<PAGE>
Nuveen
Municipal
Bond Funds
February 28, 1999
- -----------------------------
Annual Report
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Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
California
California
Insured
<PAGE>
Contents
1 Dear Shareholder
3 Portfolio Manager's Comments
4 Nuveen California Municipal Bond Fund Performance Overview
5 Nuveen California Insured Municipal Bond
Fund Performance Overview
6 Portfolio of Investments
14 Statement of Net Assets
15 Statement of Operations
16 Statement of Changes in Net Assets
17 Notes to Financial Statements
22 Financial Highlights
24 Report of Independent Public Accountants
25 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
I'm pleased to announce that over the past 12 months, the Nuveen Mutual Funds
covered in this report have continued to meet their primary objectives of
providing you with attractive levels of tax-free income and after-tax returns.
The combination of these two factors demonstrates once again that Nuveen's
municipal bond funds can serve as excellent investment options for income
oriented investors seeking tax efficient investments.
The Year in Review
The past 12 months were marked by periods of market volatility both at home and
abroad, as the financial crisis that began in Asia spread to emerging markets
and impacted economies around the globe. Investors responded to market
uncertainties by seeking a haven in more conservative investments, such as
municipal bond funds. Finally, to avert a potential domestic credit crunch and
bring some stability to global markets, the Federal Reserve stepped in and eased
short-term interest rates for the first time in almost three years. Between the
end of September and mid-November 1998, three successive rate cuts brought the
federal funds rate to 4.75%.
Throughout 1998, the U.S. economy exhibited more strength than had been
expected. Current conditions indicate that this momentum could continue. One of
the chief factors in achieving today's peaceful coexistence of economic growth
and low inflation has been improved productivity. In the months ahead, we will
continue to watch this and other factors that affect the economy's future,
including corporate earnings reports, wage and employment statistics, the
strength of the U.S. dollar, events in international markets, and any further
interest rate indications from the Federal Reserve. We believe these key
components will influence the outlook for fixed-income markets well into the
next century.
Municipal Bonds: A Compelling Value
During the past year, rising bond prices, spurred in part by demand from
international and conservative investors, drove yields on 30-year Treasuries to
historic lows, even below 5% at times. Over this period, the yield on the Bond
Buyer Revenue Bond Index, an unmanaged index of long-term municipal revenue
bonds, fell seven basis points - from 5.36% to 5.29% - versus the 34-point drop
in Treasury yields. At the end of February 1999, the ratio of long-term
municipal yields measured against 30-year Treasury yields stood at 95%, compared
with the more typical range of 86-87%. Over the past eight months,
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1
<PAGE>
"Year to date, municipal bonds have continued to outperform Treasuries on a
yield basis in 1999."
this ratio reached as high as 104%. For investors, this meant that quality
long-term municipal bonds offered almost the same yield as Treasury bonds with
comparable maturities - even before the tax advantages of municipal bonds were
taken into account. On an after-tax basis, municipal bonds presented an
exceptionally attractive investment option relative to Treasuries.
In the municipal market, low interest rates and the strong economy combined to
generate high levels of new issuance and a dramatic increase in the refinancing
of existing bonds. Municipal issuance in 1998 reached $284 billion, up 29% over
1997. In terms of total municipal issuance, 1998 ranked as the second largest
year on record, next to 1993's $292 billion. Year to date, municipal bonds have
continued to outperform Treasuries on a yield basis in 1999. There are two
reasons for this. For starters, municipal supply declined 30% in the first
quarter of 1999 when compared to the first quarter of 1998, which made the bonds
that were brought to market very attractive. The second factor involved a
drop-off in demand for Treasuries by foreign investors. As the global economic
turmoil subsided during the first quarter of 1999, so did the interest in the
U.S. Treasury market.
The continued strength of the U.S. economy also produced improvements in the
fundamental health of many municipalities and boosted the overall credit quality
of municipal bonds. In 1998, issues upgraded by Moody's outnumbered downgrades
by a margin of 4 to 1, while the comparable ratio at Standard & Poor's was more
than 2 to 1.
Nuveen Expertise is Key
The solid track record of a proven investment manager is one key to
taking advantage of the exceptional values currently available in the municipal
market. The near-record level of municipal issuance in 1998, for example,
highlighted the value of Nuveen's in-depth knowledge of the municipal market, as
our portfolio management teams carefully analyzed the flood of issues to select
those securities best suited to help the funds achieve their investment
objectives.
As a further enhancement to our management capabilities, Nuveen has assembled a
strong group of investment managers - experts in their particular areas of the
market - to provide you with the advantage of their experience and insights. In
addition to Nuveen Advisory Services for tax-free investing, you and your
adviser can rely on Institutional Capital Corporation for value-oriented equity
investing and Rittenhouse Financial Services, Inc. for growth-oriented equity
investing. For more information on these funds, contact your financial adviser
for a prospectus, or call Nuveen at (800) 621-7227. Please read the prospectus
carefully before you invest or send money.
We encourage you to talk with your financial adviser about Nuveen's expanding
array of investments and the ways they can help you establish a diversified
portfolio designed to build and sustain long-term financial security. We are
grateful for the confidence you have placed in us and are dedicated to
maintaining your trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
April 15, 1999
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2
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Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Bill Fitzgerald discusses fund performance, the municipal
market, and key investment strategies for the California funds for the fiscal
year ended February 28, 1999.
What economic factors affected California's municipal bond market?
Stability in the municipal market led Moody's Investors Service to recognize the
state's improving finances by upgrading its rating from A1 to Aa3, while
Standard & Poor's maintained its A+ rating. California's economy also continued
to improve, driven by strong retail sales and construction spending. The
entertainment, finance, and real estate industries exhibited strong and stable
growth throughout the state, while the economic slowdown in Asia had only a
marginal impact on California's economy. California has successfully diversified
its economic base over the past decade, reducing the risk that a downturn in one
industry such as aerospace will result in a recession. Overall, the prospects
for continued growth in business activity in California look very promising for
the coming year.
California's future prosperity depends heavily on its infrastructure--the
roadways, airways, and educational facilities that pave the way for economic
growth. In order to improve upon this infrastructure, local governments issued a
growing amount of tax-free bonds, which led to a sharp increase in the overall
supply of tax-free investments. In particular, the land-based financing sector
offered significant investment opportunities, as real estate projects matured
and their values continued to rise.
How did the Funds perform during the past year?
For the one-year period ended February 28, 1999, the total return* for
Class A shares on net asset value for the Nuveen California Municipal Bond Fund
was 5.28%. This fund increased its dividend in January. The total return for
Class A shares on net asset value for the Nuveen California Insured Municipal
Bond Fund was 5.31%. The taxable-equivalent total returns** for Class A shares
on net asset value for the Nuveen California Municipal Bond and the Nuveen
California Insured Municipal Bond Fund were 8.30% and 8.23%, respectively. In
comparison, the unmanaged Lehman Brothers California Municipal Bond Index
produced a total return of 6.50% while the Lehman Brothers California Insured
Municipal Bond Index generated a return of 6.56%. These indices include a broad
range of investment-grade or insured municipal bonds and do not reflect
expenses.
* Total return is the sum of the fund's income and capital gains distributions
plus price changes in the underlying bond portfolio.
**Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 37.5%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis. See your Fund's Performance Overview in this report for more
information.
Over the past year, interest rates remained relatively stable. In this
environment, the Funds' duration, which measures a bond fund's price volatility
in response to interest rate changes, played a smaller, though still significant
role in determining the Funds' total return performance relative to the
municipal market. In contrast, other factors such as portfolio credit quality,
sector weightings, call protection, and bond selection had a larger-than-usual
impact on the Funds' performance.
What key strategies were used over the course of the year?
We implemented a value investing approach to select bonds that we believe were
undervalued in the market. Those included land-based bonds whose credit quality
improves as the California real estate market appreciates in value. In addition,
as of February 28, 1999, about 20% of the Nuveen California Municipal Bond
Fund's portfolio was invested in non-rated securities that we believe merit
investment grade status. We conduct extensive surveillance on these bonds
through regular site visits and interviews with municipal officials.
In recent years, the yield spread between non-rated bonds and AAA rated bonds
has narrowed drastically. Often, the small additional yield for the non-rated
bonds isn't adequate relative to the credit risk, in our opinion. However, we
believe that Nuveen's value-added credit research is able to discern these risks
and determine when the extra yield is appropriate.
What is your outlook?
When the opportunity presents itself in the Nuveen California Municipal Bond
Fund, we would like to shift some of our exposure from AAA rated bonds to the A
rated and BBB rated categories in an attempt to enhance yield. For example, we
believe that the healthcare sector offers such opportunities. Although the
industry has been consolidating, we are finding well established community
hospitals that have built significant cash balances, which provide an extra
measure of credit stability in a rapidly changing marketplace.
The Nuveen California Municipal Bond Fund will continue to search for
attractively priced, lower-investment grade bonds while the Nuveen California
Insured Municipal Bond Fund will continue to invest in California's large supply
of insured long-term municipal bonds. We have a great deal of confidence in
California, which on its own would be the world's seventh largest economy.
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3
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Nuveen California Municipal Bond Fund
Performance Overview
As of February 28, 1999
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Monthly Tax-Free Dividends (Class A Shares)(1)
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[BAR CHART APPEARS HERE]
3/98 0.0455
4/98 0.0455
5/98 0.0455
6/98 0.0455
7/98 0.0455
8/98 0.0455
9/98 0.0455
10/98 0.0455
11/98 0.0455
12/98 0.0455
1/99 0.0450
2/99 0.0450
Top 5 Sectors (as a % of total investments)
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Tax Obligation/Limited 31%
.....................................................
Housing/Multifamily 17%
.....................................................
U.S. Guaranteed 15%
.....................................................
Healthcare 9%
.....................................................
Utilities 6%
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Portfolio Statistics
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Share Class A B C R
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Inception Date 9/94 3/97 9/94 7/86
................................................................................
Net Asset Value $10.89 $10.89 $10.90 $10.91
................................................................................
Total Net Assets ($000) $274,384
................................................................................
Average Weighted Maturity (Years) 19.22
................................................................................
Modified Duration (Years) 6.38
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Annualized Total Return2
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Share Class A(NAV) A(Offer) B C R
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1-Year 5.28% 0.84% 4.44% 4.70% 5.50%
................................................................................
5-Year 5.95% 5.04% 5.25% 5.31% 6.25%
................................................................................
10-Year 7.45% 6.99% 6.89% 6.73% 7.73%
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Index Comparison(3)
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[LINE CHART APPEARS HERE]
Nuveen California Nuveen California Lehman Brothers
Municipal Bond Municipal Bond Municipal Bond
Fund (Offer) Fund (NAV) Index
2/89 9,580 10,000 10,000
2/90 10,499 10,958 11,025
2/91 11,367 11,865 12,041
2/92 12,389 12,932 13,244
2/93 14,048 14,663 15,067
2/94 14,723 15,368 15,900
2/95 14,756 15,403 16,200
2/96 16,284 16,998 17,991
2/97 17,145 17,897 19,144
2/98 18,666 19,484 20,895
2/99 19,650 20,512 22,278
- -- Nuveen California Municipal Bond Fund (Offer) $19,650
- -- Nuveen California Municipal Bond Fund (NAV) $20,512
- -- Lehman Brothers Municipal Bond Index $22,278
Past performance is not predictive of future results.
1 The Fund also paid shareholders capital gains distributions in November of
$0.0482 per share.
2 Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class 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.
3 The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Municipal Bond Index is comprised of a
broad range of investment-grade municipal bonds, and does not reflect any
initial or ongoing expenses. The Nuveen fund return depicted in the chart
reflects the initial maximum sales charge applicable to A shares (4.20%)
and all ongoing fund expenses. For periods prior to inception of Class A
Shares, performance reflects Class R Shares performance adjusted for
differences in expenses, which are primarily differences in distribution
and service fees.
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4
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Nuveen California Insured Municipal Bond Fund
Performance Overview
As of February 28, 1999
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Monthly Tax-Free Dividends (Class A Shares)/1/
- ----------------------------------------------------
[BAR CHART APPEARS HERE]
3/98 0.0450
4/98 0.0440
5/98 0.0440
6/98 0.0440
7/98 0.0440
8/98 0.0440
9/98 0.0440
10/98 0.0440
11/98 0.0440
12/98 0.0440
1/99 0.0430
2/99 0.0430
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Top 5 Sectors (as a % of total investments)
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Tax Obligation/Limited 37%
....................................................
U.S. Guaranteed 27%
....................................................
Housing/Multifamily 8%
....................................................
Housing/Single Family 7%
....................................................
Tax Obligation/General 7%
....................................................
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Portfolio Statistics
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Share Class A B C R
- --------------------------------------------------------------------------------
Inception Date 9/94 3/97 9/94 7/86
................................................................................
Net Asset Value $11.10 $11.11 $11.03 $11.08
................................................................................
Fund Net Assets ($000) $248,547
................................................................................
Average Weighted Maturity (Years) 18.19
................................................................................
Modified Duration (Years) 5.82
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Annualized Total Return/2/
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Share Class A(NAV) A(Offer) B C R
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1-Year 5.31% 0.93% 4.61% 4.81% 5.49%
................................................................................
5-Year 6.04% 5.13% 5.26% 5.26% 6.25%
................................................................................
10-Year 7.59% 7.13% 6.98% 6.79% 7.83%
- --------------------------------------------------------------------------------
- ----------------------------------------------------
Index Comparison/3/
- ----------------------------------------------------
[LINE CHART APPEARS HERE]
Nuveen California Nuveen California Lehman Brothers
Insured Bond Insured Bond Municipal Bond
Fund (Offer) Fund (NAV) Index
2/89 9,580 10,000 10,000
2/90 10,462 10,921 11,025
2/91 11,344 11,841 12,041
2/92 12,439 12,985 13,244
2/93 14,278 14,904 15,067
2/94 14,851 15,502 15,900
2/95 14,088 15,750 16,200
2/96 16,645 17,374 17,991
2/97 17,405 18,168 19,144
2/98 18,912 19,785 20,895
2/99 19,915 20,788 22,278
- -- Nuveen California Insured Municipal Bond Fund (Offer) $19,915
- -- Nuveen California Insured Municipal Bond Fund (NAV) $20,788
- -- Lehman Brothers Municipal Bond Index $22,278
Past performance is not predictive of future results.
1 The Fund also paid shareholders capital gains distributions in November of
$0.0079 per share.
2 Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class 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.
3 The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund compared with the Lehman Brothers
Municipal Bond Index. The Lehman Municipal Bond Index is comprised of a
broad range of investment-grade municipal bonds, and does not reflect any
initial or ongoing expenses. The Nuveen fund return depicted in the chart
reflects the initial maximum sales charge applicable to A shares (4.20%)
and all ongoing fund expenses. For periods prior to inception of Class A
Shares, performance reflects Class R Shares performance adjusted for
differences in expenses, which are primarily differences in distribution
and service fees.
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5
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Portfolio of Investments
Nuveen California Municipal Bond Fund
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
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<S> <C> <C> <C> <C>
Education and Civic Organizations - 4.4%
$ 960,000 California Educational Facilities Authority, Pooled College and University 4/07 at 102 Baa2 $1,040,016
Projects Revenue Bonds, Series 1997B (Southern California College of
Optometry), 6.300%, 4/01/21
905,000 California State Public Works Board, High Technology Facilities Lease No Opt. Call Aa3 1,010,288
Bonds, The Regents of the University of California, San Diego Facility,
7.375%, 4/01/06
1,500,000 Certificates of Participation, California Statewide Community Development 12/06 at 105 N/R 1,643,730
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 3,620,750
4,335,000 6.000%, 11/01/21 11/03 at 102 Aa3 4,613,264
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Health Care - 9.2%
California Health Facilities Financing Authority, Insured Health Facility
Revenue Bonds (Small Facilities Pooled Loan Program), 1994 Series B:
3,000,000 7.400%, 4/01/14 4/05 at 102 A 3,498,840
3,635,000 7.500%, 4/01/22 4/05 at 102 A 4,258,621
3,750,000 California Health Facilities Financing Authority, Insured Revenue Bonds 8/06 at 102 AAA 4,066,688
(Sutter/CHS), 5.875%, 8/15/16
5,370,000 California Health Facilities Financing Authority, Hospital Revenue Bonds 5/03 at 102 A- 5,569,496
(Downey Community Hospital), Series 1993, 5.750%, 5/15/15
3,380,000 California Health Facilities Financing Authority, Kaiser Permanent Revenue 12/00 at 102 A 3,668,213
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 1,656,755
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 Linda 12/03 at 102 BBB 2,613,897
University Medical Center Project), Series 1993-A, 6.000%, 12/01/06
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Housing/Multifamily - 17.2%
6,570,000 California Housing Finance Agency, Multifamily Housing Revenue Bonds 8/06 at 102 AAA 6,966,762
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:
7,200,000 5.250%, 5/15/25 7/08 at 101 BBB 7,279,272
1,500,000 5.100%, 5/15/25 7/08 at 101 BBB 1,517,790
2,905,000 California Statewide Communities Development Authority, Senior Lien 6/06 at 100 AAA 3,109,018
Multifamily Housing Revenue Bonds (Monte Vista Terrace), Series 1996A,
6.375%, 9/01/20
3,000,000 City of Duarte, Multifamily Housing Revenue Bonds, 1997 Series A 11/07 at 102 AAA 3,170,850
(Heritage Park Apartments), 5.850%, 5/01/30 (Alternative Minimum Tax)
4,605,000 The Community Redevelopment Agency of the City of Los Angeles, California, 6/05 at 105 AAA 5,306,940
Multifamily Housing Revenue Refunding Bonds, 1995 Series A (Angelus Plaza
Project), 7.400%, 6/15/10
4,500,000 The City of Los Angeles, Multifamily Housing Revenue Bonds (Earthquake 7/07 at 102 AAA 4,745,565
Rehabilitation Project), Series 1997C, 5.900%, 1/01/30 (Alternative
Minimum Tax)
3,285,000 City of Riverside, California, Multifamily Housing Revenue Bonds (Fannie 7/02 at 100 AAA 3,418,470
Mae Pass-through Certificate Program/Birchwood Park Apartment Project),
Series 1992A, 6.500%, 1/01/18
4,005,000 City of Riverside, California, Multifamily Housing Revenue Bonds (Fannie 7/02 at 100 AAA 4,167,723
Mae Pass-through Certificate Program/Palm Shadows Apartments Project),
Series 1992 A, 6.500%, 1/01/18
</TABLE>
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6
<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 $2,237,290
Series 1994A (GNMA Collateralized - Villa Serra Project), 6.500%,
7/20/17
2,000,000 San Dimas Housing Authority, Mobile Home Park Revenue Bonds (Charter Oak 7/08 at 102 N/R 1,980,140
Mobile Home Estates Acquisition Project), Series 1998A, 5.700%, 7/01/28
3,000,000 Housing Authority of the County of Santa Cruz, Multifamily Housing 7/00 at 102 AAA 3,152,370
Refunding Revenue Bonds, Series 1990A (Fannie Mae Collateralized),\
7.750%, 7/01/23
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Housing/Single Family - 5.0%
2,250,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 1997 , 2/07 at 102 AAA 2,396,430
Series B 6.100%, 2/01/28 (Alternative Minimum Tax)
4,750,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 1995 8/05 at 102 AAA 5,063,880
Series F, 5.950%, 8/01/14
2,000,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 1998 2/09 at 101 1/2 AAA 2,030,060
Series E Remarketed, 5.250%, 2/01/33 (Alternative Minimum Tax)
2,850,000 California Rural Home Mortgage Finance Authority, Single Family Mortgage No Opt. Call AAA 3,212,720
Revenue Bonds (Mortgage-Backed Securities Program), 1997 Series A,
7.000%, 9/01/29 (Alternative Minimum Tax)
400,000 City of Corona (California), Single Family Mortgage Revenue Bonds, 11/06 at 102 A 429,324
Series 1996B (Subordinate), 6.300%, 11/01/28
County of San Bernardino (California), Single Family Home Mortgage
Revenue Bonds (Mortgage Backed Securities Program), 1997 Series A:
395,000 6.200%, 5/01/21 (Alternative Minimum Tax) 5/07 at 103 AAA 425,012
1,950,000 0.000%, 5/01/31 (Alternative Minimum Tax) 5/07 at 22 9/16 AAA 278,519
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 5.7%
1,500,000 Insured Certificates of Participation (Channing House), Series 1991A, 1/01 at 102 A+ 1,595,595
ABAG Finance Authority for Nonprofit Corporations, 7.125%, 1/01/21
9,000,000 American Baptist Homes of the West Facilities Project, Revenue Refunding 10/07 at 102 BBB 9,191,880
Certificates of Participation, Series 1997A, 5.850%, 10/01/27
2,500,000 California Statewide Communities Development Authority, Certificates of 11/04 at 102 A+ 2,753,025
Participation (Solheim Lutheran Home), 6.500%, 11/01/17
2,000,000 Chico (California), Redevelopment Agency, Insured Certificates of 2/01 at 102 A 2,111,120
Participation (Sierra Sunrise Lodge), Series 1991A, Walker Senior Housing
Corporation VII, 6.750%, 2/01/21
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Tax Obligation/General - 0.7%
Petaluma Joint High School District (Sonoma County, California), General
Obligation Bonds, Election of 1992, Series C:
4,220,000 0.000%, 8/01/20 8/04 at 38 13/32 AAA 1,216,499
2,080,000 0.000%, 8/01/21 8/04 at 36 1/8 AAA 563,576
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 30.2%
4,825,000 Certificates of Participation (1991 Financing Project), County of Alameda, 9/06 at 102 AAA 5,307,259
California, Alameda County Public Facilities Corporation, 6.000%, 9/01/21
8,000,000 Anaheim Public Financing Authority, Lease Revenue Bonds (Anaheim Public No Opt. Call AAA 1,471,920
Improvements Project), Senior Lease Revenue Bonds, 1997 Series C, 0.000%,
9/01/31
1,365,000 City of Brea (California), Community Facilities District No. 1997-1 3/06 at 102 N/R 1,379,442
(Olinda 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 7,223,160
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):
1,250,000 5.750%, 9/02/18 3/99 at 103 N/R 1,249,263
2,500,000 5.875%, 9/02/28 3/99 at 103 N/R 2,513,975
</TABLE>
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7
<PAGE>
Portfolio of Investments
Nuveen California Municipal Bond Fund (continued)
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$2,000,000 Carson Redevelopment Agency (California), Redevelopment Project Area No. 10/03 at 102 BBB+ $2,100,220
1, Tax Allocation Bonds, Series 1993, 6.000%, 10/01/16
2,500,000 Fontana Public Financing Authority (San Bernardino County, California), 9/00 at 102 BBB 2,634,725
Tax Allocation Revenue Bonds (North Fontana Redevelopment Project), 1990
Series A, 7.250%, 9/01/20
2,000,000 La Mirada Redevelopment Agency (California), Community Facilities 10/08 at 102 N/R 2,020,000
District No. 89-1 (Civic Theater Project), 1998 Refunding Special Tax
Bonds (Tax Increment Contribution), 5.700%, 10/01/20
2,000,000 Los Angeles County Transportation Commission (California), Sales Tax 7/99 at 102 AA- 2,069,280
Revenue Refunding Bonds, Series 1989-A, 7.400%, 7/01/15
1,260,000 Marysville Community Development Agency (California), Marysville Plaza 3/02 at 102 Baa3 1,367,314
Project, 1992 Tax Allocation Refunding Bonds, 7.250%, 3/01/21
6,240,000 City of Milpitas, Limited Obligation Improvement Bonds, Local Improvement 3/99 at 103 N/R 6,320,122
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 Obligation 3/99 at 103 N/R 1,658,291
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, 1993 Tax 9/03 at 102 BBB 4,533,146
Allocation Revenue Bonds (California), 6.125%, 9/01/23
Community Facilities District No. 88-1 of the City of Poway, California
(Parkway Business Center), Special Tax Refunding Bonds, Series 1998:
715,000 6.500%, 8/15/10 8/08 at 102 N/R 773,630
2,000,000 6.750%, 8/15/15 8/08 at 102 N/R 2,183,180
1,645,000 City of Rancho Cucamonga, Assessment District No. 93-1 (Masi Plaza), 3/99 at 103 N/R 1,697,624
Limited Obligation Improvement Bonds, 6.250%, 9/02/22
1,385,000 Redding Joint Powers Financing Authority, Lease Revenue Bonds (Capital 6/03 at 102 A 1,483,280
Improvement Projects), Series 1993, 6.250%, 6/01/23
1,000,000 County of Sacramento (California), Laguna Creek Ranch/Elliott Ranch 12/07 at 102 N/R 1,009,430
Community Facilities District No. 1, Improvement Area No. 1 Special Tax
Refunding Bonds, 5.700%, 12/01/20
2,300,000 Limited Obligation Refunding Bonds, City of Salinas, Consolidated 3/99 at 103 N/R 2,394,093
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 Authority, 1993 8/03 at 103 A 5,005,950
Series C, Tax Allocation Revenue Bonds (San Francisco Redevelopment
Projects), 5.125%, 8/01/18
2,250,000 Redevelopment Agency of the City of San Jose (California), Merged Area 8/08 at 101 AAA 2,160,765
Redevelopment Project, Tax Allocation Bonds, Series 1999, 4.750%, 8/01/29
7,090,000 Redevelopment Agency of the City of San Marcos, Tax Allocation Bonds (1997 10/07 at 102 A- 7,485,126
Affordable Housing Project), Series 1977A, 6.000%, 10/01/27 (Alternative
Minimum Tax)
1,000,000 Certificates of Participation, Series 1991, San Mateo County Board of 5/99 at 102 A+ 1,027,490
Education (Administration Building Project), 7.100%, 5/01/21
4,000,000 Shafter Joint Powers Financing Authority, Lease Revenue Bonds, 1997 1/07 at 101 A2 4,252,520
Series A (Community Correctional Facility Acquisition Project), 6.050%,
1/01/17
City of Stockton, Mello-Roos Revenue Bonds, Series 1997A, Community
Facilities District No. 90-2 (Brookside Estates):
880,000 5.850%, 8/01/09 8/05 at 102 N/R 930,785
1,000,000 6.200%, 8/01/15 8/05 at 102 N/R 1,050,450
4,225,000 City of Stockton (California), Limited Obligation Refunding Improvement No Opt. Call N/R 4,214,607
Bonds, Webe/Sperry Ranches Assessment District, Series 22, 5.650%,
9/02/13
2,000,000 Taft Public Financing Authority, Lease Revenue Bonds, 1997 Series A l1/07 at 101 A2 2,126,260
(Community Correctional Facility Acquisition Project), 6.050%, 1/01/17
1,100,000 County of Tulare (California), Certificates of Participation (1992 11/02 at 102 A3 1,247,477
Financing Project), Series B, Tulare County Public Facilities Corporation,
6.875%, 11/15/12
2,000,000 Vallejo Public Financing Authority, 1998 Limited Obligation Revenue Bonds No Opt. Call N/R 2,029,500
(Fairgrounds Drive Assessment District Refinancing), 5.700%, 9/02/11
</TABLE>
- -----
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation - 4.3%
$5,000,000 California Statewide Communities Development Authority, Special Facilities 10/07 at 102 Baa3 $5,135,800
Lease Revenue Bonds, 1997 Series A, 5.700%, 10/01/33 (Alternative Minimum
Tax)
7,150,000 Foothill/Eastern Transportation Corridor Agency (California), Toll Road 1/05 at 100 BBB- 6,779,416
Revenue Bonds, Series 1995A, 5.000%, 1/01/35
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 15.2%
2,035,000 Certificates of Participation (1991 Capital Improvement Project), Bella 10/01 at 102 Baa*** 2,279,526
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*** 2,170,480
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 Revenue Bonds 10/02 at 102 AAA 9,550,857
(The Trustees of the California State University), 1992 Series A (Various
California State University Projects), 6.700%, 10/01/17 (Pre-refunded to
10/01/02)
3,000,000 California Statewide Communities Development Authority, Certificates of 7/04 at 102 AA*** 3,452,490
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 2,170,700
Corporation Project), Series 1990, 8.100%, 7/01/20 (Pre-refunded to
7/01/00)
1,950,000 East Bay Municipal Utility District (Alameda and Contra Costa Counties, 6/00 at 102 AAA 2,094,729
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 4,404,720
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), Revenue Bonds, No Opt. Call AAA 3,275,587
Issue of 1988, 7.600%, 10/01/18
4,595,000 Los Angeles County Public Works Finance Authority, Revenue Bonds, Series 10/04 at 102 AA*** 5,237,150
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+** 2,150,919
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 4,813,115
County of Tulare, California, 6.000%, 2/15/16 (Pre-refunded to 2/15/06)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 6.4%
9,000,000 California Pollution Control Financing Authority, Solid Waste Disposal 7/07 at 102 N/R 9,270,179
Revenue Bonds (CanFibre of Riverside Project), Tax-Exempt Series 1997A,
9.000%, 7/01/19 (Alternative Minimum Tax)
6,645,000 Merced Irrigation District (California), 1998 Revenue Certificates of 3/03 at 102 N/R 6,673,639
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 1,695,125
8/01/27 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 0.8%
2,500,000 Department of Water and Power of the City of Los Angeles 10/08 at 101 AAA 2,148,849
(California), Water Works Refunding Revenue Bonds, Issue of 1998,
4.250%, 10/15/34
- ------------------------------------------------------------------------------------------------------------------------------------
$270,240,000 Total Investments - (cost $253,748,240) - 99.1% 271,803,953
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.9% 2,579,757
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 274,383,710
--------------------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions (not covered by the report of
independent public accountants): Dates (month and year) and
prices of the earliest optional call or redemption. There may
be other call provisions at varying prices at later dates.
