<PAGE>
May 31, 1999 Annual Report
NUVEEN
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Municipal Bond Funds
Dependable, tax-free income to help
you keep more
of what you earn.
[PHOTO APPEARS HERE]
Georgia
Louisiana
North Carolina
Tennessee
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
Contents
1 Dear Shareholder
3 Nuveen Flagship Georgia Municipal Bond Fund
6 Nuveen Flagship Louisiana Municipal
Bond Fund
9 Nuveen Flagship North Carolina Municipal Bond Fund
12 Nuveen Flagship Tennessee Municipal Bond Fund
15 Portfolio of Investments
33 Statement of Net Assets
35 Statement of Operations
36 Statement of Changes in Net Assets
38 Notes to Financial Statements
43 Financial Highlights
47 Report of Independent Public
Accountants
48 Building a Better Portfolio
49 Fund Information
<PAGE>
DEAR
Shareholder
[Photo of Timothy R. Schwertfeger Appears Here]
I invite you to take a few minutes to read the annual report we've prepared for
you on the performance of your Nuveen state municipal bond fund for the fiscal
year ended May 31, 1999. You, along with your financial adviser, have made a
sound choice in choosing Nuveen to manage this portion of your assets. Since
1898, more than 1.3 million investors have trusted us to help them build and
sustain the wealth of a lifetime.
I'm pleased to report your fund continued to meet its primary objective of
providing you with dependable tax-free income and attractive after-tax total
returns. I will briefly describe the national economic environment during the
past 12 months. My discussion is followed by comments about the strategies
employed in managing your fund from the portfolio manager of each fund
represented in this report.
The Year In Review.
The Federal Reserve eased short-term rates for the first time in almost three
years by cutting the federal funds rate in the fall of 1998 three times,
bringing it to 4.75%. A month after the close of your fund's fiscal year, the
Fed raised its target by 25 basis points to 5%. (Be sure to read your fund
manager's comments about managing your fund in a rising interest rate
environment.)
The fed funds rate is the rate that banks charge each other for overnight
loans and serves as the basis many financial institutions use for setting
interest charges on a variety of products, from mortgage and car loans to credit
cards.
The Fed's rate cuts were made to avert a potential domestic credit crunch and
restore some stability to global markets. The moves seemed to have worked, as
the U.S. economy since has continued its pattern of non-inflationary growth,
accompanied by low interest rates and unemployment levels that remain among the
lowest in three decades, prompting the late June reversal by the Fed.
All indications point to a confident U.S. consumer who is comfortable with the
current state of the economy, especially the performance of the housing, stock
and job markets. This confidence is reflected in the most recent Consumer
Confidence Index report, issued by the Conference Board Inc., which showed a
record-setting eighth consecutive month of gains in June.
On the global front, the turmoil of the past two years appears to be fading
somewhat, as international financial markets have begun to send recovery
signals.
Domestic inflation continues to be benign, with an increase of 2.1% for the 12
months ended May 31, 1999. The general backdrop of inflation indicators
continued to be mild, with the employment cost index, average hourly earnings,
and import and producer price trends all remaining favorable.
Federal Reserve Chairman Alan Greenspan recently stated that a key factor in
achieving today's peaceful coexistence of economic growth and low inflation has
been increased productivity. Improvements in productivity, spurred by
technological advances, have been responsible for
1
<PAGE>
offsetting wage and other inflationary pressures that we would normally expect
to see as part of a growing economy.
Why Municipal Bonds? Our municipal bond funds continued to offer attractive,
stable income in a market that places a high premium on yield. In 1998,
municipal bonds represented a reasonably insulated haven in an otherwise
turbulent market, with lower volatility relative to Treasury bonds and other
fixed-income investments. Even in 1999, with interest rates rising again,
municipals outperformed Treasuries through the end of May.
The high ratio of tax-exempt municipal yields to Treasury yields sheltered
municipal bonds, to some extent, from the price decline that occurred in the
Treasury market during the first part of the year. While the yield on 30-year
Treasury bonds rose from 5.10% at the end of December to 5.83% as of May 31,
1999, the yield on the Bond Buyer Revenue Bond Index, an unmanaged index of
long-term municipal revenue bonds, gained 15 basis points--from 5.26% to 5.41%.
Given the inverse relationship between interest rates and bond prices, we saw
bond prices fall as rates rose over this period.
Though municipal bond prices did decrease, the decline was not as dramatic
as the drop in Treasuries.
This performance differential reflects the fact that Treasuries had become
relatively expensive as the result of safe-haven buying during the international
economic crises in 1998. As the financial turmoil subsided, however, foreign
investors returned to investing in their own countries rather than in U.S.
dollar-denominated securities, and the decline in demand caused U.S. Treasuries
to drop in price.
At the end of May 1999, the ratio between long-term municipal yields and
30-year Treasury yields stood at 93%, compared with the historical average of
86% for the period of 1986-1999. For investors, this meant that quality
long-term municipal bonds offered yields comparable to those of long Treasury
bonds--even before the tax advantages of municipal bonds were taken into
account. During the funds' fiscal year, that ratio hit a high of 104% in
December.
On an after-tax basis in today's market, municipal bonds continue to
present an exceptionally attractive investment option relative to Treasuries.
During 1998, lower interest rates and the strong economy combined to
generate high levels of new municipal issuance and a significant increase in the
refinancing of existing bonds. Municipal issuance in 1998 reached $284 billion,
up 29% over 1997.
In the first part of 1999, however, as the market settled into a more
stable interest rate environment, refunding activity has dropped off
dramatically, resulting in a drop in municipal supply. This, in turn, has
enhanced the attractiveness of the municipal bonds that were brought to market,
as demand--especially from individual investors--remained relatively strong.
The Value of Nuveen Expertise. Nuveen Mutual Funds are a diverse collection of
investments featuring highly regarded asset management firms--Premier
Advisers(SM)--who direct the investment activities of each portfolio.
The Premier Advisers are firms that have earned a reputation for excellence
in their field of expertise--including Nuveen Investment Advisory Services for
income investing, Rittenhouse Financial Services for growth investing and
Institutional Capital Corporation for value investing.
For more information on our funds, contact your financial adviser for a
prospectus, or call Nuveen at (800) 621-7227, or download one from
www.nuveen.com. Please read the prospectus carefully before you invest or send
money.
We encourage you to talk with your financial adviser about Nuveen's
expanding array of investments and the ways they can help you establish a
diversified portfolio designed to build and sustain long-term financial
security.
We are grateful for the confidence you have placed in us and are dedicated
to maintaining your trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1999
2
<PAGE>
NUVEEN FLAGSHIP GEORGIA MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Tom O'Shaughnessy discusses fund performance, the municipal
market and key investment strategies for the Georgia fund for the fiscal year
ended May 31, 1999.
Comments cover the year ended May 31, 1999; performance
statistics are quoted for Class A shares at net asset value.
How strong is Georgia's economy? With an unemployment rate of just 3.7% in May,
Georgia's economy is among the strongest in the nation. It is also among the
fastest growing high-technology states in the U.S., adding 45,000 jobs during
the 1990s.
The state enjoys one of the highest population growth rates in the country,
attracting new college graduates in fields such as finance and high technology.
As a result of the strength of Georgia's expanding economy, municipalities
have looked to the municipal bond market to finance their growing infrastructure
and school financing needs. Issuers in the state took advantage of low interest
rates in late 1998 and early 1999, bringing many sizable bond issues to market.
Issuance has continued strong in 1999, as the city of Atlanta issued $1.1
billion worth of water and sewer bonds. Atlanta is privatizing the management of
its water system, and is the largest city in the nation to have done so.
How did Nuveen Flagship Georgia Municipal Bond Fund perform during its fiscal
year? Nuveen Flagship Georgia Municipal Bond Fund generated a total return on
net asset value of 3.34%, outperforming the 3.24% average annual total return
posted by the Lipper Georgia Municipal Debt Peer Group.* Total return equals a
fund's income plus capital gains distributions, if any, plus or minus changes in
net asset value. The fund's taxable equivalent return, for investors in the 35%
combined federal and state income tax bracket, was 6%.**
As of May 31, 1999, the fund's SEC 30-day yield was 4.18%. For investors in
the combined 35% federal and state income tax bracket, that is equivalent to a
yield of 6.43% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates declined.
To protect the fund's income stream, we looked for bonds with call dates far
into the future--or better yet, that are noncallable. Only 4.66% of the Georgia
portfolio is callable between now and the year 2001.
On the heels of Atlanta's successful sale of $1.1 billion of water and sewer
revenue bonds during the first quarter of 1999, many Georgia issuers brought new
bonds to market during the second quarter. Unlike the overall municipal market,
which has experienced a market decline in new issue supply, Georgia's new
issuance was up considerably during the period.
We took advantage of this market opportunity by buying Georgia bonds while
supply was strong and prices were relatively inexpensive. Purchases such as
Ginnie Mae-backed Atlanta Housing Authority Multifamily Housing Revenue bonds
and insured Private Colleges and Universities Authority Student Housing Revenue
bonds provide very good yield on a risk-adjusted basis.
We expect other purchases, such as DeKalb County Water & Sewer bonds, will
generate substantial retail interest for a long time to come and, as a result,
will provide the fund with good liquidity.
* The Lipper Peer Group return represents the average annualized total
return of the 34 funds in the Lipper Georgia Municipal Debt category. The
return assumes reinvestment of dividends and does not reflect any applicable
sales charges.
**Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
3
<PAGE>
In addition to call protection, we continued to search for bonds that offered
attractive yields and sound underlying credit quality. Nuveen Research helps
identify these opportunities.
Nuveen Research also helps us monitor events in the municipal market and
analyze how those events affect individual state and national municipal markets.
For example, during spring 1998, a major not-for-profit healthcare provider in
Philadelphia declared bankruptcy. While the impact of this bankruptcy was most
pronounced in the healthcare sector of the Pennsylvania municipal market, it was
felt to a lesser extent throughout the municipal market.
Uncertainty created by the Philadelphia healthcare situation prompted
investors to demand higher yields for lower-rated issues across the country,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen. Prior to the bankruptcy,
this spread had been relatively narrow, suggesting that investors were not being
compensated adequately for taking on additional credit risk. With spreads having
widened, lower-rated securities have become more attractive on a risk-adjusted
basis.
In recent months, we have taken advantage of rising interest rates by selling
some bonds at a loss--because as interest rates rose, prices of the bonds fell--
and subsequently buying similar securities, whose yield reflected the higher
interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Flagship Georgia Municipal Bond Fund? Rising
interest rates in 1999 have made it advantageous for us to lock in higher yields
by extending the portfolio's average maturity beyond that of our Lipper peer
group. We believe that bond yields are currently attractive relative to
inflation. Should interest rates fall or remain stable, the portfolio's longer
effective maturity would be beneficial.
With Georgia's strong economy and influx of population, we expect there will
continue to be a buoyant supply and demand for municipal bonds in areas such as
housing, healthcare, education and utilities. We will continue to seek out
undervalued securities that provide income and the opportunity for price
appreciation through credit rating upgrades.
"Unlike the overall municipal market, which has experienced a market decline in
new issue supply, Georgia's new issuance was up considerably during the period.
We took advantage of this market opportunity by buying Georgia bonds while
supply was strong and prices were relatively inexpensive."
4
<PAGE>
NUVEEN FLAGSHIP GEORGIA MUNICIPAL BOND FUND
Highlights as of May 31, 1999
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $11.02 $11.03 $11.00 $10.99
- ----------------------------------------------------------------------------------------------------
May's Declared Dividend* $0.0435 $0.0365 $0.0385 $0.0455
- ----------------------------------------------------------------------------------------------------
Fund Symbol FGATX N/A FGACX N/A
- ----------------------------------------------------------------------------------------------------
CUSIP 67065P501 67065P600 67065P709 67065P808
- ----------------------------------------------------------------------------------------------------
Inception Date 3/86 2/97 1/94 2/97
- ----------------------------------------------------------------------------------------------------
</TABLE>
*Paid June 1, 1999
Total Returns (Annualized)+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
1-Year 3.34% -0.99% 2.57% 2.80% 3.67%
- ----------------------------------------------------------------------------------------------------
1-Year TER** 6.00% 1.56% 4.81% 5.16% 6.46%
- ----------------------------------------------------------------------------------------------------
5-Year 7.04% 6.12% 6.38% 6.47% 7.10%
- ----------------------------------------------------------------------------------------------------
10-Year 7.08% 6.63% 6.61% 6.48% 7.11%
</TABLE>
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate of
35%).
Index Comparison*
[LINE CHART APPEARS HERE]
Nuveen Flagship Nuveen Flagship Lehman Brothers
Georgia Municipal Georgia Municipal Municipal
Bond Fund (Offer) Bond Fund (NAV) Bond Index
<TABLE>
<CAPTION>
May
---
<S> <C> <C> <C>
1989 9,580 10,000 10,000
1990 10,017 10,456 10,731
1991 11,007 11,490 11,813
1992 11,977 12,502 12,974
1993 13,274 13,856 14,526
1994 13,518 14,111 14,885
1995 14,642 15,284 16,240
1996 15,087 15,748 16,982
1997 16,502 17,225 18,391
1998 18,381 19,187 20,117
1999 18,992 19,825 21,058
</TABLE>
Nuveen Flagship Georgia Municipal Bond Fund (Offer) $18,922
Nuveen Flagship Georgia Municipal Bond Fund (NAV) $19,825
Lehman Brothers Municipal Bond Index $21,058
* 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 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.
Monthly Tax-Free Dividends (Class A Shares)*
[BAR CHART APPEARS HERE]
460
460
460
460
450
450
450
450
450
435
435
500
400
300
200
100
0
Portfolio Statistics
Fund Net Assets $164.9 million
- ----------------------------------------------------------------------
Effective Maturity 22.63 years
- ----------------------------------------------------------------------
Average
Effective Duration 8.89
- ----------------------------------------------------------------------
Top Five Sectors/1/
Housing (Multifamily) 16%
- ----------------------------------------------------------------------
Tax Obligation (Limited) 16%
- ----------------------------------------------------------------------
Water and Sewer 16%
- ----------------------------------------------------------------------
U.S. Guaranteed 13%
- ----------------------------------------------------------------------
Health Care 11%
- ----------------------------------------------------------------------
Bond Credit Quality/1/
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed......69%
AA..............12%
A...............12%
BBB/NR.......... 7%
/1/ as a percentage of total bond holdings
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 original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
5
<PAGE>
NUVEEN FLAGSHIP LOUISIANA MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Mike Davern discusses fund performance, the municipal market
and key investment strategies for the Louisiana fund for the fiscal year ended
May 31, 1999.
Comments cover the year ended May 31, 1999; performance statistics are quoted
for Class A shares at net asset value.
What's driving the Louisiana economy?
The Louisiana economy is heavily dependent on the energy industry, so the level
of oil and gas prices can have a major effect. While energy prices plummeted in
the second half of 1998 as it appeared that global demand would weaken, prices
recovered in early 1999, which bodes well for the state.
Overall, Louisiana's unemployment rate is quite low at 4.4% as of May 31.
The state's other important industry is tourism, which fuels sales tax and
gaming revenues.
With low interest rates and growing infrastructure and school financing
needs, the state's municipal bond issuance was robust in 1998. Rising interest
rates in 1999, however, significantly slowed municipal bond activity--both new
issuance and refundings--in the latter half of the fund's fiscal year.
There were two reasons the market slowed--the increased interest rates,
which primarily slowed new issuance, plus the fact that the refunding market has
essentially been exhausted. Municipalities flooded the market with refundings in
recent years when interest rates were dropping. A provision of the Tax Reform
Act of 1986, however, limits municipalities to only one tax-exempt refunding per
issue.
As was the case on the national level, increasing concerns about strong
economic growth and potential inflation caused bond yields to rise and prices to
fall. However, municipal bonds held their values quite well compared to U.S.
Treasury bonds.
How did Nuveen Flagship Louisiana Municipal Bond Fund perform during its fiscal
year?
Nuveen Flagship Louisiana Municipal Bond Fund generated a total return on net
asset value of 3.73%, compared to the 3.50% average annual total return posted
by the Lipper Louisiana Municipal Debt Peer Group.* Total return equals a fund's
income plus capital gains distributions, if any, plus or minus changes in net
asset value. The fund's taxable equivalent return, for investors in the 34%
combined federal and state income tax bracket, was 6.31%.**
As of May 31, 1999, the fund's SEC 30-day yield was 4.51%. For investors in
the combined 34% federal and state income tax bracket, that is equivalent to a
yield of 6.83% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates declined. To protect the fund's income
stream, we looked for bonds with call dates far in the future--or better yet,
that are noncallable.
In addition to call protection, we continued to search for bonds that
offered attractive yields and sound underlying credit quality.
Nuveen Research also helps us monitor events in the municipal market and
analyze how those events affect individual state and national municipal markets.
*The Lipper Peer Group return represents the average annualized total return of
the 11 funds in the Lipper Louisiana Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
**Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
6
<PAGE>
For example, during spring 1998, a major not-for-profit healthcare provider
in Philadelphia declared bankruptcy. While the impact of this bankruptcy was
most pronounced in the healthcare sector of the Pennsylvania municipal market,
it was felt to a lesser extent throughout the municipal market.
Uncertainty created by the Philadelphia healthcare situation prompted
investors to demand higher yields for lower-rated issues across the country,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen. Prior to the bankruptcy,
this spread had been relatively narrow, suggesting that investors were not being
compensated adequately for taking on additional credit risk. With spreads having
widened, lower-rated securities have become more attractive on a risk-adjusted
basis.
With interest rates at a higher level, and the widening differential
between lower-rated and higher-rated credits, we took the opportunity to
investigate lower-rated issues.
For example, we purchased a portion of the BBB+ rated Louisiana Public
Facility Hospital Revenue bonds for the Touro Infirmary project in New Orleans,
at a 5.72% yield, maturing in 2029.
Using the expertise of Nuveen Research, we considered only those bonds that
offered adequate compensation for the level of risk. In recent months, we have
taken advantage of rising interest rates by selling some bonds at a loss--
because as interest rates rose, prices of the bonds fell--and subsequently
buying similar securities, whose yield reflected the higher interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Flagship Louisiana Municipal Bond Fund? Rising
interest rates in 1999 have made it advantageous for us to lock in higher yields
by extending the portfolio's maturity beyond that of our Lipper peer group. We
believe that bond yields are currently attractive relative to inflation. Should
interest rates fall or remain stable, the portfolio's longer effective maturity
would be beneficial.
The fund will continue to seek out undervalued securities that provide
income and the opportunity for price appreciation through credit rating
upgrades.
"Using the expertise of Nuveen Research, we considered only those bonds
that offered adequate compensation for the level of risk."
