8/15/24 (Pre-refunded to 8/15/04)
1,000,000 New York State Urban Development Corporation, Correctional Capital 1/00 at 102 AAA 1,032,650
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 Bonds 1/01 at 102 BBB+*** 2,130,920
(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 Revenue 4/01 at 102 Aaa 3,105,552
Bonds, Series 1991, 7.500%, 4/01/20 (Pre-refunded to 4/01/01)
1,000,000 Orangetown Housing Authority (Rockland County, New York), Housing 10/00 at 102 A*** 1,059,110
Facilities Revenue Bonds (Orangetown Senior Housing Center), 1990
Series, 7.600%, 4/01/30 (Pre-refunded to 10/01/00)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 8.9%
6,500,000 Erie County Industrial Development Agency, Solid Waste Disposal Facility 12/10 at 103 N/R 6,788,080
Revenue Bonds (1998 CanFibre of Lackawanna Project), 8.875%, 12/01/13
(Alternative Minimum Tax)
New York City Industrial Development Agency, Industrial Development Revenue
Bonds (Brooklyn Navy Yard Cogeneration Partners, L.P. Project), Series 1997:
4,000,000 5.650%, 10/01/28 (Alternative Minimum Tax) 10/08 at 102 BBB- 3,745,800
5,950,000 5.750%, 10/01/36 (Alternative Minimum Tax) 10/08 at 102 BBB- 5,649,168
350,000 New York State Energy Research and Development Authority, Electric 1/00 at 101 A+ 357,193
Facilities Revenue Bonds, Series 1991 A (Consolidated Edison Company
of New York, Inc. Project), 7.500%, 1/01/26 (Alternative Minimum Tax)
</TABLE>
23
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Flagship New York Municipal Bond Fund (continued)
August 31, 1999
<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 N/R $ 1,359,775
Facilities Revenue Bonds (Long Island Lighting Company Project),
1989 Series A, 7.150%, 9/01/19 (Alternative Minimum Tax)
285,000 New York State Energy Research and Development Authority, Electric 1/03 at 102 A- 304,232
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 2,474,788
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 1,547,670
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 784,603
(Development Costs), 1992 Series, 7.000%, 5/01/15 (Alternative
Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 2.2%
10,000,000 New York City Municipal Water Finance Authority, Water and Sewer No Opt. Call A1 3,065,000
System Revenue Bonds, Fiscal 1998 Series D, 0.000%, 6/15/20
2,855,000 New York City Municipal Water Finance Authority, Water and Sewer 6/07 at 101 AAA 2,669,650
System Revenue Bonds, Fiscal 1998 Series B, 5.250%, 6/15/29
- -----------------------------------------------------------------------------------------------------------------------------------
$262,945,000 Total Investments - (cost $248,924,041) - 100.0% 258,501,291
============-----------------------------------------------------------------------------------------------------------------------
Short-Term Investments - 0.6%
$ 1,600,000 New York City General Obligation Variable Rate Demand Bonds, 3.100%, VMIG-1 1,600,000
10/01/21+
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.6)% (1,616,119)
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $258,485,172
====================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
+ Security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified market index.
See accompanying notes to financial statements.
24
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen New York Insured Municipal Bond Fund
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 9.6%
$1,000,000 Allegany County Industrial Development Agency (New York), 8/08 at 102 Aaa $ 899,370
Civic Facility Revenue Bonds, Series 1998 (Alfred
University Civic Facility), 5.000%, 8/01/28
1,350,000 Town of Hempstead Industrial Development Agency, Civic 7/06 at 102 AAA 1,381,617
Facility Revenue Bonds (Hofstra University Project),
Series 1996, 5.800%, 7/01/15
1,000,000 New York City Industrial Development Agency, Civic Facility 11/04 at 102 AAA 1,076,180
Revenue Bonds (USTA National Tennis Center Incorporated
Project), 6.375%, 11/15/14
1,000,000 New York City Industrial Development Agency, Civic Facility 9/05 at 102 AAA 1,019,570
Revenue 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 6/07 at 102 Aaa 1,141,702
Revenue 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 7/05 at 102 AAA 4,732,450
University Dormitory Facilities Lease Revenue Bonds,
Series 1995A, 5.300%, 7/01/24
260,000 Dormitory Authority of the State of New York, College and 12/99 at 102 AAA 266,185
University Revenue (Pooled Capital Program), Series
1985, 7.800%, 12/01/05
5,000,000 Dormitory Authority of the State of New York, New York 7/01 at 102 AAA 5,264,100
University Insured Revenue Bonds, Series 1991, 6.250%, 7/01/09
4,640,000 Dormitory Authority of the State of New York, Mount Sinai 7/04 at 102 AAA 4,228,757
School of Medicine Insured Revenue Bonds, Series 1994A,
5.000%, 7/01/21
1,500,000 Dormitory Authority of the State of New York, Sarah Lawrence 7/05 at 102 AAA 1,535,100
College Revenue Bonds, Series 1995, 6.000%, 7/01/24
2,500,000 Dormitory Authority of the State of New York, Siena College 7/07 at 102 AAA 2,508,150
Insured Revenue Bonds, Series 1997, 5.750%, 7/01/26
4,000,000 Dormitory Authority of the State of New York, Fordham 7/08 at 101 AAA 3,603,000
University Insured Revenue Bonds, Series 1998, 5.000%, 7/01/28
2,530,000 Dormitory Authority of the State of New York, City University 7/08 at 101 AAA 2,298,960
System Consolidated Third General Resolution Revenue Bonds,
1998 Series 2, 5.000%, 7/01/23
1,760,000 Dormitory Authority of the State of New York, City University 7/00 at 102 AAA 1,835,029
System Consolidated Second General Resolution Revenue Bonds,
Series 1990C, 7.000%, 7/01/14
3,000,000 Dormitory Authority of the State of New York, Ithaca College 7/08 at 101 Aaa 2,737,590
Insured Revenue Bonds, Series 1998, 5.000%, 7/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 15.8%
New York City Health and Hospitals Corporation, Health System
Bonds, 1993 Series A:
2,500,000 5.625%, 2/15/13 2/03 at 102 AAA 2,531,500
14,980,000 5.750%, 2/15/22 2/03 at 102 AAA 15,024,640
6,460,000 Dormitory Authority of the State of New York, St. Vincent's 8/05 at 102 AAA 6,469,755
Hospital and 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 2/06 at 102 AAA 3,717,542
