<PAGE>
ANNUAL REPORT February 29, 2000
Nuveen Investments
NUVEEN MUNICIPAL BOND FUNDS
California
California Insured
[PHOTO APPEARS HERE]
<PAGE>
Fund Information
Board of Trustees Transfer Agent and
Shareholder Services
Robert P. Bremner
Lawrence H. Brown Chase Global Funds Services Company
Anne E. Impellizzeri 73 Tremont Street
Peter R. Sawers Boston, MA 02108
William J. Schneider
Timothy R. Schwertfeger (800) 257-8787
Judith M. Stockdale
Legal Counsel
Fund Manager
Morgan, Lewis &
Nuveen Advisory Corp. Bockius LLP
333 West Wacker Drive Washington, D.C.
Chicago, IL 60606
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
Contents
1 Dear Shareholder
3 From the Portfolio Manager's Perspective
6 Nuveen California Municipal Bond Fund Spotlight
7 Nuveen California Insured Municipal Bond
Fund Spotlight
8 Portfolio of Investments
15 Statement of Net Assets
16 Statement of Operations
17 Statement of Changes in Net Assets
18 Notes to Financial Statements
23 Financial Highlights
25 Report of Independent Public Accountants
<PAGE>
DEAR
Shareholder,
[Photo of Timothy R. Schwertfeger appears here]
Timothy R. Schwertfeger
Chairman of the Board
Setting financial goals is an important first step toward building wealth. At
Nuveen Investments, we believe those goals should not be considered ends in
themselves. Rather, you and your financial advisor's focus should be on
realizing your life's dreams -- the things that matter most to you and how you
can make them happen -- or make them better.
Through a well-crafted financial plan, you have the chance to shape future
generations -- to broaden your sphere of influence -- to leave your legacy.
As you develop that plan, you'll want to consider the different ways your
success can benefit others. You may find that you want to create a new set of
goals to achieve this. Working with your financial advisor, you have the ability
to make those dreams a reality -- for yourself and future generations.
A Trusted Resource. As you face some of the most important, lasting decisions
you and your family will make, you'll want to draw upon the support, counsel and
objectivity of a trusted advisor. That's because your financial advisor has the
expertise and access to other professionals who can help you make informed
choices -- choices that affect not only your loved ones today, but those your
legacy will touch in the future.
Your financial advisor can provide sound financial insight, an integrated
approach to your investments and can serve as a knowledgeable friend with your
family's best interest at heart.
Family Wealth Management. Too often, family wealth management is thought of in
one dimension -- as the stewardship of your household's financial resources. At
Nuveen Investments, we think of family wealth management as the map to help you
reach your financial, and your life's, destinations. It's a multi-faceted
strategy to plan for not just your needs, but the needs of future generations.
We are dedicated to helping you and your financial advisor develop a family
wealth management strategy unique to you and your goals and values.
The Economic Environment. You may be reading this report at the suggestion of
your financial advisor. We've prepared the following interview to let you know
what the investment and research management teams have done during your fund's
fiscal period. Before we get to that, I want to briefly report on the economic
environment in which your Nuveen investment performed.
The end of your fund's fiscal period, February 29, 2000, was an important day
in our nation's economic life. It marked the 107th month of continued economic
expansion, the longest period of expansion in history. The only period to rival
that length was the 106-month expansion from February 1961 to December 1969, a
period known best for its military conflicts, domestic unrest and soaring
inflation.
That was then; this is now.
"We are dedicated to
helping you and your
financial advisor
develop a family
wealth management
strategy unique to
you and your goals
and values."
ANNUAL REPORT page 1
<PAGE>
"There's still faith
in the emerging
paradigm, which holds that
improvements in
productivity enable us to have both
economic growth
and low inflation
at the same time."
The vigilant inflationary watch of Federal Reserve Chairman Alan Greenspan,
the growth of the Internet and other technology-related developments and the
globalization of the economy are three reasons for continued economic health.
In their battle to keep inflation at bay, Greenspan's Fed raised interest
rates on February 2, 2000, and again on March 21, 2000. The latest increase
marked the fifth time the Fed has raised the federal funds rate -- the interest
that banks charge each other on overnight loans -- since June 1999.
Municipal bonds continued to serve investors well, in our opinion. At the end
of February 2000, the ratio between long-term municipal bond yields and 30-year
Treasury yields stood at 102%. For investors, this meant that quality long-term
municipal bonds offered yields above those of long-term Treasury bonds -- even
before the tax advantages of municipals were taken into account. Of course,
Treasuries are backed by the full faith and credit of the U.S. government. Even
so, on an after-tax basis, municipal bonds continued to present an exceptionally
attractive investment option relative to Treasuries.
Over the short term, the inflation threat has meant increased price
fluctuations in the equity markets. Part of that is due to the fact that
investors and the various markets have been watching -- and reacting to -- every
announcement concerning economic statistics.
Longer term, we believe there's still faith in the emerging paradigm, which
holds that improvements in productivity enable us to have both economic growth
and low inflation at the same time. The 1960's 106-month expansion that I noted
earlier was fueled by government spending. Today's economy has been fueled by
consumer spending and improved productivity.
What Can You Do? We believe the potential presence of inflation and price swings
in the markets reinforce the importance of working with an advisor, staying
focused on the long term and adhering to your financial plan. With a sound plan
in place, you may be better positioned to weather the markets' ups and downs. As
you pursue your life's dreams, your financial advisor can serve as a valuable
resource in helping you keep market events in perspective while you focus on
your overall financial plan.
For more information on any Nuveen investment, including a prospectus, contact
your financial advisor. Or call Nuveen at (800) 621-7227 or visit our Internet
site at www.nuveen.com. Please read the prospectus carefully before you invest
or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test of
time. We are committed to maintaining that reputation and working with financial
advisors to provide investment solutions that help individuals achieve their
lives dreams. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
April 14, 2000
ANNUAL REPORT page 2
<PAGE>
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
NUVEEN CALIFORNIA INSURED MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
- --------------------------------------------------------------------------------
Nuveen California Municipal Bond Fund and Nuveen California Insured Municipal
Bond Fund feature portfolio management by Nuveen Investment Advisory Services, a
team of portfolio managers and research analysts committed to a disciplined,
research-oriented investment strategy. To help you understand the fund's
performance for the fiscal year ended February 29, 2000, we spoke with Portfolio
Manager Bill Fitzgerald of Nuveen Advisory Corp.
Q Over the last year, the nation's economy grew at a healthy clip, continuing
an unprecedented trend of economic expansion. How did the California economy do
over the fund's fiscal year, which ended February 29, 2000?
BILL The economy in California has been very strong on many levels. As of
February 29, 2000, California's unemployment rate is 4.6%, down from 5.5% for
the same period last year. The national unemployment rate is 4.1%. Personal
income grew almost 8%, versus 6% overall for the U.S.
The state of California had its best year ever in revenues during 1999, and to
date, 2000 has been strong as well with officials projecting a $1 billion-plus
budget surplus for April 2000. The state of California was upgraded by bond
rating agency Standard & Poor's in mid-February 1999 from AA- to AA. The state's
debt ratio stood at four percent at the end of 1999.
Construction and real estate have been important drivers of this flourishing
economy; however, it has been the computer/software industry that seems to be
the most powerful driver, and the wealth it has created has been a major force
behind most everything from housing to consumer spending. It has been by far the
fastest-growing industry at an average growth rate of 18%.
The average salary across all jobs -- from janitor on up -- in this sector was
between $80,000 and $100,000, as of the period reported. This of course
contributed to the tight job market, but the upside is it has been attracting
good, quality workers from all over the country.
Q What was the level of state municipal bond supply during the fiscal year?
BILL Issuance was down 21 percent over 1999, which was in line with the rest of
the nation. The higher cost of borrowing due to rising interest rates was a
reason for decreased supply. Demand pretty much stayed consistent with supply
over the year.
Q Of course, the downside to this thriving economy has been rising interest
rates, and the Federal Reserve Board (the Fed) implemented several rate hikes,
as was expected, to help head off any inflationary pressures. How did the two
Nuveen California municipal bond funds perform in this less-than-ideal
environment for municipal bonds?
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. Nuveen has chosen them for their rigorously
disciplined investment approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's income-oriented funds feature portfolio management by Nuveen Investment
Advisory Services (NIAS). NIAS follows a disciplined, research-driven investment
approach to uncover income securities that combine exceptional relative value
with above-average return potential. Drawing on 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
.. A commitment to exhaustive research
.. An active, value-oriented investment style
.. The unmatched presence and trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen California and California Insured Municipal
Bond Funds.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the one-year period ended February 29, 2000. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
ANNUAL REPORT page 3
<PAGE>
"We took advantage of rising interest rates to improve call protection and
potentially enhance each fund's income stream."
BILL While this environment allowed us to take some measures to position the
funds for the long term, for the fiscal year ended February 29, 2000, the Nuveen
California Municipal Bond Fund reported a total return of -3.12% for Class A
shares on net asset value. That compares favorably to the Lipper California
Municipal Debt peer group average, which reported a 4.88% loss for the same one-
year period. Over the five-year period, the fund reported a 5.23% gain, compared
to the 4.87% gain for the Lipper peer group for the same period.*
As of February 29, 2000, the fund's SEC 30-day yield was 5.31%. For investors
in the combined 37.5% federal and state income tax bracket, that is equivalent
to a yield of 8.50% on a taxable investment.**
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed..34%
AA................... 7%
A....................15%
BBB/NR...............44%
As a percentage of total bond holdings as of February 29, 2000.
Holdings are subject to change.
Nuveen California Insured Municipal Bond Fund had a total return of -3.52% for
the fiscal year ended February 29, 2000, compared to the Lipper California
Insured Municipal Debt peer group average loss of 4.23%. The five-year period
shows a 4.95% gain for the fund, in line with the 4.96% gain for the Lipper peer
group.*
As of February 29, 2000, the Nuveen California Insured Municipal Bond Fund's
SEC 30-day yield was 4.70%, which is equivalent to a 7.52% yield on a taxable
investment for investors in the combined 37.5% federal and state income tax
bracket.**
Q How did you manage the funds in this challenging environment of rising
interest rates?
BILL A challenging market like this one can still present us with unique
opportunities to restructure the portfolio and position the fund for the long-
term.
We took advantage of rising interest rates to improve call protection and
potentially enhance each fund's income stream. When interest rates are falling,
bond issuers tend to call or redeem their bonds early to lower their repayment
costs, forcing bond investors to reinvest at lower rates. Improving the call
protection helps shield the fund from these early bond calls. Shareholders could
benefit as this strategy would allow the portfolio to hold onto higher-yielding
bonds in a lower-rate environment. We sold out holdings that had less than seven
years of call protection, to improve the average call protection to 10 years.
We also maintained a short duration in the portfolios, which typically works
well amid rising interest rates because as shorter-term bonds mature, we can
reinvest at higher rates (and lower prices).
Other than that, it was a combination of being in what we felt were the right
sectors and participating in a couple of opportune bond issues that were
important to the marketplace. Having the knowledge and market presence of Nuveen
research helped us get a front-row seat with some of these deals.
Q Can you give us some examples of some of these important issues and sectors?
BILL One important issue to the marketplace was the Foothill/Eastern
Transportation Corridor, which supports a toll road project in Southern
California. We purchased this issue at a 5% coupon maturing in 2035, then had
the bonds insured in the
*For the Nuveen California Municipal Bond Fund, the Lipper Peer Group returns
represent the average annualized total return of the 108 funds in the Lipper
California Municipal Debt Funds category for the one-year period ended February
29, 2000, and 78 funds for the five-year period. For the Nuveen California
Insured Municipal Bond Fund the Lipper Peer Group returns represent the 23 funds
in the Lipper California Insured Municipal Debt Funds category for the one-year
period and 20 funds in the category for the five-year period. The returns assume
reinvestment of dividends and do not reflect any applicable sales charges.
**Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis. The rate
shown is based on the 30-day SEC yield and a combined federal and state income
tax rate of 37.5%.
ANNUAL REPORT page 4
<PAGE>
secondary market once we owned them. This is just one method of insurance we use
for the Nuveen California Insured Municipal Bond Fund, but we also periodically
use this tactic in the other fund to try to enhance returns on an issue, because
bonds that are insured generally are worth more.
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
Top Five Sectors
Tax Obligation (Limited) 25%
-------------------------------------
Housing (Multifamily) 18%
-------------------------------------
Healthcare 13%
-------------------------------------
U.S. Guaranteed 10%
-------------------------------------
Transportation 9%
-------------------------------------
As a percentage of total bond holdings as of February 29, 2000. Holdings are
subject to change.
NUVEEN CALIFORNIA INSURED MUNICIPAL BOND FUND
Top Five Sectors
Tax Obligation (Limited) 30%
-------------------------------
U.S. Guaranteed 21%
-------------------------------
Tax Obligation (General) 19%
-------------------------------
Housing (Multifamily) 8%
-------------------------------
Healthcare 6%
-------------------------------
As a percentage of total bond holdings as of February 29, 2000. Holdings are
subject to change.
After the Foothill/Eastern Transportation Corridor bonds were insured, the
price increased 10 basis points. They returned 27% over the fiscal year.
Resource recovery bonds made up the best performing sector for the funds,
mainly due to one of the largest holdings in the Nuveen California Municipal
Bond Fund: the California Pollution Control Financing Authority for the CanFibre
of Riverside Project. CanFibre is a company that recycles wood fiber into a
strong fire and water-resistant wood product. As construction of this facility
was completed in May 1999 and it began operation, the prices of the bonds rose
to reflect the positive credit outlook on the project. As of February 29, 2000,
about 5% of the fund's assets were invested in CanFibre. The California Insured
Municipal Bond Fund does not hold these bonds.
The healthcare sector continued to face challenges during the period, the
resulting fallout from the federal Medicare reimbursement cuts in 1997. However,
with our California-based research we were able to identify specific issues with
attractive spreads that did well despite the market: California Health Care
(Cedars-Sinai Medical Center) and Catholic Healthcare West. Both were upgraded
by the rating agencies during the fiscal year, with Cedars-Sinai Medical Center
returning 25% over the fiscal year.
"With no apparent indication that the computer industry will slow down anytime
soon, we look for the state's economy to continue its fast-paced growth through
at least the first half of the fiscal year."
Q What is your outlook for the California economy and the municipal bond market
for the coming fiscal year?
BILL With no apparent indication that the computer industry will slow down
anytime soon, we look for the state's economy to continue its fast-paced growth
through at least the first half of the fiscal year. Even if the stock market
were to fall, the effects wouldn't be felt for a while, in our opinion, because
there are enough built-in gains from the very prevalent stock options, which
would continue to funnel spending into the state for some time.
The California market has been gaining acceptance over the last few years, and
we expect state bonds to do better compared to the rest of the market during the
next fiscal year. We also expect better credit options in the market as well as
stronger liquidity.
We plan to keep healthcare underweighted in both portfolios for now, but we
may increase exposure if interest rates continue to rise and spreads widen.
Since we fully expect the Fed to continue to raise interest rates throughout the
year, we also plan to continue to focus on bonds with a short duration in
keeping with the interest rate environment.
ANNUAL REPORT page 5
<PAGE>
NUVEEN CALIFORNIA MUNICIPAL BOND FUND
Fund Spotlight as of February 29, 2000
Terms To Know
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income investment
portfolio. The longer the duration, the greater a portfolio's sensitivity to
changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by subtracting
the fund's liabilities from its assets and dividing by the number of shares
outstanding.
SEC Yield A standardized calculation that the Securities and Exchange Commission
requires mutual funds to use when advertising rates of income return. This
standardized rate ensures that investors are comparing "apples to apples" when
comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security to
pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share earned
over a specific one-month or 30-day period expressed as a percentage of the
maximum offering price of the fund shares at the end of the period.
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 10.01 $ 10.00 $ 10.01 $ 10.02
- -----------------------------------------------------------------------------------------------
February's Declared Dividend* $0.0460 $0.0400 $0.0415 $0.0480
- -----------------------------------------------------------------------------------------------
Fund Symbol NCAAX N/A NCACX NCSPX
- -----------------------------------------------------------------------------------------------
CUSIP 67065N100 67065N209 67065N308 67065N407
- -----------------------------------------------------------------------------------------------
Inception Date 9/94 3/97 9/94 7/86
- -----------------------------------------------------------------------------------------------
* Paid March 1, 2000
</TABLE>
<TABLE>
<CAPTION>
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -3.12% -7.21% -3.93% -7.60% -3.74% -2.98%
- -----------------------------------------------------------------------------------------------
1-Year TER* -0.05% -4.27% -1.31% -4.98% -1.02% 0.21%
- -----------------------------------------------------------------------------------------------
5-Year 5.23% 4.33% 4.44% 4.28% 4.57% 5.44%
- -----------------------------------------------------------------------------------------------
5-Year TER* 8.37% 7.44% 7.14% 6.98% 7.31% 8.72%
- -----------------------------------------------------------------------------------------------
10-Year 6.13% 5.68% 5.58% 5.58% 5.43% 6.40%
- -----------------------------------------------------------------------------------------------
10-Year TER* 9.48% 9.01% 8.58% 8.58% 8.37% 9.91%
- -----------------------------------------------------------------------------------------------
</TABLE>
+ Class R shares returns are actual. Class A, B and C share returns are
actual for the period since class inception; returns prior to class inception
are Class R share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and declines
periodically to 0% over the following five years. Class C shares have a 1% CDSC
for redemptions within one year, which is not reflected in the one-year total
returns.
* Taxable Equivalent Return (Based on a combined federal and state income tax
rate of 37.5%.)
<TABLE>
<CAPTION>
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 5.31% 5.08% 4.56% 4.76% 5.51%
- -----------------------------------------------------------------------------------------------
Taxable Equivalent Yield 8.50% 8.13% 7.30% 7.62% 8.82%
- -----------------------------------------------------------------------------------------------
</TABLE>
Index Comparison
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
LEHMAN NUVEEN NUVEEN
BROTHERS CALIFORNIA CALIFORNIA
MUNICIPAL MUNICIPAL MUNICIPAL
BOND INDEX BOND FUND(Offer) BOND FUND(NAV)
<S> <C> <C> <C>
2/90 $ 10,000 $ 9,580 $ 10,000
2/91 $ 10,922 $ 10,372 $ 10,827
2/92 $ 12,013 $ 11,305 $ 11,801
2/93 $ 13,667 $ 12,819 $ 13,381
2/94 $ 14,422 $ 13,435 $ 14,024
2/95 $ 14,695 $ 13,465 $ 14,056
2/96 $ 16,318 $ 14,860 $ 15,511
2/97 $ 17,364 $ 15,645 $ 16,331
2/98 $ 18,953 $ 17,033 $ 17,780
2/99 $ 20,118 $ 17,932 $ 18,718
2/00 $ 19,696 $ 17,373 $ 18,135
</TABLE>
--Nuveen CA Municipal Bond Fund (Offer) $17,373
--Nuveen CA Municipal Bond Fund (Nav) $18,135
--Lehman Brothers Municipal Bond Index $19,696
Morningstar Rating /TM/ ++
****
Overall rating among 1,678
municipal bond funds as
of 2/29/00
Portfolio Statistics
Total Net Assets $262.5 million
- --------------------------------
Average Effective
Maturity 20.06 years
- --------------------------------
Average Duration 9.31
- --------------------------------
=== Nuveen CA Municipal Bond Fund (Offer) $17,373
=== Nuveen CA Municipal Bond Fund (Nav) $18,135
=== Lehman Brothers Municipal Bond Index $19,895
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.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
++ The Morningstar rating is an overall rating for the municipal bond category
and relates to Class A shares only; other classes may vary. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of
2/29/00 and are subject to change every month. Past performance is no
guarantee of future results. Ratings are calculated from the fund's three-,
five-, and 10-year average annual returns (if applicable) in excess of 90-
day Treasury bill returns, with appropriate fee adjustments, and a risk
factor that reflects fund performance below 90-day T-bill returns. Class A
shares of the fund received four stars for the three- and five-year periods.
The top 10% of the funds in a broad asset class receive five stars and the
next 22.5% receives four stars. The fund was rated among 1,678 and 1,365
funds for the three- and five-year periods, respectively.
The Nuveen California Municipal Bond Fund's monthly dividends rose during the
fiscal period. The amount differed based on share class. Please see Quick Facts
for the latest dividend paid.
ANNUAL REPORT page 6
<PAGE>
NUVEEN CALIFORNIA INSURED MUNICIPAL BOND FUND
Fund Spotlight as of February 29, 2000
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Quick Facts
- ------------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $10.19 $10.20 $10.13 $10.18
- ------------------------------------------------------------------------------------
February's Declared Dividend* $0.0445 $0.0380 $0.0395 $0.0460
- ------------------------------------------------------------------------------------
Fund Symbol NCAIX NCABX NCAKX NCIBX
- ------------------------------------------------------------------------------------
CUSIP 67065N506 67065N605 67065N704 67065N803
- ------------------------------------------------------------------------------------
Inception Date 9/94 3/97 9/94 7/86
- ------------------------------------------------------------------------------------
</TABLE>
* Paid March 1, 2000
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Total Returns (Annualized)+
- -------------------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -3.52% -7.60% -4.26% -7.93% -4.03% -3.27%
- -------------------------------------------------------------------------------------------
1-Year TER* -0.62% -4.83% -1.82% -5.50% -1.49% -0.27%
- -------------------------------------------------------------------------------------------
5-Year 4.95% 4.06% 4.20% 4.03% 4.37% 5.19%
- -------------------------------------------------------------------------------------------
5-Year TER* 7.97% 7.05% 6.76% 6.61% 6.99% 8.34%
- -------------------------------------------------------------------------------------------
10-Year 6.27% 5.81% 5.65% 5.65% 5.50% 6.50%
- -------------------------------------------------------------------------------------------
10-Year TER* 9.47% 8.99% 8.50% 8.50% 8.28% 9.84%
- -------------------------------------------------------------------------------------------
</TABLE>
+ Class R shares returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years. Class C shares
have a 1% CDSC for redemptions within one year, which is not reflected in the
one-year total returns.
* Taxable Equivalent Return (Based on a combined federal and state income tax
rate of 37.5%.)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Tax-Free Yields
- --------------------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 4.70% 4.51% 3.96% 4.16% 4.91%
- --------------------------------------------------------------------------------------------
Taxable Equivalent Yield 7.52% 7.22% 6.34% 6.66% 7.86%
- --------------------------------------------------------------------------------------------
</TABLE>
Index Comparison
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
NUVEEN NUVEEN
LEHMAN CALIFORNIA CALIFORNIA
BROTHERS INSURED INSURED
MUNICIPAL MUNICIPAL MUNICIPAL
BOND INDEX BOND FUND BOND FUND
(Offer) (NAV)
<S> <C> <C> <C>
2/90 $ 10,000 $ 9,580 $ 10,000
2/91 $ 10,922 $ 10,388 $ 10,843
2/92 $ 12,013 $ 11,390 $ 11,890
2/93 $ 13,667 $ 13,075 $ 13,648
2/94 $ 14,422 $ 13,599 $ 14,195
2/95 $ 14,695 $ 13,816 $ 14,422
2/96 $ 16,318 $ 15,241 $ 15,909
2/97 $ 17,364 $ 15,937 $ 16,636
2/98 $ 18,953 $ 17,317 $ 18,076
2/99 $ 20,118 $ 18,236 $ 19,036
2/00 $ 19,696 $ 17,595 $ 18,366
</TABLE>
-- Nuveen CA Insured Municipal Bond Fund (Offer) $17,595
-- Nuveen CA Insured Municipal Bond Fund (NAV) $18,366
-- Lehman Brothers Municipal Bond Index $19,696
- ----------------------------------------
Portfolio Statistics
- ----------------------------------------
Total Net Assets $228.3 million
- ----------------------------------------
Average Effective
Maturity 20.07 years
- ----------------------------------------
Average Duration 9.04
- ----------------------------------------
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.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
- --------------------------------------------------------------------------------
Terms To Know
- --------------------------------------------------------------------------------
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income
investment portfolio. The longer the duration, the greater a portfolio's
sensitivity to changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by
subtracting the fund's liabilities from its assets and dividing by the number of
shares outstanding.
SEC Yield A standardized calculation that the Securities and Exchange
Commission requires mutual funds to use when advertising rates of income return.
This standardized rate ensures that investors are comparing "apples to apples"
when comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security
to pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share earned
over a specific one-month or 30-day period expressed as a percentage of the
maximum offering price of the fund shares at the end of the period.
The Nuveen California Insured Municipal Bond Fund's monthly dividends rose
during the fiscal period. The amount differed based on share class. Please see
Quick Facts for the latest dividend paid.
ANNUAL REPORT page 7
<PAGE>
Portfolio of Investments
Nuveen California Municipal Bond Fund
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 3.8%
$ 960 California Educational Facilities Authority, Pooled College and 4/07 at 102 Baa2 $ 937,949
University Projects Revenue Bonds, Series 1997B (Southern
California College of Optometry), 6.300%, 4/01/21
1,500 California Statewide Community Development Authority, San Diego, 12/06 at 105 N/R 1,538,865
Certificates of Participation, 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 5.600%, 11/01/20 11/03 at 102 Aa3 3,314,885
4,335 6.000%, 11/01/21 11/03 at 102 Aa3 4,311,158
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 13.2%
18,000 California Health Facilities Financing Authority, Revenue Bonds 12/09 at 101 A2 17,116,020
(Cedars-Sinai Medical Center), Series 1999A, 6.125%, 12/01/30
California Health Facilities Financing Authority, Insured Health
Facility Revenue Bonds (Small Facilities Pooled Loan Program),
1994 Series B:
3,000 7.400%, 4/01/14 4/05 at 102 AA- 3,303,090
3,635 7.500%, 4/01/22 4/05 at 102 AA- 4,004,534
3,370 California Health Facilities Financing Authority, Hospital Revenue 5/03 at 102 BBB+ 3,092,683
Bonds (Downey Community Hospital), Series 1993, 5.750%, 5/15/15
3,380 California Health Facilities Financing Authority, Kaiser Permanente 12/00 at 102 A 3,521,419
Revenue Bonds, 1990 Series A, 7.000%, 12/01/10
1,755 Central Joint Powers Health Financing Authority, Certificates of 2/03 at 100 Baa1 1,319,865
Participation, Series 1993 (Community Hospital of Central
California), 5.000%, 2/01/23
2,475 City of Loma Linda, California, Hospital Revenue Bonds (Loma Linda 12/03 at 102 N/R 2,319,224
University Medical Center Project), Series 1993-A, 6.000%, 12/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 18.1%
8,400 ABAG Finance Authority for Nonprofit Corporations, Multifamily No Opt. Call BBB 8,491,476
Housing Revenue Refunding Bonds (United Dominion/2000 Post Apartments),
2000 Series B, 6.250%, 8/15/30 (Mandatory put 8/15/08)
6,570 California Housing Finance Agency, Multifamily Housing Revenue Bonds 8/06 at 102 AAA 6,465,997
II, 1996 Series A, 6.050%, 8/01/27
California Statewide Communities Development Authority, Apartment
Development Revenue Refunding Bonds (Irvine Apartment Communities,
L.P.), Series 1998A:
7,950 5.250%, 5/15/25 (Mandatory put 5/15/13) 7/08 at 101 BBB 7,362,654
1,500 5.100%, 5/15/25 (Mandatory put 5/15/10) 7/08 at 101 BBB 1,417,560
2,905 California Statewide Communities Development Authority, Senior Lien 6/06 at 100 AAA 2,959,265
Multifamily Housing Revenue Bonds (Monte Vista Terrace), Series 1996A,
6.375%, 9/01/20
4,350 The Community Redevelopment Agency of the City of Los Angeles, 6/05 at 105 AAA 4,753,985
California, Multifamily Housing Revenue Refunding Bonds,
1995 Series A (Angelus Plaza Project), 7.400%, 6/15/10
3,285 City of Riverside, California, Multifamily Housing Revenue Bonds 7/02 at 100 AAA 3,327,147
(Fannie Mae Pass-Through Certificate Program/Birchwood Park
Apartment Project), Series 1992A, 6.500%, 1/01/18
4,005 City of Riverside, California, Multifamily Housing Revenue Bonds 7/02 at 100 AAA 4,056,384
(Fannie Mae Pass-Through Certificate Program/Palm Shadows
Apartments Project), 1992 Series A, 6.500%, 1/01/18
2,000 County of Riverside (California), Mobile Home Park Revenue Bonds 3/09 at 102 N/R 1,798,160
(Bravo Mobile Home Park Project), Series 1999B, 5.900%, 3/20/29
2,080 City of Salinas, California, Housing Facility Refunding Revenue 7/04 at 102 AAA 2,141,027
Bonds, Series 1994A (GNMA Collateralized - Villa Serra Project),
6.500%, 7/20/17
2,000 San Dimas Housing Authority, Mobile Home Park Revenue Bonds 7/08 at 102 N/R 1,731,600
(Charter Oak Mobile Home Estates Acquisition Project),
Series 1998A, 5.700%, 7/01/28
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 3,000 Housing Authority of the County of Santa Cruz, Multifamily Housing 7/00 at 102 AAA $ 3,075,600
Refunding Revenue Bonds, Series 1990A (Fannie Mae Collateralized),
7.750%, 7/01/23
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 4.0%
2,250 California Housing Finance Agency, Home Mortgage Revenue Bonds, 2/07 at 102 AAA 2,240,303
1997 Series B, 6.100%, 2/01/28 (Alternative Minimum Tax)
33,500 California Housing Finance Agency, Home Mortgage Revenue Bonds, 8/09 at 31 19/32 AAA 4,955,320
1999 Series F, 0.000%, 2/01/30 (Alternative Minimum Tax)
2,850 California Rural Home Mortgage Finance Authority, Single Family No Opt. Call AAA 3,074,324
Mortgage Revenue Bonds (Mortgage-Backed Securities Program),
1997 Series A, 7.000%, 9/01/29 (Alternative Minimum Tax)
1,950 County of San Bernardino (California), Single Family Home 5/07 at 22 9/16 AAA 274,463
Mortgage Revenue Bonds (Mortgage-Backed Securities Program),
1997 Series A, 0.000%, 5/01/31 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 4.0%
7,000 ABAG Finance Authority for Nonprofit Corporations, Revenue Refunding 10/07 at 102 BBB- 5,744,760
Certificates of Participation (American Baptist Homes of the West
Facilities Project), Series 1997A, 5.850%, 10/01/27
2,500 California Statewide Communities Development Authority, Certificates 11/04 at 102 AA- 2,576,075
of Participation (Solheim Lutheran Home), 6.500%, 11/01/17
2,000 Chico Redevelopment Agency, Insured Certificates of Participation 2/01 at 102 AA- 2,072,260
(Sierra Sunrise Lodge), Series 1991A, Walker Senior Housing
Corporation VII, 6.750%, 2/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 3.9%
8,500 State of California, Various Purpose General Obligation Bonds, 3/10 at 101 AAA 8,333,315
5.750%, 3/01/27 (WI)
Petaluma Joint High School District (Sonoma County, California),
General Obligation Bonds, Election of 1992, Series C:
4,220 0.000%, 8/01/20 8/04 at 38 13/32 AAA 1,218,441
2,080 0.000%, 8/01/21 8/04 at 36 1/8 AAA 563,555
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 25.3%
4,730 Alameda County Public Facilities Corporation, Certificates of 9/06 at 102 AAA 4,772,144
Participation (1991 Financing Project), 6.000%, 9/01/21
1,365 City of Brea Community Facilities District No. 1997-1, Olinda 3/06 at 102 N/R 1,196,887
Heights Public Improvements, 1998 Special Tax Bonds, 5.875%, 9/01/28
Brentwood Infrastructure Financing Authority, CIFP 98-1 Infrastructure
Revenue Bonds, Series 1998 (Contra Costa County, California):
1,225 5.750%, 9/02/18 3/00 at 103 N/R 1,083,072
2,440 5.875%, 9/02/28 3/00 at 103 N/R 2,112,357
Brentwood Infrastructure Financing Authority, CIFP 99-1 Infrastructure
Revenue Bonds, Series 1999 (Contra Costa County, California):
1,675 6.000%, 9/02/22 3/00 at 103 N/R 1,524,351
1,500 6.000%, 9/02/29 3/00 at 103 N/R 1,340,235
2,000 Carson Redevelopment Agency (California), Redevelopment Project 10/03 at 102 BBB+ 1,965,880
Area No. 1, Tax Allocation Bonds, Series 1993, 6.000%, 10/01/16
1,500 Dinuba Redevelopment Agency, California, Merged City of Dinuba 12/01 at 101 N/R 1,472,670
Redevelopment Project and Dinuba Redevelopment Project No. 2,
As Amended, Subordinated Tax Allocation Refunding Notes,
Issue of 1999A, 6.100%, 12/01/04
2,500 Fontana Public Financing Authority (San Bernardino County, California), 9/00 at 102 BBB 2,536,950
Tax Allocation Revenue Bonds (North Fontana Redevelopment Project),
1990 Series A, 7.250%, 9/01/20
2,000 La Mirada Redevelopment Agency (California), Community Facilities 10/08 at 102 N/R 1,717,940
District No.89-1 (Civic Theatre Project), 1998 Refunding Special
Tax Bonds (Tax Increment Contribution), 5.700%, 10/01/20
1,260 Marysville Community Development Agency (California), Marysville 3/02 at 102 Baa3 1,291,475
Plaza Project, 1992 Tax Allocation Refunding Bonds, 7.250%, 3/01/21
6,240 City of Milpitas, Limited Obligation Improvement Bonds, Local 3/00 at 103 N/R 5,479,906
Improvement District No. 20, 1998 Series A (Santa Clara County,
California), 5.700%, 9/02/18
</TABLE>
9
<PAGE>
Portfolio of Investments
Nuveen California Municipal Bond Fund (continued)
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 1,590 City of Ontario (San Bernardino County, California), Limited 3/00 at 103 N/R $ 1,649,879
Obligation Improvement Bonds, Assessment District No. 100C
(California Commerce Center Phase III), 8.000%, 9/02/11
2,250 County of Orange, California, Community Facilities District No. 99-1 8/09 at 102 N/R 2,227,928
(Ladera Ranch), Series A of 1999, Special Tax Bonds, 6.700%, 8/15/29
4,300 Orange County Development Agency, Santa Ana Heights Project Area, 9/03 at 102 BBB 4,023,768
1993 Tax Allocation Revenue Bonds (California), 6.125%, 9/01/23
2,000 Community Facilities District No. 88-1 of the City of Poway, California 8/08 at 102 N/R 2,024,600
(Parkway Business Center), Special Tax Refunding Bonds, Series 1998,
6.750%, 8/15/15
1,645 City of Rancho Cucamoga, Assessment District No. 93-1 (Masi Plaza), 3/00 at 103 N/R 1,553,193
Limited Obligation Improvement Bonds, 6.250%, 9/02/22
1,360 Redding Joint Powers Financing Authority, Lease Revenue Bonds 6/03 at 102 A 1,345,870
(Capital Improvement Projects), Series 1993, 6.250%, 6/01/23
1,000 County of Sacramento (California), Laguna Creek Ranch/Elliott Ranch 12/07 at 102 N/R 848,750
Community Facilities District No. 1, Improvement Area No. 1 Special
Tax Refunding Bonds (Laguna Creek Ranch), 5.700%, 12/01/20
2,235 City of Salinas, Limited Obligation Refunding Bonds, Consolidated 3/00 at 103 N/R 2,314,007
Refunding District 94-3, Series No. A-181 Monterey County, California,
7.400%, 9/02/09
5,000 City and County of San Francisco Redevelopment Financing Authority, 8/03 at 103 A 4,462,200
1993 Series C, Tax Allocation Revenue Bonds (San Francisco
Redevelopment Projects), 5.125%, 8/01/18
7,090 Redevelopment Agency of the City of San Marcos, Tax Allocation Bonds 10/07 at 102 A- 6,716,428
(1997 Affordable Housing Project), Series 1977A, 6.000%, 10/01/27
(Alternative Minimum Tax)
4,000 Shafter Joint Powers Financing Authority, Lease Revenue Bonds, 1/07 at 101 A2 4,004,760
1997 Series A (Community Correctional Facility Acquisition Project),
6.050%, 1/01/17
1,000 City of Stockton, Mello-Roos Revenue Bonds, Series 1997A, Community 8/05 at 102 N/R 971,270
Facilities District No. 90-2 (Brookside Estates), 6.200%, 8/01/15
3,475 City of Stockton, Limited Obligation Refunding Improvement Bonds, No Opt. Call N/R 3,176,741
Weber/Sperry Ranches Assessment District, Series 22, 5.650%, 9/02/13
2,000 Taft Public Financing Authority, Lease Revenue Bonds, 1997 Series A 1/07 at 101 A2 2,002,380
(Community Correctional Facility Acquisition Project), 6.050%, 1/01/17
1,100 County of Tulare (California), Certificates of Participation 11/02 at 102 A3 1,186,196
(1992 Financing Project), Series B, Tulare County Public Facilities
Corporation, 6.875%, 11/15/12
1,500 Vallejo Public Financing Authority, 1998 Limited Obligation Revenue Bonds No Opt. Call N/R 1,432,650
(Fairgrounds Drive Assessment District Refinancing), 5.700%, 9/02/11
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 8.9%
Foothill/Eastern Transportation Corridor Agency (California), Toll Road
Revenue Bonds, Series 1995A:
7,150 5.000%, 1/01/35 1/10 at 100 BBB- 5,971,823
11,850 5.000%, 1/01/35 1/10 at 100 AAA 10,182,468
Foothill/Eastern Transportation Corridor Agency (California), Toll
Road Refunding Revenue Bonds, Series 1999:
8,900 0.000%, 1/15/28 1/14 at 101 BBB- 4,433,624
3,000 5.750%, 1/15/40 1/10 at 101 BBB- 2,733,720
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 10.4%
1,500 ABAG Finance Authority for Nonprofit Corporations, Insured Certificates of 1/01 at 102 N/R*** 1,566,555
Participation (Channing House), Series 1991A, 7.125%, 1/01/21
(Pre-refunded to 1/01/01)
2,035 Bella Vista Water District (California), Certificates of Participation 10/01 at 102 Baa*** 2,166,909
(1991 Capital Improvement Project), 7.375%, 10/01/17
(Pre-refunded to 10/01/01)
2,000 California Health Facilities Financing Authority, Health Facility 10/00 at 102 N/R*** 2,079,920
Revenue Bonds (Sisters of Providence), Series 1990, 7.500%, 10/01/10
(Pre-refunded to 10/01/00)
7,500 State Public Works Board of the State of California, Lease Revenue Bonds 10/02 at 102 AAA 8,047,575
(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)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 2,000 Desert Hospital District, Hospital Revenue Certificates of Participation 7/00 at 102 AAA $ 2,067,640
(Desert Hospital Corporation Project), Series 1990, 8.100%, 7/01/20
(Pre-refunded to 7/01/00)
1,950 East Bay Municipal Utility District (Alameda and Contra Costa Counties, 6/00 at 102 AAA 2,006,453
California), Water System Subordinated Revenue Bonds, Series 1990,
7.500%, 6/01/18 (Pre-refunded to 6/01/00)
4,000 East Bay Municipal Utility District (Alameda and Contra Costa Counties, 12/01 at 102 AAA 4,215,280
California), Water System Subordinated Revenue Bonds, Series 1991,
6.375%, 6/01/21 (Pre-refunded to 12/01/01)
2,505 Harbor Department of the City of Los Angeles (California), No Opt. Call AAA 3,006,877
Revenue Bonds, Issue of 1988, 7.600%, 10/01/18
2,000 Sonoma County Office of Education, Certificates of Participation 7/00 at 102 A+*** 2,062,840
(1990 Financing Project), 7.375%, 7/01/20 (Pre-refunded to 7/01/00)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 8.8%
12,000 California Pollution Control Financing Authority, Solid Waste Disposal 7/07 at 102 N/R 12,813,240
Revenue Bonds (CanFibre of Riverside Project), Tax-Exempt Series 1997A,
9.000%, 7/01/19 (Alternative Minimum Tax)
3,000 California Statewide Communities Development Authority, Certificates of 12/04 at 102 N/R 2,764,530
Participation Refunding (Rio Bravo Fresno Project), 1999 Series A,
6.300%, 12/01/18
6,645 Merced Irrigation District (California), 1998 Revenue Certificates of 3/03 at 102 N/R 6,088,480
Participation (1998 Electric System Project), 5.800%, 3/01/15
1,660 Salinas Valley Solid Waste Authority, Revenue Bonds, Series 1997, 8/02 at 102 BBB 1,439,530
5.800%, 8/01/27 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
$ 310,480 Total Investments - (cost $268,058,575) - 100.4% 263,495,314
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.4)% (973,466)
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $262,521,848
====================================================================================================================
</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.
(WI) Security purchased on a when-issued basis.
See accompanying notes to financial statements.