7
<PAGE>
NUVEEN FLAGSHIP LOUISIANA MUNICIPAL BOND FUND
Highlights as of May 31, 1999
Quick Facts
A Shares B Shares C Shares R Shares
NAV $11.38 $ 11.37 $ 11.36 $ 11.38
- --------------------------------------------------------------------------------
May's Declared Dividend* $0.046 $0.0390 $0.0410 $0.0480
- --------------------------------------------------------------------------------
Fund Symbol FTLAX N/A FTLCX N/A
- --------------------------------------------------------------------------------
CUSIP 67065P881 67065P873 67065P865 67065P857
- --------------------------------------------------------------------------------
Inception Date 9/89 2/97 2/94 2/97
- --------------------------------------------------------------------------------
* Paid June 1, 1999
Total Returns (Annualized)/+/
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
1-Year 3.73% -0.66% 2.98% 3.20% 4.03%
- --------------------------------------------------------------------------------
1-Year TER** 6.31% 1.82% 5.18% 5.51% 6.73%
- --------------------------------------------------------------------------------
5-Year 7.36% 6.44% 6.69% 6.77% 7.48%
- --------------------------------------------------------------------------------
Since Inception 8.01% 7.54% 7.51% 7.42% 8.07%
+ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and expenses,
which are primarily differences in distribution and service fees. Class A
shares have a 4.2% maximum sales charge. Class B shares have a CDSC that
begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate
of 34%).
Index Comparison*
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship Lehman Brothers
Louisiana Municipal Louisiana Municipal Municipal
September Bond Fund (Offer) Bond Fund (NAV) Bond Index
<S> <C> <C> <C>
1989 9,580 10,000 10,000
May
1990 10,117 10,592 10,680
1991 11,624 12,134 12,088
1992 12,929 13,496 13,352
1993 14,765 15,412 15,053
1994 14,208 14,831 14,686
1995 15,752 16,442 16,329
1996 16,941 17,684 17,316
1997 18,549 19,362 18,879
1998 20,226 21,113 20,524
1999 20,304 21,194 20,762
</TABLE>
Nuveen Flagship Louisiana Municipal Bond Fund (Offer) $20,304
Nuveen Flagship Louisiana Municipal Bond Fund (NAV) $21,194
Lehman Brothers Municipal Bond Index $20,762
* 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 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.
Monthly Tax-Free Dividends (Class A Shares)*
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Month
- -----
<S> <C>
June .0480
July .0480
August .0480
September .0480
October .0470
November .0470
December .0470
January .0470
February .0470
March .0470
April .0460
May .0460
</TABLE>
* The fund also paid shareholders capital gains distributions in December of
$0.0409 per share.
Morningstar Rating/TM 1/
****
Overall rating among 1,586
municipal bond funds as
of 5/31/99.
Portfolio Statistics
Fund Net Assets $141.8 million
- -------------------------------------------------
Effective Maturity 22.10 years
- -------------------------------------------------
Average
Effective Duration 9.15
- -------------------------------------------------
Top Five Sectors/2/
Health Care 20%
- -------------------------------------------------
Housing (Single Family) 16%
- -------------------------------------------------
Tax Obligation (General) 11%
- -------------------------------------------------
Tax Obligation (Limited) 11%
- -------------------------------------------------
Utilities 10%
- -------------------------------------------------
Bond Credit Quality/2/
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed.....67%
AA..............6%
A..............10%
BBB/NR.........17%
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 original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
/1/ 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
5/31/99 and are subject to change every month. Past performance is no
guarantee of future results. Ratings are calculated from the fund's three-,
five-, and 10-year average annual returns (if applicable) in excess of 90-
day Treasury bill returns, with appropriate fee adjustments, and a risk
factor that reflects fund performance below 90-day T-bill returns. A shares
of the fund received 4 stars for the 3- and 5-year periods. The top 10% of
the funds in a broad asset class receive 5 stars and the next 22.5% receive
4 stars. The fund was rated among 1,586, 1,184, and 368 funds for the
three-, five-, and 10-year periods, respectively.
/2/ as a percentage of total bond holdings
8
<PAGE>
NUVEEN FLAGSHIP NORTH CAROLINA MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Tom O'Shaughnessy discusses fund performance, the municipal
market and key investment strategies for the North Carolina fund for the fiscal
year ended May 31, 1999.
Comments cover the year ended May 31, 1999; performance statistics are quoted
for Class A shares at net asset value.
How strong is North Carolina's economy? North Carolina has one of the nation's
lowest unemployment rates at 3.1% as of May 31. Growth in the high technology
and pharmaceutical industries continues to outpace job losses in the textile,
apparel and furniture industries. Population and job growth are driven by the
state's low cost of doing business and its excellent university system.
Despite North Carolina's expanding economy, municipal bond issuance was
relatively quiet during the past fiscal year. As was the case on the national
level, increasing concerns about rising economic growth and potential inflation
caused bond yields to rise and prices to fall. However, municipal bonds held
their values quite well compared to U.S. Treasury bonds.
How did Nuveen Flagship North Carolina Municipal Bond Fund perform during its
fiscal year? Nuveen Flagship North Carolina Municipal Bond Fund generated a
total return on net asset value of 3.43%. That compares to the 3.37% average
annual total return posted by the Lipper North Carolina Municipal Debt Peer
Group.* The fund's taxable equivalent total return, for investors in the 36.5%
combined federal and state income tax bracket, was 6.26%.** The fund ranked 18th
out of 40 municipal bond funds in its Lipper peer group for the fiscal year
period. Total return equals a fund's income plus capital gains distributions, if
any, plus or minus changes in net asset value.
As of May 31, 1999, the fund's SEC 30-day yield was 4.71%. For investors in
the combined 36.5% federal and state income tax bracket, that is equivalent to a
yield of 7.42% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates declined. To protect the fund's income
stream, we looked for bonds with call dates far in the future--or better yet,
that are noncallable.
In addition to call protection, we continued to search for bonds that
offered attractive yields and sound underlying credit quality. From the limited
supply available, we purchased several housing bonds because they continue to
provide good yield and high credit quality.
For example, the highly rated North Carolina Housing Finance Agency Home
Ownership Revenue bonds offered a 5.3% yield, which compared favorably with
yields available during the period for comparable maturity and quality.
In addition, we continued to make selective buys in the healthcare sector,
adding North Carolina Medical Care Commission Health Care Facilities for Duke
University Health System bonds. The Duke system is among the strongest
healthcare providers in the state and carries high ratings from the major credit
rating agencies.
* The Lipper Peer Group return represents the average annualized total return
of the 40 funds in the Lipper North Carolina Municipal Debt category. The
return assumes reinvestment of dividends and does not reflect any applicable
sales charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
9
<PAGE>
Nuveen Research helps us assess the credit quality of individual issuers,
and it also monitors events in the overall municipal market and analyzes how
those events affect individual state and national municipal markets.
For example, Moody's Investors Services, a credit rating agency, lowered
its rating on one of the state's largest issuers, North Carolina Eastern
Municipal Power Authority. The downgrade can be attributed to the failure of
state legislation that would have protected the electric utility industry in its
increasingly deregulated environment.
The fund did not have uninsured exposure to this issuer, but the
uncertainty created in the municipal market by this and other credit-related
situations prompted investors to demand higher yields for lower-rated issues,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen.
In recent months, we have taken advantage of rising interest rates by
selling some bonds at a loss--because as interest rates rose, prices of the
bonds fell--and subsequently buying similar securities, whose yield reflected
the higher interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Flagship North Carolina Municipal Bond Fund?
Rising interest rates in 1999 have made it advantageous for us to lock in higher
yields by extending the portfolio's maturity beyond that of our Lipper peer
group. We believe that bond yields are currently attractive relative to
inflation. Should interest rates fall or remain stable, the portfolio's longer
effective maturity would be beneficial.
Because the fund is among Nuveen's largest and oldest funds, many bonds in
the portfolio were purchased during a much higher interest rate environment and
have substantially higher coupon rates than are available in today's market.
At the same time, retail demand for North Carolina municipal bonds is often
greater than supply. Many retail-type bond firms are showing a significant
interest in 5% or better coupon bonds in order to meet their retail clients'
needs. As supply in the North Carolina market allows, we will take advantage of
this demand to sell bonds commanding high prices.
In addition, we will continue to seek out undervalued securities that
provide income and the opportunity for price appreciation through credit rating
upgrades.
"From the limited supply available, we purchased
several housing bonds because they continue to provide good yield and
high credit quality."
10
<PAGE>
NUVEEN FLAGSHIP NORTH CAROLINA MUNICIPAL BOND FUND
Highlights as of May 31, 1999
Quick Facts
A Shares B Shares C Shares R Shares
NAV $ 10.38 $ 10.39 $ 10.36 $ 10.38
- --------------------------------------------------------------------------------
May's Declared Dividend* $0.0415 $0.0345 $0.0365 $0.0430
- --------------------------------------------------------------------------------
Fund Symbol FLNCX N/A FCNCX N/A
- --------------------------------------------------------------------------------
CUSIP 67065P840 67065P832 67065P824 67065P816
- --------------------------------------------------------------------------------
Inception Date 3/86 2/97 10/93 2/97
- --------------------------------------------------------------------------------
* Paid June 1, 1999
Total Returns (Annualized)/+/
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
1-Year 3.43% -0.95% 2.73% 2.85% 3.61%
- --------------------------------------------------------------------------------
1-Year TER** 6.26% 1.76% 5.10% 5.35% 6.54%
- --------------------------------------------------------------------------------
5-Year 6.18% 5.28% 5.53% 5.60% 6.27%
- --------------------------------------------------------------------------------
10-Year 6.73% 6.27% 6.26% 6.12% 6.77%
/+/ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (based on a combined federal and state tax rate
of 36.5%).
Index Comparison*
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
North Carolina North Carolina Lehman Brothers
Municipal Municipal Municipal
May Bond Fund (Offer) Bond Fund (NAV) Bond Index
<S> <C> <C> <C>
1989 9,580 10,000 10,000
1990 10,074 10,516 10,731
1991 11,010 11,492 11,813
1992 12,032 12,560 12,974
1993 13,434 14,023 14,526
1994 13,606 14,202 14,885
1995 14,619 15,260 16,240
1996 15,154 15,819 16,982
1997 16,334 17,050 18,391
1998 17,754 18,533 20,117
1999 18,363 19,168 21,058
</TABLE>
Nuveen Flagship North Carolina Municipal Bond Fund (Offer) $18,363
Nuveen Flagship North Carolina Municipal Bond Fund (NAV) $19,168
Lehman Brothers Municipal Bond Index $21,058
* 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 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.
Monthly Tax-Free Dividends (Class A Shares)*
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Month
- -----
<S> <C>
June .0445
July .0430
August .0430
September .0430
October .0430
November .0430
December .0430
January .0415
February .0415
March .0415
April .0415
May .0415
</TABLE>
* The fund also paid shareholders capital gains and net ordinary income
distributions in December of $0.0920 per share.
Portfolio Statistics
Fund Net Assets $212.8 million
- -------------------------------------------------
Effective Maturity 21.00 years
- -------------------------------------------------
Average
Effective Duration 8.54
- -------------------------------------------------
Top Five Sectors/1/
Health Care 21%
- -------------------------------------------------
Housing (Single Family) 17%
- -------------------------------------------------
Utilities 15%
- -------------------------------------------------
Tax Obligation (Limited) 14%
- -------------------------------------------------
U.S. Guaranteed 9%
- -------------------------------------------------
Bond Credit Quality/1/
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed.....30%
AA.............44%
A..............16%
BBB/NR.........10%
/1/ as a percentage of total bond holdings
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 original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
11
<PAGE>
NUVEEN FLAGSHIP TENNESSEE MUNICIPAL BOND FUND
Report from the Portfolio Manager
Portfolio Manager Tom O'Shaughnessy discusses fund performance, the municipal
market and key investment strategies for the Tennessee fund for the fiscal year
ended May 31, 1999.
Comments cover the year ended May 31, 1999; performance statistics are quoted
for Class A shares at net asset value.
How strong is Tennessee's economy? The state's economy is fundamentally sound,
although it has more exposure to national economic cycles due to increased
automotive manufacturing within its borders, including plants owned by Nissan,
Peterbilt and Saturn. Growth in the service, trade and manufacturing sectors has
offset losses in the textile and apparel industries. The state's unemployment
rate in May was 3.8%, down from 4.2% a year ago.
Although Tennessee is not known as a leading state for high technology,
Dell Computer, attracted to Tennessee's central location, recently announced
that it would build a new facility near the Nashville airport.
In spite of these strong economic conditions, municipal bond issuance was
very limited during the period.
How did Nuveen Flagship Tennessee Municipal Bond Fund perform during its fiscal
year? Nuveen Flagship Tennessee Municipal Bond Fund generated a total return on
net asset value of 3.47%, compared to the 3.65% average annual total return
posted by the Lipper Tennessee Municipal Debt Peer Group.* Total return equals a
fund's income plus capital gains distributions, if any, plus or minus changes in
net asset value. The fund's taxable equivalent total return, for investors in
the 35% combined federal and state income tax bracket, was 6.14%.**
As of May 31, 1999, the fund's SEC 30-day yield was 4.10%. For investors in
the combined 35% federal and state income tax bracket, that is equivalent to a
yield of 6.31% on a taxable investment.
How did you manage the fund to achieve this performance? We continued to focus
on bonds we determined to have a good "call" structure. Issuers generally have
the right to call or redeem their bonds after a given date prior to maturity,
which they would do if interest rates declined. To protect the fund's income
stream, we looked for bonds with call dates far in the future--or better yet,
that are noncallable.
In addition to call protection, we continued to search for bonds that
offered attractive yields and sound underlying credit quality.
Purchases included high quality bonds with competitive yields such as the
Tennessee Housing Development Agency Homeownership Program bonds. The program is
one of the few regular sources of issuance for the state.
In such a limited supply environment, market participants often approach
the fund seeking bonds. Because demand outstrips supply, we can often negotiate
very attractive prices for its bonds. However, bonds will not be sold out of the
fund unless they can be replaced. We have an advantage because we can capitalize
on Nuveen's extensive dealer network to locate and purchase attractive bonds to
replace those sold into strong demand.
* The Lipper Peer Group return represents the average annualized total return
of the funds in the Lipper Tennessee Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
** Taxable equivalent total return equals a fund's taxable equivalent income
(based on the combined federal and state tax rate) plus capital gains
distributions, if any, plus or minus changes in net asset value.
12
<PAGE>
In addition to assessing the credit quality of individual issuers, Nuveen
Research helps us monitor events in the municipal market and analyze how those
events affect individual state and national municipal markets.
For example, during spring 1998, a major not-for-profit healthcare provider
in Philadelphia declared bankruptcy. While the impact of this bankruptcy was
most pronounced in the healthcare sector of the Pennsylvania municipal market,
it was felt to a lesser extent throughout the municipal market.
Uncertainty created by the Philadelphia healthcare situation prompted
investors to demand higher yields for lower-rated issues across the country,
causing the yield "spread," or the difference between the highest credit quality
securities and those of lower credit quality, to widen. Prior to the bankruptcy,
this spread had been relatively narrow, suggesting that investors were not being
compensated adequately for taking on additional credit risk. With spreads having
widened, lower-rated securities have become more attractive on a risk-adjusted
basis.
With interest rates at a higher level, and the widening differential
between low-rated and high-rated credits, we took the opportunity to investigate
lower-rated issues. Using the expertise of Nuveen Research, we considered only
those bonds that offered adequate compensation for the level of risk offered.
In recent months, we have taken advantage of rising interest rates by
selling some bonds at a loss--because as interest rates rose, prices of the
bonds fell--and subsequently buying similar securities, whose yield reflected
the higher interest rates.
Called a "swap," this action produced two benefits for the fund and for
shareholders--tax efficiency and potentially higher income. Tax losses were
created by the swaps, which will benefit the fund and are used to offset capital
gains for up to eight years. The higher yield of the new bonds should boost the
fund's income as well.
What is your outlook for Nuveen Flagship Tennessee Municipal Bond Fund? Rising
interest rates in 1999 have made it advantageous for us to lock in higher yields
by extending the portfolio's maturity beyond that of our Lipper peer group. We
believe that bond yields are currently attractive relative to inflation. Should
interest rates fall or remain stable, the portfolio's longer effective maturity
would be beneficial.
Although Tennessee's economy is becoming stronger and more diversified, the
supply of available bonds continues to be thin. Nevertheless, we will continue
to seek out undervalued securities that provide income and the opportunity for
price appreciation through credit rating upgrades.
"In such a limited supply environment, market participants often approach the
fund seeking bonds. Because demand outstrips supply, we can often
negotiate very attractive prices for its bonds."
13
<PAGE>
NUVEEN FLAGSHIP TENNESSEE MUNICIPAL BOND FUND
Highlights as of May 31, 1999
Quick Facts
A Shares B Shares C Shares R Shares
NAV $ 11.30 $ 11.30 $ 11.30 $ 11.28
- --------------------------------------------------------------------------------
May's Declared Dividend* $0.0455 $0.0385 $0.0400 $0.0475
- --------------------------------------------------------------------------------
Fund Symbol FTNTX FTMBX FTNCX N/A
- --------------------------------------------------------------------------------
CUSIP 67065P758 67065P741 67065P733 67065P725
- --------------------------------------------------------------------------------
Inception Date 11/87 2/97 10/93 2/97
- --------------------------------------------------------------------------------
* Paid June 1, 1999
Total Returns (Annualized)/+/
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
1-Year 3.47% -0.85% 2.72% 2.97% 3.68%
- --------------------------------------------------------------------------------
1-Year TER** 6.14% 1.70% 4.97% 5.32% 6.46%
- --------------------------------------------------------------------------------
5-Year 6.38% 5.47% 5.71% 5.79% 6.43%
- --------------------------------------------------------------------------------
10-Year 6.92% 6.47% 6.45% 6.33% 6.95%
/+/ Class A share returns are actual. Class B, C and R share returns are actual
for the period since class inception; returns prior to class inception are
Class A share returns adjusted for differences in sales charges and
expenses, which are primarily differences in distribution and service fees.
Class A shares have a 4.2% maximum sales charge. Class B shares have a CDSC
that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following five years, which is not
reflected in the return figures. Class C shares have a 1% CDSC for
redemptions within one year which is not reflected in the one-year total
return.
** Taxable Equivalent Return (Based on a combined federal and state tax rate
of 35%.)
Index Comparison*
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Flagship Nuveen Flagship
Tennessee Mutual Tennessee Municipal Lehman Brothers
May Bond Fund (Offer) Bond Fund (NAV) Municipal Bond Index
<S> <C> <C> <C>
1989 9,580 10,000 10,000
1990 10,086 10,528 10,731
1991 11,054 11,538 11,813
1992 12,011 12,537 12,974
1993 13,524 14,117 14,526
1994 13,734 14,336 14,885
1995 14,839 15,489 16,240
1996 15,399 16,075 16,982
1997 16,587 17,314 18,391
1998 18,086 18,879 20,117
1999 18,717 19,537 21,058
</TABLE>
Nuveen Flagship Tennessee Municipal Bond Fund (Offer) $18,717
Nuveen Flagship Tennessee Municipal Bond Fund (NAV) $19,537
Lehman Brothers Municipal Bond Index $21,058
* 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 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.
