NUVEEN Exchange-Traded Funds
October 31, 1998
Annual Report
Dependable, tax-free income to help you keep more of what you earn.
NUV
Municipal Value
NMI
Municipal Income
Photo of: People talking on dock.
<PAGE>
Highlights
As of October 31, 1998
Credit Quality Performance Highlights
================================================================================
Nuveen Municipal Value Fund, Inc. (NUV)
o Graphic: 4 stars
Four-star Morningstar Rating(TM)*
o Competitive taxable equivalent yield of
7.61% for investors in the 31% federal
income tax bracket
o One-year taxable equivalent total return on
share price of 13.13% for investors in the
31% federal income tax bracket
Pie Chart:
AAA/U.S. Guaranteed 45%
AA 23%
A 15%
BBB/NR 17%
Nuveen Municipal Income Fund, Inc. (NMI)
o Graphic: 4 stars
Four-star Morningstar Rating(TM)*
o Competitive taxable equivalent yield of
8.04% for investors in the 31% federal
income tax bracket
o One-year taxable equivalent total return on
share price of 7.84% for investors in the
31% federal income tax bracket
Pie Chart:
AAA/U.S. Guaranteed 21%
AA 10%
A 18%
BBB/NR 51%
Contents
1 Dear Shareholder
3 NUV's Portfolio Manager's Comments
5 NUV's Performance Overview
6 NMI's Portfolio Manager's Comments
8 NMI's Performance Overview
9 Shareholder Meeting Report
10 Report of Independent Auditors
11 Portfolio of Investments
22 Statement of Net Assets
23 Statement of Operations
24 Statement of Changes in Net Assets
25 Notes to Financial Statements
29 Financial Highlights
32 Building Better Portfolios
33 Fund Information
* Overall rating within the municipal bond category for the period ended October
31, 1998. Morningstar proprietary ratings reflect historical risk-adjusted
performance. The ratings are subject to change every month. Past performance
is no guarantee of future results. Morningstar ratings are calculated from a
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. NUV
received 4 stars, 5 stars, and 3 stars for the three-, five-, and 10-year
periods, respectively. NMI received 5 stars, 5 stars, and 3 stars for the
three-, five-, and 10-year periods, respectively. The top 10% of the funds in
an investment class receive 5 stars, the next 22.5% receive 4 stars, and the
next 35% receive 3 stars. The funds were rated among 195, 188, and 19 funds
for the three-, five-, and 10-year periods, respectively.
<PAGE>
Photo of: Timothy R. Schwertfeger
Chairman of the Board
Sidebar text: Wealth takes a lifetime to build. Once achieved, it should be
preserved.
Dear Shareholder
I'm pleased to report that over the past 12 months, ending October 31, 1998, the
Nuveen Municipal Value Fund, Inc. (NUV)and the Nuveen Municipal Income Fund,
Inc. (NMI) have provided you with attractive levels of tax-free income and
after-tax total returns. These are two of our oldest funds, and the volatile
market of the past year highlights the importance of owning a professionally
managed and diversified portfolio. Attractive tax-free income and after-tax
total returns illustrate once again that Nuveen's Exchange-Traded Funds can
provide an excellent investment option for income-oriented investors.
The Year in Review
Over the past year, the markets endured bouts of volatility, as the Asian
financial crisis spilled over into emerging markets and affected economies
around the globe. Investors responded by seeking a haven from the uncertainty in
more conservative investments, such as municipal bond funds. As interest rates
continued to trend downward, the competitive yields offered by our
exchange-traded funds stimulated additional investor interest and demand, which
led to improved share prices overall.
In this environment, the market for exchange-traded municipal bond funds has
been exceptionally strong. These funds continue to represent a bright spot among
fixed-income investments, offering attractive income in a market that places a
high premium on yield.
In the coming months, we will continue to watch several key factors affecting
the future of the economy, including corporate earnings reports, wage and
employment figures, U.S. consumer confidence levels, the continuing impact of
foreign financial turmoil, and any further interest rate indications from the
Federal Reserve. These factors will influence the outlook for fixed-income
markets into the coming year.