** Ratings (not covered by the report of independent public
accountants): Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. government or U.S. government agency
securities which ensures the timely payment of principal and
interest. Securities are normally considered to be equivalent
to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
<PAGE>
Portfolio of Investments
Nuveen California Insured Municipal Bond Fund
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 2.0%
$4,500,000 California Educational Facilities Authority, Revenue Bonds (University 10/06 at 102 AAA $ 4,937,670
of San Francisco), Series 1996, 6.000%,10/01/26
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 5.8%
5,000,000 California Health Facilities Authority, Kaiser Permanente Medical Care 10/01 at 101 A 5,124,500
Program, 1983 Semiannual Tender Revenue Bonds, 5.450%, 10/01/13
8,500,000 California Statewide Communities Development Authority, Sutter Health 8/02 at 102 AAA 9,249,445
Obligated Group, Certificates of Participation, 6.125%, 8/15/22
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 7.5%
6,340,000 California Housing Finance Agency, Housing Revenue Bonds (Insured), 1991 2/02 at 102 AAA 6,724,394
Series B, 6.850%, 8/01/23
2,545,000 California Housing Finance Agency, Multifamily Housing Revenue Bonds II, 8/06 at 102 AAA 2,698,693
1996 Series A, 6.050%, 8/01/27
3,685,000 The Community Redevelopment Agency of the City of Los Angeles, California, 6/05 at 105 AAA 4,246,705
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 (FHA Insured 7/02 at 102 AAA 2,711,596
Mortgage Loan - Creekside Park Apartments Project), 6.625%, 7/01/24
2,000,000 City of Napa, Mortgage Revenue Refunding Bonds, Series 1994A (FHA Insured 7/04 at 101 AAA 2,143,680
Mortgage Loan - Creekside Park II Apartments Project), 6.625%, 7/01/25
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 7.0%
4,750,000 California Housing Finance Agency, Single Family Mortgage Bonds II, 1997 2/07 at 102 Aaa 5,044,738
Series A, 6.050%, 8/01/26 (Alternative Minimum Tax)
5,000,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 1997 8/07 at 102 AAA 5,337,800
Series E, 6.100%, 8/01/29 (Alternative Minimum Tax)
5,000,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 1995 8/05 at 102 AAA 5,330,400
Series F, 5.950%, 8/01/14
1,500,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 1996 2/06 at 102 AAA 1,595,190
Series E, 6.150%, 8/01/25 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 6.6%
5,000,000 State of California, Various Purpose General Obligation Bonds, 5.500%, 4/03 at 102 AAA 5,205,650
4/01/19
5,000,000 State of California, Veterans General Obligation Bonds, Series BH, 5.500%, 12/03 at 102 AAA 5,130,050
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 543,476
2,560,000 0.000%, 8/01/18 8/13 at 73 3/8 AAA 884,813
1,500,000 0.000%, 2/01/19 8/13 at 70 15/16 AAA 496,950
2,650,000 0.000%, 8/01/19 8/13 at 68 9/16 AAA 848,663
2,755,000 0.000%, 8/01/20 8/13 at 63 27/32 AAA 820,494
1,430,000 0.000%, 2/01/21 8/13 at 61 11/16 AAA 410,996
2,855,000 0.000%, 8/01/21 8/13 at 59 5/8 AAA 792,776
3,040,000 Sulphur Springs Union School District (County of Los Angeles, California), No Opt. Call AAA 1,359,062
General Obligation Bonds, Election 1991, Series A, 0.000%, 9/01/15
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited - 36.7%
$4,825,000 County of Alameda, California, Certificates of Participation (1991 9/06 at 102 AAA $5,307,259
Financing Project), Alameda County Public Facilities Corporation, 6.000%,
9/01/21
3,000,000 County of Alameda, California, 1998 Certificates of Participation, Alameda 6/03 at 101 AAA 3,045,240
County Medical Center Project, 5.300%, 6/01/26
20,000,000 Anaheim Public Financing Authority, Lease Revenue Bonds (Anaheim Public No Opt. Call AAA 3,493,000
Improvements Project), Senior Lease Revenue Bonds, 1997 Series C, 0.000%,
9/01/32
1,225,000 Redevelopment Agency of the City of Barstow, Central Redevelopment Project No Opt. Call AAA 1,544,566
Tax Allocation Bonds, 1994 Series A, 7.000%, 9/01/14
7,005,000 Big Bear Lake Financing Authority (San Bernardino County, California), 8/05 at 102 AAA 7,922,865
1995 Tax Allocation Refunding Revenue Bonds, 6.300%, 8/01/25
225,000 California Public Capital Improvements Financing Authority (A Joint Powers 3/99 at 101 1/2 AAA 229,291
Agency), Revenue Bonds (Pooled Projects), Series 1988B, 8.100%, 3/01/18
6,990,000 Chino Unified School District, Certificates of Participation (1995 Master 9/05 at 102 AAA 7,794,899
Lease Program), 6.125%, 9/01/26
850,000 Redevelopment Agency of the City of Concord, Central Concord 7/99 at 101 AAA 872,823
Redevelopment Project,Tax Allocation Bonds, Series 1988-2, 7.875%,
7/01/07
5,795,000 Dinuba Joint Unified School District (Tulare County, California), 2/05 at 100 AAA 5,819,803
Certificates of Participation (1998 Financing Project), 5.100%, 2/01/28
3,865,000 Fallbrook Sanitary District (San Diego County, California), 1991 2/01 at 100 AAA 4,072,666
Certificates of Participation (Wastewater Facilities Refunding Project),
6.600%, 2/01/13
2,500,000 Fontana Public Financing Authority (San Bernardino County, California), 9/00 at 102 AAA 2,679,475
Tax Allocation Revenue Bonds (North Fontana Redevelopment Project), 1990
Series A, 7.000%, 9/01/10
3,000,000 Gilroy Unified School District, Santa Clara County, California, 9/04 at 102 AAA 3,367,350
Certificates of Participation, Series of 1994, 6.250%, 9/01/12
1,000,000 La Quinta Redevelopment Agency, La Quinta Redevelopment Project, Tax No Opt. Call AAA 1,286,990
Allocation Refunding Bonds, Series 1994 (Project Area No.1), 7.300%,
9/01/12
1,500,000 Lancaster Housing Authority (California), Lease Refunding Revenue Bonds 4/08 at 102 AAA 1,470,495
(Brierwood Mobile Home Park Project), Issue of 1999, 5.000%, 4/01/24
3,000,000 County of Los Angeles, Certificates of Participation (1998 Disney Parking 9/08 at 101 AAA 2,889,690
Refunding Project), 4.750%, 3/01/23
1,750,000 Manteca Financing Authority (California), Tax Allocation Revenue Bonds, 10/08 at 102 AAA 1,762,880
Series 1998, 5.100%, 10/01/26
7,040,000 Norwalk Community Facilities Financing Authority (Los Angeles County, 9/05 at 102 AAA 7,840,166
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 Participation, 7/06 at 102 AAA 9,308,435
Series A, 6.000%, 7/01/26
8,000,000 Pomona Public Financing Authority (California), 1998 Refunding Revenue 2/08 at 102 AAA 7,931,280
Bonds, Series W (Southwest Pomona Redevelopment Project), 5.000%, 2/01/30
1,750,000 County of Riverside Asset Leasing Corporation, Leasehold Revenue Bonds, 6/12 at 101 AAA 1,925,280
1997 Series B (County of Riverside Hospital Project), 5.700%, 6/01/16
2,000,000 City of San Diego, California, Convention Center Expansion Financing 10/08 at 101 AAA 1,922,200
Authority, Lease Revenue Bonds, Series 1998A, 4.750%, 4/01/28
Redevelopment Agency of the City and County of San Francisco, Lease Revenue
Bonds, Series 1994 (George R. Moscow Convention Center):
2,250,000 6.800%, 7/01/19 7/04 at 102 AAA 2,578,050
1,000,000 6.750%, 7/01/24 7/04 at 102 AAA 1,143,420
2,250,000 Redevelopment Agency of the City of San Jose (California), Merged Area 2/04 at 102 AAA 2,158,515
Redevelopment Project, Tax Allocation Bonds, Series 1993, 4.750%, 8/01/24
3,000,000 Redevelopment Agency of the City of San Jose (California), Merged Area 8/08 at 101 AAA 2,881,020
Redevelopment Project, Tax Allocation Bonds, Series 1999, 4.750%, 8/01/29
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen California Insured Municipal Bond Fund (continued)
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation - 3.6%
$1,455,000 City of Palm Springs Financing Authority (California), Airport Revenue 1/08 at 102 AAA $ 1,512,152
Bonds (Palm Springs Regional Airport), Series 1998, 5.500%, 1/01/28
(Alternative Minimum Tax)
5,000,000 Airports Commission, City and County of San Francisco, California, San 5/06 at 101 AAA 5,222,700
Francisco International Airport, Second Series Revenue Bonds, Issue
13B, 5.625%, 5/01/21 (Alternative Minimum Tax)
2,000,000 Southern California Rapid Transit District, Certificates of Participation 1/01 at 102 1/2 AAA 2,190,940
(Workers Compensation Funding Program), 7.500%, 7/01/05
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 26.6%
7,000,000 City of Big Bear Lake, California, 1992 Water Revenue Refunding Bonds, 4/02 at 102 AAA 7,727,650
6.375%, 4/01/22 (Pre-refunded to 4/01/02)
3,525,000 Brea Public Financing Authority (Orange County, California), 1991 Tax 8/01 at 102 AAA 3,899,672
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 3,286,800
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 (Pepperdine 11/00 at 102 AAA 1,086,430
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 Revenue Bonds 9/00 at 102 AAA 5,386,450
(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 Counties, 6/00 at 102 AAA 2,148,440
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), Water and 7/01 at 102 AAA 2,184,400
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 and Exhibition 8/00 at 102 AAA 2,151,300
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 7/02 at 102 AAA 5,532,100
C 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 Project 9/02 at 102 AAA 10,497,595
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, 1990 Series 12/00 at 102 AAA 2,756,650
A, 8.000%, 12/01/11 (Pre-refunded to 12/01/00)
2,000,000 Mt. Diablo Unified School District, Community Facilities District No. 1, 8/00 at 102 AAA 2,149,720
Special Tax Bonds, Series 1990 (Contra Costa County, California), 7.050%,
8/01/20 (Pre-refunded to 8/01/00)
2,000,000 Redevelopment Agency of the City of Pittsburg, California, Los Medanos 8/01 at 103 AAA 2,237,740
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 4,070,160
2,500,000 6.250%, 12/01/21 (Pre-refunded to 12/01/04) 12/04 at 101 AAA 2,858,750
3,000,000 Sacramento Municipal Utility District (California), Electric Revenue Bonds, 9/01 at 102 AAA 3,291,540
1991 Series Y, 6.500%, 9/01/21 (Pre-refunded to 9/01/01)
2,500,000 San Bernardino County Transportation Authority, Sales Tax Revenue Bonds 3/02 at 102 AAA 2,770,900
(Limited Tax Bonds), 1992 Series A, 6.000%, 3/01/10
2,000,000 San Diego Regional Building Authority (California), Lease Revenue Bonds, 1/00 at 102 AAA 2,110,260
Series 1990A (San Miguel Consolidated Fire Protection District Project),
General Obligation Bonds, 7.250%, 1/01/20 (Pre-refunded to 1/01/00)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 1.3%
3,000,000 City of Shasta Lake, 1996-2 Certificates of Participation, 6.000%, 4/01/16 4/05 at 102 AAA 3,302,669
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer - 2.2%
$ 5,000,000 City of Vallejo Refunding Revenue Bonds, 1996 Series A (Water Improvement 5/06 at 102 AAA $ 5,462,699
Project), 5.875%, 5/01/26
- ------------------------------------------------------------------------------------------------------------------------------------
$258,585,000 Total Investments - (cost $225,424,215) - 99.3% 246,723,116
- ------------------------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities - 0.8%
1,000,000 California Health Facilities Financing Authority (Sutter/CHS), Variable VMIG-1 1,000,000
Rate Demand Bonds, 3.100%, 7/01/22+
500,000 California Health Facilities Financing Authority, St. Joseph Health System, VMIG-1 500,000
Series B, Variable Rate Demand Bonds, 3.100%, 7/01/13+
600,000 Irvine Ranch, California, Water District Number 182, Series A, Variable Rate N/R 600,000
Demand Bonds, 3.000%, 11/15/13+
- ------------------------------------------------------------------------------------------------------------------------------------
$ 2,100,000 Total Temporary Investments - 0.8% 2,100,000
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.1)% (276,147)
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $248,546,969
--------------------------------------------------------------------------------------------------------------------
</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 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 (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
N/R Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate
and demand features which qualify it as short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified market index. 13
See accompanying notes to financial statements.
13
<PAGE>
Statement of Net Assets
February 28, 1999
<TABLE>
<CAPTION>
California
California Insured
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $ 271,803,953 $ 246,723,116
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) -- 2,100,000
Receivables:
Interest 4,761,402 3,564,179
Investments sold 1,241,075 15,000
Shares sold 180,332 52,869
Other assets 2,372 2,153
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 277,989,134 252,457,317
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft 263,485 2,979,913
Payables:
Investments purchased 2,188,989 --
Shares redeemed 171,104 93,681
Accrued expenses:
Management fees (note 6) 114,239 103,502
12b-1 distribution and service fees (notes 1 and 6) 16,590 17,257
Other 153,209 142,569
Dividends payable 697,808 573,426
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 3,605,424 3,910,348
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $ 274,383,710 $ 248,546,969
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Shares (note 1)
Net assets $ 36,568,137 $ 47,300,015
Shares outstanding 3,356,801 4,261,585
Net asset value and redemption price per share $ 10.89 $ 11.10
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 11.37 $ 11.59
- ------------------------------------------------------------------------------------------------------------------------------------
Class B Shares (note 1)
Net assets $ 7,353,438 $ 8,825,220
Shares outstanding 675,433 794,663
Net asset value, offering and redemption price per share $ 10.89 $ 11.11
- ------------------------------------------------------------------------------------------------------------------------------------
Class C Shares (note 1)
Net assets $ 10,352,802 $ 6,993,807
Shares outstanding 950,176 634,277
Net asset value, offering and redemption price per share $ 10.90 $ 11.03
- ------------------------------------------------------------------------------------------------------------------------------------
Class R Shares (note 1)
Net assets $ 220,109,333 $ 185,427,927
Shares outstanding 20,175,234 16,732,011
Net asset value, offering and redemption price per share $ 10.91 $ 11.08
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
Statement of Operations
Year Ended February 28,1999
<TABLE>
<CAPTION>
California
California Insured
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income (note 1) $ 15,339,514 $ 13,596,037
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 1,418,730 1,308,079
12b-1 service fees - Class A (notes 1 and 6) 66,499 81,099
12b-1 distribution and service fees - Class B (notes 1 and 6) 45,809 63,652
12b-1 distribution and service fees - Class C (notes 1 and 6) 50,148 40,061
Shareholders' servicing agent fees and expenses 178,624 173,765
Custodian's fees and expenses 67,632 69,262
Trustees' fees and expenses (note 6) 5,853 5,758
Professional fees 21,268 24,661
Shareholders' reports - printing and mailing expenses 133,483 142,800
Federal and state registration fees 10,413 6,862
Portfolio insurance expense -- 27,531
Other expenses 10,642 9,265
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 2,009,101 1,952,795
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 13,330,413 11,643,242
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments Net realized gain from
investment transactions (notes 1 and 4) 1,031,974 258,361
Net change in unrealized appreciation or depreciation of investments (600,160) 847,868
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 431,814 1,106,229
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 13,762,227 $ 12,749,471
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
California California Insured
-------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
2/28/99 2/28/98 2/28/99 2/28/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 13,330,413 $ 12,708,032 $ 11,643,242 $ 11,606,206
Net realized gain from investment transactions
(notes 1 and 4) 1,031,974 1,652,819 258,361 397,413
Net change in unrealized appreciation or depreciation
of investments (600,160) 6,514,334 847,868 7,234,230
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 13,762,227 20,875,185 12,749,471 19,237,849
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1) From undistributed
net investment income:
Class A (1,620,887) (1,232,871) (1,920,349) (1,598,593)
Class B (200,523) (42,742) (263,828) (46,061)
Class C (290,569) (75,261) (221,918) (105,268)
Class R (11,079,070) (11,366,137) (9,255,409) (9,979,949)
From accumulated net realized gains from investment
transactions:
Class A (153,240) (87,570) (20,898) --
Class B (28,610) (5,059) (3,919) --
Class C (32,763) (6,498) (2,848) --
Class R (951,059) (740,517) (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 (14,356,721) (13,556,655) (11,836,347) (11,729,871)
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 35,479,670 20,926,474 32,926,505 21,520,216
Net proceeds from shares issued to shareholders due
to reinvestment of distributions 8,761,391 8,485,646 6,965,808 6,962,594
- ------------------------------------------------------------------------------------------------------------------------------------
44,241,061 29,412,120 39,892,313 28,482,810
Cost of shares redeemed (21,081,364) (20,738,805) (26,208,534) (26,910,270)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 23,159,697 8,673,315 13,683,779 1,572,540
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 22,565,203 15,991,845 14,596,903 9,080,518
Net assets at the beginning of year 251,818,507 235,826,662 233,950,066 224,869,548
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $274,383,710 $251,818,507 $ 248,546,969 $ 233,950,066
- ------------------------------------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end
of year $ 186,855 $ 47,491 $ 34,491 $ 52,753
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
Notes to Financial Statements
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
February 28, 1999, the Funds had no such outstanding purchase commitments.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income and net
realized capital gains and/or market discount are recorded on the ex-dividend
date. The amount and timing of distributions are determined in accordance with
federal income tax regulations, which may differ from generally accepted
accounting principles. Accordingly, temporary over-distributions as a result of
these differences may occur and will be classified as either distributions in
excess of net investment income, distributions in excess of net realized gains
and/or distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, each Fund intends to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and California state personal income taxes, to
retain such tax-exempt status when distributed to the shareholders of the Funds.
All monthly tax-exempt income dividends paid during the fiscal year ended
February 28, 1999, have been designated Exempt Interest Dividends. Net realized
capital gain and market discount distributions are subject to federal taxation.
17
<PAGE>
Notes to Financial Statements (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 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Funds are authorized to invest in such
financial instruments, and may do so in the future, they did not make any such
investments during the fiscal year ended February 28, 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.
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.
18
<PAGE>
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
California
-----------------------------------------------------
Year Ended 2/28/99 Year Ended 2/28/98
------------------------- ----------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,071,388 $11,687,908 915,709 $9,841,798
Class B 501,459 5,481,597 212,762 2,283,446
Class C 623,022 6,803,964 296,470 3,221,754
Class R 1,052,596 11,506,201 518,547 5,579,476
Shares issued to shareholders due to
reinvestment of distributions:
Class A 91,191 997,733 69,581 747,090
Class B 7,826 85,655 2,378 25,787
Class C 12,131 132,788 5,538 59,609
Class R 688,652 7,545,215 712,546 7,653,160
- --------------------------------------------------------------------------------------------------------
4,048,265 44,241,061 2,733,531 29,412,120
- --------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (474,337) (5,180,644) (260,273) (2,797,462)
Class B (46,662) (508,896) (2,330) (25,080)
Class C (57,000) (622,658) (24,707) (263,332)
Class R (1,351,198) (14,769,166) (1,648,255) (17,652,931)
- --------------------------------------------------------------------------------------------------------
(1,929,197) (21,081,364) (1,935,565) (20,738,805)
- --------------------------------------------------------------------------------------------------------
Net increase 2,119,068 $23,159,697 797,966 $8,673,315
========================================================================================================
<CAPTION>
California Insured
-----------------------------------------------------
Year Ended 2/28/99 Year Ended 2/28/98
------------------------- ----------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,478,042 $16,416,739 994,327 $10,714,535
Class B 559,676 6,191,761 270,416 2,948,439
Class C 396,536 4,367,453 157,741 1,703,167
Class R 537,388 5,950,552 570,721 6,154,075
Shares issued to shareholders due to
reinvestment of distributions:
Class A 92,518 1,026,442 79,157 857,036
Class B 7,358 81,754 776 8,517
Class C 14,226 156,701 6,626 71,396
Class R 514,952 5,700,911 558,410 6,025,645
- --------------------------------------------------------------------------------------------------------
3,600,696 39,892,313 2,638,174 28,482,810
- --------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (582,791) (6,459,540) (378,368) (4,074,693)
Class B (40,526) (449,360) (3,037) (33,002)
Class C (70,267) (773,501) (32,339) (350,263)
Class R (1,675,268) (18,526,133) (2,084,046) (22,452,312)
- --------------------------------------------------------------------------------------------------------
(2,368,852) (26,208,534) (2,497,790) (26,910,270)
- --------------------------------------------------------------------------------------------------------
Net increase 1,231,844 $13,683,779 140,384 $1,572,540
========================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid April 1, 1999, to shareholders of record on March 9,
1999, as follows:
California California Insured
- --------------------------------------------------------------------------------
Dividend per share:
Class A $ .0450 $ .0430
Class B .0385 .0360
Class C .0400 .0375
Class R .0470 .0445
- --------------------------------------------------------------------------------
- ----
19
<PAGE>
Notes to Financial Statements (continued)
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended
February 28, 1999, were as follows:
California California Insured
- --------------------------------------------------------------------------------
Purchases:
Investments in municipal securities $ 105,414,564 $ 71,149,314
Temporary municipal investments 36,200,000 34,840,000
Sales:
Investments in municipal securities 88,540,627 59,907,846
Temporary municipal investments 36,600,000 34,040,000
- --------------------------------------------------------------------------------
At February 28, 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.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at February 28, 1999, were as follows:
California California Insured
- --------------------------------------------------------------------------------
Gross unrealized:
appreciation $ 18,306,092 $ 21,305,700
depreciation (250,379) (6,799)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 18,055,713 $ 21,298,901
- --------------------------------------------------------------------------------
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
- --------------------------------------------------------------------------------
The management fee compensates the Advisor for overall investment advisory and
administrative services, and general office facilities. The trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser has agreed to waive part of its management fees or reimburse certain
expenses of each Fund in order to limit total expenses to .75 of 1% of the
average daily net asset value of California and .975 of 1% of the average daily
net asset value of California Insured, excluding any 12b-1 fees applicable to
Class A, B and C Shares. The Adviser may also voluntarily agree to reimburse
additional expenses from time to time, which may be terminated at any time at
its discretion.
During the fiscal year ended February 28, 1999, the Distributor collected sales
charges on purchases of Class A Shares of approximately $161,300 and $199,400
for California and California Insured, respectively, of which approximately
$140,600 and $167,400, 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 fiscal year ended February 28, 1999, the Distributor compensated
authorized dealers directly with approximately $284,300 and $323,600 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 fiscal year
ended February 28, 1999, the Distributor retained approximately $71,900 and
$87,700 in such 12b-1 fees for California and California Insured, respectively.
The remaining 12b-1 fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained approximately $21,300 and $11,300 of
CDSC on share redemptions for California and California Insured, respectively,
during the fiscal year ended February 28, 1999.
- ----
20
<PAGE>
7. Composition of Net Assets
At February 28, 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 $ 256,057,630 $ 227,271,304
Balance of undistributed net investment income 186,855 34,491
Accumulated net realized gain (loss) from investment transactions 83,512 --
Distributions in excess of net realized gains from investment
transactions -- (57,727)
Net unrealized appreciation of investments 18,055,713 21,298,901
- ----------------------------------------------------------------------------------------------------------------
Net assets $ 274,383,710 $ 248,546,969
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
- ----
21
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------ ------------------------
Net
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)
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)
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)
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)
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
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
Class (Inception Date)
Ratio/Supplemental Date
--------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
CALIFORNIA Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Before After After Portfolio
Year Ended Assets 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)
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)
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)
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)
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 waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized for periods less than one year.
(c) From commencement of class operations as noted.
- ----
22
<PAGE>
<TABLE>
<CAPTION>
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)
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)
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)
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)
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
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
CALIFORNIA Expenses Income Expenses Income to
INSURED to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Before After After Portfolio
Year Ended Assets 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)
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)
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)
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)
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 waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized for periods less than one year.
(c) From commencement of class operations as noted.
- ----
23
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust II:
We have audited the accompanying statements of net assets of Nuveen
Flagship Multistate Trust II (comprising the Nuveen California and
California Insured Municipal Bond Funds) (a Massachusetts business
trust), including the portfolios of investments, as of February 28,
1999, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two
years then ended and the financial highlights for the periods
indicated thereon. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of February 28, 1999, by
correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers,
and when replies were not received, we carried out alternative
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the net
assets of each of the respective funds constituting the Nuveen
Flagship Multistate Trust II as of February 28, 1999, the results of
their operations for the year then ended, the changes in their net
assets for each of the two years then ended, and the financial
highlights for the periods indicated thereon in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 12, 1999
- ----
24
<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
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
- ----
25
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time. We emphasize quality securities carefully chosen through
in-depth research, and we follow those securities closely over time to ensure
that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
VAN-3-2-99
<PAGE>
NUVEEN
Municipal
Bond Funds
February 28, 1999
Annual Report
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
Connecticut
Massachusetts
Massachusetts
Insured
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Contents
1 Dear Shareholder
3 Connecticut Portfolio
Manager's Comments
4 Connecticut Performance Overview
5 Massachusetts Portfolio
Manager's Comments
6 Massachusetts Performance Overview
7 Massachusetts Insured
Performance Overview
8 Portfolio of Investments
22 Statement of Net Assets
23 Statement of Operations
24 Statement of Changes in Net Assets
25 Notes to Financial Statements
29 Financial Highlights
32 Report of Independent
Public Accountants
33 Fund Information
</TABLE>
<PAGE>
Dear Shareholder
[Photo of Timothy R. Schwertfeger Appears Here]
Timothy R. Schwertfeger
Chariman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
I'm pleased to announce that over the past 12 months, the Nuveen Mutual Funds
covered in this report have continued to meet their primary objectives of
providing you with attractive levels of tax-free income and after-tax total
returns. The combination of these two factors demonstrates once again that
Nuveen's municipal bond funds can serve as excellent investment options for
income oriented investors seeking tax efficient investments.
The Year in Review
The past 12 months were marked by periods of market volatility both at home and
abroad, as the financial crisis that began in Asia spread to emerging markets
and impacted economies around the globe. Investors responded to market
uncertainties by seeking a haven in more conservative investments, such as
municipal bond funds. Finally, to avert a potential domestic credit crunch and
bring some stability to global markets, the Federal Reserve stepped in and eased
short-term interest rates for the first time in almost three years. Between the
end of September and mid-November 1998, three successive rate cuts brought the
federal funds rate to 4.75%.
Throughout 1998, the U.S. economy exhibited more strength than had been
expected. Current conditions indicate that this momentum could continue. One of
the chief factors in achieving today's peaceful coexistence of economic growth
and low inflation has been improved productivity. In the months ahead, we will
continue to watch this and other factors that affect the economy's future,
including corporate earnings reports, wage and employment statistics, the
strength of the U.S. dollar, events in international markets, and any further
interest rate indications from the Federal Reserve. We believe these key
components will influence the outlook for fixed-income markets well into the
next century.
Municipal Bonds: A Compelling Value
During the past year, rising bond prices, spurred in part by demand from
international and conservative investors, drove yields on 30-year Treasuries to
historic lows, even below 5% at times. Over this period, the yield on the Bond
Buyer Revenue Bond Index, an unmanaged index of long-term municipal revenue
bonds, fell seven basis points from 5.36% to 5.29% versus the 34-point drop in
Treasury yields. At the end of February 1999, the ratio of long-term municipal
yields measured against 30-year Treasury yields stood at 95%, compared with the
more typical range of 86-87%. Over the past eight
1
<PAGE>
"Year to date, municipal bonds have continued to outperform Treasuries on a
yield basis in 1999."
months, this ratio reached as high as 104%. For investors, this meant that
quality long-term municipal bonds offered almost the same yield as Treasury
bonds with comparable maturities even before the tax advantages of municipal
bonds were taken into account. On an after-tax basis, municipal bonds presented
an exceptionally attractive investment option relative to Treasuries.
In the municipal market, low interest rates and the strong economy combined to
generate high levels of new issuance and a dramatic increase in the refinancing
of existing bonds. Municipal issuance in 1998 reached $284 billion, up 29% over
1997. In terms of total municipal issuance, 1998 ranked as the second largest
year on record, next to 1993's $292 billion. Year to date, municipal bonds have
continued to outperform Treasuries on a yield basis in 1999. There are two
reasons for this. For starters, municipal supply declined 30% in the first
quarter of 1999 when compared to the first quarter of 1998, which made the bonds
that were brought to market very attractive. The second factor involved a drop-
off in demand for Treasuries by foreign investors. As the global economic
turmoil subsided during the first quarter of 1999, so did the interest in the
U.S. Treasury market.
The continued strength of the U.S. economy also produced improvements in the
fundamental health of many municipalities and boosted the overall credit quality
of municipal bonds. In 1998, issues upgraded by Moody's outnumbered downgrades
by a margin of 4 to 1, while the comparable ratio at Standard & Poor's was more
than 2 to 1.
Nuveen Expertise is Key
The solid track record of a proven investment manager is one key to taking
advantage of the exceptional values currently available in the municipal market.
The near-record level of municipal issuance in 1998, for example, highlighted
the value of Nuveen's in-depth knowledge of the municipal market, as our
portfolio management teams carefully analyzed the flood of issues to select
those securities best suited to help the funds achieve their investment
objectives.
As a further enhancement to our management capabilities, Nuveen has assembled a
strong group of investment managers experts in their particular areas of the
market to provide you with the advantage of their experience and insights. In
addition to Nuveen Advisory Services for tax-free investing, you and your
adviser can rely on Institutional Capital Corporation for value-oriented equity
investing and Rittenhouse Financial Services, Inc. for growth-oriented equity
investing. For more information on these funds, contact your financial adviser
for a prospectus, or call Nuveen at (800) 621-7227. Please read the prospectus
carefully before you invest or send money.
We encourage you to talk with your financial adviser about Nuveen's expanding
array of investments and the ways they can help you establish a diversified
portfolio designed to build and sustain long-term financial security. We are
grateful for the confidence you have placed in us and are dedicated to
maintaining your trust in the years ahead.
Sincerely,
/s/Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
April 15, 1999
2
<PAGE>
Nuveen Flagship Connecticut Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Rick Huber discusses fund performance, the municipal market,
and key investment strategies for the Connecticut fund for the fiscal year ended
February 28, 1999.
What economic factors affected Connecticut's municipal bond market?
Although the state's economy continued to lag the nation's in some indicators
such as job growth, the gap is narrowing. No longer heavily reliant on
manufacturing and the defense industry, Connecticut's fastest growing industry
is gaming, followed by financial services and healthcare. In terms of personal
income, Connecticut continues to be the nation's wealthiest state.
As a result, demand for municipal bonds was high, while the supply was limited.
Total issuance during the fiscal year was $3.4 billion, about one-tenth the
issuance in New York.
How did the Fund perform during the past year?
For the one-year period ended February 28, 1999, the total return* for Class A
shares on net asset value for the Nuveen Flagship Connecticut Municipal Bond
Fund was 5.51%. The taxable-equivalent total return** for Class A shares on net
asset value was 8.11%. In comparison, the unmanaged Lehman Brothers Municipal
Bond Index produced a total return of 6.15%. This index includes a broad range
of investment-grade or insured municipal bonds and does not reflect expenses.