11
<PAGE>
Portfolio of Investments
Nuveen California Insured Municipal Bond Fund
February 29, 2000
<TABLE>
<CAPTION>
Principal
Amount Optional Call Market
(000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care - 6.4%
$ 8,500 California Statewide Communities Development Authority, Sutter 8/02 at 102 AAA $ 8,568,850
Health Obligated Group, Certificates of Participation, 6.125%, 8/15/22
6,000 City of Oakland, California, Insured Revenue Bonds (1800 Harrison 1/10 at 100 AAA 6,019,320
Foundation - Kaiser Permanente), Series 1999A, 6.000%, 1/01/29
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 7.7%
6,340 California Housing Finance Agency, Housing Revenue Bonds 2/02 at 102 AAA 6,532,165
(Insured), 1991 Series B, 6.850%, 8/01/23
2,545 California Housing Finance Agency, Multifamily Housing Revenue 8/06 at 102 AAA 2,504,713
Bonds II, 1996 Series A, 6.050%, 8/01/27
3,480 The Community Redevelopment Agency of the City of Los Angeles, 6/05 at 105 AAA 3,803,188
California, Multifamily Housing Revenue Refunding Bonds,
1995 Series A (Angelus Plaza Project), 7.400%, 6/15/10
2,555 City of Napa, Mortgage Revenue Refunding Bonds, Series 1992A 7/02 at 102 AAA 2,622,784
(FHA-Insured Mortgage Loan - Creekside Park Apartments Project),
6.625%, 7/01/24
2,000 City of Napa, Mortgage Revenue Refunding Bonds, Series 1994A 7/04 at 101 AAA 2,057,100
(FHA-Insured Mortgage Loan - Creekside Park II Apartments Project),
6.625%, 7/01/25
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 6.3%
4,750 California Housing Finance Agency, Single Family Mortgage Bonds II, 2/07 at 102 Aaa 4,715,040
1997 Series A, 6.050%, 8/01/26 (Alternative Minimum Tax)
5,000 California Housing Finance Agency, Home Mortgage Revenue Bonds, 8/07 at 102 AAA 4,978,000
1997 Series E, 6.100%, 8/01/29 (Alternative Minimum Tax)
1,420 California Housing Finance Agency, Home Mortgage Revenue Bonds, 2/06 at 102 AAA 1,416,294
1996 Series E, 6.150%, 8/01/25 (Alternative Minimum Tax)
22,755 California Housing Finance Agency, Home Mortgage Revenue Bonds, 8/09 at 31 19/32 AAA 3,365,920
1999 Series F, 0.000%, 2/01/30 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 18.7%
2,000 State of California, General Obligation Bonds, 4.750%, 2/01/24 2/09 at 101 AAA 1,667,920
31,000 State of California, Various Purpose General Obligation Bonds, 3/10 at 101 AAA 30,392,090
5.750%, 3/01/27 (WI)
Golden West Schools Financing Authority (California), 1998 Revenue
Bonds, Series A (School District General Obligation Refunding Program):
1,500 0.000%, 2/01/19 8/13 at 70 15/16 AAA 470,055
2,650 0.000%, 8/01/19 8/13 at 68 9/16 AAA 802,738
2,755 0.000%, 8/01/20 8/13 at 63 27/32 AAA 777,075
1,430 0.000%, 2/01/21 8/13 at 61 11/16 AAA 387,316
2,855 0.000%, 8/01/21 8/13 at 59 5/8 AAA 747,325
6,070 Sacramento City Unified School District (Sacramento County, 7/09 at 102 Aaa 6,106,602
California), General Obligation Bonds, Series 2000A,
6.000%, 7/01/29 (WI)
3,040 Sulphur Springs Union School District (County of Los Angeles, No Opt. Call AAA 1,246,157
California), General Obligation Bonds, Election 1991,
Series A, 0.000%, 9/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 29.9%
4,730 Alameda County Public Facilities Corporation, Certificates of 9/06 at 102 AAA 4,772,144
Participation (1991 Financing Project), 6.000%, 9/01/21
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Optional Call Market
(000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
Anaheim Public Financing Authority, Lease Revenue Bonds (Anaheim Public
Improvements Project), Subordinate Lease Revenue Bonds, 1997 Series C:
$ 20,000 0.000%, 9/01/32 No Opt. Call AAA $ 2,745,800
41,885 0.000%, 9/01/35 No Opt. Call AAA 4,764,419
1,225 Redevelopment Agency of the City of Barstow, Central Redevelopment No Opt. Call AAA 1,425,116
Project, Tax Allocation Bonds, 1994 Series A, 7.000%, 9/01/14
7,005 Big Bear Lake Financing Authority (San Bernardino County, 8/05 at 102 AAA 7,212,558
California), 1995 Tax Allocation Refunding Revenue Bonds,
6.300%, 8/01/25
6,990 Chino Unified School District, Certificates of Participation (1995 9/05 at 102 AAA 7,065,282
Master Lease Program), 6.125% 9/01/26
850 Redevelopment Agency of the City of Concord, Central Concord 7/00 at 100 AAA 860,931
Redevelopment Project, Tax Allocation Bonds, Series 1988-2,
7.875%, 7/01/07
3,865 Fallbrook Sanitary District (San Diego County, California), 1991 2/01 at 100 AAA 3,920,927
Certificates of Participation (Wastewater Facilities Refunding
Project), 6.600%, 2/01/13
2,500 Fontana Public Financing Authority (San Bernardino County, 9/00 at 102 AAA 2,584,925
California), Tax Allocation Revenue Bonds (North Fontana Redevelopment
Project), 1990 Series A, 7.000%, 9/01/10
3,000 Gilroy Unified School District, Santa Clara County, California, 9/04 at 102 AAA 3,125,820
Certificates of Participation, Series of 1994, 6.250%, 9/01/12
7,040 Norwalk Community Facilities Financing Authority (Los Angeles 9/05 at 102 AAA 7,098,150
County, California), Tax Allocation Refunding Revenue Bonds,
1995 Series A, 6.050%, 9/01/25
5,120 County of Orange, California, 1996 Recovery Certificates of 7/06 at 102 AAA 5,137,818
Participation, Series A, 6.000%, 7/01/26
14,050 Paramount Redevelopment Agency (Los Angeles County, California), No Opt. Call AAA 2,641,119
Redevelopment Project Area No. 1, Compound Interest Tax Allocation
Refunding Bonds, Issue of 1998, 0.000%, 8/01/26
8,000 Pomona Public Financing Authority (California), 1998 Refunding 2/08 at 102 AAA 6,839,600
Revenue Bonds, Series W (Southwest Pomona Redevelopment Project),
5.000%, 2/01/30
Redevelopment Agency of the City and County of San Francisco, Lease
Revenue Bonds, Series 1994 (George R. Moscone Convention Center):
2,250 6.800%, 7/01/19 7/04 at 102 AAA 2,430,878
1,000 6.750%, 7/01/24 7/04 at 102 AAA 1,072,970
2,250 Redevelopment Agency of the City of San Jose, Merged Area Redevelopment 2/04 at 102 AAA 1,863,000
Project, Tax Allocation Bonds, Series 1993, 4.750%, 8/01/24
16,505 Santa Ana Unified School District (1999 Financing Project), No Opt. Call AAA 2,782,413
Certificates of Participation (Orange County, California), 0.000%,
4/01/29
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 5.5%
6,500 Foothill/Eastern Transportation Corridor Agency (California), Toll 1/10 at 100 AAA 5,585,320
Road Revenue Bonds, Series 1995A, 5.000%, 1/01/35
5,000 Airports Commission of the City and County of San Francisco, 5/06 at 101 AAA 4,767,800
California, San Francisco International Airport, Second Series Revenue
Bond, Issue 13B, 5.625%, 5/01/21 (Alternative Minimum Tax)
2,000 Southern California Rapid Transit District, Certificates of 1/01 at 102 1/2 AAA 2,104,880
Participation (Workers Compensation Funding Program),
7.500%, 7/01/05
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 20.7%
7,000 City of Big Bear Lake, California, 1992 Water Revenue Refunding 4/02 at 102 AAA 7,402,710
Bonds, 6.375%, 4/01/22 (Pre-refunded to 4/01/02)
3,525 Brea Public Financing Authority (Orange County, California), 8/01 at 102 AAA 3,726,278
1991 Tax Allocation Revenue Bonds, Series A (Redevelopment Project
AB), 7.000%, 8/01/15 (Pre-refunded to 8/01/01)
3,000 Calaveras County Water District (California), Certificates of 5/01 at 102 AAA 3,153,450
Participation (1991 Ebbetts Pass Water System Improvements Project),
6.900%, 5/01/16 (Pre-refunded to 5/01/01)
1,000 California Educational Facilities 11/00 at 102 AAA 1,041,460
Authority, Revenue Bonds (Pepperdine University), Series
1990, 7.200%, 11/01/15 (Pre-refunded to 11/01/00)
5,000 State Public Works Board of the State of California, Lease Revenue 9/00 at 102 AAA 5,176,900
Bonds (Department of Corrections), 1990 Series A (State Prison -
Madera County), 7.000%, 9/01/09 (Pre-refunded to 9/01/00)
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen California Insured Municipal Bond Fund (continued)
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 2,000 Eastern Municipal Water District (Riverside County, California), 7/01 at 102 AAA $ 2,097,380
Water and Sewer Revenue Certificates of Participation, Series 1991,
6.500%, 7/01/20 (Pre-refunded to 7/01/01)
2,000 The City of Los Angeles (California), Los Angeles Convention and 8/00 at 102 AAA 2,068,060
Exhibition Center, Certificates of Participation, 1990 Series,
7.000%, 8/15/21 (Pre-refunded to 8/15/00)
5,000 Los Angeles County Transportation Commission (California), Proposition 7/02 at 102 AAA 5,294,000
C Sales Tax Revenue Bonds, Second Senior Bonds, Series 1992-A,
6.250%, 7/01/13 (Pre-refunded to 7/01/02)
4,500 Modesto Irrigation District Financing Authority, Domestic Water 9/02 at 102 AAA 4,757,220
Project Revenue Bonds, Series 1992A, 6.125%, 9/01/19 (Pre-refunded
to 9/01/02)
2,500 Mt. Diablo Hospital District, Insured Hospital Revenue Bonds, 1990 12/00 at 102 AAA 2,623,400
Series A, 8.000%, 12/01/11 (Pre-refunded to 12/01/00)
2,000 Mt. Diablo Unified School District, Community Facilities District No. 1, 8/00 at 102 AAA 2,066,080
Special Tax Bonds, Series 1990 (Contra Costa County, California),
7.050%, 8/01/20 (Pre-refunded to 8/01/00)
2,000 Redevelopment Agency of the City of Pittsburg, California, Los Medanos 8/01 at 103 AAA 2,137,160
Community Development Project, Tax Allocation Bonds, Series 1991,
7.150%, 8/01/21 (Pre-refunded to 8/01/01)
3,000 Sacramento Municipal Utility District (California), Electric Revenue 9/01 at 102 AAA 3,155,460
Bonds, 1991 Series Y, 6.500%, 9/01/21 (Pre-refunded to 9/01/01)
2,500 San Bernardino County Transportation Authority, Sales Tax Revenue 3/02 at 102 AAA 2,558,600
Bonds (Limited Tax Bonds), 1992 Series A, 6.000%, 3/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 2.1%
1,910 California Pollution Control Financing Authority, Pollution Control 9/09 at 101 AAA 1,776,701
Refunding Revenue Bonds (Southern California Edison Company), 1999
Series C, 5.450%, 9/01/29
3,000 City of Shasta Lake, 1996-2 Certificates of Participation, 6.000%, 4/05 at 102 AAA 3,028,230
4/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 2.4%
2,500 The Metropolitan Water District of Southern California, Water Revenue 7/06 at 100 AAA 2,106,600
Refunding Bonds, 1996 Series B, 4.750%, 7/01/21
3,475 Pajaro Valley Water Management Agency (California), Revenue 3/09 at 101 AAA 3,410,711
Certificates of Participation, Series 1999A, 5.750%, 3/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
$ 336,320 Total Investments - (cost $224,758,794) - 99.7% 227,562,922
===========------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Amortized
Amount (000) Description Ratings** Cost
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Investments - 6.6%
$ 7,300 California Statewide Communities Development Authority, Tri-Modal A-1+ 7,300,000
Variable Rate Revenue Refunding Certificates of Participation
(House Ear Institute), 1993 Series A, Variable Rate Demand Bonds,
3.200%, 12/01/18+
2,900 Orange County Improvement Bond Act of 1915, Irvine Coast Assessment VMIG-1 2,900,000
District No. 88-1 Limited Obligation Improvement, Variable Rate Demand
Bonds, 3.200%, 9/02/18+
4,900 Orange County Sanitation District, Certificates of Participation, Variable VMIG-1 4,900,000
Rate Demand Bonds, 3.200%, 8/01/17+
- -----------------------------------------------------------------------------------------------------------------------------------
$ 15,100 Total Short-Term Investments - (cost $15,100,000) - 6.6% 15,100,000
===========------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (6.3)% (14,370,584)
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $228,292,338
====================================================================================================================
</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.
(WI) Security purchased on a when-issued basis.
+ 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.
14
<PAGE>
Statement of Net Assets
February 29, 2000
<TABLE>
<CAPTION>
California
California Insured
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value $263,495,314 $227,562,922
Temporary investments in short-term municipal securities, at amortized cost,
which approximates market value -- 15,100,000
Cash 3,562,477 --
Receivables:
Interest 4,812,013 2,817,251
Investments sold 298,239 21,934,838
Shares sold 68,029 96
Other assets 1,367 110
- ----------------------------------------------------------------------------------------------------------
Total assets 272,237,439 267,415,217
- ----------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 1,053,217
Payables:
Investments purchased 8,330,168 36,433,373
Shares redeemed 502,944 811,424
Accrued expenses:
Management fees 112,174 98,462
12b-1 distribution and service fees 22,846 19,998
Other 77,703 97,628
Dividends payable 669,756 608,777
- ----------------------------------------------------------------------------------------------------------
Total liabilities 9,715,591 39,122,879
- ----------------------------------------------------------------------------------------------------------
Net assets $262,521,848 $228,292,338
==========================================================================================================
Class A Shares
Net assets $ 48,560,233 $ 52,014,086
Shares outstanding 4,852,336 5,102,944
Net asset value and redemption price per share $ 10.01 $ 10.19
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 10.45 $ 10.64
==========================================================================================================
Class B Shares
Net assets $ 10,317,964 $ 10,909,397
Shares outstanding 1,031,720 1,069,401
Net asset value, offering and redemption price per share $ 10.00 $ 10.20
==========================================================================================================
Class C Shares
Net assets $ 15,132,099 $ 6,552,387
Shares outstanding 1,511,885 647,013
Net asset value, offering and redemption price per share $ 10.01 $ 10.13
==========================================================================================================
Class R Shares
Net assets $188,511,552 $158,816,468
Shares outstanding 18,810,056 15,602,056
Net asset value, offering and redemption price per share $ 10.02 $ 10.18
==========================================================================================================
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
Statement of Operations
Year Ended February 29, 2000
<TABLE>
<CAPTION>
California
California Insured
- ------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income $16,737,188 $14,117,880
- ------------------------------------------------------------------------------------
Expenses
Management fees 1,477,137 1,304,008
12b-1 service fees -- Class A 91,683 100,255
12b-1 distribution and service fees -- Class B 90,893 103,090
12b-1 distribution and service fees -- Class C 86,615 51,345
Shareholders' servicing agent fees and expenses 182,841 160,804
Custodian's fees and expenses 79,601 81,356
Trustees' fees and expenses 5,964 4,881
Professional fees 14,753 12,739
Shareholders' reports - printing and mailing expenses 24,857 46,646
Federal and state registration fees 2,272 1,704
Portfolio insurance expense -- 23,032
Other expenses 10,158 10,172
- ------------------------------------------------------------------------------------
Total expenses before custodian fee credit 2,066,774 1,900,032
Custodian fee credit (17,150) (20,429)
- ------------------------------------------------------------------------------------
Net expenses 2,049,624 1,879,603
- ------------------------------------------------------------------------------------
Net investment income 14,687,564 12,238,277
- ------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (671,954) (2,150,082)
Change in net unrealized appreciation or depreciation
of investments (22,618,973) (18,494,773)
- ------------------------------------------------------------------------------------
Net gain (loss) from investments (23,290,927) (20,644,855)
- ------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ (8,603,363) $ (8,406,578)
====================================================================================
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
California California Insured
-------------------------------- ---------------------------
Year Ended Year Ended Year Ended Year Ended
2/29/00 2/28/99 2/29/00 2/28/99
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Operations
Net investment income $ 14,687,564 $ 13,330,413 $ 12,238,277 $ 11,643,242
Net realized gain (loss) from investment transactions (671,954) 1,031,974 (2,150,082) 258,361
Change in net unrealized appreciation or depreciation
of investments (22,618,973) (600,160) (18,494,773) 847,868
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (8,603,363) 13,762,227 (8,406,578) 12,749,471
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
From undistributed net investment income:
Class A (2,397,373) (1,620,887) (2,492,127) (1,920,349)
Class B (428,484) (200,523) (455,617) (263,828)
Class C (530,805) (290,569) (301,363) (221,918)
Class R (11,164,199) (11,079,070) (8,833,909) (9,255,409)
From accumulated net realized gains from investment transactions:
Class A (20,496) (153,240) -- (20,898)
Class B (3,705) (28,610) -- (3,919)
Class C (4,435) (32,763) -- (2,848)
Class R (73,356) (951,059) -- (89,451)
In excess of net realized gains from investment transactions:
Class A -- -- -- (10,300)
Class B -- -- -- (1,931)
Class C -- -- -- (1,404)
Class R -- -- -- (44,092)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (14,622,853) (14,356,721) (12,083,016) (11,836,347)
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from sale of shares 53,669,029 35,479,670 31,862,064 32,926,505
Net proceeds from shares issued to shareholders due
to reinvestment of distributions 8,301,339 8,761,391 6,931,054 6,965,808
- ------------------------------------------------------------------------------------------------------------------------------------
61,970,368 44,241,061 38,793,118 39,892,313
Cost of shares redeemed (50,606,014) (21,081,364) (38,558,155) (26,208,534)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 11,364,354 23,159,697 234,963 13,683,779
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (11,861,862) 22,565,203 (20,254,631) 14,596,903
Net assets at the beginning of year 274,383,710 251,818,507 248,546,969 233,950,066
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $262,521,848 $274,383,710 $228,292,338 $248,546,969
====================================================================================================================================
Balance of undistributed net investment income at the end of year $ 353,558 $ 186,855 $ 189,752 $ 34,491
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
17
<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
accounting principles generally accepted in the United States.
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 29, 2000, California and California Insured had when-issued purchase
commitments of $8,330,168 and $36,433,373, respectively.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, and net
realized capital gains and/or market discount are recorded on the ex-dividend
date. The amount and timing of distributions are determined in accordance with
federal income tax regulations, which may differ from generally accepted
accounting principles. Accordingly, temporary over-distributions as a result of
these differences may occur and will be classified as either distributions in
excess of net investment income, distributions in excess of net realized gains
and/or distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, each Fund intends to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and California state personal income taxes, to
retain such tax-exempt status when distributed to the shareholders of the Funds.
All monthly tax-exempt income dividends paid during the fiscal year ended
February 29, 2000, have been designated Exempt Interest Dividends. Net realized
capital gain and market discount distributions are subject to federal taxation.
18
<PAGE>
Insurance
California Insured invests in municipal securities which are either covered by
insurance or backed by an escrow or trust account containing sufficient U.S.
Government or U.S. Government agency securities, both of which ensure the timely
payment of principal and interest. Each insured municipal security is covered by
Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance.
Such insurance does not guarantee the market value of the municipal securities
or the value of the Fund's shares. Original Issue Insurance and Secondary Market
Insurance remain in effect as long as the municipal securities covered thereby
remain outstanding and the insurer remains in business, regardless of whether
the Fund ultimately disposes of such municipal securities. Consequently, the
market value of the municipal securities covered by Original Issue Insurance or
Secondary Market Insurance may reflect value attributable to the insurance.
Portfolio Insurance is effective only while the municipal securities are held by
the Fund. Accordingly, neither the prices used in determining the market value
of the underlying municipal securities nor the net asset value of the Fund's
shares include value, if any, attributable to the Portfolio Insurance. Each
policy of the Portfolio Insurance does, however, give the Fund the right to
obtain permanent insurance with respect to the municipal security covered by the
Portfolio Insurance policy at the time of its sale.
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances, or by specified classes
of investors.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap 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 29, 2000.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
19
<PAGE>
Notes to Financial Statements (continued)
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
California
-----------------------------------------------------
Year Ended 2/29/00 Year Ended 2/28/99
------------------------- -------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 3,432,125 $ 35,505,654 1,071,388 $ 11,687,908
Class B 513,199 5,394,532 501,459 5,481,597
Class C 772,432 7,884,193 623,022 6,803,964
Class R 466,998 4,884,650 1,052,596 11,506,201
Shares issued to shareholders due to reinvestment of distributions:
Class A 103,305 1,078,310 91,191 997,733
Class B 14,385 149,673 7,826 85,655
Class C 21,661 225,699 12,131 132,788
Class R 654,133 6,847,657 688,652 7,545,215
- ----------------------------------------------------------------------------------------------------------------------------
5,978,238 61,970,368 4,048,265 44,241,061
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,039,895) (20,711,423) (474,337) (5,180,644)
Class B (171,297) (1,754,561) (46,662) (508,896)
Class C (232,384) (2,371,152) (57,000) (622,658)
Class R (2,486,309) (25,768,878) (1,351,198) (14,769,166)
- ----------------------------------------------------------------------------------------------------------------------------
(4,929,885) (50,606,014) (1,929,197) (21,081,364)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase 1,048,353 $ 11,364,354 2,119,068 $ 23,159,697
============================================================================================================================
California
-----------------------------------------------------
Year Ended 2/29/00 Year Ended 2/28/99
------------------------- -------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
Shares sold:
Class A 1,721,823 $ 18,028,989 1,478,042 $ 16,416,739
Class B 486,871 5,202,861 559,676 6,191,761
Class C 323,797 3,395,642 396,536 4,367,453
Class R 496,702 5,234,572 537,388 5,950,552
- ----------------------------------------------------------------------------------------------------------------------------
Shares issued to shareholders due to reinvestment of distributions:
Class A 118,515 1,251,002 92,518 1,026,442
Class B 16,888 177,619 7,358 81,754
Class C 17,583 184,642 14,226 156,701
Class R 502,955 5,317,791 514,952 5,700,911
- ----------------------------------------------------------------------------------------------------------------------------
3,685,134 38,793,118 3,600,696 39,892,313
- ----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (998,979) (10,412,414) (582,791) (6,459,540)
Class B (229,021) (2,375,795) (40,526) (449,360)
Class C (328,644) (3,427,568) (70,267) (773,501)
Class R (2,129,612) (22,342,378) (1,675,268) (18,526,133)
- ----------------------------------------------------------------------------------------------------------------------------
(3,686,256) (38,558,155) (2,368,852) (26,208,534)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (1,122) $ 234,963 1,231,844 $ 13,683,779
============================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid April 3, 2000, to shareholders of record on March 9,
2000, as follows:
<TABLE>
<CAPTION>
California California Insured
- ------------------------------------------------------
<S> <C> <C>
Dividend per share:
Class A $.0460 $.0445
Class B .0400 .0380
Class C .0415 .0395
Class R .0480 .0460
======================================================
</TABLE>
20
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the fiscal year ended
February 29, 2000, were as follows:
<TABLE>
<CAPTION>
California California Insured
- ------------------------------------------------------------------------------------------------------------------------------------
Purchases:
<S> <C> <C>
Long-term municipal securities $ 97,744,554 $104,966,585
Short-term municipal securities 1,000,000 19,200,000
Sales and maturities:
Long-term municipal securities 83,381,541 104,635,504
Short-term municipal securities 1,000,000 6,200,000
====================================================================================================================================
At February 29, 2000, the identified cost of investments owned for federal income tax purposes were as follows:
California California Insured
- ------------------------------------------------------------------------------------------------------------------------------------
$268,058,575 $240,559,877
====================================================================================================================================
At February 29, 2000, the Funds had unused capital loss carryforwards available for federal income tax purposes to be applied
against future capital gains, if any. If not applied, the carryforwards will expire as follows:
California California Insured
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Expiration Year:
2008 $ 690,434 $ 1,507,433
====================================================================================================================================
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments for federal income tax purposes at February 29, 2000,
were as follows:
California California Insured
- ------------------------------------------------------------------------------------------------------------------------------------
Gross unrealized:
<S> <C> <C>
appreciation $ 5,051,376 $ 5,652,295
depreciation (9,614,637) (3,549,250)
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) $(4,563,261) $ 2,103,045
====================================================================================================================================
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp. (the "Adviser"), a wholly owned subsidiary of The John
Nuveen Company, each Fund pays an annual management fee, payable monthly, at the rates set forth below which are based upon the
average daily net assets of each Fund:
Average Daily Net Assets Management Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
====================================================================================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser has agreed to waive part of its management fees or reimburse certain
expenses of each Fund in order to limit total expenses to .75 of 1% of the
average daily net assets of California and .975 of 1% of the average daily net
assets of California Insured, excluding any 12b-1 fees applicable to Class A, B
and C Shares. The Adviser may also voluntarily agree to reimburse additional
expenses from time to time, which may be terminated at any time at its
discretion.
During the fiscal year ended February 29, 2000, the Distributor collected sales
charges on purchases of Class A Shares of approximately $169,800 and $116,800
for California and California Insured, respectively, of which approximately
$169,800 and $113,100 respectively, were paid out as concessions to authorized
dealers. The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
21
<PAGE>
Notes to Financial Statements (continued)
During the fiscal year ended February 29, 2000, the Distributor compensated
authorized dealers directly with approximately $342,600 and $297,800 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 collected on Class B
Shares, and all 12b-1 service and distribution fees collected on Class C Shares
during the first year following a purchase are retained by the Distributor.
During the fiscal year ended February 29, 2000, the Distributor retained
approximately $118,800 and $112,700 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 $58,600 and $65,700 of CDSC on share redemptions for
California and California Insured, respectively, during the fiscal year ended
February 29, 2000.
7. Composition of Net Assets
At February 29, 2000, 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 $267,421,985 $227,506,974
Balance of undistributed net investment income 353,558 189,752
Accumulated net realized gain (loss) from investment transactions (690,434) (2,208,516)
Net unrealized appreciation (depreciation) of investments (4,563,261) 2,804,128
- -------------------------------------------------------------------------------------------------------
Net assets $262,521,848 $228,292,338
=======================================================================================================
</TABLE>
22
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
---------------------- -------------------
Net
CALIFORNIA Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
February 28/29, Value Income (Loss) Total Income Gains Total Value Return (a)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 $10.89 $.55 $(.89) $(.34) $(.54) $ -- $(.54) $10.01 (3.12)%
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
Class B (3/97)
2000 10.89 .47 (.89) (.42) (.47) -- (.47) 10.00 (3.93)
1999 10.92 .47 .01 .48 (.46) (.05) (.51) 10.89 4.44
1998 (d) 10.56 .46 .41 .87 (.47) (.04) (.51) 10.92 8.39
Class C (9/94)
2000 10.90 .50 (.90) (.40) (.49) -- (.49) 10.01 (3.74)
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
Class R (7/86)
2000 10.91 .57 (.89) (.32) (.57) -- (.57) 10.02 (2.98)
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
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
---------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
-------------------- -------------------- --------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
CALIFORNIA Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
February 28/29, (000) Assets Assets Assets Assets Assets Assets Rate
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 $ 48,560 .86% 5.32% .86% 5.32% .85% 5.33% 31%
1999 36,568 .90 4.97 .90 4.97 .90 4.97 34
1998 29,125 .90 5.11 .90 5.11 .90 5.11 45
1997 20,571 .94 5.16 .94 5.16 .94 5.16 74
1996 12,709 1.00 5.23 .96 5.27 .96 5.27 36
Class B (3/97)
2000 10,318 1.61 4.56 1.61 4.56 1.60 4.56 31
1999 7,353 1.65 4.23 1.65 4.23 1.65 4.23 34
1998 (d) 2,324 1.66* 4.31* 1.66* 4.31* 1.66* 4.31* 45
Class C (9/94)
2000 15,132 1.41 4.75 1.41 4.75 1.40 4.76 31
1999 10,353 1.45 4.43 1.45 4.43 1.45 4.43 34
1998 4,061 1.45 4.56 1.45 4.56 1.45 4.56 45
1997 1,003 1.67 4.44 1.67 4.44 1.67 4.44 74
1996 684 1.84 4.39 1.71 4.52 1.71 4.52 36
Class R (7/86)
2000 188,512 .66 5.47 .66 5.47 .65 5.48 31
1999 220,109 .71 5.16 .71 5.16 .71 5.16 34
1998 216,309 .70 5.31 .70 5.31 .70 5.31 45
1997 214,253 .70 5.41 .70 5.41 .70 5.41 74
1996 216,390 .71 5.53 .71 5.53 .71 5.53 36
======================================================================================================================
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
23
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------ ------------------------------------
Net
CALIFORNIA INSURED Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
February 28/29, Value Income (Loss) Total Income Gains Total Value Return (a)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 $11.10 $.53 $(.92) $(.39) $(.52) $ -- $(.52) $10.19 (3.52)%
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
Class B (3/97)
2000 11.11 .45 (.92) (.47) (.44) -- (.44) 10.20 (4.26)
1999 11.06 .44 .06 .50 (.44) (.01)** (.45) 11.11 4.61
1998 (d) 10.67 .45 .40 .85 (.46) -- (.46) 11.06 8.13
Class C (9/94)
2000 11.03 .47 (.91) (.44) (.46) -- (.46) 10.13 (4.03)
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
Class R (7/86)
2000 11.08 .55 (.91) (.36) (.54) -- (.54) 10.18 (3.27)
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
======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
---------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
-------------------- -------------------- --------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
CALIFORNIA INSURED Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
February 28/29, (000) Assets Assets Assets Assets Assets Assets Rate
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 $ 52,014 .89% 5.02% .89% 5.02% .88% 5.02% 44%
1999 47,300 .93 4.72 .93 4.72 .93 4.72 25
1998 36,203 .90 4.93 .90 4.93 .90 4.93 26
1997 27,598 .94 5.05 .94 5.05 .94 5.05 51
1996 17,250 .98 4.99 .97 5.00 .97 5.00 38
Class B (3/97)
2000 10,909 1.64 4.27 1.64 4.27 1.63 4.28 44
1999 8,825 1.68 3.96 1.68 3.96 1.68 3.96 25
1998 (d) 2,967 1.66* 4.16* 1.66* 4.16* 1.66* 4.16* 26
Class C (9/94)
2000 6,552 1.44 4.45 1.44 4.45 1.43 4.46 44
1999 6,994 1.48 4.17 1.48 4.17 1.48 4.17 25
1998 3,226 1.45 4.37 1.45 4.37 1.45 4.37 26
1997 1,719 1.67 4.32 1.67 4.32 1.67 4.32 51
1996 1,040 1.74 4.23 1.71 4.26 1.71 4.26 38
Class R (7/86)
2000 158,816 .69 5.20 .69 5.20 .68 5.20 44
1999 185,428 .74 4.92 .74 4.92 .74 4.92 25
1998 191,554 .70 5.14 .70 5.14 .70 5.14 26
1997 195,553 .69 5.30 .69 5.30 .69 5.30 51
1996 205,642 .70 5.29 .70 5.29 .70 5.29 38
======================================================================================================================
</TABLE>
* Annualized.
** The amounts shown include distributions in excess of capital gains of $.003
per share.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
24
<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 29, 2000, 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 auditing standards generally accepted
in the United States. 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 29, 2000, 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 29, 2000, 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
accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 14, 2000
25
<PAGE>
SERVING INVESTORS FOR GENERATIONS
[Photo of John Nuveen, Sr. appears here]
John Nuveen, Sr.
A 100-Year Tradition of Quality Investments Since 1898, John Nuveen & Co.
Incorporated has been synonymous with investments that withstand the test of
time. In fact, more than 1.3 million investors have trusted Nuveen to help them
build and sustain the wealth of a lifetime.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. We can help
you build a better, well-diversified portfolio.
Call Your Financial Adviser Today
To find out how the Nuveen Innovation Fund might round out your investment
portfolio, contact your financial adviser today. Or call Nuveen at (800)
257.8787 for more information. Ask your adviser or call for a prospectus which
details risks, fees and expenses. Please read the prospectus carefully before
you invest.
Nuveen Investments
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
<PAGE>
ANNUAL REPORT February 29, 2000
NUVEEN
Investments
NUVEEN
MUNICIPAL BOND
FUNDS
Connecticut
Massachusetts
Massachusetts Insured
[PHOTO APPEARS HERE]
<PAGE>
Contents
1 Dear Shareholder
3 From the Portfolio Manager's Perspective
6 Nuveen Flagship Connecticut Municipal Bond
Fund Spotlight
7 From the Portfolio Manager's Perspective
10 Nuveen Massachusetts Municipal Bond Fund Spotlight
11 Nuveen Massachusetts Insured Municipal
Bond Fund Spotlight
12 Portfolio of Investments
26 Statement of Net Assets
27 Statement of Operations
28 Statement of Changes in Net Assets
29 Notes to Financial Statements
33 Financial Highlights
36 Report of Independent Public Accountants
37 Fund Information
<PAGE>
DEAR
Shareholder,
Setting financial goals is an important first step toward building wealth. At
Nuveen Investments, we believe those goals should not be considered ends in
themselves. Rather, you and your financial advisor's focus should be on
realizing your life's dreams -- the things that matter most to you and how you
can make them happen -- or make them better.
Through a well-crafted financial plan, you have the chance to shape future
generations -- to broaden your sphere of influence -- to leave your legacy.
As you develop that plan, you'll want to consider the different ways your
success can benefit others. You may find that you want to create a new set of
goals to achieve this. Working with your financial advisor, you have the ability
to make those dreams a reality -- for yourself and future generations.
A Trusted Resource As you face some of the most important, lasting decisions you
and your family will make, you'll want to draw upon the support, counsel and
objectivity of a trusted advisor. That's because your financial advisor has the
expertise and access to other professionals who can help you make informed
choices -- choices that affect not only your loved ones today, but those your
legacy will touch in the future.
Your financial advisor can provide sound financial insight, an integrated
approach to your investments and can serve as a knowledgeable friend with your
family's best interest at heart.
Family Wealth Management Too often, family wealth management is thought of in
one dimension -- as the stewardship of your household's financial resources. At
Nuveen Investments, we think of family wealth management as the map to help you
reach your financial, and your life's, destinations. It's a multi-faceted
strategy to plan for not just your needs, but the needs of future generations.
We are dedicated to helping you and your financial advisor develop a family
wealth management strategy unique to you and your goals and values.
The Economic Environment You may be reading this report at the suggestion of
your financial advisor. We've prepared the following interview to let you know
what the investment and research management teams have done during your fund's
fiscal period. Before we get to that, I want to briefly report on the economic
environment in which your Nuveen investment performed.
The end of your fund's fiscal period, February 29, 2000, was an important
day in our nation's economic life. It marked the 107th month of continued
economic expansion, the longest period of expansion in history. The only period
to rival that length was the 106-month expansion from February 1961 to December
1969, a period known best for its military conflicts, domestic unrest and
soaring inflation.
That was then; this is now.
[Photo of Timothy R. Schwertfeger appears here]
Timothy R. Schwertfeger
Chairman of the Board
"We are dedicated to helping you and your financial advisor develop a family
wealth management strategy unique to you and your goals and values."
ANNUAL REPORT page 1
<PAGE>
"There's still faith in the emerging paradigm, which holds that improvements in
productivity enable us to have both economic growth and low inflation at the
same time."
The vigilant inflationary watch of Federal Reserve Chairman Alan Greenspan,
the growth of the Internet and other technology-related developments and the
globalization of the economy are three reasons for continued economic health.
In their battle to keep inflation at bay, Greenspan's Fed raised interest
rates on February 2, 2000, and again on March 21, 2000. The latest increase
marked the fifth time the Fed has raised the federal funds rate -- the interest
that banks charge each other on overnight loans -- since June 1999.
Municipal bonds continued to serve investors well, in our opinion. At the
end of February 2000, the ratio between long-term municipal bond yields and
30-year Treasury yields stood at 102%. For investors, this meant that quality
long-term municipal bonds offered yields above those of long-term Treasury
bonds -- even before the tax advantages of municipals were taken into account.
Of course, Treasuries are backed by the full faith and credit of the U.S.
government. Even so, on an after-tax basis, municipal bonds continued to present
an exceptionally attractive investment option relative to Treasuries. Over the
short term, the inflation threat has meant increased price fluctuations in the
equity markets. Part of that is due to the fact that investors and the various
markets have been watching -- and reacting to -- every announcement concerning
economic statistics.
Longer term, we believe there's still faith in the emerging paradigm, which
holds that improvements in productivity enable us to have both economic growth
and low inflation at the same time. The 1960's 106-month expansion that I noted
earlier was fueled by government spending. Today's economy has been fueled by
consumer spending and improved productivity.
What Can You Do? We believe the potential presence of inflation and price swings
in the markets reinforce the importance of working with an advisor, staying
focused on the long term and adhering to your financial plan. With a sound plan
in place, you may be better positioned to weather the markets' ups and downs. As
you pursue your life's dreams, your financial advisor can serve as a valuable
resource in helping you keep market events in perspective while you focus on
your overall financial plan.
For more information on any Nuveen investment, including a prospectus,
contact your financial advisor. Or call Nuveen at (800) 621-7227 or visit our
Internet site at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. We are committed to maintaining that reputation and working with
financial advisors to provide investment solutions that help individuals achieve
their lives dreams. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
April 14, 2000
ANNUAL REPORT page 2
<PAGE>
NUVEEN FLAGSHIP CONNECTICUT MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
Nuveen Flagship Connecticut Municipal Bond Fund features portfolio management by
Nuveen Investment Advisory Services, a team of portfolio managers and research
analysts committed to a disciplined, research-oriented investment strategy. To
help you understand the fund's performance for the fiscal year ended February
29, 2000, we spoke with Portfolio Manager Paul Brennan of Nuveen Advisory Corp.
Q During the fund's fiscal year ended February 29, 2000, we saw the national
economy continue its unprecedented trend of expansion, while inflation and
unemployment remained low. Did the Connecticut economy perform consistently with
the U.S.?
PAUL The Connecticut economy experienced moderate growth, with unemployment at a
miniscule 2.4% as of February 29, 2000, compared to the national average of
4.1%. The economy was strong enough to elicit tax rollbacks, and the state
refunded $109 million of sales tax during the fiscal year.
At the writing of this report, Connecticut was the wealthiest state in the
nation, measured by per capita income as of the end of 1998 (1999 figures are
not yet available.) It had ample cash during the fund's fiscal year on hand from
revenues to finance various capital and infrastructure improvement projects. New
issuance, therefore, of municipal bonds in Connecticut was down by 23% over the
fiscal year. The state's debt carries a healthy AA rating from Standard &
Poor's.
NUVEEN FLAGSHIP CONNECTICUT MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed.....50%
AA......................27%
A.......................11%
BBB/NR..................10%
Other....................2%
As a percentage of total bond holdings as of February 29, 2000.
Holdings are subject to change.
Q The Federal Reserve (the Fed) began its expected series of moves to raise
interest rates to try to cool off the economy. This is typically a challenging
environment for municipal bonds. How did you manage the fund in such an
environment?
PAUL Actually, we saw more opportunities in this market than we have seen in
markets characterized by declining interest rates. This presented us with the
opportunity to try to favorably position the portfolio for the long-term.
For one, yields were much more attractive than at the beginning of 1999, so
over the period we sold out some of the fund's positions in lower-yielding
securities and reinvested at higher yields. We believe that will help strengthen
the dividend-paying capabilities over the long run.
At the same time, we exercised transactions to help improve the funds' tax
efficiency. Selling out certain high-cost positions generated tax losses, which
can be used to help offset current or future realized capital gains.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. Nuveen has chosen them for their rigorously
disciplined investment approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's income-oriented funds feature portfolio management by Nuveen Investment
Advisory Services (NIAS). NIAS follows a disciplined, research-driven investment
approach to uncover income securities that combine exceptional relative value
with above-average return potential. Drawing on 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
.. A commitment to exhaustive research
.. An active, value-oriented investment style
.. The unmatched presence of trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen Flagship Connecticut Municipal Bond Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the one-year period ended February 29, 2000. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
ANNUAL REPORT page 3
<PAGE>
Market condition also made this an opportune time to improve the call
structure in the portfolios. Favorable call protection reduces exposure to
untimely calls during periods of falling interest rates, so that falling rates
have less of an effect on the fund's dividend. In the rising-rate environment
when early calls were not as much of a risk, call protection was undervalued. We
restructured the portfolios with new positions carrying what we believe to be
very favorable call protection. Thinking long-term helped us prepare the fund
for a future time when it may benefit from call protection.
Q How did the fund perform during the fiscal year ended February 29, 2000?