Municipals Very Attractively Priced
Over the past year, rising prices drove yields on 30-year Treasuries to their
lowest levels since 1977. The story in the municipal market, however, was quite
different. With yields on the long Treasury bond pushing below 5% at times, the
yield on the Bond Buyer 40, an unmanaged index of long-term municipal bonds,
fell just 27 basis points - from 5.40% to 5.13% - compared with the 100-basis
point drop in Treasury yields over the past 12 months. As of October 31, the
ratio between Treasury yields and municipal yields stood at 98.8%, compared with
the more typical range of 86-87%. Over the past few months, this ratio has
ranged as high as 100.6%. For investors, this means that quality municipal bonds
currently offer about the same yield as Treasury bonds with comparable
maturities - even before the tax advantages of municipal bonds are taken into
account. On an after-tax basis in today's market, municipal bonds present an
exceptionally attractive investment option relative to Treasuries.
One of the main factors in the steep decline in Treasury yields during the past
year was the strong interest in these investments by international investors. As
the financial turmoil in Asia continued to spread to economies worldwide and the
dollar strengthened against foreign currencies, the demand for U.S.
dollar-denominated Treasury securities increased. In the municipal market, where
foreign demand was limited by an inability to benefit from the tax advantages of
munis, low interest rates and a strong economy combined to generate high levels
of new issuance and a dramatic increase in the refinancing of existing bonds.
The first ten months of 1998 saw $234 billion of municipal issuance, up 32% over
the same period in 1997. In terms of total municipal issuance, this puts 1998 on
pace to be the second largest year on record.
In addition, the continued strength of the U.S. economy has brought about
improve ments in the fundamental financial health of many municipalities and
boosted the overall credit quality of municipal bonds. In the third quarter of
1998, upgraded issues by the two major rating agencies outnumbered downgrades by
a margin of 7 to 2.
Nuveen Expertise Is Key
The key to taking advantage of the exceptional values currently available in the
municipal market is the expertise of a proven investment manager. At Nuveen, we
recognize the value of time-tested expertise. The high level of recent municipal
issuance, for example, high lights the value of Nuveen's in-depth knowledge of
the municipal market, as our portfolio management teams carefully analyze the
flood of issues to select those securities best suited to help the funds achieve
their investment objectives.
As a further enhancement to our manage ment capabilities, Nuveen has assembled a
strong core of Premier AdvisersSM, managers who are experts in their particular
area of the market who can provide time-tested experience and insight. In
addition to Nuveen Advisory Corp., our Premier Adviser for tax-free investing,
you can rely on other Nuveen Premier AdvisersSM to share their wisdom in the
equity market, including Institutional Capital Corporation for equity value
investing and Rittenhouse Financial Services for equity growth investing. For
more information about our funds, including charges and expenses, contact your
financial adviser for a prospectus, or call Nuveen at (800) 621-7227.
Please read the prospectus carefully before you invest or send money.
We encourage you to talk with your financial adviser about the ways Nuveen's
expanding selection of investments can assist you in establishing a diversified
portfolio designed to help you build and sustain long-term financial security.
For more than 100 years, investors know they can count on Nuveen. We are
grateful for the confidence you have shown in us, and we intend to continue
earning your trust in the years ahead.
Sincerely,
Timothy R. Schwertfeger
Chairman of the Board
December 15, 1998
Sidebar text: "The key to taking advantage of the exceptional values currently
available in the municipal market is the expertise of a proven investment
manager."
<PAGE>
Nuveen Municipal Value Fund, Inc. (NUV)
Portfolio Manager's Comments
Portfolio manager Tom Spalding discusses the municipal market, fund performance,
and key investment strategies for the Nuveen Municipal Value Fund, Inc.
What outside factors influenced the municipal bond market the most over the past
year?
The third quarter of 1998 saw an acceleration of trends that have been apparent
in the fixed-income markets over the past 12 months: declining interest rates
and an increased ratio of municipal to Treasury yields. The cause in both cases
was heightened concern about the condition of the global financial system. While
the U.S. economy exhibited continued growth, the impact of the financial turmoil
in Southeast Asia, Russia, and other emerging markets was felt in the U.S.
equity market.
A desire to cushion this impact and avert a domestic credit crunch prompted the
Federal Reserve to ease short-term interest rates in late September, the first
rate cut in almost three years. In response to concerns that the initial
quarter-point cut might not be sufficient, the Fed reduced rates again in
October and November, bringing the federal funds rate to 4.75%. The Fed
indicated that this accommodative stance was intended to sustain U.S. economic
growth going forward, while also adding some stability to global markets.