* Total return is the sum of the fund's income and capital gains distributions
plus price changes in the underlying bond portfolio.
** Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 34%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on
an after-tax basis.
See your Fund's Performance Overview in this report for more information.
Over the past year, interest rates remained relatively stable. In this
environment, the Fund's duration (the measurement of a bond fund's price
volatility in response to interest rate changes) played a smaller, though still
significant role in determining the Fund's total return performance relative to
the municipal market. In contrast, other factors such as portfolio credit
quality, sector weightings, call protection, and bond selection had a larger-
than-usual impact on the Fund's performance.
What key strategies were used over the course of the year?
We continued to maintain very high credit quality in the portfolio, with more
than half of the bonds rated AAA, as of February 28, 1999. While still meeting
Nuveen research's quality standards, about ten percent of the fund was rated BBB
or was nonrated. Of the bonds that were issued in Connecticut during the year, a
high percentage of them were insured. Some of the most attractive bond issues
were in the healthcare area, where yields have been higher, reflecting national
concerns about levels of Medicare reimbursement and the impact of managed care.
Most of these bonds were insured, which boosted their credit rating to AAA.
The low level of Connecticut supply prevented us from investing solely in
Connecticut bonds. To keep the fund fully invested, we increased our holdings in
Puerto Rico bonds, which are also exempt from federal, state, and local taxes in
Connecticut. Our management team selected extremely liquid and actively traded
Puerto Rico bonds that can be sold when attractive opportunities in the
Connecticut market reappear.
What is your outlook?
Given the scarcity of municipal supply in Connecticut, the value of our research
team to uncover good values will be very important. Nuveen's research department
has the capability to look for pockets of opportunity that a retail investor or
another institutional investor might not find or even have access to. Our focus
will continue to be on maintaining a stable dividend that is exempt from federal
and state income taxes, while attempting to increase the duration of the fund,
when possible, to maximize total return.
3
<PAGE>
Nuveen Flagship Connecticut Municipal Bond Fund
Performance Overview
As of February 28, 1999
Monthly Tax-Free Dividends (Class A Shares)
[Graph Appears Here]
3/98 .0450
4/98 .0450
5/98 .0450
6/98 .0450
7/98 .0445
8/98 .0445
9/98 .0445
10/98 .0445
11/98 .0445
12/98 .0445
1/99 .0440
2/99 .0440
Top 5 Sectors (as a % of total investments)
<TABLE>
<CAPTION>
<S> <C>
Education and Civic Organizations 17%
............................................
Tax Obligation/Limited 16%
............................................
U.S. Guaranteed 14%
............................................
Utilities 13%
............................................
Healthcare 12%
- --------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 7/87 2/97 10/93 2/97
...............................................................................................
Net Asset Value $10.90 $10.88 $10.88 $ 10.93
...............................................................................................
Total Net Assets ($000) $249,122
...............................................................................................
Average Weighted Maturity (Years) 18.40
...............................................................................................
Modified Duration (Years) 6.16
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/1/
Share Class A(NAV) A(Offer) B C R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 5.51% 1.04% 4.77% 4.94% 5.83%
...............................................................................................
5-Year 6.06% 5.15% 5.37% 5.46% 6.20%
...............................................................................................
10-Year 7.53% 7.06% 7.06% 6.92% 7.60%
- -----------------------------------------------------------------------------------------------
</TABLE>
Index Comparison/2/
[Graph Appears Here]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
Connecticut Municipal Connecticut Municipal Lehman Brothers
Bond Fund (Offer) Bond Fund (NAV) Municipal Bond Index
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
2/89 9,580 10,000 10,000
2/90 10,460 10,918 11,025
2/91 11,158 11,648 11,938
2/92 12,264 12,801 13,245
2/93 14,034 14,650 15,068
2/94 14,748 15,395 15,901
2/95 14,862 15,513 16,201
2/96 16,355 17,072 17,991
2/97 17,249 18,005 19,144
2/98 18,758 19,580 20,895
2/99 19,792 20,660 22,278
</TABLE>
Nuveen Flagship Connecticut Municipal Bond Fund (Offer) $19,792
Nuveen Flagship Connecticut Municipal Bond Fund (NAV) $20,660
Lehman Brothers Municipal Bond Index $22,278
Past performance is not predictive of future results.
1 Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class B shares automatically convert to
Class A shares eight years after purchase. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
2 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds and does not reflect any initial or ongoing
expenses. The Nuveen fund return depicted in the chart reflects the initial
maximum sales charge applicable to Class A shares (4.20%) and all ongoing
fund expenses.
4
<PAGE>
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Tom Futrell discusses fund performance, the municipal market,
and key investment strategies for the Massachusetts funds for the fiscal year
ended February 28, 1999.
What economic factors affected Massachusetts' municipal bond market?
Massachusetts is the Northeast's strongest economy, fueled by high technology
and financial services. Personal income growth outstripped the national economy,
and the population is generally highly educated and relatively wealthy. Enabled
by state budget surpluses of the past several years, the legislature and the
Governor have cut various state taxes since 1997, thereby helping to diminish
Massachusetts' reputation as a high-tax state.
Massachusetts continued to have a very vibrant municipal bond market. Demand was
fueled by the abundance of high-income taxpayers, while the state's aging
infrastructure generated plentiful supply. For example, the multi-billion dollar
Central Artery Project issued bonds to take a road that is currently at ground
level and move it underground, a hugely expensive process that will alleviate
traffic in downtown Boston.
How did the Funds perform during the past year?
For the one year period ended February 28, 1999, the total return* for Class A
shares on net asset value for the Nuveen Massachusetts Municipal Bond Fund was
5.05%. The total return for Class A shares on net asset value for the Nuveen
Massachusetts Insured Municipal Bond Fund was 5.09%. The taxable-equivalent
total returns** for Class A shares on net asset value for the Nuveen
Massachusetts Municipal Bond Fund and the Nuveen Massachusetts Insured Municipal
Bond Fund were 7.82% and 7.72%, respectively. In comparison, the unmanaged
Lehman Brothers Municipal Bond Index produced a total return of 6.15%; the
Lehman Brothers Insured Municipal Bond Index generated a return of 6.25%. These
indices include a broad range of investment-grade or insured municipal bonds and
do not reflect expenses.
* Total return is the sum of the fund's income and capital gains distributions
plus price changes in the underlying bond portfolio.
** Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 35%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on
an after-tax basis.
See your Fund's Performance Overview in this report for more information.
Over the past year, interest rates remained relatively stable. In this
environment, the Funds' duration (the measurement of a bond fund's price
volatility in response to interest rate changes) played a smaller, though still
significant role in determining the Funds' total return performance relative to
the municipal market. In contrast, other factors such as portfolio credit
quality, sector weightings, call protection, and bond selection had a larger-
than-usual impact on the Funds' performance.
What key strategies were used over the course of the year?
Many bonds in each portfolio were issued several years ago when interest rates
were much higher. As these bonds approach maturity, the duration of the funds
shortens. In order to increase duration, our strategy has been to look for
opportunities to sell older bonds that were reaching maturity or approaching
their call dates and use the proceeds to buy new bonds with better call
protection and longer maturities. At the same time, we attempted to maintain
dividend stability and tried not to sell bonds with high yields, or where a
large capital gain would result.
Most of the bonds that became available were either insured or carried very high
credit ratings, thus offering little relative value to the funds' current
holdings in terms of enhancing the portfolios' yield. One portfolio trade that
represented particularly good value, however, was the purchase by the Nuveen
Massachusetts Municipal Bond Fund of a bond issued by the Massachusetts
Industrial Finance Authority Resource Recovery for the Ogden Haverhill project.
This BBB rated bond financed a solid waste disposal facility managed by a
subsidiary of Ogden Corporation, one of the industry's leaders. Another example
of finding good value was the purchase by the insured fund of the Brandeis
University bonds issued under the Massachusetts Health and Education Facilities
Authority.
What is your outlook?
In the 1980s, Massachusetts had a turbulent economy. However, the state's
economy has diversified significantly since then, and we believe that the
current economy is insulated from the great volatility of past years.
Both funds in this report will continue to search for municipal bonds with good
call protection and attractive yields exempt from federal and state income
taxes. The Nuveen Massachusetts Municipal Bond Fund will continue to search for
attractively priced, lower investment-grade bonds while the Nuveen Massachusetts
Insured Municipal Bond Fund will continue to invest in Massachusetts' large
supply of insured long-term municipal bonds. The value of our research team to
uncover good values will continue to be very important. Nuveen's research
department has the capability to look for pockets of opportunity that a retail
investor or another institutional investor might not find or even have access
to. Our focus will continue to be on maintaining a stable dividend that is
exempt from federal and state income taxes, while attempting to increase the
duration of the funds, when possible, to maximize total return.
5
<PAGE>
Nuveen Massachusetts Municipal Bond Fund
Performance Overview
As of February 28, 1999
Monthly Tax-Free Dividends (Class A Shares)/1/
[Graph Appears Here]
3/98 .0435
4/98 .0435
5/98 .0435
6/98 .0435
7/98 .0420
8/98 .0420
9/98 .0420
10/98 .0420
11/98 .0420
12/98 .0420
1/99 .0405
2/99 .0405
Top 5 Sectors (as a % of total investments)
<TABLE>
<CAPTION>
<S> <C>
U.S. Guaranteed 33%
...........................................
Housing/Multifamily 13%
...........................................
Healthcare 13%
...........................................
Tax Obligation/General 10%
...........................................
Education and Civic Organizations 10%
- -------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Portfolio Statistics
Share Class A B C R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 9/94 3/97 10/94 12/86
...............................................................................................
Net Asset Value $10.07 $10.10 $10.02 $10.05
...............................................................................................
Total Net Assets ($000) $97,806
...............................................................................................
Average Weighted Maturity (Years) 16.60
...............................................................................................
Modified Duration (Years) 5.84
- -----------------------------------------------------------------------------------------------
</TABLE>
Annualized Total Return/2/
<TABLE>
<CAPTION>
Share Class A(NAV) A(Offer) B C R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 5.05% 0.66% 4.40% 4.62% 5.36%
................................................................................................
5-Year 5.64% 4.73% 4.90% 4.92% 5.84%
................................................................................................
10-Year 7.37% 6.91% 6.75% 6.61% 7.61%
- ------------------------------------------------------------------------------------------------
</TABLE>
Index Comparison/3/
[Graph Appears Here]
<TABLE>
<CAPTION>
Nuveen Massachusetts Nuveen Massachusetts
Municipal Bond Municipal Bond Lehman Brothers
Fund (Offer) Fund (NAV) Municipal Bond Index
<S> <C> <C> <C>
2/89 9,580 10,000 10,000
2/90 10,378 10,833 11,025
2/91 11,185 11,675 12,041
2/92 12,317 12,856 13,245
2/93 14,032 14,647 15,068
2/94 14,833 15,483 15,901
2/95 15,067 15,728 16,201
2/96 16,517 17,241 17,991
2/97 17,297 18,056 19,144
2/98 18,575 19,390 20,895
2/99 19,513 20,368 22,278
</TABLE>
Nuveen Massachusetts Municipal Bond Fund (Offer) $19,513
Nuveen Massachusetts Municipal Bond Fund (NAV) $20,368
Lehman Brothers Municipal Bond Index $22,278
Past performance is not predictive of future results.
1 The Fund also paid shareholders net ordinary income distributions in November
of $0.0017 per share.
2 Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class 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.
3 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds and does not reflect any initial or ongoing
expenses. The Nuveen fund return depicted in the chart reflects the initial
maximum sales charge applicable to Class A shares (4.20%) and all ongoing
fund expenses. For periods prior to inception of Class A shares, performance
reflects Class R shares performance adjusted for difference in expenses,
which are primarily differences in distribution and service fees.
6
<PAGE>
Nuveen Massachusetts Insured Municipal Bond Fund
Performance Overview
As of February 28, 1999
Monthly Tax-Free Dividends (Class A Shares)/1/
[Graph Appears Here]
3/98 .0435
4/98 .0425
5/98 .0425
6/98 .0425
7/98 .0425
8/98 .0425
9/98 .0425
10/98 .0415
11/98 .0415
12/98 .0415
1/99 .0415
2/99 .0415
Top 5 Sectors (as a % of total investments)
<TABLE>
<CAPTION>
<S> <C>
U.S. Guaranteed 22%
..........................................
Tax Obligation/General 21%
..........................................
Education and Civic Organizations 19%
..........................................
Housing/Multifamily 16%
..........................................
Healthcare 14%
- ------------------------------------------
</TABLE>
Portfolio Statistics
<TABLE>
<CAPTION>
Share Class A B C R
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 9/94 3/97 9/94 12/86
...............................................................................................
Net Asset Value $10.59 $10.59 $10.56 $ 10.59
...............................................................................................
Total Net Assets ($000) $71,814
...............................................................................................
Average Weighted Maturity (Years) 17.57
...............................................................................................
Modified Duration (Years) 5.79
- -----------------------------------------------------------------------------------------------
</TABLE>
Annualized Total Return/2/
<TABLE>
<CAPTION>
Share Class A(NAV) A(Offer) B C R
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-Year 5.09% 0.71% 4.32% 4.51% 5.26%
................................................................................................
5-Year 5.41% 4.50% 4.66% 4.70% 5.65%
................................................................................................
10-Year 7.19% 6.73% 6.59% 6.43% 7.44%
- ------------------------------------------------------------------------------------------------
</TABLE>
Index Comparison/3/
[Graph Appears Here]
<TABLE>
<CAPTION>
Nuveen Massachusetts Nuveen Massachusetts
Insured Municipal Bond Insured Municipal Bond Lehman Brothers
Fund (Offer) Fund (NAV) Municipal Bond Index
<S> <C> <C> <C>
2/89 9,580 10,000 10,000
2/90 10,320 10,825 11,025
2/91 11,268 11,762 12,041
2/92 12,315 12,855 13,245
2/93 14,040 14,656 15,068
2/94 14,739 15,385 15,901
2/95 14,956 15,611 16,201
2/96 16,389 17,107 18,114
2/97 17,048 17,796 19,144
2/98 18,249 19,049 20,895
2/99 19,178 20,019 22,278
</TABLE>
Nuveen Massachusetts Insured Municipal Bond Fund (Offer) $19,178
Nuveen Massachusetts Insured Municipal Bond Fund (NAV) $20,019
Lehman Brothers Municipal Bond Index $22,278
Past performance is not predictive of future results.
1 The Fund also paid shareholders capital gains distributions in November of
$0.009 per share.
2 Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class 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.
3 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds and does not reflect any initial or ongoing
expenses. The Nuveen fund return depicted in the chart reflects the initial
maximum sales charge applicable to Class A shares (4.20%) and all ongoing
fund expenses. For periods prior to inception of Class A shares, performance
reflects Class R shares performance adjusted for difference in expenses,
which are primarily differences in distribution and service fees.
7
<PAGE>
Portfolio of Investments
Nuveen Flagship Connecticut Municipal Bond Fund
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations -- 16.4%
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 $ 1,067,180
2,000,000 5.750%, 3/01/26 3/06 at 101 AAA 2,133,360
1,000,000 State of Connecticut Health and Educational Facilities 5/02 at 102 AAA 1,073,390
Authority, Revenue Bonds, Yale University, 5.929%, 6/10/30
4,000,000 State of Connecticut Health and Educational Facilities 7/04 at 102 AAA 4,516,600
Authority, 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:
385,000 7.000%, 11/15/05 (Alternative Minimum Tax) 11/01 at 102 A 409,070
3,675,000 7.200%, 11/15/10 (Alternative Minimum Tax) 11/01 at 102 A 3,903,879
Connecticut Higher Education Supplemental Loan Authority, Revenue Bonds
(Family Education Loan Program), 1996 Series A:
1,645,000 6.300%, 11/15/10 (Alternative Minimum Tax) 11/04 at 102 A1 1,743,141
1,245,000 6.350%, 11/15/11 (Alternative Minimum Tax) 11/04 at 102 A1 1,319,140
4,400,000 State of Connecticut Health and Educational Facilities 7/08 at 101 AA 4,258,320
Authority, Revenue Bonds, Sacred Heart University Issue,
Series E, 5.000%, 7/01/28
2,875,000 State of Connecticut Health and Educational Facilities 7/03 at 102 BBB- 2,990,690
Authority, Revenue Bonds, Quinnipiac College Issue,
Series D, 6.000%, 7/01/23
2,000,000 State of Connecticut Health and Educational Facilities 7/04 at 101 1/2 AAA 2,181,140
Authority, Revenue Bonds, The Loomis Chaffee School Issue,
Series B, 6.000%, 7/01/25
2,000,000 State of Connecticut Health and Educational Facilities No Opt. Call AAA 2,168,880
Authority, 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 2,571,675
Revenue Bonds, Kent School Issue, Series B, 5.400%, 7/01/23
1,000,000 State of Connecticut Health and Educational Facilities 11/05 at 102 AAA 1,025,420
Authority, Revenue Bonds, Connecticut State University System Issue,
Series A, 5.125%, 11/01/15
1,600,000 State of Connecticut Health and Educational Facilities 7/06 at 102 AAA 1,721,344
Authority, Revenue Bonds, Trinity College Issue,
Series E, 5.875%, 7/01/26
1,435,000 State of Connecticut Health and Educational Facilities 7/06 at 101 AAA 1,488,497
Authority, Revenue Bonds, The Loomis Chaffee School Issue,
Series C, 5.500%, 7/01/26
2,500,000 State of Connecticut Health and Educational Facilities 7/08 at 102 AAA 2,486,500
Authority, Revenue Bonds, Fairfield University Issue,
Series H, 5.000%, 7/01/28
1,490,000 State of Connecticut Health and Educational Facilities 7/08 at 101 AA 1,454,702
Authority, Revenue Bonds, Canterbury School Issue,
Series A, 5.000%, 7/01/18
2,000,000 State of Connecticut Health and Educational Facilities 7/07 at 102 AAA 2,067,960
Authority, Revenue Bonds, Suffield Academy Issue,
Series A, 5.400%, 7/01/27
- ------------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products -- 0.4%
1,000,000 Town of Sprague, Connecticut, Environmental Improvement 10/07 at 102 A3 1,021,080
Revenue Bonds, 1997 Series A (International Paper Company
Project), 5.700%, 10/01/21 (Alternative Minimum Tax)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care -- 11.7%
$ 2,600,000 State of Connecticut Health and Educational Facilities 7/00 at 102 AAA $ 2,760,264
Authority, Revenue Bonds, Bristol Hospital Issue,
Series A, 7.000%, 7/01/20
1,750,000 State of Connecticut Health and Educational Facilities 7/00 at 102 AAA 1,857,870
Authority, Revenue Bonds, Waterbury Hospital Issue,
Series B, 7.000%, 7/01/20
900,000 State of Connecticut Health and Educational Facilities 7/01 at 102 AAA 971,730
Authority, Revenue Bonds, Hospital of Raphael Issue,
Series D, 6.625%, 7/01/14
2,000,000 State of Connecticut Health and Educational Facilities 7/02 at 102 AAA 2,192,880
Authority, Revenue Bonds, Bridgeport Hospital Issue,
Series A, 6.625%, 7/01/18
4,200,000 State of Connecticut Health and Educational Facilities 7/04 at 102 AAA 4,580,226
Authority, Revenue Bonds, New Britain General Hospital Issue,
Series B, 6.000%, 7/01/24
1,000,000 State of Connecticut Health and Educational Facilities 7/07 at 102 BBB 985,590
Authority, Revenue Bonds, Hospital for Special Care Issue,
Series B, 5.375%, 7/01/17
1,000,000 State of Connecticut Health and Educational Facilities 7/07 at 102 BBB 981,610
Authority, Revenue Bonds, Hospital for Special Care Issue,
Series B, 5.500%, 7/01/27
1,645,000 State of Connecticut Health and Educational Facilities 7/06 at 102 AAA 1,671,452
Authority, Revenue Bonds, Day Kimball Hospital Issue,
Series A, 5.375%, 7/01/26
State of Connecticut Health and Educational Facilities
Authority, Revenue Bonds, Greenwich Hospital Issue, Series A:
3,000,000 5.750%, 7/01/16 7/06 at 102 AAA 3,208,920
1,500,000 5.800%, 7/01/26 7/06 at 102 AAA 1,604,220
3,000,000 State of Connecticut Health and Educational Facilities 7/06 at 102 AAA 3,163,080
Authority, Revenue Bonds, Yale-New Haven Hospital Issue,
Series H, 5.700%, 7/01/25
320,000 State of Connecticut Health and Educational Facilities 1/01 at 102 AAA 344,438
Authority, Revenue Bonds, Capital Asset Issue,
Series C, 7.000%, 1/01/20
2,000,000 State of Connecticut Health and Educational Facilities 7/07 at 102 AAA 2,127,360
Authority, Revenue Bonds, The William W. Backus Hospital Issue,
Series D, 5.750%, 7/01/27
2,250,000 Connecticut Development Authority, Solid Waste Disposal 7/05 at 102 AAA 2,628,788
Facilities 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, 1/02 at 102 AAA 1,591,080
Mortgage Revenue Refunding Bonds, Series 1992A (FHA Insured Mortgage
Loan -- Nathan Hale Apartments, Section 8 Assisted Project), 6.875%,
7/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 8.6%
615,000 Connecticut Housing Finance Authority, Housing Mortgage 11/02 at 102 AA 656,795
Finance Program Bonds, 1992 Series C2, 6.700%, 11/15/22
(Alternative Minimum Tax)
1,250,000 Connecticut Housing Finance Authority, Housing Mortgage 5/03 at 102 AA 1,337,375
Finance Program Bonds, 1993 Series A, 6.200%, 5/15/14
1,205,000 Connecticut Housing Finance Authority, Housing Mortgage 5/08 at 101 1/2 AA 1,217,701
Finance Program Bonds, 1997 Series D, Subseries D2, 5.450%, 11/15/24
(Alternative Minimum Tax)
2,750,000 Connecticut Housing Finance Authority, Housing Mortgage 5/04 at 102 AA 2,898,830
Finance Program Bonds, 1994 Series A, 6.100%, 5/15/17
1,500,000 Connecticut Housing Finance Authority, Housing Mortgage 5/05 at 102 AA 1,590,255
Finance Program Bonds, 1995 Series A, Subseries A-1, 6.100%, 5/15/17
4,150,000 Connecticut Housing Finance Authority, Housing Mortgage 11/07 at 102 AA 4,348,287
Finance Program Bonds, 1997 Series B, Subseries B-2, 5.850%, 11/15/28
(Alternative Minimum Tax)
1,000,000 Connecticut Housing Finance Authority, Housing Mortgage 11/05 at 102 AA 1,066,970
Finance Program Bonds, 1995 Series F, Subseries F-1, 6.000%, 5/15/17
</TABLE>
9
<PAGE>
Portfolio of Investments
Nuveen Flagship Connecticut Municipal Bond Fund (continued)
February 28, 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 5/06 at 102 AA $ 1,604,775
Finance Program Bonds, 1996 Series B, Subseries B-1,
6.050%, 5/15/18
4,855,000 Connecticut Housing Finance Authority, Housing Mortgage 11/06 at 102 AA 5,183,878
Finance Program Bonds, 1996 Subseries E-2, 6.150%,
11/15/27 (Alternative Minimum Tax)
1,495,000 Connecticut Housing Finance Authority, Housing Mortgage 11/06 at 102 AA 1,578,197
Finance Program Bonds, 1997 Series F, Subseries F-2,
6.000%, 11/15/27 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 7.4%
1,000,000 State of Connecticut Health and Educational Facilities 8/08 at 102 AAA 990,850
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 2,366,800
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 9/02 at 102 A2 7,637,070
Refunding 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 1,716,796
2,610,000 5.800%, 4/01/21 4/07 at 102 BBB 2,645,653
1,875,000 Connecticut Development Authority, First Mortgage Gross 12/06 at 103 BBB+ 1,846,800
Revenue Health Care Project Refunding Bonds, Series
1998A (The Elim Park Baptist Home, Inc. Project),
5.375%, 12/01/18
City of New Haven, Connecticut, Facility Revenue Bonds
(Easter Seal Goodwill Industries Rehabilitation Center
Project - 1991 Series):
280,000 8.500%, 4/01/01 No Opt. Call N/R 268,937
995,000 8.875%, 4/01/16 4/01 at 102 N/R 938,305
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 8.9%
3,000,000 City of Bridgeport, Connecticut, General Obligation Bonds, 3/07 at 101 AAA 3,088,290
1997 Series A, 5.250%, 3/01/17
325,000 Town of Canterbury, Connecticut, General Obligation Bonds, No Opt. Call A3 402,142
7.200%, 5/01/09
2,800,000 State of Connecticut, General Obligation Capital No Opt. Call AA 1,573,992
Appreciation Bonds (College Savings Plan,
1991 Series B), 0.000%, 12/15/11
1,000,000 State of Connecticut, General Obligation Capital No Opt. Call AA 643,530
Appreciation Bonds (College Savings Plan,
1990 Series A), 0.000%, 5/15/09
3,000,000 State of Connecticut, General Obligation Capital No Opt. Call AA 1,724,790
Appreciation 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 241,414
200,000 7.200%, 8/15/07 No Opt. Call Aa1 244,962
200,000 7.200%, 8/15/08 No Opt. Call Aa1 248,266
Town of Griswold, Connecticut, General Obligation Bonds,
Issue of 1989:
200,000 7.500%, 4/01/02 No Opt. Call AAA 222,688
200,000 7.500%, 4/01/03 No Opt. Call AAA 228,598
200,000 7.500%, 4/01/04 No Opt. Call AAA 233,836
150,000 7.500%, 4/01/05 No Opt. Call AAA 179,000
340,000 City of Middletown, Connecticut, General Obligation Bonds, No Opt. Call AA 399,765
6.900%, 4/15/06
1,250,000 City of New Haven, Connecticut, General Obligation Bonds, 2/05 at 102 AAA 1,340,275
Series 1995, 5.750%, 2/15/14
City of New London, Connecticut, General Obligation Bonds,
Water Department Revenue Series 20:
120,000 7.300%, 12/01/05 No Opt. Call A+ 144,034
100,000 7.300%, 12/01/07 No Opt. Call A+ 123,592
Town of Old Saybrook, Connecticut, General Obligation Bonds:
160,000 7.400%, 5/01/08 No Opt. Call A 199,170
160,000 7.400%, 5/01/09 No Opt. Call A 199,752
275,000 6.500%, 2/15/10 No Opt. Call AAA 327,731
270,000 6.500%, 2/15/11 No Opt. Call AAA 323,155
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 925,000 Town of Oxford, Connecticut, General Obligation Bonds, 2/00 at 102 AAA $ 976,190
7.000%, 2/01/09
Town of Plainfield, Connecticut, General Obligation Bonds:
225,000 7.000%, 9/01/00 No Opt. Call A3 235,537
100,000 7.000%, 9/01/01 No Opt. Call A3 107,032
100,000 7.100%, 9/01/02 9/01 at 102 A3 108,696
310,000 7.100%, 9/01/03 9/01 at 102 A3 340,417
100,000 7.200%, 9/01/04 9/01 at 102 A3 110,050
335,000 7.250%, 9/01/06 9/01 at 102 A3 369,066
335,000 7.300%, 9/01/08 9/01 at 102 A3 369,465
155,000 7.300%, 9/01/10 9/01 at 102 A3 170,946
5,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 7/08 at 101 A 4,905,350
1998 (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 764,442
680,000 6.400%, 5/15/12 5/02 at 102 AAA 743,471
Town of Winchester, Connecticut, General Obligation Bonds:
140,000 6.750%, 4/15/06 No Opt. Call A1 163,734
140,000 6.750%, 4/15/07 No Opt. Call A1 165,917
140,000 6.750%, 4/15/08 No Opt. Call A1 168,084
140,000 6.750%, 4/15/09 No Opt. Call A1 168,315
140,000 6.750%, 4/15/10 No Opt. Call A1 169,261
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 16.0%
2,000,000 State of Connecticut Health and Educational Facilities 11/04 at 102 AA- 2,203,040
Authority, Revenue Bonds, Nursing Home Program Issue,
Series 1994 (St. Camillus Health Center Project),
6.250%, 11/01/18
1,000,000 State of Connecticut Health and Educational Facilities 7/08 at 102 AAA 979,580
Authority, Revenue Bonds, Child Care Facilities Program,
Series A, 5.000%, 7/01/28
1,000,000 State of Connecticut Health and Educational Facilities 11/04 at 102 AAA 1,117,020