Monthly Tax-Free Dividends (Class A Shares)
[BAR CHART APPEARS HERE]
Month
- -----
June .0470
July .0470
August .0470
September .0470
October .0460
November .0460
December .0460
January .0460
February .0460
March .0460
April .0455
May .0455
Portfolio Statistics
Fund Net Assets $327.0 million
- -------------------------------------------------
Effective Maturity 20.16 years
- -------------------------------------------------
Average
Effective Duration 8.08
- -------------------------------------------------
Top Five Sectors/1/
U.S. Guaranteed 16%
- -------------------------------------------------
Health Care 15%
- -------------------------------------------------
Tax Obligation (Limited) 13%
- -------------------------------------------------
Housing (Single Family) 12%
- -------------------------------------------------
Utilities 10%
- -------------------------------------------------
Bond Credit Quality/1/
[PIE CHART APPEARS HERE]
AAA/U.S.
Guaranteed....47%
AA............31%
A.............13%
BBB/
NR.............9%
/1/ as a percentage of total bond holdings
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 original cost. Performance of classes will
differ. For additional information, please see the fund's prospectus.
14
<PAGE>
Portfolio of Investments
Nuveen Flagship Georgia Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer Cyclical - 0.3%
$ 500,000 White County (Georgia), Development Authority, Industrial Development 6/02 at 102 BBB+ $ 528,330
Revenue Bonds (Springs Industries, Inc.), 6.850%, 6/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples - 4.0%
3,500,000 Albany Dougherty Payroll Development Authority (Georgia), Solid Waste No Opt. Call AA 3,445,855
Disposal Revenue Bonds (The Procter & Gamble Paper Products Company
Project), Series 1999, 5.200%, 5/15/28 (Alternative Minimum Tax)
1,000,000 Development Authority of Cartersville (Georgia), Water and Wastewater 5/02 at 102 A+ 1,082,120
Facilities Revenue Bonds, Series 1992 (Anheuser-Busch Project),
6.750%, 2/01/12 (Alternative Minimum Tax)
2,000,000 Development Authority of Cartersville (Georgia), Sewage Facilities 5/07 at 101 A+ 2,138,620
Refunding Revenue Bonds, Series 1997 (Anheuser-Busch Project),
6.125%, 5/01/27 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 1.0%
1,000,000 Private Colleges and Universities Authority (Georgia), Revenue Bonds No Opt. Call AAA 1,177,170
(Mercer University Project), Series 1991, 6.500%, 11/01/15
500,000 Private Colleges and Universities Authority (Georgia), Revenue Refunding 6/04 at 102 AAA 548,455
Bonds (Spelman College Project), Series 1994, 6.200%, 6/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 2.5%
1,500,000 Brunswick and Glynn County (Georgia), Development Authority, Revenue 3/08 at 102 Baa2 1,486,650
Refunding Bonds, Series 1998 (Georgia Pacific Corporation Project),
5.550%, 3/01/26 (Alternative Minimum Tax)
1,000,000 Savannah (Georgia), Economic Development Authority, Pollution Control No Opt. Call A1 1,102,420
Revenue Refunding Bonds (Union Camp Corporation Project), Series 1995,
6.150%, 3/01/17
500,000 Wayne County (Georgia), Development Authority, Solid Waste Disposal 7/00 at 102 BBB+ 524,775
Revenue Bonds (ITT Rayonier, Inc. Project), Series 1990,
8.000%, 7/01/15 (Alternative Minimum Tax)
1,000,000 Wayne County (Georgia) Development Authority, Pollution Control Revenue 5/03 at 102 BBB+ 1,052,780
Refunding Bonds (ITT Rayonier Inc. Project), Series 1993,
6.100%, 11/01/07
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 10.5%
5,000,000 Baldwin County Hospital Authority (Georgia), Revenue Bonds (Oconee 12/08 at 102 BBB 4,735,100
Regional Medical Center), Series 1998, 5.375%, 12/01/28
3,000,000 Chatham County Hospital Authority (Savannah, Georgia), Hospital Revenue 1/07 at 102 AAA 2,991,630
Refunding and Improvement Bonds (Memorial Medical Center, Inc.),
Series 1996A, 5.250%, 1/01/16
500,000 Hospital Authority of Cherokee County (Georgia), Revenue Certificates, 12/00 at 102 AAA 534,030
Tax Exempt Series 1990, 7.250%, 12/01/15
1,000,000 Coffee County Hospital Authority (Georgia), Revenue Anticipation 12/06 at 102 N/R 1,050,780
Certificates (Coffee Regional Medical Center, Inc. Project), Series
1997A, 6.750%, 12/01/16
Development Authority of the City of Dalton (Georgia), Revenue
Certificates (Hamilton Health Care System), Series 1996:
2,000,000 5.250%, 8/15/26 2/07 at 102 AAA 1,981,240
2,000,000 5.500%, 8/15/26 No Opt. Call AAA 2,088,160
2,000,000 Development Authority of the City of Dalton (Georgia), Revenue 2/08 at 101 Aaa 1,906,920
Certificates, Hamilton Health Care System (HLTC, Inc. Project), Series
1998, 5.000%, 8/15/28
1,000,000 The Hospital Authority of Hall County and the City of Gainesville, 10/05 at 102 AAA 1,063,590
Revenue Anticipation Certificates (Northeast Georgia Healthcare
Project), Series 1995, 6.000%, 10/01/20
1,000,000 Hospital Authority of Gwinnett County, Georgia, Revenue Anticipation 9/07 at 101 AAA 990,460
Certificates (Gwinnett Hospital System, Inc. Project), Series 1997A,
5.250%, 9/01/27
</TABLE>
15
<PAGE>
Portfolio of Investments
Nuveen Flagship Georgia Municipal Bond Fund (continued]
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily - 16.0%
$ 755,000 Housing Authority of Clayton County, Georgia, Multifamily Housing 12/05 at 102 AAA $ 775,981
Revenue Bonds, Series 1995 (The Advantages Project),
5.700%, 12/01/16
1,000,000 Housing Authority of the County of DeKalb, Georgia, Multifamily Housing 1/05 at 102 AAA 1,089,160
Revenue Bonds (The Lakes at Indian Creek Apartments Project), Series
1994, 7.150%, 1/01/25 (Alternative Minimum Tax)
3,470,000 Housing Authority of the County of DeKalb, Georgia, Multifamily Housing 1/06 at 102 A 3,668,345
Revenue Bonds (Regency Woods I and II Project), Senior Series 1996A,
6.500%, 1/01/26
4,000,000 Housing Authority of Fulton County, Georgia, Multifamily Housing 7/06 at 102 A 4,227,000
Revenue Bonds (Concorde Place Apartments Project), Series 1996A,
6.375%, 1/01/27 (Alternative Minimum Tax)
4,715,000 Housing Authority of the City of Lawrenceville, Georgia, Multifamily 6/07 at 102 AAA 5,124,969
Housing Revenue Bonds (Knollwood Park Apartments Project), Series
1997, 6.250%, 12/01/29 (Alternative Minimum Tax)
1,295,000 Housing Authority of the City of Macon, Georgia, Multifamily Mortgage 10/04 at 102 Aaa 1,378,605
Revenue Refunding Bonds, Series 1994A (FHA Insured Mortgage Loan The
Vistas), 6.450%, 4/01/26
The Housing Authority of the City of Atlanta, Georgia, Multifamily
Housing Revenue Bonds (The Village at Castleberry Hill Project), GNMA
Collateralized Series 1999:
3,000,000 5.300%, 2/20/29 (Alternative Minimum Tax) 2/09 at 102 AAA 2,981,970
5,000,000 5.400%, 2/20/39 (Alternative Minimum Tax) 2/09 at 102 AAA 4,967,150
1,840,000 Housing Authority of the City of Augusta, Georgia, Mortgage Revenue 5/05 at 102 Aa 1,971,118
Refunding Bonds, Series 1995A (FHA Insured Mortgage Loan - River Glen
Apartments, Section 8 Assisted Project), 6.500%, 5/01/27
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 8.3%
Housing Authority of Fulton County, Georgia, Single Family Mortgage
Revenue Bonds (GNMA Mortgage-Backed Securities Program), Series 1995A:
310,000 6.550%, 3/01/18 (Alternative Minimum Tax) 3/05 at 102 AAA 330,699
105,000 6.600%, 3/01/28 (Alternative Minimum Tax) 3/05 at 102 AAA 110,177
Housing Authority of Fulton County, Georgia, Single Family Mortgage
Revenue Refunding Bonds (GNMA Mortgage-Backed Securities Program),
Series 1996A:
415,000 6.125%, 9/01/18 (Alternative Minimum Tax) 9/06 at 102 AAA 436,962
655,000 6.200%, 9/01/27 (Alternative Minimum Tax) 9/06 at 102 AAA 690,770
Georgia Housing and Finance Authority, Single Family Mortgage Bonds,
1994 Series A (FHA Insured or VA Guaranteed Mortgage Loans):
1,215,000 6.500%, 12/01/17 (Alternative Minimum Tax) 6/04 at 102 AAA 1,291,569
750,000 6.600%, 12/01/23 (Alternative Minimum Tax) 6/04 at 102 AAA 799,155
1,000,000 Georgia Housing and Finance Authority, Single Family Mortgage Bonds, 3/05 at 102 AAA 1,065,860
1995 Series A, Subseries A-2, 6.400%, 12/01/15 (Alternative Minimum
Tax)
2,500,000 Georgia Housing and Finance Authority, Single Family Mortgage Bonds, 6/05 at 102 AAA 2,676,825
1995 Series B, Subseries B-2, 6.550%, 12/01/27 (Alternative Minimum Tax)
3,355,000 Georgia Housing and Finance Authority, Single Family Mortgage Bonds, 6/06 at 102 AAA 3,579,013
1996 Series A, Subseries A-2, 6.450%, 12/01/27 (Alternative Minimum Tax)
1,000,000 Georgia Housing and Finance Authority, Single Family Mortgage Bonds, 12/08 at 101 AAA 986,600
1998 Series B2, 5.200%, 12/01/26 (Alternative Minimum Tax)
175,000 Georgia Residential Finance Authority, Home Ownership Mortgage Bonds, 12/99 at 103 AA+ 181,365
1989 Series D (Conventional Mortgage Loans), 7.800%, 6/01/21
(Alternative Minimum Tax)
235,000 Georgia Residential Finance Authority, Home Ownership Mortgage Bonds, 12/00 at 103 AA+ 245,925
1990 Series A (FHA Insured or VA Guaranteed Mortgage Loans),
7.750%, 6/01/18 (Alternative Minimum Tax)
1,235,000 Georgia Residential Finance Authority, Home Ownership Mortgage Bonds, 12/01 at 103 AA+ 1,304,469
1991 Series A (FHA Insured or VA Guaranteed Mortgage Loans),
7.250%, 12/01/21 (Alternative Minimum Tax)
55,000 Georgia Residential Finance Authority, Single Family Mortgage Bonds, 6/99 at 103 AA+ 56,767
1988 Series B (FHA Insured or VA Guaranteed Mortgage Loans),
8.000%, 12/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 3.6%
3,810,000 Peach County School District (Georgia), General Obligation School Bonds, 2/05 at 102 AAA 4,290,289
Series 1994, 6.400%, 2/01/19
1,500,000 Washington County School District (Georgia), General Obligation School 1/05 at 102 AAA 1,722,225
Bonds, Series 1994, 6.875%, 1/01/14
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/Limited - 15.7%
$ 570,000 Development Authority of Burke County (Georgia), Industrial Development 2/01 at 102 A $ 605,500
Revenue Bonds (Georgia Safe Corporation Project), Series 1991, 7.500%,
2/01/11 (Alternative Minimum Tax)
1,150,000 Burke County Economic Development Authority (Georgia), Revenue Bonds 12/02 at 102 A 1,255,156
(Ritz Instrument Transformers, Inc. Project), Series 1991A, 7.250%,
12/01/11 (Alternative Minimum Tax)
1,750,000 Association County Commissioners of Georgia Leasing Program (Butts 12/04 at 102 AAA 1,968,050
County, Georgia Public Purpose Project), Series 1994 Certificates of
Participation, 6.750%, 12/01/14
1,000,000 The Hospital Authority of Clarke County (Georgia), Hospital Revenue 1/07 at 100 AAA 956,020
Certificates (Athens Regional Medical Center Project), Series 1996,
5.000%, 1/01/27
1,215,000 Clayton County Solid Waste Management Authority (Georgia), Revenue Bonds, 2/02 at 102 AA 1,299,467
Series 1992A, 6.500%, 2/01/12
3,000,000 Cobb-Marietta Coliseum and Exhibit Hall Authority (Georgia), Revenue 10/19 at 100 AAA 3,214,470
Refunding Bonds, Series 1993, 5.625%, 10/01/26
1,000,000 Downtown Smyrna Development Authority (Georgia), Revenue Bonds, 2/05 at 102 AAA 1,136,060
Series 1994, 6.600%, 2/01/17
2,765,000 Metropolitan Atlanta Rapid Transit Authority (Georgia), Sales Tax No Opt. Call AA- 3,141,538
Revenue Bonds, Refunding Series N, 6.250%, 7/01/18
500,000 Metropolitan Atlanta Rapid Transit Authority (Georgia), Sales Tax No Opt. Call AAA 572,680
Revenue Bonds, Refunding Series P, 6.250%, 7/01/20
2,000,000 Puerto Rico Highway and Transportation Authority, Highway Revenue 7/06 at 101 1/2 A 2,043,660
Bonds, Series 1996Y, 5.500%, 7/01/26
125,000 Puerto Rico Infrastructure Finance Authority, Special Tax Revenue 7/99 at 101 BBB+ 127,895
Bonds, Series 1988A, 7.750%, 7/01/08
8,055,000 Upper Oconee Basin Water Authority (Georgia), Revenue Bonds, 7/08 at 102 AAA 8,078,118
Series 1997, 5.250%, 7/01/27
1,250,000 Hospital Authority of Ware County (Georgia), Revenue Anticipation 3/02 at 102 AAA 1,351,213
Certificates, Series 1992A (Satilla Park Hospital), 6.625%, 3/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 0.6%
1,000,000 City of Atlanta, Georgia, Airport Facilities Revenue Refunding 1/07 at 101 AAA 1,037,390
Bonds, Series 1996, 5.250%, 1/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 12.3%
Chatham County Hospital Authority, Hospital Revenue Bonds (Memorial
Medical Center, Inc.) (Savannah, Georgia), Series 1990A:
100,000 7.000%, 1/01/10 (Pre-refunded to 1/01/01) 1/01 at 102 AAA 106,962
1,130,000 7.000%, 1/01/21 (Pre-refunded to 1/01/01) 1/01 at 102 AAA 1,208,671
505,000 Cherokee County Water and Sewer Authority (Georgia), Revenue Bonds, No Opt. Call AAA 683,063
Series 1985, 9.750%, 8/01/09
500,000 Hospital Authority of Colquitt County (Georgia), Hospital Revenue 3/02 at 102 AAA 546,540
Certificates, Series 1992, 6.700%, 3/01/12 (Pre-refunded to 3/01/02)
1,000,000 City of Conyers (Georgia), Water and Sewer Revenue Bonds, Series 7/04 at 102 AAA 1,135,140
1994A, 6.600%, 7/01/15
800,000 Downtown Marietta Development Authority (Georgia), Revenue Bonds, 1/02 at 102 Aaa 868,544
Series 1992, 6.600%, 1/01/19 (Pre-refunded to 1/01/02)
Fulco Hospital Authority, Revenue Anticipation Certificates (Georgia
Baptist Health Care System Project), Series 1992A:
3,000,000 6.250%, 9/01/13 (Pre-refunded to 9/01/02) 9/02 at 102 Baa1*** 3,264,030
2,600,000 6.375%, 9/01/22 (Pre-refunded to 9/01/02) 9/02 at 102 Baa1*** 2,838,680
2,250,000 Fulco Hospital Authority, Refunding Revenue Anticipation Certificates 9/02 at 102 Baa1*** 2,456,550
(Georgia Baptist Health Care System Project), Series 1992B, 6.375%,
9/01/22 (Pre-refunded to 9/01/02)
500,000 City of Gainesville, Georgia, Water and Sewer Revenue Bonds, 11/00 at 102 AAA 536,360
Series 1990B, 7.200%, 11/15/10 (Pre-refunded to 11/15/00)
1,855,000 Development Authority of the City of Marietta (Georgia), Revenue 12/99 at 102 AAA 1,928,885
Bonds (Life College, Inc.), Series 1989, 7.250%, 12/01/19
(Pre-refunded to 12/01/99)
1,200,000 Metropolitan Atlanta Rapid Transit Authority (Georgia), Sales Tax 7/99 at 102 AAA 1,228,092
Revenue Bonds, Series L, 7.200%, 7/01/20 (Pre-refunded to 7/01/99)
</TABLE>
17
<PAGE>
Portfolio of Investments
Nuveen Flagship Georgia Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,650,000 Metropolitan Atlanta Rapid Transit Authority (Georgia), Sales Tax 7/04 at 102 AAA $ 1,889,184
Revenue Bonds, Second Indenture Series 1994A, 6.900%, 7/01/20
(Pre-refunded to 7/01/04)
1,015,000 Peach County School District (Georgia), General Obligation School 2/05 at 102 AAA 1,137,876
Bonds, Series 1994, 6.300%, 2/01/14 (Pre-refunded to 2/01/05)
500,000 Hospital Authority of Ware County (Georgia), Revenue Anticipation 3/01 at 102 AAA 524,080
Certificates, Series 1991, 7.125%, 3/01/15 (Pre-refunded to 3/01/01)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 7.7%
1,800,000 Development Authority of Appling County (Georgia), Pollution Control 1/04 at 101 AAA 2,003,742
Revenue Bonds (Oglethorpe Power Corporation Hatch Project), Series
1994, 7.150%, 1/01/21
1,500,000 Municipal Electric Authority of Georgia, General Power Revenue Bonds, 1/15 at 100 A 1,702,335
1992B Series, 6.375%, 1/01/16
Municipal Electric Authority of Georgia, Power Revenue Bonds,
Series Z:
1,000,000 5.500%, 1/01/12 1/10 at 100 AAA 1,061,150
1,000,000 5.500%, 1/01/20 No Opt. Call AAA 1,051,230
Development Authority of Monroe County (Georgia), Pollution Control
Revenue Bonds (Oglethorpe Power Corporation, Scherer Project),
Series 1992A:
500,000 6.750%, 1/01/10 No Opt. Call A 578,610
1,000,000 6.800%, 1/01/12 No Opt. Call A 1,168,780
2,000,000 Municipal Electric Authority of Georgia, Project One Subordinated 1/07 at 101 AAA 1,984,460
Bonds, Series 1997A, 5.125%, 1/01/16
1,250,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T, 7/04 at 100 BBB+ 1,271,825
5.500%, 7/01/20
4,500,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series O, No Opt. Call AAA 1,831,860
0.000%, 7/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 15.5%
12,000,000 City of Atlanta, Georgia, Water and Wastewater Revenue 5/09 at 101 AAA 11,321,760
Bonds, Series 1999A, 5.000%, 11/01/38
City of Brunswick, Georgia, Water and Sewer Revenue Refunding and
Improvement Bonds, Series 1992:
500,000 6.000%, 10/01/11 No Opt. Call AAA 558,070
400,000 6.100%, 10/01/19 No Opt. Call AAA 452,156
2,000,000 Cherokee County, Georgia, Water and Sewer Authority, Water and No Opt. Call AAA 2,105,980
Sewer Revenue Bonds, Refunding and Improvements Series 1993,
5.500%, 8/01/23
8,500,000 DeKalb County, Georgia, Water and Sewer Revenue Bonds, Series 1999, 10/09 at 101 AA 8,177,000
5.000%, 10/01/28
1,500,000 Henry County Water and Sewer Authority, Georgia, Water and Sewer No Opt. Call AAA 1,702,782
Revenue Bonds, Series 1996, 6.150%, 2/01/20
1,000,000 City of Milledgeville, Georgia, Water and Sewer Revenue No Opt. Call AAA 1,118,870
and Refunding Bonds, Series 1996, 6.000%, 12/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
$157,825,000 Total Investments - (cost $153,619,706) - 98.0% 161,612,537
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.0% 3,239,126
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $164,851,663
====================================================================================================================
</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.