Medical Center FHA-Insured Mortgage Hospital Revenue Bonds,
Series 1996A, 5.750%, 8/01/24
2,500,000 Dormitory Authority of the State of New York, Secured 2/08 at 101 1/2 AAA 2,255,500
Hospital Insured Revenue Bonds (Southside Hospital),
Series 1998, 5.000%, 2/15/25
3,000,000 Dormitory Authority of the State of New York (North Shore 11/08 at 101 AAA 2,720,610
Health System Obligated Group), North Shore University
Hospital Revenue Bonds, Series 1998, 5.000%, 11/01/23
895,000 New York State Medical Care Facilities Finance Agency, St. 11/99 at 101 AAA 915,549
Francis Hospital Project Revenue Bonds, 1988 Series A,
7.625%, 11/01/21
</TABLE>
25
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen New York Insured Municipal Bond Fund (continued)
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$3,000,000 New York State Medical Care Facilities Finance Agency, 11/02 at 102 AAA $ 3,188,790
South Nassau Communities Hospital Project
Revenue Bonds, 1992 Series A, 6.125%, 11/01/11
3,200,000 New York State Medical Care Facilities Finance 11/00 at 102 AAA 3,384,064
Agency, North Shore University Hospital Mortgage
Project Revenue Bonds, 1990 Series A, 7.200%, 11/01/20
1,670,000 New York State Medical Care Facilities Finance 11/01 at 102 AAA 1,765,591
Agency, Our Lady of Victory Hospital Project
Revenue Bonds, 1991 Series A, 6.625%, 11/01/16
New York State Medical Care Facilities Finance
Agency, Sisters of Charity Hospital of Buffalo
Project Revenue Bonds, 1991 Series A:
500,000 6.600%, 11/01/10 11/01 at 102 AAA 530,275
1,550,000 6.625%, 11/01/18 11/01 at 102 AAA 1,638,722
1,000,000 New York State Medical Care Facilities Finance 11/01 at 102 AAA 1,067,200
Agency, Aurelia Osborn Fox Memorial Hospital Project
Revenue Bonds, 1992 Series A, 6.500%, 11/01/19
2,500,000 New York State Medical Care Facilities Finance 11/03 at 102 AAA 2,658,400
Agency, St. Mary's Hospital (Rochester) Mortgage
Project Revenue Bonds, 1994 Series A Refunding,
6.200%, 11/01/14
650,000 New York State Medical Care Facilities Finance 2/00 at 102 AA 664,697
Agency, Hospital and Nursing Home Insured Mortgage
Revenue Bonds, 1989 Series B, 7.350%, 2/15/29
7,890,000 New York State Medical Care Facilities Finance 2/05 at 102 AAA 7,973,082
Agency, Montefiore Medical Center FHA-Insured
Mortgage Revenue Bonds, 1995 Series A, 5.750%, 2/15/15
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 8.8%
5,000,000 New York City Housing Development Corporation, 9/99 at 105 AAA 5,261,550
Multifamily Housing Limited Obligation Bonds, Series
1991A, Pass Through Certificates, 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 5,916,398
4,980,000 6.125%, 11/01/20 5/06 at 102 AAA 5,205,793
640,000 New York State Housing Finance Agency, 11/99 at 102 AAA 654,611
Multi-Family Housing Revenue 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 4,091,010
9,650,000 6.750%, 1/01/26 1/02 at 102 AAA 10,264,705
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 1.0%
3,500,000 State of New York Mortgage Agency, Homeowner 10/03 at 102 AAA 3,530,240
Mortgage Revenue Bonds, 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, 7/02 at 102 AAA 1,057,500
United Cerebral Palsy 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, 8/07 at 102 AAA 961,850
Sarah Neuman Nursing Home, FHA-Insured Mortgage
Nursing Home Revenue Bonds, Series 1997, 5.450%, 8/01/27
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 8.9%
1,000,000 City of Buffalo, New York, 2/01 at 101 AAA 1,034,160
Refunding Serial Bonds-1991,
6.150%, 2/01/04
Camden Central School District, Oneida County,
New York, School District (Serial) Bonds, 1991:
500,000 7.100%, 6/15/07 No Opt. Call AAA 573,325
600,000 7.100%, 6/15/08 No Opt. Call AAA 692,406
600,000 7.100%, 6/15/09 No Opt. Call AAA 696,132
275,000 7.100%, 6/15/10 No Opt. Call AAA 321,024
500,000 Greece Central School District, Monroe County, No Opt. Call AAA 539,695
New York, General Obligation Bonds, School
District (Serial) Bonds, Series 1992, 6.000%, 6/15/09
Town of Halfmoon, Saratoga County, New York,
Public Improvement (Serial) Bonds, Series 1991:
385,000 6.500%, 6/01/09 No Opt. Call AAA 434,011
395,000 6.500%, 6/01/10 No Opt. Call AAA 446,583
395,000 6.500%, 6/01/11 No Opt. Call AAA 448,262
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
Middle County Central School District at Centereach, In the Town of
Brookhaven, Suffolk Co., N.Y., School District (Serial) Bonds,
Series 1991:
$ 475,000 6.900%, 12/15/07 No Opt. Call AAA $ 544,013
475,000 6.900%, 12/15/08 No Opt. Call AAA 545,053
Mount Sinai Union Free School District, County of Suffolk, New York,
School District Refunding (Serial) Bonds, Series 1992:
500,000 6.200%, 2/15/15 No Opt. Call AAA 545,675
1,035,000 6.200%, 2/15/16 No Opt. Call AAA 1,127,457
1,500,000 County of Nassau, New York, General Obligation Serial Bonds, 8/04 at 103 AAA 1,539,270
General Improvement Bonds, Series O, 5.700%, 8/01/13
1,505,000 County of Nassau, New York, General Obligations Serial Bonds, 6/09 at 102 AAA 1,431,616
General Improvement Bonds, Series B, 5.250%, 6/01/18
1,020,000 City of New Rochelle, Westchester County, New York, General Obligations 8/04 at 102 AAA 1,056,312
Bonds, Public Improvement Bonds, 1994 Series B, 6.200%, 8/15/22
60,000 The City of New York, General Obligation Bonds, Fiscal 1992 Series C, 8/02 at 101 1/2 AAA 63,543
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 21,324
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 1,303,302
1,025,000 7.000%, 10/01/17 10/99 at 100 AAA 1,027,798
310,000 7.000%, 10/01/18 10/99 at 100 AAA 310,846
2,000,000 The City of New York, General Obligation Bonds, Fiscal 1990 Series B, 10/99 at 100 AAA 2,005,320
7.000%, 10/01/16
5,000,000 The City of New York, General Obligation Bonds, Fiscal 1998 Series H, 8/08 at 101 AAA 4,609,750
5.125%, 8/01/25
1,590,000 City of Niagara Falls, Niagara County, New York, Public Improvement 3/04 at 102 AAA 1,742,672
(Serial) Bonds, Series 1994, 6.900%, 3/01/21
1,505,000 Town of North Hempstead, Nassau County, New York, General Obligation No Opt. Call AAA 1,674,042
Refunding Serial Bonds, 1992 Series B, 6.400%, 4/01/14
Rensselaer County, New York, General Obligation Serial Bonds, Series 1991:
960,000 6.700%, 2/15/13 No Opt. Call AAA 1,092,787