How have these outside factors affected municipal bond issuance?
In response to an environment of low interest rates and continued economic
growth, municipal bond issuance over the past year has been among the heaviest
in years. As of the end of October, total issuance in 1998 - both new deals and
refundings - was on pace to become the second largest year on record. Another
point concerns the level of insured bonds that have been brought to market. For
the month of September, insured bonds made up 56% of all issuance. Most notable
among the flood of new bonds was the $7 billion Long Island Power Authority
(LIPA) offering. The first part of the LIPA issuance, which exceeded $3.5
billion, the largest issuance in municipal bond history, came to market in May,
and another segment was brought out in October. Increased municipal supply has
been met with strong investor demand, due in part to recent volatility in the
equity markets. Demand from institutional buyers such as insurance companies has
also increased, as these investors recognize the exceptionally attractive values
currently offered by municipal bonds.
How did NUV's underlying portfolio perform during the past year?
For the fiscal year ending October 31, 1998, the Nuveen Municipal Value Fund,
Inc. (NUV) produced a total return on net asset value of 7.49%. Our strategy of
retaining bonds with relatively high coupons helped minimize dividend
volatility. The fund's higher-coupon, lower duration bonds gave the fund less
overall risk than the benchmark Lehman Brothers Municipal Bond Index*, and also
caused the fund's total return for the period to slightly trail the Index's
total return of 8.02%.
Though NUV's total return on net asset value underper formed the Lehman Index,
it did outperform its Lipper Peer Group average**, which had a total return on
net asset value of 7.38%.
What was NUV's duration, and what role does duration play in minimizing invest
ment risk and holding down total return?
As of October 31, 1998, NUV had a modified duration of 5.97 years, compared with
the Lehman index's duration of 7.30 years. Much of the fund's performance over
the past 12 months can be tied to its duration. Duration measures a bond fund's
price volatility, or reaction to interest rate movements. The longer the
duration, the more sensitive the fund is to changes in interest rates. During a
period of falling interest rates, longer duration enables a fund to participate
more fully in market gains. However, when rates rise, longer duration can make
the fund more vulnerable to potential price declines. Over the past year, as
interest rates trended downward, funds with durations shorter than that of the
Lehman index, like NUV, generally tended to underperform the market.
Why is NUV's duration shorter considering the trend is for lower rates?
NUV's duration was shorter than that of the Lehman index in part because we held
bonds purchased during higher interest rate environments rather than sell them
in an attempt to lengthen duration and capture slightly higher total returns. In
the low interest rate environment of the past year, any bonds we would have sold
would have been replaced with issues offering lower yields, which could have
impacted the monthly dividend. In keeping with the fund's objectives, our focus
will continue to be on maintaining the attractiveness and stability of NUV's
dividend as long as possible.
What caused NUV to lower its dividend?
Over the year, the combination of declining interest rates, bond calls, and the
payment of taxable distributions acted to reduce the income level of NUV, the
oldest of Nuveen's Exchange-Traded Funds. Brought to market in June 1987, NUV's
portfolio has undergone an anticipated restructuring as higher-yielding bonds
purchased when the fund was first assembled reached their call dates or matured.
Proceeds from the called bonds and those that matured were reinvested in bonds
paying relatively lower current interest rates, reduc ing the income earned by
the fund. The fund also paid a taxable distribution of $0.1326 in December 1997.
When a fund pays out taxable distributions to shareholders, it reduces the
amount of assets working to earn income for the fund. This was the case for NUV.
Despite the dividend adjustment, NUV continues to provide a very competitive
current market yield of 5.25% for potential shareholders, equivalent to a
taxable yield of 7.61% for investors in the 31% federal income tax bracket.
What was the effect on NUV's share price performance?
As Tim mentioned in his letter to shareholders, share price performance among
many of the Nuveen Exchange-Traded Funds has generally been strong over the past
12 months. For NUV, however, market reaction to the effect of bond calls over
the past year resulted in a slight decline in share price, while strong bond
market performance boosted the fund's net asset value, narrowing the spread
between the share price and the NAV by almost 230 basis points. As of October
31, 1998, NUV was trading at a discount of 4.17% to its net asset value.