PAUL While we were able to take advantage of those positioning opportunities,
the fund reported a total return for the fiscal year period of -3.84% for Class
A shares on net asset value. The fund slightly underperformed the Lipper
Connecticut Municipal Debt peer group average, which reported a -3.79% total
return for the same one-year period. Over the five-year period, the fund
reported a 5.07% gain, compared to the 4.83% gain for the Lipper peer group for
the same period.*
As of February 29, 2000, the fund's SEC 30-day yield was 5.03%. For
investors in the combined 34% federal and state income tax bracket, that is
equivalent to a yield of 7.62% on a taxable investment.**
Q With Connecticut being such a small state, and with new issuance supply being
down over the period, how did you find attractive buys?
PAUL Issuance in Connecticut was indeed very small and concentrated in
comparison to issuance in other states, and over the fiscal period that was
amplified by higher interest rates, which tend to discourage borrowing.
Further, many times we are competing with individuals. With issuance at its
lowest level since 1995, it can be very difficult for individuals to have access
to new issues like Nuveen does.
Our research department and market presence puts us in a position as a
major player in the Connecticut municipal bond market. Many times we have been
able to find information on lesser-known issues and negotiate the price of an
issue. It is not unusual for us to buy an entire maturity of a certain issue.
For example, we negotiated directly with underwriters prior to purchasing
bonds issued by the Town of Cheshire and bonds issued by the state on behalf of
Connecticut State University. Our negotiations allowed us to purchase these
bonds at relatively attractive yields and to ensure a purchase of the amount of
the bonds we wanted.
Nuveen's presence can help when we are selling in the secondary market, as
well.
NUVEEN FLAGSHIP CONNECTICUT MUNICIPAL BOND FUND
Top Five Sectors
Tax Obligation (Limited) 16%
--------------------------------------------
Education and Civic Organizations 16%
--------------------------------------------
U.S. Guaranteed 14%
--------------------------------------------
Healthcare 12%
--------------------------------------------
Tax Obligation (General) 11%
--------------------------------------------
As a percentage of total bond holdings as of February 29, 2000. Holdings are
subject to change.
* The Lipper Peer Group returns represent the average annualized total return
of the 28 funds in the Lipper Connecticut Municipal Debt Funds category for
the one-year period ended February 29, 2000, and 20 funds for the five-year
period. The returns assume reinvestment of dividends and do not reflect any
applicable sales charges.
** Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis. The
taxable-equivalent yield shown is based on the 30-day SEC yield and a
combined federal and state income tax rate of 34%.
ANNUAL REPORT page 4
<PAGE>
Q Was diversification also a challenge?
PAUL Very much, but again, our access to the market came in handy to lead us to
a variety of issues. Over the past fiscal year, we were active buying new issues
that added to the fund's diversification.
In addition to the previously mentioned purchases, we further diversified
the fund's holdings by purchasing bonds issued on behalf of Horace Bushnell
Memorial Hall, a new borrower in the Connecticut municipal market. The Bushnell
is a performing arts center located in Hartford. It was founded in 1930 and
draws over 400,000 people annually.
In the long-term care sector, we purchased bonds issued on behalf of the
Mary Wade Home located in New Haven. This purchase, like others throughout the
year, offered a very attractive yield and excellent call protection.
Another tactic we used to improve diversification was purchasing Puerto
Rico bonds, which are tax exempt in Connecticut. Working closely with a regional
broker, we were able to purchase a sizable block of insured Puerto Rico General
Obligation Bonds for the fund, with excellent credit quality and priced at what
we believe was a favorable level.
Q What is your outlook for the fund for the coming months?
PAUL We expect the state's economy to continue its healthy pace, with enough
revenues to hold new issuance down. In our opinion, new issuance will likely be
even less in the next fiscal year. We plan to continue leveraging our access to
the market to search for and negotiate attractively priced bonds offering strong
relative yields. We believe this will enable the fund to continue to produce
competitive and stable tax-exempt dividends.
"We plan to continue leveraging our access to the market to search for and
negotiate attractively priced bonds offering strong relative yields."
ANNUAL REPORT page 5
<PAGE>
Terms To Know
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income investment
portfolio. The longer the duration, the greater a portfolio's sensitivity to
changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by subtracting
the fund's liabilities from its assets and dividing by the number of shares
outstanding.
SEC Yield A standardized calculation that the Securities and Exchange Commission
requires mutual funds to use when advertising rates of income return. This
standardized rate ensures that investors are comparing "apples to apples" when
comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security to
pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share earned
over a specific one-month or 30-day period expressed as a percentage of the
maximum offering price of the fund shares at the end of the period.
NUVEEN FLAGSHIP CONNECTICUT MUNICIPAL BOND FUND
Fund Spotlight as of February 29, 2000
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $9.96 $9.94 $9.95 $9.99
- ---------------------------------------------------------------------------------------------------
February's Declared Dividend* $0.0440 $0.0375 $0.0390 $0.0455
- ---------------------------------------------------------------------------------------------------
Fund Symbol FCTTX N/A FCTCX N/A
- ---------------------------------------------------------------------------------------------------
CUSIP 67065N886 67065N878 67065N860 67065N852
- ---------------------------------------------------------------------------------------------------
Inception Date 7/87 2/97 10/93 2/97
- ---------------------------------------------------------------------------------------------------
*Paid March 1, 2000
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
1-Year -3.84% -7.90% -4.57% -8.23% -4.31% -3.63%
- ---------------------------------------------------------------------------------------------------
1-Year TER* -1.29% -5.45% -2.40% -6.05% -2.05% -0.97%
- ---------------------------------------------------------------------------------------------------
5-Year 5.07% 4.18% 4.34% 4.18% 4.50% 5.26%
- ---------------------------------------------------------------------------------------------------
5-Year TER* 7.83% 6.91% 6.75% 6.59% 6.96% 8.09%
- ---------------------------------------------------------------------------------------------------
10-Year 6.17% 5.71% 5.67% 5.67% 5.58% 6.26%
- ---------------------------------------------------------------------------------------------------
10-Year TER* 9.15% 8.68% 8.40% 8.40% 8.26% 9.28%
- ---------------------------------------------------------------------------------------------------
</TABLE>
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years. Class C shares
have a 1% CDSC for redemptions within one year, which is not reflected in the
one-year total returns.
*Taxable Equivalent Return (Based on a combined federal and state income tax
rate of 34%.)
<TABLE>
<CAPTION>
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 5.03% 4.81% 4.28% 4.48% 5.23%
- ---------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 7.62% 7.29% 6.48% 6.79% 7.92%
</TABLE>
Index Comparison
[MOUNTAIN CHART APPEARS HERE]
NUVEEN NUVEEN
FLAGSHIP FLAGSHIP
LEHMAN CONNECTICUT CONNECTICUT
BROTHERS MUNICIPAL MUNICIPAL
MUNICIPAL BOND FUND BOND FUND
BOND INDEX (NAV) (Offer)
2/90 $10,000 $10,000 $ 9,580
2/91 $10,922 $10,668 $10,220
2/92 $12,013 $11,725 $11,232
2/93 $13,667 $13,417 $12,854
2/94 $14,422 $14,101 $13,508
2/95 $14,696 $14,209 $13,612
2/96 $16,318 $15,636 $14,980
2/97 $17,364 $16,491 $15,798
2/98 $18,953 $17,934 $17,180
2/99 $20,118 $18,922 $18,127
2/00 $19,696 $18,195 $17,430
- - Nuveen Flagship Connecticut Bond Fund (Offer) $17,430
- - Nuveen Flagship Connecticut Bond Fund (NAV) $18,195
- - Lehman Brothers Municipal Bond Index $19,696
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.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Portfolio Statistics
Total Net Assets $229.9 million
- ------------------------------------------
Average Effective
Maturity 18.28 years
- ------------------------------------------
Average Duration 8.08
- ------------------------------------------
ANNUAL REPORT page 6
<PAGE>
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND
NUVEEN MASSACHUSETTS INSURED MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
- --------------------------------------------------------------------------------
Nuveen Massachusetts Municipal Bond Fund and Nuveen Massachusetts Insured
Municipal Bond Fund feature portfolio management by Nuveen Investment Advisory
Services, a team of portfolio managers and research analysts committed to a
disciplined, research-oriented investment strategy. To help you understand the
fund's performance for the fiscal year ended February 29, 2000, we spoke with
Portfolio Manager Tom Futrell of Nuveen Advisory Corp.
Q Throughout the fiscal year of Nuveen Massachusetts Municipal Bond Fund and
Nuveen Massachusetts Insured Municipal Bond Fund, which ended February 29, 2000,
the nation as a whole experienced continued strong economic growth. How did the
Massachusetts economy perform compared to that of the rest of the nation?
TOM The Massachusetts economy also remained very strong, with an unemployment
rate of 3.1%, far below the national average of 4.1%. Both the Commonwealth of
Massachusetts and the city of Boston were upgraded by bond rating agencies
during the period.
The flourishing high-tech sector in Massachusetts helped drive the economy to
some extent. Massachusetts has the second largest infusion of venture capital in
the country, after California. A large proportion of the funding has been used
by high-tech/Internet start-up companies in Boston, which should translate into
continued growth in the Commonwealth's technology sector.
The state had some pressure to deal with regarding the Central Artery/Tunnel
Project (also known as the "Big Dig"), backed by a bond issue through the
Massachusetts Bay Transportation Authority (MBTA), in which the Nuveen funds
have a stake. Work on the project continues in the midst of brewing controversy
that arose during December 1999 regarding cost overruns. A federal agency has
launched an inquiry into whether the MBTA intentionally withheld details of cost
overruns for the project. Nevertheless, Massachusetts Governor Paul Celluci has
unveiled a plan to fund the approximately $1.4 billion in overruns through
various sources such as direct payments, toll hikes, and the leveraging of state
funding and federal grants, pending approval by the state legislature.
Q The Federal Reserve (the Fed) began its expected series of moves to raise
interest rates to try to cool off the economy. This is typically a challenging
environment for municipal bonds. How did the fund perform in this environment?
TOM Although this market presented us with some long-term fund positioning
opportunities for the fiscal year ended February 29, 2000, the Nuveen
Massachusetts Municipal Bond Fund reported a total return of -3.21%, and the
Nuveen Massachusetts Insured Municipal Bond Fund had a total return of -2.95%
for Class A shares on net asset value. Even so, both funds' returns bested the
Lipper Massachusetts Municipal Debt peer group average, which reported a 4.42%
loss for the same one-year period.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. Nuveen has chosen them for their rigorously
disciplined investment approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's income-oriented funds feature portfolio management by Nuveen Investment
Advisory Services (NIAS). NIAS follows a disciplined, research-driven investment
approach to uncover income securities that combine exceptional relative value
with above-average return potential. Drawing on 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
.. A commitment to exhaustive research
.. An active, value-oriented investment style
.. The unmatched presence of trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen Massachusetts and Massachusetts Insured
Municipal Bond funds.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the one-year period ended February 29, 2000. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
ANNUAL REPORT page 7
<PAGE>
For the five-year period ended February 29, 2000, the Massachusetts Fund
reported a 4.62% gain and the Massachusetts Insured Fund had a 4.47% gain,
compared to the 4.59% gain for the Lipper peer group for the same period.*
As of February 29, 2000, the Massachusetts Fund's SEC 30-day yield was 5.08%.
For investors in the combined 35% federal and state income tax bracket, that is
equivalent to a yield of 7.82% on a taxable investment. For the Insured Fund,
the SEC yield was 4.62%, which is equivalent to a 7.11% yield on a taxable
investment.**
Q Which sectors in particular were noteworthy?
TOM The housing sector was very attractive to us for several reasons. First,
bonds in this sector historically have offered additional incremental yield. For
investors seeking income at reasonable prices, housing bonds can be a great
option. Also, the prepays on these bonds have been slower as interest rates have
risen. Prepay simply means the bond issuer pays back the borrowed money before
required to do so. It saves issuers money but is costly to investors.
We bought an issue from West Springfield Multifamily Housing that had an
attractive structure. With tax credits built in and insured by the Government
National Mortgage Association (GNMA), these bonds offered a high level of
security plus an attractive yield (6.50%).
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND
Top Five Sectors
U.S. Guaranteed 26%
-------------------------------
Housing (Multifamily) 13%
-------------------------------
Long-Term Care 13%
-------------------------------
Tax Obligation (General) 12%
-------------------------------
Healthcare 11%
-------------------------------
As a percentage of total bond holdings as of February 29, 2000. Holdings are
subject to change.
NUVEEN MASSACHUSETTS INSURED MUNICIPAL BOND FUND
Top Five Sectors
U.S. Guaranteed 21%
----------------------------------------
Tax Obligation (General) 19%
----------------------------------------
Education and Civic Organizations 19%
----------------------------------------
Healthcare 14%
----------------------------------------
Housing (Multifamily) 13%
----------------------------------------
As a percentage of total bond holdings as of February 29, 2000. Holdings are
subject to change.
We believe the value of the higher education sector has decreased in the
market, but there were still opportunities awaiting those with the capabilities
for thorough research. Our research turned up an attractive buy in higher
education, from Massachusetts Development Finance Authority for Curry College.
Located in Milton, this small liberal arts college has been experiencing
positive enrollment trends and solid growth in its continuing education program.
These insured bonds offered an attractive yield for the 30-year maturity, which
was higher than insured bonds of comparable maturities at the time of purchase.
In the Massachusetts Insured portfolio, we found a good value in the secondary
market through Massachusetts Industrial Finance Authority for Western New
England College. Based in Springfield and with 17 other teaching sites, New
England College has had positive enrollment trends, a growing endowment and
sound operations. The bonds offered additional incremental yield.
The healthcare sector continued to struggle. One of the holdings in the
Massachusetts Fund, Harvard Pilgrim Health Care (HPHC), was placed into
temporary receivership in January. Because the bonds are insured, there was no
potential loss of income in the fund since the debt was still being serviced.
HPHC has begun to show signs of improvement and state officials believe the
health plan could function on its own through a rehab plan. With more than one
million residents covered by HPHC, we believe the state insurance commissioner
will be certain it doesn't slip through the cracks.
* The Lipper Peer Group returns represent the average annualized total return
of the 56 funds in the Lipper Massachusetts Municipal Debt Funds category for
the one-year period ended February 29, 2000, and 44 funds for the five-year
period. The returns assume reinvestment of dividends and do not reflect any
applicable sales charges.
** Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis. The
taxable-equivalent yield shown is based on the 30-day SEC yield and a
combined federal and state income tax rate of 35%.
ANNUAL REPORT page 8
<PAGE>
Q Given the difficult market, was municipal bond issuance in Massachusetts down
over the period?
TOM Actually, issuance in Massachusetts was up over the prior year, by 5.6%,
compared to the national supply, which was down 35%. Most of the increase came
over the earlier part of the year; supply slowed down during the third and
fourth calendar quarters primarily because of the higher interest rates and
lower demand.
NUVEEN MASSACHUSETTS MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed. 52%
AA.................. 15%
A................... 14%
BBB/NR.............. 19%
As a percentage of total bond holdings as of February 29, 2000. Holdings are
subject to change.
Q During periods of scarce supply and rising interest rates, how do you find
attractive buys when other investors are facing the same challenge?
TOM It is especially during a market like this, where choices are limited, that
Nuveen's active management, experienced research department and important
relationships with national and state dealers may offer a distinct advantage.
This combination allows us the opportunity to not only identify the attractive
deals that may be lesser-known to other investors, but also to negotiate
structure and be among the first to participate in more widely known issues.
An example of this advantage at work was the Curry College example I just
gave. Another was an issue through Massachusetts Development Finance Authority
for the Massachusetts College of Pharmacy and Allied Health Sciences Bonds.
These bonds offered higher yields than comparable bonds that were in the market
at the same time. Because the Boston-based College of Pharmacy does not issue
bonds often, it is not well known by the municipal market. Fortunately, our
analysis helped us act quickly and purchase a sizable portion of the issue for
the Massachusetts Fund.
Q What was involved in long-term positioning of the Funds during the period?
TOM Amid rising interest rates, we were able to pursue our goal of improving
fund yields. Several of the purchases I mentioned earlier definitely contributed
to that goal, as we sold bonds with lower coupons to reinvest at higher rates.
We also improved the call structure in the portfolios. Good call structure is
important to a fund's total return. Extending the call protection helps reduce
exposure to prepayment and therefore the risk of reinvesting in what may be an
uncertain market. In the rising rate market, we sold out our smaller positions
that were below $1 million with unfavorable call structure. We generated a tax
loss on the sales -- which comes in handy to help offset future realized capital
gains -- then we reinvested in bonds with what we believe to have better call
structure.
Q What is your outlook for the Massachusetts market and the funds?
TOM We expect the Massachusetts economy to continue to be strong. Municipal
bond issuance may level off or decrease with more Fed interest rate hikes a near
certainty in our opinion. We plan to maintain our defensive position for the
funds, watching for opportunities to improve yield and call protection.
"It is especially during a market like this, where choices are limited, that
Nuveen's active management, experienced research department and important
relationships with national and state dealers may offer a distinct advantage."
ANNUAL REPORT page 9
<PAGE>
Terms To Know
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income investment
portfolio. The longer the duration, the greater a portfolio's sensitivity to
changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by subtracting
the fund's liabilities from its assets and dividing by the number of shares
outstanding.
SEC Yield A standardized calculation that the Securities and Exchange Commission
requires mutual funds to use when advertising rates of income return. This
standardized rate ensures that investors are comparing "apples to apples" when
comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security to
pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share earned
over a specific one-month or 30-day period expressed as a percentage of the
maximum offering price of the fund shares at the end of the period.
The Nuveen Massachusetts Municipal Bond Fund's monthly dividends rose during the
fiscal period. The amount differed based on share class. Please see Quick Facts
for the latest dividend paid.
NUVEEN MASSACHUSETTS INSURED MUNICIPAL BOND FUND
Fund Spotlight as of February 29, 2000
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $9.26 $9.28 $9.20 $9.24
- ---------------------------------------------------------------------------------------------------
February's Declared Dividend* $0.0420 $0.0360 $0.0375 $0.0435
- ---------------------------------------------------------------------------------------------------
Fund Symbol NMAAX N/A NMACX NBMAX
- ---------------------------------------------------------------------------------------------------
CUSIP 67065N845 67065N837 67065N829 67065N811
- ---------------------------------------------------------------------------------------------------
Inception Date 9/94 3/97 10/94 12/86
- ---------------------------------------------------------------------------------------------------
* Paid March 1, 2000
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
1-Year -3.21% -7.26% -4.02% -7.69% -3.87% -3.03%
- ---------------------------------------------------------------------------------------------------
1-Year TER* -0.52% -4.68% -1.73% -5.41% -1.47% -0.23%
- ---------------------------------------------------------------------------------------------------
5-Year 4.62% 3.73% 3.90% 3.74% 3.98% 4.85%
- ---------------------------------------------------------------------------------------------------
5-Year TER* 7.46% 6.54% 6.33% 6.18% 6.48% 7.81%
- ---------------------------------------------------------------------------------------------------
10-Year 6.17% 5.71% 5.57% 5.57% 5.42% 6.40%
- ---------------------------------------------------------------------------------------------------
10-Year TER* 9.18% 8.70% 8.26% 8.26% 8.07% 9.54%
- ---------------------------------------------------------------------------------------------------
</TABLE>
+ Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and declines
periodically to 0% over the following five years. Class C shares have a 1%
CDSC for redemptions within one year, which is not reflected in the one-year
total returns.
Taxable Equivalent Return (Based on a combined federal and state income tax rate
of 35%.)
<TABLE>
<CAPTION>
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 5.08% 4.87% 4.34% 4.54% 5.29%
- ---------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 7.82% 7.49% 6.68% 6.98% 8.14%
</TABLE>
Index Comparison
[MOUNTAIN CHART APPEARS HERE]
LEHMAN NUVEEN NUVEEN
BROTHERS MASSACHUSETTS MASSACHUSETTS
MUNICIPAL MUNICIPAL MUNICIPAL
BOND INDEX BOND FUND BOND FUND
(NAV) (OFFER)
2/90 $10,000 $10,000 $ 9,580
2/91 $10,922 $10,778 $10,325
2/92 $12,013 $11,868 $11,370
2/93 $13,667 $13,521 $12,953
2/94 $14,422 $14,293 $13,692
2/95 $14,695 $14,519 $13,909
2/96 $16,318 $15,914 $15,247
2/97 $17,364 $16,668 $15,968
2/98 $18,953 $17,899 $17,147
2/99 $20,118 $18,803 $18,013
2/00 $19,696 $18,199 $17,435
- - Nuveen Massachusetts Municipal Bond Fund (Offer) $17,435
- - Nuveen Massachusetts Municipal Bond Fund (NAV) $18,199
- - Lehman Brothers Municipal Bond Index $19,696
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
maximun 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.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
++ The Morningstar rating is an overall rating for the municipal bond category
and relates to Class A Shares only; other classes may vary. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of
2/29/00 and are subject to change every month. Past performance is no
guarantee of future results. Ratings are calculated from the fund's three-,
five-, and 10-year average annual returns (if applicable) in excess of 90-day
Treasury bill returns, with appropriate fee adjustments, and a risk factor
that reflects fund performance below 90-day T-bill returns. The Class A
Shares of the fund received four stars for the three- and five-year periods.
The top 10% of the funds in a broad asset class receive five stars and the
next 22.5% receive four stars. The fund was rated among 1,678 and 1,365 funds
for the three- and five-year periods, respectively.
Morningstar Rating/TM/++
* * * *
Overall rating among 1,678
municipal bond funds as
of 2/29/00
Portfolio Statistics
Total Net Assets $91.3 million
- -----------------------------------
Average Effective
Maturity 17.69 years
- -----------------------------------
Average Duration 7.53
- -----------------------------------
ANNUAL REPORT page 10
<PAGE>
NUVEEN MASSACHUSETTS INSURED MUNICIPAL BOND FUND
Fund Spotlight as of February 29, 2000
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 9.77 $ 9.78 $ 9.75 $ 9.78
- ---------------------------------------------------------------------------------------------------
February's Declared Dividend* $0.0420 $0.0355 $0.0370 $0.0435
- ---------------------------------------------------------------------------------------------------
Fund Symbol NMAIX N/A NMAKX NIMAX
- ---------------------------------------------------------------------------------------------------
CUSIP 67065N795 67065N787 67065N779 67065N761
- ---------------------------------------------------------------------------------------------------
Inception Date 9/94 3/97 9/94 12/86
- ---------------------------------------------------------------------------------------------------
* Paid March 1, 2000
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
1-Year -2.95% -6.99% -3.59% -7.29% -3.43% -2.68%
- ---------------------------------------------------------------------------------------------------
1-Year TER* -0.34% -4.49% -1.40% -5.09% -1.14% 0.03%
- ---------------------------------------------------------------------------------------------------
5-Year 4.47% 3.58% 3.73% 3.56% 3.82% 4.70%
- ---------------------------------------------------------------------------------------------------
5-Year TER* 7.18% 6.27% 6.03% 5.88% 6.17% 7.53%
- ---------------------------------------------------------------------------------------------------
10-Year 6.02% 5.57% 5.43% 5.43% 5.30% 6.28%
- ---------------------------------------------------------------------------------------------------
10-Year TER* 8.87% 8.40% 7.96% 7.96% 7.77% 9.25%
- ---------------------------------------------------------------------------------------------------
</TABLE>
+ Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years. Class C shares
have a 1% CDSC for redemptions within one year, which is not reflected in the
one-year total returns.
* Taxable Equivalent Return (Based on a combined federal and state income tax
rate of 35%.)
<TABLE>
<CAPTION>
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 4.62% 4.43% 3.88% 4.08% 4.82%
- ------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 7.11% 6.82% 5.97% 6.28% 7.42%
- ------------------------------------------------------------------------------------------------
</TABLE>
Index Comparison
[MOUNTAIN CHART APPEARS HERE]
NUVEEN NUVEEN
MASSACHUSETTS MASSACHUSETTS
LEHMAN INSURED INSURED
BROTHERS MUNICIPAL MUNICIPAL
MUNICIPAL BOND FUND BOND FUND
BOND INDEX (NAV) (OFFER)
2/90 $10,000 $10,000 $ 9,580
2/91 $10,922 $10,865 $10,409
2/92 $12,013 $11,875 $11,376
2/93 $13,667 $13,539 $12,970
2/94 $14,422 $14,213 $13,616
2/95 $14,695 $14,422 $13,816
2/96 $16,318 $15,804 $15,140
2/97 $17,364 $16,440 $15,749
2/98 $18,953 $17,598 $16,859
2/99 $20,118 $18,493 $17,717
2/00 $19,696 $17,948 $17,194
- - Nuveen Massachusetts Insured Municipal Bond Fund (offer) $17,194
- - Nuveen Massachusetts Insured Municipal Bond Fund (NAV) $12,948
- - Lehman Brothers Municipal Bond Index $19,696
Past performance is not predictive of future results.
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.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Portfolio Statistics
Total Net Assets $65.9 million
- -----------------------------------
Average Effective
Maturity 17.86 years
- -----------------------------------
Average Duration 6.56
- -----------------------------------
Terms To Know
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income investment
portfolio. The longer the duration, the greater a portfolio's sensitivity to
changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by subtracting
the fund's liabilities from its assets and dividing by the number of shares
outstanding.
SEC Yield A standardized calculation that the Securities and Exchange Commission
requires mutual funds to use when advertising rates of income return. This
standardized rate ensures that investors are comparing "apples to apples" when
comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security to
pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share earned
over a specific one-month or 30-day period expressed as a percentage of the
maximum offering price of the fund shares at the end of the period.
The Nuveen Massachusetts Insured Municipal Bond Fund's monthly dividends rose
during the fiscal period. The amount differed based on share class. Please see
Quick Facts for the latest dividend paid.
ANNUAL REPORT page 11
<PAGE>
Portfolio of Investments
Nuveen Flagship Connecticut Municipal Bond Fund
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 0.4%
$ 1,000 Town of Sprague, Connecticut, Environmental Improvement Revenue 10/07 at 102 A3 $ 876,860
Bonds (International Paper Company Project), 1997 Series A, 5.700%,
10/01/21 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 15.1%
State of Connecticut Health and Educational Facilities Authority, Revenue
Bonds, Greenwich Academy Issue, Series A:
1,000 5.700%, 3/01/16 3/06 at 101 AAA 1,000,310
2,000 5.750%, 3/01/26 3/06 at 101 AAA 1,938,400
1,000 State of Connecticut Health and Educational Facilities Authority, 5/02 at 102 AAA 990,030
Revenue Bonds, Yale University, 5.929%, 6/10/30
Connecticut Higher Education Supplemental Loan Authority, Revenue Bonds
(Family Education Loan Program), 1991 Series A:
365 7.000%, 11/15/05 (Alternative Minimum Tax) 11/01 at 102 A 379,188
3,440 7.200%, 11/15/10 (Alternative Minimum Tax) 11/01 at 102 A 3,566,833
Connecticut Higher Education Supplemental Loan Authority, Revenue Bonds
(Family Education Loan Program), 1996 Series A:
1,545 6.300%, 11/15/10 (Alternative Minimum Tax) 11/04 at 102 A1 1,585,973
1,170 6.350%, 11/15/11 (Alternative Minimum Tax) 11/04 at 102 A1 1,202,280
4,400 State of Connecticut Health and Educational Facilities Authority, 7/08 at 101 AA 3,613,368
Revenue Bonds, Sacred Heart University Issue, Series E, 5.000%, 7/01/28
2,875 State of Connecticut Health and Educational Facilities Authority, 7/03 at 102 BBB- 2,593,538
Revenue Bonds, Quinnipiac College Issue, Series D, 6.000%, 7/01/23
2,000 State of Connecticut Health and Educational Facilities Authority, 7/04 at 101 1/2 AAA 2,002,740
Revenue Bonds, The Loomis Chaffee School Issue, Series B, 6.000%,
7/01/25
2,500 State of Connecticut Health and Educational Facilities Authority, 7/05 at 101 AAA 2,305,325
Revenue Bonds, Kent School Issue, Series B, 5.400%, 7/01/23
1,600 State of Connecticut Health and Educational Facilities Authority, 7/06 at 102 AAA 1,576,656
Revenue Bonds, Trinity College Issue, Series E, 5.875%, 7/01/26
1,435 State of Connecticut Health and Educational Facilities Authority, 7/06 at 101 AAA 1,325,366
Revenue Bonds, The Loomis Chaffee School Issue, Series C, 5.500%,
7/01/26
1,490 State of Connecticut Health and Educational Facilities Authority, 7/08 at 101 AA 1,254,535
Revenue Bonds, Canterbury School Issue, Series A, 5.000%, 7/01/18
2,000 State of Connecticut Health and Educational Facilities Authority, 7/07 at 102 AAA 1,830,300
Revenue Bonds, Suffield Academy Issue, Series A, 5.400%, 7/01/27
State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Fairfield University, Series I:
585 5.250%, 7/01/25 7/09 at 101 AAA 524,330
2,755 5.500%, 7/01/29 7/09 at 101 AAA 2,560,332
1,250 State of Connecticut Health and Educational Facilities Authority, 7/09 at 101 Aaa 1,178,175
Revenue Bonds, The Horace Bushnell Memorial Hall Issue, Series A,
5.625%, 7/01/29
State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Connecticut State University System Issue, Series 1999C:
1,155 5.500%, 11/01/17 11/09 at 101 AAA 1,124,993
1,155 5.500%, 11/01/18 11/09 at 101 AAA 1,115,060
1,155 5.500%, 11/01/19 11/09 at 101 AAA 1,107,368
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care - 11.5%
$ 2,600 State of Connecticut Health and Educational Facilities Authority, 7/00 at 102 AAA $ 2,670,044
Revenue Bonds, Bristol Hospital Issue, Series A, 7.000%, 7/01/20
900 State of Connecticut Health and Educational Facilities Authority, 7/01 at 102 AAA 934,353
Revenue Bonds, Hospital of Raphael Issue, Series D, 6.625%, 7/01/14
2,000 State of Connecticut Health and Educational Facilities Authority, 7/02 at 102 AAA 2,107,040
Revenue Bonds, Bridgeport Hospital Issue, Series A, 6.625%, 7/01/18
800 State of Connecticut Health and Educational Facilities Authority, 7/04 at 102 AAA 791,344
Revenue Bonds, New Britain General Hospital Issue, Series B, 6.000%,
7/01/24
1,405 State of Connecticut Health and Educational Facilities Authority, 7/09 at 101 Aaa 1,252,066
Revenue Bonds, Stamford Hospital Issue, Series G, 5.000%, 7/01/18
State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Hospital for Special Care Issue, Series B:
1,000 5.375%, 7/01/17 7/07 at 102 BBB 826,810
3,500 5.500%, 7/01/27 7/07 at 102 BBB 2,799,720
1,645 State of Connecticut Health and Educational Facilities Authority, 7/06 at 102 AAA 1,484,547
Revenue Bonds, Day Kimball Hospital Issue, Series A, 5.375%, 7/01/26
1,500 State of Connecticut Health and Educational Facilities Authority, 7/06 at 102 AAA 1,457,505
Revenue Bonds, Greenwich Hospital Issue, Series A, 5.800%, 7/01/26
1,400 State of Connecticut Health and Educational Facilities Authority, 7/06 at 102 AAA 1,337,980
Revenue Bonds, Yale-New Haven Hospital Issue, Series H, 5.700%, 7/01/25
320 State of Connecticut Health and Educational Facilities Authority, 1/01 at 102 AAA 332,262
Revenue Bonds, Capital Asset Issue, Series C, 7.000%, 1/01/20
2,000 State of Connecticut Health and Educational Facilities Authority, 7/07 at 102 AAA 1,927,840
Revenue Bonds, The William W. Backus Hospital Issue, Series D, 5.750%,
7/01/27
1,500 State of Connecticut Health and Educational Facilities Authority, 11/09 at 101 AAA 1,447,125
Revenue Bonds, Catholic Health East Issue, Series 1999F, 5.750%,
11/15/29
2,725 State of Connecticut Health and Educational Facilities Authority, 7/09 at 101 AA 2,591,639
Revenue Bonds, Waterbury Hospital Issue Series C, 5.750%, 7/01/20
2,000 State of Connecticut Health and Educational Facilities Authority, 7/10 at 101 AA 1,955,260
Revenue Bonds, Eastern Connecticut Health Network Issue, Series A,
6.000%, 7/01/25
2,250 Connecticut Development Authority, Solid Waste Disposal Facilities 7/05 at 102 AAA 2,428,223
Revenue Bonds, Pfizer Inc. Project, 1994 Series, 7.000%, 7/01/25
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 2.4%
2,000 Housing Authority of the City of Bridgeport, Connecticut, Multifamily 12/09 at 102 N/R 1,997,400
Housing Revenue Bonds (Stratfield Apartments Project), Series 1999,
7.250%, 12/01/24
2,000 Connecticut Housing Finance Agency, Housing Mortgage Finance Program 12/09 at 100 AA 1,947,440
Bonds, 1999 Series D, 6.200%, 11/15/41 (Alternative Minimum Tax)
1,500 New Britain Senior Citizens Housing Development Corporation, Mortgage 1/02 at 102 AAA 1,546,830
Revenue Refunding Bonds (FHA-Insured Mortgage Loan - Nathan Hale
Apartments - Section 8 Assisted Project), Series 1992A,
6.875%, 7/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 9.3%
225 Connecticut Housing Finance Authority, Housing Mortgage Finance 11/02 at 102 AA 231,075
Program Bonds, 1992 Series C2, 6.700%, 11/15/22 (Alternative Minimum Tax)
1,250 Connecticut Housing Finance Authority, Housing Mortgage Finance 5/03 at 102 AA 1,276,575
Program Bonds, 1993 Series A, 6.200%, 5/15/14
2,750 Connecticut Housing Finance Authority, Housing Mortgage Finance 5/04 at 102 AA 2,752,503
Program Bonds, 1994 Series A, 6.100%, 5/15/17
1,500 Connecticut Housing Finance Authority, Housing Mortgage Finance 5/05 at 102 AA 1,501,560
Program Bonds, 1995 Series A, Subseries A-1, 6.100%, 5/15/17
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship Connecticut Municipal Bond Fund (continued)
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$ 7,490 Connecticut Housing Finance Authority, Housing Mortgage Finance 11/07 at 102 AA $ 7,122,316
Program Bonds, 1997 Series B, Subseries B-2, 5.850%, 11/15/28
(Alternative Minimum Tax)
1,000 Connecticut Housing Finance Authority, Housing Mortgage Finance 11/05 at 102 AA 996,710
Program Bonds, 1995 Series F, Subseries F-1, 6.000%, 5/15/17
1,500 Connecticut Housing Finance Authority, Housing Mortgage Finance 5/06 at 102 AA 1,506,570
Program Bonds, 1996 Series B, Subseries B-1, 6.050%, 5/15/18
4,605 Connecticut Housing Finance Authority, Housing Mortgage Finance 11/06 at 102 AA 4,526,301
Program Bonds, 1996 Subseries E-2, 6.150%, 11/15/27 (Alternative
Minimum Tax)
1,490 Connecticut Housing Finance Authority, Housing Mortgage Finance 11/06 at 102 AA 1,452,541
Program Bonds, 1997 Series F, Subseries F-2, 6.000%, 11/15/27
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 7.0%
1,000 State of Connecticut Health and Educational Facilities Authority, 8/08 at 102 AAA 850,150
Revenue Bonds, Hebrew Home and Hospital Issue (FHA-Insured Mortgage),
Series B, 5.200%, 8/01/38
2,000 State of Connecticut Health and Educational Facilities Authority, 11/04 at 102 AAA 2,209,960
Revenue Bonds, Nursing Home Program Issue, Series 1994, AHF/Hartford,
Inc. Project, 7.125%, 11/01/24
Connecticut Development Authority, First Mortgage Gross Revenue Health
Care Project Refunding Bonds (Church Homes, Inc., Congregational Avery
Heights Project - 1997 Series):
1,700 5.700%, 4/01/12 4/07 at 102 BBB 1,506,353
2,610 5.800%, 4/01/21 4/07 at 102 BBB 2,172,225
1,875 Connecticut Development Authority, First Mortgage Gross Revenue Health 12/06 at 103 BBB+ 1,519,031
Care Project Refunding Bonds (The Elim Park Baptist Home, Inc.
Project), Series 1998A, 5.375%, 12/01/18
Connecticut Development Authority, First Mortgage Gross Revenue Health
Care Project Refunding Bonds (Connecticut Baptist Homes, Inc. Project),
1999 Series:
1,000 5.500%, 9/01/15 9/09 at 102 AA 941,810
500 5.625%, 9/01/22 9/09 at 102 AA 458,290
1,000 Connecticut Development Authority, First Mortgage Gross Revenue Health 12/09 at 102 N/R 962,160
Care Project Refunding Bonds (The Mary Wade Home, Incorporated Project),
1999 Series A, 6.375%, 12/01/18
Connecticut Development Authority, Revenue Refunding Bonds (Duncaster Inc.
Project), Series 1999A:
2,200 5.250%, 8/01/19 2/10 at 102 AA 1,948,760
3,910 5.375%, 8/01/24 2/10 at 102 AA 3,468,561
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 10.8%
3,000 City of Bridgeport, Connecticut, General Obligation Bonds, 1997 Series 3/07 at 101 AAA 2,812,320
A, 5.250%, 3/01/17
1,000 City of Bridgeport, Connecticut, General Obligation Bonds, 2000 Series 7/10 at 101 AAA 1,012,560
A, 6.000%, 7/15/19
325 Town of Canterbury, Connecticut, General Obligation Bonds, 7.200%, No Opt. Call A3 371,244
5/01/09
Town of Cheshire, Connecticut, General Obligation Bonds, Issue of 1999:
660 5.625%, 10/15/18 10/09 at 101 Aa3 647,269
660 5.625%, 10/15/19 10/09 at 101 Aa3 642,378
2,800 State of Connecticut, General Obligation Capital Appreciation Bonds No Opt. Call AA 1,457,988
(College Savings Plan - 1991 Series B), 0.000%, 12/15/11
1,000 State of Connecticut, General Obligation Capital Appreciation Bonds No Opt. Call AA 607,210
(College Savings Plan 1990 Series A), 0.000%, 5/15/09
500 State of Connecticut, General Obligation Bonds (1999 Series B), 11/09 at 101 AA 485,480
5.500%, 11/01/18
3,000 State of Connecticut, General Obligation Capital Appreciation Bonds No Opt. Call AA 1,605,960
(College Savings Plan - 1993 Series A), 0.000%, 6/15/11
Town of Glastonbury, Connecticut, General Obligation Bonds, Issue of
1988:
200 7.200%, 8/15/06 No Opt. Call Aa1 223,624
200 7.200%, 8/15/07 No Opt. Call Aa1 225,722
200 7.200%, 8/15/08 No Opt. Call Aa1 227,902
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
Town of Griswold, Connecticut, General Obligation Bonds, Issue of 1989:
$ 200 7.500%, 4/01/02 No Opt. Call AAA $ 211,068
200 7.500%, 4/01/03 No Opt. Call AAA 215,290
200 7.500%, 4/01/04 No Opt. Call AAA 219,006
150 7.500%, 4/01/05 No Opt. Call AAA 166,622
340 City of Middletown, Connecticut, General Obligation Bonds, 6.900%, No Opt. Call AA 372,341
4/15/06
City of New London, Connecticut, General Obligation Bonds, Water
Department Revenue Bonds, Series 20:
120 7.300%, 12/01/05 No Opt. Call A+ 133,612
100 7.300%, 12/01/07 No Opt. Call A+ 113,696
Town of Old Saybrook, Connecticut, General Obligation Bonds:
160 7.400%, 5/01/08 No Opt. Call A2 183,120
160 7.400%, 5/01/09 No Opt. Call A2 184,368
275 6.500%, 2/15/10 No Opt. Call AAA 302,288
270 6.500%, 2/15/11 No Opt. Call AAA 297,851
Town of Plainfield, Connecticut, General Obligation Bonds:
225 7.000%, 9/01/00 No Opt. Call A3 227,826
100 7.000%, 9/01/01 No Opt. Call A3 102,875
100 7.100%, 9/01/02 9/01 at 102 A3 104,405
310 7.100%, 9/01/03 9/01 at 102 A3 325,884
100 7.200%, 9/01/04 9/01 at 102 A3 105,267
335 7.250%, 9/01/06 9/01 at 102 A3 352,886
335 7.300%, 9/01/08 9/01 at 102 A3 353,127
155 7.300%, 9/01/10 9/01 at 102 A3 163,387
3,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1998 (General 7/08 at 101 A 2,529,000
Obligation Bonds), 5.000%, 7/01/28
4,190 Commonwealth of Puerto Rico, Public Improvement Bonds of 1999 (General 7/08 at 101 AAA 3,611,948
Obligation Bonds), 5.000%, 7/01/28
City of Torrington, Connecticut, General Obligation Bonds:
700 6.400%, 5/15/11 5/02 at 102 AAA 734,041
680 6.400%, 5/15/12 5/02 at 102 AAA 710,308
City of Waterbury, Connecticut, General Obligation Tax Revenue Intercept
Bonds, 2000 Issue:
910 6.000%, 2/01/18 2/09 at 101 AA 908,462
1,025 6.000%, 2/01/20 2/09 at 101 AA 1,011,470
Town of Winchester, Connecticut, General Obligation Bonds:
140 6.750%, 4/15/06 No Opt. Call A1 152,438
140 6.750%, 4/15/07 No Opt. Call A1 153,693
140 6.750%, 4/15/08 No Opt. Call A1 154,860
140 6.750%, 4/15/09 No Opt. Call A1 155,600
140 6.750%, 4/15/10 No Opt. Call A1 155,973
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 15.6%
2,000 State of Connecticut Health and Educational Facilities Authority, 11/04 at 102 AA- 1,994,320
Revenue Bonds, Nursing Home Program Issue (St. Camillus Health
Center Project), Series 1994, 6.250%, 11/01/18
945 State of Connecticut Health and Educational Facilities Authority, 7/08 at 102 AAA 796,635
Revenue Bonds, Child Care Facilities Program, Series A, 5.000%, 7/01/28
1,000 State of Connecticut Health and Educational Facilities Authority, 11/04 at 102 AAA 1,011,560
Revenue Bonds, Nursing Home Program Issue (Sharon Health Care Project),
Series 1994, 6.250%, 11/01/21
5,000 State of Connecticut Health and Educational Facilities Authority, 11/04 at 102 AAA 5,052,350
Revenue Bonds, Nursing Home Program Issue (Saint Joseph's Manor
Project), Series 1994, 6.250%, 11/01/16
3,695 State of Connecticut Health and Educational Facilities Authority, 11/04 at 102 AAA 3,766,129
Revenue Bonds, Nursing Home Program Issue (St. Camillus Health Center
Project), Series 1994, 6.250%, 11/01/18
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship Connecticut Municipal Bond Fund (continued)
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 3,000 State of Connecticut Health and Educational Facilities Authority, 11/04 at 102 AAA $ 3,039,600
Revenue Bonds, Nursing Home Program Issue (The Jewish Home for the
Elderly of Fairfield County Project), Series 1994, 6.250%, 11/01/20
State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Nursing Home Program Issue (Highland View Manor, Inc.