18
<PAGE>
Portfolio of Investments
Nuveen Flagship Louisiana Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials - 1.5%
$ 1,500,000 Parish of St. Charles, State of Louisiana, Pollution Control Revenue Bonds 11/02 at 102 BBB $1,633,215
(Union Carbide Corporation), Series 1992, 7.350%, 11/01/22 (Alternative
Minimum Tax)
500,000 Parish of St. John the Baptist, State of Louisiana, Environmental 12/08 at 101 Baa2 491,585
Improvement Revenue Bonds (USX Corporation Project), Refunding Series
of 1998, 5.350%, 12/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 4.2%
750,000 Louisiana Public Facilities Authority, College and University Equipment 10/99 at 102 A+ 774,075
and Capital Facilities Revenue Refunding Bonds (Loyola University
Project), Series 1989A, 7.250%, 10/01/09
380,000 Louisiana Public Facilities Authority, College and University Equipment 4/02 at 102 A+ 412,642
and Capital Facilities Revenue Refunding Bonds (Loyola University
Project), Series 1992, 6.750%, 4/01/10
775,000 Louisiana Public Facilities Authority, Student Loan Revenue Bonds, 9/02 at 102 Aaa 824,678
Series 1992A-2, 6.600%, 3/01/03 (Alternative Minimum Tax)
1,000,000 Louisiana Public Facilities Authority, Revenue Bonds (Tulane University 12/07 at 102 AAA 1,034,180
of Louisiana), Series 1997, 5.600%, 12/15/27
1,000,000 Louisiana Public Facilities Authority, Revenue and Refunding Bonds 9/07 at 102 AAA 989,020
(Xavier University of Louisiana Project), Series 1997, 5.250%, 9/01/27
1,000,000 Louisiana Public Facilities Authority, Revenue and Refunding Bonds 2/08 at 102 AAA 955,240
(Dillard University Project), Series 1998, 5.000%, 2/01/28
960,000 Board of Supervisors of Louisiana State University and Agricultural and 10/08 at 102 AAA 914,026
Mechanical College, Revenue and Refunding Bonds (University of New
Orleans Project), Series 1998, 5.000%, 10/01/30
- -----------------------------------------------------------------------------------------------------------------------------------
Energy - 4.5%
1,000,000 Lake Charles, Louisiana, Harbor and Terminal District, Port Facilities 12/02 at 102 BBB 1,085,630
Refunding Revenue Bonds, Series 1992 (Occidental Petroleum Corporation
Project), 7.200%, 12/01/20
500,000 Louisiana Offshore Terminal Authority, Deepwater Port Refunding Revenue 9/01 at 102 A 539,700
Bonds (LOOP Inc. Project), First Stage Series 1991B, 7.200%, 9/01/08
475,000 Louisiana Offshore Terminal Authority, Deepwater Port Refunding Revenue 9/00 at 102 A 503,989
Bonds (LOOP Inc.), First Stage Series E, 7.600%, 9/01/10
1,000,000 Louisiana Offshore Terminal Authority, Deepwater Port Refunding Revenue 10/08 at 100 A 977,860
Bonds, Series 1998 (LOOP LLC Project), 5.200%, 10/01/18
3,150,000 Parish of St. Bernard, Louisiana, Exempt Facility Revenue Bonds (Mobil 11/06 at 102 AA 3,345,048
Oil Corporation Project), Series 1996, 5.900%, 11/01/26 (Alternative
Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 4.3%
1,640,000 Parish of DeSoto, Louisiana, Environmental Improvement Revenue Refunding 6/05 at 102 A3 1,776,645
Bonds, 1995 Series B (International Paper Company Project), 6.550%,
4/01/19 (Alternative Minimum Tax)
1,250,000 Parish of DeSoto, Louisiana, Environmental Improvement Revenue Bonds, 11/08 at 101 A3 1,258,775
1998 Series A (International Paper Company Project), 5.600%,
11/01/22 (Alternative Minimum Tax)
3,000,000 Parish of Natchitoches, Louisiana, Solid Waste Disposal Revenue Bonds 12/03 at 102 A- 3,081,450
(Willamette Industries Project), Series 1993, 5.875%, 12/01/23
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 20.4%
1,000,000 Jefferson Parish Hospital District No. 1, Louisiana, Fixed Rate 1/09 at 101 AAA 954,840
Hospital Revenue Bonds (West Jefferson Medical Center),
Series 1998A, 5.000%, 1/01/21
3,000,000 Jefferson Parish Hospital Service District No. 2, Louisiana, Hospital 7/09 at 101 AAA 2,835,270
Revenue Bonds, Series 1998, 5.000%, 7/01/28
1,000,000 Louisiana Public Facilities Authority, Hospital Revenue and Refunding Bonds 7/07 at 101 AAA 994,660
(Woman's Hospital Foundation Project), Series 1997, 5.375%, 10/01/22
</TABLE>
19
<PAGE>
Portfolio of Investments
Nuveen Flagship Louisiana Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$ 1,000,000 Louisiana Public Facilities Authority, Hospital Revenue Bonds (Franciscan No Opt. Call AAA $1,069,800
Missionaries of Our Lady Health System Project), Series 1998A, 5.750%,
7/01/25
5,000,000 Louisiana Public Facilities Authority, Hospital Revenue and Refunding Bonds 1/08 at 102 BBB+ 4,683,300
(Lincoln Health System Project), Series 1998, 5.150%, 1/01/19
2,300,000 Louisiana Public Facilities Authority, Hospital Revenue Bonds (Touro 8/09 at 101 BBB+ 2,265,270
Infirmary Project), Series 1999A, 5.625%, 8/15/29
1,325,000 Louisiana Public Facilities Authority, Revenue Bonds (Alton Ochsner Medical 5/02 at 102 AAA 1,427,674
Foundation Project), Series 1992-B, 6.500%, 5/15/22
3,400,000 Louisiana Public Facilities Authority, Health Facilities Revenue Refunding No Opt. Call AA+ 3,324,316
Bonds (Sisters of Mercy Health System, St. Louis, Inc.), Series 1993A,
5.000%, 6/01/19
2,500,000 Louisiana Public Facilities Authority, Revenue Bonds (General Health, Inc. 11/04 at 102 AAA 2,763,875
Project), Series 1994, 6.375%, 11/01/24
500,000 Louisiana Public Facilities Authority, Revenue Bonds (Mary Bird Perkins 1/05 at 102 AAA 543,030
Cancer Center Project), Series 1994, 6.200%, 1/01/19
2,180,000 St. Tammany Parish Hospital Service District No. 2, Louisiana, Hospital 10/04 at 102 AAA 2,395,210
Revenue Bonds, Series 1994, 6.250%, 10/01/14
885,000 Hospital Service District No. 1, Parish of Tangipahoa, Louisiana, Hospital 2/04 at 102 AAA 963,358
Revenue Bonds, Series 1994, 6.250%, 2/01/24
4,570,000 Hospital Service District No. 1, Parish of Terrebonne, Louisiana, Hospital 4/08 at 102 AAA 4,543,128
Revenue and Refunding Bonds (Terrebonne General Medical Center Project),
Series 1998, 5.375%, 4/01/28
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 1.5%
750,000 Lake Charles, Louisiana, Non Profit Housing Development Corporation, 10/99 at 100 AAA 758,250
Mortgage Revenue Refunding Bonds, Series 1990A (FHA Insured Mortgage
Loan - Section 8 Assisted Chateau Project), 7.875%, 2/15/25
735,000 Louisiana Public Facilities Authority, Revenue Bonds (Walmsley Housing 6/03 at 103 AAA 790,610
Corporation), Series 1989A, 7.500%, 6/01/21
500,000 Louisiana Public Facilities Authority, Multifamily Housing Revenue Bonds 11/01 at 102 AA 534,020
(VOA National Housing Corporation Projects), Series 1991, 7.750%,
11/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 15.8%
990,000 East Baton Rouge Mortgage Finance Authority, Single Family Mortgage Revenue 8/00 at 102 Aaa 1,026,511
Bonds (GNMA Mortgage Backed Securities Program), Series 1990A, 7.875%,
8/01/23 (Alternative Minimum Tax)
2,235,000 East Baton Rouge Mortgage Finance Authority, Single Family Mortgage 10/07 at 102 Aaa 2,320,690
Revenue Refunding Bonds (GNMA and FNMA Mortgage-Backed Securities
Program), Series 1997D, 5.900%, 10/01/30 (Alternative Minimum Tax)
3,000,000 East Baton Rouge Mortgage Finance Authority, Single Family Mortgage Revenue 10/08 at 101 Aaa 2,967,120
Refunding Bonds (GNMA and FNMA Mortgage-Backed Securities Program), Series
1998C-1, 5.200%, 10/01/23
265,000 Louisiana Housing Finance Agency, Single Family Mortgage Revenue Bonds, 6/05 at 102 Aaa 282,297
Series 1995A-2, 6.550%, 12/01/26 (Alternative Minimum Tax)
Louisiana Housing Finance Agency, Tax Exempt Bonds, Single Family Mortgage
Revenue Bonds, Series 1997B-2:
975,000 5.600%, 6/01/17 (Alternative Minimum Tax) 6/07 at 102 Aaa 998,244
2,445,000 5.750%, 12/01/28 (Alternative Minimum Tax) 6/07 at 102 Aaa 2,504,780
2,440,000 Louisiana Housing Finance Agency, Tax Exempt Bonds, Single Family Mortgage 12/07 at 102 Aaa 2,501,878
Revenue Bonds, Series 1997C-1, 5.750%, 12/01/28 (Alternative Minimum Tax)
Louisiana Housing Finance Agency, Tax Exempt Bonds, Single Family Mortgage
Revenue Bonds (Home Ownership Program), Series 1998B-2:
1,695,000 5.200%, 12/01/26 12/07 at 101 Aaa 1,690,068
1,500,000 5.250%, 6/01/29 (Alternative Minimum Tax) 12/07 at 101 Aaa 1,493,250
480,000 New Orleans, Louisiana, Home Mortgage Authority, Single Family Mortgage 1/00 at 102 Aaa 493,978
Revenue Bonds, Series 1988-C1, 7.750%, 12/01/22 (Alternative Minimum Tax)
1,000,000 New Orleans, Louisiana, Home Mortgage Authority, Single Family Mortgage 12/06 at 102 Aaa 1,048,490
Revenue Bonds, Series 1996A, 6.100%, 12/01/29 (Alternative Minimum Tax)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Single Family (continued)
$1,000,000 New Orleans, Louisiana, Home Mortgage Authority, Single Family Mortgage 12/07 at 102 Aaa $1,033,290
Revenue Bonds, Series 1997A, 5.850%, 12/01/30 (Alternative Minimum Tax)
1,000,000 New Orleans, Louisiana, Home Mortgage Authority, Single Family Mortgage 12/08 at 101 Aaa 990,830
Revenue Refunding Bonds, Series 1998B-2, 5.200%, 12/01/21 (Alternative
Minimum Tax)
Rapides Finance Authority, Louisiana, Single Family Mortgage Revenue
Refunding Bonds (GNMA and Fannie Mae Mortgage-Backed Securities Program),
Series 1998B:
2,000,000 5.450%, 12/01/30 (Alternative Minimum Tax) 6/08 at 102 Aaa 2,012,260
800,000 5.350%, 6/01/26 6/08 at 102 Aaa 804,304
166,189 St. Bernard Parish, Louisiana, Home Mortgage Authority, Single Family No Opt. Call A1 183,483
Mortgage Revenue Refunding Bonds, Series 1991A, 8.000%, 3/25/12
58,428 St. Mary, Louisiana, Public Trust Financing Authority, Single Family No Opt. Call Aaa 65,100
Mortgage Revenue Refunding Bonds, Series 1991A, 7.625%, 3/25/12
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 3.6%
3,000,000 Louisiana Housing Finance Agency, Mortgage Revenue Bonds (GNMA 9/05 at 103 AAA 3,280,560
Collateralized Mortgage Loan -- St. Dominic Assisted Care Facility),
Series 1995, 6.950%, 9/01/36
1,740,000 Louisiana Housing Finance Agency, Mortgage Revenue Bonds (GNMA 1/04 at 101 AAA 1,868,047
Collateralized Mortgage Loan -- Villa Maria Retirement Center Project),
Series 1993, 7.100%, 1/20/35
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 10.5%
500,000 State of Louisiana, General Obligation Bonds, Series 1993-B, 5.625%, No Opt. Call AAA 538,555
8/01/13
City of New Orleans, Louisiana, General Obligation Refunding Bonds,
Series 1991:
2,000,000 0.000%, 9/01/10 No Opt. Call AAA 1,158,400
5,785,000 0.000%, 9/01/16 No Opt. Call AAA 2,361,321
3,000,000 Parishwide School District of the Parish of Orleans, Louisiana, General 3/06 at 100 AAA 2,895,060
Obligation School Bonds, Series 1996, 5.000%, 9/01/20
1,000,000 Parishwide School District of the Parish of Orleans, Louisiana, General 3/08 at 100 Aaa 978,640
Obligation School Bonds, Series 1998A, 5.125%, 9/01/22
13,875,000 Orleans Parish, Louisiana, School Board Public School Refunding Bonds, No Opt. Call AAA 6,064,763
Series 1991, 0.000%, 2/01/15
1,000,000 East Ouachita School District of the Parish of Ouachita, Louisiana, 3/09 at 100 AAA 963,220
General Obligation School Bonds, Series 1999, 5.000%, 3/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 10.5%
1,000,000 Jefferson Sales Tax District, Jefferson Parish, Louisiana, Special 12/02 at 100 AAA 1,092,770
Sales Tax Revenue Bonds, Series 1991B, 6.750%, 12/01/06
2,000,000 Parish School Board, Jefferson Parish, Louisiana, Sales Tax School No Opt. Call AAA 1,260,160
Bonds, Refunding Series 1998, 0.000%, 3/01/09
1,000,000 City of Lafayette, Louisiana, Public Improvement Sales Tax Bonds, 3/07 at 101 AAA 960,670
Series 1998A, 5.000%, 5/01/22
3,000,000 Louisiana Local Government Environmental Facilities and Community No Opt. Call AAA 2,752,080
Development Authority, Revenue Bonds (Capital Projects and Equipment
Acquisition Program), Series 1999, 4.500%, 12/01/18
1,870,000 Louisiana Stadium and Exposition District, Hotel Occupancy Tax Refunding 7/09 at 102 AAA 1,738,109
Bonds, Series 1998B, 4.750%, 7/01/21
1,500,000 Office Facilities Corporation (A Louisiana Non Profit Corporation), 12/01 at 103 BBB+ 1,642,410
Capital Facilities Bonds (Statewide Lease/Purchase Program), Series
1990, 7.750%, 12/01/10
750,000 Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds, 7/16 at 100 A 771,375
Series 1996Y, 5.500%, 7/01/36
250,000 Puerto Rico Public Buildings Authority, Government Facilities Revenue 7/07 at 101 1/2 A 248,533
Bonds, Series B, Guaranteed by the Commonwealth of Puerto Rico,
5.250%, 7/01/21
1,500,000 Parish of St. John the Baptist, Louisiana, Sales Tax District, Public 12/99 at 103 Baa 1,570,815
Improvement Refunding Bonds, Series ST-1989, 7.800%, 12/01/14
2,995,000 City of Shreveport, Louisiana, Certificates of Indebtedness, Series 10/09 at 102 AAA 2,918,538
1998A, 5.000%, 10/01/16
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen Flagship Louisiana Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation -- 1.8%
$ 505,000 New Orleans (Louisiana), Aviation Board Revenue Bonds, Series 10/07 at 102 AAA $ 505,556
1997B-1, 5.450%, 10/01/27 (Alternative Minimum Tax)
2,100,000 City of Shreveport (Louisiana), Airport System Revenue Bonds, 1/08 at 102 AAA 2,081,709
Series 1997A (SMT-Subject), 5.375%, 1/01/28 (Alternative
Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 9.2%
745,000 Louisiana Public Facilities Authority, Hospital Revenue No Opt. Call AAA 900,735
Refunding Bonds (Southern Baptist Hospitals, Inc. Project),
Series 1986, 8.000%, 5/15/12
1,125,000 Louisiana Public Facilities Authority, Hospital Revenue Bonds 10/02 at 102 A3*** 1,256,996
(Woman's Hospital Foundation Project), Series 1992, 7.250%,
10/01/22 (Pre-refunded to 10/01/02)
Louisiana Public Facilities Authority, Hospital Revenue Refunding
Bonds (Lafayette General Medical Center Project), Series 1992:
1,000,000 6.400%, 10/01/12 (Pre-refunded to 10/01/02) 10/02 at 102 AAA 1,095,300
2,000,000 6.500%, 10/01/22 (Pre-refunded to 10/01/02) 10/02 at 102 AAA 2,196,800
10,000,000 Louisiana Public Facilities Authority, Revenue Bonds, Custodial No Opt. Call AAA 3,475,700
Receipts, Series 1990B, 0.000%, 12/01/19
2,000,000 City of New Orleans, Audubon Park Commission, Aquarium Revenue 4/02 at 102 N/R*** 2,246,440
Bonds, Series 1992, 8.000%, 4/01/12 (Pre-refunded to 4/01/02)
1,400,000 Ouachita Parish (Louisiana), Hospital Service District No. 1, 7/01 at 102 A*** 1,527,092
Revenue Bonds (Glenwood Regional Medical Center), Series 1991,
7.500%, 7/01/21 (Pre-refunded to 7/01/01)
250,000 Shreveport (Louisiana), Home Mortgage Authority, Single Family No Opt. Call Aaa 279,745
Mortgage Revenue Bonds, Series 1979A, 6.750%, 9/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities -- 10.2%
3,000,000 Lake Charles Harbor and Terminal District, Louisiana, Port 8/02 at 103 A3 3,380,550
Facilities Revenue Refunding Bonds, Series 1992 (Trunkline
LNG Company Project), Panhandle Eastern Corporation,
7.750%, 8/15/22
6,910,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/08 at 101 1/2 BBB+ 6,628,625
Series DD, 5.000%, 7/01/28
250,000 Puerto Rico Electric Power Authority, Power Revenue 7/05 at 100 BBB+ 249,178
Refunding Bonds, Series Z, 5.250%, 7/01/21
1,000,000 Parish of St. Charles, Louisiana, Environmental Improvement 11/02 at 102 BBB 1,035,480
Revenue, Louisiana Power and Light Company Project, Series A,
6.200%, 5/01/23 (Alternative Minimum Tax)
1,000,000 Parish of St. Charles, State of Louisiana Environmental 11/00 at 102 BBB- 1,025,330
Revenue Bonds (Louisiana Power and Light Company Project),
Series 1995, 6.375%, 11/01/25 (Alternative Minimum Tax)
500,000 Parish of St. Charles, Louisiana, Pollution Control Revenue 12/99 at 103 Baa3 522,885
Bonds (Louisiana Power and Light Company), 2nd Series 1984,
8.000%, 12/01/14
1,500,000 Parish of St. Charles, Louisiana, Solid Waste Disposal Revenue 12/02 at 102 BBB 1,618,901
Bonds (Louisiana Power and Light Company Project), Series 1992A,
7.000%, 12/01/22 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer -- 1.1%
1,500,000 Louisiana Public Facilities Authority, Revenue Bonds, Series 1992, 2/03 at 101 AA- 1,611,600
Baton Rouge Water Works Company Project, 6.400%, 2/01/10
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
$157,124,617 Total Investments (cost $133,510,305) -- 99.1% 140,563,590
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 0.9% 1,285,413
-------------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $141,849,003
===================================================================================================================
</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.