What key strategies were used over the past year?
Over the past year, our primary focus has been on keeping the fund fully
invested by anticipating bond calls and seeking out the issuers, states, and
sectors of the market that provided the best yields. Overall, the credit quality
of the fund is high--68% of NUV is rated AAA and AA--with excellent balance
provided by a 17% allocation of BBB-rated and non-rated bonds. Most of the bonds
we have added to the portfolio have maturities in the 20- to 25-year range. For
the most part, we find that these bonds offer the yield and liquidity of longer
bonds with less risk.
Are there any particular sectors where Nuveen is looking for undervalued
securities?
Two of the sectors we currently favor are utilities and healthcare, which
represent 28% and 11%, respectively, of the portfolio. The largest segment of
the utilities allocation is invested in public power bonds, where we are taking
advantage of the competitive environment created by deregulation to enhance the
fund's yield. The public power sector also presents opportunities to buy bonds
that may be advance refunded, which can improve the fund's net asset value. Over
the past year, we focused on low-cost power producers - primarily coal and oil
plants - with strong service areas. In healthcare, our focus was on large
hospitals that were AA-rated or insured and that were characterized by good cost
control measures and expanding market share. Smaller hospitals with the same
characteristics that dominated their geographic service areas also interested us
because of their potential as takeover candidates.
In the transportation sector, the fund continues to benefit from its holdings of
Denver Airport bonds, which were recently upgraded to BBB+ from BBB. This
represents the second upgrade for these bonds in the past year. Nuveen has been
involved in this project since the late 1980s, when we bought the first bonds to
finance the purchase of land for the airport, and we continue to be significant
investors. The recent upgrades illustrate how Nuveen's expertise has proven our
ability to assess a project's potential and to select investments that reward
shareholders.
What is Nuveen's outlook for the future?
NUV continues to be an excellent choice for investors who want attractive levels
of current income with lower volatility. While the majority of bond calls are
now behind us, our focus will remain on strategies that support the income
stream of this fund, along with trying to increase and maintain the NAV relative
to the market. We will look to new issuance for value, taking advantage of the
buying opportunities that can arise as issues come to market. Our focus will be
on generating incremental return through careful selection of sectors,
individual credits, and perhaps regional plays. Trades will continue to be
evaluated in terms of capital gains and their potential impact on the fund's
dividend. We also plan to maintain the fund's duration in the six-year range.
From a credit quality per spective, our allocation of BBB-rated bonds should
remain in the 15-20% range as we selectively buy bonds in the lower investment
grade market that add incremental yield or have the potential for upgrades.
These are areas where Nuveen's expertise as an experienced investment manager
knowledgeable about the unique aspects of the municipal market can result in
added value for our investors.
The current market environment--influenced by declining interest rates, benign
inflation, and strong municipal supply--has helped to position municipal bonds
as one of the most compelling values in today's marketplace. We expect that the
excellent municipal-to-Treasury ratio, combined with continued volatility in the
equity markets and investors' increasing awareness of the need for asset
allocation rebalancing, will result in growing demand for municipal bond funds.
We believe that investors who take advantage of current opportunities in the
municipal market should be rewarded with healthy returns and attractive yields
in the months ahead, as the market recognizes the value of these quality
investments.
*The Lehman Brothers Municipal Bond Index is an unleveraged index comprised of
a broad range of investment-grade municipal bonds, and does not reflect any
initial or ongoing expenses.
**The Lipper Peer Group returns represent the average annualized returns of the
funds in the Lipper National Unleveraged Municipal Debt category. Returns
assume reinvestment of dividends and do not reflect any applicable sales
charge.
<PAGE>
Nuveen Municipal Value Fund, Inc.