960,000 6.700%, 2/15/14 No Opt. Call AAA 1,095,235
960,000 6.700%, 2/15/15 No Opt. Call AAA 1,096,954
Rondout Valley Central School District at Accord, Ulster County, New York,
General Obligation, School District (Serial) Bonds, Series 1991:
550,000 6.800%, 6/15/06 No Opt. Call AAA 616,451
550,000 6.850%, 6/15/07 No Opt. Call AAA 622,386
550,000 6.850%, 6/15/08 No Opt. Call AAA 625,922
550,000 6.850%, 6/15/09 No Opt. Call AAA 628,821
550,000 6.850%, 6/15/10 No Opt. Call AAA 631,076
600,000 County of Suffolk, New York, General Obligation Refunding (Serial) Bonds, 5/02 at 102 AAA 634,326
Public Improvement Refunding Bonds, 1993 Series B, 6.150%, 5/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 7.8%
5,000,000 Dormitory Authority of the State of New York, Municipal Health Facilities 1/09 at 101 AAA 4,541,750
Improvement Program, Lease Revenue Bonds (New York City Issue), 1998
Series 1, 5.000%, 1/15/23
1,750,000 Dormitory Authority of the State of New York, Office Facilities Lease 4/09 at 101 AAA 1,714,808
Revenue Bonds (Department of Audit and Control), Series 1999,
5.500%, 4/01/23
2,500,000 Dormitory Authority of the State of New York, Mental Health Services 8/07 at 101 AAA 2,298,500
Facilities Improvement Revenue Bonds, Series 1997D, 5.125%, 8/15/27
3,280,000 New York Local Government Assistance Corporation, Series 1993 B, 4/04 at 100 AAA 2,982,078
Refunding Bonds, 5.000%, 4/01/23
1,000,000 New York State Medical Care Facilities Finance Agency, Mental Health 8/04 at 102 AAA 1,090,210
Services Facilities Improvement Revenue Bonds, 1994 Series D,
6.150%, 2/15/15
185,000 New York State Medical Care Facilities Finance Agency, Mental Health 2/02 at 102 AAA 191,481
Services Facilities Improvement Revenue Bonds, 1992 Series B,
6.250%, 8/15/18
</TABLE>
27
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen New York Insured Municipal Bond Fund (continued)
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 150,000 New York State Medical Care Facilities Finance Agency, Mental Health 2/02 at 102 AAA $ 157,910
Services 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 1,884,860
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 4/06 at 102 AAA 3,922,280
Facility Assistance Program), 1996 Series A, 5.500%, 4/01/19
8,650,000 Triborough Bridge and Tunnel Authority, Special Obligation Refunding 1/01 at 102 AAA 9,082,846
Bonds, Series 1991B, 6.875%, 1/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 7.6%
2,500,000 Albany County Airport Authority, Airport Revenue Bonds, Series 1997, 12/07 at 102 AAA 2,435,700
5.500%, 12/15/19 (Alternative Minimum Tax)
2,250,000 Buffalo and Fort Erie Public Bridge Authority, Toll Bridge 1/05 at 101 AAA 2,255,805
System Revenue Bonds, Series 1995, 5.750%, 1/01/25
4,000,000 Metropolitan Transportation Authority (New York), Commuter Facilities 7/05 at 101 AAA 3,997,000
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 3,014,280
Bonds, Series 1997A, 5.750%, 7/01/21
3,000,000 Metropolitan Transportation Authority, Commuter Facilities Revenue 7/07 at 102 AAA 2,770,200
Bonds, Series 1997B, 5.125%, 7/01/24
2,000,000 Metropolitan Transportation Authority, Commuter Facilities Revenue 7/07 at 101 AAA 1,911,000
Bonds, Series 1997C, 5.375%, 7/01/27
3,500,000 Metropolitan Transportation Authority, Commuter Facilities Revenue 7/07 at 101 AAA 3,193,855
Bonds, Series 1997E, 5.000%, 7/01/21
Niagara Frontier Transportation Authority (Buffalo Niagara International
Airport), Airport Revenue Bonds, Series 1998:
1,000,000 5.000%, 4/01/18 (Alternative Minimum Tax) 4/08 at 101 AAA 912,340
1,000,000 5.000%, 4/01/28 (Alternative Minimum Tax) 4/08 at 101 AAA 892,120
3,000,000 The Port Authority of New York and New Jersey, Special Project Bonds, 12/07 at 100 AAA 3,038,010
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 1/02 at 101 1/2 AAA 2,897,785
Bonds, Series X, 6.500%, 1/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 27.1%
3,385,000 Buffalo Municipal Water Finance Authority, Water System Revenue Bonds, 7/03 at 102 AAA 3,610,949
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 12/09 at 100 AAA 1,122,940
Bonds, Series 1990B, 6.750%, 12/01/14
10,340,000 Metropolitan Transportation Authority, Transit Facilities Revenue Bonds, 7/02 at 102 AAA 11,150,656
Series J, 6.500%, 7/01/18 (Pre-refunded to 7/01/02)
Public Improvement Serial Bonds of 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 397,189
375,000 6.500%, 6/01/16 (Pre-refunded to 6/01/01) 6/01 at 102 AAA 397,189
350,000 6.500%, 6/01/17 (Pre-refunded to 6/01/01) 6/01 at 102 AAA 370,710
3,725,000 Montgomery, Otsego, Schoharie, Solid Waste Management Authority, Solid 1/00 at 103 AAA 3,880,370
Waste System Revenue Bonds, Series 1990, 7.250%, 1/01/14
(Pre-refunded to 1/01/00)
Mount Sinai Union Free School District, Suffolk County, New York, School
District (Serial) Bonds, Series 1989:
1,000,000 7.250%, 2/15/15 (Pre-refunded to 2/15/00) 2/00 at 102 AAA 1,036,050
1,000,000 7.250%, 2/15/17 (Pre-refunded to 2/15/00) 2/00 at 102 AAA 1,036,050
4,840,000 Nassau County Industrial Development Agency, Civic Facility Revenue Bonds 8/01 at 102 AAA 5,165,780
(Hofstra University Project), Series 1991, 6.750%, 8/01/11 (Pre-refunded
to 8/01/01)
The City of New York, General Obligation Bonds, Fiscal 1992 Series C, Fixed
Rate Bonds, Subseries C-1:
3,940,000 6.250%, 8/01/10 (Pre-refunded to 8/01/02) 8/02 at 101 1/2 AAA 4,210,954
55,000 6.625%, 8/01/12 (Pre-refunded to 8/01/02) 8/02 at 101 1/2 AAA 59,343
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 2,000,000 New York City Municipal Water Finance Authority, Water and Sewer 6/01 at 101 AAA $ 2,109,920
System 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 1,042,320
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 1,032,650
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 2,334,486
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 Services, 2/00 at 102 N/R*** 1,541,256
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 1,253,256
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 1,050,690
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 2,039,420
Educational Facilities Revenue Bonds, Series 1990A, 6.500%, 5/15/19
(Pre-refunded to 5/15/00)