Authority, 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 11/04 at 102 AAA 5,585,100
Authority, 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 11/04 at 102 AAA 4,127,389
Authority, 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 11/04 at 102 AAA 3,351,060
Authority, Revenue Bonds, Nursing Home Program Issue,
Series 1994 (The Jewish Home for the Elderly of Fairfield
County Project), 6.250%, 11/01/20
State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Nursing Home Program Issue, Series 1994 (Highland
View Manor, Inc. Project):
1,500,000 7.200%, 11/01/10 (Alternative Minimum Tax) 11/04 at 102 AAA 1,738,965
4,200,000 7.500%, 11/01/16 (Alternative Minimum Tax) 11/04 at 102 AAA 4,919,166
State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Nursing Home Program Issue, Series 1994 (Wadsworth
Glen Health Care Center Project):
1,100,000 7.200%, 11/01/10 (Alternative Minimum Tax) 11/04 at 102 AAA 1,275,241
1,000,000 7.500%, 11/01/16 (Alternative Minimum Tax) 11/04 at 102 AAA 1,171,230
4,115,000 State of Connecticut Health and Educational Facilities 11/06 at 102 AA- 4,449,303
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 4,859,205
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- 1,330,700
Transportation Infrastructure Purposes, 1992 Series B, 6.125%,
9/01/12
2,000,000 Puerto Rico Aqueduct and Sewer Authority, Refunding Bonds, 7/06 at 101 1/2 A 1,971,000
Series 1995, Guaranteed by the Commonwealth of Puerto Rico,
5.000%, 7/01/19
725,000 Town of Woodstock, Connecticut, Special Obligation Bonds 3/00 at 103 AAA 771,632
(Woodstock Academy - 1990 Issue) (General Obligation Bonds),
6.900%, 3/01/06
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Flagship Connecticut Municipal Bond Fund (continued)
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - 13.6%
$ 3,080,000 State of Connecticut Health and Educational Facilities Authority, 7/03 at 100 AAA $ 3,549,269
Revenue Bonds, University of Hartford Issue, Series C, 8.000%, 7/01/18
(Pre-refunded to 7/01/03)
1,300,000 State of Connecticut Health and Educational Facilities Authority, No Opt. Call AAA 1,651,507
Revenue Bonds, Lutheran General Health Care System (Parkside Lodges
Projects), 7.375%, 7/01/19
250,000 State of Connecticut Health and Educational Facilities Authority, 7/99 at 102 BBB+*** 258,285
Revenue Bonds, Fairfield University Issue, Series F, 6.900%, 7/01/14
(Pre-refunded to 7/01/99)
1,000,000 State of Connecticut Health and Educational Facilities Authority, 7/00 at 102 N/R*** 1,072,550
Revenue Bonds, The Taft School Issue, Series A, 7.375%, 7/01/20
(Pre-refunded to 7/01/00)
190,000 State of Connecticut Health and Educational Facilities Authority, 7/00 at 102 Aaa 204,020
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 Authority, 7/00 at 102 AAA 5,886,540
Revenue Bonds, Yale-New Haven Hospital Issue, Series F, 7.100%,
7/01/25 (Pre-refunded to 7/01/00)
State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Sacred Heart University Issue, Series B:
500,000 5.700%, 7/01/16 (Pre-refunded to 7/01/03) 7/03 at 102 BBB-*** 546,095
2,200,000 5.800%, 7/01/23 (Pre-refunded to 7/01/03) 7/03 at 102 BBB-*** 2,411,552
3,500,000 State of Connecticut Health and Educational Facilities Authority, 7/02 at 102 AAA 3,856,055
Revenue Bonds, Middlesex Hospital Issue, Series G, 6.250%, 7/01/12
(Pre-refunded to 7/01/02)
1,100,000 State of Connecticut Health and Educational Facilities Authority, 7/02 at 102 N/R*** 1,196,723
Revenue Bonds, The William W. Backus Hospital Issue, Series C,
6.000%, 7/01/12
(Pre-refunded to 7/01/02)
5,410,000 State of Connecticut Health and Educational Facilities Authority, 7/03 at 102 BBB-*** 5,973,235
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 195,066
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 1,783,925
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 651,336
1,000,000 7.400%, 3/01/12 (Pre-refunded to 3/01/02) 3/02 at 102 AAA 1,123,980
1,130,000 Town of Stratford, Connecticut, General Obligation Bonds, 3/01 at 102 N/R*** 1,234,050
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*** 583,749
785,000 7.300%, 3/01/05 (Pre-refunded to 3/01/01) 3/01 at 102 N/R*** 857,283
780,000 7.400%, 3/01/06 (Pre-refunded to 3/01/01) 3/01 at 102 N/R*** 853,328
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 12.3%
8,000,000 Bristol Resource Recovery Facility Operating Committee, Solid 7/05 at 102 A2 8,764,400
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:
400,000 6.750%, 11/15/03 (Alternative Minimum Tax) 11/01 at 102 AA 430,972
170,000 7.500%, 1/01/04 7/99 at 102 A 173,886
500,000 6.800%, 11/15/04 (Alternative Minimum Tax) 11/01 at 102 AA 537,930
3,085,000 7.625%, 1/01/09 7/99 at 102 A 3,207,475
5,250,000 Connecticut Resources Recovery Authority, Corporate Credit 11/02 at 102 A- 5,583,113
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 Waste 1/03 at 102 BBB+ 9,581,398
Revenue Bonds (Wheelbrator Lisbon Project), Series 1993A, 5.500%,
1/01/20 (Alternative Minimum Tax)
2,500,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/08 at 101 1/2 BBB+ 2,452,675
Series DD, 5.000%, 7/01/28
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer -- 2.4%
$ 770,000 Connecticut Development Authority, Water Facilities Refunding Revenue Bonds 6/00 at 102 A+ $ 809,123
(Bridgeport Hydraulic Company Project - 1990 Series), 7.250%, 6/01/20
2,000,000 Connecticut Development Authority, Water Facilities Revenue Refunding Bonds 12/03 at 102 AAA 2,260,079
(The Connecticut Water Company Project - 1993 Series), 6.650%, 12/15/20
1,750,000 Connecticut Development Authority, Water Facilities Revenue Bonds 4/07 at 102 A+ 1,905,417
(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 1,082,088
Series, 7.000%, 1/01/11
- -----------------------------------------------------------------------------------------------------------------------------------
$231,595,000 Total Investments - (cost $224,739,980) - 98.3% 244,817,440
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.7% 4,304,325
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $249,121,765
====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent
public accountants): Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at
varying prices at later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to
be equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
13
<PAGE>
Portfolio of Investments
Nuveen Massachusetts Municipal Bond Fund
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations -- 9.3%
Massachusetts Educational Loan Authority, Education Loan Revenue Bonds,
Issue C, Series 1985A:
$ 125,000 7.875%, 6/01/03 6/99 at 100 1/2 AAA $ 126,930
840,000 7.875%, 6/01/03 6/99 at 101 AAA 857,128
1,000,000 Massachusetts Development Finance Agency, Revenue Bonds, YMCA 11/08 at 102 BBB+ 991,190
of Greater Boston Issue, Series 1998, 5.450%, 11/01/28
1,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/02 at 102 AAA 1,087,920
Suffolk University Issue, Series B, 6.350%, 7/01/22
30,000 Massachusetts Health and Educational Facilities Authority, 7/01 at 102 AAA 32,444
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 1,889,200
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 1,043,660
(College of the Holy Cross -- 1996 Issue), 5.500%, 3/01/20
500,000 Massachusetts Industrial Finance Agency, Revenue Bonds 7/03 at 102 Aa1 491,300
(Whitehead Institute for Biomedical Research 1993 Issue),
5.125%, 7/01/26
2,290,000 Massachusetts Industrial Finance Agency, Revenue and Refunding 7/05 at 102 AAA 2,580,280
Bonds, 1995 Series A (Lesley College Project), 6.300%, 7/01/25
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care -- 12.3%
495,000 Massachusetts Health and Educational Facilities Authority, 7/99 at 100 A 501,811
Revenue Bonds, Brockton Hospital Issue, Series B, 8.000%, 7/01/07
500,000 Massachusetts Health and Educational Facilities Authority, 7/99 at 102 1/2 N/R 518,210
Revenue Bonds, Series 1989 (Cardinal Cushing General Hospital),
8.875%, 7/01/18
700,000 Massachusetts Health and Educational Facilities Authority, 7/04 at 102 AA+ 760,375
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 823,575
Revenue Bonds, New England Medical Center Hospitals Issue,
Series F, 6.625%, 7/01/25
1,000,000 Massachusetts Health and Educational Facilities Authority, 7/03 at 102 AAA 1,042,670
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 2,584,800
2,000,000 6.000%, 2/15/34 2/04 at 102 Aa 2,064,440
2,000,000 Massachusetts Health and Educational Facilities Authority, 7/08 at 102 AAA 1,936,420
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 1,412,145
Revenue Bonds, Harvard Pilgrim Health Care Issue
Series A, 4.750%, 7/01/22
415,000 Massachusetts Industrial Finance Agency, Revenue Bonds (Sturdy 6/99 at 102 A 428,122
Memorial Hospital), Series 1989, 7.900%, 6/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 12.9%
955,000 Boston--Mount Pleasant Housing Development Corporation, 8/02 at 102 AAA 1,018,488
Multi-family 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+ 3,955,152
Bonds, 6.375%, 4/01/21
1,000,000 Massachusetts Housing Finance Agency, Residential Development 11/02 at 102 AAA 1,068,010
Bonds, 6.250%, 11/15/14
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
Housing--Multifamily (continued)
<S> <C> <C> <C> <C>
$1,000,000 Massachusetts Housing Finance Agency, Residential Development Bonds, 1992 5/02 at 102 AAA $1,084,540
Series D, 6.875%, 11/15/21
2,000,000 Massachusetts Industrial Finance Agency, Assisted Living Facility Revenue 12/07 at 102 AAA 2,081,560
Bonds (Arbors at Living Amherst Project), GNMA Collateralized,
Series 1997, 5.950%, 6/20/39 (Alternative Minimum Tax)
1,000,000 Massachusetts Housing Finance Agency, Rental Housing Mortgage Revenue 7/07 at 101 AAA 1,027,960
Bonds, 1997 Series C, 5.625%, 7/01/40 (Alternative Minimum Tax)
1,000,000 Massachusetts Industrial Finance Agency (FHA-Insured Mortgage Loan), Hudner 1/08 at 102 AAA 1,049,990
Associates Projects, 5.650%, 1/01/23
1,250,000 Somerville Housing Authority (Massachusetts), Mortgage Revenue Bonds, 5/00 at 102 AAA 1,305,738
Series 1990 (GNMA Collateralized -- Clarendon Hill Towers Project),
7.950%, 11/20/30
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 0.5%
500,000 Massachusetts Housing Finance Agency, Single Family Housing Revenue Bonds, 6/01 at 102 Aa 526,800
Series 18, 7.350%, 12/01/16
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care -- 6.3%
885,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/03 at 102 AAA 951,003
Cable Housing and Health Services Issue, Series A, 5.625%, 7/01/13
3,285,000 Massachusetts Health and Educational Facilities Authority Revenue 2/07 at 102 Aa2 3,554,633
Refunding Bonds, Youville Hospital Issue (FHA-Insured Project),
Series A, 6.250%, 2/15/41
400,000 Massachusetts Industrial Finance Agency, Assisted Living Facility Revenue 8/08 at 105 AAA 418,556
Bonds (TNG Draper Place Project, Series 1998) (GNMA Collateralized),
5.400%, 8/20/12 (Alternative Minimum Tax)
1,125,000 Massachusetts Industrial Financial Agency, Revenue Bonds, Heights Crossing 2/06 at 102 AAA 1,183,669
Limited Partnership Issue (FHA-Insured Project), Series 1995,
6.000%, 2/01/15 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 9.9%
Town of Barnstable, Massachusetts, General Obligation Bonds:
880,000 5.750%, 9/15/13 9/04 at 102 Aa3 956,534
490,000 5.750%, 9/15/14 9/04 at 102 Aa3 531,351
Town of Deerfield, Massachusetts, General Obligation School Bonds of 1992,
School Project Loan Act of 1948, Bank-Qualified Unlimited Tax:
420,000 6.200%, 6/15/09 6/02 at 102 A1 458,153
415,000 6.250%, 6/15/10 6/02 at 102 A1 452,657
375,000 City of Holyoke, Massachusetts, General Obligation Bonds, 1991 No Opt. Call BBB+ 393,026
Series A, 8.000%, 6/01/01
500,000 City of Holyoke, Massachusetts, General Obligation School Project 8/01 at 102 Baa2 557,145
Loan Act of 1948, 7.650%, 8/01/09
750,000 City of Holyoke, Massachusetts, General Obligation Refunding Bonds, 11/02 at 102 BBB+ 824,678
7.000%, 11/01/08
545,000 City of Lowell, Massachusetts, General Obligation Qualified Bonds, 2/01 at 103 A3 606,787
8.300%, 2/15/05
500,000 Town of Palmer, Massachusetts, General Obligation Refunding Bonds, 10/03 at 102 AAA 533,315
5.500%, 10/01/10
425,000 South Essex Sewerage District, Massachusetts, General Obligation Bonds, No Opt. Call Baa1 465,452
9.000%, 12/01/00
City of Taunton, Massachusetts, General Obligation Bonds (Electric Loan,
Act of 1969):
1,465,000 8.000%, 2/01/02 No Opt. Call A3 1,629,417
1,005,000 8.000%, 2/01/03 No Opt. Call A3 1,149,519
1,000,000 City of Worcester, Massachusetts, General Obligation Bonds, 8/02 at 102 BBB+ 1,075,760
6.000%, 8/01/04
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 1.1%
900,000 Massachusetts Industrial Finance Agency, Library Revenue Bonds 1/05 at 102 AAA 1,053,774
(Malden Public Library Project), Series 1994, 7.250%, 1/01/15
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation -- 5.2%
1,500,000 Massachusetts Industrial Finance Agency, Parking Facility Revenue Bonds 4/03 at 102 AAA 1,527,990
(Avon Associates LLC Project), Series 1998A, 5.375%, 4/01/20
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Massachusets Municipal Bond Fund (continued)
February 28, 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 A (Senior):
$10,000,000 0.000%, 1/01/29 No Opt. Call AAA $2,161,200
1,425,000 5.000%, 1/01/37 1/07 at 102 AAA 1,376,807
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 32.0%
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*** 499,397
450,000 6.250%, 1/15/11 (Pre-refunded to 1/15/03) 1/03 at 102 A3*** 499,397
1,000,000 City of Boston, Massachusetts, General Obligation Bonds, 1991 Series 7/01 at 102 AAA 1,092,790
A, 6.750%, 7/01/11 (Pre-refunded to 7/01/01)
1,500,000 City of Boston, Massachusetts, Revenue Bonds, Boston City Hospital 8/00 at 102 Aaa 1,620,390
(FHA-Insured Mortgage), Series A, 7.625%, 2/15/21 (Pre-refunded to 8/15/00)
500,000 Boston Water and Sewer Commission (Massachusetts), General Revenue 11/01 at 102 AAA 554,875
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, Municipal 10/01 at 102 A2*** 447,860
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 291,710
8.150%, 6/15/06 (Pre-refunded to 6/15/02)
445,000 City of Lowell, Massachusetts, General Obligation Qualified Bonds, 1/01 at 102 Aaa 493,719
8.400%, 1/15/09 (Pre-refunded to 1/15/01)
1,000,000 City of Lynn, Massachusetts, General Obligation Bonds, 1/02 at 104 Aaa 1,151,630
7.850%, 1/15/11 (Pre-refunded to 1/15/02)
1,000,000 Massachusetts Bay Transportation Authority, General Transportation 3/01 at 102 Aaa 1,088,550
System Bonds, 1991 Series A, 7.000%, 3/01/11 (Pre-refunded to 3/01/01)
250,000 The Massachusetts Bay Transportation Authority, Certificates of 12/06 at 100 A*** 311,783
Participation, Series 1988, 7.800%, 1/15/14 (Pre-refunded to 12/22/06)
165,000 Commonwealth of Massachusetts, General Obligation Bonds, 3/00 at 102 AAA 174,950
7.250%, 3/01/09 (Pre-refunded to 3/01/00)
500,000 Massachusetts Health and Educational Facilities Authority, Revenue 9/02 at 102 AAA 557,005
Refunding Bonds, Worcester Polytechnic Institute Issue, Series E,
6.625%, 9/01/17 (Pre-refunded to 9/01/02)
750,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/99 at 102 A+*** 776,475
Bonds, Baystate Medical Center Issue, Series C, 7.500%, 7/01/20
(Pre-refunded to 7/01/99)
1,270,000 Massachusetts Health and Educational Facilities Authority, 7/00 at 102 AAA 1,373,569
Revenue Bonds, Emerson Hospital Issue, Series C, 8.000%, 7/01/18
(Pre-refunded to 7/01/00)
3,000,000 Massachusetts Health and Educational Facilities Authority, Revenue No Opt. Call AAA 3,064,860
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*** 1,271,013
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 267,938
Bonds, University Hospital Issue, Series C, 7.250%, 7/01/10
(Pre-refunded to 7/01/00)
1,270,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/01 at 102 A1*** 1,400,823
Bonds, Charlton Memorial Hospital Issue, Series B, 7.250%, 7/01/13
(Pre-refunded to 7/01/01)
2,750,000 Massachusetts Health and Educational Facilities Authority, Revenue 4/02 at 102 AAA 3,057,835
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 1,116,260
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 1,055,680
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 1,071,842
7/01/13
500,000 Massachusetts Industrial Finance Agency, Revenue Bonds (Springfield College 10/99 at 103 Aaa 529,030
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-*** 273,443
Holy Cross, 1992 Issue, 6.450%, 1/01/12 (Pre-refunded to 1/01/02)
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Previsions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed (continued)
<S> <C> <C> <C> <C>
$1,185,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Merrimack 7/02 at 102 AAA $1,336,573
College Issue, Series 1992, 7.125%, 7/01/12 (Pre-refunded to 7/01/02)
500,000 Town of Monson, Massachusetts, General Obligation Bonds, School Project 10/00 at 102 AAA 545,045
Loan Act of 1948 Bonds, 7.700%, 10/15/10 (Pre-refunded to 10/15/00)
500,000 Town of Palmer, Massachusetts, General Obligation Bonds, School Project 10/00 at 102 AAA 544,244
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 Bonds, 8/01 at 102 AAA 1,243,101
6.950%, 8/01/09 (Pre-refunded to 8/01/01)
2,250,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 7/01 at 102 Aaa 2,477,272
P, 7.000%, 7/01/21 (Pre-refunded to 7/01/01)
1,000,000 City of Springfield, Massachusetts, General Obligation School Project 9/02 at 102 Baa3*** 1,129,389
Loan, Act of 1948 Bonds, Series B, 7.100%, 9/01/11 (Pre-refunded to
9/01/02)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities -- 7.2%
2,700,000 Massachusetts Development Finance Agency, Resource Recovery Revenue Bonds 12/08 at 102 BBB 2,694,788
(Ogden Haverhill Project), Series 1998B, 5.500%, 12/01/19
(Alternative Minimum Tax)
1,245,000 Massachusetts Industrial Finance Agency, Resource Recovery Revenue Bonds 7/01 at 103 N/R 1,368,852
(SEMASS Project), Series 1991A, 9.000%, 7/01/15
3,000,000 Massachusetts Industrial Finance Agency, Resource Recovery Revenue 12/08 at 102 BBB 3,021,569
Refunding Bonds (Ogden Haverhill Project), Series 1998A, 5.600%,
12/01/19 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
$96,585,000 Total Investments -- (cost $88,072,490) -- 96.7% 94,555,941
===========-------------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities -- 1.2%
$ 1,200,000 Massachusetts Health and Educational Facilities Authority, VMIG-1 1,200,000
=========== Capital Assets, Series B, Variable Rate Demand Bonds, 3.250%, 7/01/05+
---------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 2.1% 2,050,324
---------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $ 97,806,265
=====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified market index.
See accompanying notes to financial statements
17
<PAGE>
Portfolio of Investments
Nuveen Massachusetts Insured Municipal Bond Fund
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations -- 18.7%
<S> <C> <C> <C> <C>
$1,600,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 10/02 at 102 AAA $1,767,376
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 1,543,946
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 2,171,760
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 32,444
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 2,833,800
Brandeis University Issue, Series I, 4.750%, 10/01/28
1,000,000 Massachusetts Industrial Finance Agency, Revenue Bonds 3/06 at 102 AAA 1,043,660
(College of the Holy Cross -- 1996 Issue), 5.500%, 3/01/20
500,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Brandeis University 10/99 at 102 AAA 520,310
Issue, 1989 Series C, 6.800%, 10/01/19
420,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Babson College 10/05 at 102 AAA 465,767
Issue, Series 1995A, 5.800%, 10/01/10
1,000,000 Massachusetts Industrial Finance Agency, Revenue Refunding Bonds, Mount 7/01 at 102 AAA 1,075,410
Holyoke College Issue, Series 1992A, 6.300%, 7/01/13
2,000,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Western New England 7/08 at 102 AAA 1,952,940
College Issue, Series 1998, 5.000%, 7/01/28
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care -- 13.7%
500,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/00 at 102 AAA 535,875
University Hospital Issue, Series C, 7.250%, 7/01/19
250,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/99 at 102 AAA 258,313
Capital Asset Program, 7.200%, 7/01/09
1,500,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/02 at 102 AAA 1,647,150
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 1,094,220
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 1,772,539
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 1,936,420
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 2,563,747
Control Facilities Financing Authority, Hospital Revenue Bonds, 1995
Series A (Hospital Auxilio Mutuo Obligated Group Project), 6.250%, 7/01/16
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily -- 15.6%
1,500,000 Massachusetts Housing Finance Agency, Housing Development Bonds, 1998 6/08 at 101 AAA 1,542,660
Series A, 5.375%, 6/01/16 (Alternative Minimum Tax)
4,290,000 Massachusetts Industrial Finance Agency, Assisted Living Facility Revenue 12/07 at 102 AAA 4,464,946
Bonds (Arbors at Living Amherst Project), GNMA Collateralized, Series
1997, 5.950%, 6/20/39 (Alternative Minimum Tax)
215,000 Massachusetts Housing Finance Agency, Housing Revenue Bonds, 1989 Series A, 12/99 at 103 AAA 224,810
7.600%, 12/01/16
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Housing/Multifamily (continued)
$ 1,000,000 Massachusetts Housing Finance Agency, Rental Housing Mortgage Revenue 7/07 at 101 AAA $ 1,027,960
Bonds, 1997 Series C, 5.625%, 7/01/40 (Alternative Minimum Tax)
2,950,000 Massachusetts Housing Finance Agency, Rental Housing Mortgage Revenue 1/05 at 102 AAA 3,246,829
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 671,994
Hudner Associates Projects, 5.650%, 1/01/23
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family -- 0.7%
500,000 Massachusetts Housing Finance Agency, Single Family Housing Revenue 6/01 at 102 Aa 526,800
Bonds, Series 18, 7.350%, 12/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General -- 21.0%
250,000 Town of Groveland, Massachusetts, General Obligation Bonds, 6/01 at 102 AAA 272,605
6.900%, 6/15/07
1,000,000 City of Haverhill, Massachusetts, General Obligation, Hospital 9/01 at 102 AAA 1,085,830
Refunding Bonds, Series A, 6.700%, 9/01/10
500,000 City of Lawrence, Massachusetts, General Obligation Bonds, No Opt. Call AAA 629,340
9.750%, 3/15/04
2,625,000 City of Lowell, Massachusetts, General Obligation State Qualified Bonds, 11/03 at 102 AAA 2,831,719
5.600%, 11/01/12
1,025,000 City of Lynn, Massachusetts, General Obligation Bonds, No Opt. Call AAA 1,109,634
6.750%, 1/15/02
1,000,000 Town of Mansfield, Massachusetts, General Obligation Bonds, 1/02 at 102 AAA 1,102,630
6.700%, 1/15/11
250,000 Massachusetts Bay Transportation Authority, General Transportation 3/00 at 102 AAA 264,580
System, 7.250%, 3/01/03
250,000 Town of Methuen, Massachusetts, General Obligation Bonds, 5/00 at 102 AAA 266,693
7.400%, 5/15/04
1,500,000 Town of Monson, Massachusetts, General Obligation, Bank-Qualified No Opt. Call AAA 1,667,730
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 325,746
7.400%, 9/15/10
190,000 Town of Northfield, Massachusetts, General Obligation Bonds, Municipal 10/01 at 102 AAA 206,678
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 1,070,260
Obligation Bonds), 5.750%, 7/01/24
440,000 Quaboag Regional School District, General Obligation Bonds, 6/02 at 102 AAA 480,647
6.250%, 6/15/08
City of Salem, Massachusetts, General Obligation Bonds:
500,000 6.800%, 8/15/09 8/01 at 102 AAA 547,130
900,000 6.000%, 7/15/10 7/02 at 102 AAA 974,565
220,000 Taunton, Massachusetts, General Obligation Bonds, 6.800%, 9/01/09 9/01 at 103 AAA 243,034
455,000 Town of Wareham, Massachusetts, General Obligation School Bonds, 1/01 at 103 AAA 496,915
7.050%, 1/15/07
215,000 Town of Whately, Massachusetts, General Obligation Bonds, 6.350%, 1/15/09 1/02 at 102 AAA 234,051
1,210,000 Town of Winchendon, Massachusetts, Unlimited Tax General Obligation 3/03 at 102 AAA 1,321,683
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 1,703,601
Public Library Project), Series 1994, 7.250%, 1/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation -- 2.9%
9,500,000 Massachusetts Turnpike Authority, Metropolitan Highway System Revenue No Opt. Call AAA 2,053,140
Bonds, 1997 Series A (Senior), 0.000%, 1/01/29
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 21.7%
1,000,000 City of Boston, Massachusetts, General Obligation Bonds, 1991 Series A, 7/01 at 102 AAA 1,092,790
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 540,130
Insured Mortgage), Series A, 7.625%, 2/15/21 (Pre-refunded to 8/15/00)
</TABLE>
19
<PAGE>
Portfolio of Investments
Nuveen Massachusetts Insured Municipal Bond Fund (continued)
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Rating** 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 $ 550,060
7.200%, 6/01/10 (Pre-refunded to 6/01/01)
250,000 City of Holyoke, Massachusetts, General Obligation Bonds, 8.150%, 6/02 at 103 AAA 291,710
6/15/06 (Pre-refunded to 6/15/02)
450,000 City of Leominster, Massachusetts, General Obligation Bonds, 4/00 at 102 AAA 479,700
7.500%, 4/01/09 (Pre-refunded to 4/01/00)
250,000 Lynn, Massachusetts, Water and Sewer Commission, General Revenue 12/00 at 102 AAA 271,655
Bonds, 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 270,215
Participation, 1990 Series A, 7.650%, 8/01/15 (Pre-refunded to 8/01/00)
250,000 Commonwealth of Massachusetts, General Obligation Bonds, 7.250%, 3/00 at 102 AAA 265,075
3/01/09 (Pre-refunded to 3/01/00)
The Commonwealth of Massachusetts, General Obligation Bonds, Consolidated
Loan of 1992, Series A:
25,000 6.500%, 6/01/08 (Pre-refunded to 6/01/02) 6/02 at 101 AAA 27,439
1,200,000 6.000%, 6/01/13 (Pre-refunded to 6/01/02) 6/02 at 100 AAA 1,288,056
500,000 Massachusetts Health and Educational Facilities Authority, Revenue 10/01 at 102 AAA 551,915
Bonds, Berklee College of Music Issue, Series C, 6.875%,
10/01/21 (Pre-refunded to 10/01/01)
1,000,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/01 at 102 AAA 1,092,070
Bonds, Brigham and Women's Hospital Issue, Series D, 6.750%, 7/01/24
(Pre-refunded to 7/01/01)
500,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/99 at 102 A+*** 517,650
Bonds, Baystate Medical Center Issue, Series C, 7.500%,
7/01/20 (Pre-refunded to 7/01/99)
250,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/00 at 102 AAA 268,753
Bonds, South Shore Hospital Issue, Series C, 7.500%, 7/01/20
(Pre-refunded to 7/01/00)
500,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/00 at 102 AAA 539,020
Bonds (Stonehill College), 7.700%, 7/01/20 (Pre-refunded to 7/01/00)
250,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/99 at 102 AAA 258,683
Bonds, Beverly Hospital Issue, Series D, 7.300%, 7/01/19
(Pre-refunded to 7/01/99)
970,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/01 at 102 AAA 1,055,680
Bonds, 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, 13.000%, No Opt. Call AAA 1,687,940
7/01/13
250,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Milton 9/99 at 102 AAA 260,408
Academy Issue, Series A, 7.250%, 9/01/19 (Pre-refunded to 9/01/99)
375,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Museum of 11/99 at 102 AAA 393,184
Science Issue, Series 1989, 7.300%, 11/01/09 (Pre-refunded to 11/01/99)
500,000 Town of Monson, Massachusetts, General Obligation Bonds, School 10/00 at 102 AAA 545,045
Project Loan Act of 1948, 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 291,565
245,000 7.200%, 6/15/09 (Pre-refunded to 6/15/00) 6/00 at 103 AAA 264,568
270,000 Town of Palmer, Massachusetts, General Obligation School Bonds of 3/00 at 102 AAA 286,416
1990, Series A, School Project Loan of 1948, 7.300%, 3/01/10
(Pre-refunded to 3/01/00)
250,000 Town of Palmer, Massachusetts, General Obligation Bonds, School 10/00 at 102 AAA 272,123
Project Loan, Act of 1948, 1990 Series B, 7.700%, 10/01/10
(Pre-refunded to 10/01/00)
Southern Berkshire Regional School District, Massachusetts, General
Obligation School Bonds:
515,000 7.500%, 4/15/07 (Pre-refunded to 4/15/02) 4/02 at 102 AAA 583,155
1,145,000 7.000%, 4/15/11 (Pre-refunded to 4/15/02) 4/02 at 102 AAA 1,288,846
250,000 City of Westfield, Massachusetts, General Obligation Bonds, 12/00 at 102 AAA 271,662
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 178,781
6.900%, 5/15/07 (Pre-refunded to 5/15/02)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Rating** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities -- 1.9%
$ 1,300,000 Massachusetts Municipal Wholesale Electric Company, Power Supply System 7/03 at 102 AAA $ 1,335,099
Revenue Bonds, 1993 Series A, 5.000%, 7/01/10
- ------------------------------------------------------------------------------------------------------------------------------------
$73,295,000 Total Investments -- (cost $65,590,839) -- 98.6 70,829,280
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.4% 984,764
---------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $ 71,814,044
=====================================================================================================================
</TABLE>
* Optional Call Provisions: (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings: (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
See accompanying notes to financial statements.