Project), Series 1994:
1,500 7.200%, 11/01/10 (Alternative Minimum Tax) 11/04 at 102 AAA 1,636,215
4,200 7.500%, 11/01/16 (Alternative Minimum Tax) 11/04 at 102 AAA 4,653,474
State of Connecticut Health and Educational Facilities Authority, Revenue
Bonds, Nursing Home Program Issue (Wadsworth Glen Health Care Center
Project), Series 1994:
1,100 7.200%, 11/01/10 (Alternative Minimum Tax) 11/04 at 102 AAA 1,199,891
1,000 7.500%, 11/01/16 (Alternative Minimum Tax) 11/04 at 102 AAA 1,107,970
4,115 State of Connecticut Health and Educational Facilities Authority, 11/06 at 102 AA- 4,135,534
Revenue Bonds, Nursing Home Program Issue (Abbott Terrace Health Center
Project), Series 1996, 5.750%, 11/01/13
4,365 State of Connecticut Health and Educational Facilities Authority, 11/06 at 102 AA 4,316,025
Revenue Bonds, Nursing Home Program Issue (3030 Park Fairfield Health
Center Project), Series 1996, 6.250%, 11/01/21
1,150 State of Connecticut, Special Tax Obligation Bonds, Transportation No Opt. Call AA- 1,221,864
Infrastructure Purposes, 1992 Series B, 6.125%, 9/01/12
1,250 Virgin Islands Public Finance Authority, Revenue Bonds (Virgin 10/10 at 101 BBB- 1,240,050
Islands Gross Receipts Taxes Loan Note), Series 1999A, 6.500%, 10/01/24
725 Town of Woodstock, Connecticut, Special Obligation Bonds (Woodstock 3/00 at 103 AAA 748,345
Academy - 1990 Issue), (General Obligation Bonds), 6.900%, 3/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 13.1%
3,010 State of Connecticut Health and Educational Facilities Authority, 7/03 at 100 AAA 3,264,104
Revenue Bonds, University of Hartford Issue, Series C, 8.000%, 7/01/18
(Pre-refunded to 7/01/03)
1,300 State of Connecticut Health and Educational Facilities Authority, 7/00 at 101 AAA 1,500,174
Revenue Bonds, Lutheran General Health Care System (Parkside Lodges
Projects), 7.375%, 7/01/19
1,000 State of Connecticut Health and Educational Facilities Authority, 7/00 at 102 N/R*** 1,030,470
Revenue Bonds, The Taft School Issue, Series A, 7.375%, 7/01/20
(Pre-refunded to 7/01/00)
190 State of Connecticut Health and Educational Facilities Authority, 7/00 at 102 Aaa 195,843
Revenue Bonds, St. Mary's Hospital Issue, Series C, 7.375%, 7/01/20
(Pre-refunded to 7/01/00)
3,500 State of Connecticut Health and Educational Facilities Authority, 7/02 at 102 AAA 3,683,365
Revenue Bonds, Middlesex Hospital Issue, Series G, 6.250%, 7/01/12
(Pre-refunded to 7/01/02)
1,100 State of Connecticut Health and Educational Facilities Authority, 7/02 at 102 N/R*** 1,148,609
Revenue Bonds, The William W. Backus Hospital Issue, Series C, 6.000%,
7/01/12 (Pre-refunded to 7/01/02)
2,000 State of Connecticut Health and Educational Facilities Authority, 7/04 at 102 AAA 2,126,580
Revenue Bonds, Trinity College Issue, Series D, 6.125%, 7/01/24
(Pre-refunded to 7/01/04)
2,910 State of Connecticut Health and Educational Facilities Authority, 7/03 at 102 BBB-*** 3,054,482
Revenue Bonds, Quinnipiac College Issue, Series D, 6.000%, 7/01/23
(Pre-refunded to 7/01/03)
180 State of Connecticut Health and Educational Facilities Authority, 1/01 at 102 AAA 187,690
Revenue Bonds, Capital Asset Issue, Series C, 7.000%, 1/01/20
(Pre-refunded to 1/01/01)
7,000 Connecticut Development Authority, Health Care Project Refunding 9/02 at 102 A2*** 7,430,640
Bonds (Duncaster, Inc. Project - 1992 Series), 6.750%, 9/01/15
(Pre-refunded to 9/01/02)
1,605 City of New Haven, Connecticut, General Obligation Bonds, Issue of 8/01 at 102 AAA 1,701,669
1991, 7.400%, 8/15/11 (Pre-refunded to 8/15/01)
City of New Haven, Connecticut, General Obligation Bonds, Issue of 1992:
400 9.250%, 3/01/02 No Opt. Call AAA 417,560
1,000 7.400%, 3/01/12 (Pre-refunded to 3/01/02) 3/02 at 102 AAA 1,069,820
1,130 Town of Stratford, Connecticut, General Obligation Bonds, 7.300%, 3/01 at 102 N/R*** 1,184,918
3/01/12 (Pre-refunded to 3/01/01)
City of Waterbury, Connecticut, General Obligation Bonds:
535 7.250%, 3/01/02 (Pre-refunded to 3/01/01) 3/01 at 102 N/R*** 560,739
785 7.300%, 3/01/05 (Pre-refunded to 3/01/01) 3/01 at 102 N/R*** 823,151
780 7.400%, 3/01/06 (Pre-refunded to 3/01/01) 3/01 at 102 N/R*** 818,649
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities - 9.5%
$ 8,000 Bristol Resource Recovery Facility Operating Committee, Solid Waste 7/05 at 102 A2 $ 8,038,400
Revenue Refunding Bonds (Ogden Martin Systems of Bristol, Inc.
Project - 1995 Series), 6.500%, 7/01/14
Connecticut Resources Recovery Authority, 1991 Series One Subordinated
(Wallingsford Resource Recovery Project):
400 6.750%, 11/15/03 (Alternative Minimum Tax) 11/01 at 102 AA 417,212
500 6.800%, 11/15/04 (Alternative Minimum Tax) 11/01 at 102 AA 520,995
5,250 Connecticut Resources Recovery Authority, Corporate Credit Bonds/Tax 11/02 at 102 BB- 4,696,230
Exempt Interest (American REF-FUEL Company of Southeastern Connecticut
Project), 1992 Series A, 6.450%, 11/15/22 (Alternative Minimum Tax)
Eastern Connecticut Resource Recovery Authority, Solid Waste Revenue Bonds
(Wheelbrator Lisbon Project), Series 1993A:
240 5.250%, 1/01/06 (Alternative Minimum Tax) 1/03 at 102 BBB 221,098
9,665 5.500%, 1/01/20 (Alternative Minimum Tax) 1/03 at 102 BBB 7,846,820
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 2.4%
770 Connecticut Development Authority, Water Facilities Refunding 6/00 at 102 A+ 788,952
Revenue Bonds (Bridgeport Hydraulic Company Project - 1990 Series),
7.250%, 6/01/20
2,000 Connecticut Development Authority, Water Facilities Revenue 12/03 at 102 AAA 2,090,520
Refunding Bonds (The Connecticut Water Company Project - 1993 Series),
6.650%, 12/15/20
1,750 Connecticut Development Authority, Water Facilities Revenue Bonds 4/07 at 102 A+ 1,683,340
(Bridgeport Hydraulic Company Project - 1995 Series), 6.150%, 4/01/35
(Alternative Minimum Tax)
1,000 State of Connecticut Clean Water Fund, Revenue Bonds, 1991 Series, 1/01 at 102 AAA 1,042,500
7.000%, 1/01/11
- -----------------------------------------------------------------------------------------------------------------------------------
$ 232,155 Total Investments - (cost $224,894,800) - 97.1% 223,087,700
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.9% 6,777,068
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $229,864,768
====================================================================================================================
</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.
17
<PAGE>
Portfolio of Investments
Nuveen Massachusetts Municipal Bond Fund
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 10.9%
$ 1,000 Massachusetts Development Finance Agency, Revenue Bonds, YMCA of Greater 11/08 at 102 BBB+ $ 822,470
Boston Issue, Series 1998, 5.450%, 11/01/28
2,000 Massachusetts Development Finance Agency, Revenue Bonds, Curry College 3/09 at 101 A 1,748,600
Issue, 1999 Series A, 5.500%, 3/01/29
2,000 Massachusetts Development Finance Agency, Revenue Bonds, Massachusetts 1/10 at 101 BBB 1,976,680
College of Pharmacy and Allied Health Sciences Issue, 1999 Series B,
6.625%, 7/01/20
1,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/02 at 102 AAA 1,015,950
Suffolk University Issue, Series B, 6.350%, 7/01/22
30 Massachusetts Health and Educational Facilities Authority, Revenue 7/01 at 102 AAA 31,181
Bonds, Boston College Issue, Series J, 6.625%, 7/01/21
2,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 10/08 at 101 AAA 1,610,620
Brandeis University Issue, Series I, 4.750%, 10/01/28
500 Massachusetts Industrial Finance Agency, Revenue Bonds (Whitehead 7/03 at 102 Aa1 432,185
Institute for Biomedical Research - 1993 Issue), 5.125%, 7/01/26
2,290 Massachusetts Industrial Finance Agency, Revenue and Refunding Bonds 7/05 at 102 AAA 2,326,686
(Lesley College Project), 1995 Series A, 6.300%, 7/01/25
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 11.2%
495 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/00 at 100 A 496,485
Brockton Hospital Issue, Series B, 8.000%, 7/01/07
500 Massachusetts Health and Educational Facilities Authority, Revenue Bonds 7/00 at 102 N/R 513,285
(Cardinal Cushing General Hospital), Series 1989, 8.875%, 7/01/18
750 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/02 at 102 AAA 775,245
New England Medical Center Hospitals Issue, Series F, 6.625%, 7/01/25
1,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/03 at 102 AAA 974,860
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 6.000%, 2/15/25 2/04 at 102 Aa2 2,377,575
2,000 6.000%, 2/15/34 2/04 at 102 Aa2 1,877,600
2,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/08 at 102 AAA 1,662,960
Caregroup Issue, Series A, 5.000%, 7/01/25
1,500 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/08 at 101 AAA 1,137,255
Harvard Pilgrim Health Care Issue, Series A, 4.750%, 7/01/22
385 Massachusetts Industrial Finance Agency, Revenue Bonds (Sturdy Memorial 6/00 at 101 A 393,793
Hospital), Series 1989, 7.900%, 6/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 13.1%
940 Boston-Mount Pleasant Housing Development Corporation, Multifamily 8/02 at 102 AAA 970,277
Housing Refunding Revenue Bonds, Series 1992 A, 6.750%, 8/01/23
3,000 Massachusetts Development Finance Agency, Assisted Living Revenue Bonds 12/09 at 102 N/R 2,984,400
(Prospect House Apartments), Series 1999, 7.000%, 12/01/31
(Alternative Minimum Tax)
3,700 Massachusetts Housing Finance Agency, Housing Project Revenue Bonds, 4/03 at 102 A+ 3,722,829
6.375%, 4/01/21
1,000 Massachusetts Housing Finance Agency, Residential Development Bonds, 11/02 at 102 AAA 1,029,820
6.250%, 11/15/14
1,000 Massachusetts Housing Finance Agency, Residential Development 5/02 at 102 AAA 1,050,160
Bonds, 1992 Series D, 6.875%, 11/15/21
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 1,000 Massachusetts Industrial Finance Agency (FHA-Insured Mortgage Loan), 1/08 at 102 AAA $ 945,190
Hudner Associates Projects, 5.650%, 1/01/23
1,250 Somerville Housing Authority (Massachusetts), Mortgage Revenue 5/00 at 102 AAA 1,278,325
Bonds (GNMA Collateralized - Clarendon Hill Towers Project), Series
1990, 7.950%, 11/20/30
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 0.3%
295 Massachusetts Housing Finance Agency, Single Family Housing Revenue Bonds, 6/01 at 102 Aa3 297,829
Series 18, 7.350%, 12/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 12.9%
1,790 Massachusetts Development Finance Agency, Revenue Bonds, The May 9/09 at 102 AA 1,664,736
Institute Issue, Series 1999, 5.750%, 9/01/24
2,900 Massachusetts Development Finance Agency, Revenue Bonds, Northern 8/09 at 101 A 2,825,702
Berkshire Community Services, Inc. Issue, 1999 Series A, 6.250%,
8/15/29
885 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/03 at 102 AAA 877,557
Cable Housing and Health Services Issue, Series A, 5.625%, 7/01/13
3,285 Massachusetts Health and Educational Facilities Authority, Revenue 2/07 at 102 Aa2 3,175,938
Refunding Bonds, Youville Hospital Issue (FHA-Insured Project), Series
A, 6.250%, 2/15/41
400 Massachusetts Industrial Finance Agency, Assisted Living Facility Revenue 8/08 at 105 AAA 377,884
Bonds (TNG Draper Place Project) (GNMA Collateralized), Series 1998,
5.400%, 8/20/12 (Alternative Minimum Tax)
2,040 Massachusetts Industrial Finance Agency, Assisted Living Facility Revenue 6/09 at 102 AAA 1,784,470
Bonds (The Arbors at Taunton Project) (GNMA Collateralized), Series
1999, 5.500%, 6/20/40 (Alternative Minimum Tax)
1,055 Massachusetts Industrial Financial Agency, Revenue Bonds, Heights Crossing 2/06 at 102 AAA 1,050,822
Limited Partnership Issue (FHA-Insured Project), Series 1995, 6.000%,
2/01/15 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 11.5%
490 Town of Barnstable, Massachusetts, General Obligation Bonds, 5.750%, 9/04 at 102 AA 495,704
9/15/14
Town of Deerfield, Massachusetts, General Obligation School Bonds of 1992,
School Project Loan Act of 1948, Bank-Qualified Unlimited Tax:
420 6.200%, 6/15/09 6/02 at 102 A1 439,874
415 6.250%, 6/15/10 6/02 at 102 A1 434,642
260 City of Holyoke, Massachusetts, General Obligation Bonds, 1991 Series A, No Opt. Call BBB+ 266,713
8.000%, 6/01/01
500 City of Holyoke, Massachusetts, General Obligation School Project 8/01 at 102 Baa1 530,825
Loan Act of 1948, 7.650%, 8/01/09
750 City of Holyoke, Massachusetts, General Obligation Refunding Bonds, 11/02 at 102 BBB+ 792,368
7.000%, 11/01/08
545 City of Lowell, Massachusetts, General Obligation Qualified Bonds, 2/01 at 103 Aa3 579,651
8.300%, 2/15/05
2,500 Massachusetts Bay Transportation Authority, General Transportation No Opt. Call Aa2 2,829,975
System Bonds, 1991 Series A, 7.000%, 3/01/21
425 South Essex Sewerage District, Massachusetts, General Obligation Bonds, No Opt. Call Baa1 439,718
9.000%, 12/01/00
City of Taunton, Massachusetts, General Obligation (Electric Loan,
Act of 1969) Bonds:
1,465 8.000%, 2/01/02 No Opt. Call A3 1,545,751
1,005 8.000%, 2/01/03 No Opt. Call A3 1,082,717
1,000 City of Worcester, Massachusetts, General Obligation Bonds, 6.000%, 8/02 at 102 BBB+ 1,028,610
8/01/04
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 1.0%
865 Massachusetts Industrial Finance Agency, Library Revenue Bonds 1/05 at 102 AAA 947,763
(Malden Public Library Project), Series 1994, 7.250%, 1/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 3.1%
Massachusetts Turnpike Authority, Metropolitan Highway System Revenue
Bonds, 1997 Series C (Senior):
10,000 0.000%, 1/01/29 No Opt. Call AAA 1,676,300
1,425 5.000%, 1/01/37 1/07 at 102 AAA 1,179,045
</TABLE>
19
<PAGE>
Portfolio of Investments
Nuveen Massachusetts Municipal Bond Fund (continued)
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed - 26.1%
City of Attleboro, Massachusetts, General Obligation Bonds:
$ 450 6.250%, 1/15/10 (Pre-refunded to 1/15/03) 1/03 at 102 A3*** $ 475,601
450 6.250%, 1/15/11 (Pre-refunded to 1/15/03) 1/03 at 102 A3*** 475,601
1,000 City of Boston, Massachusetts, General Obligation Bonds, 1991 7/01 at 102 AAA 1,048,690
Series A, 6.750%, 7/01/11 (Pre-refunded to 7/01/01)
500 Boston Water and Sewer Commission (Massachusetts), General 11/01 at 102 AAA 529,285
Revenue Bonds 1991 (Senior Series), Series A, 7.000%, 11/01/18
(Pre-refunded to 11/01/01)
355 City of Haverhill, Massachusetts, General Obligation Bonds, 10/01 at 102 BBB*** 377,976
Municipal Purpose Loan of 1991 Bonds, 7.500%, 10/15/11 (Pre-refunded
to 10/15/01)
250 City of Holyoke, Massachusetts, General Obligation Bonds, 8.150%, 6/02 at 103 AAA 275,233
6/15/06 (Pre-refunded to 6/15/02)
445 City of Lowell, Massachusetts, General Obligation Qualified 1/01 at 102 Aaa 469,493
Bonds, 8.400%, 1/15/09 (Pre-refunded to 1/15/01)
1,000 City of Lynn, Massachusetts, General Obligation Bonds, 7.850%, 1/02 at 104 Aaa 1,092,770
1/15/11 (Pre-refunded to 1/15/02)
1,000 Massachusetts Bay Transportation Authority, General 3/01 at 102 Aaa 1,046,730
Transportation System Bonds, 1991 Series A, 7.000%, 3/01/11
(Pre-refunded to 3/01/01)
250 The Massachusetts Bay Transportation Authority, Certificates of 12/06 at 100 A*** 288,183
Participation, Series 1988, 7.800%, 1/15/14 (Pre-refunded to 12/22/06)
500 Massachusetts Health and Educational Facilities Authority, Revenue 9/02 at 102 AAA 530,645
Refunding Bonds, Worcester Polytechnic Institute Issue, Series E,
6.625%, 9/01/17 (Pre-refunded to 9/01/02)
1,240 Massachusetts Health and Educational Facilities Authority, Revenue 7/00 at 102 AAA 1,280,474
Bonds, Emerson Hospital Issue, Series C, 8.000%, 7/01/18 (Pre-refunded
to 7/01/00)
2,000 Massachusetts Health and Educational Facilities Authority, Revenue No Opt. Call AAA 1,865,020
Bonds, Malden Hospital Issue (FHA-Insured Project), Series A, 5.000%,
8/01/16
1,180 Massachusetts Health and Educational Facilities Authority, Revenue 7/00 at 101 1/2 N/R*** 1,212,946
Bonds, Suffolk University Issue, Series A, 8.125%, 7/01/20
(Pre-refunded to 7/01/00)
700 Massachusetts Health and Educational Facilities Authority, Revenue 7/06 at 100 AA+*** 737,366
Bonds (Daughters of Charity National Health System - The Carney
Hospital), Series D, 6.100%, 7/01/14 (Pre-refunded to 7/01/06)
2,750 Massachusetts Health and Educational Facilities Authority, Revenue 4/02 at 102 AAA 2,917,173
Bonds, New England Deaconess Hospital Issue, Series D, 6.875%,
4/01/22 (Pre-refunded to 4/01/02)
1,000 Massachusetts Health and Educational Facilities Authority, Revenue 11/02 at 102 Aaa 1,061,490
Bonds, MetroWest Health, Inc. Issue, Series C, 6.500%, 11/15/18
(Pre-refunded to 11/15/02)
970 Massachusetts Health and Educational Facilities Authority, Revenue 7/01 at 102 AAA 1,015,018
Bonds, Boston College Issue, Series J, 6.625%, 7/01/21 (Pre-refunded
to 7/01/01)
635 Massachusetts Port Authority, Revenue Bonds, Series 1982, 7/00 at 100 AAA 972,331
13.000%, 7/01/13
250 Massachusetts Industrial Finance Agency, Revenue Bonds, College of 1/02 at 102 AA-*** 262,170
the Holy Cross, 1992 Issue, 6.450%, 1/01/12 (Pre-refunded to 1/01/02)
1,145 Massachusetts Industrial Finance Agency, Revenue Bonds, Merrimack 7/02 at 102 AAA 1,226,799
College Issue, Series 1992, 7.125%, 7/01/12 (Pre-refunded to 7/01/02)
1,130 City of Peabody, Massachusetts, General Obligation Electric Bonds, 8/01 at 102 AAA 1,189,879
6.950%, 8/01/09 (Pre-refunded to 8/01/01)
2,250 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series P, 7/01 at 102 AAA 2,372,512
7.000%, 7/01/21 (Pre-refunded to 7/01/01)
1,000 City of Springfield, Massachusetts, General Obligation School 9/02 at 102 Baa3*** 1,072,280
Project Loan Act of 1948 Bonds, Series B, 7.100%, 9/01/11
(Pre-refunded to 9/01/02)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities - 9.0%
$ 2,700 Massachusetts Development Finance Agency, Resource Recovery Revenue 12/08 at 102 BBB $ 2,264,652
Bonds (Ogden Haverhill Project), Series 1998B, 5.500%, 12/01/19
(Alternative Minimum Tax)
1,245 Massachusetts Industrial Finance Agency, Resource Recovery Revenue 7/01 at 103 N/R 1,326,298
Bonds (SEMASS Project), Series 1991A, 9.000%, 7/01/15
5,420 Massachusetts Industrial Finance Agency, Resource Recovery Revenue 12/08 at 102 BBB 4,618,920
Refunding Bonds (Ogden Haverhill Project), Series 1998A, 5.600%,
12/01/19 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
$ 100,370 Total Investments - (cost $92,117,711) - 99.1% 90,484,560
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.9% 844,702
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $91,329,262
====================================================================================================================
</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.
21
<PAGE>
Portfolio of Investments
Nuveen Massachusetts Insured Municipal Bond Fund
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 18.7%
$1,600 Massachusetts Health and Educational Facilities Authority, Revenue 10/02 at 102 AAA $1,658,368
Bonds, Northeastern University Issue, Series E, 6.550%, 10/01/22
1,000 Massachusetts Health and Educational Facilities Authority, Revenue 10/02 at 100 AAA 1,000,050
Bonds, Boston University Issue, Series M, 6.000%, 10/01/22
30 Massachusetts Health and Educational Facilities Authority, Revenue 7/01 at 102 AAA 31,181
Bonds, Boston College Issue, Series J, 6.625%, 7/01/21
3,000 Massachusetts Health and Educational Facilities Authority, Revenue 10/08 at 101 AAA 2,415,930
Bonds, Brandeis University Issue, Series I, 4.750%, 10/01/28
1,030 Massachusetts Health and Educational Facilities Authority, Revenue 7/02 at 102 AAA 1,043,565
Bonds, Bentley College Issue, Series I, 6.125%, 7/01/17
2,000 Massachusetts Health and Educational Facilities Authority, Revenue 10/09 at 101 AAA 1,684,640
Bonds, Northeastern University Issue, Series I, 5.000%, 10/01/29
1,000 Massachusetts Industrial Finance Agency, Revenue Bonds (College of the 3/06 at 102 AAA 941,650
Holy Cross - 1996 Issue), 5.500%, 3/01/20
420 Massachusetts Industrial Finance Agency, Revenue Bonds, Babson College 10/05 at 102 AAA 432,298
Issue, Series 1995A, 5.800%, 10/01/10
1,000 Massachusetts Industrial Finance Agency, Revenue Refunding Bonds, 7/01 at 102 AAA 1,037,590
Mount Holyoke College Issue, Series 1992A, 6.300%, 7/01/13
2,470 Massachusetts Industrial Finance Agency, Revenue Bonds, Western New 7/08 at 102 AAA 2,062,154
England College Issue, Series 1998, 5.000%, 7/01/28
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 14.2%
500 Massachusetts Health and Educational Facilities Authority, Revenue 7/00 at 102 AAA 515,160
Bonds, University Hospital Issue, Series C, 7.250%, 7/01/19
145 Massachusetts Health and Educational Facilities Authority, Revenue 7/00 at 101 AAA 148,247
Bonds, Capital Asset Program, Series G2, 7.200%, 7/01/09
1,500 Massachusetts Health and Educational Facilities Authority, Revenue 7/02 at 102 AAA 1,550,490
Bonds, New England Medical Center Hospitals Issue, Series F,
6.625%, 7/01/25
1,700 Massachusetts Health and Educational Facilities Authority, Revenue 7/03 at 102 AAA 1,657,262
Bonds, Lahey Clinic Medical Center Issue, Series B, 5.625%, 7/01/15
1,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/06 at 102 AAA 977,270
Bonds, Baystate Medical Center Issue, Series E, 6.000%, 7/01/26
2,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/08 at 102 AAA 1,662,960
Bonds, Caregroup Issue, Series A, 5.000%, 7/01/25
505 Massachusetts Health and Educational Facilities Authority, Revenue 7/02 at 102 AAA 515,721
Bonds, South Shore Hospital Issue, Series D, 6.500%, 7/01/22
2,290 Puerto Rico Industrial, Tourist, Educational, Medical and 1/05 at 102 AAA 2,363,555
Environmental Control Facilities Financing Authority,
Hospital Revenue Bonds (Hospital Auxilio Mutuo
Obligated Group Project), 1995 Series A, 6.250%, 7/01/16
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 12.7%
2,000 Massachusetts Development Finance Agency, Assisted Living Facility 9/10 at 105 AAA 2,209,280
Revenue Bonds
(The Monastery at West Springfield Project) (GNMA Collateralized),
Series 1999A, 7.625%, 3/20/41 (Alternative Minimum Tax)
1,500 Massachusetts Housing Finance Agency, Housing Development Bonds, 1998 6/08 at 101 AAA 1,374,225
Series A, 5.375%, 6/01/16 (Alternative Minimum Tax)
205 Massachusetts Housing Finance Agency, Housing Revenue Bonds, 1989 6/00 at 103 AAA 211,728
Series A, 7.600%, 12/01/16
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 1,000 Massachusetts Housing Finance Agency, Rental Housing Mortgage Revenue 7/07 at 101 AAA $ 884,460
Bonds, 1997 Series C, 5.625%, 7/01/40 (Alternative Minimum Tax)
2,930 Massachusetts Housing Finance Agency, Rental Housing Mortgage Revenue 1/05 at 102 AAA 3,101,786
Bonds (FHA-Insured Mortgage Loans), 1995 Series A, 7.350%, 1/01/35
(Alternative Minimum Tax)
640 Massachusetts Industrial Finance Agency (FHA-Insured Mortgage Loan), 1/08 at 102 AAA 604,922
Hudner Associates Projects, 5.650%, 1/01/23
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 0.5%
295 Massachusetts Housing Finance Agency, Single Family Housing Revenue 6/01 at 102 Aa3 297,829
Bonds, Series 18, 7.350%, 12/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 5.9%
3,185 Massachusetts Industrial Finance Agency, Assisted Living Facility 12/07 at 102 AAA 3,025,368
Revenue Bonds (The Arbors at Amherst Project, Series 1997)
(GNMA Collateralized), 5.950%, 6/20/39 (Alternative Minimum Tax)
1,000 Massachusetts Industrial Finance Agency, Assisted Living Facility 6/09 at 102 AAA 874,740
Revenue Bonds (The Arbors at Taunton Project, Series 1999)
(GNMA Collateralized), 5.500%, 6/20/40 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 19.0%
250 Town of Groveland, Massachusetts, General Obligation Bonds, 6/01 at 102 AAA 261,710
6.900%, 6/15/07
1,000 City of Haverhill, Massachusetts, General Obligation, Hospital 9/01 at 102 AAA 1,045,350
Refunding Bonds, Series A, 9/01/10
2,625 City of Lowell, Massachusetts, General Obligation State Qualified 11/03 at 102 AAA 2,641,853
Bonds, 5.600%, 11/01/12
1,025 City of Lynn, Massachusetts, General Obligation Bonds, 6.750%, 1/15/02 No Opt. Call AAA 1,061,808
1,000 Town of Mansfield, Massachusetts, General Obligation Bonds, 1/02 at 102 AAA 1,054,450
6.700%, 1/15/11
80 Massachusetts Bay Transportation Authority, General Transportation 3/00 at 102 AAA 81,805
System Bonds, 7.250%, 3/01/03
250 Town of Methuen, Massachusetts, General Obligation Bonds, 7.400%, 5/15/04 5/00 at 102 AAA 256,688
1,500 Town of Monson, Massachusetts, General Obligation, Bank-Qualified No Opt. Call AAA 1,537,515
Unlimited Tax, School Refunding Bonds, 5.500%, 10/15/10
300 Town of North Andover, Massachusetts, General Obligation Bonds, 9/00 at 103 AAA 313,851
7.400%, 9/15/10
190 Town of Northfield, Massachusetts, General Obligation Bonds, 10/01 at 102 AAA 198,503
Municipal Purpose Loan of 1992, Bank-Qualified, 6.350%, 10/15/09
440 Quaboag Regional School District, General Obligation Bonds, 6/02 at 102 AAA 461,314
6.250%, 6/15/08
City of Salem, Massachusetts, General Obligation Bonds:
500 6.800%, 8/15/09 8/01 at 102 AAA 524,500
900 6.000%, 7/15/10 7/02 at 102 AAA 931,329
220 Taunton, Massachusetts, General Obligation Bonds, 6.800%, 9/01/09 9/01 at 103 AAA 233,002
455 Town of Wareham, Massachusetts, General Obligation School Bonds, 1/01 at 103 AAA 478,965
7.050%, 1/15/07
215 Town of Whately, Massachusetts, General Obligation Bonds, 6.350%, 1/02 at 102 AAA 225,034
1/15/09
1,210 Town of Winchendon, Massachusetts, Unlimited Tax, General Obligation 3/03 at 102 AAA 1,250,644
Bonds, 6.050%, 3/15/10
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 2.3%
1,405 Massachusetts Industrial Finance Agency, Library Revenue Bonds 1/05 at 102 AAA 1,539,430
(Malden Public Library Project), Series 1994, 7.250%, 1/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 2.4%
9,500 Massachusetts Turnpike Authority, Metropolitan Highway System No Opt. Call AAA 1,592,485
Revenue Bonds, 1997 Series C (Senior), 0.000%, 1/01/29
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 21.1%
1,000 City of Boston, Massachusetts, General Obligation Bonds, 1991 7/01 at 102 AAA 1,048,690
Series A 6.750%, 7/01/11 (Pre-refunded to 7/01/01)
500 City of Boston, Massachusetts, Revenue Bonds, Boston City Hospital 8/00 at 102 Aaa 516,775
(FHA-Insured Mortgage), Series A, 7.625%, 2/15/21 (Pre-refunded
to 8/15/00)
</TABLE>
23
<PAGE>
Portfolio of Investments
Nuveen Massachusetts Insured Municipal Bond Fund (continued)
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Guaranteed (continued)
$ 500 City of Fall River, Massachusetts, General Obligation Bonds, 7.200%, 6/01/10 6/01 at 102 AAA $ 526,660
(Pre-refunded to 6/01/01)
250 City of Holyoke, Massachusetts, General Obligation Bonds, 8.150%, 6/15/06 6/02 at 103 AAA 275,233
(Pre-refunded to 6/15/02)
250 Lynn, Water and Sewer Commission, General Revenue Bonds, 1990 Series A, 12/00 at 102 AAA 260,613
7.250%, 12/01/10 (Pre-refunded to 12/01/00)
250 Massachusetts Bay Transportation Authority, Certificates of Participation, 8/00 at 102 AAA 258,645
1990 Series A, 7.650%, 8/01/15 (Pre-refunded to 8/01/00)
The Commonwealth of Massachusetts, General Obligation Bonds, Consolidated
Loan of 1992, Series A:
25 6.500%, 6/01/08 (Pre-refunded to 6/01/02) 6/02 at 101 AAA 26,191
860 6.000%, 6/01/13 (Pre-refunded to 6/01/02) 6/02 at 100 AAA 884,106
340 Massachusetts State, General Obligation Bonds, Consolidated Loan, 6/02 at 100 AAA 349,530
Series 1992-A, 6.000%, 6/01/13 (Pre-refunded to 6/01/02)
500 Massachusetts Health and Educational Facilities Authority, Revenue 10/01 at 102 AAA 527,345
Bonds, Berklee College of Music Issue, Series C, 6.875%, 10/01/21
(Pre-refunded to 10/01/01)
1,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/01 at 102 AAA 1,048,420
Brigham and Women's Hospital Issue, Series D, 6.750%, 7/01/24
(Pre-refunded to 7/01/01)
250 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/00 at 102 AAA 257,780
South Shore Hospital Issue, Series C, 7.500%, 7/01/20 (Pre-refunded
to 7/01/00)
500 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/00 at 102 AAA 515,925
Stonehill College Issue, 7.700%, 7/01/20 (Pre-refunded to 7/01/00)
970 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/01 at 102 AAA 1,015,018
Boston College Issue, Series J, 6.625%, 7/01/21 (Pre-refunded to 7/01/01)
970 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, 7/02 at 102 AAA 1,018,161
Bentley College Issue, Series I, 6.125%, 7/01/17 (Pre-refunded to 7/01/02)
495 Massachusetts Health and Educational Facilities Authority, Revenue 7/02 at 102 AAA 523,190
Bonds, South Shore Hospital Issue, Series D, 6.500%, 7/01/22
(Pre-refunded to 7/01/02)
1,000 Massachusetts Port Authority, Revenue Bonds, Series 1982, 13.000%, 7/01/13 7/00 at 100 AAA 1,531,230
500 Town of Monson, Massachusetts, General Obligation School Project Loan 10/00 at 102 AAA 520,905
Act of 1948 Bonds, 7.700%, 10/15/10 (Pre-refunded to 10/15/00)
270 North Middlesex Regional School District, School Bonds of 1990, 7.200%, 6/00 at 103 AAA 280,473
6/15/08 (Pre-refunded to 6/15/00)
250 Town of Palmer, Massachusetts, General Obligation School Project Loan Act 10/00 at 102 AAA 260,128
of 1948, 1990 Series B, 7.700%, 10/01/10 (Pre-refunded to 10/01/00)
Southern Berkshire Regional School District, General Obligation Bonds:
515 7.500%, 4/15/07 (Pre-refunded to 4/15/02) 4/02 at 102 AAA 553,414
1,145 7.000%, 4/15/11 (Pre-refunded to 4/15/02) 4/02 at 102 AAA 1,217,673
250 City of Westfield, Massachusetts, General Obligation Bonds, 7.100%, 12/00 at 102 AAA 260,715
12/15/08 (Pre-refunded to 12/15/00)
160 City of Worcester, Massachusetts, General Obligation Bonds, 6.900%, 5/15/07 5/02 at 102 AAA 170,284
(Pre-refunded to 5/15/02)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities - 1.9%
$ 1,300 Massachusetts Municipal Wholesale Electric Company, Power Supply System 7/03 at 102 AAA $ 1,259,620
Revenue Bonds, 1993 Series A, 5.000%, 7/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
$73,060 Total Investments - (cost $ 65,413,189) - 98.7% 65,079,389
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 848,384
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $65,927,773
====================================================================================================================
</TABLE>
All of the bonds in the portfolio are either covered by Original Issue
Insurance, Secondary Market Insurance or Portfolio Insurance, or are
backed by an escrow or trust containing sufficient U.S. Government or
U.S. Government agency securities, any of which ensure the timely
payment of principal and interest.
* Optional Call Provisions (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.
See accompanying notes to financial statements.
25
<PAGE>
Statement of Net Assets
February 29, 2000
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value $223,087,700 $90,484,560 $65,079,389
Cash 3,693,424 -- --
Receivables:
Interest 3,651,858 1,290,429 977,794
Investments sold 200,000 1,398,818 632,475
Shares sold 186,915 17,578 5,000
Other assets 2,611 277 288
- --------------------------------------------------------------------------------------------------------------------
Total assets 230,822,508 93,191,662 66,694,946
- --------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 1,360,830 474,374
Payable for shares redeemed 277,221 106,781 35,759
Accrued expenses:
Management fees 98,739 40,005 28,689
12b-1 distribution and service fees 52,375 8,037 3,895
Other 90,117 52,270 25,022
Dividends payable 439,288 294,477 199,434
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 957,740 1,862,400 767,173
- --------------------------------------------------------------------------------------------------------------------
Net assets $229,864,768 $91,329,262 $65,927,773
====================================================================================================================
Class A Shares
Net assets $196,415,795 $16,814,363 $11,984,338
Shares outstanding 19,715,283 1,816,686 1,226,407
Net asset value and redemption price per share $ 9.96 $ 9.26 $ 9.77
Offering price per share (net asset value per share
plus maximum sales charge of 4.20% of offering price) $ 10.40 $ 9.67 $ 10.20
====================================================================================================================
Class B Shares
Net assets $ 15,931,299 $ 3,730,132 $ 1,550,101
Shares outstanding 1,602,483 402,089 158,545
Net asset value, offering and redemption price per share $ 9.94 $ 9.28 $ 9.78
====================================================================================================================
Class C Shares
Net assets $ 16,180,887 $ 4,730,056 $ 1,354,820
Shares outstanding 1,626,861 513,959 138,970
Net asset value, offering and redemption price per share $ 9.95 $ 9.20 $ 9.75
====================================================================================================================
Class R Shares
Net assets $ 1,336,787 $66,054,711 $51,038,514
Shares outstanding 133,874 7,152,132 5,217,938
Net asset value, offering and redemption price per share $ 9.99 $ 9.24 $ 9.78
====================================================================================================================
</TABLE>
26 See accompanying notes to financial statements.
<PAGE>
Statement of Operations
Year Ended February 29, 2000
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income $ 14,455,669 $ 5,897,695 $ 4,141,193
- ---------------------------------------------------------------------------------------------------------------------
Expenses
Management fees 1,316,529 529,891 380,128
12b-1 service fees - Class A 418,906 32,599 23,576
12b-1 distribution and service fees - Class B 134,392 34,852 14,883
12b-1 distribution and service fees - Class C 129,728 37,422 11,790
Shareholders' servicing agent fees and expenses 173,551 100,400 76,369
Custodian's fees and expenses 71,666 64,539 64,246
Trustees' fees and expenses 4,858 2,010 1,469
Professional fees 3,037 10,052 9,166
Shareholders' reports - printing and mailing expenses 60,410 40,208 19,170
Federal and state registration fees 9,570 1,925 7,284
Portfolio insurance expense -- -- 3,177
Other expenses 8,204 4,883 3,554
- ---------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 2,330,851 858,781 614,812
Custodian fee credit (20,226) (16,349) (9,940)
Expense reimbursement -- (20,381) --
- ---------------------------------------------------------------------------------------------------------------------
Net expenses 2,310,625 822,051 604,872
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 12,145,044 5,075,644 3,536,321
- ---------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (98,153) (155,666) 51,955
Change in net unrealized appreciation or depreciation of investments (21,884,560) (8,116,602) (5,572,241)
- ---------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (21,982,713) (8,272,268) (5,520,286)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ (9,837,669) $(3,196,624) $(1,983,965)
=====================================================================================================================
</TABLE>
See accompanying notes to financial statements.