22
<PAGE>
Portfolio of Investments
Nuveen Flagship North Carolina Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 5.4%
North Carolina Educational Facilities Finance Agency, Revenue Bonds
(High Point College Project), Series 1989:
$ 165,000 7.050%, 12/01/05 12/99 at 102 A3 $ 170,930
175,000 7.100%, 12/01/06 12/99 at 102 A3 181,333
4,220,000 North Carolina Educational Facilities Finance Agency, Refunding Revenue 10/06 at 102 AA+ 4,182,231
Bonds (Duke University Project), Series 1996B, 5.000%, 10/01/17
1,250,000 North Carolina Educational Facilities Finance Agency, Revenue Bonds 11/07 at 102 AA 1,231,463
(Wake Forest University), Series 1997, 5.000%, 11/01/17
1,000,000 State of North Carolina, State Education Assistance Authority, 7/05 at 102 A 1,047,960
Guaranteed Student Loan Revenue Bonds, 1995 Series A (Subordinate
Lien), 6.300%, 7/01/15 (Alternative Minimum Tax)
295,000 Board of Governors of the University of North Carolina at Chapel Hill, 6/01 at 102 AAA 319,408
Student Fee Revenue Bonds, Series 1991 (Student Recreation Center),
7.000%, 6/01/08
Board of Governors of the University of North Carolina at Chapel Hill,
Utilities System Revenue Refunding Bonds, Series 1997:
4,000,000 0.000%, 8/01/15 No Opt. Call AA 1,765,720
4,265,000 0.000%, 8/01/18 No Opt. Call AA 1,581,889
2,750,000 0.000%, 8/01/20 No Opt. Call AA 912,175
- ------------------------------------------------------------------------------------------------------------------------------------
Energy - 0.6%
1,100,000 New Hanover County, North Carolina Industrial Facilities and Pollution 7/02 at 102 BBB 1,173,898
Control Financing Authority,Revenue Refunding Bonds (Occidental
Petroleum Corporation Project), Series 1992, 6.700%, 7/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 8.6%
1,400,000 The Haywood County Industrial Facilities and Pollution Control 9/05 at 102 Baa1 1,478,778
Financing Authority (North Carolina), Environmental Improvement
Revenue Bonds (Champion International Corporation Project), Series
1995, 6.250%, 9/01/25 (Alternative Minimum Tax)
4,000,000 The Haywood County Industrial Facilities & Pollution Control 10/03 at 102 Baa1 3,941,200
Financing Authority (North Carolina), Solid Waste Disposal Revenue
Bonds (Champion International Corporation Project), Series 1993,
5.500%, 10/01/18 (Alternative Minimum Tax)
3,100,000 The Haywood County Industrial Facilities and Pollution Control 3/06 at 102 Baa1 3,207,694
Financing Authority (North Carolina), Variable Rate Demand Pollution
Control Refunding Revenue Bonds (Champion International Corporation
Project), Series 1995, 6.000%, 3/01/20
1,900,000 The Martin County Industrial Facilities and Pollution Control 9/01 at 103 A 2,049,435
Financing Authority (North Carolina), Solid Waste Revenue Disposal
Revenue Bonds (Weyerhaeuser Company Project), Series 1991,
7.250%, 9/01/14 (Alternative Minimum Tax)
6,000,000 The Martin County Industrial Facilities and Pollution Control Financing 5/04 at 102 A 6,520,320
Authority (North Carolina), Solid Waste Disposal Revenue Bonds
(Weyerhaeuser Company Project), Series 1994, 6.800%, 5/01/24
(Alternative Minimum Tax)
1,000,000 The Martin County Industrial Facilities and Pollution Control Financing 11/05 at 102 A 1,037,050
Authority (North Carolina), Solid Waste Disposal Revenue Bonds
(Weyerhaeuser Company Project), Series 1995 6.000%, 11/01/25
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 21.1%
The Charlotte-Mecklenburg Hospital Authority (North Carolina),
Health Care System Revenue Refunding Bonds, Series A:
5,300,000 5.750%, 1/15/21 1/06 at 102 AA 5,535,850
5,500,000 5.875%, 1/15/26 1/06 at 102 AA 5,792,270
</TABLE>
23
<PAGE>
Portfolio of Investments
Nuveen Flagship North Carolina Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Health Care (continued)
$ 6,000,000 The Charlotte-Mecklenburg Hospital Authority (North Carolina), 1/07 at 102 AA $ 5,789,340
Health Care System Revenue Bonds, Series 1997A, Doing Business as
Carolina Healthcare System, 5.125%, 1/15/22
4,000,000 County of Cumberland (North Carolina), Hospital Facility Revenue 10/09 at 101 A- 3,827,360
Bonds (Cumberland County Hospital System, Inc.), Series 1999,
5.250%, 10/01/29
North Carolina Medical Care Commission, Health Care Facilities
Revenue Bonds (Duke University Health System), Series 1998A:
5,000,000 5.000%, 6/01/23 6/08 at 101 AA 4,787,750
4,500,000 4.750%, 6/01/28 6/08 at 101 AA 4,064,670
1,000,000 North Carolina Medical Care Commission, Hospital Revenue Bonds 2/02 at 102 Baa3 1,107,180
(Annie Penn Memorial Hospital Project), Series 1991, 7.500%, 8/15/21
4,000,000 North Carolina Medical Care Commission, Hospital Revenue Bonds 12/08 at 101 AA- 3,876,440
(Pitt County Memorial Hospital), Series 1998A, 5.000%, 12/01/18
2,000,000 North Carolina Medical Care Commission, Hospital Revenue Bonds 10/08 at 101 AAA 1,946,600
(Mission - St. Joseph's Health System) Series 1998, 5.125%, 10/01/28
2,500,000 Northern Hospital District, Surry County (North Carolina), Health 10/01 at 102 BBB 2,675,400
Care Facilities Revenue Refunding Bonds, Series 1991,
7.875%, 10/01/21
5,750,000 Board of Governors of the University of North Carolina, University of 2/06 at 102 AA 5,656,218
North Carolina Hospitals at Chapel Hill, Revenue Bonds, Series
1996, 5.250%, 2/15/26
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 1.0%
1,340,000 Housing Authority of the City of Asheville (North Carolina), 11/07 at 102 AAA 1,385,801
Multifamily Housing Revenue Bonds (GNMA Collateralized Woodridge
Apartments), Series 1997, 5.750%, 11/20/29 (Alternative Minimum Tax)
620,000 North Carolina Housing Finance Agency, Multifamily Revenue Refunding 7/02 at 102 AA 663,226
Bonds (1992 Refunding Bond Resolution), Series B, 6.900%, 7/01/24
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 16.6%
610,000 North Carolina Housing Finance Agency, Single Family Revenue Bonds, 3/01 at 102 AA 641,256
Series O (1985 Resolution), 7.600%, 3/01/21 (Alternative Minimum
Tax)
North Carolina Housing Finance Agency, Single Family Revenue Bonds,
Series Y, (1985 Resolution):
2,000,000 6.300%, 9/01/15 9/04 at 102 AA 2,136,160
1,845,000 6.350%, 3/01/18 9/04 at 102 AA 1,969,519
1,865,000 North Carolina Housing Finance Agency, Single Family Revenue Bonds, 3/05 at 102 AA 1,982,514
Series BB, (1985 Resolution), 6.500%, 9/01/26 (Alternative Minimum
Tax)
3,405,000 North Carolina Housing Finance Agency, Single Family Revenue Bond, 3/05 at 102 AA 3,566,669
Series DD, (1985 Resolution), 6.200%, 9/01/27 (Alternative Minimum Tax)
4,360,000 North Carolina Housing Finance Agency, Single Family Revenue Bonds, 3/06 at 102 AA 4,587,984
Series LL (1985 Resolution), 6.200%, 3/01/26 (Alternative Minimum
Tax)
6,550,000 North Carolina Housing Finance Agency, Single Family Revenue Bonds, 3/07 at 101 1/2 AA 6,800,865
Series RR (1985 Resolution), 5.850%, 9/01/28 (Alternative Minimum
Tax)
1,635,000 North Carolina Housing Finance Agency, Single Family Revenue Bonds, 3/08 at 101 AA 1,630,259
Series VV (1985 Resolution), 5.250%, 3/01/17 (Alternative Minimum
Tax)
2,500,000 North Carolina Housing Finance Agency, Home Ownership Revenue Bonds, 7/08 at 101 AA 2,478,450
Series 2-A (1998 Trust Agreement), 5.250%, 7/01/26
(Alternative Minimum Tax)
4,370,000 North Carolina Housing Finance Agency, Home Ownership Revenue Bonds, 1/09 at 101 AA 4,325,907
Series 3-A (1998 Trust Agreement), 5.200%, 7/01/26
(Alternative Minimum Tax)
5,000,000 North Carolina Housing Finance Agency, Home Ownership Revenue Bonds, 1/09 at 100 AA 4,978,350
Series 4-A (1998 Trust Agreement), 5.300%, 7/01/26
(Alternative Minimum Tax)
505,000 Winston Salem, North Carolina, Single Family Mortgage Revenue Bonds, 9/00 at 102 A1 521,519
Series 1990, 8.000%, 9/01/07 (Alternative Minimum Tax)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial/Other - 0.7%
$ 1,400,000 Gaston County, Industrial Facilities and Pollution Control Financing 11/01 at 103 N/R $ 1,497,300
Authority North Carolina, Industrial Development Revenue Bonds,
Series 1985 (ABB-Combustion Engineering Inc.), 8.850%, 11/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 13.9%
500,000 City of Asheville, North Carolina, Certificates of Participation, 2/02 at 102 A1 536,440
Series 1992, 6.500%, 2/01/08
1,000,000 City of Asheville, North Carolina, Certificates of Participation, 6/07 at 101 AAA 996,390
Series 1997A, 5.125%, 6/01/18
City of Charlotte, North Carolina, General Obligation Water and Sewer
Bonds, Series 1995A:
500,000 5.400%, 4/01/19 4/05 at 102 AAA 515,550
3,445,000 5.400%, 4/01/20 4/05 at 102 AAA 3,548,625
600,000 City of Durham, North Carolina, Certificates of Participation, 6/05 at 102 AA 641,766
Series 1995, 5.800%, 6/01/15
County of Harnett, North Carolina Certificates of Participation,
Series 1994 (Harnett County Projects):
1,000,000 6.200%, 12/01/06 12/04 at 102 AAA 1,103,970
1,750,000 6.200%, 12/01/09 12/04 at 102 AAA 1,931,948
500,000 6.400%, 12/01/14 12/04 at 102 AAA 556,705
County of Pitt, North Carolina Certificates of Participation
(Pitt County Public Facilities Project) Series 1997A:
1,250,000 5.550%, 4/01/12 4/07 at 102 AAA 1,316,450
1,000,000 5.850%, 4/01/17 4/07 at 102 AAA 1,069,290
10,000,000 Puerto Rico Commonwealth Highway and Transportation Authority, Highway 7/16 at 100 A 10,285,000
Revenue Bonds, Series 1996Y, 5.500%, 7/01/36
555,000 Puerto Rico Infrastructure Finance Authority, Special Tax Revenue 7/99 at 101 BBB+ 567,854
Bonds, Series 1988A, 7.750%, 7/01/08
1,000,000 Puerto Rico Public Buildings Authority, Revenue Refunding Bonds, No Opt. Call A 1,047,840
Series L, Guaranteed by the Commonwealth of Puerto Rico,
5.500%, 7/01/21
Town of Ramseur, North Carolina General Obligation Water Refunding Bonds,
Series 1997:
120,000 5.750%, 6/01/18 6/07 at 102 N/R 122,725
125,000 5.750%, 6/01/19 6/07 at 102 N/R 127,314
125,000 5.750%, 6/01/20 6/07 at 102 N/R 126,911
130,000 5.750%, 6/01/21 6/07 at 102 N/R 131,658
105,000 5.750%, 6/01/22 6/07 at 102 N/R 106,261
715,000 County of Stokes, North Carolina, Certificates of Participation, Series 3/01 at 102 AAA 766,037
1991, 7.000%, 3/01/06
1,410,000 County of Union, North Carolina, Certificates of Participation, Series 4/03 at 102 AAA 1,534,080
1992, 6.375%, 4/01/12
2,375,000 City of Winston-Salem, North Carolina, Special Obligation Bonds 4/05 at 102 AA 2,450,311
(Solid Waste Management Project), Series 1995, 5.500%, 4/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 9.4%
135,000 Asheville, North Carolina, Housing Development Corporation, First Lien 11/09 at 100 N/R*** 176,791
Revenue Bonds, Series 1980, 10.500%, 5/01/11 (Pre-refunded to 11/01/09)
1,500,000 County of Buncombe, North Carolina, Certificates of Participation (1992 12/02 at 102 Aa3*** 1,660,845
Buncombe County Project), 6.625%, 12/01/10 (Pre-refunded to 12/01/02)
1,900,000 Craven Regional Medical Authority, North Carolina, Insured Health Care 10/00 at 102 AAA 2,029,694
Facilities Revenue Bonds, Series 1990, 7.200%, 10/01/19 (Pre-refunded
to 10/01/00)
705,000 City of Durham, North Carolina, Certificates of Participation (1990 9/00 at 102 Aa*** 751,629
Financing Project), 7.250%, 9/01/10 (Pre-refunded to 9/01/00)
1,000,000 City of Durham, North Carolina, Certificates of Participation, Series 12/01 at 102 Aa3*** 1,090,540
1991, 6.750%, 12/01/11 (Pre-refunded to 12/01/01)
2,055,000 North Carolina Medical Care Commission, Health Care Facilities 10/99 at 102 AAA 2,126,596
Revenue Bonds (Stanly Memorial Hospital Project), Series 1989,
7.800%, 10/01/19 (Pre-refunded to 10/01/99)
995,000 North Carolina Eastern Municipal Power Agency, Power System Revenue No Opt. Call AAA 1,174,936
Refunding Bonds, Series 1991A, 6.500%, 1/01/18
75,000 North Carolina Medical Care Commission, Hospital Revenue Bonds No Opt. Call AAA 86,882
(Memorial Mission Hospital Project), Series A, 7.625%, 10/01/08
</TABLE>
25
<PAGE>
Portfolio of Investments
Nuveen Flagship North Carolina Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Guaranteed (continued)
North Carolina Medical Care Commission, Hospital
Revenue Bonds (Halifax Memorial Hospital
Project) Series 1992:
$ 1,275,000 6.750%, 8/15/14 (Pre-refunded to 8/15/02) 8/02 at 102 Baa1*** $ 1,403,138
1,000,000 6.750%, 8/15/24 (Pre-refunded to 8/15/02) 8/02 at 102 Baa1*** 1,100,500
2,200,000 North Carolina Medical Care Commission, Hospital Revenue Bonds (Roanoke, 10/99 at 102 Aaa 2,276,274
Chowan Hospital Project), Series 1989, 7.750%, 10/01/19 (Pre-refunded
to 10/01/99)
600,000 North Carolina Medical Care Commission, Hospital Revenue Bonds 10/99 at 102 N/R*** 620,988
(Transylvania Community Hospital Project), Series 1989, 8.000%,
10/01/19 (Pre-refunded to 10/01/99)
3,400,000 North Carolina Medical Care Commission, Hospital Revenue Bonds 10/00 at 102 AA*** 3,669,280
(Community General Hospital of Thomasville), Series 1990, 8.100%,
10/01/15 (Pre-refunded to 10/01/00)
700,000 County of Pender, North Carolina, Certificates of Participation, 6/01 at 102 Baa1*** 767,179
Series 1991, 7.700%, 6/01/11 (Pre-refunded to 6/01/01)
1,000,000 County of Pitt, North Carolina, Certificates of Participation, 6.900%, 4/00 at 102 AAA 1,049,680
4/01/08 (Pre-refunded to 4/01/00)
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 14.9%
Coastal Regional Solid Waste Management Authority, North Carolina, Solid
Waste System Revenue Bonds, Series 1992:
1,000,000 6.500%, 6/01/08 6/02 at 102 A 1,071,710
1,000,000 6.300%, 6/01/04 6/02 at 102 A 1,071,790
1,000,000 City of Concord, North Carolina, Utilities Systems Revenue Bonds, Series 12/05 at 102 AAA 1,030,460
1995, 5.500%, 12/01/19
3,000,000 City of Concord, North Carolina, Utilities Systems Refunding Revenue 12/08 at 101 AAA 2,955,480
Bonds, Series 1998B, 5.000%, 12/01/17
City of Fayetteville, North Carolina, Public Works
Commission Revenue Bonds, Series 1995A:
1,845,000 5.250%, 3/01/16 3/05 at 102 AAA 1,864,170
1,000,000 5.375%, 3/01/20 3/05 at 102 AAA 1,010,650
5,900,000 City of Fayetteville, North Carolina, Public Works Commission Revenue 3/07 at 101 AAA 5,810,025
Bonds, Series 1997, 5.125%, 3/01/24
1,500,000 City of Gastonia, North Carolina, Combined Utilities System Revenue 5/08 at 102 AAA 1,455,090
Bonds, Series 1998, 4.750%, 5/01/15
2,000,000 City of Greenville, North Carolina, Utilities Commission Combined 9/04 at 102 A+ 2,146,680
Enterprise System Revenue Bonds, Series 1994, 6.000%, 9/01/16
5,300,000 North Carolina Eastern Municipal Power Agency, Power System Revenue No Opt. Call AAA 5,844,681
Bonds, Refunding Series 1993B, 6.000%, 1/01/18
5,250,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series DD, 7/08 at 101 1/2 BBB+ 5,036,220
5.000%, 7/01/28
870,000 City of Shelby, North Carolina, Combined Enterprise System Revenue 5/05 at 102 A- 883,067
Bonds, Series 1995A, 5.500%, 5/01/17
1,470,000 City of Shelby, North Carolina, Combined Enterprise System Revenue 5/05 at 102 A- 1,492,079
Refunding Bonds, Series 1995B, 5.500%, 5/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 6.9%
2,000,000 City of Asheville, North Carolina, Water System Revenue Bonds, 8/06 at 102 AAA 2,102,920
Series 1996, 5.700%, 8/01/25
1,000,000 County of Dare, North Carolina, Utilities System Revenue Bonds, Series 6/08 at 102 AAA 930,160
1998A, 4.750%, 6/01/24
3,400,000 City of Greensboro, North Carolina, Combined Enterprise System Revenue 6/05 at 102 AA- 3,457,460
Bonds, Series 1995A, 5.375%, 6/01/19
2,500,000 City of Raleigh, North Carolina, Combined Enterprise System Revenue 3/09 at 101 AA+ 2,326,075
Bonds, Series 1999, 4.750%, 3/01/24
3,000,000 County of Union, North Carolina, Enterprise Systems Revenue Bonds, 6/06 at 102 AAA 3,097,830
Series 1996, 5.500%, 6/01/17
City of Winston-Salem, North Carolina Water and Sewer System Revenue
Bonds Series 1995B:
750,000 5.600%, 6/01/14 6/05 at 102 AA+ 781,658
1,500,000 5.700%, 6/01/17 6/05 at 102 AA+ 1,569,090
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer (continued)
$ 406,337 Woodfin Treatment Facility, Inc., North Carolina, Proportionate Interest No Opt. Call N/R $ 408,212
Certificates, 5.500%, 12/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
$212,611,337 Total Investments - (cost $201,689,801) - 99.1% 210,839,925
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.9% 1,957,604
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $212,797,529
===================================================================================================================
</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.