1,200,000 Dormitory Authority of the State of New York, State University 5/00 at 102 AAA 1,251,180
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 7/00 at 102 AAA 6,614,094
System Consolidated Second General Resolution Revenue Bonds,
Series 1990F, 7.500%, 7/01/20 (Pre-refunded to 7/01/00)
2,500,000 Dormitory Authority of the State of New York, Cooper Union Insured 7/01 at 102 AAA 2,682,900
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 1,048,260
Insured Revenue Bonds, Series 1990, 7.200%, 7/01/15
(Pre-refunded to 7/01/00)
740,000 Dormitory Authority of the State of New York, City University 7/00 at 102 AAA 774,506
System Consolidated Second General Resolution Revenue Bonds,
Series 1990C, 7.000%, 7/01/14 (Pre-refunded to 7/01/00)
2,630,000 New York State Medical Care Facilities Finance Agency, Mental 2/02 at 102 AAA 2,799,425
Health Services Facilities Improvement Revenue Bonds,
1992 Series B, 6.250%, 8/15/18 (Pre-refunded to 2/15/02)
7,000,000 New York State Medical Care Facilities Finance Agency, New York 2/05 at 102 AAA 7,853,650
Hospital, FHA-Insured Mortgage Revenue Bonds, 1994 Series A,
6.800%, 8/15/24 (Pre-refunded to 2/15/05)
6,000,000 New York State Medical Care Facilities Finance Agency, Mental Health 2/02 at 102 AAA 6,399,480
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 2,137,620
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 7,681,863
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 1,547,745
575,000 7.000%, 1/01/17 (Pre-refunded to 1/01/00) 1/00 at 102 AAA 592,831
2,000,000 New York State Urban Development Corporation, Correctional Facilities 1/00 at 102 AAA 2,065,300
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 443,097
425,000 6.800%, 6/01/11 (Pre-refunded to 6/01/00) 6/00 at 102 AAA 443,097
Nyack Union Free School District, Rockland County, New York, School
District Serial Bonds of 1992:
625,000 6.500%, 4/01/12 (Pre-refunded to 4/01/02) 4/02 at 102 AAA 670,963
625,000 6.500%, 4/01/13 (Pre-refunded to 4/01/02) 4/02 at 102 AAA 670,963
625,000 6.500%, 4/01/14 (Pre-refunded to 4/01/02) 4/02 at 102 AAA 670,963
1,000,000 County of Suffolk, New York, General Obligation Refunding (Serial) 4/00 at 102 AAA 1,038,280
Bonds, Public Improvement Refunding Bonds, 1993 Series B,
6.900%, 4/01/01 (Pre-refunded to 4/01/00)
</TABLE>
29
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen New York Insured Municipal Bond Fund (continued)
August 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 2,000,000 Triborough Bridge and Tunnel Authority, General Purpose Revenue Bonds, 1/01 at 102 AAA $ 2,113,460
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 1,236,088
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, Series 12/00 at 102 AAA 1,859,200
1990-C, 7.375%, 12/01/09 (Pre-refunded to 12/01/00)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 3.0%
6,000,000 Long Island Power Authority, Electric System General Revenue Bonds, 6/08 at 101 AAA 5,554,440
Series 1998A, 5.125%, 12/01/22
8,500,000 Long Island Power Authority, Electric System General Revenue Bonds, No Opt. Call AAA 2,729,010
Series 1998A, 0.000%, 12/01/19
2,500,000 New York State Energy Research and Development Authority, Pollution 10/99 at 103 AAA 2,582,550
Control Revenue Bonds (Central Hudson Gas and Electric Corporation
Project), 1984 Series B, 7.375%, 10/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 8.4%
280,000 Albany, Municipal Water Finance Authority, Water and Sewer System 12/99 at 101 AAA 286,401
Revenue Bonds, Series 1988A, 7.500%, 12/01/17
2,930,000 Buffalo Municipal Water Finance Authority, Water System Revenue Bonds, 7/08 at 101 AAA 2,639,198
Series 1998-A, 5.000%, 7/01/28
7,000,000 New York City Municipal Water Finance Authority, Water and Sewer System 6/06 at 101 AAA 7,018,900
Revenue Bonds, Fiscal 1996 Series B, 5.750%, 6/15/26
1,250,000 New York City Municipal Water Finance Authority, Water and Sewer System 6/01 at 101 AAA 1,310,225
Revenue Bonds, Fiscal 1992 Series A, 6.750%, 6/15/16
2,765,000 New York City Municipal Water Finance Authority, Water and Sewer System 6/02 at 101 1/2 AAA 2,780,208
Revenue Bonds, Fiscal 1993 Series A, 5.750%, 6/15/18
4,650,000 New York City Municipal Water Finance Authority, Water and Sewer System 6/02 at 100 AAA 4,573,275
Revenue Bonds, Fiscal 1993 Series A, 5.500%, 6/15/20
3,250,000 New York City Municipal Water Finance Authority, Water and Sewer System 6/08 at 101 AAA 2,932,215
Revenue Bonds, Fiscal 1999 Series A, 5.000%, 6/15/27
3,000,000 New York City Municipal Water Finance Authority, Water and Sewer System 6/07 at 101 AAA 2,805,240
Revenue Bonds, Fiscal 1998 Series B, 5.250%, 6/15/29
1,450,000 New York State Environmental Facilities Corporation, State Water Pollution 3/00 at 102 AAA 1,502,718
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 York), 2/04 at 101 AAA 975,867
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 3,446,066
Series 1994, 5.000%, 6/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
$353,635,000 Total Investments - (cost $340,634,983) - 98.6% 353,513,157
============-----------------------------------------------------------------------------------------------------------------------
Short-Term Investments - 0.8%
$ 3,000,000 New York City, Series B, Subseries B-4, Variable Rate Demand Bonds, VMIG-1 3,000,000
============-----------------------------------------------------------------------------------------------------------------------
2.800%, 8/15/23+
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.6% 2,136,169
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $358,649,326
====================================================================================================================
</TABLE>
All of the bonds in the portfolio, excluding temporary investments in short-
term municipal securities, are either covered by Original Issue Insurance,
Secondary Market Insurance or Portfolio Insurance, or are backed by an
escrow or trust containing sufficient U.S. Government or U.S. Government
agency securities, any of which ensure the timely payment of principal and
interest.
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
+ Security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified market index.
See accompanying notes to financial statements.