21
<PAGE>
Statement of Net Assets
February 28, 1999
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $244,817,440 $94,555,941 $70,829,280
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) -- 1,200,000 --
Cash 1,019,255 322,248 7,585
Receivables:
Interest 3,671,831 1,194,110 1,005,569
Investments sold 200,000 -- 255,000
Shares sold 295,221 1,018,931 12,142
Other assets 3,573 1,028 767
- ---------------------------------------------------------------------------------------------------------------------------
Total assets 250,007,320 98,292,258 72,110,343
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities
Payable for shares redeemed 245,039 100,765 20,500
Accrued expenses:
Management fees (note 6) 103,916 37,338 30,372
12b-1 distribution and service fees (notes 1 and 6) 51,018 6,351 3,872
Other 45,020 66,047 41,952
Dividends payable 440,562 275,492 199,603
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 885,555 485,993 296,299
- ---------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $249,121,765 $97,806,265 $71,814,044
===========================================================================================================================
Class A Shares (note 1)
Net assets $220,721,482 $15,134,171 $11,207,515
Shares outstanding 20,249,167 1,502,206 1,058,785
Net asset value and redemption price per share $ 10.90 $ 10.07 $ 10.59
Offering price per share (net asset value per share plus maximum sales
charge of 4.20% of offering price) $ 11.38 $ 10.51 $ 11.05
===========================================================================================================================
Class B Shares (note 1)
Net assets $ 11,223,114 $ 3,225,947 $ 1,650,197
Shares outstanding 1,031,753 319,521 155,841
Net asset value, offering and redemption price per share $ 10.88 $ 10.10 $ 10.59
===========================================================================================================================
Class C Shares (note 1)
Net assets $ 16,198,146 $ 3,696,447 $ 1,675,253
Shares outstanding 1,488,852 368,949 158,674
Net asset value, offering and redemption price per share $ 10.88 $ 10.02 $ 10.56
===========================================================================================================================
Class R Shares (note 1)
Net assets $ 979,023 $75,749,700 $57,281,079
Shares outstanding 89,607 7,535,810 5,407,464
Net asset value, offering and redemption price per share $ 10.93 $ 10.05 $ 10.59
===========================================================================================================================
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
Statement of Operations
Year Ended February 28, 1999
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $13,856,417 $5,371,656 $4,043,652
- --------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 1,304,324 497,224 384,603
12b-1 service fees -- Class A (notes 1 and 6) 437,384 24,070 20,089
12b-1 distribution and service fees -- Class B (notes 1 and 6) 68,556 19,293 10,454
12b-1 distribution and service fees -- Class C (notes 1 and 6) 98,745 19,355 10,662
Shareholders' servicing agent fees and expenses 140,618 97,448 66,841
Custodian's fees and expenses 68,315 52,442 49,749
Trustees' fees and expenses (note 6) 5,101 2,723 2,337
Professional fees 20,046 9,582 9,406
Shareholders' reports -- printing and mailing expenses 104,386 67,263 46,324
Federal and state registration fees 7,844 10,028 2,795
Portfolio insurance expense -- -- 3,602
Other expenses 14,549 2,931 2,626
- --------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 2,269,868 802,359 609,488
Expense reimbursement (note 6) (89,265) (61,609) --
- --------------------------------------------------------------------------------------------------------------------
Net expenses 2,180,603 740,750 609,488
- --------------------------------------------------------------------------------------------------------------------
Net investment income 11,675,814 4,630,906 3,434,164
- --------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 37,313 9,069 10,474
Net change in unrealized appreciation or depreciation of investments 1,140,555 24,879 126,217
- --------------------------------------------------------------------------------------------------------------------
Net gain from investments 1,177,868 33,948 136,691
- --------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $12,853,682 $4,664,854 $3,570,855
====================================================================================================================
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Connecticut Massachusetts Massachusetts Insured
-------------------------- ----------------------- ------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
2/28/99 2/28/98 2/28/99 2/28/98 2/28/99 2/28/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 11,675,814 $ 11,489,859 $ 4,630,906 $ 4,455,881 $ 3,434,164 $ 3,372,157
Net realized gain from investment
transactions (notes 1 and 4) 37,313 189,964 9,069 270,739 10,474 221,510
Net change in unrealized appreciation
or depreciation of investments 1,140,555 6,726,949 24,879 1,315,343 126,217 960,239
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 12,853,682 18,406,772 4,664,854 6,041,963 3,570,855 4,553,906
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (10,761,378) (10,989,264) (600,238) (420,405) (477,517) (394,204)
Class B (300,238) (59,967) (85,561) (12,202) (44,120) (7,953)
Class C (574,135) (419,099) (114,651) (65,022) (59,779) (44,444)
Class R (35,162) (17,894) (3,854,276) (3,950,179) (2,835,474) (2,925,848)
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 (11,670,913) (11,486,224) (4,654,726) (4,447,808) (3,422,931) (3,372,449)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 37,401,420 25,394,964 19,090,381 8,022,615 8,126,094 4,862,078
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 5,622,058 6,417,815 3,182,349 3,144,288 2,357,024 2,388,253
- -----------------------------------------------------------------------------------------------------------------------------------
43,023,478 31,812,779 22,272,730 11,166,903 10,483,118 7,250,331
Cost of shares redeemed (27,408,991) (23,469,546) (9,388,148) (8,874,610) (6,161,130) (6,580,186)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
Fund share transactions 15,614,487 8,343,233 12,884,582 2,292,293 4,321,988 670,145
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 16,797,256 15,263,781 12,894,710 3,886,448 4,469,912 1,851,602
Net assets at the beginning of year 232,324,509 217,060,728 84,911,555 81,025,107 67,344,132 65,492,530
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $249,121,765 $232,324,509 $97,806,265 $84,911,555 $71,814,044 $67,344,132
===================================================================================================================================
Balance of undistributed net investment
income at the end of year $ 15,056 $ 10,155 $ 57,503 $ 81,323 $ 32,353 $ 15,079
===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
Notes to Financial Statements
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
February 28, 1999, there were no such outstanding purchase commitments in any of
the Funds.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, each Fund intends to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain such
tax-exempt status when distributed to the shareholders of the Funds. All monthly
tax-exempt income dividends paid during the fiscal year ended February 28, 1999,
have been designated Exempt Interest Dividends. 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
25
<PAGE>
Notes to Financial Statements (continued)
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 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap 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 fiscal year ended February 28, 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.
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
------------------------------------------------------ -------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
2/28/99 2/28/98 2/28/99 2/28/98
-------------------------- ------------------------- ----------------------- ----------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 1,897,699 $ 20,627,217 1,537,629 $ 16,474,829 639,103 $ 6,439,208 292,755 $ 2,911,172
Class B 710,277 7,706,793 339,187 3,623,542 254,134 2,567,554 75,039 748,530
Class C 792,638 8,606,155 444,025 4,723,004 227,608 2,284,530 104,408 1,031,535
Class R 42,278 461,255 53,941 573,589 776,075 7,799,089 336,646 3,331,378
Shares issued to
shareholders due to
reinvestment of
distributions:
Class A 474,626 5,158,453 578,075 6,132,935 35,262 355,925 26,383 262,341
Class B 13,433 145,945 2,614 28,078 3,924 39,717 533 5,354
Class C 27,834 302,045 23,910 253,777 4,780 47,973 3,865 38,216
Class R 1,430 15,615 280 3,025 272,093 2,738,734 286,472 2,838,377
- --------------------------------------------------------------------------------------------------------------------------------
3,960,215 43,023,478 2,979,661 31,812,779 2,212,979 22,272,730 1,126,101 11,166,903
- --------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,078,959) (22,587,955) (2,133,260) (22,598,891) (94,086) (949,795) (125,362) (1,245,649)
Class B (34,851) (379,111) (8,576) (93,295) (14,108) (142,462) (1) (10)
Class C (401,917) (4,351,297) (72,981) (777,360) (55,487) (556,453) (9,048) (89,159)
Class R (8,327) (90,628) -- -- (770,575) (7,739,438) (760,819) (7,539,792)
- --------------------------------------------------------------------------------------------------------------------------------
(2,524,054) (27,408,991) (2,214,817) (23,469,546) (934,256) (9,388,148) (895,230) (8,874,610)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase 1,436,161 $ 15,614,487 764,844 $ 8,343,233 1,278,723 $12,884,582 230,871 $ 2,292,293
================================================================================================================================
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Massachusetts Insured
-----------------------------------------------
Year Ended Year Ended
2/28/99 2/28/98
--------------------- ---------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 306,475 $ 3,240,290 173,848 $ 1,817,609
Class B 99,734 1,058,079 62,675 658,125
Class C 41,194 436,072 37,089 389,926
Class R 320,868 3,391,653 192,043 1,996,418
Shares issued to shareholders due to reinvestment of distributions:
Class A 25,691 272,136 23,296 242,741
Class B 740 7,856 285 2,989
Class C 4,745 50,126 3,712 38,566
Class R 191,284 2,026,906 201,982 2,103,957
- --------------------------------------------------------------------------------------------------------------------
990,731 10,483,118 694,930 7,250,331
- --------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (94,783) (1,003,330) (94,300) (984,085)
Class B (7,593) (79,870) -- --
Class C (9,956) (105,092) (10,565) (109,299)
Class R (469,182) (4,972,838) (526,802) (5,486,802)
- --------------------------------------------------------------------------------------------------------------------
(581,514) (6,161,130) (631,667) (6,580,186)
- --------------------------------------------------------------------------------------------------------------------
Net increase 409,217 $ 4,321,988 63,263 $ 670,145
====================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid April 1, 1999, to shareholders of record on March 9,
1999, as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $.0440 $.0405 $.0415
Class B .0375 .0345 .0350
Class C .0390 .0360 .0365
Class R .0460 .0420 .0430
===============================================================================
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended
February 28, 1999, were as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Investments in municipal securities $30,544,992 $19,321,673 $ 9,931,560
Temporary municipal investments 17,000,000 17,320,000 12,390,000
Sales:
Investments in municipal securities 16,653,926 9,199,493 7,389,577
Temporary municipal investments 17,000,000 16,120,000 12,390,000
================================================================================
</TABLE>
At February 28, 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, Connecticut and Massachusetts had unused capital loss
carryforwards available for federal income tax purposes to be applied against
future capital gains, if any. If not applied, the carryforwards will expire as
follows:
<TABLE>
<CAPTION>
Connecticut Massachusetts
- -------------------------------------------------------------------------------
<S> <C> <C>
Expiration year:
2003 $810,300 $ 12,393
2004 -- 507,247
2005 -- 156,261
- -------------------------------------------------------------------------------
Total $810,300 $675,901
===============================================================================
</TABLE>
27
<PAGE>
Notes to Financial Statements (continued)
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at February 28, 1999, were as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $20,219,010 $6,503,490 $5,243,770
depreciation (141,550) (20,039) (5,329)
- -------------------------------------------------------------------------------
Net unrealized appreciation $20,077,460 $6,483,451 $5,238,441
===============================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trusts' investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- -----------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
===============================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser has agreed to waive part of its management fees or reimburse certain
expenses of each Fund in order to limit total expenses to .75 of 1% of the
average daily net asset value of Massachusetts and .975 of 1% of the average
daily net asset value of Massachusetts Insured, excluding any 12b-1 fees
applicable to Class A, B and C Shares. The Adviser may also voluntarily agree to
reimburse additional expenses from time to time, which may be terminated at any
time at its discretion.
During the fiscal year ended February 28, 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 $342,593 $92,315 $59,563
Paid to authorized dealers $300,315 $83,580 $49,636
===============================================================================
</TABLE>
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the fiscal year ended February 28, 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 $431,731 $129,659 $45,871
===============================================================================
</TABLE>
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees on Class B Shares, and all 12b-1 service and
distribution fees on Class C Shares during the first year following a purchase
are retained by the Distributor. During the fiscal year ended February 28, 1999,
the Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 fees retained $112,934 $27,950 $14,057
===============================================================================
</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 fiscal year ended February 28, 1999, as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
CDSC retained $24,861 $5,813 $4,314
===============================================================================
</TABLE>
7. Composition of Net Assets
At February 28, 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 $229,839,549 $91,941,212 $66,533,973
Balance of undistributed
net investment income 15,056 57,503 32,353
Accumulated net realized gain
(loss) from investment transactions (810,300) (675,901) 9,277
Net unrealized
appreciation of investments 20,077,460 6,483,451 5,238,441
- -------------------------------------------------------------------------------
Net assets $249,121,765 $97,806,265 $71,814,044
===============================================================================
</TABLE>
28
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
Class (Inception Date)
<TABLE>
<CAPTION>
Investment Operations Less Distributions
------------------------------ --------------------------
CONNECTICUT Net
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)**
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
1994 (d) 10.66 .59 (.39) .20 (.60) (.09) (.69) 10.17 1.70
Class B (2/97)
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)**
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
1994 (f) 11.06 .33 (.84) (.51) (.33) (.06) (.39) 10.16 (6.48)*
Class R (2/97)
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 Expenses Income
to Average to Average to Average to Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Before After After 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 (7/87)**
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
1994 (d) 202,607 1.03 5.14 .65 5.52 30
Class B (2/97)
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)**
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
1994 (f) 4,360 1.77* 4.22* 1.22* 4.77* 30
Class R (2/97)
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 the predecessor fund, Flagship
Connecticut Double Tax Exempt.
(a) After waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory or its predecessor Flagship Financial.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized for periods less than one year except where noted.
(c) For the nine months ended February 28.
(d) For the fiscal year ended May 31.
(e) From commencement of class operations as noted.
(f) From commencement of class operations as noted through May 31.
29
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
Class (Inception Date)
<TABLE>
<CAPTION>
Investment Operations Less Distributions
----------------------------- ---------------------------
MASSACHUSETTS Net
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)
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)
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)
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)
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 Expenses Income
to Average to Average to Average to Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Before After After 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)
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)
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)
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)
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 waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized for periods less than one year.
(c) From commencement of class operations as noted.
30
<PAGE>
Selected data for a share outstanding throughout each period is as follows:
Class (Inception Date)
<TABLE>
<CAPTION>
Investment Operations Less Distributions
------------------------------ --------------------------
MASSACHUSETTS INSURED Net
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)
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)
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)
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)
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 Expenses Income
to Average to Average to Average to Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Before After After Portfolio
Year Ended Assets 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)
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)
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)
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)
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 waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized for periods less than one year.
(c) From commencement of class operations as noted.
31
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust II:
We have audited the accompanying statement of net assets of Nuveen
Flagship Multistate Trust II (comprising the Nuveen Flagship
Connecticut, Nuveen Massachusetts and Massachusetts Insured
Municipal Bond Funds) (a Massachusetts business trust), including
the portfolio of investments, as of February 28, 1999, and the
related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years then
ended and the financial highlights for the periods indicated
thereon. These financial statements and financial highlights are
the responsibility of the Funds' management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities
owned as of February 28, 1999, by correspondence with the
custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
net assets of each of the respective funds constituting the Nuveen
Flagship Multistate Trust II as of February 28, 1999, the results
of their operations for the year then ended, the changes in their
net assets for each of the two years then ended, and the financial
highlights for the periods indicated thereon in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 12, 1999
32
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremmer
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawyers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
33
<PAGE>
Serving Investors for Generations
[Photo of John Nuveen, Sr. appears here]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time. We emphasize quality securities carefully chosen through
in-depth research, and we follow those securities closely over time to ensure
that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
<PAGE>
NUVEEN
Municipal
Bond Funds
February 28, 1999
- --------------------------------------
Annual Report
- --------------------------------------
Dependable, tax-free income
to help you keep more of
what you earn.
[PHOTO APPEARS HERE]
New Jersey
New York
New York
Insured
<PAGE>
Contents
1 Dear Shareholder
3 New Jersey Portfolio
Manager's Comments
4 New Jersey Performance Overview
5 New York and New York Insured Portfolio
Manager's Comments
6 New York Performance Overview
7 New York Insured Performance Overview
8 Portfolio of Investments
27 Statement of Net Assets
28 Statement of Operations
29 Statement of Changes in Net Assets
31 Notes to Financial Statements
37 Financial Highlights
40 Report of Independent Public
Accountants
41 Fund Information
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERFEGER APPEARS HERE]
TIMOTHY R. SCHWERTFEGER
Chairman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
I'm pleased to announce that over the past 12 months, the Nuveen Mutual Funds
covered in this report have continued to meet their primary objectives of
providing you with attractive levels of tax-free income and after-tax total
returns. The combination of these two factors demonstrates once again that
Nuveen's municipal bond funds can serve as excellent investment options for
income oriented investors seeking tax efficient investments.
The Year in Review
The past 12 months were marked by periods of market volatility both at home and
abroad, as the financial crisis that began in Asia spread to emerging markets
and impacted economies around the globe. Investors responded to market
uncertainties by seeking a haven in more conservative investments, such as
municipal bond funds. Finally, to avert a potential domestic credit crunch and
bring some stability to global markets, the Federal Reserve stepped in and eased
short-term interest rates for the first time in almost three years. Between the
end of September and mid-November 1998, three successive rate cuts brought the
federal funds rate to 4.75%.
Throughout 1998, the U.S. economy exhibited more strength than had
been expected. Current conditions indicate that this momentum could continue.
One of the chief factors in achieving today's peaceful coexistence of economic
growth and low inflation has been improved productivity. In the months ahead, we
will continue to watch this and other factors that affect the economy's future,
including corporate earnings reports, wage and employment statistics, the
strength of the U.S. dollar, events in international markets, and any further
interest rate indications from the Federal Reserve. We believe these key
components will influence the outlook for fixed-income markets well into the
next century.
Municipal Bonds: A Compelling Value
During the past year, rising bond prices, spurred in part by demand from
international and conservative investors, drove yields on 30-year Treasuries to
historic lows, even below 5% at times. Over this period, the yield on the Bond
Buyer Revenue Bond Index, an unmanaged index of long-term municipal revenue
bonds, fell seven basis points - from 5.36% to 5.29% - versus the 34-point drop
in Treasury yields. At the end of February 1999, the ratio of long-term
municipal yields measured against 30-year Treasury yields stood at 95%, compared
with the more typical range of 86-87%. Over the past eight months,
1
<PAGE>
"Year to date, municipal bonds have continued to outperform Treasuries on a
yield basis in 1999."
this ratio reached as high as 104%. For investors, this meant that quality long-
term municipal bonds offered almost the same yield as Treasury bonds with
comparable maturities - even before the tax advantages of municipal bonds were
taken into account. On an after-tax basis, municipal bonds presented an
exceptionally attractive investment option relative to Treasuries.
In the municipal market, low interest rates and the strong economy combined to
generate high levels of new issuance and a dramatic increase in the refinancing
of existing bonds. Municipal issuance in 1998 reached $284 billion, up 29% over
1997. In terms of total municipal issuance, 1998 ranked as the second largest
year on record, next to 1993's $292 billion. Year to date, municipal bonds have
continued to outperform Treasuries on a yield basis in 1999. There are two
reasons for this. For starters, municipal supply declined 30% in the first
quarter of 1999 when compared to the first quarter of 1998, which made the bonds
that were brought to market very attractive. The second factor involved a
drop-off in demand for Treasuries by foreign investors. As the global economic
turmoil subsided during the first quarter of 1999, so did the interest in the
U.S. Treasury market.
The continued strength of the U.S. economy also produced improvements in the
fundamental health of many municipalities and boosted the overall credit quality
of municipal bonds. In 1998, issues upgraded by Moody's outnumbered downgrades
by a margin of 4 to 1, while the comparable ratio at Standard & Poor's was more
than 2 to 1.
Nuveen Expertise is Key
The solid track record of a proven investment manager is one key to taking
advantage of the exceptional values currently available in the municipal market.
The near-record level of municipal issuance in 1998, for example, highlighted
the value of Nuveen's in-depth knowledge of the municipal market, as our
portfolio management teams carefully analyzed the flood of issues to select
those securities best suited to help the funds achieve their investment
objectives.
As a further enhancement to our management capabilities, Nuveen has assembled a
strong group of investment managers - experts in their particular areas of the
market - to provide you with the advantage of their experience and insights. In
addition to Nuveen Advisory Services for tax-free investing, you and your
adviser can rely on Institutional Capital Corporation for value-oriented equity
investing and Rittenhouse Financial Services, Inc. for growth-oriented equity
investing. For more information on these funds, contact your financial adviser
for a prospectus, or call Nuveen at (800) 621-7227. Please read the prospectus
carefully before you invest or send money.
We encourage you to talk with your financial adviser about Nuveen's expanding
array of investments and the ways they can help you establish a diversified
portfolio designed to build and sustain long-term financial security. We are
grateful for the confidence you have placed in us and are dedicated to
maintaining your trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
April 15, 1999
2
<PAGE>
Nuveen Flagship New Jersey Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Tom Futrell discusses fund performance, the municipal market,
and key investment strategies for the New Jersey fund for the fiscal year ended
February 28, 1999.
What economic factors affected New Jersey's municipal bond market?
New Jersey's economy, which is among the most diverse in the U.S., has performed
relatively well recently. Growth in the science and technology sectors played a
part in the state's recent economic performance. Because its residents are among
the wealthiest in the nation, there was a strong demand for municipal bonds at
the retail level.
During the fiscal year, municipal bond issuance totaled $8.7 billion, ranking
New Jersey among the top ten issuers nationally. New issue supply was
particularly strong in the fourth quarter of 1998, providing attractive
investment opportunities to the fund.
How did the Fund perform during the past year?
For the one-year period ended February 28, 1999, the total return* for Class A
shares on net asset value for the Nuveen Flagship New Jersey Municipal Bond Fund
was 5.00%. The taxable-equivalent total return** for Class A shares on net asset
value was 7.80%. In comparison, the Lehman Brothers Municipal Bond Index
produced a total return of 6.15%. This index includes a broad range of
investment-grade or insured municipal bonds from around the country and does not
reflect expenses.
* Total return is the sum of the fund's income and capital gains distributions
plus price changes in the underlying bond portfolio.
**Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 35.5%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis.
See your Fund's Performance overview in this report for more information.
Over the past year, interest rates remained relatively stable. In this
environment, the Fund's duration, which measures a bond fund's price volatility
in response to interest rate changes, played a smaller, though still significant
role in determining the Fund's total return performance relative to the
municipal market. In contrast, other factors such as portfolio credit quality,
sector weightings, call protection, and bond selection had a larger-than-usual
impact on the Fund's performance. The Fund modestly underperformed its Lipper
Peer Group due to a credit problem with one of the portfolio's holdings, whose
weak performance offset the relatively strong showing of the rest of the
portfolio. However, based on our assessment of the bond's current prospects, we
believe that continuing to hold the bond in the Fund's portfolio is in the best
interest of our shareholders.
What key strategies were used over the course of the year?
The merger of the Nuveen Flagship New Jersey Municipal Bond Fund and the Nuveen
Flagship New Jersey Intermediate Municipal Bond Fund represented an opportunity
for shareholders to benefit from increased operating efficiencies. In addition,
in order to increase duration, our strategy consisted of looking for
opportunities to sell older bonds that were reaching maturity or approaching
their call dates and using the proceeds to buy new bonds with better call
protection and longer maturities.
Rather than focus on particular sectors, we looked at each security on its own
merits. One recent trade that represented good value was the purchase of Bergen
County Lease bonds. A private placement, these bonds were offered only to
institutional investors and were not available to the retail market in New
Jersey. As an added benefit, the bonds are insured. On the other end of the
credit spectrum, we purchased an educational bond issue for the Gil St. Bernard
preparatory school. The fund's overall credit quality was very high, with more
than 60% of the bonds rated AAA, as of February 28, 1999.
What is your outlook?
New Jersey's diversified economy is likely to continue to perform well.
Diversity in the state's economy should help provide a buffer if the state
experiences a downturn in a particular sector.
New Jersey's solid waste environment will continue to present problems in the
near term. The U.S. Supreme Court's 1997 decision to overrule the state's flow
control legislation created financial stress for several solid waste service
providers with debt outstanding. While the state and other interested parties
have discussed solutions to the problem, no decisions have been made. We will
continue to monitor this situation closely.
Going forward, the ability of Nuveen's research team to uncover good values will
be very important. Nuveen's research department has the capability to look for
pockets of opportunity that a retail investor or another institutional investor
might not find or even have access to. Our focus will continue to be on
maintaining a stable dividend that is exempt from federal and state income
taxes, while attempting to increase the duration of the fund, when possible, to
maximize total return.
3
<PAGE>
Nuveen Flagship New Jersey Municipal Bond Fund
Performance Overview
As of February 28, 1999
- --------------------------------------------------------------------------------
Monthly Tax-Free Dividends (Class A Shares)
- --------------------------------------------------------------------------------
[BAR CHART APPEARS HERE]
NEW JERSEY DIVIDENDS
3/98 0.045
4/98 0.045
5/98 0.045
6/98 0.045
7/98 0.044
8/98 0.044
9/98 0.044
10/98 0.044
11/98 0.044
12/98 0.044
1/99 0.042
2/99 0.042
- --------------------------------------------------------------------------------
Top 5 Sections (as a % of total investments)
- --------------------------------------------------------------------------------
Tax Obligation/Limited 17%
................................................................................
Transportation 13%
................................................................................
U.S. Guaranteed 12%
................................................................................
Tax Obligation/General 12%
................................................................................
Education and Civic Organizations 8%
................................................................................
- --------------------------------------------------------------------------------
Portfolio Statistics
- --------------------------------------------------------------------------------
Share Class A B C R
- --------------------------------------------------------------------------------
Inception Date 9/94 2/97 9/94 12/91
................................................................................
Net Asset Value $10.60 $10.60 $10.58 $10.60
................................................................................
Total Net Assets ($000) $121,133
................................................................................
Average Weighted Maturity (Years) 16.54
................................................................................
Average Weighted Duration (Years) 6.24
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Annualized Total Return 1
- --------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
1-Year 5.00% 0.55% 4.23% 4.48% 5.13%
................................................................................
5-Year 5.87% 4.96% 5.13% 5.20% 6.11%
................................................................................
Since Inception 6.95% 6.30% 6.20% 6.24% 7.20%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Index Comparison 2
- --------------------------------------------------------------------------------
[LINE CHART APPEARS HERE]
Nuveen New Jersey Nuveen New Jersey
Lehman Brothers Municipal Bond Municipal Bond
Municipal Bond Index Fund (NAV) Fund (Offer)
-------------------- ----------------- -----------------
2/92 10,000 10,000 9,580
2/93 11,376 10,795 10,795
2/94 12,005 12,036 11,530
2/95 12,231 12,198 11,685
2/96 13,583 13,332 12,772
2/97 14,454 13,979 13,392
2/98 15,776 15,245 14,605
2/99 16,820 16,008 15,335
- -- Nuveen New Jersey Municipal Bond Fund (Offer) $15,335
- -- Nuveen New Jersey Municipal Bond Fund (NAV) $16,008
- -- Lehman Brothers Municipal Bond Index $16,820
Past performance is not predictive of future results.
1 Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and declines
periodically to 0% over the following five years, which is not reflected in
the return figures. Class B shares automatically convert to Class A shares
eight years after purchase. Class C shares have a 1% CDSC for redemptions
within one year which is not reflected in the one-year total return.
2 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds and does not reflect any initial or ongoing
expenses. The Nuveen fund return depicted in the chart reflects the initial
maximum sales charge applicable to Class A shares (4.20%) and all ongoing fund
expenses. For periods prior to inception of Class A shares, performance
reflects Class R shares performance adjusted for difference in expenses, which
are primarily differences in distribution and service fees.
4
<PAGE>
Nuveen Flagship New York Municipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
Portfolio Manager's Comments
Portfolio Manager Steve Peterson discusses fund performance, the municipal
market, and key investment strategies for the New York funds for the fiscal year
ended February 28, 1999. Steve manages 13 funds for Nuveen and took over the
portfolio manager duties from Dan Solender for the two New York funds covered
here. Steve joined Nuveen in 1988 and is a Vice President of Nuveen Advisory
Corp.
What economic factors affected New York's municipal bond market?
New York State's economy continued to improve, with unemployment dropping from
6.0% in January 1998 to 5.2% in January 1999. New York's reliance on the booming
finance, insurance, and real estate industries was a major benefit during the
year, boosting state and local income tax revenues. During the fiscal year,
Standard & Poor's Corporation and Moody's Investors Service upgraded their
credit ratings for New York City from BBB+/Baa1 to A-/A3, respectively. New York
State's ratings remained unchanged at A2/A.
The state of New York's municipal market was particularly active during the
period, producing the greatest supply of any state in the U.S. The $3.5 billion
issue by the Long Island Power Authority was the largest municipal issue in
history. New York issuance was also driven by low interest rates and its
considerable capital needs to repair and replace an aging infrastructure.
How did the Funds perform during the past year?
For the one year period ended February 28, 1999, the total return* for Class A
shares on net asset value for the Nuveen Flagship New York Municipal Bond Fund
was 5.69%. The total return for Class A shares on net asset value for the Nuveen
New York Insured Municipal Bond Fund was 4.91%. The taxable-equivalent total
return** for Class A shares on net asset value for the Nuveen Flagship New York
Municipal Bond Fund was 8.51%. It was 7.62% for the Nuveen New York Insured
Municipal Bond Fund for Class A shares on net asset value. In comparison, the
unmanaged Lehman Brothers New York Municipal Bond Index produced a total return
of 6.55% and the New York Insured Municipal Bond Index generated a total return
of 6.46%. These indices include a broad range of investment-grade or insured
municipal bonds and do not reflect expenses.
* Total return is the sum of the fund's income and capital gains distributions
plus price changes in the underlying bond portfolio.
**Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 35.5%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis.
See your Fund's Performance Overview in this report for more information.
Over the past year, interest rates remained relatively stable. In this
environment, the Funds' duration, which measures a bond fund's price volatility
in response to interest rate changes, played a smaller, though still significant
role in determining the Fund's total return performance relative to the
municipal market. In contrast, other factors such as portfolio credit quality,
sector weightings, call protection, and bond selection had a larger-than-usual
impact on the Fund's performance.
What key strategies were used over the course of the year?
In the Nuveen Flagship New York Municipal Bond Fund, the portfolio strategy has
been to focus on the highest credit quality bonds, since yields on lower-quality
securities have generally not been high enough to justify the additional risk.
However, in an attempt to boost yield without sacrificing quality, a small
portion of the portfolio was invested in selected lower-rated bonds with
especially attractive yields. Credit quality is not a major strategic concern in
the Nuveen New York Insured Municipal Bond Fund, since the bonds are insured
against default.
We continued to diversify the portfolios broadly across sectors such as housing,
transportation, utilities, education, and healthcare. Our participation in the
Long Island Power Authority issue was rewarded, as those bonds appreciated in
value during the period.
Many bonds in each portfolio were issued several years ago when interest rates
were much higher. As these bonds age, the duration of the funds shortens. We
have attempted incrementally to increase duration as well as yield by buying
bonds maturing in the 20-year range.
What is your outlook?
Like many municipalities across the country, New York State is currently
enjoying a budget surplus. The credit rating agencies would like to see New York
use the surplus to pay down its debt, which we would welcome because it could
improve the State's credit rating and boost the value of our portfolios.
Both funds will continue searching for municipal bonds with good call protection
and attractive yields exempt from federal and state income taxes. The Nuveen
Flagship New York Municipal Bond Fund will continue to invest in attractively
priced, lower-investment grade bonds while the Nuveen New York Insured Municipal
Bond Fund will continue to invest in New York's large supply of insured
long-term municipal bonds.
5
<PAGE>
Nuveen Flagship New York Municipal Bond Fund
Performance Overview
As of February 28, 1999
- --------------------------------------------------------------------------------
Monthly Tax-Free Dividends (Class A Shares)
- --------------------------------------------------------------------------------
[BAR CHART APPEARS HERE]
3/98 0.0475
4/98 0.0475
5/98 0.0475
6/98 0.0475
7/98 0.0455
8/98 0.0455
9/98 0.0455
10/98 0.0455
11/98 0.0455
12/98 0.0455
1/99 0.0435
2/99 0.0435
- --------------------------------------------------------------------------------
Top 5 Sectors (as a % of total investments)
- --------------------------------------------------------------------------------
Tax Obligation/Limited 24%
................................................................................