27
<PAGE>
Portfolio of Investments
Nuveen Flagship Tennessee Municipal Bond Fund
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Basic Materials - 5.0%
$3,000,000 Industrial Development Board of the City of Chattanooga (Tennessee), 7/03 at 103 AA- $ 3,257,160
Pollution Control Revenue Bonds, Series 1982A (E.I. du Pont de
Nemours & Company), 6.350%, 7/01/22
12,000,000 The Industrial Development Board of Humphreys County, Tennessee, Solid 5/04 at 102 AA- 13,187,280
Waste Disposal Facility Bonds (E.I. du Pont de Nemours and Company
Project), 6.700%, 5/01/24 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclical - 2.3%
7,000,000 The Industrial Development Board of Maury County, Tennessee, Multi-Modal 9/04 at 102 A 7,657,370
Interchangeable Rate Pollution Control Refunding Revenue Bonds (Saturn
Corporation Project), Series 1994, 6.500%, 9/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Staples - 0.5%
250,000 Memphis, Shelby County, Tennessee, Industrial Development Board No Opt. Call A1 268,935
Industrial Development Revenue Bonds (Colonial Baking Company Memphis
Project), Series 1981, 9.500%, 4/01/01
1,245,000 Industrial Development Board of the City of South Fulton, Tennessee, 10/05 at 102 A3 1,335,574
Industrial Development Revenue Bonds (Tyson Foods, Inc. Project),
Series 1995, 6.400%, 10/01/20 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Education and Civic Organizations - 1.9%
3,705,000 Tennessee State School Bond Authority, Higher Educational Facilities 5/02 at 101 1/2 AAA 3,999,955
Bonds, 1992 Series A, 6.250%, 5/01/22
2,000,000 Tennessee State School Bond Authority, Higher Educational Facilities 5/06 at 101 1/2 AA+ 2,099,320
Bonds, 1996 Series C, 5.700%, 5/01/20
- -----------------------------------------------------------------------------------------------------------------------------------
Forest and Paper Products - 4.7%
6,750,000 The Industrial Development Board of Loudon County (Tennessee), Solid 2/03 at 102 AA 7,183,688
Waste Disposal Revenue Bonds (Kimberly-Clark Corporation Project),
Series 1993, 6.200%, 2/01/23 (Alternative Minimum Tax)
2,500,000 The Industrial Development Board of the County of McMinn (Tennessee), 3/01 at 102 Baa1 2,666,300
Pollution Control Facilities Revenue Bonds, Series 1991 (Calhoun
Newsprint Company Project-Bowater Incorporated Obligor) (The
Construction Bonds), 7.625%, 3/01/16 (Alternative Minimum Tax)
4,950,000 The Industrial Development Board of the County of McMinn (Tennessee) 12/02 at 102 Baa1 5,438,912
Solid Waste Recycling Facilities Revenue Bonds, Series 1992 (Calhoun
Newsprint Company Project-Bowater Incorporated Obligor), 7.400%,
12/01/22 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 15.3%
3,060,000 Blount County, Tennessee, Hospital Revenue Improvement Bonds, Series 7/08 at 100 Baa1 2,857,520
1998B, 5.125%, 7/01/19
4,000,000 The Health, Educational and Housing Facility Board, the City of 6/08 at 101 A- 3,738,000
Chattanooga, Tennessee, Hospital Improvement and Refunding
Revenue Bonds, Series 1998 (Siskin Hospital for Physical
Rehabilitation, Inc. Project), 5.250%, 6/01/28
1,550,000 The Industrial Development Board of the City of Cookeville, Tennessee, 10/03 at 102 A 1,629,577
Hospital Refunding Revenue Bonds, Series 1993 (Cookeville General
Hospital Project), 5.750%, 10/01/10
7,350,000 The City of Jackson, Tennessee, Hospital Revenue Refunding and 4/05 at 102 AAA 7,589,096
Improvement Bonds, Series 1995 (Jackson-Madison County General
Hospital Project), 5.625%, 4/01/15
2,090,000 The Health and Educational Facilities Board of the City of Johnson 7/01 at 102 AAA 2,242,612
City, Tennessee, Hospital Revenue Refunding and Improvement Bonds,
Series 1991 (Johnson City Medical Center Hospital), 6.750%, 7/01/16
The Health and Educational Facilities Board of the City of Johnson City,
Tennessee, Hospital Revenue Refunding and Improvement Bonds, Series 1998C
(Johnson City Medical Center Hospital):
5,000,000 5.125%, 7/01/25 1/09 at 101 AAA 4,859,600
5,000,000 5.250%, 7/01/28 1/09 at 101 AAA 4,922,750
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Health Care (continued)
The Health, Educational and Housing Facilities Board of the County
of Knox, Tennessee, Hospital Revenue Bonds, Series 1993A
(Fort Sanders Alliance Obligated Group):
$ 1,000,000 6.250%, 1/01/13 No Opt. Call AAA $ 1,130,110
3,000,000 5.250%, 1/01/15 No Opt. Call AAA 3,072,210
1,250,000 The Health and Educational Facilities Board of the Metropolitan 11/05 at 102 AAA 1,308,325
Government of Nashville and Davidson Counties, Tennessee, Hospital
Revenue Bonds, Series 1995 (Adventist Health Group),
5.750%, 11/15/25
2,395,000 The Health and Educational Facilities Board of the Metropolitan 11/01 at 102 AAA 2,604,275
Government of Nashville and Davidson Counties, Tennessee, Hospital
Revenue Bonds, Series 1991 (Adventist Health System -
Sunbelt, Inc.), 7.000%, 11/15/16
7,500,000 The Health and Educational Facilities Board of the Metropolitan 5/09 at 101 AA+ 7,154,625
Government of Nashville and Davidson Counties, Tennessee, Hospital
Revenue Bonds (Charity Obligated Group), Series 1999A,
5.125%, 11/01/27
4,000,000 Shelby County, Tennessee, Health, Educational and Housing Facility Board, 8/05 at 100 AAA 4,017,480
Formerly Shelby County, Health System Inc., 5.250%, 8/01/15
2,500,000 Sumner County Tennessee Health, Educational and Housing Facilities Board, 11/04 at 102 A- 2,799,550
Revenue Refunding Bonds, Sumner Regional Health System Inc.,
Series 1994, 7.500%, 11/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 1.7%
1,200,000 The Health, Educational and Housing Facility Board of the City of 7/03 at 102 Aaa 1,248,948
Chattanooga, Tennessee, Multifamily Mortgage Revenue Refunding Bonds,
Series 1993A (Windridge Apartments-FHA Insured Mortgage),
5.950%, 7/01/14
3,500,000 The Industrial Development Board of the City of Franklin, Tennessee, 10/06 at 102 AAA 3,667,895
Multifamily Housing Revenue Refunding Bonds (The Landings Apartments
Project), Senior Series 1996A, 6.000%, 10/01/26
Metropolitan Government Nashville and Davidson Counties, Tennessee,
Health and Educational Facilities Board, Revenue Board, Housing,
Mortgage, Herman Street:
250,000 7.000%, 6/01/17 6/02 at 103 AAA 268,300
495,000 7.250%, 6/01/32 6/02 at 103 AAA 533,625
- -----------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 11.5%
235,000 County of Hamilton, Tennessee, Single Family Mortgage Revenue Bonds 9/00 at 102 AAA 244,275
(Home Purchase and Rehabilitation Program), Series 1990, 8.000%,
9/01/23 (Alternative Minimum Tax)
6,000,000 Tennessee Housing Development Agency, Homeownership Program Bonds, 7/06 at 102 AA 6,388,980
Issue 4A, 6.375%, 7/01/22 (Alternative Minimum Tax)
990,000 Tennessee Housing Development Agency, Homeownership Program Bonds, 7/07 at 102 AA 1,031,293
Issue 1996-3, 5.850%, 7/01/17 (Alternative Minimum Tax)
120,000 Tennessee Housing Development Agency, Homeownership Program Bonds, 7/01 at 102 AA 125,658
Issue U, 7.400%, 7/01/16
3,900,000 Tennessee Housing Development Agency, Homeownership Program Bonds, 7/01 at 102 AA 4,075,695
Issue T, 7.375%, 7/01/23 (Alternative Minimum Tax)
2,695,000 Tennessee Housing Development Agency, Homeownership Program Bonds, 7/02 at 102 AA 2,840,341
Issue WR, 6.800%, 7/01/17
Tennessee Housing Development Agency, Homeownership Program Bonds,
Issue 1998-2:
4,000,000 5.350%, 7/01/23 (Alternative Minimum Tax) 1/09 at 101 AA 4,015,840
10,145,000 5.375%, 7/01/29 (Alternative Minimum Tax) 1/09 at 101 AA 10,164,783
7,700,000 Tennessee Housing Development Agency, Homeownership Program Bonds, 1/09 at 101 AA 7,727,335
Issue 1996-5B (Remarketing), 5.375%, 7/01/23 (Alternative Minimum Tax)
1,000,000 Tennessee Housing Development Agency, Mortgage Finance Program Bonds, 7/04 at 102 A+ 1,068,720
1994 Series A, 6.900%, 7/01/25 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Care - 2.3%
2,925,000 The Health and Educational Facilities Board of the Metropolitan Government 2/08 at 102 AA 2,961,270
of Nashville and Davidson Counties, Tennessee, Multi-Modal
Interchangeable Rate, Health Facility Revenue Bonds (Richland Place, Inc.
Project), Series 1993, 5.500%, 5/01/23
4,700,000 The Health and Educational Facilities Board of the Metropolitan 7/08 at 102 N/R 4,508,287
Government of Nashville and Davidson Counties, Tennessee, Revenue
Refunding Bonds, Series 1998 (The Blakford at Green Hills),
5.650%, 7/01/24
</TABLE>
29
<PAGE>
Portfolio of Investments
Nuveen Flagship Tennessee Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Obligation/General -- 5.1%
Hamilton County, Tennessee, General Obligation Bonds,
Series 1995:
$ 2,025,000 6.300%, 2/01/25 2/05 at 102 Aa2 $ 2,266,866
1,000,000 6.250%, 2/01/20 2/05 at 102 Aa2 1,116,940
4,000,000 The Metropolitan Government of Nashville and Davidson 5/07 at 102 AA 3,882,600
Counties, Tennessee, General Obligation Refunding Bonds,
Series 1997, 5.125%, 5/15/25
8,000,000 The Metropolitan Government of Nashville and Davidson 5/06 at 101 AA 8,505,200
Counties, Tennessee, General Obligation
Public Improvement Bonds, Series 1996, 5.875%, 5/15/21
750,000 Shelby County, Tennessee, General Obligation Refunding Bonds, 4/05 at 101 AA+ 781,898
1995 Series A, 5.625%, 4/01/14
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited -- 12.6%
3,500,000 The Industrial Development Board of Fayetteville and Lincoln 5/08 at 100 Aaa 3,487,015
Counties, Tennessee, Hospital Facility Lease Revenue and Tax
Bonds, Series 1998 (ULT), 5.300%, 5/01/28
The Health and Educational Facilities Board of the Metropolitan
Government of Nashville and Davidson Counties, Tennessee,
Revenue Refunding and Improvement Bonds (Meharry Medical
College Project), Series 1996:
1,000,000 6.000%, 12/01/19 12/17 at 100 AAA 1,114,320
4,000,000 5.000%, 12/01/24 6/09 at 100 AAA 3,835,880
5,000,000 The Sports Authority of the Metropolitan Government of 7/06 at 101 AAA 5,267,900
Nashville and Davidson Counties, Public Improvement Revenue
Bonds (Stadium Project), Series 1996, 5.750%, 7/01/26
6,275,000 Puerto Rico Commonwealth Highway and Transportation 7/16 at 100 A 6,453,838
Authority, Highway Revenue Bonds, Series 1996Y, 5.500%,
7/01/36
500,000 Puerto Rico Commonwealth Highway and Transportation No Opt. Call AAA 534,545
Authority, Highway Revenue Bonds, Series W, 5.500%,
7/01/15
13,300,000 Puerto Rico Public Buildings Authority, Revenue Refunding No Opt. Call A 13,936,272
Bonds, Series L, Guaranteed by the Commonwealth of Puerto
Rico, 5.500%, 7/01/21
Tennessee State Local Development Authority, Revenue Bonds,
State Loan Program Series A:
1,325,000 7.000%, 3/01/12 3/01 at 102 AA 1,422,520
1,175,000 7.000%, 3/01/21 3/01 at 102 AA 1,261,480
2,660,000 Tennessee State Local Development Authority, Revenue Bonds, 10/02 at 102 A 2,899,852
Community Provider Loan Program, 7.000%, 10/01/21
1,000,000 Wilson County, Tennessee, Certificates of Participation, 3/08 at 102 AAA 992,250
Series 1998, School Facilities Lease Agreement with Wilson
County Educational Facilities Development Corporation,
5.250%, 3/30/18
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation -- 4.7%
5,545,000 Memphis-Shelby County Airport Authority (Tennessee), 9/01 at 103 BBB 6,081,091
Special Facilities Revenue Bonds, Series 1984
(Federal Express Corporation), 7.875%, 9/01/09
4,100,000 Memphis-Shelby County Airport Authority (Tennessee), 9/02 at 102 BBB 4,445,958
Special Facilities Revenue Refunding Bonds, Series 1992
(Federal Express Corporation), 6.750%, 9/01/12
Metropolitan Nashville Airport Authority (Tennessee), Airport
Improvement Revenue Bonds, Refunding Series 1991C:
145,000 6.625%, 7/01/07 7/01 at 102 AAA 155,562
4,385,000 6.600%, 7/01/15 7/01 at 102 AAA 4,696,686
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed -- 15.5%
1,000,000 City of Chattanooga, Tennessee, General Obligation Bonds, 5/00 at 102 AA*** 1,055,080
Series 1990, Various Purpose, 7.250%, 5/01/12
(Pre-refunded to 5/01/00)
1,930,000 The Health, Educational and Housing Facility Board of the 9/01 at 102 AAA 2,084,921
City of Chattanooga, Tennessee, Hospital Revenue Bonds,
Series 1991A (Memorial Hospital Project), 6.600%, 9/01/12
(Pre-refunded to 9/01/01)
City of Clarksville, Tennessee, Hospital Revenue Refunding and
Improvement Bonds, Series 1993 (Clarksville Memorial Hospital
Project):
1,000,000 6.250%, 7/01/08 (Pre-refunded to 7/01/03) 7/03 at 102 Baa1*** 1,096,930
1,775,000 6.250%, 7/01/13 (Pre-refunded to 7/01/03) 7/03 at 102 Baa1*** 1,947,051
1,250,000 6.375%, 7/01/18 (Pre-refunded to 7/01/03) 7/03 at 102 Baa1*** 1,376,988
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Guaranteed (continued)
$ 1,125,000 Eastside Utility District of Hamilton County, Tennessee, Water System 11/01 at 102 A*** $ 1,225,665
Revenue Bonds, Series 1992, 6.750%, 11/01/11 (Pre-refunded to 11/01/01)
1,455,000 Gladeville Utility District of Wilson County, Tennessee, Waterworks 10/00 at 100 AAA 1,531,198
Revenue Bonds, Series 1990, 7.400%, 10/01/10 (Pre-refunded to 10/01/00)
5,000,000 City of Johnson City, Tennessee, School Sales Tax Revenue and Unlimited 5/06 at 100 AAA 5,723,200
Tax Bonds, Series 1994, 6.700%, 5/01/21 (Pre-refunded to 5/01/06)
3,000,000 The Health, Educational and Housing Facilities Board of the County of 9/99 at 102 AAA 3,092,010
Knox, Tennessee, Hospital Facilities Revenue Bonds, Series 1989A
(Mercy Health System, Province of Cincinnati), 7.600%, 9/01/19
(Pre-refunded to 9/01/99)
3,065,000 The Health, Educational and Housing Facilities Board of the County of 1/00 at 102 AAA 3,192,473
Knox (Tennessee), Hospital Revenue Bonds, Series 1990C (Fort Sanders
Alliance Obligated Group), 7.000%, 1/01/15 (Pre-refunded to 1/01/00)
41,570,000 The Health and Educational Facilities Board of the Metropolitan No Opt. Call Aaa 11,976,733
Government of Nashville and Davidson Counties, Tennessee, Revenue
Bonds, Series 1988 (Volunteer Healthcare), Subordinate Lien,
0.000%, 6/01/21
1,200,000 The Health and Educational Facilities Board of the Metropolitan 10/07 at 105 N/R*** 1,596,768
Government of Nashville and Davidson Counties, Tennessee, Revenue
Bonds, Series 1992A (Mur-Ci Homes Inc. Project), 9.000%, 10/01/22
(Pre-refunded to 10/01/07)
2,500,000 The Public Building Authority of the City of Mt. Juliet, Tennessee, 2/04 at 110 AAA 3,098,100
Revenue Bonds (Utility District Loan Program), Series B, the Madison
Suburban Utility District, 7.800%, 2/01/19 (Pre-refunded to 2/01/04)
1,500,000 Northeast Knox, Tennessee, Utility District Water Revenue Bonds, 1/00 at 102 AAA 1,563,030
7.000%, 1/01/20 (Pre-refunded to 1/01/00)
250,000 Shelby County, Tennessee, General Obligation Refunding Bonds, 1995 4/05 at 101 AA+*** 269,895
Series A, 5.625%, 4/01/14 (Pre-refunded to 4/01/05)
4,000,000 The Health, Educational and Housing Facilities Board of the County of 2/00 at 102 AAA 4,189,760
Sullivan, Tennessee, Hospital Revenue Bonds, Series 1990 (Holston
Valley Health Care, Inc.), 7.250%, 2/15/20 (Pre-refunded to 2/15/00)
2,300,000 The White House Utility District of Robertson and Sumner Counties, 1/02 at 102 AAA 2,484,414
Tennessee, Water Revenue Refunding and Improvement Bonds, Series
1992B, 6.375%, 1/01/22 (Pre-refunded to 1/01/02)
Wilson County, Tennessee, Certificates of Participation (Wilson County
Educational Facilities Corporation), Series 1994:
1,500,000 6.125%, 6/30/10 (Pre-refunded to 6/30/04) 6/04 at 102 A2*** 1,654,185
1,500,000 6.250%, 6/30/15 (Pre-refunded to 6/30/04) 6/04 at 102 A2*** 1,662,690
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities - 10.2%
1,520,000 City of Clarksville, Tennessee, Water, Sewer and Gas Revenue Refunding No Opt. Call AAA 642,626
and Improvement Bonds, Series 1992, 0.000%, 2/01/16
2,160,000 The City of Dickson, Tennessee, Electric System Revenue Bonds, Series 9/08 at 102 AAA 2,243,441
1996, 5.500%, 9/01/16
The City of Jackson, Tennessee, Electric System Revenue Bonds, Series E:
315,000 6.300%, 8/01/09 8/00 at 102 A1 330,366
335,000 6.300%, 8/01/10 8/00 at 102 A1 351,341
355,000 6.300%, 8/01/11 8/00 at 102 A1 371,728
380,000 6.300%, 8/01/12 8/00 at 102 A1 398,107
3,000,000 The City of Jackson, Tennessee, Natural Gas System Revenue Bonds, 4/07 at 100 AAA 2,944,140
Series 1997, 5.000%, 4/15/18
4,475,000 Lawrenceburg, Tennessee, Electric Revenue Bonds, Series 7/09 at 100 AAA 4,627,105
5.500%, 7/01/26
The Metropolitan Government of Nashville and Davidson Counties,
Tennessee, Electric Revenue Bonds, Series 1996A:
7,800,000 0.000%, 5/15/11 No Opt. Call AAA 4,340,310
8,500,000 0.000%, 5/15/12 No Opt. Call AAA 4,464,030
</TABLE>
31
<PAGE>
Portfolio of Investments
Nuveen Flagship Tennessee Municipal Bond Fund (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Utilities (continued)
The Metropolitan Government of Nashville and Davidson Counties,
Tennessee, Electric System Revenue Bonds, 1998 Series A:
$ 11,000,000 0.000%, 5/15/19 No Opt. Call AAA $ 3,841,310
4,000,000 5.200%, 5/15/23 5/08 at 102 AA 3,948,640
1,000,000 The Middle Tennessee Utility District of Cannon, Cumberland, DeKalb, 10/02 at 102 AAA 1,092,620
Putnam, Rhea, Rutherford, Smith, Warren, White and Wilson Counties,
Tennessee, Gas System Revenue Bonds, Series 1992, 6.250%, 10/01/12
2,000,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, 7/08 at 101 1/2 BBB+ 1,857,380
Series EE, 4.750%, 7/01/24
2,000,000 The Tennergy Corporation, Tennessee, Gas Revenue Bonds, Series 1999, No Opt. Call AAA 2,046,660
5.000%, 6/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 6.4%
8,000,000 Harpeth Valley Utilities District of Davidson and Williamson Counties, 9/08 at 100 AAA 7,719,440
Tennessee, Utilities Improvement Revenue Bonds, Series 1998,
5.000%, 9/01/28
5,445,000 City of Knoxville, Tennessee, Waste Water System Refunding and 4/07 at 101 AA 5,277,076
Improvement Bonds, Series 1998, 5.125%, 4/01/23
3,000,000 Madison Suburban Utility District, Water Revenue Refunding Bonds, 2/08 at 100 AAA 2,921,010
5.000%, 2/01/19
1,000,000 Milcrofton Utility District of Williamson County, Tennessee, Waterworks 2/06 at 102 N/R 1,024,820
Revenue Refunding Bonds, Series 1996 (Junior Lien), 6.000%, 2/01/24
1,100,000 The Consolidated Utility District of Rutherford County, Tennessee, 2/08 at 100 Aaa 1,101,056
Waterworks Revenue Refunding and Improvement Bonds, Series 1997A,
5.250%, 2/01/27
1,100,000 The White House Utility District of Robertson and Sumner Counties, 1/07 at 100 Aaa 1,116,342
Tennessee, Water and Sewer Revenue Refunding Bonds, Series 1997B,
5.300%, 1/01/15
1,500,000 Wilson County, Tennessee, Water and Wastewater Authority, Waterworks 3/08 at 102 Baa1 1,625,460
Revenue Refunding and Improvement Bonds Series 1993, 6.000%, 3/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
$359,540,000 Total Investments - (cost $308,771,148) - 99.7% 326,136,241
============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.3% 871,022
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $327,007,263
===================================================================================================================
</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.