30
<PAGE>
Statement of Net Assets (Unaudited)
August 31, 1999
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $120,623,916 $258,501,291 $353,513,157
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) -- 1,600,000 3,000,000
Cash 141,173 -- --
Receivables:
Fund manager (note 6) -- 2,613 --
Interest 1,525,720 3,274,444 3,943,618
Investments sold 20,000 4,528,300 5,467,206
Shares sold 184,404 630,449 391,853
Other assets 13,228 24,855 65,283
- ----------------------------------------------------------------------------------------------------------
Total assets 122,508,441 268,561,952 366,381,117
- ----------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 5,497,418 1,197,960
Payables:
Investments purchased -- 3,649,351 4,751,324
Shares redeemed 4,870 54,056 451,976
Accrued expenses:
Management fees (note 6) 56,782 -- 163,757
12b-1 distribution and service fees (notes 1 and 6) 26,652 32,151 26,013
Other 112,427 125,570 111,167
Dividends payable 287,266 718,234 1,029,594
- ----------------------------------------------------------------------------------------------------------
Total liabilities 487,997 10,076,780 7,731,791
- ----------------------------------------------------------------------------------------------------------
Net assets (note 7) $122,020,444 $258,485,172 $358,649,326
==========================================================================================================
Class A Shares (note 1)
Net assets $ 53,017,951 $ 84,064,027 $ 56,094,929
Shares outstanding 5,237,663 7,960,352 5,470,486
Net asset value and redemption price per share $ 10.12 $ 10.56 $ 10.25
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 10.56 $ 11.02 $ 10.70
==========================================================================================================
Class B Shares (note 1)
Net assets $ 14,272,104 $ 16,106,598 $ 17,655,639
Shares outstanding 1,411,199 1,523,583 1,720,299
Net asset value, offering and redemption price per share $ 10.11 $ 10.57 $ 10.26
==========================================================================================================
Class C Shares (note 1)
Net assets $ 10,721,163 $ 9,192,885 $ 4,281,778
Shares outstanding 1,062,122 867,847 417,706
Net asset value, offering and redemption price per share $ 10.09 $ 10.59 $ 10.25
==========================================================================================================
Class R Shares (note 1)
Net assets $ 44,009,226 $149,121,662 $280,616,980
Shares outstanding 4,348,733 14,078,345 27,351,514
Net asset value, offering and redemption price per share $ 10.12 $ 10.59 $ 10.26
==========================================================================================================
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended August 31, 1999
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $ 3,434,698 $ 7,659,119 $ 10,569,643
- -------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 338,972 705,557 991,736
12b-1 service fees - Class A (notes 1 and 6) 53,651 81,751 55,231
12b-1 distribution and service fees - Class B (notes 1 and 6) 62,732 66,257 73,203
12b-1 distribution and service fees - Class C (notes 1 and 6) 40,964 34,230 16,139
Shareholders' servicing agent fees and expenses 61,695 98,499 127,997
Custodian's fees and expenses 40,906 52,361 50,024
Trustees' fees and expenses (note 6) 1,786 2,315 3,795
Professional fees 2,483 4,671 8,614
Shareholders' reports - printing and mailing expenses 43,185 34,702 84,141
Federal and state registration fees 11,644 4,095 2,898
Portfolio insurance expense -- -- 3,358
Other expenses 2,449 4,123 5,948
- -------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 660,467 1,088,561 1,423,084
Custodian fee credit (note 1) (12,201) (15,278) (8,312)
Expense reimbursement (note 6) (97,085) (120,837) --
- -------------------------------------------------------------------------------------------------------------------
Net expenses 551,181 952,446 1,414,772
- -------------------------------------------------------------------------------------------------------------------
Net investment income 2,883,517 6,706,673 9,154,871
- -------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (notes 1 and 4) (11,755) (16,460) (192,562)
Change in net unrealized appreciation or depreciation of investments (5,673,527) (11,405,432) (16,555,024)
- -------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (5,685,282) (11,421,892) (16,747,586)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $(2,801,765) $ (4,715,219) $ (7,592,715)
===================================================================================================================
</TABLE>
See accompanying notes to financial statements.
32
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
New Jersey
--------------------------------
Six Months Ended Year Ended
8/31/99 2/28/99
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 2,883,517 $ 5,254,037
Net realized gain (loss) from investment transactions (notes 1 and 4) (11,755) 115,134
Change in net unrealized appreciation or depreciation of investments (5,673,527) (239,717)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (2,801,765) 5,129,454
- ----------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,277,592) (2,238,254)
Class B (263,771) (289,199)
Class C (232,689) (361,714)
Class R (1,136,989) (2,367,199)
From accumulated net realized gains from investment transactions:
Class A -- --
Class B -- --
Class C -- --
Class R -- --
- ----------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (2,911,041) (5,256,366)
- ----------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from shares issued in the reorganization of
New Jersey Intermediate (note 1) -- 10,490,003
Net proceeds from sale of shares 12,642,704 32,345,835
Net proceeds from shares issued to shareholders due to reinvestment of distributions 1,747,145 3,178,514
- ----------------------------------------------------------------------------------------------------------------------
14,389,849 46,014,352
Cost of shares redeemed (7,790,063) (14,067,767)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 6,599,786 31,946,585
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets 886,980 31,819,673
Net assets at the beginning of period 121,133,464 89,313,791
- ----------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $122,020,444 $121,133,464
======================================================================================================================
Balance of undistributed (over-distributed) net investment income at the end of period $ (25,339) $ 2,185
======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
Statement of Changes in Net Assets (Unaudited) (continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
New York New York Insured
------------------------------ -------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
8/31/99 2/28/99 8/31/99 2/28/99
- ----------------------------------------------------------------------------------------------------------------------------------
Operations
Net investment income $ 6,706,673 $ 12,946,294 $ 9,154,871 $ 18,001,673
Net realized gain (loss) from investment transactions
(notes 1 and 4) (16,460) 1,767,488 (192,562) 2,051,978
Change in net unrealized appreciation or depreciation of
investments (11,405,432) (482,766) (16,555,024) (1,737,215)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (4,715,219) 14,231,016 (7,592,715) 18,316,436
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (2,026,143) (3,991,380) (1,327,006) (2,291,771)
Class B (289,996) (318,702) (308,331) (375,855)
Class C (200,425) (328,331) (91,265) (124,512)
Class R (4,008,132) (8,212,001) (7,338,457) (15,260,254)
From accumulated net realized gains from investment transactions:
Class A -- -- -- (130,963)
Class B -- -- -- (31,353)
Class C -- -- -- (8,852)
Class R -- -- -- (822,078)
- ----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (6,524,696) (12,850,414) (9,065,059) (19,045,638)
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 22,423,140 32,108,889 20,664,180 30,426,780
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 3,778,204 7,870,186 6,162,735 13,375,740
- ----------------------------------------------------------------------------------------------------------------------------------
26,201,344 39,979,075 26,826,915 43,802,520
Cost of shares redeemed (15,213,190) (31,347,095) (23,249,637) (38,003,474)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 10,988,154 8,631,980 3,577,278 5,799,046
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (251,761) 10,012,582 (13,080,496) 5,069,844
Net assets at the beginning of period 258,736,933 248,724,351 371,729,822 366,659,978
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $258,485,172 $258,736,933 $358,649,326 $371,729,822
==================================================================================================================================
Balance of undistributed net investment income at the end of period $ 283,135 $ 101,158 $ 153,287 $ 63,475
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
34
<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 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, Nuveen Flagship New Jersey
Intermediate Municipal Bond Fund ("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, 1999, New York had an outstanding when-issued purchase commitment of
$1,722,794. There were no such outstanding purchase commitments in either 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 monthly as a dividend and payment
is made or reinvestment is credited to shareholders accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss 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.