27
<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
2/29/00 2/28/99 2/29/00 2/28/99 2/29/00 2/28/99
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 12,145,044 $ 11,675,814 $ 5,075,644 $ 4,630,906 $ 3,536,321 $ 3,434,164
Net realized gain (loss) from investment
transactions (98,153) 37,313 (155,666) 9,069 51,955 10,474
Change in net unrealized appreciation
or depreciation of investments (21,884,560) 1,140,555 (8,116,602) 24,879 (5,572,241) 126,217
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
operations (9,837,669) 12,853,682 (3,196,624) 4,664,854 (1,983,965) 3,570,855
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
From undistributed net investment income:
Class A (10,657,962) (10,761,378) (834,612) (600,238) (585,940) (477,517)
Class B (614,284) (300,238) (159,314) (85,561) (65,676) (44,120)
Class C (782,580) (574,135) (228,951) (114,651) (69,087) (59,779)
Class R (59,079) (35,162) (3,792,977) (3,854,276) (2,780,997) (2,835,474)
From accumulated net realized gains from
investment transactions:
Class A -- -- -- -- (12,128) (891)
Class B -- -- -- -- (1,527) (121)
Class C -- -- -- -- (1,532) (131)
Class R -- -- -- -- (52,493) (4,898)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions
to shareholders (12,113,905) (11,670,913) (5,015,854) (4,654,726) (3,569,380) (3,422,931)
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from sale of shares 31,868,633 37,401,420 12,772,381 19,090,381 5,630,264 8,126,094
Net proceeds from shares issued to
shareholders due to reinvestment
of distributions 5,335,507 5,622,058 3,409,712 3,182,349 2,440,826 2,357,024
- ------------------------------------------------------------------------------------------------------------------------------------
37,204,140 43,023,478 16,182,093 22,272,730 8,071,090 10,483,118
Cost of shares redeemed (34,509,563) (27,408,991) (14,446,618) (9,388,148) (8,404,016) (6,161,130)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
Fund share transactions 2,694,577 15,614,487 1,735,475 12,884,582 (332,926) 4,321,988
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (19,256,997) 16,797,256 (6,477,003) 12,894,710 (5,886,271) 4,469,912
Net assets at the beginning of year 249,121,765 232,324,509 97,806,265 84,911,555 71,814,044 67,344,132
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $229,864,768 $249,121,765 $ 91,329,262 $97,806,265 $65,927,773 $71,814,044
====================================================================================================================================
Balance of undistributed net investment
income at the end of year $ 46,195 $ 15,056 $ 117,293 $ 57,503 $ 66,974 $ 32,353
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
28
<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
accounting principles generally accepted in the United States.
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 29, 2000, 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 monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, each Fund intends to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain such
tax-exempt status when distributed to the shareholders of the Funds. All monthly
tax-exempt income dividends paid during the fiscal year ended February 29, 2000,
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 and interest. Each insured municipal security is covered by
Original Issue Insurance, Secondary Market Insurance or Portfolio Insurance.
Such insurance does not guarantee the market value of the municipal securities
or the value of the Fund's shares. Original
29
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
Issue Insurance and Secondary Market Insurance remain in effect as long as the
municipal securities covered thereby remain outstanding and the insurer remains
in business, regardless of whether the Fund ultimately disposes of such
municipal securities. Consequently, the market value of the municipal securities
covered by Original Issue Insurance or Secondary Market Insurance may reflect
value attributable to the insurance. Portfolio Insurance is effective only while
the municipal securities are held by the Fund. Accordingly, neither the prices
used in determining the market value of the underlying municipal securities nor
the net asset value of the Fund's shares include value, if any, attributable to
the Portfolio Insurance. Each policy of the Portfolio Insurance does, however,
give the Fund the right to obtain permanent insurance with respect to the
municipal security covered by the Portfolio Insurance policy at the time of its
sale.
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances, or by specified classes
of investors.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the fiscal year ended February 29, 2000.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Custodian Fee Credit
Each Fund has an agreement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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
2/29/00 2/28/99 2/29/00 2/28/99
--------------------------- ------------------------- ------------------------ -----------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 1,760,501 $ 18,283,345 1,897,699 $ 20,627,217 555,350 $ 5,352,717 639,103 $ 6,439,208
Class B 717,184 7,460,912 710,277 7,706,793 122,296 1,198,347 254,134 2,567,554
Class C 539,467 5,653,475 792,638 8,606,155 324,709 3,157,803 227,608 2,284,530
Class R 45,537 470,901 42,278 461,255 317,025 3,063,514 776,075 7,799,089
Shares issued to
shareholders due to
reinvestment of
distributions:
Class A 437,447 4,555,256 474,626 5,158,453 56,499 543,920 35,262 355,925
Class B 29,721 307,191 13,433 145,945 6,865 66,174 3,924 39,717
Class C 41,923 435,212 27,834 302,045 13,836 132,246 4,780 47,973
Class R 3,634 37,848 1,430 15,615 277,062 2,667,372 272,093 2,738,734
- ------------------------------------------------------------------------------------------------------------------------------------
3,575,414 37,204,140 3,960,215 43,023,478 1,673,642 16,182,093 2,212,979 22,272,730
- ------------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,731,832) (28,162,520) (2,078,959) (22,587,955) (297,369) (2,832,789) (94,086) (949,795)
Class B (176,175) (1,782,560) (34,851) (379,111) (46,593) (444,503) (14,108) (142,462)
Class C (443,381) (4,513,336) (401,917) (4,351,297) (193,535) (1,827,478) (55,487) (556,453)
Class R (4,904) (51,147) (8,327) (90,628) (977,765) (9,341,848) (770,575) (7,739,438)
- ------------------------------------------------------------------------------------------------------------------------------------
(3,356,292) (34,509,563) (2,524,054) (27,408,991) (1,515,262) (14,446,618) (934,256) (9,388,148)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase 219,122 $ 2,694,577 1,436,161 $ 15,614,487 158,380 $ 1,735,475 1,278,723 $12,884,582
====================================================================================================================================
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Massachusetts Insured
-------------------------------------------------
Year Ended Year Ended
2/29/00 2/28/99
----------------------- ------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 254,753 $ 2,598,020 306,475 $ 3,240,290
Class B 45,211 450,067 99,734 1,058,079
Class C 35,202 357,973 41,194 436,072
Class R 219,986 2,224,204 320,868 3,391,653
Shares issued to shareholders due to reinvestment of distributions:
Class A 34,368 347,267 25,691 272,136
Class B 1,344 13,625 740 7,856
Class C 4,699 47,584 4,745 50,126
Class R 200,374 2,032,350 191,284 2,026,906
- ------------------------------------------------------------------------------------------------------------------------
795,937 8,071,090 990,731 10,483,118
- ------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (121,499) (1,226,864) (94,783) (1,003,330)
Class B (43,851) (439,599) (7,593) (79,870)
Class C (59,605) (598,631) (9,956) (105,092)
Class R (609,886) (6,138,922) (469,182) (4,972,838)
- ------------------------------------------------------------------------------------------------------------------------
(834,841) (8,404,016) (581,514) (6,161,130)
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (38,904) $ (332,926) 409,217 $ 4,321,988
========================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid April 3, 2000, to shareholders of record on March 9,
2000, as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $.0440 $.0420 $.0420
Class B .0375 .0360 .0355
Class C .0390 .0375 .0370
Class R .0455 .0435 .0435
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the fiscal year ended
February 29, 2000, were as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Long-term municipal securities $ 52,735,337 $18,805,653 $ 6,515,517
Short-term municipal securities 9,600,000 4,500,000 500,000
Sales and maturities:
Long-term municipal securities 52,705,821 14,625,377 6,809,473
Short-term municipal securities 9,600,000 5,700,000 500,000
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
At February 29, 2000, the identified cost of investments owned for federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$224,894,800 $92,378,674 $65,419,892
======================================================================================================================
</TABLE>
At February 29, 2000, 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 $ --
2004 -- 414,343
2005 -- 156,261
2006 -- --
2007 -- --
2008 98,153 --
- ----------------------------------------------------------------------------------------------------------------------
Total $908,453 $570,604
======================================================================================================================
</TABLE>
31
<PAGE>
Notes to Financial Statements (continued)
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at February 29, 2000, were as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $ 5,669,293 $ 1,982,051 $ 1,816,907
depreciation (7,476,393) (3,876,165) (2,157,410)
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) $(1,807,100) $(1,894,114) $ (340,503)
========================================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trusts' investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of each Fund:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
- -------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
=========================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser or its affiliates.
The Adviser has agreed to waive part of its management fees or reimburse certain
expenses of each Fund in order to limit total expenses to .75 of 1% of the
average daily net assets of Massachusetts and .975 of 1% of the average daily
net assets of Massachusetts Insured, excluding any 12b-1 fees applicable to
Class A, B and C Shares. The Adviser may also voluntarily agree to reimburse
additional expenses from time to time, which may be terminated at any time at
its discretion.
During the fiscal year ended February 29, 2000, 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 $232,865 $48,902 $35,409
Paid to authorized dealers 225,365 48,902 30,844
============================================================================
</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 29, 2000, the Distributor compensated
authorized dealers directly with commission advances collected at the time of
purchase as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Commission advances $ 398,052 $ 88,384 $ 12,955
=============================================================================
</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 collected on Class B Shares, and all 12b-1 service and
distribution fees collected on Class C Shares during the first year following a
purchase are retained by the Distributor. During the fiscal year ended February
29, 2000, the Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 fees retained $ 174,708 $ 53,107 $ 16,401
=============================================================================
</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 during the
fiscal year ended February 29, 2000, as follows:
<TABLE>
<CAPTION>
Massachusetts
Connecticut Massachusetts Insured
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
CDSC retained $ 59,386 $ 15,002 $ 7,853
=============================================================================
</TABLE>
7. Composition of Net Assets
At February 29, 2000, 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 $232,534,126 $93,676,687 $66,201,047
Balance of undistributed net investment income 46,195 117,293 66,974
Accumulated net realized gain (loss) from investment transactions (908,453) (831,567) (6,448)
Net unrealized appreciation (depreciation) of investments (1,807,100) (1,633,151) (333,800)
- -------------------------------------------------------------------------------------------------------------------------------
Net assets $229,864,768 $91,329,262 $65,927,773
===============================================================================================================================
</TABLE>
32
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------- ---------------------------
Net
CONNECTICUT Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
February 28/29, Value Income (Loss) Total Income Gains Total Value Return (a)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (7/87)**
2000 $10.90 $.53 $(.94) $(.41) $(.53) -- $(.53) $ 9.96 (3.84)%
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 (d) 10.23 .42 .28 .70 (.42) -- (.42) 10.51 6.96
1996 (e) 10.38 .57 (.14) .43 (.58) -- (.58) 10.23 4.18
1995 (e) 10.17 .58 .22 .80 (.59) -- (.59) 10.38 8.21
Class B (2/97)
2000 10.88 .45 (.94) (.49) (.45) -- (.45) 9.94 (4.57)
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 (f) 10.53 .04 (.02) .02 (.04) -- (.04) 10.51 .19
Class C (10/93)**
2000 10.88 .47 (.93) (.46) (.47) -- (.47) 9.95 (4.31)
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 (d) 10.22 .38 .27 .65 (.38) -- (.38) 10.49 6.43
1996 (e) 10.36 .52 (.14) .38 (.52) -- (.52) 10.22 3.71
1995 (e) 10.16 .53 .20 .73 (.53) -- (.53) 10.36 7.53
Class R (2/97)
2000 10.93 .55 (.94) (.39) (.55) -- (.55) 9.99 (3.63)
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 (f) 10.55 .01 (.05) (.04) -- -- -- 10.51 (.38)
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
------------------ ------------------ ------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
February 28/29, (000) Assets Assets Assets Assets Assets Assets Rate
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (7/87)*
2000 $196,416 .88% 5.09% .88% 5.09% .87% 5.10% 22%
1999 220,721 .89 4.89 .86 4.92 .86 4.92 7
1998 216,436 .85 5.15 .78 5.22 .78 5.22 12
1997 (d) 209,873 1.02* 5.18* .79* 5.41* .79* 5.41* 20
1996 (e) 202,219 1.03 5.23 .74 5.52 .74 5.52 24
1995 (e) 203,210 1.03 5.54 .73 5.84 .73 5.84 25
Class B (2/97)
2000 15,931 1.64 4.37 1.64 4.37 1.63 4.38 22
1999 11,223 1.64 4.14 1.61 4.17 1.61 4.17 7
1998 3,713 1.61 4.34 1.52 4.43 1.52 4.43 12
1997 (f) 102 1.59* 6.61* 1.12* 7.08* 1.12* 7.08* 20
Class C (10/93)*
2000 16,181 1.43 4.54 1.43 4.54 1.42 4.55 22
1999 16,198 1.44 4.34 1.41 4.37 1.41 4.37 7
1998 11,586 1.41 4.59 1.33 4.67 1.33 4.67 12
1997 (d) 7,087 1.57* 4.65* 1.34* 4.88* 1.34* 4.88* 20
1996 (e) 7,243 1.58 4.67 1.29 4.96 1.29 4.96 24
1995 (e) 5,536 1.58 4.97 1.28 5.27 1.28 5.27 25
Class R (2/97)
2000 1,337 .68 5.31 .68 5.31 .67 5.32 22
1999 979 .69 5.10 .66 5.13 .66 5.13 7
1998 590 .66 5.29 .57 5.38 .57 5.38 12
1997 (f) -- -- 10.97* -- 10.97* -- 10.97* 20
======================================================================================================
</TABLE>
* Annualized.
** Information included prior to the nine months ended February 28, 1997,
reflects the financial highlights of Flagship Connecticut Double Tax Exempt.
(a) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) For the nine months ended February 28.
(e) For the fiscal year ended May 31.
(f) From commencement of class operations as noted.
33
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------- ---------------------------
Net
MASSACHUSETTS Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
February 28/29, Value Income (Loss) Total Income Gains Total Value Return (a)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 $10.07 $.50 $(.82) $(.32) $(.49) $ -- $(.49) $ 9.26 (3.21)%
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
Class B (3/97)
2000 10.10 .43 (.83) (.40) (.42) -- (.42) 9.28 (4.02)
1999 10.10 .43 .01 .44 (.44) -- (.44) 10.10 4.40
1998 (d) 9.88 .45 .22 .67 (.45) -- (.45) 10.10 6.93
Class C (10/94)
2000 10.02 .44 (.82) (.38) (.44) -- (.44) 9.20 (3.87)
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
Class R (12/86)
2000 10.05 .52 (.82) (.30) (.51) -- (.51) 9.24 (3.03)
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
=====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
------------------ ------------------ ------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
February 28/29, (000) Assets Assets Assets Assets Assets Assets Rate
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 $16,814 .98% 5.15% .96% 5.17% .94% 5.19% 15%
1999 15,134 1.02 4.94 .95 5.01 .95 5.01 10
1998 9,291 1.00 5.20 .95 5.25 .95 5.25 17
1997 7,200 1.01 5.22 .99 5.24 .99 5.24 10
1996 4,290 1.17 5.04 1.00 5.21 1.00 5.21 6
Class B (3/97)
2000 3,730 1.73 4.40 1.71 4.42 1.69 4.44 15
1999 3,226 1.77 4.23 1.71 4.29 1.71 4.29 10
1998 (d) 763 1.77* 4.41* 1.70* 4.48* 1.70* 4.48* 17
Class C (10/94)
2000 4,730 1.53 4.60 1.51 4.62 1.49 4.64 15
1999 3,696 1.57 4.41 1.50 4.48 1.50 4.48 10
1998 1,924 1.55 4.64 1.50 4.69 1.50 4.69 17
1997 913 1.74 4.50 1.73 4.51 1.73 4.51 10
1996 638 2.24 3.96 1.75 4.45 1.75 4.45 6
Class R (12/86)
2000 66,055 .78 5.33 .76 5.35 .74 5.37 15
1999 75,750 .82 5.12 .75 5.19 .75 5.19 10
1998 72,934 .80 5.40 .75 5.45 .75 5.45 17
1997 72,912 .77 5.46 .75 5.48 .75 5.48 10
1996 76,773 .82 5.42 .75 5.49 .75 5.49 6
====================================================================================================
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
34
<PAGE>
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------- ---------------------------
Net
MASSACHUSETTS INSURED Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
February 28/29, Value Income (Loss) Total Income Gains Total Value Return (a)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 $10.59 $.50 $(.81) $(.31) $(.50) $(.01) $(.51) $ 9.77 (2.95)%
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
Class B (3/97)
2000 10.59 .43 (.81) (.38) (.42) (.01) (.43) 9.78 (3.59)
1999 10.57 .43 .02 .45 (.43) -- (.43) 10.59 4.32
1998 (d) 10.36 .44 .21 .65 (.44) -- (.44) 10.57 6.45
Class C (9/94)
2000 10.56 .45 (.81) (.36) (.44) (.01) (.45) 9.75 (3.43)
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
Class R (12/86)
2000 10.59 .52 (.80) (.28) (.52) (.01) (.53) 9.78 (2.68)
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
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
------------------ ------------------ ------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
February 28/29, (000) Assets Assets Assets Assets Assets Assets Rate
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 $11,984 1.02% 4.98% 1.02% 4.98% 1.00% 5.00% 10%
1999 11,208 1.01 4.77 1.01 4.77 1.01 4.77 11
1998 8,679 1.03 4.98 1.03 4.98 1.03 4.98 23
1997 7,459 1.04 5.02 1.04 5.02 1.04 5.02 10
1996 5,291 1.09 4.92 1.07 4.94 1.07 4.94 1
Class B (3/97)
2000 1,550 1.76 4.22 1.76 4.22 1.75 4.24 10
1999 1,650 1.75 4.03 1.75 4.03 1.75 4.03 11
1998 (d) 666 1.80* 4.20* 1.80* 4.20* 1.80* 4.20* 23
Class C (9/94)
2000 1,355 1.56 4.42 1.56 4.42 1.55 4.43 10
1999 1,675 1.56 4.22 1.56 4.22 1.56 4.22 11
1998 1,293 1.58 4.43 1.58 4.43 1.58 4.43 23
1997 957 1.78 4.29 1.78 4.29 1.78 4.29 10
1996 706 1.81 4.20 1.81 4.20 1.81 4.20 1
Class R (12/86)
2000 51,039 .82 5.17 .82 5.17 .80 5.19 10
1999 57,281 .81 4.97 .81 4.97 .81 4.97 11
1998 56,707 .83 5.18 .83 5.18 .83 5.18 23
1997 57,076 .80 5.26 .80 5.26 .80 5.26 10
1996 60,102 .81 5.21 .81 5.21 .81 5.21 1
======================================================================================================
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
35
<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 29, 2000, 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 auditing standards
generally accepted in the United States. 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 29, 2000, 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 29, 2000, 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
accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 14, 2000
36
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
Chase Global Funds Services
73 Tremont Street
Boston, MA 02108
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
37
<PAGE>
SERVING INVESTORS
FOR GENERATIONS
[Photo of John Nuveen, Sr. appears here]
John Nuveen, Sr.
A 100-Year Tradition of Quality Investments
Since 1898, John Nuveen & Co. Incorporated has been synonymous with investments
that withstand the test of time. In fact, more than 1.3 million investors have
trusted Nuveen to help them build and sustain the wealth of a lifetime.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. We can help
you build a better, well-diversified portfolio.
Call Your Financial Adviser Today
To find out how the Nuveen Innovation Fund might round out your investment
portfolio, contact your financial adviser today. Or call Nuveen at (800)
257.8787 for more information. Ask your adviser or call for a prospectus which
details risks, fees and expenses. Please read the prospectus carefully before
you invest.
NUVEEN
Investments
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
<PAGE>
ANNUAL REPORT February 29, 2000
NUVEEN
Investments
NUVEEN
MUNICIPAL BOND
FUNDS
New Jersey
[PHOTO APPEARS HERE]
New York
New York Insured
<PAGE>
Contents
1 Dear Shareholder
3 Nuveen Flagship New Jersey Municipal Bond Fund Portfolio Manager's
Perspective
6 Nuveen Flagship New Jersey Municipal Bond Fund Spotlight
7 Nuveen Flagship New York Municipal Bond Fund and Nuveen New York Insured
Municipal Bond Fund Portfolio Manager's Perspective
10 Nuveen Flagship New York Municipal Bond Fund Spotlight
11 Nuveen New York Insured Municipal Bond Fund Spotlight
12 Portfolio of Investments
31 Statement of Net Assets
32 Statement of Operations
33 Statement of Changes in Net Assets
35 Notes to Financial Statements
41 Financial Highlights
44 Report of Independent Public Accountants
45 Fund Information
<PAGE>
DEAR
Shareholder,
Setting financial goals is an important first step toward building wealth. At
Nuveen Investments, we believe those goals should not be considered ends in
themselves. Rather, you and your financial advisor's focus should be on
realizing your life's dreams -- the things that matter most to you and how you
can make them happen -- or make them better.
Through a well-crafted financial plan, you have the chance to shape future
generations -- to broaden your sphere of influence -- to leave your legacy.
As you develop that plan, you'll want to consider the different ways your
success can benefit others. You may find that you want to create a new set of
goals to achieve this. Working with your financial advisor, you have the ability
to make those dreams a reality -- for yourself and future generations.
A Trusted Resource As you face some of the most important, lasting decisions
you and your family will make, you'll want to draw upon the support, counsel and
objectivity of a trusted advisor. That's because your financial advisor has the
expertise and access to other professionals who can help you make informed
choices -- choices that affect not only your loved ones today, but those your
legacy will touch in the future.
Your financial advisor can provide sound financial insight, an integrated
approach to your investments and can serve as a knowledgeable friend with your
family's best interest at heart.
Family Wealth Management Too often, family wealth management is thought of in
one dimension -- as the stewardship of your household's financial resources. At
Nuveen Investments, we think of family wealth management as the map to help you
reach your financial, and your life's, destinations. It's a multi-faceted
strategy to plan for not just your needs, but the needs of future generations.
We are dedicated to helping you and your financial advisor develop a family
wealth management strategy unique to you and your goals and values.
The Economic Environment You may be reading this report at the suggestion of
your financial advisor. We've prepared the following interview to let you know
what the investment and research management teams have done during your fund's
fiscal period. Before we get to that, I want to briefly report on the economic
environment in which your Nuveen investment performed.
The end of your fund's fiscal period, February 29, 2000, was an important
day in our nation's economic life. It marked the 107th month of continued
economic expansion, the longest period of expansion in history. The only period
to rival that length was the 106-month expansion from February 1961 to December
1969, a period known best for its military conflicts, domestic unrest and
soaring inflation.
That was then; this is now.
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
"We are dedicated to helping you and your financial advisor develop a family
wealth management strategy unique to you and your goals and values."
Timothy R. Schwertfeger
Chairman of the Board
ANNUAL REPORT page 1
<PAGE>
"There's still faith in the emerging paradigm, which holds that improvements in
productivity enable us to have both economic growth and low inflation at the
same time."
The vigilant inflationary watch of Federal Reserve Chairman Alan Greenspan,
the growth of the Internet and other technology related developments and the
globalization of the economy are three reasons for continued economic health.
In their battle to keep inflation at bay, Greenspan's Fed raised interest
rates on February 2, 2000 and again on March 21, 2000. The latest increase
marked the fifth time the Fed has raised the federal funds rate -- the interest
that banks charge each other on overnight loans -- since June 1999.
Municipal bonds continued to serve investors well in our opinion. At the
end of February 2000, the ratio between long-term municipal bond yields and
30-year Treasury yields stood at 102%. For investors, this meant that quality
long-term municipal bonds offered yields above those of long-term Treasury
bonds --even before the tax advantages of municipals were taken into account. Of
course, Treasuries are backed by the full faith and credit of the U.S.
government. Even so, on an after-tax basis, municipal bonds continued to present
an exceptionally attractive investment option relative to Treasuries.
Over the short term, the inflation threat has meant increased price
fluctuations in the equity markets. Part of that is due to the fact that
investors and the various markets have been watching -- and reacting to -- every
announcement concerning economic statistics.
Longer term, we believe there's still faith in the emerging paradigm, which
holds that improvements in productivity enable us to have both economic growth
and low inflation at the same time. The 1960's 106-month expansion that I noted
earlier was fueled by government spending. Today's economy has been fueled by
consumer spending and improved productivity.
What Can You Do? We believe the potential presence of inflation and price swings
in the markets reinforce the importance of working with an advisor, staying
focused on the long term and adhering to your financial plan. With a sound plan
in place, you may be better positioned to weather the markets' ups and downs. As
you pursue your life's dreams, your financial advisor can serve as a valuable
resource in helping you keep market events in perspective while you focus on
your overall financial plan.
For more information on any Nuveen investment, including a prospectus,
contact your financial advisor. Or call Nuveen at (800) 621-7227 or visit our
Internet site at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. We are committed to maintaining that reputation and working with
financial advisors to provide investment solutions that help individuals achieve
their lives dreams. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
April 14, 2000
ANNUAL REPORT page 2
<PAGE>
NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
- --------------------------------------------------------------------------------
Nuveen Flagship New Jersey Municipal Bond Fund features portfolio management by
Nuveen Investment Advisory Services, a team of portfolio managers and research
analysts committed to a disciplined, research-oriented investment strategy. To
help you understand the fund's performance for the fiscal year ended February
29, 2000, we spoke with Portfolio Manager Tom Futrell of Nuveen Advisory Corp.
Q Throughout Nuveen Flagship New Jersey Municipal Bond Fund's fiscal year,
which ended February 29, 2000, the nation as a whole continued the ongoing trend
of strong economic growth. How did the New Jersey economy perform compared to
that of the rest of the nation?
NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA/U.S. Guaranteed..63%
AA...................11%
A.....................8%
BBB/NR...............15%
Other.................3%
As a percentage of total bond holdings as of February 29, 2000. Holdings are
subject to change.
TOM The New Jersey economy also remained very strong, with an unemployment rate
of 4.1%, the same as the national average. New Jersey unemployment dipped to its
lowest levels since 1989, according to the state's labor department. State
employment increased across all sectors in 1999 except manufacturing.
Strong commercial building continued to drive an expanded real estate market.
The state has also recently approved a major tax break in an attempt to lure
financial service firms from New York City to Jersey City.
The state's bond ratings (AA+/Aa1) were affirmed by Standard and Poor's and
Moody's Investors Service, reflecting overall credit strength.
Q Given the difficult market, was municipal bond supply in New Jersey down over
the period?
TOM Actually, for the fund's fiscal year, issuance in New Jersey was up over the
prior year by 9.5%, compared to national issuance which was down 35%. The state
moved up in the national issuance ranking to the number five spot as of February
29, 2000, up from its number seven ranking during 1999. Issuance slowed down in
the last six months of the fiscal year, however, declining by 12.1% compared to
the first six months.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. Nuveen has chosen them for their rigorously
disciplined investment approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's income-oriented funds feature portfolio management by Nuveen Investment
Advisory Services (NIAS). NIAS follows a disciplined, research-driven investment
approach to uncover income securities that combine exceptional relative value
with above-average return potential. Drawing on 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
.. A commitment to exhaustive
research
.. An active, value-oriented investment
style
.. The unmatched presence of trading
leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors,
and is a key investment strategy for Nuveen Flagship New Jersey Municipal Bond
Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the one-year period ended February 29, 2000. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
ANNUAL REPORT page 3
<PAGE>
"It is especially during a market like this, where choices are limited, that
Nuveen's active management, experienced research department and important
relationships with national and state dealers may offer a distinct advantage."
Q The Federal Reserve (the Fed) began its expected series of moves to raise
interest rates to try to cool off the economy, which cooled off bond markets in
the process. How did the fund perform in this environment?
TOM Although this market presented us with some long-term fund positioning
opportunities, for the fiscal year period, which ended February 29, 2000, the
Nuveen Flagship New Jersey Municipal Bond Fund reported a total return of -3.67%
for Class A shares on net asset value. Even so, the fund bested the Lipper New
Jersey Municipal Debt peer group average, which reported a 4.67% loss for the
same one-year period.
For the five-year period ended February 29, 2000, the fund had a 4.80%
gain, compared to the 4.52% gain for the Lipper peer group for the same period.*
As of February 29, 2000, the fund's SEC 30-day yield was 5.07%. For
investors in the combined 35.5% federal and state income tax bracket, that is
equivalent to a yield of 7.86% on a taxable investment.**
NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND
Top Five Sectors
Tax Obligation (Limited) 20%
- -------------------------------------
Transportation 15%
- -------------------------------------
Healthcare 10%
- -------------------------------------
Long-Term Care 9%
- -------------------------------------
Tax Obligation (General) 9%
As a percentage of total bond holdings as of February 29, 2000. Holdings are
subject to change.
Q Which sectors in particular were noteworthy? Can you give us some specific
examples of holdings in those sectors?
TOM In the healthcare sector, there were some lingering concerns regarding the
state bailout of two HMOs that failed during 1999 and owe $100 million in unpaid
bills to doctors and hospitals. The latest bailout proposal calls for the state
of New Jersey and other state HMOs to share the cost burden. About 10 percent of
the fund's portfolio was invested in the healthcare sector as of the period end,
and we have no plans to increase this exposure in the near future.
On a more positive note, the housing sector was very attractive since bonds
in this sector offered additional incremental yield at reasonable prices
compared to other bonds. Our research led us to a multifamily housing issue
through New Jersey Housing and Mortgage Finance. Insured by the FSA and well
run, in our opinion, we were pleased with the level of security and attractive
yield of 6.35%.
Q During periods of scarce supply and rising interest rates, how do you find
attractive buys when other investors are facing the same challenge?
TOM It is especially during a market like this, where choices are limited, that
Nuveen's active management, experienced research department and important
relationships with national and state dealers may offer a distinct advantage.
This combination allows us the opportunity to not only identify the attractive
deals that may be lesser known to other investors, but also to negotiate
structure and be among the first to participate in more widely known issues.
We participated in a unique issue through the Delaware River Port
Authority, which operates bridges and a rapid transit system that spans two
states - New Jersey and Pennsylvania. The dual state income tax exemption made
this a very attractive issue in the secondary market, and liquidity was further
bolstered by bond insurance from FSA.
* The Lipper Peer Group returns represent the average annualized total return
of the 59 funds in the Lipper New Jersey Municipal Debt Funds category for
the one-year period ended February 29, 2000, and 41 funds for the five-year
period. The returns assume reinvestment of dividends and do not reflect any
applicable sales charges.
** Taxable equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen Fund on an after-tax basis. The
taxable-equivalent yield shown is based on the 30-day SEC yield and a
combined federal and state income tax rate of 35.5%.
ANNUAL REPORT page 4
<PAGE>
Q You mentioned earlier that there were some opportunities for long-term
positioning of the funds during the period. What was involved in that
positioning?
TOM Amid rising interest rates, we were able to pursue our goal of improving
fund yields. Several of the purchases I mentioned earlier definitely contributed
to that goal, as we sold bonds with lower coupons to reinvest at higher rates.
We also improved the call structure in the portfolios. Good call structure
is important to a fund's total return. Extending the call protection helps
reduce exposure to prepayment and therefore the risk of reinvesting in what may
be an uncertain market. In the rising rate market, we sold our smaller positions
with unfavorable call structure. We generated a tax loss on the sales, which
allows us to offset future realized capital gains, then we reinvested in bonds
with what we believe to be better call structure.
Here is another example where active management offers advantages. We
search constantly for issues offering good structure, and the fund offers
investors constant liquidity and diversification.
Q What is your outlook for the New Jersey market and the fund for the coming
months?
TOM We expect the New Jersey economy to continue to be strong. After the large
anticipated New Jersey Turnpike new issue comes to market, municipal bond
issuance may level off or decrease with more Fed interest rate hikes a near
certainty, in our opinion. As we move forward, the fund plans to continue to
focus its efforts on finding bonds in the lower investment grade credit sector
that offer positive credit and structural characteristics, in an effort to
improve overall portfolio income and total return prospects.
"Extending the call protection helps reduce exposure to prepayment and therefore
the risk of reinvesting in what may be an uncertain market."
ANNUAL REPORT page 5
<PAGE>
NUVEEN FLAGSHIP NEW JERSEY MUNICIPAL BOND FUND
Fund Spotlight as of February 29, 2000
Terms To Know
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income investment
portfolio. The longer the duration, the greater a portfolio's sensitivity to
changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by subtracting
the fund's liabilities from its assets and dividing by the number of shares
outstanding.
SEC Yield A standardized calculation that the Securities and Exchange Commission
requires mutual funds to use when advertising rates of income return. This
standardized rate ensures that investors are comparing "apples to apples" when
comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security to
pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share earned
over a specific one-month or 30-day period expressed as a percentage of the
maximum offering price of the fund shares at the end of the period.
The Nuveen New Jersey Municipal Bond Fund's monthly dividend was reduced
slightly during the period. The amount differed based on share class. Please see
Quick Facts for the latest divided paid.
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 9.73 $ 9.72 $ 9.70 $ 9.73
- -------------------------------------------------------------------------------------------------------
February's Declared Dividend* $0.0395 $0.0330 $0.0350 $0.0410
- -------------------------------------------------------------------------------------------------------
Fund Symbol NNJAX N/A NNJCX NMNJX
- -------------------------------------------------------------------------------------------------------
CUSIP 67065N753 67065N746 67065N738 67065N720
- -------------------------------------------------------------------------------------------------------
Inception Date 9/94 2/97 9/94 12/91
- -------------------------------------------------------------------------------------------------------
* Paid March 1, 2000
Total Returns (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
1-Year -3.67% -7.68% -4.51% -8.17% -4.29% -3.47%
- -------------------------------------------------------------------------------------------------------
1-Year TER* -1.08% -5.20% -2.34% -6.00% -1.99% -0.76%
- -------------------------------------------------------------------------------------------------------
5-Year 4.80% 3.91% 4.01% 3.84% 4.14% 5.01%
- -------------------------------------------------------------------------------------------------------
5-Year TER* 7.65% 6.74% 6.44% 6.29% 6.65% 7.99%
- -------------------------------------------------------------------------------------------------------
Since Inception 5.56% 5.00% 4.81% 4.81% 4.86% 5.81%
- -------------------------------------------------------------------------------------------------------
Since Inception TER* 8.36% 7.78% 7.20% 7.20% 7.30% 8.74%
- -------------------------------------------------------------------------------------------------------
</TABLE>
+ Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years. Class C shares
have a 1% CDSC for redemptions within one year, which is not reflected in the
one-year total returns.
* Taxable Equivalent Return (Based on a combined federal and state income tax
rate of 35.5%.)
<TABLE>
<CAPTION>
Tax-Free Yields
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 5.07% 4.86% 4.33% 4.53% 5.27%
- --------------------------------------------------------------------------------------
Taxable
Equivalent Yield 7.86% 7.53% 6.71% 7.02% 8.17%
</TABLE>
Index Comparison
<TABLE>
<CAPTION>
[MOUNTAIN CHART APPEARS HERE]
NUVEEN NUVEEN
FLAGSHIP FLAGSHIP
LEHMAN NEW JERSEY NEW JERSEY
BROTHERS MUNICIPAL MUNICIPAL
MUNICIPAL BOND FUND BOND FUND
BOND INDEX (NAV) (OFFER)
<S> <C> <C> <C>
2/92 $10,000 $10,000 $ 9,580
2/93 $11,376 $11,268 $10,795
2/94 $12,005 $12,035 $11,530
2/95 $12,232 $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 $16,746 $16,008 $15,335
2/00 $16,395 $15,420 $14,772
</TABLE>
- --Nuveen Flahship New Jersey Municipal Bond Fund (Offer) $14,773
- --Nuveen Flagship New Jersey Municipal Bond Fund (NAV) $15,420
- --Lehman Brothers Municipal Bond Index $16,395
Portfolio Statistics
Total Net Assets $110.0 million
- -------------------------------------
Average Effective
Maturity 18.44 years
- -------------------------------------
Average Duration 9.23
- -------------------------------------
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.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
ANNUAL REPORT page 6
* Paid March 1, 2000
<PAGE>
NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND FUND
NUVEEN NEW YORK INSURED MUNICIPAL BOND FUND
From the Portfolio Manager's Perspective
Nuveen Flagship New York Municipal Bond Fund and Nuveen New York Insured
Municipal Bond Fund feature portfolio management by Nuveen Investment Advisory
Services, a team of portfolio managers and research analysts committed to a
disciplined, research-oriented investment strategy. To help you understand the
fund's performance for the fiscal year ended February 29, 2000, we spoke with
Portfolio Manager Paul Brennan of Nuveen Advisory Corp.
Q During the funds' fiscal year ended February 29, 2000, we saw the national
economy continue its unprecedented trend of expansion, while inflation and
unemployment remained low. Did New York's economy perform consistently with the
U.S.?
PAUL The New York economy was also strong, although unemployment in the state
was at 4.9% as of January 31, 2000 (the most recent figure available at this
time), higher than the national average of 4%. It was a disjointed economy,
since the ongoing bull market in stocks fueled New York City to a
disproportionately robust level compared to upstate.
The state's debt was upgraded to A+ during the year, reflecting its
increasing credit strength. Supplies of cash abound; in fact, New York City
recently postponed a major debt issue because of positive budget variances.
New issuance was down by 14% for the year, due in part to rising interest
rates, a delay in approval of the state's annual budget and the state's healthy
cash flow. Further, a 40% decline in the supply occurred over January and
February 2000 versus the prior two months.
Q As expected, the Federal Reserve (the Fed) raised interest rates several
times over the year to try to cool off the economy. This is typically a
challenging market for municipal bonds. How did you manage the fund in such an
environment?
PAUL Actually, we saw more opportunities in this market than we have seen in
markets characterized by declining interest rates. These opportunities
manifested themselves in tactics we could take to try to favorably position the
portfolio for the long term.
For one, yields were much more attractive than at the beginning of 1999, so
over the period we sold out some of the funds' positions in lower-yielding
securities and reinvested at higher yields. That helped position the funds to
strengthen their dividend-paying capabilities over the long run.
At the same time, we helped improve the funds' tax efficiency. Selling
certain high cost positions generated a tax loss, which we can use to help
offset current or future realized capital gains.
The market also presented an excellent opportunity to improve the call
structure in the funds. Favorable call protection reduces exposure to untimely
calls during periods of falling interest rates. In the rising-rate environment
when calls were not as much of a risk, call protection was undervalued. We
restructured the portfolios with new positions carrying what we believed to be
very favorable protection. Thinking long-term helped us prepare the funds for a
future time when they may benefit from call protection.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. Nuveen has chosen them for their rigorously
disciplined investment approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's income-oriented funds feature portfolio management by Nuveen Investment
Advisory Services (NIAS). NIAS follows a disciplined, research-driven investment
approach to uncover income securities that combine exceptional relative value
with above-average return potential. Drawing on 300 combined years of investment
experience, the Nuveen team of portfolio managers and research analysts offers:
.. A commitment to exhaustive research
.. An active, value-oriented investment style
.. The unmatched presence of trading leverage of a market leader.
This disciplined, research-oriented approach has paid off for investors, and is
a key investment strategy for Nuveen Flagship New York and
Nuveen New York Insured Municipal Bond Funds.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the one-year period ended February 29, 2000. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
ANNUAL REPORT page 7
<PAGE>
"We are equipped to identify what we believe are the attractive deals in the
market that may be lesser-known to other investors, and many times we can
negotiate the structure of an entire issue based on our size and market
presence."
Q How did the fund perform during the fiscal year ended February 29, 2000?
PAUL Although the Nuveen Flagship New York Municipal Bond Fund reported a total
return of -2.44% for the year on Class A shares at net asset value, it compared
quite favorably to the Lipper New York Municipal Debt peer group average, which
reported a 4.72% loss for the same one-year period. Over the five-year period,
the fund reported a 5.63% gain, compared to the 4.60% gain for the Lipper peer
group for the same period.*
As of February 29, 2000, the fund's SEC 30-day yield was 6.35%. For investors
in the combined 35.5% federal and state income tax bracket, that is equivalent
to a yield of 9.84% on a taxable investment.**
Nuveen New York Insured Municipal Bond Fund had a total return of -2.50% over
the one-year period, compared to the Lipper New York Insured Municipal Debt peer
group average return of -3.04%. The five-year period showed a 4.78% gain for the
fund and a 4.66% gain for the Lipper peer group.*
As of February 29, 2000, the Nuveen New York Insured Municipal Bond Fund's
SEC 30-day yield was 4.58%, which is equivalent to a 7.10% yield on a taxable
investment for investors in the combined 35.5% federal and state income tax
bracket.**
Q Competition to find attractive issues during periods of scarce supply and
rising interest rates must be difficult. How did you find the municipal bond
deals in this competitive market?
PAUL Having an experienced research team and relationships with national and
state dealers are key. We are equipped to identify what we believe are the
attractive deals in the market that may be lesser-known to other investors, and
many times we can negotiate the structure of an entire issue based on our size
and market presence.