32
<PAGE>
Statement of Net Assets
May 31, 1999
<TABLE>
<CAPTION>
Georgia Louisiana
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $161,612,537 $140,563,590
Receivables:
Interest 2,997,675 2,325,088
Investments sold 205,000 175,000
Shares sold 1,422,602 6,615,085
Other assets 139,097 117,768
- ------------------------------------------------------------------------------------------------------------
Total assets 166,376,911 149,796,531
- ------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft 993,175 669,887
Payables:
Investments purchased -- 6,722,893
Shares redeemed 131,815 248,387
Accrued expenses:
Management fees (note 6) 65,085 24,643
12b-1 distribution and service fees (notes 1 and 6) 46,683 43,837
Other 38,592 44,450
Dividends payable 249,898 193,431
- ------------------------------------------------------------------------------------------------------------
Total liabilities 1,525,248 7,947,528
- ------------------------------------------------------------------------------------------------------------
Net assets (note 7) $164,851,663 $141,849,003
============================================================================================================
Class A Shares (note 1)
Net assets $128,137,926 $ 99,176,129
Shares outstanding 11,628,099 8,717,343
Net asset value and redemption price per share $ 11.02 $ 11.38
Offering price per share (net asset value per share plus maximum
sales charge of 4.20% of offering price) $ 11.50 $ 11.88
============================================================================================================
Class B Shares (note 1)
Net assets $ 11,991,319 $ 18,869,746
Shares outstanding 1,087,011 1,659,222
Net asset value, offering and redemption price per share $ 11.03 $ 11.37
============================================================================================================
Class C Shares (note 1)
Net assets $ 24,357,963 $ 21,352,207
Shares outstanding 2,214,908 1,879,084
Net asset value, offering and redemption price per share $ 11.00 $ 11.36
============================================================================================================
Class R Shares (note 1)
Net assets $ 364,455 $ 2,450,921
Shares outstanding 33,174 215,380
Net asset value, offering and redemption price per share $ 10.99 $ 11.38
============================================================================================================
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
Statement of Net Assets (continued)
May 31, 1999
<TABLE>
<CAPTION>
North Carolina Tennessee
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $210,839,925 $326,136,241
Cash -- 80,005
Receivables:
Fund manager (note 6) 9,545 --
Interest 3,549,762 5,162,285
Investments sold -- 719,892
Shares sold 402,444 452,709
Other assets 278,162 247,702
- ------------------------------------------------------------------------------------------------------------
Total assets 215,079,838 332,798,834
- ------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft 1,571,531 --
Payables:
Investments purchased -- 4,051,527
Shares redeemed 73,295 908,168
Accrued expenses:
Management fees (note 6) -- 146,835
12b-1 distribution and service fees (notes 1 and 6) 50,657 76,744
Other 162,544 40,672
Dividends payable 424,282 567,625
- ------------------------------------------------------------------------------------------------------------
Total liabilities 2,282,309 5,791,571
- ------------------------------------------------------------------------------------------------------------
Net assets (note 7) $212,797,529 $327,007,263
============================================================================================================
Class A Shares (note 1)
Net assets $183,369,994 $285,934,816
Shares outstanding 17,667,751 25,311,130
Net asset value and redemption price per share $ 10.38 $ 11.30
Offering price per share (net asset value per share plus maximum
sales charge of 4.20% of offering price) $ 10.84 $ 11.80
============================================================================================================
Class B Shares (note 1)
Net assets $ 10,609,033 $ 12,409,697
Shares outstanding 1,021,189 1,097,936
Net asset value, offering and redemption price per share $ 10.39 $ 11.30
============================================================================================================
Class C Shares (note 1)
Net assets $ 17,506,808 $ 28,134,237
Shares outstanding 1,689,147 2,490,680
Net asset value, offering and redemption price per share $ 10.36 $ 11.30
============================================================================================================
Class R Shares (note 1)
Net assets $ 1,311,694 $ 528,513
Shares outstanding 126,340 46,850
Net asset value, offering and redemption price per share $ 10.38 $ 11.28
============================================================================================================
</TABLE>
See accompanying notes to financial statements.
34
<PAGE>
Statement of Operations
Year Ended May 31, 1999
<TABLE>
<CAPTION>
Georgia Louisiana North Carolina Tennessee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (note 1) $ 8,609,268 $ 7,057,315 $11,463,316 $18,140,465
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 847,461 688,665 1,129,150 1,732,982
12b-1 service fees - Class A (notes 1 and 6) 250,073 185,203 373,199 572,541
12b-1 distribution and service fees - Class B (notes 1 and 6) 71,822 128,440 67,989 93,467
12b-1 distribution and service fees - Class C (notes 1 and 6) 164,125 129,015 91,426 183,788
Shareholders' servicing agent fees and expenses 60,454 33,389 90,850 133,336
Custodian's fees and expenses 68,557 52,267 64,955 76,957
Trustees' fees and expenses (note 6) 2,542 2,598 3,714 6,469
Professional fees 18,643 13,947 21,428 15,090
Shareholders' reports - printing and mailing expenses 47,918 46,840 81,566 59,940
Federal and state registration fees 3,243 8,569 2,061 7,142
Other expenses 7,295 5,829 12,624 18,643
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 1,542,133 1,294,762 1,938,962 2,900,355
Custodian fee credit (note 1) (11,657) (4,773) (18,793) (499)
Expense reimbursement (note 6) (212,546) (164,948) (286,712) (3,700)
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,317,930 1,125,041 1,633,457 2,896,156
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 7,291,338 5,932,274 9,829,859 15,244,309
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain from investment transactions 1,743,273 542,532 104,431 557,919
Net change in unrealized appreciation or depreciation of investments (4,263,258) (2,258,787) (3,181,988) (5,201,506)
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (2,519,985) (1,716,255) (3,077,557) (4,643,587)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 4,771,353 $ 4,216,019 $ 6,752,302 $10,600,722
===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
35
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Georgia Louisiana
--------------------------- ---------------------------
Year Ended Year Ended Year Ended Year Ended
5/31/99 5/31/98 5/31/99 5/31/98
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 7,291,338 $ 6,768,866 $ 5,932,274 $ 4,905,021
Net realized gain from investment transactions (notes 1 and 4) 1,743,273 1,432,222 542,532 141,609
Net change in unrealized appreciation or depreciation of investments (4,263,258) 5,917,362 (2,258,787) 3,885,856
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 4,771,353 14,118,450 4,216,019 8,932,486
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (6,036,625) (5,990,008) (4,530,236) (4,236,624)
Class B (302,465) (64,796) (554,071) (179,990)
Class C (938,110) (704,588) (749,521) (486,474)
Class R (13,736) (8,432) (98,115) (844)
From accumulated net realized gains from investment transactions:
Class A -- -- (327,196) (274,625)
Class B -- -- (46,841) (13,410)
Class C -- -- (60,212) (36,540)
Class R -- -- (8,993) (77)
- ----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (7,290,936) (6,767,824) (6,375,185) (5,228,584)
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 39,029,909 23,251,629 42,859,091 30,672,632
Net proceeds from shares issued to shareholders due to reinvestment of
distributions 2,897,417 4,132,821 2,607,781 3,175,043
- ----------------------------------------------------------------------------------------------------------------------------------
41,927,326 27,384,450 45,466,872 33,847,675
Cost of shares redeemed (17,634,491) (15,113,415) (13,310,878) (10,292,295)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 24,292,835 12,271,035 32,155,994 23,555,380
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 21,773,252 19,621,661 29,996,828 27,259,282
Net assets at the beginning of year 143,078,411 123,456,750 111,852,175 84,592,893
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $164,851,663 $143,078,411 $141,849,003 $111,852,175
==================================================================================================================================
Balance of undistributed net investment income at the end of year $ 1,490 $ 1,088 $ 1,619 $ 1,288
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
36
<PAGE>
<TABLE>
<CAPTION>
North Carolina Tennessee
----------------------------- ---------------------------
Year Ended Year Ended Year Ended Year Ended
5/31/99 5/31/98 5/31/99 5/31/98
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 9,829,859 $ 9,818,009 $ 15,244,309 $ 14,669,556
Net realized gain from investment transactions (notes 1 and 4) 104,431 2,602,198 557,919 1,206,421
Net change in unrealized appreciation or depreciation of investments (3,181,988) 3,819,600 (5,201,506) 8,713,135
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 6,752,302 16,239,807 10,600,722 24,589,112
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (8,995,903) (9,438,035) (13,826,854) (13,691,307)
Class B (283,644) (56,790) (398,784) (105,904)
Class C (514,487) (342,967) (1,039,949) (783,552)
Class R (60,402) (34,750) (27,716) (18,350)
From accumulated net realized gains from investment transactions:
Class A (1,598,066) (28,220) -- --
Class B (60,411) (137) -- --
Class C (99,492) (1,157) -- --
Class R (11,127) (109) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (11,623,532) (9,902,165) (15,293,303) (14,599,113)
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 34,546,447 18,647,466 47,588,847 41,278,818
Net proceeds from shares issued to shareholders due to reinvestment
of distributions 5,975,298 5,610,070 6,661,847 7,905,778
- ----------------------------------------------------------------------------------------------------------------------------------
40,521,745 24,257,536 54,250,694 49,184,596
Cost of shares redeemed (21,940,534) (20,843,771) (27,763,938) (27,270,877)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 18,581,211 3,413,765 26,486,756 21,913,719
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 13,709,981 9,751,407 21,794,175 31,903,718
Net assets at the beginning of year 199,087,548 189,336,141 305,213,088 273,309,370
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $212,797,529 $199,087,548 $327,007,263 $305,213,088
==================================================================================================================================
Balance of undistributed net investment income at the end of year $ 4,982 $ 29,559 $ 24,884 $ 73,878
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
37
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Flagship Multistate Trust III (the "Trust") is an open-end investment
company registered under the Investment Company Act of 1940, as amended. The
Trust comprises the Nuveen Flagship Georgia Municipal Bond Fund ("Georgia"), the
Nuveen Flagship Louisiana Municipal Bond Fund ("Louisiana"), the Nuveen Flagship
North Carolina Municipal Bond Fund ("North Carolina"), and the Nuveen Flagship
Tennessee Municipal Bond Fund ("Tennessee") (collectively, the "Funds"). The
Trust was organized as a Massachusetts business trust on July 1, 1996.
The Funds seek to provide high tax-free income and preservation of capital
through investments in diversified portfolios of quality municipal bonds.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
May 31, 1999, there were no such outstanding purchase commitments in any of the
Funds.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared 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, the Funds intend 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 May 31, 1999, have
been designated Exempt Interest Dividends. Net realized capital gain and market
discount distributions are subject to federal taxation.
38
<PAGE>
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 May 31, 1999.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
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.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Georgia
--------------------------------------------------------
Year Ended Year Ended
5/31/99 5/31/98
--------------------------- -------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,719,183 $ 19,217,921 999,370 $ 11,052,211
Class B 806,630 9,032,174 326,545 3,623,322
Class C 953,740 10,667,189 754,384 8,321,447
Class R 10,082 112,625 23,229 254,649
Shares issued to shareholders due to reinvestment of distributions:
Class A 216,299 2,426,448 332,037 3,634,474
Class B 11,396 127,876 2,642 29,369
Class C 29,544 330,616 42,144 461,364
Class R 1,116 12,477 689 7,614
- -------------------------------------------------------------------------------------------------------------------------------
3,747,990 41,927,326 2,481,040 27,384,450
- -------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,084,049) (12,116,347) (1,106,180) (12,206,698)
Class B (45,215) (503,665) (25,707) (286,183)
Class C (449,451) (5,014,371) (234,595) (2,575,425)
Class R (10) (108) (4,054) (45,109)
- -------------------------------------------------------------------------------------------------------------------------------
(1,578,725) (17,634,491) (1,370,536) (15,113,415)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase 2,169,265 $ 24,292,835 1,110,504 $ 12,271,035
===============================================================================================================================
</TABLE>
- ----------
39
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
Louisiana
----------------------------------------------------------
Year Ended Year Ended
5/31/99 5/31/98
-------------------------- --------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,716,601 $ 19,817,323 1,434,264 $ 16,414,741
Class B 914,530 10,557,807 695,080 7,947,255
Class C 865,510 9,983,365 551,499 6,283,912
Class R 215,752 2,500,596 2,348 26,724
Shares issued to shareholders due to reinvestment of distributions:
Class A 175,520 2,033,853 240,527 2,733,739
Class B 24,928 288,244 6,824 78,150
Class C 16,348 189,229 31,852 362,355
Class R 8,320 96,455 70 799
- ----------------------------------------------------------------------------------------------------------------------------------
3,937,509 45,466,872 2,962,464 33,847,675
- ----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (893,149) (10,322,469) (808,970) (9,237,098)
Class B (59,695) (688,490) (5,147) (58,547)
Class C (188,463) (2,173,160) (87,146) (996,590)
Class R (11,114) (126,759) (5) (60)
- ----------------------------------------------------------------------------------------------------------------------------------
(1,152,421) (13,310,878) (901,268) (10,292,295)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase 2,785,088 $ 32,155,994 2,061,196 $ 23,555,380
==================================================================================================================================
North Carolina
----------------------------------------------------------
Year Ended Year Ended
5/31/99 5/31/98
-------------------------- --------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
Shares sold:
Class A 1,497,738 $ 15,852,866 1,219,335 $ 12,822,305
Class B 765,417 8,109,386 313,974 3,317,845
Class C 945,187 9,986,996 192,020 2,022,009
Class R 56,314 597,199 46,162 485,307
Shares issued to shareholders due to reinvestment of distributions:
Class A 510,481 5,422,357 506,157 5,310,271
Class B 16,356 173,663 2,287 24,150
Class C 30,647 324,719 24,082 252,068
Class R 5,136 54,559 2,244 23,581
- ----------------------------------------------------------------------------------------------------------------------------------
3,827,276 40,521,745 2,306,261 24,257,536
- ----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,889,845) (19,995,567) (1,846,947) (19,438,714)
Class B (100,335) (1,061,551) (2,877) (30,241)
Class C (68,759) (724,414) (122,639) (1,290,365)
Class R (14,938) (159,002) (7,984) (84,451)
- ----------------------------------------------------------------------------------------------------------------------------------
(2,073,877) (21,940,534) (1,980,447) (20,843,771)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase 1,753,399 $ 18,581,211 325,814 $ 3,413,765
==================================================================================================================================
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Tennessee
-----------------------------------------------------------
Year Ended Year Ended
5/31/99 5/31/98
--------------------------- ---------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 2,608,976 $ 29,959,161 2,614,021 $ 29,710,291
Class B 645,177 7,415,547 456,706 5,193,888
Class C 887,754 10,185,551 538,381 6,116,529
Class R 2,492 28,588 22,800 258,110
Shares issued to shareholders due to reinvestment of distributions:
Class A 525,327 6,045,014 641,169 7,255,500
Class B 17,555 202,163 3,774 42,976
Class C 34,095 392,181 52,336 590,588
Class R 1,957 22,489 1,474 16,714
- ----------------------------------------------------------------------------------------------------------------------------------
4,723,333 54,250,694 4,330,661 49,184,596
- ----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,109,544) (24,227,337) (2,250,196) (25,540,334)
Class B (68,504) (782,931) (5,300) (59,853)
Class C (236,242) (2,705,131) (147,264) (1,670,240)
Class R (4,257) (48,539) (39) (450)
- ----------------------------------------------------------------------------------------------------------------------------------
(2,418,547) (27,763,938) (2,402,799) (27,270,877)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase 2,304,786 $ 26,486,756 1,927,862 $ 21,913,719
==================================================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on July 1, 1999, to shareholders of record on June 9,
1999, as follows:
<TABLE>
<CAPTION>
North
Georgia Louisiana Carolina Tennessee
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share:
Class A $ .0435 $ .0460 $ .0415 $ .0455
Class B .0365 .0390 .0350 .0385
Class C .0385 .0410 .0365 .0400
Class R .0455 .0480 .0430 .0470
=================================================================================================================================
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal secruities for the fiscal year ended May 31,
1999, were as follows:
<TABLE>
<CAPTION>
North
Georgia Louisiana Carolina Tennessee
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases:
Long-term municipal securities $70,671,532 $43,583,118 $41,349,768 $74,524,629
Short-term municipal securities 19,000,000 5,000,000 49,400,000 31,700,000
Sales:
Long-term municipal securities 49,248,668 13,972,466 21,358,893 50,669,165
Short-term municipal securities 19,000,000 5,900,000 49,400,000 31,700,000
==================================================================================================================================
</TABLE>
At May 31, 1999, the identified cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes for each
Fund.