Performance Overview
As of October 31, 1998
NUV
Portfolio Statistics
==================================================
Inception Date 6/87
- --------------------------------------------------
Share Price $9 15/16
- --------------------------------------------------
Net Asset Value $10.37
- --------------------------------------------------
Current Market Yield Per Share 5.25%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal Only)(1) 7.61%
- --------------------------------------------------
Fund Net Assets ($000) $2,022,282
- --------------------------------------------------
Effective Maturity (Years) 18.55
- --------------------------------------------------
Modified Duration (Years) 5.97
- --------------------------------------------------
Annualized Total Return
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 10.55% 7.49%
- --------------------------------------------------
5-Year 4.15% 5.93%
- --------------------------------------------------
10-Year 7.53% 7.63%
- --------------------------------------------------
Taxable-Equivalent Total Return(2)
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 13.13% 9.91%
- --------------------------------------------------
5-Year 7.01% 8.68%
- --------------------------------------------------
10-Year 10.56% 10.61%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
==================================================
Utilities 28%
- --------------------------------------------------
U.S. Guaranteed 14%
- --------------------------------------------------
Health Care 11%
- --------------------------------------------------
Transportation 11%
- --------------------------------------------------
Tax Obligation (Limited) 10%
- --------------------------------------------------
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis. The
federal only rate is based on the current market yield and a federal income
tax rate of 31%.
2 Taxable-equivalent total return is based on the annualized total return and a
federal income tax rate of 31%. It represents the return on a taxable
investment necessary to equal the return of the Nuveen fund on an after-tax
basis.
3 The Fund also paid shareholders taxable distributions in December of $0.1326
per share.
<PAGE>
BAR CHART:
1997-1998 Monthly Tax-Free Dividends Per Share(3)
Nov 1997 0.0455
Dec. 1997 0.0455
Jan. 1998 0.0455
Feb. 1998 0.0455
Mar. 1998 0.0455
Apr. 1998 0.0455
May 1998 0.0435
June 1998 0.0435
July 1998 0.0435
Aug. 1998 0.0435
Sept. 1998 0.0435
Oct. 1998 0.0435
Mountain Chart
Share Price Performance
11/7/97 9.5
9.375
9.313
9.375
9.563
9.438
9.563
9.688
9.563
9.813
9.875
9.875
9.938
10.063
9.875
9.938
9.813
9.813
9.688
9.625
9.688
9.625
9.563
9.5
9.375
9.5
9.438
9.5
9.563
9.625
9.688
9.563
9.563
9.5
9.625
9.5
9.5
9.5
9.5
9.5
9.5
9.563
9.625
9.625
9.625
9.625
9.813
9.875
9.938
10
10/31/97 9.94
<PAGE>
Nuveen Municipal Income Fund, Inc. (NMI)
Portfolio Manager's Comments
Portfolio manager Steve Peterson reviews the municipal market, fund performance,
and key investment strategies for the Nuveen Municipal Income Fund, Inc. Steve
assumed portfolio management responsibilities for NMI on July 1, 1998, as part
of Nuveen's efforts to maximize the efficient use of staff resources and
portfolio manager expertise. Steve, who joined Nuveen in 1988, manages a range
of Nuveen national exchange-traded funds.
What outside factors influenced the municipal bond market the most over the past
year?
The third quarter of 1998 saw an acceleration of trends that have been apparent
in the fixed-income markets over the past 12 months: declining interest rates
and an increased ratio of municipal to Treasury yields. The cause in both cases
was heightened concern about the condition of the global financial system. While
the U.S. economy exhibited continued growth, the impact of the financial turmoil
in Southeast Asia, Russia, and other emerging markets was felt in the U.S.
equity market.
A desire to cushion this impact and avert a domestic credit crunch prompted the
Federal Reserve to ease short-term interest rates in late September, the first
rate cut in almost three years. In response to concerns that the initial
quarter-point cut might not be sufficient, the Fed reduced rates again in
October and November, bringing the federal funds rate to 4.75%. The Fed
indicated that this accommodative stance was intended to sustain U.S. economic
growth going forward, while also adding some stability to global markets.
How have these outside factors affected municipal bond issuance?
In response to an environment of low interest rates and continued economic
growth, municipal bond issuance over the past year has been among the heaviest
in years. As of the end of October, total issuance in 1998--both new deals and
refundings--was on pace to become the second largest year on record. Another
point concerns the level of insured bonds that have been brought to market. For
the month of September, insured bonds made up 56% of all issuance. Most notable
among the flood of new bonds was the $7 billion Long Island Power Authority
(LIPA) offering. The first part of the LIPA issuance, which exceeded $3.5
billion, the largest issuance in municipal bond history, came to market in May,
and another segment was brought out in October. Increased municipal supply has
been met with strong investor demand, due in part to recent volatility in the
equity markets. Demand from institutional buyers such as insurance companies has
also increased, as these investors recognize the exceptionally attractive values
currently offered by municipal bonds.