An excellent example of this advantage was our participation in the initial
offering of what is commonly called tobacco bonds. The first issue of this type
was issued by New York City, through the Tobacco Settlement Asset Securitization
Corporation (TSASC), an instrumentality of New York City. The bonds in this
issue are backed by payments from tobacco companies as part of a master
settlement agreement among the attorney generals of 46 states and virtually all
the tobacco companies. Proceeds from the Aa-rated TSASC bonds are being used to
fund renovations in city schools.
Nuveen's institutional presence in New York prompted officials from New York
City to visit Nuveen prior to issuance to discuss the terms of the transaction
as well as solicit our feedback. This gave us a valuable opportunity to
thoroughly review the complex structure of the TSASC bonds, as well as to
provide insight on how the structure of the issue could be improved before the
deal actually came to market.
JIM Were there any particular sectors or purchases that were significant for
either of the funds over the fiscal year?
PAUL Our focus during the year was more on security selection as opposed to
sector selection. One purchase that offered a very attractive yield was an
issuance by Tonawonda Housing Authority on behalf of the Kibler Senior Housing
Project. This issue funded the conversion of a school into a senior housing
complex. Before investing in the project, Nuveen negotiated directly with the
borrowers to craft an appropriate security structure and purchased the entire
issue.
The healthcare sector has had ongoing struggles in the wake of the federal
Medicare reimbursement cuts a few years ago, but healthcare exposure in the
funds was light so there wasn't much of an effect. For the healthcare holdings
that are insured there was less concern.
* For the Nuveen Flagship New York Municipal Bond Fund, the Lipper Peer Group
returns represent the average annualized total return of the 102 funds in the
Lipper New York Municipal Bond Debt Funds category for the one-year period
ended February 29, 2000, and 77 funds for the five-year period. For the Nuveen
New York Insured Municipal Bond Fund the Lipper Peer Group returns represent
the 10 funds in the Lipper New York Insured Municipal Debt Funds category for
the one-year period and 8 funds in the category for the five-year period. The
returns assume reinvestment of dividends and do not reflect any applicable
sales charges.
** Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis. The
taxable-equivalent yield shown is based on the 30-day SEC yield and combined
federal and state income tax rate of 35.5%.
ANNUAL REPORT page 8
<PAGE>
One interesting characteristic of this market was the prevalence of bond
buybacks. Again, Nuveen's presence in the market came in handy because as
bondholders we could participate in these tender offers to submit large blocks
of bonds for buyback, and essentially exert influence on the sale price.
Consequently, we were able to sell some bonds at above market prices.
NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND FUND
Bond Credit Quality
[PIE CHART APPEARS HERE}
AAA/U.S. Guaranteed.....37%
AA......................12%
A.......................33%
BBB/NR..................18%
As a percentage of total bond holdings as of February 29, 2000. Holdings are
subject to change.
Long Island Power Authority (LIPA) initiated one such bond buyback. In an
effort to reduce debt service costs, the LIPA offered to buy back approximately
$150 million of bonds from bondholders. Nuveen was successful in selling certain
holdings back to LIPA at above market prices, which helped enhance both funds'
return.
We received early indications of another possible buyback of certain New
York City Metropolitan Transit Authority (MTA) bonds in a situation similar to
the LIPA buyback. MTA is proposing major debt restructuring, which could result
in bond refundings or buybacks. As of February 29, 2000, we are holding onto
these bonds in anticipation of another opportunity to tender bonds. Where
opportunities exist, we also plan to increase the funds' holdings of LIPA and/or
MTA debt.
NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND FUND
Top Five Sectors
Tax Obligation (Limited) 21%
- -----------------------------------------
U.S. Guaranteed 15%
- -----------------------------------------
Education and Civic Organizations 12%
- -----------------------------------------
Utilities 11%
- -----------------------------------------
Healthcare 10%
- -----------------------------------------
As a percentage of total bond holdings as of February 29, 2000. Holdings are
subject to change.
NUVEEN NEW YORK INSURED MUNICIPAL BOND FUND
Top Five Sectors
U.S. Guaranteed 23%
- -----------------------------------------
Healthcare 15%
- -----------------------------------------
Tax Obligation (Limited) 14%
- -----------------------------------------
Education and Civic Organizations 10%
- -----------------------------------------
Housing (Multifamily) 9%
- -----------------------------------------
As a percentage of total bond holdings as of February 29, 2000. Holdings are
subject to change.
Q What is your outlook for the funds going into the next fiscal year?
PAUL We expect overall strength in New York to continue in line with that of
the nation. Concern about an end to the long-running bull market in stocks puts
New York City's economy in a somewhat vulnerable position. On the other hand, a
bear market in stocks could have a positive effect on bond prices.
In this high tax state and in the current market, we think municipal bonds
currently offer an attractive level of income exempt from federal and local
income taxes, and we will continue to pursue our goal to maintain a competitive
and stable dividend.
Annual Report page 9
<PAGE>
NUVEEN FLAGSHIP NEW YORK MUNICIPAL BOND FUND
Fund Spotlight as of February 29, 2000
Terms To Know
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income
investment or portfolio. The longer the duration, the greater a portfolio's
sensitivity to changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by
subtracting the fund's liabilities from its assets and dividing by the number of
shares outstanding.
SEC Yield A standardized calculation that the Securities and Exchange
Commission requires mutual funds to use when advertising rates of income return.
This standardized rate ensures that investors are comparing "apples to apples"
when comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security
to pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share earned
over a specific one-month or 30-day period expressed as a percentage of the
maximum offering price of the fund shares at the end of the period.
The Nuveen New York Municipal Bond Fund's monthly dividend's rose during the
fiscal period. The amount differed based on share class. Please see Quick Facts
for latest dividend paid.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Quick Facts
- ------------------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 10.17 $ 10.18 $10.20 $ 10.20
- ------------------------------------------------------------------------------------------
February's Declared Dividend* $0.0500 $0.0435 $0.0455 $0.0520
- ------------------------------------------------------------------------------------------
Fund Symbol NNYAX NNYBX NNYCX NTNYX
- ------------------------------------------------------------------------------------------
CUSIP 67065N670 67065N662 67065N654 67065N647
- ------------------------------------------------------------------------------------------
Inception Date 9/94 2/97 9/94 12/86
- ------------------------------------------------------------------------------------------
</TABLE>
* Paid March 1, 2000
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Total Returns (Annualized)+
- ------------------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -2.44% -6.51% -3.18% -6.87% -2.97% -2.21%
- ------------------------------------------------------------------------------------------
1-Year TER* 0.48% -3.71% -0.69% -4.38% -0.36% 0.82%
- ------------------------------------------------------------------------------------------
5-Year 5.63% 4.74% 4.86% 4.70% 5.05% 5.86%
- ------------------------------------------------------------------------------------------
5-Year TER* 8.60% 7.68% 7.41% 7.25% 7.66% 8.96%
- ------------------------------------------------------------------------------------------
10-Year 6.74% 6.28% 6.17% 6.17% 6.06% 7.02%
- ------------------------------------------------------------------------------------------
10-Year TER* 9.86% 9.39% 8.97% 8.97% 8.79% 10.27%
- ------------------------------------------------------------------------------------------
</TABLE>
+ Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years. Class C shares
have a 1% CDSC for redemptions within one year, which is not reflected in the
one-year total returns.
* Taxable Equivalent Return (Based on a combined federal and state income tax
rate of 35.5%.)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Tax-Free Yields
- --------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 6.35% 6.09% 5.61% 5.81% 6.56%
- --------------------------------------------------------------------------------
Taxable Equivalent Yield 9.84% 9.44% 8.70% 9.01% 10.17%
- --------------------------------------------------------------------------------
</TABLE>
Index Comparison
[MOUNTAIN CHART APPEARS HERE]
NUVEEN NUVEEN
FLAGSHIP FLAGSHIP
LEHMAN NEW YORK NEW YORK
BROTHERS MUNICIPAL MUNICIPAL
MUNICIPAL BOND FUND BOND FUND
BOND INDEX (NAV) (OFFER)
2/90 $10,000 $10,000 $ 9,580
2/91 $10,922 $10,656 $10,208
2/92 $12,013 $11,905 $11,405
2/93 $13,667 $13,632 $13,060
2/94 $14,422 $14,565 $13,953
2/95 $14,695 $14,594 $13,981
2/96 $16,318 $16,128 $15,451
2/97 $17,364 $16,947 $16,236
2/98 $18,953 $18,616 $17,834
2/99 $20,118 $19,675 $18,848
2/00 $19,696 $19,194 $18,388
- --Nuveen Flahship New York Municipal Bond Fund (Offer) $18,388
- --Nuveen Flagship New York Municipal Bond Fund (NAV) $19,194
- --Lehman Brothers Municipal Bond Index $19,696
- -----------------------------
Morningstar Rating(TM)++
- -----------------------------
****
Overall rating among 1,678
municipal bond funds as
of 2/29/00
- -----------------------------------------
Portfolio Statistics
- -----------------------------------------
Total Net Assets $250.3 million
- -----------------------------------------
Average Effective
Maturity 18.71 years
- -----------------------------------------
Average Duration 8.35
- -----------------------------------------
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.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
++ The Morningstar rating is an overall rating for the municipal bond category
and relates to Class A shares only; other classes may vary. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of
2/29/00 and are subject to change every month. Past performance is no
guarantee of future results. Ratings are calculated from the fund's three-,
five-, and 10-year average annual returns (if applicable) in excess of 90-day
Treasury bill returns, with appropriate fee adjustments, and a risk factor
that reflects fund performance below 90-day T-bill returns. Class A shares of
the fund received four stars for the three- and five-year periods. The top
10% of the funds in a broad asset class receive five stars and the next 22.5%
receive four stars. The fund was rated among 1,678 and 1,365 funds for the
three- and five-year periods, respectively.
ANNUAL REPORT page 10
<PAGE>
NUVEEN NEW YORK INSURED MUNICIPAL BOND FUND
Fund Spotlight as of February 29, 2000
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Quick Facts
- ----------------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $ 9.95 $ 9.96 $ 9.94 $ 9.95
- ----------------------------------------------------------------------------------------
February's Declared Dividend* $0.0425 $0.0360 $0.0375 $0.0440
- ----------------------------------------------------------------------------------------
Fund Symbol NNYIX NNIMX NNYKX NINYX
- ----------------------------------------------------------------------------------------
CUSIP 67065N639 67065N621 67065N613 67065N597
- ----------------------------------------------------------------------------------------
Inception Date 9/94 2/97 9/94 12/86
- ----------------------------------------------------------------------------------------
</TABLE>
* Paid March 1, 2000
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Total Returns (Annualized)+
- ----------------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -2.50% -6.60% -3.26% -6.97% -3.17% -2.43%
- ----------------------------------------------------------------------------------------
1-Year TER* 0.17% -4.03% -1.01% -4.72% -0.81% 0.34%
- ----------------------------------------------------------------------------------------
5-Year 4.78% 3.90% 4.01% 3.85% 4.17% 5.00%
- ----------------------------------------------------------------------------------------
5-Year TER* 7.57% 6.66% 6.37% 6.22% 6.59% 7.90%
- ----------------------------------------------------------------------------------------
10-Year 6.31% 5.85% 5.71% 5.71% 5.59% 6.55%
- ----------------------------------------------------------------------------------------
10-Year TER* 9.25% 8.78% 8.33% 8.33% 8.16% 9.63%
- ----------------------------------------------------------------------------------------
</TABLE>
+ Class R share returns are actual. Class A, B and C share returns are actual
for the period since class inception; returns prior to class inception are
Class R share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years. Class C shares
have a 1% CDSC for redemptions within one year, which is not reflected in the
one-year total returns.
* Taxable Equivalent Return (Based on a combined federal and state income tax
rate of 35.5%.)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Tax-Free Yields
- --------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
SEC 30-Day Yield 4.58% 4.39% 3.84% 4.04% 4.79%
- --------------------------------------------------------------------------------
Taxable Equivalent Yield 7.10% 6.81% 5.95% 6.26% 7.43%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------
Index Comparison
- ----------------------------------------------------
[MOUNTAIN CHART APPEARS HERE]
NUVEEN NUVEEN
NEW YORK NEW YORK
LEHMAN INSURED INSURED
BROTHERS MUNICIPAL MUNICIPAL
MUNICIPAL BOND FUND BOND FUND
BOND INDEX (NAV) (OFFER)
<S> <C> <C> <C>
2/90 $10,000 $10,000 $ 9,580
2/91 $10,922 $10,733 $10,282
2/92 $12,013 $11,954 $11,452
2/93 $13,667 $13,709 $13,133
2/94 $14,422 $14,438 $13,832
2/95 $14,695 $14,592 $13,979
2/96 $16,318 $16,078 $15,403
2/97 $17,364 $16,724 $16,022
2/98 $18,953 $18,021 $17,264
2/99 $20,118 $18,906 $18,112
2/00 $19,696 $18,433 $17,659
</TABLE>
- --Nuveen New York Insured Municipal Bond Fund (Offer) $17,659
- --Nuveen New York Insured Municipal Bond Fund (NAV) $18,433
- --Lehman Brothers Municipal Bond Index $19,696
- -----------------------------------------
Portfolio Statistics
- -----------------------------------------
Total Net Assets $335.4 million
- -----------------------------------------
Average Effective
Maturity 16.74 years
- -----------------------------------------
Average Duration 7.36
- -----------------------------------------
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.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
- --------------------------------------------------------------------------------
Terms To Know
- --------------------------------------------------------------------------------
The following are a few terms used throughout this report.
Duration A measure of the interest rate sensitivity of a fixed-income
investment or portfolio. The longer the duration, the greater a portfolio's
sensitivity to changes in interest rates.
Net Asset Value (NAV) The per-share value of a mutual fund, found by
subtracting the fund's liabilities from its assets and dividing by the number of
shares outstanding.
SEC Yield A standardized calculation that the Securities and Exchange
Commission requires mutual funds to use when advertising rates of income return.
This standardized rate ensures that investors are comparing "apples to apples"
when comparing advertisements from different mutual fund companies.
Taxable Equivalent Yield The yield that would have to be earned on a security
to pay as much, after tax, as what is earned from a tax-exempt bond.
Yield A fund's yield is a measure of the net investment income per share earned
over a specific one-month or 30-day period expressed as a percentage of the
maximum offering price of the fund shares at the end of the period.
ANNUAL REPORT page 11
<PAGE>
Portfolio of Investments
Nuveen Flagship New Jersey Municipal Bond Fund
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 0.2%
$ 250 New Jersey Economic Development Authority, Solid Waste Disposal 4/02 at 102 Aa1 $ 263,708
Facility Revenue Bonds (Garden State Paper Company, Inc. Project),
Series 1992, 7.125%, 4/01/22 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 5.2%
960 New Jersey Economic Development Authority, Economic Development Bonds No Opt. Call N/R 1,059,869
(Yeshiva Ktana of Passaic - 1992 Project), 8.000%, 9/15/18
420 New Jersey Economic Development Authority, Insured Revenue Bonds No Opt. Call AAA 429,013
(Educational Testing Service Issue), Series 1995B, 5.500%, 5/15/05
2,230 New Jersey Economic Development Authority, School Revenue Bonds 2/08 at 101 N/R 1,974,576
(Gill/St. Bernard School), Series 1998, 6.000%, 2/01/25
805 New Jersey Educational Facilities Authority, Trenton State College 7/00 at 100 A+ 806,570
Issue Revenue Bonds, Series 1976D, 6.750%, 7/01/08
140 New Jersey Educational Facilities Authority, Seton Hall University 7/01 at 102 A- 146,322
Project Revenue Bonds, 1991 Series, Project D, 6.600%, 7/01/02
410 New Jersey Educational Facilities Authority, Revenue Refunding Bonds 7/03 at 102 BBB 397,261
(Monmouth College), Series 1993-A, 5.625%, 7/01/13
835 New Jersey Educational Facilities Authority, Princeton University 7/04 at 100 AAA 853,161
Revenue Bonds, 1994 Series A, 5.875%, 7/01/11
75 Higher Education Assistance Authority (State of New Jersey), Student 7/02 at 102 A+ 76,091
Loan Revenue Bonds, 1992 Series A, NJ Class Loan Program, 6.000%,
1/01/06 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 9.5%
700 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/00 at 102 AAA 718,858
Community Medical Center/Kensington Manor Care Center Issue, Series E,
7.000%, 7/01/20
1,200 New Jersey Health Care Facilities Financing Authority, Revenue and 7/07 at 102 AAA 1,089,084
Refunding Bonds, Holy Name Hospital Issue, Series 1997, 5.250%,
7/01/20
New Jersey Health Care Facilities Financing Authority, Revenue Bonds,
Newark Beth Israel Medical Center Issue, Series 1994:
200 5.800%, 7/01/07 7/04 at 102 AAA 209,746
200 6.000%, 7/01/16 7/04 at 102 AAA 211,290
250 New Jersey Health Care Facilities Financing Authority, Refunding 8/04 at 102 AAA 267,928
Revenue Bonds, Irvington General Hospital Issue (FHA-Insured
Mortgage), Series 1994, 6.375%, 8/01/15
400 New Jersey Health Care Facilities Financing Authority, Refunding 7/02 at 102 A- 422,072
Revenue Bonds, Atlantic City Medical Center Issue, Series C, 6.800%,
7/01/05
100 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/02 at 102 AAA 104,555
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 5.700%, 7/01/02 No Opt. Call AAA 255,265
250 6.250%, 7/01/16 7/04 at 102 AAA 266,525
250 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/04 at 102 AAA 259,995
Dover General Hospital and Medical Center Issue, Series 1994, 5.900%,
7/01/05
1,000 New Jersey Health Care Facilities Financing Authority, Revenue and 7/07 at 102 AAA 848,040
Refunding Bonds, AHS Hospital Corporation Issue, Series 1997A, 5.000%,
7/01/27
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
New Jersey Health Care Facilities Financing Authority, Bayonne Hospital
Obligated Group Revenue Bonds, Series 1994:
$ 215 6.400%, 7/01/07 7/04 at 102 AAA $ 227,210
175 6.250%, 7/01/12 7/04 at 102 AAA 181,125
3,425 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/09 at 101 A 2,793,533
Palisades Medical Center of New York Obligated Group Issue, Series
1999, 5.250%, 7/01/28
230 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/02 at 102 Baa3 238,326
Palisades Medical Center Obligated Group Issue, Series 1992, 7.500%,
7/01/06
790 New Jersey Economic Development Authority, Economic Growth Lease 12/03 at 102 Aa3 788,191
Revenue Bonds, Remarketed 1992 Second Series B, 5.300%, 12/01/07
(Alternative Minimum Tax)
300 New Jersey Economic Development Authority, Revenue Bonds (RWJ Health 7/04 at 102 AAA 310,500
Care Corporation at Hamilton Obligated Group Project), Series 1994,
6.250%, 7/01/14
1,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental 1/05 at 102 AAA 1,032,120
Control Facilities Financing Authority, Hospital Revenue Bonds, 1995
Series A (Hospital Auxilio Mutuo Obligated Group Project), 6.250%,
7/01/16
250 Pollution Control Financing Authority of Union County (New Jersey), No Opt. Call A3 260,280
Pollution Control Revenue Refunding Bonds, American Cyanamid Company
Issue, Series 1994, 5.800%, 9/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 7.3%
400 The Hudson County Improvement Authority, Multifamily Housing Revenue 6/04 at 100 AA 412,388
Bonds, Series 1992 A (Conduit Financing - Observer Park Project),
6.900%, 6/01/22 (Alternative Minimum Tax)
1,500 New Jersey Housing and Mortgage Finance Agency, Multi-Family Housing 3/10 at 100 AAA 1,506,600
Revenue Bonds, 2000 Series A1, 6.350%, 11/01/31 (Alternative Minimum
Tax)
1,500 New Jersey Housing and Mortgage Finance Agency, Multi-Family Housing 5/06 at 102 AAA 1,510,335
Revenue Bonds, 1996 Series A, 6.200%, 11/01/18 (Alternative Minimum Tax)
1,750 New Jersey Housing Finance Agency, Special Pledge Revenue Obligations, 5/00 at 100 A+ 1,763,860
1975 Series One, 9.000%, 11/01/18
700 New Jersey Housing and Mortgage Finance Agency, Housing Revenue Bonds, 5/02 at 102 A+ 735,686
1992 Series A, 6.950%, 11/01/13
500 New Jersey Housing and Mortgage Finance Agency, Housing Revenue Refunding 11/02 at 102 A+ 522,225
Bonds, 1992 Series One, 6.600%, 11/01/14
1,090 Housing Authority of the City of Newark, New Jersey, Housing Revenue 10/09 at 102 Aaa 1,095,243
Bonds (GNMA Collateralized - Fairview Apartments Project), 2000
Series A, 6.300%, 10/20/19 (Alternative Minimum Tax)
500 North Bergen Housing Development Corporation (North Bergen, New Jersey), 3/00 at 101 1/2 N/R 507,660
Mortgage Revenue Bonds, Series 1978 (FHA-Insured Mortgage Loan -
Section 8 Assisted Project), 7.400%, 9/01/20
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 5.4%
250 New Jersey Housing and Mortgage Finance Agency, Home Buyer Revenue Bonds, 7/04 at 102 AAA 254,145
1994 Series K, 6.300%, 10/01/16 (Alternative Minimum Tax)
4,000 New Jersey Housing and Mortgage Finance Agency, Home Buyer Revenue 10/07 at 101 1/2 AAA 3,989,560
Bonds, 1997 Series U, 5.700%, 10/01/14 (Alternative Minimum Tax)
1,450 Puerto Rico Housing Finance Corporation, Homeownership Mortgage Revenue 12/08 at 101 AAA 1,234,632
Bonds (GNMA-Guaranteed Mortgage Loans), 1998 Series A, 5.200%,
12/01/32 (Alternative Minimum Tax)
455 Virgin Islands Housing Finance Authority, Single Family Mortgage 3/05 at 102 AAA 461,638
Refunding Bonds (GNMA Mortgage Backed Securities Program),
1995 Series A, 6.450%, 3/01/16 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial/Other - 0.2%
215 New Jersey Economic Development Authority, District Heating and Cooling 12/03 at 102 BBB- 215,108
Revenue Bonds (Trigen-Trenton Project), 1993 Series B, 6.100%,
12/01/04 (Alternative Minimum Tax)
</TABLE>
13
<PAGE>
Portfolio of Investments
Nuveen Flagship New Jersey Municipal Bond Fund (continued)
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Care - 9.0%
New Jersey Economic Development Authority, Economic Development Revenue
Bonds (United Methodist Homes of New Jersey Obligated Group Issue),
Series 1998:
$ 1,500 5.125%, 7/01/18 7/08 at 102 BBB- $ 1,150,425
3,610 5.125%, 7/01/25 7/08 at 102 BBB- 2,617,900
5,100 New Jersey Economic Development Authority, Economic Development Revenue 12/09 at 101 Aa3 4,963,983
Bonds (Jewish Community Housing Corporation of Metropolitan New Jersey -
1999 Project), 5.900%, 12/01/31
1,300 New Jersey Economic Development Authority, First Mortgage Revenue Fixed 7/08 at 102 A 1,150,955
Rate Bonds (Cadbury Corporation Project), Series 1998A, 5.500%, 7/01/18
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 8.9%
200 The City of Atlantic City, In the County of Atlantic, New Jersey, General No Opt. Call A 204,374
Obligation General Improvement Bonds, Series 1994, 5.650%, 8/15/04
100 The Board of Education of the City of Atlantic City, Atlantic County, New 12/02 at 102 AAA 104,976
Jersey, School Bonds, Series 1992, 6.000%, 12/01/06
100 County of Atlantic, New Jersey, General Improvement Bonds, 6.000%, 1/01/07 1/04 at 101 AAA 104,131
100 County of Camden, New Jersey, General Obligation Refunding Bonds, Series No Opt. Call AAA 101,797
1992, 5.500%, 6/01/02
500 The Board of Education of the Township of Hillsborough, In the County of No Opt. Call AA 525,470
Somerset, State of New Jersey, General Obligation School Purpose Bonds,
Series 1992, 5.875%, 8/01/11
400 The City of Jersey City (Hudson County, New Jersey), General Obligation No Opt. Call AA 412,912
Bonds, 1992 School Issue, 6.500%, 2/15/02
2,645 The Board of Education of the Township of Middletown, In the County of 8/07 at 100 AAA 2,630,426
Monmouth, New Jersey, School Bonds, 5.800%, 8/01/21
100 Township of Montclair, In the County of Essex, New Jersey, General 3/00 at 101 1/2 AAA 101,552
Obligation, School Bonds, 5.800%, 3/01/06
1,000 State of New Jersey, General Obligation Bonds, Series D, 5.800%, 2/15/07 No Opt. Call AA+ 1,042,050
200 State of New Jersey, General Obligation Refunding Bonds, Series D, 0.000%, No Opt. Call AA+ 173,266
2/15/03
165 Parsippany-Troy Hills Township, General Obligation, Capital Appreciation No Opt. Call AA- 113,289
Bonds, Series 1992, 0.000%, 4/01/07
185 The Board of Education of the City of Perth Amboy, In the County of No Opt. Call AAA 194,577
Middlesex, New Jersey, School Bonds, 6.200%, 8/01/04
2,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997, 5.375%, 7/07 at 101 1/2 AAA 1,883,720
7/01/21
2,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1995, 5.750%, 7/05 at 101 1/2 AAA 1,962,580
7/01/24
250 The City of Union City, In the County of Hudson, State of New Jersey, No Opt. Call AAA 273,055
General Obligation School Purpose Bonds, Series 1992, 6.375%,
11/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 20.0%
150 The Bergen County Utilities Authority (New Jersey), 1992 Water Pollution 12/02 at 102 AAA 153,077
Control System Revenue Bonds, Series B, 6.000%, 12/15/13
500 The Essex County Improvement Authority (Essex County, New Jersey), County 12/02 at 102 Baa1 510,875
Guaranteed Pooled Revenue Bonds, Series 1992A, 6.500%, 12/01/12
1,235 The Board of Education of the Borough of Little Ferry, Bergen County, New No Opt. Call N/R 1,248,474
Jersey, Certificates of Participation, 6.300%, 1/15/08
250 Mercer County Improvement Authority (New Jersey), Solid Waste Revenue No Opt. Call Aa 203,030
Bonds, County Guaranteed, Site and Disposal Facilities Project
Refunding, 1992 Issue, 0.000%, 4/01/04
3,025 Middlesex County Improvement Authority (New Jersey), County Guaranteed 9/09 at 100 Aaa 2,911,411
Open Space Trust Fund Revenue Bonds, Series 1999, 5.250%, 9/15/15
5,280 New Jersey Economic Development Authority, Lease Revenue Bonds, Series 11/08 at 101 Aaa 4,354,786
1998 (Bergen County Administration Complex), 4.750%, 11/15/26
New Jersey Economic Development Authority, Market Transition Facility
Senior Lien Revenue Bonds, Series 1994A:
300 7.000%, 7/01/04 No Opt. Call AAA 323,784
650 5.875%, 7/01/11 7/04 at 102 AAA 667,563
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
New Jersey Sports and Exposition Authority, Convention Center Luxury
Tax Bonds, 1992 Series A:
$ 100 6.000%, 7/01/07 7/02 at 102 AAA $ 104,646
250 6.250%, 7/01/20 7/02 at 102 AAA 262,983
100 North Jersey District Water Supply Commission of the State of New 7/03 at 102 AAA 103,545
Jersey, Wanaque South Project Revenue Refunding Bonds, Series 1993,
5.700%, 7/01/05
2,350 The Ocean County Utilities Authority (New Jersey), Wastewater 7/00 at 100 AAA 2,186,370
Revenue Bonds, Refunding Series 1987, 5.000%, 1/01/14
170 Puerto Rico Aqueduct and Sewer Authority, Refunding Bonds, Series 7/06 at 101 1/2 A 154,443
1995, Guaranteed by the Commonwealth of Puerto Rico, 5.000%,
7/01/15
5,000 Puerto Rico Public Finance Corporation, 1998 Series A Bonds No Opt. Call AAA 4,494,150
(Commonwealth Appropriation Bonds), 5.125%, 6/01/24
5,000 The Union County Utilities Authority (Union County, New Jersey), 6/08 at 102 Aaa 4,241,850
Solid Waste Bonds, County Deficiency Agreement, Series 1998A1,
5.000%, 6/15/28 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 14.7%
2,150 Delaware River Port Authority (New Jersey), Port District Project 1/08 at 101 AAA 1,855,429
Bonds, Series B of 1998, 5.000%, 1/01/26
3,500 Delaware River Port Authority (New Jersey and Pennsylvania), 1/10 at 100 AAA 3,454,710
Revenue Bonds, Series of 1999, 5.750%, 1/01/22
Parking Authority of the City of Hoboken, County of Hudson, New Jersey,
Parking General Revenue Refunding Bonds, Series 1992A:
330 5.850%, 3/01/00 No Opt. Call Baa1 330,026
100 6.625%, 3/01/09 3/02 at 102 Baa1 103,922
1,750 New Jersey Turnpike Authority, Turnpike Revenue Bonds, Series 1991C, No Opt. Call BBB+ 1,866,375
6.500%, 1/01/08
125 The Port Authority of New York and New Jersey, Consolidated Bonds, 10/04 at 101 AAA 131,368
Ninety-Sixth Series, 6.600%, 10/01/23 (Alternative Minimum Tax)
200 The Port Authority of New York and New Jersey, Consolidated Bonds, 7/04 at 101 AA- 202,630
Ninety-Fifth Series, 5.500%, 7/15/05 (Alternative Minimum Tax)
The Port Authority of New York and New Jersey, Consolidated Bonds,
One Hundred Ninth Series:
1,500 5.375%, 7/15/22 1/07 at 101 AA- 1,380,930
2,000 5.375%, 7/15/27 1/07 at 101 AAA 1,828,320
2,000 The Port Authority of New York and New Jersey, Consolidated Bonds, 6/05 at 101 AA- 1,899,260
One Hundred Twelfth Series, 5.250%, 12/01/13 (Alternative Minimum
Tax)
3,100 The Port Authority of New York and New Jersey, Special Project Bonds, 12/07 at 100 AAA 2,984,928
Series 6, JFK International Air Terminal LLC Project, 5.750%,
12/01/25 (Alternative Minimum Tax)
45 South Jersey Transportation Authority, Transportation System Revenue 11/02 at 102 AAA 46,580
Bonds, 1992 Series B (Tax Exempt), 5.900%, 11/01/06
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 8.6%
The Essex County Improvement Authority (Essex County, New Jersey),
City of Newark, General Obligation Lease Revenue Bonds, Series 1994:
620 6.350%, 4/01/07 (Pre-refunded to 4/01/04) 4/04 at 102 BBB+*** 659,872
450 6.600%, 4/01/14 (Pre-refunded to 4/01/04) 4/04 at 102 BBB+*** 483,053
100 The Essex County Improvement Authority (Essex County, New Jersey), 12/04 at 102 AAA 109,828
County of Essex, General Obligation Lease Revenue Bonds, Series 1994
(County Jail and Youth House Projects), 6.900%, 12/01/14 (Pre-refunded
to 12/01/04)
The Monmouth County Improvement Authority (Monmouth County, New Jersey),
Revenue Bonds, Series 1992 (Howell Township Board of Education Project):
100 6.000%, 7/01/03 (Pre-refunded to 7/01/02) 7/02 at 102 AAA 104,646
50 6.450%, 7/01/08 (Pre-refunded to 7/01/02) 7/02 at 102 AAA 52,816
200 New Jersey Economic Development Authority, Lease Rental Bonds, 1992 3/02 at 102 AAA 211,788
Series (Liberty State Park Project), 6.800%, 3/15/22 (Pre-refunded
to 3/15/02)
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship New Jersey Municipal Bond Fund (continued)
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,480 New Jersey Health Care Facilities Financing Authority No Opt. Call AAA $1,676,574
(Hackensack Hospital), Revenue Bonds, Series 1979A, 8.750%,
7/01/09
2,065 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/01 at 102 A2*** 2,202,302
Series 1990-E (Kennedy Memorial Hospital), 8.375%, 7/01/10
(Pre-refunded to 7/01/01)
New Jersey Health Care Facilities Financing Authority, Bayonne Hospital
Obligated Group Revenue Bonds, Series 1994:
35 6.400%, 7/01/07 (Pre-refunded to 7/01/04) 7/04 at 102 AAA 37,445
25 6.250%, 7/01/12 (Pre-refunded to 7/01/04) 7/04 at 102 AAA 26,602
365 New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 7/02 at 102 Baa3*** 385,524
Palisades Medical Center Obligated Group Issue, Series 1992, 7.500%,
7/01/06 (Pre-refunded to 7/01/02)
180 New Jersey Economic Development Authority, Economic Growth Bonds, 12/02 at 101 1/2 Aa3*** 189,833
Composite Issue - 1992 Second Series A3, 6.550%, 12/01/07
(Alternative Minimum Tax) (Pre-refunded to 12/01/02)
625 New Jersey Economic Development Authority, Insured Revenue Bonds 5/05 at 102 AAA 665,181
(Educational Testing Service Issue), Series 1995B, 6.125%, 5/15/15
(Pre-refunded to 5/15/05)
100 New Jersey Educational Facilities Authority, Stevens Institute of 7/02 at 102 A*** 105,430
Technology Issue Revenue Bonds, 1992 Series A, 6.400%, 7/01/03
(Pre-refunded to 7/01/02)
195 New Jersey Turnpike Authority, Turnpike Revenue Bonds, 1984 Series, No Opt. Call AAA 214,375
10.375%, 1/01/03
200 New Jersey Wastewater Treatment Trust, Wastewater Treatment Bonds, 4/04 at 102 Aa1*** 214,574
Series 1994A, 6.500%, 4/01/14 (Pre-refunded to 4/01/04)
300 The Township of North Bergen (Hudson County, New Jersey), Fiscal Year 8/02 at 102 AAA 317,706
Adjustment General Obligation Bonds, Series 1992, 6.500%, 8/15/12
(Pre-refunded to 8/15/02)
60 Puerto Rico Highway and Transportation Authority, Highway Revenue 7/02 at 101 1/2 AAA 63,669
Bonds (Series T), 6.625%, 7/01/18 (Pre-refunded to 7/01/02)
55 South Jersey Transportation Authority, Transportation System Revenue 11/02 at 102 AAA 57,566
Bonds, 1992 Series B (Tax Exempt), 5.900%, 11/01/06 (Pre-refunded
to 11/01/02)
1,100 Sparta Township School District, General Obligation Bonds (Unlimited 9/06 at 100 AAA 1,144,330
Tax), 5.800%, 9/01/18 (Pre-refunded to 9/01/06)
100 University of Medicine and Dentistry of New Jersey, Series E, 6.500%, 12/01 at 102 AA-*** 105,090
12/01/18 (Pre-refunded to 12/01/01)
300 The Wanaque Borough Sewerage Authority (Passaic County, New Jersey), 12/02 at 102 A3*** 322,266
Sewer Revenue Bonds, Series 1992 (Bank Qualified), 7.000%, 12/01/21
(Pre-refunded to 12/01/02)
75 The Wanaque Valley Regional Sewerage Authority (Passaic County, 9/03 at 102 Baa1*** 79,080
New Jersey), Sewer Revenue Bonds, 1993 Series A, 6.125%, 9/01/22
(Pre-refunded to 9/01/03)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 7.1%
685 Pollution Control Financing Authority of Camden County (Camden County, No Opt. Call B2 668,067
New Jersey), Solid Waste Disposal and Resource Recovery System
Revenue Bonds, Series 1991 C, 7.125%, 12/01/01 (Alternative Minimum
Tax)
2,645 Pollution Control Financing Authority of Camden County (Camden County, 12/01 at 102 B2 2,502,673
New Jersey), Solid Waste Disposal and Resource Recovery System
Revenue Bonds, Series 1991 D, 7.250%, 12/01/10
300 The Port Authority of New York and New Jersey, Special Project Bonds, No Opt. Call N/R 311,850
Series 4, KIAC Partners Project, 7.000%, 10/01/07 (Alternative
Minimum Tax)
250 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, No Opt. Call BBB+ 254,328
Series Q, 5.900%, 7/01/01
790 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series P, No Opt. Call BBB+ 871,963
7.000%, 7/01/07
2,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T, 7/04 at 100 BBB+ 1,882,120
5.500%, 7/01/20
1,500 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, 7/05 at 100 BBB+ 1,354,635
Series Z, 5.250%, 7/01/21
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer - 3.3%
$ 250 The Hoboken-Union City-Weehawken Sewerage Authority (New Jersey), Sewer 8/02 at 102 AAA $ 253,960
Revenue Bonds, Refunding Series 1992, 6.200%, 8/01/19
3,800 The North Hudson Sewerage Authority (New Jersey), Sewer Revenue Bonds, 8/06 at 101 AAA 3,390,702
Series 1996, 5.125%, 8/01/22
- -----------------------------------------------------------------------------------------------------------------------------------
$ 115,235 Total Investments - (cost $113,784,605) - 99.4% 109,337,045
===============--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.6% 643,015
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $109,980,060
====================================================================================================================
</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 Flagship New York Municipal Bond Fund
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 700 Essex County Industrial Development Agency (New York), Environmental 11/09 at 101 A3 $ 688,646
Improvement Revenue Bonds, 1999 Series A (International Paper
Company Projects), 6.450%, 11/15/23 (Alternative Minimum Tax)
750 Jefferson County Industrial Development Agency, Multi-Modal 11/02 at 102 Baa1 780,255
Interchangeable Rate, Solid Waste Disposal Revenue Bonds (Champion
International Corporation Project), Series 1990, 7.200%, 12/01/20
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Staples - 2.5%
1,500 Nassau County Tobacco Settlement Corporation (New York), Tobacco 7/09 at 101 A2 1,503,780
Settlement Asset-Backed Bonds, Series A, 6.500%, 7/15/27
2,750 Tobacco Settlement Asset Securitization Corporation (TSASC), Tobacco 7/09 at 101 Aa1 2,688,098
Flexible Amortization Bonds, Series 1999-1, 6.250%, 7/15/27
2,500 Westchester Tobacco Asset Securitization Corporation (New York), 7/10 at 101 A1 2,134,950
Tobacco Settlement Asset-Backed Bonds, Series 1999, 6.750%, 7/15/29
- ------------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 12.3%
1,750 Town of Brookhaven Industrial Development Agency, 1993 Civic Facility 3/03 at 102 BBB- 1,788,238
Revenue Bonds (Dowling College/The National Aviation and Transportation
Center Civic Facility), 6.750%, 3/01/23
2,470 Dutchess County Industrial Development Agency, Civic Facility Revenue 11/03 at 102 A 2,577,124
Bonds (The Bard College Project), Series 1992, 7.000%, 11/01/17
195 New York City Industrial Development Agency, Civic Facility Revenue 11/01 at 102 Aa1 203,880
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 6.200%, 9/01/10 9/05 at 102 Baa2 1,034,190
1,000 6.300%, 9/01/15 9/05 at 102 Baa2 1,007,060
2,000 Dormitory Authority of the State of New York, State University 5/00 at 102 A 2,050,940
Educational Facilities Revenue Bonds, Series 1990A, 7.400%, 5/15/01
750 Dormitory Authority of the State of New York, City University System No Opt. Call Baa1 841,193
Consolidated Second General Resolution Revenue Bonds, Series 1990C,
7.500%, 7/01/10
500 Dormitory Authority of the State of New York, Revenue Bonds, State 7/01 at 102 A- 526,885
University Athletic Facility Issue, Series 1991, 7.250%, 7/01/21
2,100 Dormitory Authority of the State of New York, University of Rochester 7/04 at 102 A+ 2,166,969
Revenue Bonds, Series 1994A, 6.500%, 7/01/19
1,500 Dormitory Authority of the State of New York, City University System No Opt. Call A- 1,522,725
Consolidated Second General Resolution Revenue Bonds, Series 1993A,
5.750%, 7/01/07
1,000 Dormitory Authority of the State of New York, State University 5/14 at 100 A- 912,400
Educational Facilities Revenue Bonds, Series 1993B, 5.250%, 5/15/19
4,925 Dormitory Authority of the State of New York, City University System 7/05 at 102 AAA 4,469,832
Consolidated Third General Resolution Revenue Bonds, 1995 Series 1,
5.375%, 7/01/25
1,750 Dormitory Authority of the State of New York, University of Rochester 7/09 at 101 A+ 1,648,308
Revenue Bonds, Series 1999A and 1999B, 5.625%, 7/01/24
1,250 Dormitory Authority of the State of New York, Pratt Institute Revenue 7/09 at 102 AA 1,225,600
Bonds, Series 1999, 6.000%, 7/01/24
2,700 Dormitory Authority of the State of New York, Marymount Manhattan 7/09 at 101 AA 2,722,626
College Insured Revenue Bonds, Series 1999, 6.250%, 7/01/29
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations (continued)
$ 3,515 Suffolk County Industrial Development Agency, Civic Facility Revenue 6/04 at 102 BBB- $ 3,365,613
Bonds (Dowling College Civic Facility), Series 1994, 6.625%, 6/01/24
1,000 Suffolk County Industrial Development Agency, Civic Facility Revenue 12/06 at 102 BBB- 974,420
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 5.300%, 8/01/08 No Opt. Call N/R 857,007
1,000 5.750%, 8/01/28 8/08 at 102 N/R 862,470
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 9.7%
3,300 Dormitory Authority of the State of New York, Menorah Campus, Inc., 2/07 at 102 AAA 3,295,281
FHA-Insured Mortgage Nursing Home Revenue Bonds, Series 1997, 5.950%,
2/01/17
1,000 Dormitory Authority of the State of New York, NYACK Hospital Revenue 7/06 at 102 Baa 981,250
Bonds, Series 1996, 6.000%, 7/01/06
2,250 Dormitory Authority of the State of New York, The Rosalind and Joseph 2/07 at 102 AAA 2,116,507
Gurwin Jewish Geriatric Center of Long Island, Inc., FHA-Insured Mortgage
Nursing Home Revenue Bonds, Series 1997, 5.700%, 2/01/37
2,500 Dormitory Authority of the State of New York, The Brooklyn Hospital 2/09 at 101 Aaa 2,178,700
Center, FHA Insured Mortgage Hospital Revenue Bonds, Series 1999,
5.150%, 2/01/29
2,700 Dormitory Authority of the State of New York (Catholic Health Services 7/09 at 101 AAA 2,505,114
of Long Island Obligated Group), St. Francis Hospital Revenue Bonds,
Series 1999A, 5.500%, 7/01/22
1,925 New York State Medical Care Facilities Finance Agency, Hospital and 8/02 at 102 AAA 1,935,703
Nursing Home FHA-Insured Mortgage Revenue Bonds, 1992 Series B,
6.200%, 8/15/22
2,255 New York State Medical Care Facilities Finance Agency, Hospital and 8/04 at 102 AAA 2,334,940
Nursing Home FHA-Insured Mortgage Revenue Bonds, 1994 Series C,
6.400%, 8/15/14
1,000 New York State Medical Care Facilities Finance Agency, Brookdale No Opt. Call AAA 1,020,440
Hospital Medical Center Secured Hospital Revenue Bonds, 1995 Series A,
6.400%, 2/15/01
325 New York State Medical Care Facilities Finance Agency, Hospital and Nursing 8/00 at 101 AA 332,173
Home Insured Mortgage Revenue Bonds, 1989 Series B, 7.350%, 2/15/29
1,000 New York State Medical Care Facilities Finance Agency, FHA-Insured Mortgage 2/05 at 102 AA 1,012,790
Project Revenue Bonds, 1995 Series B, 6.100%, 2/15/15
960 New York State Medical Care Facilities Finance Agency, Health Center 11/05 at 102 Aa1 983,338