U.S. Guaranteed 17%
................................................................................
Education and Civic Organizations 11%
................................................................................
Healthcare 9%
................................................................................
Utilities 9%
- --------------------------------------------------------------------------------
1 Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and declines
periodically to 0% over the following five years, which is not reflected in
the return figures. Class B shares automatically convert to Class A shares
eight years after purchase. Class C shares have a 1% CDSC for redemptions
within one year which is not reflected in the one-year total return.
2 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds and does not reflect any initial or ongoing
expenses. The Nuveen fund return depicted in the chart reflects the initial
maximum sales charge applicable to Class A shares (4.20%) and all ongoing fund
expenses. For periods prior to inception of Class A shares, performance
reflects Class R shares performance adjusted for difference in expenses, which
are primarily differences in distribution and service fees.
- --------------------------------------------------------------------------------
Portfolio Statistics
- --------------------------------------------------------------------------------
Share Class A B C R
- --------------------------------------------------------------------------------
Inception Date 9/94 2/97 9/94 12/86
................................................................................
Net Asset Value $11.03 $11.04 $11.06 $11.06
................................................................................
Total Net Assets ($000) $258,737
................................................................................
Average Weighted Maturity (Years) 18.00
................................................................................
Average Weighted Duration (Years) 5.88
................................................................................
- --------------------------------------------------------------------------------
Annualized Total Return 1
- --------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
1-Year 5.69% 1.26% 4.88% 5.00% 5.88%
................................................................................
5-Year 6.20% 5.29% 5.50% 5.60% 6.50%
................................................................................
10-Year 7.85% 7.38% 7.28% 7.14% 8.13%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Index Comparison 2
- --------------------------------------------------------------------------------
[LINE CHART APPEARS HERE]
Nuveen Flagship Nuveen Flagship
Lehman Brothers New York Municipal New York Municipal
Municipal Bond Index Bond Fund (NAV) Bond Fund (Offer)
-------------------- ------------------ ------------------
2/89 10,000 10,000 9,580
2/90 11,025 10,821 10,367
2/91 12,041 11,531 11,046
2/92 13,244 12,882 12,341
2/93 15,067 14,752 14,132
2/94 15,900 15,761 15,099
2/95 16,201 15,792 15,129
2/96 17,991 17,453 16,720
2/97 19,144 18,339 17,569
2/98 20,895 20,144 19,298
2/99 22,278 21,291 20,396
- -- Nuveen Flagship New York Municipal Bond Fund (Offer) $20,396
- -- Nuveen Flagship New York Municipal Bond Fund (NAV) $21,291
- -- Lehman Brothers Municipal Bond Index $22,278
Past performance is not predictive of future results.
6
<PAGE>
Nuveen New York Insured Municipal Bond Fund
Performance Overview
As of February 28, 1999
- --------------------------------------------------------------------------------
Monthly Tax-Free Dividends (Class A Shares)1
- --------------------------------------------------------------------------------
[BAR CHART APPEARS HERE]
3/98 0.0445
4/98 0.0435
5/98 0.0435
6/98 0.0435
7/98 0.0435
8/98 0.0435
9/98 0.0435
10/98 0.0425
11/98 0.0425
12/98 0.0425
1/99 0.0425
2/99 0.0425
- --------------------------------------------------------------------------------
Top 5 Sectors (as a % of total investments)
- --------------------------------------------------------------------------------
U.S. Guaranteed 27%
................................................................................
Healthcare 16%
................................................................................
Education and Civic Organizations 11%
................................................................................
Water and Sewer 9%
................................................................................
Housing/Multifamily 9%
- --------------------------------------------------------------------------------
1 The Fund also paid shareholders capital gains distributions in November of
$0.0291 per share.
2 Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and declines
periodically to 0% over the following five years, which is not reflected in
the return figures. Class 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.
3 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Lehman Brothers Municipal
Bond Index. The Lehman Municipal Bond Index is comprised of a broad range of
investment-grade municipal bonds and does not reflect any initial or ongoing
expenses. The Nuveen fund return depicted in the chart reflects the initial
maximum sales charge applicable to Class A shares (4.20%) and all ongoing fund
expenses. For periods prior to inception of Class A shares, performance
reflects Class R shares performance adjusted for difference in expenses, which
are primarily differences in distribution and service fees.
- --------------------------------------------------------------------------------
Portfolio Statistics
- --------------------------------------------------------------------------------
Share Class A B C R
- --------------------------------------------------------------------------------
Inception Date 9/94 2/97 9/94 12/86
................................................................................
Net Asset Value $10.73 $10.74 $10.73 $10.74
................................................................................
Total Net Assets ($000) $371,730
................................................................................
Average Weighted Maturity (Years) 16.03
................................................................................
Average Weighted Duration (Years) 5.32
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Annualized Total Return 2
- --------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
- --------------------------------------------------------------------------------
1-Year 4.91% 0.52% 4.19% 4.53% 5.18%
................................................................................
5-Year 5.54% 4.63% 4.79% 4.89% 5.80%
................................................................................
10-Year 7.45% 6.98% 6.84% 6.72% 7.71%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Index Comparison 3
- --------------------------------------------------------------------------------
[LINE CHART APPEARS HERE]
Lehman Brothers Nuveen New York Nuveen New York
Municipal Insured Municipal Insured Municipal
Bond Index Bond Fund (NAV) Bond Fund (Offer)
--------------- ----------------- -----------------
2/89 9,976 9,976 9,557
2/90 11,025 10,847 10,392
2/91 12,041 11,642 11,153
2/92 13,244 12,967 12,422
2/93 15,067 14,871 14,247
2/94 15,900 15,662 15,004
2/95 16,200 15,828 15,164
2/96 17,991 17,441 16,708
2/97 19,144 18,141 17,380
2/98 20,895 19,549 18,728
2/99 22,278 20,509 19,648
- -- Nuveen New York Insured Municipal Bond Fund (Offer) $19,648
- -- Nuveen New York Insured Municipal Bond Fund (NAV) $20,509
- -- Lehman Brothers Municipal Bond Index $22,278
Past performance is not predictive of future results.
7
<PAGE>
Portfolio of Investments
Nuveen Flagship New Jersey Municipal Bond Fund
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Goods - 4.8%
$5,955,000 New Jersey Economic Development Authority, Economic Development Bonds No Opt. Call N/R $5,657,250
(Bridgewater Resources Inc. Project), 1994 Series A, 8.375%, 11/01/04
(Alternative Minimum Tax)+
180,000 New Jersey Economic Development Authority, Economic Growth Bonds, 12/02 at 101 1/2 Aa3 195,370
Second Series A3, 6.550%, 12/01/07 (Alternative Minimum Tax)
Composite Issue - 1992
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals - 0.2%
200,000 New Jersey Economic Development Authority, Economic Development Refunding No Opt. Call Aa3 212,774
Bonds (Burlington Coat Factory Warehouse of New Jersey, Inc. - 1995 Project),
5.400%, 9/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 7.5%
980,000 New Jersey Economic Development Authority, Economic Development Bonds No Opt. Call N/R 1,220,688
(Yeshiva Ktana of Passaic - 1992 Project), 8.000%, 9/15/18
480,000 New Jersey Economic Development Authority, Insured Revenue Bonds (Educational No Opt. Cal AAA 517,762
Testing Service Issue), Series 1995B, 5.500%, 5/15/05
2,230,000 New Jersey Economic Development Authority, School Revenue Bonds (Gill/St. 2/08 at 101 N/R 2,232,542
Bernard School), Series 1998, 6.000%, 2/01/25
870,000 New Jersey Educational Facilities Authority, Trenton State College Issue, 7/99 at 100 A+ 872,401
Revenue Bonds, Series 1976D, 6.750%, 7/01/08
140,000 New Jersey Educational Facilities Authority, Seton Hall University Project 7/01 at 102 A- 150,489
Revenue Bonds, 1991 Series, Project D, 6.600%, 7/01/02
330,000 New Jersey Educational Facilities Authority, Higher Educational Facilities No Opt. Call BBB 333,366
Revenue Bonds, Saint Peters College Issue, 1992 Series B, 6.000%, 7/01/99
270,000 New Jersey Educational Facilities Authority, Revenue Bonds, Saint Peters 7/08 at 102 BBB 279,142
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 418,954
(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 910,910
Bonds, 1994 Series A, 5.875%, 7/01/11
2,000,000 New Jersey Educational Facilities Authority, Revenue Bonds, Trenton State 7/06 at 101 AAA 2,020,580
College Issue, Series 1996A, 5.125%, 7/01/24
75,000 Higher Education Assistance Authority (State of New Jersey), Student Loan 7/02 at 102 A+ 80,110
Revenue Bonds, 1992 Series A, NJ Class Loan Program, 6.000%, 1/01/06
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.2%
250,000 New Jersey Economic Development Authority, Solid Waste Disposal Facility 4/02 at 102 Aa1 274,838
Revenue Bonds (Garden State Paper Company, Inc. Project), Series 1992,
7.125%, 4/01/22 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 7.3%
700,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/00 at 102 AAA 743,148
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 Refunding 7/07 at 102 AAA 1,222,464
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 221,988
200,000 6.000%, 7/01/16 7/04 at 102 AAA 223,904
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$ 250,000 New Jersey Health Care Facilities Financing Authority, Refunding Revenue 8/04 at 102 AAA $ 284,790
Bonds, Irvington General Hospital Issue (FHA Insured Mortgage), Series 1994,
6.375%, 8/01/15
650,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, Palisades 7/02 at 102 N/R 691,288
Medical Center Obligated Group Issue, Series 1992, 7.500%, 7/01/06
400,000 New Jersey Health Care Facilities Financing Authority, Refunding Revenue 7/02 at 102 A- 440,812
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 109,124
West Jersey Health System, Series 1992, 6.000%, 7/01/07
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 266,038
250,000 6.250%, 7/01/16 7/04 at 102 AAA 282,875
250,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/04 at 102 AAA 276,985
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 Refunding 7/07 at 102 AAA 991,700
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 241,755
175,000 6.250%, 7/01/12 7/04 at 102 AAA 194,590
865,000 New Jersey Economic Development Authority, Economic Growth Lease Revenue Bonds, 12/03 at 102 Aa3 917,583
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 333,582
Corporation at Hamilton Obligated Group Project), Series 1994, 6.250%, 7/01/14
1,000,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control 1/05 at 102 AAA 1,119,540
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), Pollution No Opt. Call A3 281,338
Control Revenue Refunding Bonds, American Cyanamid Company Issue, Series
1994, 5.800%, 9/01/09
- ----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 6.6%
235,000 Hoboken Housing Finance Corporation, Multifamily Mortgage Revenue Bonds 4/04 at 100 AA 241,961
(Project Uplift - FHA Section 8), 1995-A Refunding, 6.250%, 2/01/24
400,000 The Hudson County Improvement Authority, Multifamily Housing Revenue Bonds, 6/04 at 100 AA+ 429,780
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 2,136,920
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 1,612,800
Bonds, 1996 Series A, 6.200%, 11/01/18 (Alternative Minimum Tax)
1,750,000 New Jersey Housing Finance Agency, Special Pledge Revenue Obligations, 5/99 at 101 A+ 1,789,375
1975 Series One, 9.000%, 11/01/18
700,000 New Jersey Housing and Mortgage Finance Agency, Housing Revenue Bonds, 5/02 at 102 A+ 755,881
1992 Series A, 6.950%, 11/01/13
500,000 New Jersey Housing and Mortgage Finance Agency, Housing Revenue Refunding 11/02 at 102 A+ 537,510
Bonds, 1992 Series One, 6.600%, 11/01/14
500,000 North Bergen Housing Development Corporation (North Bergen, New Jersey), 3/99 at 102 N/R 511,155
Mortgage Revenue Bonds, Series 1978 (FHA Insured Mortgage Loan - Section 8
Assisted Project), 7.400%, 9/01/20
- ----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 6.5%
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 267,565
400,000 6.375%, 10/01/26 (Alternative Minimum Tax) 7/04 at 102 AAA 429,492
</TABLE>
9
<PAGE>
Portfolio of Investments
Nuveen Flagship New Jersey Municipal Bond Fund (continued)
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Cell Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 4,000,000 New Jersey Housing and Mortgage Finance Agency, Home Buyer 10/07 at 101 1/2 AAA $ 4,204,440
Revenue Bonds, 1997 Series U, 5.700%, 10/01/14 (Alternative
Minimum Tax)
2,450,000 Puerto Rico Housing Finance Corporation, Home Ownership Mortgage 12/08 at 101 AAA 2,456,419
Revenue Bonds (GNMA - Guaranteed Mortgage Loans), 1998 Series A,
5.200%, 12/01/32 (Alternative Minimum Tax)
505,000 Virgin Islands Housing Finance Authority, Single Family Mortgage 3/05 at 102 AAA 540,592
Revenue 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 12/03 at 102 BBB- 255,713
Cooling 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 1,121,634
Composite Issue, 1992 Second Series H, 5.300%, 12/01/07
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 3.0%
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- 1,418,055
1,000,000 5.125%, 7/01/25 7/08 at 102 BBB- 925,840
1,300,000 New Jersey Economic Development Authority, First Mortgage Revenue 7/08 at 102 A 1,314,677
Fixed Rate Bonds (Cadbury Corporation Project), Series 1998A,
5.500%, 7/01/18
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 11.4%
200,000 The City of Atlantic City, In the County of Atlantic, New Jersey, No Opt. Call A 214,138
General Obligation General Improvement Bonds, Series 1994,
5.650%, 8/15/04
100,000 The Board of Education of the City of Atlantic City, Atlantic 12/02 at 102 AAA 110,101
County, New Jersey, School Bonds, Series 1992, 6.000%, 12/01/06
100,000 County of Atlantic, New Jersey, General Improvement Bonds, 6.000%, 1/04 at 101 AAA 109,460
1/01/07
100,000 County of Camden, New Jersey, General Obligation Refunding Bonds, No Opt. Call AAA 105,717
Series 1992, 5.500%, 6/01/02
250,000 City of East Orange, In the County of Essex, New Jersey, Fiscal No Opt. Call AAA 317,715
Year Adjustment Bonds (Qualified under the Municipal Qualified
Bond Act P.L. 1976, c. 38, as Amended), 8.400%, 8/01/06
200,000 Government of Guam, General Obligation Bonds, Series 1993A, 11/03 at 102 BBB 207,218
5.150%, 11/15/07
500,000 The Board of Education of The Township of Hillsborough, In the No Opt. Call AA 567,705
County of 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 431,508
2,645,000 The Board of Education of the Township of Middletown, In the 8/07 at 100 AAA 2,825,574
County of Monmouth, New Jersey, School Bonds, 5.800%, 8/01/21
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 7/02 at 102 AA+ 109,124
50,000 6.450%, 7/01/08 7/02 at 102 AA+ 55,265
100,000 Township of Montclair, In the County of Essex, New Jersey, 3/00 at 101 1/2 AAA 103,924
General Obligation School Bonds, 5.800%, 3/01/06
1,000,000 State of New Jersey, General Obligation Bonds, Series D, 5.800%, No Opt. Call AA+ 1,115,650
2/15/07
200,000 State of New Jersey, General Obligation Refunding Bonds, Series No Opt. Call AA+ 172,106
D, 0.000%, 2/15/03
165,000 Parsippany-Troy Hills Township, General Obligation Capital No Opt. Call AA- 117,195
Appreciation Bonds, Series 1992, 0.000%, 4/01/07
185,000 The Board of Education of The City of Perth Amboy, In the County No Opt. Call AAA 206,183
of Middlesex, New Jersey, School Bonds, 6.200%, 8/01/04
1,950,000 The Board of Education of the City of Pleasantville, In the 2/08 at 100 AAA 1,952,067
County of Atlantic, New Jersey, School District Bonds, 5.000%,
2/15/20
</TABLE>
- ----
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Cell Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 550,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1996 7/06 at 101 1/2 A $ 563,547
(General Obligation Bonds), 5.400%, 7/01/25
2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997 7/07 at 101 1/2 AAA 2,067,220
(General Obligation Bonds), 5.375%, 7/01/21
2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1995 7/05 at 101 1/2 AAA 2,140,520
(General Obligation Bonds), 5.750%, 7/01/24
250,000 The City of Union City, In the County of Hudson, State of New No Opt. Call AAA 296,338
Jersey, General Obligation School Purpose Bonds, Series 1992,
6.375%, 11/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 16.9%
250,000 The City of Atlantic City, New Jersey, Municipal Utilities 5/02 at 102 A- 262,908
Authority, Water System Revenue Refunding Bonds, Series 1993,
5.650%, 5/01/07
150,000 The Bergen County Utilities Authority (New Jersey), 1992 Water 12/02 at 102 AAA 163,473
Pollution Control System Revenue Bonds, Series B, 6.000%,
12/15/13
250,000 The Camden County Municipal Utilities Authority (Camden County, 7/06 at 102 AAA 253,765
New Jersey), County Agreement Sewer Revenue Refunding Bonds,
1996 Series, 5.125%, 7/15/17
The Essex County Improvement Authority (Essex County, New Jersey),
City of Newark General Obligation Lease Revenue Bonds, Series 1994:
620,000 6.350%, 4/01/07 4/04 at 102 BBB+ 671,379
450,000 6.600%, 4/01/14 4/04 at 102 BBB+ 492,318
750,000 The Essex County Improvement Authority (Essex County, New Jersey), 10/08 at 101 AAA 750,878
Parking Facility Revenue Refunding Bonds, Series 1998 (Non-AMT),
5.000%, 10/01/22
500,000 The Essex County Improvement Authority (Essex County, New Jersey), 12/02 at 102 Baa1 535,215
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, No Opt. Call N/R 1,449,262
New Jersey, Certificates of Participation, 6.300%, 1/15/08
1,000,000 The State of New Jersey, as Lessee, and The Mercer County 7/99 at 100 Aa 1,002,440
Improvement 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 204,300
5,280,000 New Jersey Economic Development Authority, Lease Revenue Bonds, 11/08 at 101 Aaa 5,101,958
Series 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 325,152
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 344,085
650,000 5.875%, 7/01/11 7/04 at 102 AAA 716,313
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 108,545
250,000 6.250%, 7/01/20 7/02 at 102 AAA 272,853
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 108,798
200,000 6.000%, 7/01/21 7/03 at 102 AAA 218,624
2,350,000 The Ocean County Utilities Authority (New Jersey), Wastewater 7/99 at 100 AAA 2,350,353
Revenue Bonds, Refunding Series 1987, 5.000%, 1/01/14
170,000 Puerto Rico Aqueduct and Sewer Authority, Refunding Bonds, 7/06 at 101 1/2 A 171,316
Series 1995, Guaranteed by the Commonwealth of Puerto Rico,
5.000%, 7/01/15
5,000,000 The Union County Utilities Authority (Union County, New Jersey), 6/08 at 102 Aaa 4,942,750
Solid Waste Bonds, County Deficiency Agreement, Series 1998A1,
5.000%, 6/15/28 (Alternative Minimum Tax)
</TABLE>
- ----
11
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Flagship New Jersey Municipal Bond Fund (continued)
February 28, 1999
Principal Optional Call Market
Amount Description Provisions Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 12.9%
<S> <C> <C> <C> <C>
$2,150,000 Delaware River Port Authority (New Jersey),
Port District Project Bonds, Series B of 1998,
5.000%, 1/01/26 1/08 at 101 AAA $ 2,152,344
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 337,887
100,000 6.625%, 3/01/09 3/02 at 102 Baa1 106,260
1,750,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds,
Series 1991C, 6.500%, 1/01/08 No Opt. Call BBB+ 2,011,958
125,000 The Port Authority of New York and New Jersey, 10/04 at 101 AAA 140,311
Consolidated Bonds, 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- 212,986
One Hundredth Series, 5.750%, 12/15/20
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- 215,460
200,000 5.875%, 7/15/09 (Alternative Minimum Tax) 7/04 at 101 AA- 216,882
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- 1,548,705
2,000,000 5.375%, 7/15/27 1/07 at 101 AAA 2,074,440
2,000,000 The Port Authority of New York and New Jersey, Consolidated Bonds, 6/05 at 101 AA- 2,071,020
One 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 4,356,045
Series 6, JFK International Air Terminal LLC Project,
5.750%, 12/01/25 (Alternative Minimum Tax)
100,000 South Jersey Transportation Authority, Transportation System 11/02 at 102 AAA 108,993
Revenue Bonds, 1992 Series B (Tax Exempt), 5.900%, 11/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
U.S. Guaranteed - 11.7%
<S> <C> <C> <C> <C>
100,000 The Essex County Improvement Authority (Essex County, New Jersey), 12/04 at 102 AAA 117,485
General Obligation Lease Revenue Bonds, Series 1994
(County Jail and Youth House Projects), 6.900%, 12/01/14
(Pre-refunded to 12/01/04)
200,000 New Jersey Economic Development Authority, Lease Rental Bonds, 3/02 at 102 AAA 221,910
1992 Series (Liberty State Park Project), 6.800%, 3/15/22
(Pre-refunded to 3/15/02)
1,630,000 New Jersey Health Care Facilities Financing Authority No Opt. Call AAA 1,982,194
(Hackensack Hospital), 8.750%, 7/01/09
2,065,000 New Jersey Health Care Facilities Financing Authority, 7/01 at 102 A1*** 2,325,913
Revenue Bonds, Series 1990-E (Kennedy Memorial Hospital),
8.375%, 7/01/10 (Pre-refunded to 7/01/01)
3,000,000 New Jersey Health Care Facilities Financing Authority, 7/99 at 102 A-*** 3,105,900
Revenue Bonds, Newton Memorial Hospital
Issue, Series A, 7.500%, 7/01/19 (Pre-refunded to 7/01/99)
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 39,854
25,000 6.250%, 7/01/12 (Pre-refunded to 7/01/04) 7/04 at 102 AAA 28,288
625,000 New Jersey Economic Development Authority, Insured Revenue Bonds 5/05 at 102 AAA 710,744
(Educational Testing Service Issue), Series 1995B,
6.125%, 5/15/15 (Pre-refunded to 5/15/05)
100,000 New Jersey Educational Facilities Authority, 7/02 at 102 A*** 110,374
Stevens Institute of Technology Issue Revenue Bonds,
1992 Series A, 6.400%, 7/01/03 (Pre-refunded to 7/01/02)
245,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds, 1984 Series, No Opt. Call AAA 282,218
10.375%, 1/01/03
200,000 New Jersey Wastewater Treatment Trust, Wastewater Treatment Bonds, 4/04 at 102 Aa1*** 227,652
Series 1994A, 6.500%, 4/01/14 (Pre-refunded to 4/01/04)
300,000 The Township of North Bergen (Hudson County, New Jersey), 8/02 at 102 AAA 333,384
Fiscal Year Adjustment General Obligation Bonds,
Series 1992, 6.500%, 8/15/12 (Pre-refunded to 8/15/02)
60,000 Puerto Rico Highway and Transportation Authority, 7/02 at 101 1/2 AAA 66,622
Highway Revenue Bonds (Series T),
6.625%, 7/01/18 (Pre-refunded to 7/01/02)
225,000 Puerto Rico Commonwealth Highway Authority, Highway Revenue Bonds, 7/00 at 100 A*** 233,246
Series 1990-Q, 6.000%, 7/01/20 (Pre-refunded to 7/01/00)
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed (continued)
<S> <C> <C> <C> <C>
$1,875,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/01 at 102 Aaa $ 2,064,394
Series P, 7.000%, 7/01/21 (Pre-refunded to 7/01/01)
200,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/02 at 101 1/2 BBB+*** 219,456
Series R, 6.250% 7/01/17 (Pre-refunded to 7/01/02)
250,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/04 at 102 BBB+*** 285,155
Series 1994-T, 6.375%, 7/01/24 (Pre-refunded to 7/01/04)
1,100,000 Sparta Township School District, General Obligation Bonds 9/06 at 100 AAA 1,226,269
(Unlimited Tax), 5.800%, 9/01/18
100,000 University of Medicine and Dentistry of New Jersey Bonds, 12/01 at 102 AA-*** 109,858
Series E, 6.500%, 12/01/18 (Pre-refunded to 12/01/01)
300,000 The Wanaque Borough Sewerage Authority 12/02 at 102 A3*** 340,317
(Passaic County, New Jersey), Sewer Revenue Bonds
(Series 1992), (Bank Qualified), 7.000%,
12/01/21 (Pre-refunded to 12/01/02)
75,000 The Wanaque Valley Regional Sewerage Authority 9/03 at 102 Baa1*** 83,287
(Passaic County, New Jersey), Sewer Revenue Bonds
(1993 Series A), 6.125%, 9/01/22 (Pre-refunded to 9/01/03)
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Utilities - 7.3%
<S> <C> <C> <C> <C>
1,000,000 Pollution Control Financing Authority of Camden County No Opt. Call B2 993,080
(Camden County, New Jersey), Solid Waste Disposal and
Resource Recovery System Revenue Bonds, Series 1991 C,
7.125%, 12/01/01 (Alternative Minimum Tax)
2,645,000 Pollution Control Financing Authority of Camden County 12/01 at 102 B2 2,651,083
(Camden County, New Jersey), Solid Waste Disposal and
Resource Recovery System Revenue Bonds,
Series 1991 D, 7.250%, 12/01/10
75,000 New Jersey Economic Development Authority, No Opt. Call N/R 75,303
Electric Energy Facility Revenue Bonds (Vineland
Cogeneration Limited Partnership Project), Series 1992,
6.750%, 6/01/99 (Alternative Minimum Tax)
300,000 The Port Authority of New York and New Jersey, No Opt. Call N/R 332,886
Special Project Bonds, Series 4, KIAC Partners
Project, 7.000%, 10/01/07 (Alternative Minimum Tax)
250,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, No Opt. Call BBB+ 263,284
Series Q, 5.900%, 7/01/01
790,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, No Opt. Call BBB+ 938,519
Series P, 7.000%, 7/01/07
2,000,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, 7/04 at 100 BBB+ 2,048,619
Series T, 5.500%, 7/01/20
1,500,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, 7/05 at 100 BBB+ 1,508,324
Series Z, 5.250%, 7/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Water and Sewer - 0.4%
<S> <C> <C> <C> <C>
250,000 The Hoboken - Union City - Weehawken Sewerage Authority (New Jersey), 8/02 at 102 AAA 272,879
Sewer Revenue Bonds (Refunding Series 1992), 6.200%, 8/01/19
100,000 New Jersey Economic Development Authority, Water Facilities 6/03 at 102 AAA 102,678
Revenue Refunding Bonds (New Jersey American Water
Company Inc. Project), Series 1993, 5.500%, 6/01/23
(Alternative Minimum Tax)
150,000 New Jersey Economic Development Authority, Water Facilities 3/04 at 102 AAA 159,467
Revenue Refunding Bonds (Hackensack
Water Company Project - 1994 Series B), 5.900%, 3/01/24
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
$113,615,000 Total Investments - (cost $112,884,317) - 97.8% 118,419,382
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.2% 2,714,082
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $121,133,464
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard and Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government agency securities which ensures the timely payment of principal
and interest. Securities are normally considered to be equivalent to AAA
rated securities.
N/R Investment is not rated.
+ The fund has not received the last two semi-annual interest coupon payments
on these bonds. We understand that the issuer is in the process of
attempting to re-structure the bond debt by bringing to market new bonds
whose proceeds would be used to call the currently defaulted bonds at a
price significantly higher than their current market value. There is no
assurance that the bonds will be re-structured on such favorable terms, or
that the re-structuring will occur in the near future. The Fund has
continued to hold the bonds, because the Adviser believes that the prospects
that a re-structuring of the debt will substantially increase their value
make the bonds's true value much higher than the current market price at
which they could be sold.
See accompanying note to financial statements.