At May 31, 1999, Tennessee had an unused capital loss carryforward of $2,228,819
available for federal income tax purposes to be applied against future capital
gains, if any. If not applied, the carryforward will expire in the year 2003.
41
<PAGE>
Notes to Financial Statements (continued)
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 1999, were as follows:
<TABLE>
<CAPTION>
North
Georgia Louisiana Carolina Tennessee
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
appreciation $8,554,585 $7,659,298 $9,767,765 $18,419,436
depreciation (561,754) (606,013) (617,641) (1,054,343)
- ---------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation $7,992,831 $7,053,285 $9,150,124 $17,365,093
=====================================================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays an annual management fee, payable monthly, at the rates set forth below
which are based upon the average daily net assets of each Fund 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 or its affiliates.
The adviser may voluntarily reimburse expenses from time to time, which may be
terminated at any time at its discretion.
During the fiscal year ended May 31, 1999, John Nuveen & Co. Incorporated (the
"Distributor"), a wholly owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares of approximately $387,300,
$303,300, $307,600 and $751,500 for Georgia, Louisiana, North Carolina and
Tennessee, respectively, of which approximately $368,200, $303,300, $270,800 and
$684,700, respectively, were paid out as concessions to authorized dealers. The
Distributor also received 12b-1 service fees on Class A Shares, substantially
all of which were paid to compensate authorized dealers for providing services
to shareholders relating to their investments.
During the fiscal year ended May 31, 1999, the Distributor compensated
authorized dealers with approximately $474,700, $612,700, $452,700 and $467,300
in commission advances at the time of purchase for Georgia, Louisiana, North
Carolina and Tennessee, respectively. To compensate for commissions advanced to
authorized dealers, all 12b-1 service fees collected on Class B Shares during
the first year following a purchase, all 12b-1 distribution fees on Class B
Shares, and all 12b-1 service and distribution fees on Class C Shares during the
first year following a purchase are retained by the Distributor. During the
fiscal year ended May 31, 1999, the Distributor retained approximately $148,300,
$184,400, $107,900 and $165,100 in such 12b-1 fees for Georgia, Louisiana, North
Carolina and Tennessee, respectively. The remaining 12b-1 fees charged to the
Funds were paid to compensate authorized dealers for providing services to
shareholders relating to their investments. The Distributor also retained
approximately $39,500, $22,800, $33,900 and $32,400 of CDSC on share redemptions
for Georgia, Louisiana, North Carolina and Tennessee, respectively, during the
fiscal year ended May 31, 1999.
7. Composition of Net Assets
At May 31, 1999, the Funds had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
North
Georgia Louisiana Carolina Tennessee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $156,289,893 $134,753,874 $203,772,398 $311,846,319
Balance of undistributed net
investment income 1,490 1,619 4,982 24,884
Accumulated net realized gain (loss)
from investment transactions 567,449 40,225 (129,975) (2,229,033)
Net unrealized appreciation of investments 7,992,831 7,053,285 9,150,124 17,365,093
- -------------------------------------------------------------------------------------------------------------
Net assets $164,851,663 $141,849,003 $212,797,529 $327,007,263
=============================================================================================================
</TABLE>
42
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
---------------------------------- -----------------------------
GEORGIA** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (3/86)
1999 $11.19 $.54 $(.17) $ .37 $(.54) $ -- $(.54) $11.02 3.34%
1998 10.57 .56 .62 1.18 (.56) -- (.56) 11.19 11.37
1997 10.20 .57 .37 .94 (.57) -- (.57) 10.57 9.39
1996 10.46 .57 (.25) .32 (.58) -- (.58) 10.20 3.05
1995 10.23 .58 .23 .81 (.58) -- (.58) 10.46 8.31
Class B (2/97)
1999 11.20 .46 (.17) .29 (.46) -- (.46) 11.03 2.57
1998 10.57 .48 .63 1.11 (.48) -- (.48) 11.20 10.66
1997 (c) 10.66 .14 (.11) .03 (.12) -- (.12) 10.57 .31
Class C (1/94)
1999 11.17 .48 (.17) .31 (.48) -- (.48) 11.00 2.80
1998 10.55 .50 .62 1.12 (.50) -- (.50) 11.17 10.79
1997 10.18 .51 .37 .88 (.51) -- (.51) 10.55 8.80
1996 10.44 .51 (.25) .26 (.52) -- (.52) 10.18 2.48
1995 10.21 .52 .23 .75 (.52) -- (.52) 10.44 7.72
Class R (2/97)
1999 11.15 .56 (.15) .41 (.57) -- (.57) 10.99 3.67
1998 10.57 .58 .59 1.17 (.59) -- (.59) 11.15 11.23
1997 (c) 10.65 .18 (.06) .12 (.20) -- (.20) 10.57 1.11
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Year Ended Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
May 31, (000) ment ment ment (a) ment (a) Rate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (3/86)
1999 $128,138 .88% 4.69% .74% 4.83% 32%
1998 120,545 .87 4.88 .66 5.09 25
1997 111,518 1.02 5.20 .78 5.44 39
1996 107,862 1.08 5.18 .80 5.46 59
1995 113,354 1.09 5.53 .83 5.79 40
Class B (2/97)
1999 11,991 1.64 3.94 1.50 4.08 32
1998 3,518 1.62 4.08 1.38 4.32 25
1997 (c) 113 1.63* 4.49* 1.32* 4.80* 39
Class C (1/94)
1999 24,358 1.44 4.13 1.29 4.28 32
1998 18,770 1.42 4.33 1.21 4.54 25
1997 11,803 1.56 4.63 1.32 4.87 39
1996 9,433 1.63 4.61 1.34 4.90 59
1995 6,973 1.64 4.92 1.38 5.18 40
Class R (2/97)
1999 364 .68 4.89 .54 5.03 32
1998 245 .67 5.04 .45 5.26 25
1997 (c) 22 .68* 5.41* .38* 5.71* 39
==============================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Georgia.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(c) From commencement of class operations as noted.
43
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
---------------------------------- -----------------------------
LOUISIANA** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (9/89)
1999 $11.55 $.57 $(.13) $ .44 $(.57) $(.04) $(.61) $11.38 3.73%
1998 11.10 .59 .49 1.08 (.59) (.04) (.63) 11.55 9.88
1997 10.71 .59 .39 .98 (.59) -- (.59) 11.10 9.37
1996 10.80 .59 (.08) .51 (.60) -- (.60) 10.71 4.77
1995 10.48 .60 .32 .92 (.60) -- (.60) 10.80 9.20
Class B (2/97)
1999 11.55 .48 (.14) .34 (.48) (.04) (.52) 11.37 2.98
1998 11.09 .50 .50 1.00 (.50) (.04) (.54) 11.55 9.18
1997 (c) 11.10 .16 -- .16 (.17) -- (.17) 11.09 1.44
Class C (2/94)
1999 11.54 .50 (.13) .37 (.51) (.04) (.55) 11.36 3.20
1998 11.09 .52 .50 1.02 (.53) (.04) (.57) 11.54 9.32
1997 10.70 .53 .39 .92 (.53) -- (.53) 11.09 8.78
1996 10.80 .53 (.09) .44 (.54) -- (.54) 10.70 4.12
1995 10.48 .54 .32 .86 (.54) -- (.54) 10.80 8.59
Class R (2/97)
1999 11.55 .59 (.13) .46 (.59) (.04) (.63) 11.38 4.03
1998 11.09 .61 .50 1.11 (.61) (.04) (.65) 11.55 10.21
1997 (c) 11.17 .15 (.08) .07 (.15) -- (.15) 11.09 .67
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Year Ended Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
May 31, (000) ment ment ment (a) ment (a) Rate
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (9/89)
1999 $99,176 .88% 4.76% .75% 4.89% 11%
1998 89,143 .88 5.00 .75 5.13 15
1997 76,030 1.03 5.14 .79 5.38 25
1996 72,005 1.09 5.17 .80 5.46 26
1995 68,145 1.18 5.45 .83 5.80 44
Class B (2/97)
1999 18,870 1.64 4.00 1.49 4.15 11
1998 8,999 1.62 4.21 1.45 4.38 15
1997 (c) 917 1.65* 4.50* 1.46* 4.69* 25
Class C (2/94)
1999 21,352 1.43 4.20 1.29 4.34 11
1998 13,682 1.42 4.45 1.29 4.58 15
1997 7,645 1.57 4.59 1.33 4.83 25
1996 5,658 1.64 4.58 1.35 4.87 26
1995 3,220 1.73 4.85 1.37 5.21 44
Class R (2/97)
1999 2,451 .68 4.97 .55 5.10 11
1998 28 .67 5.17 .52 5.32 15
1997 (c) -- .08* 5.27* .04* 5.31* 25
===============================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Georgia.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(c) From commencement of class operations as noted.
44
<PAGE>
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
---------------------------------- -----------------------------
NORTH CAROLINA** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (3/86)
1999 $10.62 $.51 $(.15) $.36 $(.51) $(.09) $(.60) $10.38 3.43%
1998 10.28 .53 .34 .87 (.53) -- (.53) 10.62 8.69
1997 10.05 .54 .23 .77 (.54) -- (.54) 10.28 7.79
1996 10.23 .55 (.18) .37 (.55) -- (.55) 10.05 3.67
1995 10.08 .57 .15 .72 (.57) -- (.57) 10.23 7.45
Class B (2/97)
1999 10.62 .44 (.15) .29 (.43) (.09) (.52) 10.39 2.73
1998 10.28 .45 .35 .80 (.46) -- (.46) 10.62 7.89
1997 (c) 10.33 .12 (.06) .06 (.11) -- (.11) 10.28 .64
Class C (10/93)
1999 10.60 .46 (.16) .30 (.45) (.09) (.54) 10.36 2.85
1998 10.26 .47 .34 .81 (.47) -- (.47) 10.60 8.09
1997 10.03 .48 .23 .71 (.48) -- (.48) 10.26 7.20
1996 10.22 .49 (.18) .31 (.50) -- (.50) 10.03 3.01
1995 10.06 .51 .16 .67 (.51) -- (.51) 10.22 6.97
Class R (2/97)
1999 10.62 .53 (.15) .38 (.53) (.09) (.62) 10.38 3.61
1998 10.28 .55 .34 .89 (.55) -- (.55) 10.62 8.88
1997 (c) 10.27 .18 .01 .19 (.18) -- (.18) 10.28 1.92
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------
Ratio Ratio
NORTH CAROLINA** of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Year Ended Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
May 31, (000) ment ment ment (a) ment (a) Rate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (3/86)
1999 $183,370 .88% 4.66% .74% 4.80% 11%
1998 186,340 .86 5.06 .86 5.06 29
1997 181,595 1.00 5.24 .93 5.31 23
1996 185,016 1.03 5.19 .90 5.32 54
1995 191,850 1.06 5.58 .91 5.73 35
Class B (2/97)
1999 10,609 1.64 3.91 1.44 4.11 11
1998 3,609 1.61 4.23 1.61 4.23 29
1997 (c) 271 1.62* 4.60* 1.62* 4.60* 23
Class C (10/93)
1999 17,507 1.44 4.11 1.24 4.31 11
1998 8,291 1.41 4.50 1.41 4.50 29
1997 7,065 1.54 4.70 1.48 4.76 23
1996 6,589 1.58 4.64 1.45 4.77 54
1995 6,049 1.61 4.98 1.46 5.13 35
Class R (2/97)
1999 1,312 .68 4.86 .53 5.01 11
1998 848 .66 5.24 .66 5.24 29
1997 (c) 405 .66* 5.57* .66* 5.57* 23
====================================================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship North Carolina.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
---------------------------------- -----------------------------
TENNESSEE** Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (11/87)
1999 $11.46 $.55 $ (.15) $ .40 $(.56) $ -- $(.56) $11.30 3.47%
1998 11.06 .58 .40 .98 (.58) -- (.58) 11.46 9.01
1997 10.83 .59 .23 .82 (.59) -- (.59) 11.06 7.71
1996 11.01 .59 (.18) .41 (.59) -- (.59) 10.83 3.78
1995 10.78 .60 .23 .83 (.60) -- (.60) 11.01 8.04
Class B (2/97)
1999 11.46 .47 (.16) .31 (.47) -- (.47) 11.30 2.72
1998 11.06 .49 .40 .89 (.49) -- (.49) 11.46 8.21
1997 (c) 11.14 .14 (.09) .05 (.13) -- (.13) 11.06 .42
Class C (10/93)
1999 11.45 .49 (.15) .34 (.49) -- (.49) 11.30 2.97
1998 11.05 .52 .39 .91 (.51) -- (.51) 11.45 8.39
1997 10.82 .53 .23 .76 (.53) -- (.53) 11.05 7.12
1996 11.00 .53 (.18) .35 (.53) -- (.53) 10.82 3.22
1995 10.78 .54 .22 .76 (.54) -- (.54) 11.00 7.35
Class R (2/97)
1999 11.44 .57 (.15) .42 (.58) -- (.58) 11.28 3.68
1998 11.04 .60 .40 1.00 (.60) -- (.60) 11.44 9.20
1997 (c) 11.09 .20 (.05) .15 (.20) -- (.20) 11.04 1.40
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
TENNESSEE** Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
(000) ment ment ment (a) ment (a) Rate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (11/87)
1999 $285,935 .84% 4.81% .84% 4.81% 16%
1998 278,232 .84 5.09 .82 5.11 15
1997 257,475 .97 5.23 .85 5.35 23
1996 250,886 1.01 5.17 .88 5.30 38
1995 241,778 1.07 5.46 .89 5.64 23
Class B (2/97)
1999 12,410 1.59 4.08 1.59 4.08 16
1998 5,775 1.59 4.30 1.58 4.31 15
1997 (c) 537 1.60* 4.49* 1.37* 4.72* 23
Class C (10/93)
1999 28,134 1.39 4.27 1.39 4.27 16
1998 20,673 1.39 4.53 1.37 4.55 15
1997 15,049 1.53 4.67 1.40 4.80 23
1996 15,483 1.56 4.62 1.43 4.75 38
1995 12,494 1.62 4.90 1.44 5.08 23
Class R (2/97)
1999 529 .64 5.01 .64 5.01 16
1998 534 .64 5.27 .62 5.29 15
1997 (c) 248 .66* 5.55* .46* 5.75* 23
====================================================================================================================================
</TABLE>
* Annualized.
** Information included prior to the fiscal year ended May 31, 1997, reflects
the financial highlights of Flagship Tennessee.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 6).
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
46
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Flagship Multistate Trust III:
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Flagship Georgia Municipal Bond Fund,
Nuveen Flagship Louisiana Municipal Bond Fund, Nuveen Flagship North Carolina
Municipal Bond Fund, and Nuveen Flagship Tennessee Municipal Bond Fund
(collectively, the "Funds") (the four portfolios constituting the Nuveen
Flagship Multistate Trust III (a Massachusetts business trust)), as of May 31,
1999, and the related statements of operations for the year then ended, and the
statements of changes in net assets and the financial highlights for each of the
two years then ended. These financial statements and financial highlights are
the responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1999, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Flagship Georgia Municipal Bond Fund, Nuveen Flagship Louisiana Municipal Bond
Fund, Nuveen Flagship North Carolina Municipal Bond Fund, and Nuveen Flagship
Tennessee Municipal Bond Fund of the Nuveen Flagship Multistate Trust III as of
May 31, 1999, and the results of their operations for the year then ended, and
the changes in their net assets and the financial highlights for each of the two
years then ended, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 20, 1999
47
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family
of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and
Income
European Value Fund
Growth and
Income Stock Fund
Balanced Stock
and Bond Fund
Balanced Municipal
and Stock Fund
Dividend and
Growth Fund
Income
Income Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers/SM/ including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
quality municipal bonds. The fund shares are listed and traded on the New York
and American stock exchanges. Exchange-traded funds provide the investment
convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
48
<PAGE>
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
Chase Global Fund Services Company
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
49
#
<PAGE>
SERVING
Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive performance over time -- with moderated risk. We emphasize quality
securities carefully chosen through in-depth research, and we follow those
securities closely over time to ensure that they continue to meet our exacting
standards.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
[NUVEEN]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
VAN-4-5-99