How did NMI's underlying portfolio perform during the past year?
For the fiscal year ending October 31, 1998, the Nuveen Municipal Income Fund,
Inc. (NMI) produced a total return on net asset value of 7.06%. Our strategy of
retaining bonds with relatively high coupons helped minimize dividend
volatility. The fund's higher-coupon, lower duration bonds gave the fund less
overall risk than the benchmark Lehman Brothers Municipal Bond Index*, and also
caused the fund's total return for the period to slightly trail the Index's
total return of 8.02%.
What was NMI's duration, and what role does duration play in minimizing invest
ment risk and holding down total return?
As of October 31, 1998, NMI had a modified duration of 5.35 years,
compared with the Lehman index's duration of 7.30 years. Duration measures a
bond fund's price volatility, or reaction to interest rate movements. The longer
the duration, the more sensitive the fund is to changes in interest rates.
During a period of falling interest rates, longer duration enables a fund to
participate more fully in market gains. However, when rates rise, longer
duration can make the fund more vulnerable to potential price declines. Over the
past year, as interest rates trended downward, funds with durations shorter than
that of the Lehman index, like NMI, generally tended to underperform the market.
Why is NMI's duration shorter considering the trend is for lower rates?
NMI's duration was shorter than that of the Lehman index in part because we held
bonds purchased during higher interest rate environments rather than sell them
in an attempt to lengthen duration and capture slightly higher total returns. In
the low interest rate environment of the past year, any bonds we would have sold
would have been replaced with issues offering lower yields, which could have
impacted the monthly dividend. In keeping with the fund's objectives, our focus
will continue to be on maintaining the attractiveness and stability of NMI's
dividend as long as possible.
What caused NMI to lower its dividend?
Over the past year, the combination of declining interest rates and a
significant number of bond calls--affecting approximately 20% of the
portfolio--acted to reduce the income level of NMI. Brought to market in April
1988, NMI's portfolio has undergone an anticipated restructuring as
higher-yielding bonds purchased when the fund was first assembled reached their
call dates. As proceeds from the called bonds were reinvested in bonds paying
relatively lower current interest rates, the change in income level earned by
NMI necessitated a dividend reduction. Despite the adjustment, NMI continues to
provide a very competitive current market yield of 5.55% for potential
shareholders, equivalent to a taxable yield of 8.04% for investors in the 31%
federal income tax bracket.
What was the effect on NMI's share price performance?
As Tim mentioned in his letter to shareholders, share price performance among
many of the Nuveen Exchange-Traded Funds has generally been strong over the past
12 months. For NMI, however, market reaction to the effect of bond calls over
the past year resulted in a slight decline in share price, while strong bond
market performance boosted the fund's net asset value. Although the spread
between the fund's share price and net asset value narrowed over the past year,
NMI continued to trade at a premium of 2.71% to its NAV as of October 31, 1998.
What key strategy was used over the past year?
Since the primary focus of NMI is to provide a high level of current interest
income exempt from federal income tax, our strategy was to hold a higher
percentage of lower investment grade securities that have higher yields. We were
able to achieve this goal, as 51% of NMI's holdings are in BBB-rated and
non-rated securities, which, on the whole, offer a yield advantage over their
higher-rated counterparts. When reinvesting the proceeds from bonds called from
NMI, we looked for bonds with longer maturities to increase the fund's duration
as well as bonds that we anticipate will be refunded in order to realize the
gain in price. The fund continues to be well diversified across sectors and
states.
What is Nuveen's outlook for the future?
With the majority of bond calls now behind us, our focus for NMI will remain on
the yield-enhancing strategies mentioned earlier in order to support the fund's
attractive income stream. We also plan to continue adding non-rated bonds to the
portfolio to capture additional yield and to provide strength and stability for
the fund's dividend. As opportunities arise, we will invest in bonds that extend
the fund's duration. These are areas where Nuveen's expertise - as an
experienced investment manager knowledgeable about the unique aspects of the
municipal market - can help add value for our investors.