35
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
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. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances, or by specified classes
of investors.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the six months ended August 31, 1999.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Custodian Fee Credit
Each Fund has an agreement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
36
<PAGE>
<TABLE>
<CAPTION>
2. Fund Shares
Transactions in Fund shares were as follows:
New Jersey
----------------------------------------------------------------
Six Months Ended 8/31/99 Year Ended 2/28/99
----------------------------- -----------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization of
New Jersey Intermediate:
Class A -- $ -- 853,955 $ 9,095,179
Class C -- -- 112,286 1,193,933
Class R -- -- 18,846 200,891
Shares sold:
Class A 421,929 4,387,934 1,377,846 14,619,825
Class B 394,331 4,114,451 839,961 8,903,892
Class C 230,278 2,399,552 416,475 4,399,120
Class R 168,397 1,740,767 419,192 4,422,998
Shares issued to shareholders due to
reinvestment of distributions:
Class A 67,521 706,612 113,228 1,200,274
Class B 11,405 119,118 11,053 117,220
Class C 10,934 114,089 18,796 198,846
Class R 77,141 807,326 156,770 1,662,174
- -----------------------------------------------------------------------------------------------------------------
1,381,936 14,389,849 4,338,408 46,014,352
- -----------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (291,353) (3,045,805) (678,226) (7,190,108)
Class B (67,402) (691,240) (59,129) (626,831)
Class C (151,928) (1,576,130) (115,892) (1,227,825)
Class R (238,046) (2,476,888) (473,934) (5,023,003)
- -----------------------------------------------------------------------------------------------------------------
(748,729) (7,790,063) (1,327,181) (14,067,767)
- -----------------------------------------------------------------------------------------------------------------
Net increase 633,207 $ 6,599,786 3,011,227 $ 31,946,585
=================================================================================================================
</TABLE>
37
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
<TABLE>
<CAPTION>
New York New York Insured
---------------------------------------------------- ---------------------------------------------------
Six Months Ended 8/31/99 Year Ended 2/28/99 Six Months Ended 8/31/99 Year Ended 2/28/99
------------------------- ----------------------- -------------------------- ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 1,154,387 $ 12,414,344 1,144,690 $ 12,559,731 1,012,573 $ 10,664,798 1,093,274 $ 11,747,659
Class B 469,964 5,075,579 754,802 8,315,942 582,934 6,124,095 743,984 8,011,299
Class C 180,429 1,954,931 353,162 3,894,020 56,768 601,475 205,983 2,218,265
Class R 275,119 2,978,286 666,093 7,339,196 313,194 3,273,812 787,360 8,449,557
Shares issued to
shareholders due to
reinvestment of
distributions:
Class A 76,715 834,541 161,024 1,770,662 78,199 825,618 148,515 1,598,123
Class B 12,791 139,183 14,049 154,837 16,708 176,554 20,611 222,064
Class C 6,157 67,135 12,193 134,459 5,785 61,087 8,421 90,556
Class R 250,926 2,737,345 526,668 5,810,228 482,395 5,099,476 1,065,213 11,464,997
- ------------------------------------------------------------------------------------------------------------------------------------
2,426,488 26,201,344 3,632,681 39,979,075 2,548,556 26,826,915 4,073,361 43,802,520
- ------------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (572,971) (6,190,215) (1,117,036) (12,242,649) (506,961) (5,338,579) (513,163) (5,519,037)
Class B (56,948) (619,240) (63,760) (700,876) (124,451) (1,305,251) (75,529) (812,400)
Class C (119,513) (1,291,365) (130,900) (1,437,273) (27,328) (287,788) (46,912) (504,054)
Class R (656,186) (7,112,370) (1,539,770) (16,966,297) (1,552,516) (16,318,019) (2,903,948) (31,167,983)
- ------------------------------------------------------------------------------------------------------------------------------------
(1,405,618) (15,213,190) (2,851,466) (31,347,095) (2,211,256) (23,249,637) (3,539,552) (38,003,474)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase 1,020,870 $ 10,988,154 781,215 $ 8,631,980 337,300 $ 3,577,278 533,809 $ 5,799,046
====================================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid October 1, 1999, to shareholders of record on September
9, 1999, as follows:
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $.0400 $.0500 $.0425
Class B .0335 .0435 .0360
Class C .0355 .0450 .0375
Class R .0420 .0520 .0440
=========================================================================
</TABLE>
38
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the six months ended August
31, 1999, were as follows:
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Long-term municipal securities $17,780,287 $20,324,521 $13,462,129
Short-term municipal securities 2,700,000 9,105,000 11,800,000
Sales:
Long-term municipal securities 9,820,000 7,751,200 9,712,876
Short-term municipal securities 2,700,000 9,405,000 12,600,000
- --------------------------------------------------------------------------------
</TABLE>
At August 31, 1999, the identified cost of investments owned for federal income
tax purposes was $120,767,417 for New Jersey, $248,924,041 for New York and
$340,634,983 for New York Insured.
At February 28, 1999, the Funds' last fiscal year end, New Jersey had unused
capital loss carryforwards of $1,035,576 available for federal income tax
purposes to be applied against future capital gains, if any. If not applied,
$256,350 of the carryforwards will expire in the year 2002, $424,626 will expire
in the year 2003, $116,050 will expire in the year 2004 and $238,550 will expire
in the year 2006.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at August 31, 1999, were as follows:
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $ 3,047,593 $12,570,812 $16,400,976
depreciation (3,191,094) (2,993,562) (3,522,802)
- --------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) $ (143,501) $ 9,577,250 $12,878,174
- --------------------------------------------------------------------------------
</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 assets of each Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
- --------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
- --------------------------------------------------------------------------------
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser.