Projects Revenue Bonds (Secured Mortgage Program), 1995 Series A,
6.375%, 11/15/19
1,020 New York State Medical Care Facilities Finance Agency, Hospital and Nursing 2/04 at 102 AA 1,026,263
Home FHA-Insured Mortgage Revenue Bonds, 1994 Series A, 6.200%, 2/15/21
345 New York State Medical Care Facilities Finance Agency, Hospital and Nursing 8/01 at 102 AA 362,343
Home Insured Mortgage Revenue Bonds, 1991 Series A, 7.450%, 8/15/31
2,150 Newark-Wayne Community Hospital, Inc., Hospital Revenue Improvement and 9/03 at 102 N/R 2,214,909
Refunding Bonds, Series 1993A, 7.600%, 9/01/15
2,000 New York City Industrial Development Agency, Civic Facility Revenue Bonds 12/02 at 102 BBB 2,012,140
(1992 Jewish Board of Family and Children's Services, Inc. Project),
6.750%, 12/15/12
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 5.2%
1,000 City of Batavia Housing Authority, Tax-Exempt Mortgage Revenue Refunding 7/01 at 102 Aaa 1,017,240
Bonds, Series 1994A (Washington Towers - FHA-Insured Mortgage),
6.500%, 1/01/23
2,000 New York City Housing Development Corporation, Multi-Family Mortgage 4/03 at 102 AAA 2,074,060
Revenue Bonds (FHA-Insured Mortgage Loan), 1993 Series A, 6.550%, 10/01/15
1,250 New York City Housing Development Corporation, Multi-Unit Mortgage 6/01 at 102 AAA 1,307,588
Refunding Bonds (FHA-Insured Mortgage Loans), 1991 Series A,
7.350%, 6/01/19
750 Dormitory Authority of the State of New York, GNMA Collateralized 8/00 at 101 AAA 759,270
Revenue Bonds (Park Ridge Housing, Inc. Project), Series 1989,
7.850%, 2/01/29
2,240 New York State Finance Agency, Housing Project Mortgage Revenue Bonds, 5/06 at 102 AAA 2,238,454
1996 Series A Refunding, 6.125%, 11/01/20
</TABLE>
19
<PAGE>
Portfolio of Investments
Nuveen Flagship New York Municipal Bond Fund (continued)
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
New York State Housing Finance Agency, Insured Multi-Family Mortgage
Housing Revenue Bonds, 1992 Series A:
$ 1,650 6.950%, 8/15/12 8/02 at 102 AA $ 1,730,471
500 7.000%, 8/15/22 8/02 at 102 AA 523,185
1,000 New York State Housing Finance Agency, Multi-Family Housing Revenue 2/04 at 102 Aa1 1,037,940
Bonds (Secured Mortgage Program), 1994 Series C, 6.450%, 8/15/14
1,000 New York State Urban Development Corporation, Section 236 Revenue Bonds, 1/02 at 102 AAA 1,043,430
Series 1992A, 6.750%, 1/01/26
1,300 Tonawanda Housing Authority, New York, Housing Revenue Bonds (Kibler 9/09 at 103 N/R 1,286,389
Senior Housing, L.P. Project), Series 1999B Bonds, 7.750%, 12/01/31
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 2.0%
1,500 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 9/04 at 102 Aa1 1,539,960
Series 43, 6.450%, 10/01/17
1,000 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 3/05 at 102 Aa1 1,028,340
1995 Series 46, 6.600%, 10/01/19 (Alternative Minimum Tax)
2,700 State of New York Mortgage Agency, Homeowner Mortgage Revenue Bonds, 3/08 at 101 Aa1 2,398,923
Series 69, 5.500%, 10/01/28 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 5.0%
2,000 Dormitory Authority of the State of New York, Bishop Henry R. Hucles 7/06 at 102 Aa1 1,893,540
Nursing Home, Inc. Revenue Bonds, Series 1996, 6.000%, 7/01/24
2,460 Dormitory Authority of the State of New York, W.K. Nursing Home 8/06 at 102 AAA 2,465,830
Corporation, FHA-Insured Mortgage Revenue Bonds, Series 1996,
5.950%, 2/01/16
1,500 Dormitory Authority of the State of New York, Concord Nursing Home, Inc. 7/10 at 101 A1 1,511,865
Revenue Bonds, Series 2000, 6.500%, 7/01/29
5,000 Syracuse Housing Authority (Syracuse, New York), FHA-Insured Mortgage 2/08 at 102 AAA 4,743,250
Revenue Bonds (Loretto Rest Residential Health Care Facility Project),
Series 1997A, 5.800%, 8/01/37
2,100 UFA Development Corporation, Utica, New York, FHA-Insured Mortgage 7/04 at 102 Aa2 2,021,712
Revenue Bonds, Series 1993, (Loretto-Utica Project), 5.950%, 7/01/35
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 7.0%
5 The City of New York, General Obligation Bonds, Fiscal 1992 Series C, 8/02 at 101 1/2 AAA 5,256
Fixed Rate Bonds, Subseries C1, 6.625%, 8/01/13
1,000 The City of New York, General Obligation Bonds, Fiscal 1996 Series F, 2/06 at 101 1/2 A- 969,150
5.750%, 2/01/19
The City of New York, General Obligation Bonds, Fiscal 1996 Series G:
2,000 5.750%, 2/01/17 2/06 at 101 1/2 A- 1,954,460
2,500 5.750%, 2/01/20 2/06 at 101 1/2 A- 2,415,100
1,750 The City of New York, General Obligation Bonds, Fiscal 1997 Series D, 11/06 at 101 1/2 A- 1,781,938
Tax Exempt Bonds, 5.875%, 11/01/11
1,450 The City of New York, General Obligation Bonds, Fiscal 1992 Series B, 2/02 at 101 1/2 A- 1,536,725
7.500%, 2/01/06
5,000 The City of New York, General Obligation Bonds, Fiscal 1998 Series J, 8/08 at 101 A- 4,222,800
5.000%, 8/01/23
4,440 The City of New York, General Obligation Bonds, Fiscal 1999 Series C, 8/08 at 101 A- 3,772,402
5.000%, 8/15/22
South Orangetown Central School District, Rockland County, New York,
Serial General Obligation Bonds, Series 1990:
390 6.875%, 10/01/08 No Opt. Call A2 431,917
390 6.875%, 10/01/09 No Opt. Call A2 434,444
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 21.0%
300 Albany Housing Authority, City of Albany, New York, Limited Obligation 10/05 at 102 Baa1 297,000
Bonds, Series 1995, 5.850%, 10/01/07
1,500 Albany Parking Authority, Aggregate Principal Amount, Parking Revenue No Opt. Call Baa1 509,445
Refunding Bonds, Series 1992A, 0.000%, 11/01/17
2,500 New York Housing Corporation, Senior Revenue Refunding Bonds, 11/03 at 102 AA 2,275,325
Series 1993, 5.000%, 11/01/13
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 4,000 Metropolitan Transportation Authority (New York), Transit Facilities 7/03 at 101 1/2 A- $ 3,925,800
Service Contract Bonds, Series P, 5.750%, 7/01/15
1,500 New York Metropolitan Transportation Authority, Dedicated Tax Fund Bonds, 4/10 at 100 AAA 1,500,465
Series 2000A, 6.000%, 4/01/30
1,500 New York City Transitional Finance Authority, Future Tax Secured Bonds, 5/10 at 101 AA 1,496,745
Fiscal 2000 Series B, 6.000%, 11/15/29
220 Dormitory Authority of the State of New York, Judicial Facilities Lease 4/00 at 114 5/32 Baa1 252,087
Revenue Bonds (Suffolk County Issue), Series 1991A, 9.500%, 4/15/14
1,000 Dormitory Authority of the State of New York, Department of Education 7/04 at 102 A- 1,000,670
of the State of New York Issue, Series 1994A, 6.250%, 7/01/24
2,900 Dormitory Authority of the State of New York, Department of Health of 7/04 at 102 BBB+ 2,629,546
the State of New York, Series 1994, 5.500%, 7/01/23
2,225 Dormitory Authority of the State of New York, Court Facilities Lease 5/03 at 101 1/2 A- 2,089,765
Revenue Bonds (The City of New York Issue), Series 1993A,
5.700%, 5/15/22
2,500 Dormitory Authority of the State of New York, Mental Health Services 2/07 at 102 A 2,336,700
Facilities Improvement Revenue Bonds, Series 1997B, 5.625%, 2/15/21
2,000 Dormitory Authority of the State of New York, Mental Health Services 8/09 at 101 AAA 1,749,400
Facilities Improvement Revenue Bonds, Series 1999D, 5.250%, 2/15/29
1,545 New York State Environmental Facilities Corporation, State Park 3/03 at 101 A- 1,537,244
Infrastructure Special Obligation Bonds, Series 1993 A, 5.750%, 3/15/13
1,000 New York State Housing Finance Agency, Health Facilities Revenue Bonds 5/06 at 101 1/2 A- 1,022,240
(New York City), 1996 Series A Refunding, 6.000%, 11/01/08
340 New York State Housing Finance Agency, Health Facilities Revenue Bonds 11/00 at 102 BBB+ 350,040
(New York City), 1990 Series A Refunding, 8.000%, 11/01/08
2,990 New York State Housing Finance Agency, Service Contract Obligation 9/03 at 102 A- 2,969,698
Revenue Bonds, 1993 Series C Refunding, 5.875%, 9/15/14
2,000 New York State Housing Finance Agency, Service Contract Obligation 9/05 at 102 A- 2,027,960
Revenue Bonds, 1995 Series A, 6.375%, 9/15/15
250 State of New York Municipal Bond Bank Agency, Special Program Bonds 9/01 at 102 BBB+ 260,738
(City of Buffalo), 1991 Series A, 6.875%, 3/15/06
110 New York State Medical Care Facilities Finance Agency, Mental Health 8/00 at 100 A- 110,255
Services Facilities Improvement Revenue Bonds, 1988 Series A,
7.700%, 2/15/18
15 New York State Medical Care Facilities Finance Agency, Mental Health 8/04 at 102 A 15,376
Services Facilities Improvement Revenue Bonds, 1994 Series E,
6.500%, 8/15/24
7,500 New York State Urban Development Corporation, Correctional Capital 1/04 at 102 A- 6,628,200
Facilities Revenue Bonds, 1993A Refunding Series, 5.250%, 1/01/21
1,000 New York State Urban Development Corporation, Project Revenue Bonds 1/06 at 102 A- 1,006,970
(Onondaga County Convention Center), Refunding Series 1995,
6.250%, 1/01/20
5,090 New York State Urban Development Corporation, Correctional Capital 1/03 at 102 A- 4,853,824
Facilities Revenue Bonds, 1993 Refunding Series, 5.500%, 1/01/15
2,500 New York State Urban Development Corporation, Correctional Facilities 1/08 at 102 A- 2,054,550
Service Contract Revenue Bonds, Series A, 5.000%, 1/01/28
2,000 City School District of the City of Niagara Falls (New York), 6/08 at 101 BBB- 1,683,220
Certificates of Participation (High School Facility), Series 1998,
5.375%, 6/15/28
2,000 34th Street Partnership, Inc., 34th Street Business Improvement District 1/03 at 102 A1 1,819,800
(New York), Capital Improvement Bonds, Series 1993, 5.500%, 1/01/23
500 Triborough Bridge and Tunnel Authority (New York), Convention Center No Opt. Call A- 550,885
Project Bonds, Series E, 7.250%, 1/01/10
2,000 Triborough Bridge and Tunnel Authority (New York), Special Obligation 1/01 at 102 A1 2,082,400
Refunding Bonds, Series 1991B, 7.100%, 1/01/10
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen Flagship New York Municipal Bond Fund (continued)
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited (continued)
$2,000 Triborough Bridge and Tunnel Authority, Special Obligation Refunding 1/01 at 102 AAA $2,083,240
Bonds, Series 1991B, 7.100%, 1/01/10
1,250 Virgin Islands Public Finance Authority, Revenue Bonds (Virgin Islands 10/10 at 101 BBB- 1,240,050
Gross Receipts Taxes Loan Note), Series 1999A, 6.500%, 10/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 7.0%
500 Albany Parking Authority, Aggregate Principal Amount Parking Revenue 9/01 at 102 A 513,880
Refunding Bonds (Green and Hudson Garage Project - Letter of Credit
Secured), Series 1991A, 7.150%, 9/15/16
4,000 Metropolitan Transportation Authority (New York), Commuter Facilities 7/07 at 101 1/2 AAA 3,901,280
Revenue Bonds, Series 1997A, 5.750%, 7/01/21
2,000 Metropolitan Transportation Authority (New York), Commuter Facilities 7/07 at 101 AAA 1,805,660
Revenue Bonds, Series 1997C, 5.375%, 7/01/27
2,000 New York City Industrial Development Agency, Special Facility 8/07 at 102 Baa1 1,715,300
Revenue Bonds (1990 American Airlines, Inc. Project), Remarketed,
5.400%, 7/01/20 (Alternative Minimum Tax)
4,000 New York City Industrial Development Agency, Special Facility 1/04 at 102 A 3,935,600
Revenue Bonds, Series 1994 (Terminal One Group Association, L.P.
Project), 6.125%, 1/01/24 (Alternative Minimum Tax)
500 New York City Industrial Development Agency, Special Facility Revenue 12/08 at 102 A 403,120
Bonds, Series 1998 (1998 British Airways PLC Project), 5.250%,
12/01/32 (Alternative Minimum Tax)
1,000 Niagara Frontier Transportation Authority (Buffalo Niagara International 4/09 at 101 AAA 932,420
Airport), Airport Revenue Bonds, Series 1999A, 5.625%, 4/01/29
(Alternative Minimum Tax)
1,500 The Port Authority of New York and New Jersey, Special Project Bonds, 12/07 at 100 AAA 1,444,320
Series 6, JFK International Air Terminal LLC Project, 5.750%,
12/01/25 (Alternative Minimum Tax)
3,000 Triborough Bridge and Tunnel Authority (New York), General Purpose 1/10 at 100 Aa3 2,751,840
Revenue Bonds, Series 1999B, 5.500%, 1/01/30
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 14.8%
1,600 County of Franklin Industrial Development Agency, Lease Revenue Bonds 11/02 at 102 BBB-*** 1,679,248
(County Correctional Facility Project), Series 1992, 6.750%, 11/01/12
(Pre-refunded to 11/01/02)
1,025 Metropolitan Transportation Authority, Transit Facilities Revenue Bonds, 7/02 at 102 AAA 1,084,307
Series J, 6.500%, 7/01/18 (Pre-refunded to 7/01/02)
1,000 City of Rochelle Industrial Development Agency, Civic Facility Revenue 7/02 at 102 Baa2*** 1,057,850
Bonds (College of New Rochelle Project - 1992 Series), 6.625%,
7/01/12 (Pre-refunded to 7/01/02)
40 The City of New York General Obligation Bonds, Fiscal 1992 Series C, 8/02 at 101 1/2 AAA 42,294
6.625%, 8/01/13 (Pre-refunded to 8/01/02)
40 The City of New York General Obligation Bonds, Fiscal 1991 Series F, 11/01 at 101 1/2 AAA 42,982
Tax-Exempt Bonds, 8.250%, 11/15/19 (Pre-refunded to 11/15/01)
1,000 The City of New York General Obligation Bonds, Fiscal 1995 Series B, 8/04 at 101 Aaa 1,090,850
7.000%, 8/15/16 (Pre-refunded to 8/15/04)
550 The City of New York General Obligation Bonds, Fiscal 1992 Series B, 2/02 at 101 1/2 A-*** 585,349
7.500%, 2/01/06 (Pre-refunded to 2/01/02)
1,500 New York City Municipal Water Finance Authority (New York), Water 6/01 at 101 1/2 Aaa 1,583,775
and Sewer System Revenue Bonds, Fiscal 1991 Series C, 7.750%,
6/15/20 (Pre-refunded to 6/15/01)
5,345 New York City Industrial Development Agency, Civic Facility Revenue 7/02 at 102 Aa2*** 5,645,710
Bonds (1992 The Lighthouse, Inc. Project), 6.500%, 7/01/22
(Pre-refunded to 7/01/02)
300 State of New York Serial Bonds, Series 1991, 7.300%, 3/01/12 3/01 at 102 A+*** 314,853
(Pre-refunded to 3/01/01)
300 Dormitory Authority of the State of New York, State of New York 7/01 at 102 Baa1*** 317,976
Department of Education Revenue Bonds, Series 1991, 7.750%,
7/01/21 (Pre-refunded to 7/01/01)
400 Dormitory Authority of the State of New York, Menorah Campus, Inc., 8/01 at 102 AA*** 423,572
FHA-Insured Mortgage Revenue Bonds, Series 1991, 7.400%, 2/01/31
(Pre-refunded to 8/01/01)
250 Dormitory Authority of the State of New York, Department of Health 7/01 at 102 BBB+*** 263,208
Revenue Bonds, Veterans Home, Series 1990, 7.250%, 7/01/21
(Pre-refunded to 7/01/01)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 235 Dormitory Authority of the State of New York, Iroquois Nursing 2/01 at 102 AA-*** $ 245,479
Insured Revenue Bonds, Series 1991, 7.000%, 2/01/15
(Pre-refunded to 2/01/01)
985 Dormitory Authority of the State of New York, Dormitory Revenue Bonds, 7/04 at 102 AAA 1,095,468
State University Issue, Series X, 7.400%, 7/01/24
(Pre-refunded to 7/01/04)
1,500 Dormitory Authority of the State of New York, Department of Health 7/05 at 102 AAA 1,629,630
of the State of New York Revenue Bonds, Series 1995, 6.625%, 7/01/24
(Pre-refunded to 7/01/05)
215 New York State Energy Research and Development Authority, Electric 1/03 at 102 A-*** 229,805
Facilities Revenue Bonds (Long Island Lighting Company Project),
1992 Series D, 6.900%, 8/01/22 (Alternative Minimum Tax)
(Pre-refunded to 1/21/03)
200 New York State Housing Finance Agency, State University Construction No Opt. Call AAA 238,688
Refunding Bonds, 1986 Series A, 8.000%, 5/01/11
1,660 New York State Housing Finance Agency, Health Facilities Revenue 11/00 at 102 AAA 1,734,551
Bonds (New York City), 1990 Series A Refunding, 8.000%, 11/01/08
(Pre-refunded to 11/01/00)
250 State of New York Municipal Bond Bank Agency, Special Program 9/01 at 102 AAA 263,163
Revenue Bonds (City of Rochester), 1991 Series A, 6.750%, 3/15/11
(Pre-refunded to 9/15/01)
1,460 New York State Medical Care Facilities Finance Agency, Mental Health 2/01 at 102 Aaa 1,533,146
Services Facilities Improvement Revenue Bonds, 1991 Series A,
7.500%, 2/15/21 (Pre-refunded to 2/15/01)
1,365 New York State Medical Care Facilities Finance Agency, Mental Health 2/03 at 102 AAA 1,443,761
Services Facilities Improvement Revenue Bonds, 1992 Series F,
6.450%, 2/15/09 (Pre-refunded to 2/15/03)
New York State Medical Care Facilities Finance Agency, New York Hospital
FHA-Insured Mortgage Revenue Bonds, 1994 Series A:
1,000 6.750%, 8/15/14 (Pre-refunded to 2/15/05) 2/05 at 102 AAA 1,090,060
1,000 6.800%, 8/15/24 (Pre-refunded to 2/15/05) 2/05 at 102 AAA 1,092,240
2,700 New York State Medical Care Facilities Finance Agency, Hospital 2/05 at 102 AAA 2,942,811
Medical Center Secured Revenue Bonds, Series 1995-A, 6.800%,
8/15/12 (Pre-refunded to 2/15/05)
1,480 New York State Medical Care Facilities Finance Agency, Hospital and 2/04 at 102 AA*** 1,567,690
Nursing Home, FHA-Insured Mortgage Revenue Bonds, 1994 Series A,
6.200%, 2/15/21 (Pre-refunded to 2/15/04)
1,485 New York State Medical Care Facilities Finance Agency, Mental Health 8/04 at 102 A*** 1,591,326
Services Facilities Improvement Revenue Bonds, 1994 Series E,
6.500%, 8/15/24 (Pre-refunded to 8/15/04)
140 New York State Medical Care Facilities Finance Agency, Hospital and 8/01 at 102 AA*** 148,428
Nursing Home Insured Mortgage Revenue Bonds, 1991 Series A, 7.450%,
8/15/31 (Pre-refunded to 8/15/01)
2,000 New York State Urban Development Corporation, Project Revenue Bonds 1/01 at 102 A-*** 2,097,240
(Clarkson Center for Advanced Materials Processing Loan),
Series 1990, 7.800%, 1/01/20 (Pre-refunded to 1/01/01)
2,900 New York State Urban Development Corporation, State Facilities Revenue 4/01 at 102 Aaa 3,056,571
Bonds, Series 1991, 7.500%, 4/01/20 (Pre-refunded to 4/01/01)
1,000 Orangetown Housing Authority (Rockland County, New York), Housing 10/00 at 102 A*** 1,039,690
Facilities Revenue Bonds (Orangetown Senior Housing Center -
1990 Series), 7.600%, 4/01/30 (Pre-refunded to 10/01/00)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 10.4%
6,500 Erie County Industrial Development Agency, Solid Waste Disposal 12/10 at 103 N/R 6,923,020
Facility Revenue Bonds (1998 Canfibre of Lackawanna Project),
8.875%, 12/01/13 (Alternative Minimum Tax)
4,325 Long Island Power Authority (New York), Electric System General 6/03 at 101 A- 3,864,734
Revenue Bonds, Series 1998A, 5.500%, 12/01/29
New York City Industrial Development Agency, Industrial Development
Revenue Bonds (Brooklyn Navy Yard Cogeneration Partners, L.P. Project),
Series 1997:
4,000 5.650%, 10/01/28 (Alternative Minimum Tax) 10/08 at 102 BBB- 3,471,760
5,950 5.750%, 10/01/36 (Alternative Minimum Tax) 10/08 at 102 BBB- 5,185,187
350 New York State Energy Research and Development Authority, Electric 7/00 at 101 A+ 354,288
Facilities Revenue Bonds, Series 1991 A (Consolidated Edison Company
of New York, Inc. Project), 7.500%, 1/01/26 (Alternative Minimum Tax)
1,250 New York State Energy Research and Development Authority, Electric 6/02 at 102 N/R 1,332,325
Facilities Revenue Bonds (Long Island Lighting Company Project),
1989 Series A, 7.150%, 9/01/19 (Alternative Minimum Tax)
</TABLE>
23
<PAGE>
Portfolio of Investments
Nuveen Flagship New York Municipal Bond Fund (continued)
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities (continued)
$ 285 New York State Energy Research and Development Authority, Electric 1/03 at 102 A- $ 295,072
Facilities Revenue Bonds (Long Island Lighting Company Project),
1992 Series D, 6.900%, 8/01/22 (Alternative Minimum Tax)
2,435 New York State Energy Research and Development Authority, Adjustable 7/05 at 102 AAA 2,442,594
Rate Pollution Control Revenue Bonds (New York State Electric and
Gas Corporation Project), 1987 Series A, 6.150%, 7/01/26
(Alternative Minimum Tax)
1,500 New York State Energy Research and Development Authority, Facilities 7/05 at 102 AAA 1,514,760
Refunding Revenue Bonds, Series 1995 A (Consolidated Edison Company of
New York, Inc. Project), 6.100%, 8/15/20
750 Onondaga County Resource Recovery Agency, System Revenue Bonds 5/02 at 102 Baa1 764,540
(Development Costs - 1992 Series), 7.000%, 5/01/15
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 1.0%
2,855 New York City, Municipal Water Finance Authority, Water and Sewer 6/07 at 101 AAA 2,513,023
System Revenue Bonds, 1998 Series B, 5.250%, 6/15/29
- -----------------------------------------------------------------------------------------------------------------------------------
$253,970 Total Investments - (cost $245,274,953) - 98.5% 246,606,821
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.5% 3,731,394
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $250,338,215
====================================================================================================================
</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.
24
<PAGE>
Portfolio of Investments
Nuveen New York Insured Municipal Bond Fund
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 9.8%
$ 1,000 Allegany County Industrial Development Agency (New York), Civic 8/08 at 102 Aaa $ 847,450
Facility Revenue Bonds, Series 1998 (Alfred University Civic
Facility), 5.000%, 8/01/28
1,350 Town of Hempstead Industrial Development Agency, Civic Facility 7/06 at 102 AAA 1,354,739
Revenue Bonds (Hofstra University Project - Series 1996),
5.800%, 7/01/15
1,000 New York City Industrial Development Agency, Civic Facility Revenue 11/04 at 102 AAA 1,047,880
Bonds (USTA National Tennis Center Incorporated Project),
6.375%, 11/15/14
1,145 New York City Industrial Development Agency, Civic Facility Revenue 6/07 at 102 Aaa 1,112,471
Bonds (Anti-Defamation League Foundation Project),
Series 1997A, 5.600%, 6/01/17
225 Dormitory Authority of the State of New York, College and 6/00 at 101 1/2 AAA 230,222
University Revenue (Pooled Capital Program), Series 1985,
7.800%, 12/01/05
5,000 Dormitory Authority of the State of New York, New York University 7/01 at 102 AAA 5,199,650
Insured Revenue Bonds, Series 1991, 6.250%, 7/01/09
4,640 Dormitory Authority of the State of New York, Mount Sinai School of 7/04 at 102 AAA 3,968,499
Medicine Insured Revenue Bonds, Series 1994A, 5.000%, 7/01/21
1,500 Dormitory Authority of the State of New York, Sarah Lawrence 7/05 at 102 AAA 1,498,905
College Revenue Bonds, Series 1995, 6.000%, 7/01/24
5,000 Dormitory Authority of the State of New York, State University 5/06 at 102 AAA 4,618,700
Educational Facilities Revenue Bonds, Series 1996, 5.500%,
5/15/26
2,925 Dormitory Authority of the State of New York, Siena College Insured 7/07 at 102 AAA 2,822,918
Revenue Bonds, Series 1997, 5.750%, 7/01/26
4,000 Dormitory Authority of the State of New York, Fordham University 7/08 at 101 AAA 3,390,800
Insured Revenue Bonds, Series 1998, 5.000%, 7/01/28
2,530 Dormitory Authority of the State of New York, City University 7/08 at 101 AAA 2,181,568
System Consolidated Third General Resolution Revenue Bonds,
1998 Series 2, 5.000%, 7/01/23
1,760 Dormitory Authority of the State of New York, City University 7/00 at 102 AAA 1,812,026
System Consolidated Second General Resolution Revenue Bonds,
Series 1990C, 7.000%, 7/01/14
3,000 Dormitory Authority of the State of New York, Ithaca College 7/08 at 101 Aaa 2,613,690
Insured Revenue Bonds, Series 1998, 5.000%, 7/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 15.2%
13,730 New York City Health and Hospitals Corporation, Health System 2/03 at 102 AAA 13,160,342
Bonds, 1993 Series A, 5.750%, 2/15/22
6,460 Dormitory Authority of the State of New York, St. Vincent's 8/05 at 102 AAA 6,190,812
Hospital and Medical Center of New York, FHA-Insured Mortgage
Revenue Bonds, Series 1995, 5.800%, 8/01/25
3,730 Dormitory Authority of the State of New York, Maimonides Medical 2/06 at 102 AAA 3,613,363
Center, FHA-Insured Mortgage Hospital Revenue Bonds, Series
1996A, 5.750%, 8/01/24
2,500 Dormitory Authority of the State of New York, Secured Hospital 2/08 at 101 1/2 AAA 2,117,275
Insured Revenue Bonds (Southside Hospital), Series 1998,
5.000%, 2/15/25
3,000 Dormitory Authority of the State of New York (North Shore Health 11/08 at 101 AAA 2,550,990
System Obligated Group), North Shore University Hospital
Revenue Bonds, Series 1998, 5.000%, 11/01/23
Dormitory Authority of the State of New York (Catholic Health Services
of Long Island Obligated Group), St. Francis Hospital Revenue Bonds,
Series 1999A:
3,105 5.500%, 7/01/22 7/09 at 101 AAA 2,880,881
2,260 5.500%, 7/01/29 7/09 at 101 AAA 2,059,900
1,000 Dormitory Authority of the State of New York, New Island Hospital 7/09 at 101 AAA 965,430
Insured Revenue Bonds, Series 1999A, 5.750%, 7/01/19
</TABLE>
25
<PAGE>
Portfolio of Investments
Nuveen New York Insured Municipal Bond Fund (continued)
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$3,000 New York State Medical Care Facilities Finance Agency, South Nassau 11/02 at 102 AAA $ 3,118,950
Communities Hospital Project Revenue Bonds, 1992 Series A,
6.125%, 11/01/11
3,200 New York State Medical Care Facilities Finance Agency, North Shore 11/00 at 102 AAA 3,328,064
University Hospital Mortgage Project Revenue Bonds, 1990 Series A,
7.200%, 11/01/20
1,670 New York State Medical Care Facilities Finance Agency, Our Lady of 11/01 at 102 AAA 1,742,929
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 6.600%, 11/01/10 11/01 at 102 AAA 522,635
1,550 6.625%, 11/01/18 11/01 at 102 AAA 1,612,558
1,000 New York State Medical Care Facilities Finance Agency, Aurelia Osborn 11/01 at 102 AAA 1,050,210
Fox Memorial Hospital Project Revenue Bonds, 1992 Series A,
6.500%, 11/01/19
2,500 New York State Medical Care Facilities Finance Agency, St. Mary's 11/03 at 102 AAA 2,588,975
Hospital (Rochester) Mortgage Project Revenue Bonds, 1994 Series A
Refunding, 6.200%, 11/01/14
645 New York State Medical Care Facilities Finance Agency, Hospital and 8/00 at 101 AA 659,235
Nursing Home Insured Mortgage Revenue Bonds, 1989 Series B,
7.350%, 2/15/29
2,890 New York State Medical Care Facilities Finance Agency, Montefiore 2/05 at 102 AAA 2,857,112
Medical Center, FHA-Insured Mortgage Revenue Bonds, 1995 Series A,
5.750%, 2/15/15
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 9.2%
5,000 New York City Housing Development Corporation, Multifamily Housing 3/00 at 105 AAA 5,259,650
Limited Obligation Bonds, Series 1991A, Pass Through Certificates,
6.500%, 2/20/19
New York State Finance Agency, Housing Project Mortgage Revenue Bonds,
1996 Series A Refunding:
5,650 6.100%, 11/01/15 5/06 at 102 AAA 5,721,868
4,980 6.125%, 11/01/20 5/06 at 102 AAA 4,976,564
635 New York State Housing Finance Agency, Multi-Family Housing Revenue 5/00 at 102 AAA 648,824
Bonds (AMBAC Insured Program), 1989 Series A, 7.450%, 11/01/28
New York State Urban Development Corporation, Section 236 Revenue Bonds,
Series 1992A:
3,850 6.700%, 1/01/12 1/02 at 102 AAA 4,037,418
9,650 6.750%, 1/01/26 1/02 at 102 AAA 10,069,100
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 1.8%
4,250 Village of East Rochester Housing Authority, FHA-Insured Mortgage 8/07 at 102 AAA 4,025,260
Revenue Bonds (St. John's Meadows Project), Series 1997A,
5.700%, 8/01/27
1,000 Dormitory Authority of the State of New York, United Cerebral Palsy 7/02 at 102 AAA 1,037,330
Association of Westchester County, Inc. Insured Revenue Bonds,
Series 1992, 6.200%, 7/01/12
1,000 Dormitory Authory of the State of New York, Sarah Neuman Nursing Home, 8/07 at 102 AAA 914,020
FHA-Insured Mortgage Nursing Home Revenue Bonds, Series 1997,
5.450%, 8/01/27
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 8.8%
1,000 City of Buffalo, New York, Refunding Serial Bonds of 1991, 2/01 at 101 AAA 1,020,240
6.150%, 2/01/04
Camden Central School District, Oneida County, New York, School District
(Serial) Bonds of 1991:
500 7.100%, 6/15/07 No Opt. Call AAA 558,035
600 7.100%, 6/15/08 No Opt. Call AAA 675,180
600 7.100%, 6/15/09 No Opt. Call AAA 680,328
275 7.100%, 6/15/10 No Opt. Call AAA 312,920
500 Greece Central School District, Monroe County, New York, General No Opt. Call AAA 528,200
Obligation Bonds, School District (Serial) Bonds of 1992,
6.000%, 6/15/09
Town of Halfmoon, Saratoga County, New York, Public Improvement (Serial)
Bonds of 1991:
385 6.500%, 6/01/09 No Opt. Call AAA 423,292
395 6.500%, 6/01/10 No Opt. Call AAA 436,041
395 6.500%, 6/01/11 No Opt. Call AAA 437,585
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
Middle County Central School District at Centereach, In the Town of
Brookhaven, Suffolk County, New York, School District (Serial)
Bonds of 1991:
$ 475 6.900%, 12/15/07 No Opt. Call AAA $ 526,576
475 6.900%, 12/15/08 No Opt. Call AAA 531,259
Mount Sinai Union Free School District, County of Suffolk, New York,
School District Refunding (Serial) Bonds of 1992:
500 6.200%, 2/15/15 No Opt. Call AAA 531,940
1,035 6.200%, 2/15/16 No Opt. Call AAA 1,099,367
1,500 County of Nassau, New York, General Obligation Serial Bonds, 8/04 at 103 AAA 1,511,835
General Improvement Bonds, Series O, 5.700%, 8/01/13
1,020 City of New Rochelle, Westchester County, New York, General Obligation 8/04 at 102 AAA 1,036,483
Public Improvement Bonds, 1994 Series B, 6.200%, 8/15/22
60 The City of New York, General Obligation Bonds, Fiscal 1992 Series C 8/02 at 101 1/2 AAA 62,650
Fixed Rate Bonds, Subseries C-1, 6.250%, 8/01/10
20 The City of New York, General Obligation Bonds, Fiscal 1992 Series C, 8/02 at 101 1/2 AAA 21,024
6.625%, 8/01/12
The City of New York, General Obligation Bonds, Fiscal 1990 Series B:
1,300 7.000%, 10/01/15 4/00 at 100 AAA 1,303,146
1,025 7.000%, 10/01/17 4/00 at 100 AAA 1,027,665
310 7.000%, 10/01/18 4/00 at 100 AAA 310,685
2,000 The City of New York, General Obligation Bonds, Fiscal 1990 Series B, 4/00 at 100 AAA 2,005,200
7.000%, 10/01/16
5,000 The City of New York, General Obligation Bonds, Fiscal 1998 Series H, 8/08 at 101 AAA 4,371,150
5.125%, 8/01/25
1,590 City of Niagara Falls, Niagara County, New York, Public Improvement 3/04 at 102 AAA 1,698,486
(Serial) Bonds of 1994, 6.900%, 3/01/21
1,505 Town of North Hempstead, Nassau County, New York, General Obligation No Opt. Call AAA 1,638,825
Refunding Serial Bonds, Refunding Serial Bonds of 1992, Series B,
6.400%, 4/01/14
Rensselaer County, New York, General Obligation Serial Bonds, Series 1991:
960 6.700%, 2/15/13 No Opt. Call AAA 1,073,798
960 6.700%, 2/15/14 No Opt. Call AAA 1,072,714
960 6.700%, 2/15/15 No Opt. Call AAA 1,069,632
Rondout Valley Central School District at Accord, Ulster County, New York,
General Obligation School District (Serial) Bonds of 1991:
550 6.800%, 6/15/06 No Opt. Call AAA 599,715
550 6.850%, 6/15/07 No Opt. Call AAA 606,100
550 6.850%, 6/15/08 No Opt. Call AAA 610,572
550 6.850%, 6/15/09 No Opt. Call AAA 614,312
550 6.850%, 6/15/10 No Opt. Call AAA 615,846
600 County of Suffolk, New York, General Obligation Refunding (Serial) Bonds, 5/02 at 102 AAA 622,218
Improvement Refunding Bonds, 1993 Series B, 6.150%, 5/01/10
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 13.8%
2,500 Metropolitan Transportation Authority, Dedicated Tax Fund Bonds, 4/07 at 101 AAA 2,219,675
Series 1996A, 5.250%, 4/01/26
2,000 Metropolitan Transportation Authority, Dedicated Tax Fund Bonds, 4/10 at 100 AAA 2,000,620
Series 2000A, 6.000%, 4/01/30
3,000 New York City Transitional Finance Authority, Future Tax Secured Bonds, 5/10 at 101 AAA 3,011,280
Fiscal 2000 Series B, 6.000%, 11/15/24
5,000 Dormitory Authority of the State of New York, Municipal Health 1/09 at 101 AAA 4,284,900
Facilities Improvement Program, Lease Revenue Bonds (New York City
Issue), 1998 Series 1, 5.000%, 1/15/23
1,750 Dormitory Authority of the State of New York, Office Facilities 4/09 at 101 AAA 1,640,275
Lease Revenue Bonds (Department of Audit and Control), Series 1999,
5.500%, 4/01/23
2,500 Dormitory Authority of the State of New York, Court Facilities 5/10 at 101 AAA 2,411,350
Lease Revenue Bonds (The City of New York Issue), Series 1999,
5.750%, 5/15/30
2,500 Dormitory Authority of the State of New York, Mental Health 8/07 at 101 AAA 2,170,825
Services Facilities Improvement Revenue Bonds, Series 1997D,
5.125%, 8/15/27
</TABLE>
27
<PAGE>
Portfolio of Investments
Nuveen New York Insured Municipal Bond Fund (continued)
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/Limited (continued)
$ 3,400 Dormitory Authority of the State of New York, Mental Health 8/09 at 101 AAA $2,973,980
Services Facilities Improvement Revenue Bonds, Series 1999D,
5.250%, 2/15/29
3,280 New York Local Government Assistance Corporation, Series 1993 4/04 at 100 AAA 2,812,534
B Refunding Bonds, 5.000%, 4/01/23
1,000 New York State Medical Care Facilities Finance Agency, Mental 8/04 at 102 AAA 1,063,560
Health Services Facilities Improvement Revenue Bonds, 1994
Series D, 6.150%, 2/15/15
2,000 New York State Medical Care Facilities Finance Agency, Mental 2/04 at 102 AAA 1,765,520
Health Services Facilities Improvement Revenue Bonds, 1994
Series A, 5.250%, 8/15/23
185 New York State Medical Care Facilities Finance Agency, Mental 2/02 at 102 AAA 187,024
Health Services Facilities Improvement Revenue Bonds, 1992
Series B, 6.250%, 8/15/18
150 New York State Medical Care Facilities Finance Agency, Mental 2/02 at 102 AAA 155,727
Health Services Facilities Improvement Revenue Bonds, 1992
Series A, 6.375%, 8/15/17
2,000 New York State Medical Care Facilities Finance Agency, Mental 2/04 at 102 AAA 1,796,980
Health Services Facilities Improvement Revenue Bonds, 1993
Series F Refunding, 5.250%, 2/15/19
4,000 New York State Urban Development Corporation, Revenue Bonds 4/06 at 102 AAA 3,780,760
(Sports Facility Assistance Program), 1996 Series A, 5.500%,
4/01/19
5,000 New York State Urban Development Corporation, Correctional 1/09 at 101 AAA 5,001,350
Facilities Service Contract Revenue Bonds, Series C, 6.000%,
1/01/29
8,650 Triborough Bridge and Tunnel Authority, Special Obligation 1/01 at 102 AAA 8,959,497
Refunding Bonds, Series 1991B, 6.875%, 1/01/15
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 8.3%
2,500 Albany County Airport Authority, Airport Revenue Bonds, 12/07 at 102 AAA 2,327,350
Series 1997, 5.500%, 12/15/19 (Alternative Minimum Tax)
3,000 Buffalo and Fort Erie Public Bridge Authority, Toll Bridge 1/05 at 101 AAA 2,894,130
System Revenue Bonds, Series 1995, 5.750%, 1/01/25
4,000 Metropolitan Transportation Authority (New York), Commuter 7/05 to 101 AAA 3,835,720
Facilities Subordinated Revenue Bonds, Series 1995-2
(Grand Central Terminal Redevelopment Project), 5.700%,
7/01/24
3,000 Metropolitan Transportation Authority (New York), Commuter 7/07 at 101 AAA 2,925,960
Facilities Revenue Bonds, Series 1997A, 5.750%, 7/01/21
3,000 Metropolitan Transportation Authority (New York), Commuter 7/07 at 102 AAA 2,622,750
Facilities Revenue Bonds, Series 1997B, 5.125%, 7/01/24
2,000 Metropolitan Transportation Authority (New York), Commuter 7/07 at 101 AAA 1,805,660
Facilities Revenue Bonds, Series 1997C, 5.375%, 7/01/27
3,500 Metropolitan Transportation Authority, Commuter Facilities 7/07 at 101 AAA 3,030,545
International Airport), Revenue Bonds, Series 1997E, 5.000%,
7/01/21
Niagara Frontier Transportation Authority (Buffalo Niagara
Airport Revenue Bonds, Series 1998:
1,000 5.000%, 4/01/18 (Alternative Minimum Tax) 4/08 at 101 AAA 872,990
1,000 5.000%, 4/01/28 (Alternative Minimum Tax) 4/08 at 101 AAA 831,210
1,000 Niagara Frontier Transportation Authority (Buffalo Niagara 4/09 at 101 AAA 932,420
International Airport), Airport Revenue Bonds, Series 1999A,
5.625%, 4/01/29 (Alternative Minimum Tax)
3,000 The Port Authority of New York and New Jersey, Special Project 12/07 at 100 AAA 2,888,640
Bonds, Series 6, JFK International Air Terminal LLC Project, 5.750%,
12/01/25 (Alternative Minimum Tax)
2,750 Triborough Bridge and Tunnel Authority, General Purpose Revenue 1/02 at 101 AAA 2,811,820
Bonds, Series X, 6.500%, 1/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 22.5%
3,385 Buffalo Municipal Water Finance Authority, Water System Revenue Bonds, 7/03 at 102 AAA 3,540,135
Series 1992, 5.750%, 7/01/19 (Pre-refunded to 7/01/03)
1,000 Erie County Water Authority (New York), Water Works System Revenue Bonds, 12/09 at 100 AAA 1,101,600
Series 1990B, 6.750%, 12/01/14
10,340 Metropolitan Transportation Authority, Transit Facilities Revenue Bonds, 7/02 at 102 AAA 10,938,272
Series J, 6.500%, 7/01/18 (Pre-refunded to 7/01/02)
28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
Public Improvement Serial Bonds of 1992, County of Monroe, New York,
General Obligation Bonds:
$ 375 6.500%, 6/01/15 (Pre-refunded to 6/01/01) 6/01 at 102 AAA $ 391,875
375 6.500%, 6/01/16 (Pre-refunded to 6/01/01) 6/01 at 102 AAA 391,875
350 6.500%, 6/01/17 (Pre-refunded to 6/01/01) 6/01 at 102 AAA 365,750
4,840 Nassau County Industrial Development Agency, Civic Facility Revenue 8/01 at 102 AAA 5,083,984
Bonds (Hofstra University Project - Series 1991), 6.750%, 8/01/11
(Pre-founded to 8/01/01)
The City of New York, General Obligation Bonds, Fiscal 1992 Series C
Fixed Rate Bonds, Subseries C-1:
3,940 6.250%, 8/01/10 (Pre-refunded to 8/01/02) 8/02 at 101 1/2 AAA 4,132,469
55 6.625%, 8/01/12 (Pre-refunded to 8/01/02) 8/02 at 101 1/2 AAA 58,154
2,000 New York City Municipal Water Finance Authority, Water and Sewer 6/01 at 101 AAA 2,077,880
Revenue Bonds, Fiscal 1992 Series A, 6.750%, 6/15/16
(Pre-refunded to 6/15/01)
2,200 The Trust for Cultural Resources of the City of New York, Revenue 4/01 at 102 AAA 2,304,390
Refunding Bonds, Series 1991A (The American Museum of Natural
History), 6.900%, 4/01/21 (Pre-refunded to 4/01/01)
1,000 Dormitory Authority of the State of New York, Manhattanville College 7/00 at 102 AAA 1,031,220
Insured Revenue Bonds, Series 1990, 7.500%, 7/01/22
(Pre-refunded to 7/01/00)
6,295 Dormitory Authority of the State of New York, City University System 7/00 at 102 AAA 6,491,530
Consolidated Second General Resolution Revenue Bonds, Series 1990F,
7.500%, 7/01/20 (Pre-refunded to 7/01/00)
2,500 Dormitory Authority of the State of New York, Cooper Union Insured 7/01 at 102 AAA 2,636,500
Revenue Bonds, Series 1990, 7.200%, 7/01/20 (Pre-refunded to 7/01/01)
1,000 Dormitory Authority of the State of New York, Fordham University 7/00 at 102 AAA 1,030,270
Insured Revenue Bonds, Series 1990, 7.200%, 7/01/15
(Pre-refunded to 7/01/00)
2,630 New York State Medical Care Facilities Finance Agency, Mental Health 2/02 at 102 AAA 2,753,216
Services Facilities Improvement Revenue Bonds, 1992 Series B, 6.250%,
8/15/18 (Pre-refunded to 2/15/02)
7,000 New York State Medical Care Facilities Finance Agency, New York 2/05 at 102 AAA 7,645,680
Hospital FHA-Insured Mortgage Revenue Bonds, 1994 Series A, 6.800%,
8/15/24 (Pre-refunded to 2/15/05)
6,000 New York State Medical Care Facilities Finance Agency, Mental Health 2/02 at 102 AAA 6,291,540
Services Facilities Improvement Revenue Bonds, 1992 Series A, 6.375%,
8/15/17 (Pre-refunded to 2/15/02)
2,000 Power Authority of the State of New York, General Purpose Bonds, 1/02 at 102 AAA 2,100,540
Series Z, 6.500%, 1/01/19 (Pre-refunded to 1/01/02)
7,300 New York State Thruway Authority, General Revenue Bonds, Series A, 1/02 at 102 AAA 7,566,377
5.750%, 1/01/19 (Pre-refunded to 1/01/02)
Town of North Hempstead, Nassau County, New York, Public Improvement
(Serial) Bonds of 1991, Series B:
425 6.800%, 6/01/10 (Pre-refunded to 6/01/00) 6/00 at 102 AAA 436,365
425 6.800%, 6/01/11 (Pre-refunded to 6/01/00) 6/00 at 102 AAA 436,365
Nyack Union Free School District, Rockland County, New York, School
District Serial Bonds of 1992:
625 6.500%, 4/01/12 (Pre-refunded to 4/01/02) 4/02 at 102 AAA 658,894
625 6.500%, 4/01/13 (Pre-refunded to 4/01/02) 4/02 at 102 AAA 658,894
625 6.500%, 4/01/14 (Pre-refunded to 4/01/02) 4/02 at 102 AAA 658,894
2,000 Triborough Bridge and Tunnel Authority, General Purpose Revenue 1/01 at 102 AAA 2,085,440
Bonds, Series T, 7.000%, 1/01/20 (Pre-refunded to 1/01/01)
1,175 Triborough Bridge and Tunnel Authority, General Purpose Revenue 1/01 at 101 1/2 AAA 1,219,521
Bonds, Series S, 7.000%, 1/01/21 (Pre-refunded to 1/01/01)
1,750 City of Yonkers, New York, General Obligation School Bonds, Series 12/00 at 102 AAA 1,826,633
1990-C, 7.375%, 12/01/09 (Pre-refunded to 12/01/00)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 2.5%
Long Island Power Authority, Electric System General Revenue Bonds,
Series 1998A:
6,520 0.000%, 12/01/19 No Opt. Call AAA 1,987,426
4,000 5.125%, 12/01/22 6/08 at 101 AAA 3,520,920
1,000 5.750%, 12/01/24 6/08 at 101 AAA 968,500
</TABLE>
29
<PAGE>
Portfolio of Investments
Nuveen New York Insured Municipal Bond Fund (continued)
February 29, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities (continued)
$ 2,000 New York State Energy Research and Development Authority, Adjustable 7/05 at 102 AAA $ 2,006,240
Rate Pollution Control Revenue Bonds (New York State Electric and Gas
Corporation Project), 1987 Series A, 6.150%, 7/01/26 (Alternative
Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 7.7%
2,930 Buffalo Municipal Water Finance Authority, Water System Revenue 7/08 at 101 AAA 2,483,760
Bonds, Series 1998-A, 5.000%, 7/01/28
7,000 New York City Municipal Water Finance Authority, Water and Sewer 6/06 at 101 AAA 6,755,770
System Revenue Bonds, Fiscal 1996 Series B, 5.750%, 6/15/26
1,250 New York City Municipal Water Finance Authority, Water and Sewer 6/01 at 101 AAA 1,290,000
System Revenue Bonds, Fiscal 1992 Series A, 6.750%, 6/15/16
2,500 New York City Municipal Water Finance Authority, Water and Sewer 6/02 at 101 1/2 AAA 2,462,250
System Revenue Bonds, Fiscal 1993 Series A, 5.750%, 6/15/18
4,650 New York City Municipal Water Finance Authority, Water and Sewer 6/02 at 100 AAA 4,371,000
System Revenue Bonds, Fiscal 1993 Series A, 5.500%, 6/15/20
3,000 New York City Municipal Water Finance Authority, Water and Sewer 6/07 at 101 AAA 2,640,660
System Revenue Bonds, Fiscal 1998 Series B, 5.250%, 6/15/29
1,450 New York State Environmental Facilities Corporation, State Water 3/00 at 102 AAA 1,482,330
Pollution Control Revolving Fund Revenue Bonds, Series 1990 C
(Pooled Loan Issue), 7.200%, 3/15/11
1,000 Suffolk County Industrial Development Agency (Suffolk County, 2/04 at 101 AAA 941,240
New York), Suffolk County Southwest Sewer System Revenue Bonds,
Series 1994, 4.750%, 2/01/09
3,700 Suffolk County Water Authority, New York, Water System Revenue 6/03 at 102 AAA 3,278,050
Bonds, Series 1994, 5.000%, 6/01/17
- ------------------------------------------------------------------------------------------------------------------------------------
$ 344,425 Total Investments - (cost $331,724,215) - 99.6% 334,159,693
============------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.4% 1,193,971
---------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $335,353,664
=====================================================================================================================
</TABLE>
All of the bonds in the portfolio are either covered by Original Issue
Insurance, Secondary Market Insurance or Portfolio Insurance, or are backed
by an escrow or trust containing sufficient U.S. Government or U.S.