13
<PAGE>
Portfolio of Investments
Nuveen Flagship New York Municipal Bond Fund
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 11.4%
$1,750,000 Town of Brookhaven Industrial Development Agency, 1993 Civic 3/03 at 102 BBB- $ 1,875,405
Facility 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 11/03 at 102 A 2,725,744
Revenue Bonds (The Bard College Project), Series 1992, 7.000%,
11/01/17
1,000,000 City of Rochelle, Industrial Development Agency, Civic Facility 7/02 at 102 Baa2 1,073,920
Revenue Bonds (College of New Rochelle Project - 1992 Series),
6.625%, 7/01/12
205,000 New York City Industrial Development Agency, Civic Facility 11/01 at 102 AA+ 223,294
Revenue Bonds (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 1,096,920
1,000,000 6.300%, 9/01/15 9/05 at 102 Baa2 1,061,820
2,000,000 Dormitory Authority of the State of New York, State University 5/00 at 102 A- 2,127,320
Educational Facilities Revenue Bonds, Series 1990A, 7.400%,
5/15/01
750,000 Dormitory Authority of the State of New York, City University No Opt. Call BBB+ 911,318
System 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+ 550,785
University Athletic Facility Issue, Series 1991, 7.250%, 7/01/21
2,100,000 Dormitory Authority of the State of New York, University of 7/04 at 102 A+ 2,342,823
Rochester Revenue Bonds, Series 1994A, 6.500%, 7/01/19
1,500,000 Dormitory Authority of the State of New York, City University No Opt. Call BBB+ 1,648,335
System 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 No Opt. Call BBB+ 2,462,697
Refunding 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- 1,030,850
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+ 2,521,397
1,000,000 6.250%, 7/01/25 7/05 at 102 BBB+ 1,095,850
3,515,000 Suffolk County Industrial Development Agency, Civic Facility 6/04 at 102 BBB- 3,715,425
Revenue Bonds (Dowling College Civic Facility), Series 1994,
6.625%, 6/01/24
1,000,000 Suffolk County Industrial Development Agency, Civic Facility 12/06 at 102 BBB- 1,078,250
Revenue 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 926,415
1,000,000 5.750%, 8/01/28 8/08 at 102 N/R 1,019,680
- ------------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.3%
750,000 Jefferson County Industrial Development Agency, Multi-Modal 11/02 at 102 Baa1 816,360
Interchangeable Rate, Solid Waste Disposal Revenue Bonds
(Champion International Corporation Project), Series 1990,
7.200%, 12/01/20 (Alternative Minimum Tax)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care - 9.4%
$1,000,000 New York City Health and Hospitals Corporation, Health System Bonds, 2/03 at 102 BBB- $ 1,053,140
1993 Series A, 6.300%, 2/15/20
3,300,000 Dormitory Authority of the State of New York, Menorah Campus, Inc., 2/07 at 102 AAA 3,544,233
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 Bonds, 7/06 at 102 Baa 1,082,360
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 2,371,118
Gurwin Jewish Geriatric Center of Long Island, Inc., FHA-Insured Mortgage
Nursing Home Revenue Bonds, Series 1997, 5.700%, 2/01/37
365,000 New York State Medical Care Facilities Finance Agency, Hospital and Nursing 8/99 at 100 AA 369,829
Home Insured Mortgage Revenue Bonds, 1987 Series A, 8.000%, 2/15/27
485,000 New York State Medical Care Facilities Finance Agency, Hospital and Nursing 8/01 at 102 AA 525,876
Home Insured Mortgage Revenue Bonds, 1991 Series A, 7.450%, 8/15/31
1,400,000 New York State Medical Care Facilities Finance Agency, Hospital and Nursing 2/03 at 102 AAA 1,548,372
Home FHA-Insured Mortgage Revenue Bonds, 1992 Series D, 6.450%, 2/15/09
2,000,000 New York State Medical Care Facilities Finance Agency, Hospital and Nursing 8/02 at 102 AAA 2,125,380
Home FHA-Insured Mortgage Revenue Bonds, 1992 Series B, 6.200%, 8/15/22
2,345,000 New York State Medical Care Facilities Finance Agency, Hospital and Nursing 8/04 at 102 AAA 2,562,710
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 1,056,470
Medical Center Secured Hospital Revenue Bonds, 1995 Series A, 6.400%,
2/15/01
325,000 New York State Medical Care Facilities Finance Agency, Hospital and Nursing 8/99 at 102 AA 337,428
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 Mortgage 2/05 at 102 AA 1,076,150
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 1,069,526
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 Nursing 2/04 at 102 AAA 1,126,978
Home FHA-Insured Mortgage Revenue Bonds, 1994 Series A, 6.200%, 2/15/21
2,220,000 Newark - Wayne Community Hospital, Inc., Hospital Revenue Improvement and 9/03 at 102 N/R 2,387,144
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 2,128,640
(1992 Jewish Board of Family and Childrens Services, Inc. Project),
6.750%, 12/15/12
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 5.5%
1,000,000 City of Batavia Housing Authority, Tax-Exempt Mortgage Revenue Refunding 7/01 at 102 Aaa 1,046,470
Bonds, Series 1994A (Washington Towers - FHA Insured Mortgage), 6.500%,
1/01/23
2,000,000 Village of East Rochester (New York), Housing Authority, FHA-Insured Mortgage 2/08 at 102 AA 2,021,360
Revenue 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 2,150,760
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 1,348,350
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 8/99 at 102 AAA 767,115
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, 1996 5/06 at 102 AAA 2,421,709
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 1,792,148
500,000 7.000%, 8/15/22 8/02 at 102 AA 540,405
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship New York Municipal Bond Fund (continued)
February 28, 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 Housing Finance Agency, Multi-Family Housing Revenue Bonds 2/04 at 102 Aa1 $ 1,081,490
(Secured Mortgage Program), 1994 Series C, 6.450%, 8/15/14
1,000,000 New York State Urban Development Corporation, Section 236 Revenue Bonds, 1/02 at 102 AAA 1,093,240
Series 1992A, 6.750%, 1/01/26
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 2.9%
190,000 State of New York Mortgage Agency, Mortgage Revenue Bonds, Ninth Series E, 4/99 at 101 Aaa 192,850
8.100%, 10/01/17
1,500,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 9/04 at 102 Aa2 1,620,480
Series 43, 6.450%, 10/01/17
540,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 4/01 at 102 Aa2 566,681
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 1,085,200
1995 Series 46, 6.600%, 10/01/19 (Alternative Minimum Tax)
4,000,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 3/08 at 101 Aa2 4,079,440
Series 69, 5.500%, 10/01/28 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 5.1%
600,000 Town of Hempstead Industrial Development Agency, Civic Facility 10/99 at 102 Aa2 620,970
Revenue Bonds (United Cerebral Palsy Association of Nassau
County, Inc. - Civic Facility Project - 1989 Series), 7.500%, 10/01/09
245,000 Dormitory Authority of the State of New York, Iroquois Nursing Home, 2/01 at 102 AA- 261,988
Insured Revenue Bonds, Series 1991, 7.000%, 2/01/15
2,000,000 Dormitory Authority of the State of New York, Bishop Henry R. Hucles 7/06 at 102 Aa1 2,175,860
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 2,681,600
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 5,322,650
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 2,232,531
Revenue Bonds, Series 1993 (Loretto-Utica Project), 5.950%, 7/01/35
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 7.6%
10,000 The City of New York, General Obligation Bonds, Fiscal 1992 Series C, 8/02 at 101 1/2 AAA 10,996
Fixed Rate Bonds, Subseries C1, 6.625%, 8/01/13
1,000,000 The City of New York, General Obligation Bonds, Fiscal 1996 Series F, 2/06 at 101 1/2 A- 1,059,820
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- 2,125,720
2,500,000 5.750%, 2/01/20 2/06 at 101 1/2 A- 2,649,550
1,750,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series D, 11/06 at 101 1/2 A- 1,921,535
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- 1,611,023
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- 4,906,450
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- 4,358,704
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 471,342
390,000 6.875%, 10/01/09 No Opt. Call A2 474,923
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 23.8%
300,000 Albany Housing Authority, City of Albany, New York, Limited Obligation 10/05 at 102 Baa1 312,204
Bonds, Series 1995 5.850%, 10/01/07
1,500,000 Albany Parking Authority, Aggregate Principal Amount, Parking Revenue No Opt. Call Baa1 581,775
Refunding Bonds, Series 1992A, 0.000%, 11/01/17
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$4,400,000 Dutchess County Water and Wastewater Authority (New York), Service 6/08 at 101 A $ 4,472,072
Agreement Revenue Bonds, 1998 Series One, 5.300%, 6/01/15
1,600,000 County of Franklin (New York), Industrial Development Agency, Lease 11/02 at 102 BBB- 1,740,192
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 11/03 at 102 AA 2,535,250
1993, 5.000%, 11/01/13
4,000,000 Metropolitan Transportation Authority (New York), Transit Facilities 7/03 at 101 1/2 BBB+ 4,180,800
Service Contract Bonds, Series P, 5.750%, 7/01/15
2,250,000 Dormitory Authority of the State of New York, Judicial Facilities 4/99 at 116 9/32 Baa1 2,600,978
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 (Department 7/04 at 102 BBB+ 1,087,820
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 Health of 7/04 at 102 BBB+ 2,974,588
the State of New York Revenue Bonds, Series 1994, 5.500%, 7/01/23
2,225,000 Dormitory Authority of the State of New York, Court Facilities Lease 5/03 at 101 1/2 A3 2,322,166
Revenue Bonds (The City of New York Issue), Series 1993A, 5.700%,
5/15/22
2,500,000 Dormitory Authority of the State of New York, Mental Health Services 2/07 at 102 A- 2,638,525
Facilities Improvement Revenue Bonds, Series 1997B, 5.625%, 2/15/21
1,545,000 New York State Environmental Facilities Corporation, State Park 3/03 at 101 BBB+ 1,613,984
Infrastructure Special Obligation Bonds, Series 1993A, 5.750%, 3/15/13
1,000,000 New York State Housing Finance Agency, Health Facilities Revenue Bonds 5/06 at 101 1/2 A- 1,108,170
(New York City), 1996 Series A Refunding, 6.000%, 11/01/08
340,000 New York State Housing Finance Agency, Health Facilities Revenue Bonds 11/00 at 102 BBB+ 365,643
(New York City), 1990 Series A Refunding, 8.000%, 11/01/08
2,990,000 New York State Housing Finance Agency, Service Contract Obligation Revenue 9/03 at 102 BBB+ 3,180,164
Bonds, 1993 Series C Refunding, 5.875%, 9/15/14
2,000,000 New York State Housing Finance Agency, Service Contract Obligation Revenue 9/05 at 102 BBB+ 2,221,900
Bonds, 1995 Series A, 6.375%, 9/15/15
250,000 State of New York Municipal Bond Bank Agency, Special Program Bonds 9/01 at 102 BBB+ 270,898
(City of Buffalo), 1991 Series A, 6.875%, 3/15/06
110,000 New York State Medical Care Facilities Finance Agency, Mental Health 8/99 at 101 A- 111,475
Services Facilities Improvement Revenue Bonds, 1988 Series A, 7.700%,
2/15/18
15,000 New York State Medical Care Facilities Finance Agency, Mental Health 8/04 at 102 A- 16,858
Services Facilities Improvement Revenue Bonds, 1994 Series E, 6.500%,
8/15/24
2,000,000 New York State Medical Care Facilities Financing Agency, Mental Health 2/02 at 100 AAA 2,034,140
Services Facilities Improvement Revenue Bonds, 1992 Series A, 5.500%,
8/15/21
7,500,000 New York State Urban Development Corporation, Correctional Capital 1/04 at 102 BBB+ 7,514,400
Facilities Revenue Bonds, 1993A Refunding Series, 5.250%, 1/01/21
1,000,000 New York State Urban Development Corporation, Project Revenue Bonds 1/06 at 102 BBB+ 1,097,840
(Onondaga County Convention Center), Refunding Series 1995, 6.250%,
1/01/20
5,090,000 New York State Urban Development Corporation, Correctional Capital 1/03 at 102 BBB+ 5,231,553
Facilities Revenue Bonds, 1993 Refunding Series, 5.500%, 1/01/15
2,500,000 New York State Urban Development Corporation, Correctional Facilities 1/08 at 102 BBB+ 2,420,100
Service Contract Revenue Bonds, Series A, 5.000%, 1/01/28
2,000,000 City School District of the City of Niagara Falls (New York), Certificates 6/08 at 101 BBB- 2,008,240
of Participation (High School Facility), Series 1998, 5.375%, 6/15/28
2,000,000 34th Street Partnership, Inc., 34th Street Business Improvement District, 1/03 at 102 A1 2,047,480
Capital Improvement Bonds, Series 1993, 5.500%, 1/01/23
500,000 Triborough Bridge and Tunnel Authority (New York), Convention Center Project No Opt. Call BBB+ 591,885
Bonds, Series E, 7.250%, 1/01/10
2,000,000 Triborough Bridge and Tunnel Authority (New York), Special Obligation 1/01 at 102 A1 2,156,460
Refunding Bonds, Series 1991B, 7.100%, 1/01/10
</TABLE>
17
<PAGE>
Portfolio of Investments
Nuveen Flagship New York Municipal Bond Fund (continued)
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$2,000,000 Triborough Bridge and Tunnel Authority, Special Obligation Refunding 1/01 at 102 AAA $ 2,158,340
Bonds, Series 1991B, 7.100%, 1/01/10
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 5.8%
500,000 Albany Parking Authority, Aggregate Principal Amount (Green and 9/01 at 102 A 534,945
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 Revenue Bonds, 7/07 at 101 1/2 AAA 4,295,200
Series 1997A, 5.750%, 7/01/21
2,000,000 New York City Industrial Development Agency, Special Facility Revenue 8/07 at 102 Baa1 2,025,880
Bonds (1990 American Airlines, Inc. Project), 5.400%, 7/01/20
(Alternative Minimum Tax)
2,000,000 New York City Industrial Development Agency, Special Facility Revenue 1/04 at 102 A 2,126,680
Bonds, Series 1994 (Terminal One Group Association, L.P. Project),
6.125%, 1/01/24 (Alternative Minimum Tax)
2,500,000 New York City Industrial Development Agency, Special Facility Revenue 12/08 at 102 A 2,489,975
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- 1,961,460
Series E, 5.000%, 1/01/25 (DD)
1,500,000 The Port Authority of New York and New Jersey, Special Project Bonds, 12/07 at 100 AAA 1,593,675
Series 6, JFK International Air Terminal LLC Project, 5.750%, 12/01/25
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 16.9%
1,000,000 Metropolitan Transportation Authority (New York), Commuter Facilities 7/02 at 102 AAA 1,100,720
Revenue Bonds, Series 1992B, 6.250%, 7/01/17 (Pre-refunded to 7/01/02)
1,000,000 Metropolitan Transportation Authority (New York), Commuter Facilities 7/04 at 101 1/2 AAA 1,137,570
Revenue Bonds, Series 1994A, 6.375%, 7/01/18 (Pre-refunded to 7/01/04)
1,000,000 Metropolitan Transportation Authority (New York), Commuter Facilities 7/00 at 102 AAA 1,075,430
Revenue Bonds, 1987 Service Contract Bonds, Series 3, 7.500%, 7/01/16
(Pre-refunded to 7/01/00)
1,025,000 Metropolitan Transportation Authority (New York), Transit Facilities 7/02 at 102 AAA 1,136,254
Revenue Bonds, Series J, 6.500%, 7/01/18 (Pre-refunded to 7/01/02)
1,000,000 Metropolitan Transportation Authority (New York), Transit Facilities 7/06 at 102 AAA 1,149,860
Revenue Bonds, Series A, 6.100%, 7/01/21 (Pre-refunded to 7/01/06)
35,000 The City of New York General Obligation Bonds, 1992 Series C, 6.625%, 8/02 at 101 1/2 AAA 38,845
8/01/13 (Pre-refunded to 8/01/02)
40,000 City of New York General Obligation Bonds, Fiscal 1991 Series F, 11/01 at 101 1/2 AAA 45,556
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 1,165,090
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-*** 615,780
7.500%, 2/01/06 (Pre-refunded to 2/01/02)
1,500,000 New York City Municipal Water Finance Authority (New York), Water 6/01 at 101 1/2 Aaa 1,664,595
and 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 7/02 at 102 Aa2*** 5,909,004
Bonds (1992 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 3/01 at 102 A*** 328,056
(Pre-refunded to 3/01/01)
2,135,000 Dormitory Authority of the State of New York, United Health Services, 2/00 at 102 AAA 2,259,129
Inc., FHA-Insured Mortgage Revenue Bonds, Series 1989, 7.350%,
8/01/29 (Pre-refunded to 2/01/00)
1,000,000 Dormitory Authority of the State of New York, City University System 7/00 at 102 Aaa 1,077,060
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*** 333,822
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*** 444,132
FHA-Insured Mortgage Revenue Bonds, Series 1991, 7.400%, 2/01/31
(Pre-refunded to 8/01/01)
</TABLE>
18
<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 7/01 at 102 BBB+*** $ 275,393
Revenue Bonds, Veterans Home, Series 1990, 7.250%, 7/01/21
(Pre-refunded to 7/01/01)
985,000 Dormitory Authority of the State of New York, Dormitory Revenue Bonds, 7/04 at 102 AAA 1,172,495
State University Issue, Series X, 7.400%, 7/01/24 (Pre-refunded
to 7/01/04)
1,500,000 Dormitory Authority of the State of New York, Department of Health 7/05 at 102 BBB+*** 1,746,165
of the State of New York Revenue Bonds, Series 1995, 6.625%, 7/01/24
(Pre-refunded to 7/01/05)
200,000 New York State Housing Finance Agency, State University Construction No Opt. Call AAA 261,788
Refunding Bonds ,1986 Series A, 8.000%, 5/01/11
1,660,000 New York State Housing Finance Agency, Health Facilities Revenue Bonds 11/00 at 102 AAA 1,819,792
(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 Revenue 9/01 at 102 AAA 274,993
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 Health 2/00 at 102 Aaa 53,156
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 Health 2/01 at 102 Aaa 1,599,810
Services Facilities Improvement Revenue Bonds, 1991 Series A, 7.500%,
2/15/21 (Pre-refunded to 2/15/01)
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 1,165,470
1,000,000 6.800%, 8/15/24 (Pre-refunded to 2/15/05) 2/05 at 102 AAA 1,168,100
2,700,000 New York State Medical Care Facilities Finance Agency, Hospital Medical 2/05 at 102 AAA 3,153,870
Center Secured, Revenue Bonds, Series 1995-A, 6.800%, 8/15/12
(Pre-refunded to 2/15/05)
620,000 New York State Medical Care Facilities Finance Agency, Hospital and 8/99 at 102 AA*** 644,837
Nursing Home Insured Mortgage Revenue Bonds, 1989 Series B, 7.350%,
2/15/29 (Pre-refunded to 8/15/99)
1,480,000 New York State Medical Care Facilities Finance Agency, Hospital and 2/04 at 102 AAA 1,666,524
Nursing 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-*** 1,697,147
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 1,056,160
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+*** 2,189,360
(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 3,192,929
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*** 1,087,440
Facilities Revenue Bonds (Orangetown Senior Housing Center - 1990
Series), 7.600%, 4/01/30 (Pre-refunded to 10/01/00)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 9.4%
6,500,000 Erie County (New York), Industrial Development Agency, Solid Waste 12/10 at 103 N/R 6,564,545
Disposal Facility 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- 4,092,040
5,950,000 5.750%, 10/01/36 (Alternative Minimum Tax) 10/08 at 102 BBB- 6,111,900
350,000 New York State Energy Research and Development Authority, Electric 1/00 at 101 A+ 364,556
Facilities Revenue Bonds, Series 1991 A (Consolidated Edison Company
of New York, Inc. Project), 7.500%, 1/01/26 (Alternative Minimum Tax)
1,250,000 New York State Energy Research and Development Authority, Electric 6/02 at 102 N/R 1,399,937
Facilities Revenue Bonds (Long Island Lighting Company Project), 1989
Series A, 7.150%, 9/01/19 (Alternative Minimum Tax)
500,000 New York State Energy Research and Development Authority, Electric 1/03 at 102 A- 551,934
Facilities Revenue Bonds (Long Island Lighting Company Project), 1992
Series D, 6.900%, 8/01/22 (Alternative Minimum Tax)
</TABLE>
- ----
19
<PAGE>
Portfolio of Investments
Nuveen Flagship New York Municipal Bond Fund (continued)
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities (continued)
$ 2,435,000 New York State Energy Research and Development Authority, Adjustable Rate 7/05 at 102 AAA $ 2,656,584
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 1,664,489
Refunding Revenue Bonds, Series 1995A (Consolidated Edison Company of
New York, Inc. Project), 6.100%, 8/15/20
750,000 Onondaga County Resource Recovery Agency, System Revenue Bonds (Development 5/02 at 102 Baa1 801,382
Costs - 1992 Series), 7.000%, 5/01/15 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 1.3%
10,000,000 New York City Municipal Water Finance Authority, Water and Sewer System No Opt. Call A1 3,308,699
Revenue Bonds, Fiscal 1998 Series D, 0.000%, 6/15/20
- ------------------------------------------------------------------------------------------------------------------------------------
$249,445,000 Total Investments - (cost $236,226,753) - 99.4% 257,209,435
- ------------------------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities - 0.7%
400,000 New York City, New York, General Obligation Bonds, Subseries B-4, Variable VMIG-1 400,000
Rate Demand Bond, 3.300%, 8/15/23+
1,500,000 New York City, New York, General Obligation Bonds, Subseries 93B, Variable VMIG-1 1,500,000
Demand Rate Bonds, 3.650%, 10/01/21+
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1,900,000 Total Temporary Investments - 0.7% 1,900,000
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.1)% (372,502)
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $258,736,933
--------------------------------------------------------------------------------------------------------------------
</TABLE>
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices
at later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to
be equivalent to AAA rated securities.
N/R Investment is not rated.
(DD) Security purchased on a delayed delivery basis (note 1).
+ The security has a maturity of more than one year, but has variable rate
and demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically
based on market conditions or a specified market index.
See accompanying notes to financial statements.
- ----
20
<PAGE>
Portfolio of Investments
Nuveen New York Insured Municipal Bond Fund
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 11.0%
$1,000,000 Allegany County Industrial Development Agency (New York), Civic Facility 8/08 at 102 Aaa $ 990,070
Revenue Bonds, Series 1998 (Alfred University Civic Facility), 5.000%,
8/01/28
1,350,000 Town of Hempstead Industrial Development Agency, Civic Facility Revenue 7/06 at 102 AAA 1,469,543
Bonds (Hofstra University Project - Series 1996), 5.800%, 7/01/15
1,000,000 New York City Industrial Development Agency, Civic Facility Revenue Bonds 11/04 at 102 AAA 1,124,980
(USTA National Tennis Center Incorporated Project), 6.375%, 11/15/14
1,000,000 New York City Industrial Development Agency, Civic Facility Revenue Bonds 9/05 at 102 AAA 1,076,910
(New School For Social Research Project), Series 1995A, 5.750%, 9/01/15
1,145,000 New York City Industrial Development Agency, Civic Facility Revenue Bonds 6/07 at 102 Aaa 1,212,463
(Anti-Defamation League Foundation Project), Series 1997A, 5.600%, 6/01/17
5,000,000 Dormitory Authority of the State of New York, State University Dormitory 7/05 at 102 AAA 5,119,850
Facilities Lease Revenue Bonds, Series 1995A, 5.300%, 7/01/24
305,000 Dormitory Authority of the State of New York, College and University Revenue 6/99 at 102 AAA 314,116
(Pooled Capital Program), Series 1985, 7.800%, 12/01/05
5,000,000 Dormitory Authority of the State of New York, New York University Insured 7/01 at 102 AAA 5,394,450
Revenue Bonds, Series 1991, 6.250%, 7/01/09
1,000,000 Dormitory Authority of the State of New York, City University System 7/03 at 100 AAA 988,940
Consolidated Revenue Bonds, Series 1993F, 5.000%, 7/01/20
4,640,000 Dormitory Authority of the State of New York, Mount Sinai School of 7/04 at 102 AAA 4,581,304
Medicine Insured Revenue Bonds, Series 1994A, 5.000%, 7/01/21
1,500,000 Dormitory Authority of the State of New York, Sarah Lawrence College 7/05 at 102 AAA 1,649,490
Revenue Bonds, Series 1995, 6.000%, 7/01/24
2,500,000 Dormitory Authority of the State of New York, Siena College Insured 7/07 at 102 AAA 2,701,700
Revenue Bonds, Series 1997, 5.750%, 7/01/26
4,000,000 Dormitory Authority of the State of New York, Fordham University Insured 7/08 at 101 AAA 3,960,240
Revenue Bonds, Series 1998, 5.000%, 7/01/28
2,530,000 Dormitory Authority of the State of New York, City University System 7/08 at 101 AAA 2,506,977
Consolidated Third General Resolution Revenue Bonds, 1998 Series 2,
5.000%, 7/01/23
3,000,000 Dormitory Authority of the State of New York, State University Educational 5/08 at 100 AAA 2,859,300
Facilities Revenue Bonds, Series 1998A, 4.750%, 5/15/25
1,760,000 Dormitory Authority of the State of New York, City University System 7/00 at 102 AAA 1,872,376
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 Insured 7/08 at 101 Aaa 2,977,860
Revenue Bonds, Series 1998, 5.000%, 7/01/21
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 15.9%
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 2,677,550
14,980,000 5.750%, 2/15/22 2/03 at 102 AAA 15,714,769
6,460,000 Dormitory Authority of the State of New York, St. Vincents Hospital and 8/05 at 102 AAA 6,818,530
Medical Center of New York, FHA-Insured Mortgage Revenue Bonds,
Series 1995, 5.800%, 8/01/25
3,730,000 Dormitory Authority of the State of New York, Maimonides Medical 2/06 at 102 AAA 3,936,232
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 Hospital Insured 2/08 at 101 1/2 AAA 2,465,950
Revenue Bonds (Southside Hospital), Series 1998, 5.000%, 2/15/25
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen New York Insured Municipal Bond Fund
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$3,000,000 Dormitory Authority of the State of New York (North Shore Health System 11/08 at 101 AAA $ 2,960,010
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. Francis Hospital 5/99 at 102 AAA 916,149
Project Revenue Bonds, 1988 Series A, 7.625%, 11/01/21
3,000,000 New York State Medical Care Facilities Finance Agency, South Nassau 11/02 at 102 AAA 3,277,560
Communities Hospital Project Revenue Bonds, 1992 Series A, 6.125%,
11/01/11
3,200,000 New York State Medical Care Facilities Finance Agency, North Shore 11/00 at 102 AAA 3,466,624
University Hospital Mortgage Project Revenue Bonds, 1990 Series A,
7.200%, 11/01/20
1,670,000 New York State Medical Care Facilities Finance Agency, Our Lady of 11/01 at 102 AAA 1,815,791
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 544,635
1,550,000 6.625%, 11/01/18 11/01 at 102 AAA 1,685,315
1,000,000 New York State Medical Care Facilities Finance Agency, Aurelia Osborn 11/01 at 102 AAA 1,097,400
Fox Memorial Hospital Project Revenue Bonds, 1992 Series A, 6.500%,
11/01/19
2,500,000 New York State Medical Care Facilities Finance Agency, St. Marys Hospital 11/03 at 102 AAA 2,762,150
(Rochester), Mortgage Project Revenue Bonds, 1994 Series A Refunding,
6.200%, 11/01/14
655,000 New York State Medical Care Facilities Finance Agency, Hospital and 8/99 at 102 AA 680,047
Nursing Home Insured Mortgage Revenue Bonds, 1989 Series B, 7.350%,
2/15/29
7,890,000 New York State Medical Care Facilities Finance Agency, Montefiore Medical 2/05 at 102 AAA 8,405,612
Center FHA-Insured Mortgage Revenue Bonds, 1995 Series A , 5.750%,
2/15/15
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 8.7%
5,000,000 Pass-Through Certificates of New York City Housing Development Corporation, 3/99 at 105 AAA 5,265,700
Multifamily Housing, Limited Obligation Bonds, Series 1991A, 6.500%,
2/20/19
New York State Finance Agency, Housing Project Mortgage Revenue Bonds, 1996
Series A Refunding:
5,650,000 6.100%, 11/01/15 5/06 at 102 AAA 6,142,793
4,980,000 6.125%, 11/01/20 5/06 at 102 AAA 5,383,978
640,000 New York State Housing Finance Agency, Multi-Family Housing Revenue Bonds 11/99 at 102 AAA 662,189
(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 4,206,010
9,650,000 6.750%, 1/01/26 1/02 at 102 AAA 10,549,766
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 1.0%
190,000 State of New York Mortgage Agency, Mortgage Revenue Bonds, Ninth Series E, 4/99 at 101 Aaa 192,850
8.100%, 10/01/17
3,500,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 10/03 at 102 AAA 3,646,265
Series 29-C-1, 5.650%, 4/01/15
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 0.6%
1,000,000 Dormitory Authority of the State of New York, United Cerebral Palsy 7/02 at 102 AAA 1,088,870
Association of Westchester County, Inc., Insured Revenue Bonds, Series
1992, 6.200%, 7/01/12
1,000,000 Dormitory Authority of the State of New York, Sarah Neuman Nursing Home, 8/07 at 102 AAA 1,039,080
FHA-Insured Mortgage Nursing Home Revenue Bonds, Series 1997, 5.450%,
8/01/27
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 8.6%
1,000,000 City of Buffalo, New York, Refunding Serial Bonds, Series 1991, 6.150%, 2/01 at 101 AAA 1,056,780
2/01/04
Camden Central School District, Oneida County, New York, School District
(Serial) Bonds, Series 1991:
500,000 7.100%, 6/15/07 No Opt. Call AAA 601,650
600,000 7.100%, 6/15/08 No Opt. Call AAA 731,922
600,000 7.100%, 6/15/09 No Opt. Call AAA 742,158
275,000 7.100%, 6/15/10 No Opt. Call AAA 342,579
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 500,000 Greece Central School District, Monroe County, New York, General No Opt. Call AAA $ 573,030
Obligation Bonds, School District (Serial) Bonds, Series 1992, 6.000%,
6/15/09
Town of Halfmoon, Saratoga County, New York, Public Improvement (Serial)
Bonds of 1991:
385,000 6.500%, 6/01/09 No Opt. Call AAA 459,251
395,000 6.500%, 6/01/10 No Opt. Call AAA 473,475
395,000 6.500%, 6/01/11 No Opt. Call AAA 475,442
Middle County Central School District at Centereach in the Town of
Brookhaven, Suffolk Co., N.Y., School District (Serial) Bonds of 1991
(Unlimited Tax):
475,000 6.900%, 12/15/07 No Opt. Call AAA 573,544
475,000 6.900%, 12/15/08 No Opt. Call AAA 577,534
Mount Sinai Union Free School District, County of Suffolk, New York,
School District Refunding (Serial) Bonds, 1992:
500,000 6.200%, 2/15/15 No Opt. Call AAA 581,420
1,035,000 6.200%, 2/15/16 No Opt. Call AAA 1,202,535
1,500,000 County of Nassau, New York, General Obligation Serial Bonds, General 8/04 at 103 AAA 1,619,715
Improvement Bonds, Series O, 5.700%, 8/01/13
1,020,000 City of New Rochelle, Westchester County, New York, General Obligation 8/04 at 102 AAA 1,139,524
Public Improvement Bonds, 1994 Series B, 6.200%, 8/15/22
80,000 The City of New York, General Obligation Bonds, Fiscal 1992 Series C, 8/02 at 101 1/2 AAA 87,003
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 21,993
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 1,330,537
2,000,000 7.000%, 10/01/16 10/99 at 100 AAA 2,046,980
1,025,000 7.000%, 10/01/17 10/99 at 100 AAA 1,049,262
310,000 7.000%, 10/01/18 10/99 at 100 AAA 317,338
5,000,000 The City of New York, General Obligation Bonds, Fiscal 1998 Series H, 8/08 at 101 AAA 5,021,300
5.125%, 8/01/25
1,590,000 City of Niagara Falls, Niagara County, New York, Public Improvement 3/04 at 102 AAA 1,818,594
(Serial) Bonds of 1994, 6.900%, 3/01/21
1,505,000 Town of North Hempstead, Nassau County, New York, General Obligation No Opt. Call AAA 1,787,443
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 1,168,848
960,000 6.700%, 2/15/14 No Opt. Call AAA 1,169,942
960,000 6.700%, 2/15/15 No Opt. Call AAA 1,169,683
Rondout Valley Central School District at Accord, Ulster County,
New York, General Obligation School District (Serial) Bonds of
1991:
1,100,000 6.800%, 6/15/06 No Opt. Call AAA 1,298,589
550,000 6.850%, 6/15/08 No Opt. Call AAA 662,228
550,000 6.850%, 6/15/09 No Opt. Call AAA 669,031
550,000 6.850%, 6/15/10 No Opt. Call AAA 673,079
600,000 County of Suffolk, New York, General Obligation Refunding (Serial) 5/02 at 102 AAA 650,532
Bonds, Public Improvement Refunding Bonds, 1993 Series B, 6.150%,
5/01/10
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 7.5%
5,000,000 Dormitory Authority of the State of New York, Municipal Health 1/09 at 101 AAA 4,934,550
Facilities Improvement Program, Lease Revenue Bonds (New York City
Issue), 1998 Series 1, 5.000%, 1/15/23
2,500,000 Dormitory Authority of the State of New York, Mental Health Services 8/07 at 101 AAA 2,510,000
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 3,241,362
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 1,131,070
Services Facilities Improvement Revenue Bonds, 1994 Series D, 6.150%,
2/15/15
</TABLE>
23
<PAGE>
Portfolio of Investments
Nuveen New York Insured Municipal Bond Fund
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 185,000 New York State Medical Care Facilities Finance Agency, Mental Health 2/02 at 102 AAA $ 199,968
Services Facilities Improvement Revenue Bonds, 1992 Series B, 6.250%,
8/15/18
150,000 New York State Medical Care Facilities Financing Agency, Mental Health 2/02 at 102 AAA 163,098
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 2,020,300
Services Facilities Improvement Revenue Bonds, 1993 Series F, 5.250%,
2/15/19
4,000,000 New York State Urban Development Corporation, Revenue Bonds (Sports 4/06 at 102 AAA 4,196,720
Facility Assistance Program), 1996 Series A, 5.500%, 4/01/19
8,650,000 Triborough Bridge and Tunnel Authority, Special Obligation Refunding Bonds, 1/01 at 102 AAA 9,291,484
Series 1991B, 6.875%, 1/01/15
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 7.3%
2,500,000 Albany County Airport Authority, Airport Revenue Bonds, Series 1997, 12/07 at 102 AAA 2,599,975
5.500%, 12/15/19 (Alternative Minimum Tax)
2,250,000 Buffalo and Fort Erie Public Bridge Authority, Toll Bridge System 1/05 at 101 AAA 2,401,650
Revenue Bonds, Series 1995, 5.750%, 1/01/25
4,000,000 Metropolitan Transportation Authority (New York), Commuter Facilities 7/05 at 101 AAA 4,247,600