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 assets of New York and .975 of 1% of the average daily net
assets 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, 1999, 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 York
New Jersey New York Insured
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales charges collected $ 60,236 $ 61,862 $ 68,877
Paid to authorized dealers 52,045 53,228 58,872
</TABLE>
39
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
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, 1999, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
Commission advances $ 189,291 $ 205,298 $ 283,128
================================================================================
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, 1999,
the Distributor retained such 12b-1 fees as follows:
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
12b-1 fees retained $ 73,749 $ 74,344 $ 70,700
================================================================================
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, 1999, as follows:
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
CDSC retained $ 20,582 $ 27,612 $ 27,298
================================================================================
7. Composition of Net Assets
At August 31, 1999, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid-in $123,214,993 $248,106,802 $345,675,694
Balance of undistributed (over-
distributed) net investment income (25,339) 283,135 153,287
Accumulated net realized gain (loss)
from investment transactions (1,030,748) 517,985 (57,829)
Net unrealized appreciation
(depreciation) of investments (138,462) 9,577,250 12,878,174
- -------------------------------------------------------------------------------------------
Net assets $122,020,444 $258,485,172 $358,649,326
===========================================================================================
</TABLE>
40
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period:
Class (Inception Date)
<TABLE>
<CAPTION>
Investment Operations Less Distributions
------------------------------------- ------------------------------
Net
NEW JERSEY Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
February 28/29, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)**
2000 (f) $10.60 $.25 $(.48) $(.23) $(.25) $ -- $(.25) $10.12 (2.21)%
1999 10.61 .53 (.01) .52 (.53) -- (.53) 10.60 5.00
1998 10.26 .55 .36 .91 (.56) -- (.56) 10.61 9.06
1997 (c) 10.22 .05 .04 .09 (.05) -- (.05) 10.26 .85
1997 (d) 10.40 .48 (.15) .33 (.51) -- (.51) 10.22 3.31
1996 (d) 9.73 .51 .69 1.20 (.53) -- (.53) 10.40 12.63
1995 (e) 10.03 .21 (.21) -- (.21) (.09) (.30) 9.73 .02
Class B (2/97)
2000 (f) 10.60 .21 (.49) (.28) (.21) -- (.21) 10.11 (2.67)
1999 10.61 .45 (.01) .44 (.45) -- (.45) 10.60 4.23
1998 10.26 .48 .35 .83 (.48) -- (.48) 10.61 8.25
1997 (c) 10.22 .05 .03 .08 (.04) -- (.04) 10.26 .78
Class C (9/94)**
2000 (f) 10.58 .22 (.49) (.27) (.22) -- (.22) 10.09 (2.56)
1999 10.59 .47 (.01) .46 (.47) -- (.47) 10.58 4.48
1998 10.25 .50 .34 .84 (.50) -- (.50) 10.59 8.40
1997 (c) 10.20 .04 .05 .09 (.04) -- (.04) 10.25 .90
1997 (d) 10.38 .41 (.16) .25 (.43) -- (.43) 10.20 2.53
1996 (d) 9.71 .44 .68 1.12 (.45) -- (.45) 10.38 11.80
1995 (e) 9.77 .16 (.05) .11 (.17) -- (.17) 9.71 1.16
Class R (12/91)**
2000 (f) 10.60 .26 (.48) (.22) (.26) -- (.26) 10.12 (2.10)
1999 10.62 .55 (.02) .53 (.55) -- (.55) 10.60 5.13
1998 10.27 .58 .35 .93 (.58) -- (.58) 10.62 9.29
1997 (c) 10.23 .05 .04 .09 (.05) -- (.05) 10.27 .86
1997 (d) 10.41 .49 (.14) .35 (.53) -- (.53) 10.23 3.55
1996 (d) 9.74 .55 .68 1.23 (.56) -- (.56) 10.41 12.88
1995 (d) 10.71 .52 (.88) (.36) (.52) (.09) (.61) 9.74 (3.27)
</TABLE>
<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
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
(000) ment ment ment(a) ment(a) Rate
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (9/94)**
2000 (f) $ 53,018 1.01%* 4.55%* .84%* 4.72%* 8%
1999 53,442 1.02 4.62 .66 4.98 10
1998 35,782 1.01 4.92 .60 5.33 16
1997 (c) 27,879 1.01* 5.43* .55* 5.89* --
1997 (d) 17,072 1.13 4.85 1.00 4.98 10
1996 (d) 10,661 1.25 4.85 1.00 5.10 39
1995 (e) 2,741 1.31* 5.03* 1.00* 5.34* 32
Class B (2/97)
2000 (f) 14,272 1.78* 3.78* 1.59* 3.97* 8
1999 11,368 1.76 3.88 1.39 4.25 10
1998 2,981 1.77 4.16 1.36 4.57 16
1997 (c) 74 1.77* 5.71* 1.27* 6.21* --
Class C (9/94)**
2000 (f) 10,721 1.57* 3.99* 1.39* 4.17* 8
1999 10,290 1.57 4.07 1.21 4.43 10
1998 5,733 1.56 4.37 1.16 4.77 16
1997 (c) 2,712 1.56* 4.89* 1.10* 5.35* --
1997 (d) 2,611 1.88 4.09 1.75 4.22 10
1996 (d) 1,065 1.96 4.16 1.75 4.37 39
1995 (e) 464 2.00* 4.37* 1.75* 4.62* 32
Class R (12/91)**
2000 (f) 44,009 .81* 4.75* .64* 4.92* 8
1999 46,033 .82 4.82 .47 5.17 10
1998 44,817 .81 5.12 .40 5.53 16
1997 (c) 42,651 .81* 5.63* .35* 6.09* --
1997 (d) 42,905 .89 5.10 .75 5.24 10
1996 (d) 43,304 .98 5.20 .75 5.43 39
1995 (d) 39,582 .89 5.18 .75 5.32 32
===============================================================================================================
</TABLE>
* Annualized.
** Information included prior to the one month ended February 28, 1997,
reflects the financial highlights of the predecessor fund, Nuveen New Jersey
Tax-Free Value.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(c) For the one month ended February 28.
(d) For the fiscal year ended January 31.
(e) From commencement of class operations as noted through January 31.
(f) For the six months ended August 31, 1999.
41
<PAGE>
Financial Highlights (Unaudited) (continued)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
---------------------------------------- ----------------------------
NEW YORK Net
Realized/
Beginning Net Unrealized Net Ending
Net Invest- Invest- Invest- Net
Year Ended Asset ment ment ment Capital Asset
February 28/29, Value Income (a) Gain (Loss) Total Income Gains Total Value
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)**
2000 (d) $11.03 $.28 $ (.48) $ (.20) $(.27) $ -- $(.27) $10.56
1999 10.97 .55 .06 .61 (.55) -- (.55) 11.03
1998 10.53 .57 .44 1.01 (.57) -- (.57) 10.97
1997 10.61 .59 (.07) .52 (.56) (.04) (.60) 10.53
1996 10.12 .56 .48 1.04 (.55) -- (.55) 10.61
1995 (c) 10.23 .28 (.07) .21 (.27) (.05) (.32) 10.12
Class B (2/97)
2000 (d) 11.04 .24 (.48) (.24) (.23) -- (.23) 10.57
1999 10.98 .47 .06 .53 (.47) -- (.47) 11.04
1998 10.53 .49 .45 .94 (.49) -- (.49) 10.98
1997 (c) 10.48 .05 .04 .09 (.04) -- (.04) 10.53
Class C (9/94)**
2000 (d) 11.06 .25 (.48) (.23) (.24) -- (.24) 10.59
1999 11.01 .49 .05 .54 (.49) -- (.49) 11.06
1998 10.56 .51 .45 .96 (.51) -- (.51) 11.01
1997 10.64 .55 (.11) .44 (.48) (.04) (.52) 10.56
1996 10.11 .48 .53 1.01 (.48) -- (.48) 10.64
1995 (c) 10.11 .23 .04 .27 (.22) (.05) (.27) 10.11
Class R (12/86)**
2000 (d) 11.06 .29 (.48) (.19) (.28) -- (.28) 10.59
1999 11.00 .58 .05 .63 (.57) -- (.57) 11.06
1998 10.55 .59 .45 1.04 (.59) -- (.59) 11.00
1997 10.64 .59 (.05) .54 (.59) (.04) (.63) 10.55
1996 10.15 .58 .49 1.07 (.58) -- (.58) 10.64
1995 10.72 .58 (.53) .05 (.57) (.05) (.62) 10.15
============================================================================================================================
</TABLE>
<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 Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Year Ended Total Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
February 28/29, Return (b) Assets(000) ment ment ment (a) ment (a) Rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)**
2000 (d) (1.84)% $ 84,064 .90%* 4.98%* .79%* 5.09%* 3%
1999 5.69 80,549 .94 4.88 .79 5.03 28
1998 9.84 78,038 .90 5.14 .77 5.27 30
1997 5.07 71,676 .95 5.39 .89 5.45 37
1996 10.52 15,732 1.02 5.28 .99 5.31 47
1995 (c) 2.21 3,189 1.56* 5.31* 1.00* 5.87* 29
Class B (2/97)
2000 (d) (2.21) 16,107 1.66* 4.22* 1.53* 4.35* 3
1999 4.88 12,121 1.68 4.16 1.57 4.27 28
1998 9.10 4,311 1.67 4.32 1.50 4.49 30
1997 (c) .87 124 1.65* 5.86* 1.44* 6.07* 37
Class C (9/94)**
2000 (d) (2.10) 9,193 1.45* 4.43* 1.34* 4.54* 3
1999 5.00 8,858 1.49 4.33 1.35 4.47 28
1998 9.31 6,233 1.46 4.57 1.32 4.71 30
1997 4.31 3,965 1.64 4.73 1.57 4.80 37
1996 10.13 646 1.99 4.29 1.73 4.55 47
1995 (c) 2.80 86 7.97* (1.06)* 1.75* 5.16* 29
Class R (12/86)**
2000 (d) (1.72) 149,122 .69* 5.19* .59* 5.29* 3
1999 5.88 157,209 .74 5.08 .59 5.23 28
1998 10.11 160,142 .70 5.34 .57 5.47 30
1997 5.26 152,598 .71 5.55 .69 5.57 37
1996 10.80 154,776 .76 5.55 .74 5.57 47
1995 .75 149,454 .74 5.79 .74 5.79 29
=================================================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended February 28, 1997,
reflects the financial highlights of the predecessor fund, Nuveen New York
Tax-Free Value.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(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, 1999.