Government agency securities, any of which ensure the timely payment of
principal and interest.
* Optional Call Provisions (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.
See accompanying notes to financial statements.
30
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
February 29, 2000
<S> <C> <C> <C>
New York
New Jersey New York Insured
- ---------------------------------------------------------------------------------------------------------------
Assets
Investments in municipal securities, at market value $109,337,045 $246,606,821 $334,159,693
Cash -- 4,634,676 --
Receivables:
Interest 1,503,109 3,342,770 3,771,406
Investments sold -- 556,127 289,567
Shares sold 52,789 688,997 52,940
Other assets 811 2,425 5,888
- ---------------------------------------------------------------------------------------------------------------
Total assets 110,893,754 255,831,816 338,279,494
- ---------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft 386,564 -- 668,690
Payables:
Investments purchased -- 4,103,652 --
Shares redeemed 63,187 547,857 992,857
Accrued expenses:
Management fees 74,038 18,110 143,463
12b-1 distribution and service fees 23,034 33,410 23,433
Other 107,002 52,264 103,210
Dividends payable 259,869 738,308 994,177
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 913,694 5,493,601 2,925,830
- ---------------------------------------------------------------------------------------------------------------
Net assets $109,980,060 $250,338,215 $335,353,664
===============================================================================================================
Class A Shares
Net assets $ 46,234,809 $ 81,857,280 $ 54,363,828
Shares outstanding 4,753,197 8,050,985 5,464,981
Net asset value and redemption price per share $ 9.73 $ 10.17 $ 9.95
Offering price per share (net asset value per share plus
maximum sales charge of 4.20% of offering price) $ 10.16 $ 10.62 $ 10.39
===============================================================================================================
Class B Shares
Net assets $ 13,680,572 $ 19,803,454 $ 15,893,355
Shares outstanding 1,407,427 1,945,690 1,595,990
Net asset value, offering and redemption price per share $ 9.72 $ 10.18 $ 9.96
===============================================================================================================
Class C Shares
Net assets $ 10,007,089 $ 10,374,124 $ 4,627,401
Shares outstanding 1,031,800 1,017,117 465,480
Net asset value, offering and redemption price per share $ 9.70 $ 10.20 $ 9.94
===============================================================================================================
Class R Shares
Net assets $ 40,057,590 $138,303,357 $260,469,080
Shares outstanding 4,118,798 13,562,878 26,165,983
Net asset value, offering and redemption price per share $ 9.73 $ 10.20 $ 9.95
===============================================================================================================
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
Statement of Operations
Year Ended February 29, 2000
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income $ 6,838,538 $ 15,515,226 $ 21,131,930
- ------------------------------------------------------------------------------------------------------------------
Expenses
Management fees 655,578 1,382,433 1,922,386
12b-1 service fees - Class A 103,268 161,150 110,560
12b-1 distribution and service fees - Class B 129,126 153,449 154,721
12b-1 distribution and service fees - Class C 79,627 69,761 32,715
Shareholders' servicing agent fees and expenses 137,520 220,957 309,279
Custodian's fees and expenses 68,386 97,369 92,561
Trustees' fees and expenses 3,562 4,596 8,445
Professional fees 1,630 1,650 12,893
Shareholders' reports - printing and mailing expenses 66,454 42,878 133,638
Federal and state registration fees 2,560 348 7,303
Portfolio insurance expense -- -- 6,588
Other expenses 6,313 11,523 14,298
- ------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 1,254,024 2,146,114 2,805,387
Custodian fee credit (18,630) (21,145) (8,726)
Expense reimbursement (71,000) (711,646) --
- ------------------------------------------------------------------------------------------------------------------
Net expenses 1,164,394 1,413,323 2,796,661
- ------------------------------------------------------------------------------------------------------------------
Net investment income 5,674,144 14,101,903 18,335,269
- ------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (442,612) (777,587) (516,349)
Net change in unrealized appreciation or depreciation of investments (9,982,626) (19,650,813) (26,997,720)
- ------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (10,425,238) (20,428,400) (27,514,069)
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ (4,751,094) $ (6,326,497) $ (9,178,800)
==================================================================================================================
</TABLE>
See accompanying notes to financial statements.
32
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
New Jersey
-------------------------
Year Ended Year Ended
2/29/00 2/28/99
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Operations
Net investment income $ 5,674,144 $ 5,254,037
Net realized gain (loss) from investment transactions (442,612) 115,134
Net change in unrealized appreciation or depreciation of investments (9,982,626) (239,717)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (4,751,094) 5,129,454
- -------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
From undistributed net investment income:
Class A (2,490,807) (2,238,254)
Class B (549,377) (289,199)
Class C (455,400) (361,714)
Class R (2,180,089) (2,367,199)
From accumulated net realized gains from investment transactions:
Class A -- --
Class B -- --
Class C -- --
Class R -- --
- -------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (5,675,673) (5,256,366)
- -------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from shares issued in the reorganization of New Jersey Intermediate -- 10,490,003
Net proceeds from sale of shares 23,313,205 32,345,835
Net proceeds from shares issued to shareholders due to reinvestment of distributions 3,366,469 3,178,514
- -------------------------------------------------------------------------------------------------------------------
26,679,674 46,014,352
Cost of shares redeemed (27,406,311) (14,067,767)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions (726,637) 31,946,585
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (11,153,404) 31,819,673
Net assets at the beginning of year 121,133,464 89,313,791
- -------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $109,980,060 $121,133,464
===================================================================================================================
Balance of undistributed net investment income at the end of year $ 656 $ 2,185
===================================================================================================================
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
Statement of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
New York New York Insured
------------------------- -------------------------
Year Ended Year Ended Year Ended Year Ended
2/29/00 2/28/99 2/29/00 2/28/99
- ---------------------------------------------------------------------------------------------------------------------------------
Operations
<S> <C> <C> <C> <C>
Net investment income $ 14,101,903 $ 12,946,294 $ 18,335,269 $ 18,001,673
Net realized gain (loss) from investment transactions (777,587) 1,767,488 (516,349) 2,051,978
Net change in unrealized appreciation or depreciation of investments (19,650,813) (482,766) (26,997,720) (1,737,215)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (6,326,497) 14,231,016 (9,178,800) 18,316,436
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
From undistributed net investment income:
Class A (4,361,271) (3,991,380) (2,744,482) (2,291,771)
Class B (757,621) (318,702) (682,606) (375,855)
Class C (452,805) (328,331) (194,703) (124,512)
Class R (8,347,109) (8,212,001) (14,463,882) (15,260,254)
From accumulated net realized gains from investment transactions:
Class A (171,256) -- (21,641) (130,963)
Class B (38,412) -- (6,843) (31,353)
Class C (20,085) -- (1,774) (8,852)
Class R (305,575) -- (105,965) (822,078)
- ---------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (14,454,134) (12,850,414) (18,221,896) (19,045,638)
- ---------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from sale of shares 51,408,121 32,108,889 31,304,562 30,426,780
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 8,466,145 7,870,186 12,335,565 13,375,740
- ---------------------------------------------------------------------------------------------------------------------------------
59,874,266 39,979,075 43,640,127 43,802,520
Cost of shares redeemed (47,492,353) (31,347,095) (52,615,589) (38,003,474)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions 12,381,913 8,631,980 (8,975,462) 5,799,046
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (8,398,718) 10,012,582 (36,376,158) 5,069,844
Net assets at the beginning of year 258,736,933 248,724,351 371,729,822 366,659,978
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $250,338,215 $258,736,933 $335,353,664 $371,729,822
=================================================================================================================================
Balance of undistributed net investment income at the end of year $ 284,255 $ 101,158 $ 313,071 $ 63,475
=================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
34
<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
accounting principles generally accepted in the United States.
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 29, 2000, 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 monthly as a dividend and payment
is made or reinvestment is credited to shareholders accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount from investment transactions. The Funds
currently consider significant net realized capital gains and/or market discount
as amounts in excess of $.001 per share. Furthermore, each Fund intends to
satisfy conditions which will enable interest from municipal securities, which
is exempt from regular federal and designated state income taxes, to retain such
tax-exempt status when distributed to the shareholders of the Funds. All monthly
tax-exempt income dividends paid during the fiscal year ended February 29, 2000,
have been designated Exempt Interest Dividends. Net realized capital gains and
market discount distributions are subject to federal taxation.
35
<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 contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances, or by specified classes
of investors.
Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments including
futures, forward, swap, and option contracts, and other financial instruments
with similar characteristics. Although the Funds are authorized to invest in
such financial instruments, and may do so in the future, they did not make any
such investments during the fiscal year ended February 29, 2000.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Custodian Fee Credit
Each Fund has an agreement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results may differ from those estimates.
36
<PAGE>
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
New Jersey
----------------------------------------------------
Year Ended 2/29/00 Year Ended 2/28/99
------------------------ -------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued in the reorganization of
New Jersey Intermediate:
Class A -- $ -- 853,955 $ 9,095,179
Class C -- -- 112,286 1,193,933
Class R -- -- 18,846 200,891
Shares sold:
Class A 1,031,880 10,382,720 1,377,846 14,619,825
Class B 613,401 6,270,631 839,961 8,903,892
Class C 360,453 3,684,927 416,475 4,399,120
Class R 293,764 2,974,927 419,192 4,422,998
Shares issued to shareholders due to
reinvestment of distributions:
Class A 132,266 1,345,915 113,228 1,200,274
Class B 24,234 245,622 11,053 117,220
Class C 22,706 229,919 18,796 198,846
Class R 151,879 1,545,013 156,770 1,662,174
- ------------------------------------------------------------------------------------------------------
2,630,583 26,679,674 4,338,408 46,014,352
- ------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,450,515) (14,400,959) (678,226) (7,190,108)
Class B (303,073) (3,009,282) (59,129) (626,831)
Class C (324,197) (3,273,108) (115,892) (1,227,825)
Class R (668,086) (6,722,962) (473,934) (5,023,003)
- ------------------------------------------------------------------------------------------------------
(2,745,871) (27,406,311) (1,327,181) (14,067,767)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) (115,288) $ (726,637) 3,011,227 $ 31,946,585
======================================================================================================
</TABLE>
37
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
New York New York Insured
----------------------------------------------------- -----------------------------------------------------
Year Ended 2/29/00 Year Ended 2/28/99 Year Ended 2/29/00 Year Ended 2/28/99
------------------------- ------------------------- ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A 2,790,883 $ 29,104,680 1,144,690 $ 12,559,731 1,496,280 $ 15,529,903 1,093,274 $ 11,747,659
Class B 1,036,762 10,937,779 754,802 8,315,942 715,180 7,454,738 743,984 8,011,299
Class C 528,399 5,518,626 353,162 3,894,020 147,209 1,505,110 205,983 2,218,265
Class R 554,613 5,847,036 666,093 7,339,196 666,121 6,814,811 787,360 8,449,557
Shares issued to
shareholders due to
reinvestment of
distributions:
Class A 179,500 1,892,549 161,024 1,770,662 167,792 1,725,557 148,515 1,598,123
Class B 36,081 378,936 14,049 154,837 36,951 380,102 20,611 222,064
Class C 15,250 160,948 12,193 134,459 12,055 124,036 8,421 90,556
Class R 570,094 6,033,712 526,668 5,810,228 980,490 10,105,870 1,065,213 11,464,997
- ------------------------------------------------------------------------------------------------------------------------------------
5,711,582 59,874,266 3,632,681 39,979,075 4,222,078 43,640,127 4,073,361 43,802,520
- ------------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,221,619) (23,154,539) (1,117,036) (12,242,649) (1,085,766) (11,116,343) (513,163) (5,519,037)
Class B (224,929) (2,347,237) (63,760) (700,876) (401,249) (4,062,416) (75,529) (812,400)
Class C (327,306) (3,418,515) (130,900) (1,437,273) (76,265) (776,795) (46,912) (504,054)
Class R (1,770,315) (18,572,062) (1,539,770) (16,966,297) (3,589,069) (36,660,035) (2,903,948) (31,167,983)
- ------------------------------------------------------------------------------------------------------------------------------------
(4,544,169) (47,492,353) (2,851,466) (31,347,095) (5,152,349) (52,615,589) (3,539,552) (38,003,474)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) 1,167,413 $ 12,381,913 781,215 $ 8,631,980 (930,271) $ (8,975,462) 533,809 $ 5,799,046
====================================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid April 3, 2000, to shareholders of record on March 9,
2000, as follows:
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend per share:
Class A $.0395 $.0500 $.0425
Class B .0330 .0435 .0360
Class C .0350 .0455 .0375
Class R .0410 .0520 .0440
================================================================================
</TABLE>
38
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the fiscal year ended
February 29, 2000, were as follows:
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Long-term municipal securities $ 31,886,015 $ 57,501,478 $ 56,529,815
Short-term municipal securities 4,700,000 11,905,000 11,100,000
Sales and maturities:
Long-term municipal securities 30,414,561 47,915,422 61,534,383
Short-term municipal securities 4,700,000 13,805,000 14,900,000
================================================================================
</TABLE>
At February 29, 2000, the identified cost of investments owned for federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
$114,099,381 $245,274,953 $331,836,839
================================================================================
</TABLE>
At February 29, 2000, the Funds had unused capital loss carryforwards available
for federal income tax purposes to be applied against future capital gains, if
any. If not applied, the carryforwards will expire as follows:
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Expiration year:
2002 $ 256,350 $ -- $ --
2003 424,626 -- --
2004 116,050 -- --
2005 -- -- --
2006 238,550 -- --
2007 -- -- --
2008 132,876 778,471 405,215
- --------------------------------------------------------------------------------
Total $1,168,452 $778,471 $405,215
================================================================================
</TABLE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at February 29, 2000, were as follows:
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $ 1,484,801 $ 7,068,842 $ 9,699,806
depreciation (6,247,137) (5,736,974) (7,376,952)
- --------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) $(4,762,336) $ 1,331,868 $ 2,322,854
================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of each Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
- --------------------------------------------------------------------------------
<S> <C>
For the first $125 million .5500 of 1%
For the next $125 million .5375 of 1
For the next $250 million .5250 of 1
For the next $500 million .5125 of 1
For the next $1 billion .5000 of 1
For net assets over $2 billion .4750 of 1
================================================================================
</TABLE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Trust pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Trust from the Adviser.
39
<PAGE>
Notes to Financial Statements (continued)
The adviser has agreed to waive part of its management fees or reimburse certain
expenses of New York and New York Insured in order to limit total expenses to
..75 of 1% of the average daily net assets of New York and .975 of 1% of the
average daily net assets of New York Insured, excluding any 12b-1 fees
applicable to Class A, B and C Shares. The adviser may also voluntarily agree to
reimburse additional expenses in any of the Funds from time to time, which may
be terminated at any time at its discretion.
During the fiscal year ended February 29, 2000, the Distributor collected sales
charges on purchases of Class A Shares, the majority of which were paid out as
concessions to authorized dealers as follows:
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales charges collected $88,103 $94,308 $98,883
Paid to authorized dealers 86,193 83,660 98,700
================================================================================
</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 29, 2000, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Commission advances $306,543 $491,757 $339,107
================================================================================
</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 collected on Class B Shares, and all 12b-1 service and
distribution fees collected on Class C Shares during the first year following a
purchase are retained by the Distributor. During the fiscal year ended February
29, 2000, the Distributor retained such 12b-1 fees as follows:
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
12b-1 fees retained $147,899 $161,873 $148,865
================================================================================
</TABLE>
The remaining 12b-1 fees charged to the Funds were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during the
fiscal year ended February 29, 2000, as follows:
<TABLE>
<CAPTION>
New York
New Jersey New York Insured
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CDSC retained $73,240 $65,745 $83,013
================================================================================
</TABLE>
7. Composition of Net Assets
At February 29, 2000, 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 $115,910,192 $249,500,563 $333,122,954
Balance of undistributed
net investment income 656 284,255 313,071
Accumulated net realized gain
(loss) from investment transactions (1,483,228) (778,471) (517,839)
Net unrealized appreciation
(depreciation) of investments (4,447,560) 1,331,868 2,435,478
- --------------------------------------------------------------------------------
Net assets $109,980,060 $250,338,215 $335,353,664
================================================================================
</TABLE>
40
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------- ---------------------------
NEW JERSEY 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 (Loss) Total Income Gains Total Value Return (a)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)**
2000 $10.60 $.49 $(.87) $(.38) $(.49) $ -- $(.49) $ 9.73 (3.67)%
1999 10.61 .53 (.01) .52 (.53) -- (.53) 10.60 5.00
1998 10.26 .55 .36 .91 (.56) -- (.56) 10.61 9.06
1997 (d) 10.22 .05 .04 .09 (.05) -- (.05) 10.26 .85
1997 (e) 10.40 .48 (.15) .33 (.51) -- (.51) 10.22 3.31
1996 (e) 9.73 .51 .69 1.20 (.53) -- (.53) 10.40 12.63
Class B (2/97)
2000 10.60 .41 (.88) (.47) (.41) -- (.41) 9.72 (4.51)
1999 10.61 .45 (.01) .44 (.45) -- (.45) 10.60 4.23
1998 10.26 .48 .35 .83 (.48) -- (.48) 10.61 8.25
1997 (d) 10.22 .05 .03 .08 (.04) -- (.04) 10.26 .78
Class C (9/94)**
2000 10.58 .43 (.88) (.45) (.43) -- (.43) 9.70 (4.29)
1999 10.59 .47 (.01) .46 (.47) -- (.47) 10.58 4.48
1998 10.25 .50 .34 .84 (.50) -- (.50) 10.59 8.40
1997 (d) 10.20 .04 .05 .09 (.04) -- (.04) 10.25 .90
1997 (e) 10.38 .41 (.16) .25 (.43) -- (.43) 10.20 2.53
1996 (e) 9.71 .44 .68 1.12 (.45) -- (.45) 10.38 11.80
Class R (12/91)**
2000 10.60 .51 (.87) (.36) (.51) -- (.51) 9.73 (3.47)
1999 10.62 .55 (.02) .53 (.55) -- (.55) 10.60 5.13
1998 10.27 .58 .35 .93 (.58) -- (.58) 10.62 9.29
1997 (d) 10.23 .05 .04 .09 (.05) -- (.05) 10.27 .86
1997 (e) 10.41 .49 (.14) .35 (.53) -- (.53) 10.23 3.55
1996 (e) 9.74 .55 .68 1.23 (.56) -- (.56) 10.41 12.88
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
------------------ ------------------ ------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
February 28/29, (000) Assets Assets Assets Assets Assets Assets Rate
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)**
2000 $46,235 .99% 4.74% .93% 4.80% .91% 4.82% 26%
1999 53,442 1.02 4.62 .66 4.98 .66 4.98 10
1998 35,782 1.01 4.92 .60 5.33 .60 5.33 16
1997 (d) 27,879 1.01* 5.43* .55* 5.89* .55* 5.89* --
1997 (e) 17,072 1.13 4.85 1.00 4.98 1.00 4.98 10
1996 (e) 10,661 1.25 4.85 1.00 5.10 1.00 5.10 39
Class B (2/97)
2000 13,681 1.74 4.01 1.69 4.06 1.67 4.08 26
1999 11,368 1.76 3.88 1.39 4.25 1.39 4.25 10
1998 2,981 1.77 4.16 1.36 4.57 1.36 4.57 16
1997 (d) 74 1.77* 5.71* 1.27* 6.21* 1.27* 6.21* --
Class C (9/94)**
2000 10,007 1.54 4.20 1.48 4.26 1.47 4.27 26
1999 10,290 1.57 4.07 1.21 4.43 1.21 4.43 10
1998 5,733 1.56 4.37 1.16 4.77 1.16 4.77 16
1997 (d) 2,712 1.56* 4.89* 1.10* 5.35* 1.10* 5.35* --
1997 (e) 2,611 1.88 4.09 1.75 4.22 1.75 4.22 10
1996 (e) 1,065 1.96 4.16 1.75 4.37 1.75 4.37 39
Class R (12/91)**
2000 40,058 .79 4.94 .73 5.00 .71 5.02 26
1999 46,033 .82 4.82 .47 5.17 .47 5.17 10
1998 44,817 .81 5.12 .40 5.53 .40 5.53 16
1997 (d) 42,651 .81* 5.63* .35* 6.09* .35* 6.09* --
1997 (e) 42,905 .89 5.10 .75 5.24 .75 5.24 10
1996 (e) 43,304 .98 5.20 .75 5.43 .75 5.43 39
=====================================================================================================
</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) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) For the one month ended February 28.
(e) For the fiscal year ended January 31.
41
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------- ---------------------------
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 (Loss) Total Income Gains Total Value Return (a)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)**
2000 $11.03 $.58 $(.85) $(.27) $ (57) $(.02) $(.59) $10.17 (2.44)%
1999 10.97 .55 .06 .61 (.55) -- (.55) 11.03 5.69
1998 10.53 .57 .44 1.01 (.57) -- (.57) 10.97 9.84
1997 10.61 .59 (.07) .52 (.56) (.04) (.60) 10.53 5.07
1996 10.12 .56 .48 1.04 (.55) -- (.55) 10.61 10.52
Class B (2/97)
2000 11.04 .51 (.86) (.35) (.49) (.02) (.51) 10.18 (3.18)
1999 10.98 .47 .06 .53 (.47) -- (.47) 11.04 4.88
1998 10.53 .49 .45 .94 (.49) -- (.49) 10.98 9.10
1997 (d) 10.48 .05 .04 .09 (.04) -- (.04) 10.53 .87
Class C (9/94)**
2000 11.06 .52 (.85) (.33) (.51) (.02) (.53) 10.20 (2.97)
1999 11.01 .49 .05 .54 (.49) -- (.49) 11.06 5.00
1998 10.56 .51 .45 .96 (.51) -- (.51) 11.01 9.31
1997 10.64 .55 (.11) .44 (.48) (.04) (.52) 10.56 4.31
1996 10.11 .48 .53 1.01 (.48) -- (.48) 10.64 10.13
Class R (12/86)**
2000 11.06 .60 (.84) (.24) (.60) (.02) (.62) 10.20 (2.21)
1999 11.00 .58 .05 .63 (.57) -- (.57) 11.06 5.88
1998 10.55 .59 .45 1.04 (.59) -- (.59) 11.00 10.11
1997 10.64 .59 (.05) .54 (.59) (.04) (.63) 10.55 5.26
1996 10.15 .58 .49 1.07 (.58) -- (.58) 10.64 10.80
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
------------------ ------------------ ------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
February 28/29 (000) Assets Assets Assets Assets Assets Assets Rate
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)**
2000 $ 81,857 .89% 5.21% .61% 5.49% .60% 5.50% 19%
1999 80,549 .94 4.88 .79 5.03 .79 5.03 28
1998 78,038 .90 5.14 .77 5.27 .77 5.27 30
1997 71,676 .95 5.39 .89 5.45 .89 5.45 37
1996 15,732 1.02 5.28 .99 5.31 .99 5.31 47
Class B (2/97)
2000 19,803 1.65 4.50 1.33 4.81 1.32 4.82 19
1999 12,121 1.68 4.16 1.57 4.27 1.57 4.27 28
1998 4,311 1.67 4.32 1.50 4.49 1.50 4.49 30
1997 (d) 124 1.65* 5.86* 1.44* 6.07* 1.44* 6.07* 37
Class C (9/94)**
2000 10,374 1.44 4.67 1.16 4.95 1.15 4.96 19
1999 8,858 1.49 4.33 1.35 4.47 1.35 4.47 28
1998 6,233 1.46 4.57 1.32 4.71 1.32 4.71 30
1997 3,965 1.64 4.73 1.57 4.80 1.57 4.80 37
1996 646 1.99 4.29 1.73 4.55 1.73 4.55 47
Class R (12/86)**
2000 138,303 .69 5.40 .42 5.67 .41 5.68 19
1999 157,209 .74 5.08 .59 5.23 .59 5.23 28
1998 160,142 .70 5.34 .57 5.47 .57 5.47 30
1997 152,598 .71 5.55 .69 5.57 .69 5.57 37
1996 154,776 .76 5.55 .74 5.57 .74 5.57 47
=====================================================================================================
</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) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
42
<PAGE>
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Investment Operations Less Distributions
----------------------------- ---------------------------
NEW YORK 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 (Loss) Total Income Gains Total Value Return (a)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 $10.73 $.52 $(.79) $(.27) $(.51) $ -- $(.51) $ 9.95 (2.50)%
1999 10.76 .51 .01 .52 (.52) (.03) (.55) 10.73 4.91
1998 10.50 .53 .26 .79 (.53) -- (.53) 10.76 7.76
1997 10.61 .55 (.14) .41 (.52) -- (.52) 10.50 4.02
1996 10.15 .52 .49 1.01 (.52) (.03)** (.55) 10.61 10.19
Class B (2/97)
2000 10.74 .44 (.79) (.35) (.43) -- (.43) 9.96 (3.26)
1999 10.76 .44 -- .44 (.43) (.03) (.46) 10.74 4.19
1998 10.50 .45 .26 .71 (.45) -- (.45) 10.76 6.96
1997 (d) 10.53 .03 (.02) .01 (.04) -- (.04) 10.50 .07
Class C (9/94)
2000 10.73 .46 (.80) (.34) (.45) -- (.45) 9.94 (3.17)
1999 10.74 .46 .02 .48 (.46) (.03) (.49) 10.73 4.53
1998 10.48 .47 .26 .73 (.47) -- (.47) 10.74 7.16
1997 10.61 .47 (.16) .31 (.44) -- (.44) 10.48 3.06
1996 10.12 .44 .53 .97 (.45) (.03)** (.48) 10.61 9.71
Class R (12/86)
2000 10.74 .54 (.80) (.26) (.53) -- (.53) 9.95 (2.43)
1999 10.76 .53 .02 .55 (.54) (.03) (.57) 10.74 5.18
1998 10.49 .55 .27 .82 (.55) -- (.55) 10.76 8.04
1997 10.61 .55 (.13) .42 (.54) -- (.54) 10.49 4.15
1996 10.15 .55 .49 1.04 (.55) (.03)** (.58) 10.61 10.51
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
------------------ ------------------ ------------------
Ratio Ratio Ratio
of Net of Net of Net
NEW YORK INSURED Invest- Invest- Invest-
Ratio ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Year Ended Assets Net Net Net Net Net Net Turnover
February 28/29, (000) Assets Assets Assets Assets Assets Assets Rate
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/94)
2000 $ 54,364 .90% 5.02% .90% 5.02% .90% 5.02% 16%
1999 52,448 .92 4.78 .92 4.78 .92 4.78 16
1998 44,721 .88 4.98 .88 4.98 .88 4.98 17
1997 35,957 .92 5.04 .92 5.04 .92 5.04 29
1996 24,747 .93 4.97 .93 4.97 .93 4.97 17
Class B (2/97)
2000 15,893 1.65 4.28 1.65 4.28 1.65 4.28 16
1999 13,374 1.67 4.04 1.67 4.04 1.67 4.04 16
1998 5,982 1.65 4.24 1.65 4.24 1.65 4.24 17
1997 (d) 1,279 1.64* 5.17* 1.64* 5.17* 1.64* 5.17* 29
Class C (9/94)
2000 4,627 1.45 4.48 1.45 4.48 1.45 4.48 16
1999 4,103 1.47 4.25 1.47 4.25 1.47 4.25 16
1998 2,310 1.43 4.43 1.43 4.43 1.43 4.43 17
1997 2,015 1.67 4.28 1.67 4.28 1.67 4.28 29
1996 1,369 1.69 4.21 1.69 4.21 1.69 4.21 17
Class R (12/86)
2000 260,469 .70 5.21 .70 5.21 .70 5.21 16
1999 301,805 .72 4.98 .72 4.98 .72 4.98 16
1998 313,647 .68 5.18 .68 5.18 .68 5.18 17
1997 319,208 .68 5.28 .68 5.28 .68 5.28 29
1996 343,348 .67 5.26 .67 5.26 .67 5.26 17
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** The amounts shown include distributions in excess of capital gains of $.0024
per share.
(a) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
43
<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 29,
2000, 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 auditing standards generally accepted
in the United States. 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 29, 2000, 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 29, 2000, 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
accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 14, 2000
44
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
Chase Global Funds Services
73 Tremont Street
Boston, MA 02108
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
45
<PAGE>
SERVING INVESTORS
FOR GENERATIONS
[Photo of John Nuveen, Sr. appears here]
John Nuveen, Sr.
A 100-Year Tradition of Quality Investments
Since 1898, John Nuveen & Co. Incorporated has been synonymous with investments
that withstand the test of time. In fact, more than 1.3 million investors have
trusted Nuveen to help them build and sustain the wealth of a lifetime.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. We can help
you build a better, well-diversified portfolio.
Call Your Financial Adviser Today
To find out how the Nuveen Innovation Fund might round out your investment
portfolio, contact your financial adviser today. Or call Nuveen at (800)
257.8787 for more information. Ask your adviser or call for a prospectus which
details risks, fees and expenses. Please read the prospectus carefully before
you invest.
NUVEEN
Investments
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