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 3,221,400
Bonds, Series 1997A, 5.750%, 7/01/21
3,000,000 Metropolitan Transportation Authority, Commuter Facilities Revenue 7/07 at 102 AAA 3,011,760
Bonds, Series 1997B, 5.125%, 7/01/24
3,500,000 Metropolitan Transportation Authority, Commuter Facilities Revenue 7/07 at 101 AAA 3,469,550
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 990,850
1,000,000 5.000%, 4/01/28 (Alternative Minimum Tax) 4/08 at 101 AAA 967,940
3,000,000 The Port Authority of New York and New Jersey, Special Project Bonds, 12/07 at 100 AAA 3,187,350
Series 6, JFK International Air Terminal LLC Project, 5.750%, 12/01/25
(Alternative Minimum Tax)
2,750,000 Triborough Bridge and Tunnel Authority, General Purpose Revenue Bonds, 1/02 at 101 1/2 AAA 2,975,748
Series X, 6.500%, 1/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 26.9%
3,385,000 Buffalo Municipal Water Finance Authority, Water System Revenue Bonds, 7/03 at 102 AAA 3,722,451
Series 1992, 5.750%, 7/01/19 (Pre-refunded to 7/01/03)
1,000,000 Erie County Water Authority (New York), Water Works System Revenue Bonds, 12/09 at 100 AAA 1,208,800
Series 1990B, 6.750%, 12/01/14
10,340,000 Metropolitan Transportation Authority, Transit Facilities Revenue Bonds, 7/02 at 102 AAA 11,462,304
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 407,179
375,000 6.500%, 6/01/16 (Pre-refunded to 6/01/01) 6/01 at 102 AAA 407,179
350,000 6.500%, 6/01/17 (Pre-refunded to 6/01/01) 6/01 at 102 AAA 380,034
3,725,000 Montgomery, Otsego and Schoharie Solid Waste Management Authority, 1/00 at 103 AAA 3,962,767
Solid Waste System Revenue Bonds, Series 1990, 7.250%, 1/01/14
(Pre-refunded to 1/01/00)
Mount Sinai Union Free School District, Suffolk County, New York, School
District (Serial) Bonds, 1989:
1,000,000 7.250%, 2/15/15 (Pre-refunded to 2/15/00) 2/00 at 102 AAA 1,058,680
1,000,000 7.250%, 2/15/17 (Pre-refunded to 2/15/00) 2/00 at 102 AAA 1,058,680
4,840,000 Nassau County Industrial Development Agency, Civic Facility Revenue Bonds 8/01 at 102 AAA 5,305,995
(Hofstra University Project - Series 1991), 6.750%, 8/01/11
(Pre-refunded to 8/01/01)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
The City of New York, General Obligation Bonds, Fiscal 1992
Series C, Fixed Rate Bonds, Subseries C-1:
$ 3,920,000 6.250%, 8/01/10 (Pre-refunded to 8/01/02) 8/02 at 101 1/2 AAA $ 4,303,650
55,000 6.625%, 8/01/12 (Pre-refunded to 8/01/02) 8/02 at 101 1/2 AAA 61,043
2,000,000 New York City Municipal Water Finance Authority, Water and Sewer System 6/01 at 101 AAA 2,166,740
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 System 6/00 at 101 1/2 AAA 1,065,950
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 1,056,240
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 2,396,680
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 AAA 1,576,629
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 Educational 5/00 at 102 AAA 1,281,216
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 1,075,430
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 2,079,320
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 1,277,808
Educational Facilities Revenue Bonds, Series 1990C, 7.000%, 5/15/18
(Pre-refunded to 5/15/00)
6,295,000 Dormitory Authority of the State of New York, City University System 7/00 at 102 AAA 6,769,832
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 2,759,050
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 1,071,530
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 System 7/00 at 102 AAA 791,082
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 Health 2/02 at 102 AAA 2,869,540
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 8,176,700
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 6,560,280
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 2,192,500
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 7,855,749
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 1,581,120
575,000 7.000%, 1/01/17 (Pre-refunded to 1/01/00) 1/00 at 102 AAA 604,958
2,000,000 7.500%, 1/01/20 (Pre-refunded to 1/01/00) 1/00 at 102 AAA 2,112,320
Town of North Hempstead, Nassau County, New York, Public Improvement
(Serial) Bonds of 1991, Series B, Unlimited Tax:
425,000 6.800%, 6/01/10 (Pre-refunded to 6/01/00) 6/00 at 102 AAA 452,136
425,000 6.800%, 6/01/11 (Pre-refunded to 6/01/00) 6/00 at 102 AAA 452,136
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 688,938
625,000 6.500%, 4/01/13 (Pre-refunded to 4/01/02) 4/02 at 102 AAA 688,938
625,000 6.500%, 4/01/14 (Pre-refunded to 4/01/02) 4/02 at 102 AAA 688,938
</TABLE>
25
<PAGE>
Portfolio of Investments
Nuveen New York Insured Municipal Bond Fund (continued)
February 28, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$1,000,000 County of Suffolk, New York, General Obligation Refunding (Serial) 4/00 at 102 AAA $ 1,059,700
Bonds, Public Improvement Refunding Bonds, 1993 Series B, 6.900%,
4/01/01 (Pre-refunded to 4/01/00)
2,000,000 Triborough Bridge and Tunnel Authority, General Purpose Revenue Bonds, 1/01 at 102 AAA 2,166,260
Series T, 7.000%, 1/01/20 (Pre-refunded to 1/01/01)
1,175,000 Triborough Bridge and Tunnel Authority, General Purpose Revenue 1/01 at 101 1/2 AAA 1,267,155
Bonds, Series S, 7.000%, 1/01/21 (Pre-refunded to 1/01/01)
1,750,000 City of Yonkers, New York, General Obligation School Bonds, 1990-C, 12/00 at 102 AAA 1,907,203
7.375%, 12/01/09 (Pre-refunded to 12/01/00)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 2.3%
6,000,000 Long Island Power Authority, Electric System General Revenue Bonds, 6/08 at 101 AAA 6,025,020
Series 1998A, 5.125%, 12/01/22
2,500,000 New York State Energy Research and Development Authority, Pollution 10/99 at 103 AAA 2,633,350
Control Revenue Bonds (Central Hudson Gas and Electric Corporation
Project), 1984 Series B, 7.375%, 10/01/14
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 8.8%
280,000 Albany, New York, Municipal Water Finance Authority, Water and Sewer 6/99 at 102 AAA 286,588
System 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 2,900,876
Series 1998-A, 5.000%, 7/01/28
7,000,000 New York City (New York), Municipal Water Finance Authority, Water and 6/06 at 101 AAA 7,541,940
Sewer System Revenue Bonds, Fiscal 1996 Series B, 5.750%, 6/15/26
1,250,000 New York City (New York), Municipal Water Finance Authority, Water and 6/01 at 101 AAA 1,346,024
Sewer System Revenue Bonds, Fiscal 1992 Series A, 6.750%, 6/15/16
New York City (New York), Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, Fiscal 1993 Series A:
2,765,000 5.750%, 6/15/18 6/02 at 101 1/2 AAA 2,879,166
4,650,000 5.500%, 6/15/20 6/02 at 100 AAA 4,793,080
3,200,000 New York City (New York), Municipal Water Finance Authority, Water and 6/07 at 101 AAA 3,211,487
Sewer System Revenue Bonds, Fiscal 1998 Series B, 5.125%, 6/15/30
3,500,000 New York City (New York), Municipal Water Finance Authority, Water and 6/08 at 101 AAA 3,465,734
Sewer System Revenue Bonds, Fiscal 1999 Series A, 5.000%, 6/15/27
1,450,000 New York State Environmental Facilities Corporation, State Water 3/00 at 102 AAA 1,532,693
Pollution Control Revolving Fund Revenue Bonds, Series 1990 C (Pooled
Loan Issue), 7.200%, 3/15/11
1,000,000 Suffolk County Industrial Development Agency (Suffolk County, New York), 2/04 at 101 AAA 1,023,979
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 3,700,701
Series 1994, 5.000%, 6/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
$344,570,000 Total Investments - (cost $336,995,990) - 98.6% 366,429,188
- ------------------------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities - 1.0%
900,000 Long Island, New York, Power Authority, Variable Rate Demand Bonds, VMIG-1 900,000
3.200%, 4/01/25+
2,900,000 Nassau County International Development Authority, Harbor, New York, VMIG-1 2,900,000
Variable Rate Demand Bonds, 3.150%, 7/01/19+
- ------------------------------------------------------------------------------------------------------------------------------------
$ 3,800,000 Total Temporary Investments - 1.0% 3,800,000
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.4% 1,500,634
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $371,729,822
- ------------------------------------------------------------------------------------------------------------------------------------
</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 (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices
at later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
+ The security has a maturity of more than one year, but has variable rate
and demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically
based on market conditions or a specified market index.
See accompanying notes to financial statements.
26
<PAGE>
Statement of Net Assets
February 28, 1999
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $118,419,382 $257,209,435 $366,429,188
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) -- 1,900,000 3,800,000
Cash 529,007 -- --
Receivables:
Fund manager (note 6) 121,835 -- --
Interest 2,094,758 3,147,669 3,995,904
Investments sold -- 51,433 46,290
Shares sold 477,548 42,198 164,434
Other assets 1,591 2,841 6,143
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 121,644,121 262,353,576 374,441,959
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 210,865 1,052,109
Payables:
Investments purchased -- 1,993,584 --
Shares redeemed 5,331 492,119 354,098
Accrued expenses:
Management fees (note 6) -- 108,014 153,699
12b-1 distribution and service fees (notes 1 and 6) 21,366 26,135 19,852
Other 196,270 158,643 100,520
Dividends payable 287,690 627,283 1,031,859
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 510,657 3,616,643 2,712,137
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $121,133,464 $258,736,933 $371,729,822
====================================================================================================================================
Class A Shares (note 1)
Net assets $ 53,442,296 $ 80,549,287 $ 52,447,688
Shares outstanding 5,039,566 7,302,221 4,886,675
Net asset value and redemption price per share $ 10.60 $ 11.03 $ 10.73
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 11.06 $ 11.51 $ 11.20
====================================================================================================================================
Class B Shares (note 1)
Net assets $ 11,367,905 $ 12,120,830 $ 13,373,532
Shares outstanding 1,072,865 1,097,776 1,245,108
Net asset value, offering and redemption price per share $ 10.60 $ 11.04 $ 10.74
====================================================================================================================================
Class C Shares (note 1)
Net assets $ 10,289,883 $ 8,858,241 $ 4,103,431
Shares outstanding 972,838 800,774 382,481
Net asset value, offering and redemption price per share $ 10.58 $ 11.06 $ 10.73
====================================================================================================================================
Class R Shares (note 1)
Net assets $ 46,033,380 $157,208,575 $301,805,171
Shares outstanding 4,341,241 14,208,486 28,108,441
Net asset value, offering and redemption price per share $ 10.60 $ 11.06 $ 10.74
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
Statement of Operations
Year Ended February 28, 1999
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income (note 1) $ 5,961,002 $ 14,740,566 $ 20,828,391
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 581,041 1,376,212 1,968,107
12b-1 service fees - Class A (notes 1 and 6) 90,001 159,739 95,428
12b-1 distribution and service fees - Class B (notes 1 and 6) 66,212 72,777 89,703
12b-1 distribution and service fees - Class C (notes 1 and 6) 61,233 55,635 21,951
Shareholders' servicing agent fees and expenses 122,575 256,854 321,134
Custodian's fees and expenses 53,513 71,005 82,949
Trustees' fees and expenses (note 6) 2,699 6,548 8,711
Professional fees 6,746 49,805 49,724
Shareholders' reports - printing and mailing expenses 83,798 88,792 164,511
Federal and state registration fees 13,167 5,851 1,080
Portfolio insurance expense -- -- 9,169
Other expenses 3,575 11,864 14,251
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 1,084,560 2,155,082 2,826,718
Expense reimbursement (note 6) (377,595) (360,810) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses 706,965 1,794,272 2,826,718
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5,254,037 12,946,294 18,001,673
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (notes 1 and 4) 115,134 1,767,488 2,051,978
Net change in unrealized appreciation or depreciation of investments (239,717) (482,766) (1,737,215)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (124,583) 1,284,722 314,763
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 5,129,454 $ 14,231,016 $ 18,316,436
====================================================================================================================================
</TABLE>
See notes to financial statements.
28
<PAGE>
<TABLE>
<CAPTION>
New Jersey
-----------------------------------
Year Ended Year Ended
2/28/99 2/28/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 5,254,037 $ 4,336,199
Net realized gain (loss) from investment transactions (notes 1 and 4) 115,134 (222,985)
Net change in unrealized appreciation or depreciation of investments (239,717) 2,933,349
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 5,129,454 7,046,563
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (2,238,254) (1,643,900)
Class B (289,199) (60,466)
Class C (361,714) (207,627)
Class R (2,367,199) (2,422,933)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (5,256,366) (4,334,926)
- ------------------------------------------------------------------------------------------------------------------------------------
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 32,345,835 20,831,468
Net proceeds from shares issued to shareholders due to reinvestment of distributions 3,178,514 2,802,902
- ------------------------------------------------------------------------------------------------------------------------------------
46,014,352 23,634,370
Cost of shares redeemed (14,067,767) (10,348,638)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 31,946,585 13,285,732
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 31,819,673 15,997,369
Net assets at the beginning of year 89,313,791 73,316,422
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 121,133,464 $ 89,313,791
====================================================================================================================================
Balance of undistributed net investment income at end of year $ 2,185 $ 1,850
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
Statement of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
New York New York Insured
---------------------------- ---------------------------
Year Ended Year Ended Year Ended Year Ended
2/28/99 2/28/98 2/28/99 2/28/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 12,946,294 $ 12,613,469 $ 18,001,673 $ 18,457,075
Net realized gain from investment transactions (notes 1 and 4) 1,767,488 661,126 2,051,978 619,011
Net change in unrealized appreciation or depreciation of investments (482,766) 9,051,117 (1,737,215) 8,290,299
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 14,231,016 22,325,712 18,316,436 27,366,385
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (3,991,380) (3,875,640) (2,291,771) (2,006,721)
Class B (318,702) (83,036) (375,855) (123,259)
Class C (328,331) (239,478) (124,512) (99,554)
Class R (8,212,001) (8,443,262) (15,260,254) (16,348,358)
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 (12,850,414) (12,641,416) (19,045,638) (18,577,892)
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 32,108,889 30,298,985 30,426,780 28,258,045
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 7,870,186 7,761,760 13,375,740 13,010,796
- ------------------------------------------------------------------------------------------------------------------------------------
39,979,075 38,060,745 43,802,520 41,268,841
Cost of shares redeemed (31,347,095) (27,382,856) (38,003,474) (41,856,071)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions 8,631,980 10,677,889 5,799,046 (587,230)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 10,012,582 20,362,185 5,069,844 8,201,263
Net assets at the beginning of year 248,724,351 228,362,166 366,659,978 358,458,715
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $258,736,933 $248,724,351 $371,729,822 $366,659,978
- ------------------------------------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end of year $ 101,158 $ 5,278 $ 63,475 $ 114,194
====================================================================================================================================
</TABLE>
- ---
30 See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
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
February 28, 1999, New York had an outstanding delayed delivery purchase
commitment of $1,993,584. There were no such outstanding purchase commitments in
any of the other Funds.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or credited to shareholders accounts on the first business day after
month-end. Net realized capital gains and/or market discount from investment
transactions, if any, are distributed to shareholders not less frequently than
annually. Furthermore, capital gains are distributed only to the extent they
exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, each Fund intends to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain such
tax-exempt status when distributed to the shareholders of the Funds. All monthly
tax-exempt income dividends paid during the fiscal year ended February 28, 1999,
have been designated Exempt Interest Dividends. Net realized capital gains and
market discount distributions are subject to federal taxation.
31
<PAGE>
Notes to Financial Statements (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 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, option contracts, and other financial instruments with
similar characteristics. Although the Funds are authorized to invest in such
financial instruments, and may do so in the future, they did not make any such
investments during the fiscal year ended February 28, 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.
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.
- ---
32
<PAGE>
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
New Jersey
------------------------------------------------------------------
Year Ended 2/28/99 Year Ended 2/28/98
------------------------------ ------------------------------
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 1,377,846 14,619,825 1,075,954 11,229,962
Class B 839,961 8,903,892 272,258 2,840,031
Class C 416,475 4,399,120 312,192 3,236,991
Class R 419,192 4,422,998 338,039 3,524,484
Shares issued to shareholders due to
reinvestment of distributions:
Class A 113,228 1,200,274 91,399 950,346
Class B 11,053 117,220 1,672 17,562
Class C 18,796 198,846 12,365 128,765
Class R 156,770 1,662,174 164,047 1,706,229
- -----------------------------------------------------------------------------------------------------------------
4,338,408 46,014,352 2,267,926 23,634,370
- -----------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (678,226) (7,190,108) (511,590) (5,328,382)
Class B (59,129) (626,831) (180) (1,846)
Class C (115,892) (1,227,825) (47,998) (501,403)
Class R (473,934) (5,023,003) (433,419) (4,517,007)
- -----------------------------------------------------------------------------------------------------------------
(1,327,181) (14,067,767) (993,187) (10,348,638)
- -----------------------------------------------------------------------------------------------------------------
Net increase 3,011,227 $ 31,946,585 1,274,739 $ 13,285,732
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ---
33
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
New York New York Insured
-------------------------------------------------------- ----------------------------------------------------
Year Ended 2/28/99 Year Ended 2/28/98 Year Ended 2/28/99 Year Ended 2/28/98
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 1,144,690 $ 12,559,731 1,192,340 $ 12,830,429 1,093,274 $ 11,747,659 1,218,422 $ 12,894,251
Class B 754,802 8,315,942 400,533 4,306,773 743,984 8,011,299 440,390 4,686,122
Class C 353,162 3,894,020 254,474 2,741,394 205,983 2,218,265 36,490 382,197
Class R 666,093 7,339,196 963,440 10,420,389 787,360 8,449,557 970,440 10,295,475
Shares issued to
shareholders due to
reinvestment of
distributions:
Class A 161,024 1,770,662 152,051 1,627,414 148,515 1,598,123 124,699 1,317,874
Class B 14,049 154,837 3,386 36,761 20,611 222,064 2,936 31,367
Class C 12,193 134,459 9,491 102,142 8,421 90,556 6,978 73,631
Class R 526,668 5,810,228 558,993 5,995,443 1,065,213 11,464,997 1,097,334 11,587,924
- ------------------------------------------------------------------------------------------------------------------------------------
3,632,681 39,979,075 3,534,708 38,060,745 4,073,361 43,802,520 3,897,689 41,268,841
- ------------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,117,036) (12,242,649) (1,038,824) (11,085,975) (513,163) (5,519,037) (610,560) (6,423,983)
Class B (63,760) (700,876) (22,971) (250,548) (75,529) (812,400) (9,085) (96,502)
Class C (130,900) (1,437,273) (73,153) (789,011) (46,912) (504,054) (20,702) (219,749)
Class R (1,539,770) (16,966,297) (1,424,412) (15,257,322) (2,903,948) (31,167,983) (3,324,737) (35,115,837)
- ------------------------------------------------------------------------------------------------------------------------------------
(2,851,466) (31,347,095) (2,559,360) (27,382,856) (3,539,552) (38,003,474) (3,965,084) (41,856,071)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) 781,215 $ 8,631,980 975,348 $ 10,677,889 533,809 $ 5,799,046 (67,395) $ (587,230)
====================================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid April 1, 1999, to shareholders of record on March 9,
1999, as follows:
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
Dividend per share:
Class A $ .0420 $ .0435 $ .0425
Class B .0355 .0365 .0355
Class C .0375 .0385 .0375
Class R .0440 .0455 .0440
- --------------------------------------------------------------------------------
- ---
34
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended
February 28, 1999, were as follows:
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Investments in municipal securities $32,954,181 $80,487,226 $61,341,291
Temporary municipal investments 26,000,000 17,400,000 23,900,000
Sales:
Investments in municipal securities 10,153,629 69,966,277 56,289,355
Temporary municipal investments 29,600,000 16,500,000 23,300,000
- -----------------------------------------------------------------------------------
</TABLE>
At February 28, 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, 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
at February 28, 1999, were as follows:
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
Gross unrealized:
appreciation $ 6,118,937 $ 21,133,827 $ 29,433,198
depreciation (583,872) (151,145) --
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 5,535,065 $ 20,982,682 $ 29,433,198
- --------------------------------------------------------------------------------
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net asset value of each Fund:
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------
For the first $125,000,000 .5500 of 1%
For the next $125,000,000 .5375 of 1
For the next $250,000,000 .5250 of 1
For the next $500,000,000 .5125 of 1
For the next $1,000,000,000 .5000 of 1
For net assets over $2,000,000,000 .4750 of 1
- --------------------------------------------------------------------------------
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser.
The adviser has agreed to waive part of its management fees or reimburse certain
expenses of each Fund in order to limit total expenses to .75 of 1% of the
average daily net asset value of New York and .975 of 1% of the average daily
net asset value of New York Insured, excluding any 12b-1 fees applicable to
Class A, B and C Shares. The adviser may also voluntarily agree to reimburse
additional expenses in any of the Funds from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended February 28, 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:
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
Sales charges collected $186,295 $149,108 $170,683
Paid to authorized dealers 161,689 126,032 149,674
- --------------------------------------------------------------------------------
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.
- ---
35
<PAGE>
Notes to Financial Statements (continued)
During the fiscal year ended February 28, 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 $ 425,019 $ 413,817 $ 342,007
- --------------------------------------------------------------------------------
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees on Class B Shares, and all 12b-1 service and
distribution fees on Class C Shares during the first year following a purchase
are retained by the Distributor. During the fiscal year ended February 28, 1999,
the Distributor retained such 12b-1 fees as follows:
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
12b-1 fees retained $ 95,269 $ 98,950 $ 93,265
- --------------------------------------------------------------------------------
The remaining 12b-1 fees charged to the Funds were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
fiscal year ended February 28, 1999, as follows:
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
CDSC retained $ 18,456 $ 21,485 $ 27,085
- --------------------------------------------------------------------------------
7. Composition of Net Assets
At February 28, 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 $ 116,615,207 $ 237,119,673 $ 342,098,416
Balance of undistributed net investment income 2,185 101,158 63,475
Accumulated net realized gain (loss) from investment transactions (1,018,993) 533,420 134,733
Net unrealized appreciation of investments 5,535,065 20,982,682 29,433,198
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $ 121,133,464 $ 258,736,933 $ 371,729,822
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---
36
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Selected data for a share outstanding throughout each period is as follows:
Class (Inception Date)
Investment Operations Less Distributions
----------------------------------------------- -----------------------------------
NEW JERSEY 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)**
1999 $ 10.61 $ .53 $ (.01) $ .52 $ (.53) $ -- $ (.53) $ 10.60
1998 10.26 .55 .36 .91 (.56) -- (.56) 10.61
1997 (c) 10.22 .05 .04 .09 (.05) -- (.05) 10.26
1997 (d) 10.40 .48 (.15) .33 (.51) -- (.51) 10.22
1996 (d) 9.73 .51 .69 1.20 (.53) -- (.53) 10.40
1995 (e) 10.03 .21 (.21) -- (.21) (.09) (.30) 9.73
Class B (2/97)
1999 10.61 .45 (.01) .44 (.45) -- (.45) 10.60
1998 10.26 .48 .35 .83 (.48) -- (.48) 10.61
1997 (c) 10.22 .05 .03 .08 (.04) -- (.04) 10.26
Class C (9/94)**
1999 10.59 .47 (.01) .46 (.47) -- (.47) 10.58
1998 10.25 .50 .34 .84 (.50) -- (.50) 10.59
1997 (c) 10.20 .04 .05 .09 (.04) -- (.04) 10.25
1997 (d) 10.38 .41 (.16) .25 (.43) -- (.43) 10.20
1996 (d) 9.71 .44 .68 1.12 (.45) -- (.45) 10.38
1995 (e) 9.77 .16 (.05) .11 (.17) -- (.17) 9.71
Class R (12/91)**
1999 10.62 .55 (.02) .53 (.55) -- (.55) 10.60
1998 10.27 .58 .35 .93 (.58) -- (.58) 10.62
1997 (c) 10.23 .05 .04 .09 (.05) -- (.05) 10.27
1997 (d) 10.41 .49 (.14) .35 (.53) -- (.53) 10.23
1996 (d) 9.74 .55 .68 1.23 (.56) -- (.56) 10.41
1995 (d) 10.71 .52 (.88) (.36) (.52) (.09) (.61) 9.74
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Total Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Return (b) Assets (000) ment ment ment(a) ment(a) Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)**
1999 5.00% $53,442 1.02% 4.62% .66% 4.98% 10%
1998 9.06 35,782 1.01 4.92 .60 5.33 16
1997 (c) .85 27,879 1.01* 5.43* .55* 5.89* --
1997 (d) 3.31 17,072 1.13 4.85 1.00 4.98 10
1996 (d) 12.63 10,661 1.25 4.85 1.00 5.10 39
1995 (e) .02 2,741 1.31* 5.03* 1.00* 5.34* 32
Class B (2/97)
1999 4.23 11,368 1.76 3.88 1.39 4.25 10
1998 8.25 2,981 1.77 4.16 1.36 4.57 16
1997 (c) .78 74 1.77* 5.71* 1.27* 6.21* --
Class C (9/94)**
1999 4.48 10,290 1.57 4.07 1.21 4.43 10
1998 8.40 5,733 1.56 4.37 1.16 4.77 16
1997 (c) .90 2,712 1.56* 4.89* 1.10* 5.35* --
1997 (d) 2.53 2,611 1.88 4.09 1.75 4.22 10
1996 (d) 11.80 1,065 1.96 4.16 1.75 4.37 39
1995 (e) 1.16 464 2.00* 4.37* 1.75* 4.62* 32
Class R (12/91)**
1999 5.13 46,033 .82 4.82 .47 5.17 10
1998 9.29 44,817 .81 5.12 .40 5.53 16
1997 (c) .86 42,651 .81* 5.63* .35* 6.09* --
1997 (d) 3.55 42,905 .89 5.10 .75 5.24 10
1996 (d) 12.88 43,304 .98 5.20 .75 5.43 39
1995 (d) (3.27) 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 waiver of certain management fees or reimbursement of expenses, if
any, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized for periods less than one year.
(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.
- ---
37
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for a share outstanding throughout each period is as follows:
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)**
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)
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)**
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)**
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
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Total Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Return (b) Assets (000) ment ment ment(a) ment(a) Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)**
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)
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)**
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)**
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 waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized for periods less than one year.
(c) From commencement of class operations as noted.
- ---
38
<PAGE>
<TABLE>
<CAPTION>
Selected data for a share outstanding throughout each period is as follows:
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)
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)
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)
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)
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
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
---------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Total Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Return (b) Assets (000) ment ment ment(a) ment(a) Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
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)
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)
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) 285 285 2.32* 4.13* 1.80* 4.65* 11
Class R (12/86)
1999 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 waiver of certain management fees or reimbursement of expenses, if
applicable, by Nuveen Advisory.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized for periods less than one year.
(c) From commencement of class operations as noted.
- ---
39
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust II:
We have audited the accompanying statements of net assets of the Nuveen Flagship
Multistate Trust II (comprising the Nuveen Flagship New Jersey, Nuveen Flagship
New York and Nuveen New York Insured Municipal Bond Funds) (a Massachusetts
business trust), including the portfolio of investments, as of February 28,
1999, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years then ended and the
financial highlights for the periods indicated thereon. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 28, 1999, by correspondence with the custodian and brokers. As to
securities purchased but not received, we requested confirmation from brokers,
and when replies were not received, we carried out alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of each of the
respective funds constituting the Nuveen Flagship Multistate Trust II as of
February 28, 1999, the results of their operations for the year then ended, the
changes in their net assets for each of the two years then ended, and the
financial highlights for the periods indicated thereon in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 12, 1999
- ----
40
<PAGE>
Fund Information
Board of Trustees Transfer Agent and
Robert P. Bremner Shareholder Services
Lawrence H. Brown The Chase Manhattan Bank
Anne E. Impellizzeri 4 New York Plaza
Peter R. Sawers New York, NY 10004-2413
William J. Schneider (800) 257-8787
Timothy R. Schwertfeger
Judith M. Stockdale Legal Counsel
Morgan, Lewis &
Fund Manager Bockius LLP
Nuveen Advisory Corp. Washington, D.C.
333 West Wacker Drive
Chicago, IL 60606 Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
- ----
41
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR APPEARS HERE]
JOHN NUVEEN, SR.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time. We emphasize quality securities carefully chosen through
in-depth research, and we follow those securities closely over time to ensure
that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