42
<PAGE>
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Investment Operations Less Distributions
--------------------------------------- -----------------------------
NEW YORK INSURED Net
Realized/
Beginning Net Unrealized Net Ending
Net Invest- Invest- Invest- Net
Year Ended Asset ment ment ment Capital Asset
February 28/29, Value Income (a) Gain (Loss) Total Income Gains Total Value
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 (d) $10.73 $.26 $(.48) $(.22) $(.26) $ -- $(.26) $10.25
1999 10.76 .51 .01 .52 (.52) (.03) (.55) 10.73
1998 10.50 .53 .26 .79 (.53) -- (.53) 10.76
1997 10.61 .55 (.14) .41 (.52) -- (.52) 10.50
1996 10.15 .52 .49 1.01 (.52) (.03)** (.55) 10.61
1995 (c) 10.16 .25 .04 .29 (.26) (.04) (.30) 10.15
Class B (2/97)
2000 (d) 10.74 .22 (.49) (.27) (.21) -- (.21) 10.26
1999 10.76 .44 -- .44 (.43) (.03) (.46) 10.74
1998 10.50 .45 .26 .71 (.45) -- (.45) 10.76
1997 (c) 10.53 .03 (.02) .01 (.04) -- (.04) 10.50
Class C (9/94)
2000 (d) 10.73 .23 (.48) (.25) (.23) -- (.23) 10.25
1999 10.74 .46 .02 .48 (.46) (.03) (.49) 10.73
1998 10.48 .47 .26 .73 (.47) -- (.47) 10.74
1997 10.61 .47 (.16) .31 (.44) -- (.44) 10.48
1996 10.12 .44 .53 .97 (.45) (.03)** (.48) 10.61
1995 (c) 10.03 .21 .13 .34 (.21) (.04) (.25) 10.12
Class R (12/86)
2000 (d) 10.74 .27 (.49) (.22) (.26) -- (.26) 10.26
1999 10.76 .53 .02 .55 (.54) (.03) (.57) 10.74
1998 10.49 .55 .27 .82 (.55) -- (.55) 10.76
1997 10.61 .55 (.13) .42 (.54) -- (.54) 10.49
1996 10.15 .55 .49 1.04 (.55) (.03)** (.58) 10.61
1995 10.63 .56 (.44) .12 (.56) (.04) (.60) 10.15
</TABLE>
<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 Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Year Ended Total Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
February 28/29, Return (b) Assets(000) ment ment ment (a) ment (a) Rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 (d) (2.13)% $ 56,095 .89%* 4.83%* .89%* 4.83%* 3%
1999 4.91 52,448 .92 4.78 .92 4.78 16
1998 7.76 44,721 .88 4.98 .88 4.98 17
1997 4.02 35,957 .92 5.04 .92 5.04 29
1996 10.19 24,747 .93 4.97 .93 4.97 17
1995 (c) 3.01 7,258 1.13* 5.33* 1.05* 5.41* 11
Class B (2/97)
2000 (d) (2.50) 17,656 1.64* 4.08* 1.63* 4.09* 3
1999 4.19 13,374 1.67 4.04 1.67 4.04 16
1998 6.96 5,982 1.65 4.24 1.65 4.24 17
1997 (c) .07 1,279 1.64* 5.17* 1.64* 5.17* 29
Class C (9/94)
2000 (d) (2.41) 4,282 1.44* 4.28* 1.44* 4.28* 3
1999 4.53 4,103 1.47 4.25 1.47 4.25 16
1998 7.16 2,310 1.43 4.43 1.43 4.43 17
1997 3.06 2,015 1.67 4.28 1.67 4.28 29
1996 9.71 1,369 1.69 4.21 1.69 4.21 17
1995 (c) 3.53 285 2.32* 4.13* 1.80* 4.65* 11
Class R (12/86)
2000 (d) (2.04) 280,617 .69* 5.03* .69* 5.03* 3
1999 5.18 301,805 .72 4.98 .72 4.98 16
1998 8.04 313,647 .68 5.18 .68 5.18 17
1997 4.15 319,208 .68 5.28 .68 5.28 29
1996 10.51 343,348 .67 5.26 .67 5.26 17
1995 1.37 345,121 .65 5.57 .65 5.57 11
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** The amounts shown include distributions in excess of capital gains of $.0024
per share.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(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, 1999.
43
<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
Dividend and Growth Fund
Income
Income 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 Advisers/SM/ including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
quality municipal bonds. The fund shares are listed and traded on the New York
and American stock exchanges. Exchange-traded funds provide the investment
convenience, price visibility and liquidity of common stocks.
MuniPreferred/R/
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
44
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and Shareholder Services
Chase Global Fund Services Company
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
45
<PAGE>
Serving
Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive performance over time -- with moderated risk. We emphasize quality
securities carefully chosen through in-depth research, and we follow those
securities closely over time to ensure that they continue to meet our exacting
standards.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
[Photo of John Nuveen Sr. appears here]
John Nuveen, Sr.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