The current market environment - influenced by declining interest rates, benign
inflation, and strong municipal supply has helped to position municipal bonds as
one of the most compelling values in today's marketplace. We expect that the
excellent municipal-to-Treasury ratio, combined with continued volatility in the
equity markets and investors' increasing awareness of the need for asset
allocation rebalancing, will result in growing demand for municipal bond funds.
We believe that investors who take advantage of current opportunities in the
municipal market should be rewarded with healthy returns and attractive yields
in the months ahead, as the market recognizes the value of these quality
investments.
*The Lehman Brothers Municipal Bond Index is an unleveraged index comprised of
a broad range of investment-grade municipal bonds, and does not reflect any
initial or ongoing expenses.
<PAGE>
Nuveen Municipal Income Fund, Inc.
Performance Overview
As of October 31, 1998
NMI
Portfolio Statistics
==================================================
Inception Date 4/88
- --------------------------------------------------
Share Price $12 7/16
- --------------------------------------------------
Net Asset Value $12.10
- --------------------------------------------------
Current Market Yield Per Share 5.55%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal Only)(1) 8.04%
- --------------------------------------------------
Fund Net Assets ($000) $95,756
- --------------------------------------------------
Effective Maturity (Years) 18.63
- --------------------------------------------------
Modified Duration (Years) 5.35
- --------------------------------------------------
Annualized Total Return
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 5.21% 7.06%
- --------------------------------------------------
5-Year 4.78% 6.11%
- --------------------------------------------------
10-Year 8.11% 7.70%
- --------------------------------------------------
Taxable-Equivalent Total Return(2)
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 7.84% 9.81%
- --------------------------------------------------
5-Year 7.75% 9.08%
- --------------------------------------------------
10-Year 11.22% 10.84%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
==================================================
U.S. Guaranteed 16%
- --------------------------------------------------
Long Term Care 15%
- --------------------------------------------------
Health Care 13%
- --------------------------------------------------
Utilities 12%
- --------------------------------------------------
Education and Civic Organizations 11%
- --------------------------------------------------
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis. The
federal only rate is based on the current market yield and a federal income
tax rate of 31%.
2 Taxable-equivalent total return is based on the annualized total return and a
federal income tax rate of 31%. It represents the return on a taxable
investment necessary to equal the return of the Nuveen fund on an after-tax
basis.
3 The Fund also paid shareholders taxable distributions in December of $0.0318
per share.
Bar Chart:
1997-1998 Monthly Tax-Free Dividends Per Share(3)
Nov. 1997 0.0605
Dec. 1997 0.0605
Jan. 1998 0.0605
Feb. 1998 0.0605
Mar. 1998 0.0605
Apr. 1998 0.0605
May 1998 0.0605
June 1998 0.0605
July 1998 0.0575
Aug. 1998 0.0575
Sept. 1998 0.0575
Oct. 1998 0.0575
Mountain Chart:
Share Price Performance
11/7/97 12.563
12.313
12
12.063
12.125
12
11.938
12.125
12.25
12.313
12.25
12.375
12.5
12.375
12.375
12.313
12.188
12.125
12.313
12.313
12.25
12.375
12.5
12.438
12.25
12.313
12.25
12.25
12.313
12.313
12.313
12.438
12.375
12.25
12.25
12.188
12.188
12.125
11.875
11.813
12.188
12.313
12.25
12.313
12.188
12.125
12.375
12.313
12.563
12.38
10/31/98 12.44
<PAGE>
<TABLE>
<CAPTION>
Shareholder Meeting Report
NUV NMI
- --------------------------------------------------------------------------------
<S> <C> <C>
Approval of the Trustee was reached as follows:
Common Common
Shares Shares
================================================================================
Robert P. Bremner
For -- --
Withhold -- --
- --------------------------------------------------------------------------------
Total -- --
================================================================================
Lawrence H. Brown
For 165,593,675 6,875,274
Withhold 1,647,689 40,119
- --------------------------------------------------------------------------------
Total 167,241,364 6,915,393
================================================================================
Anthony T. Dean
For -- --
Withhold -- --
- --------------------------------------------------------------------------------
Total -- --
================================================================================
Anne E. Impellizzeri
For -- --
Withhold -- --
- --------------------------------------------------------------------------------
Total -- --
================================================================================
Peter R. Sawers
For 165,588,942 6,879,073
Withhold 1,652,422 36,320
- --------------------------------------------------------------------------------
Total 167,241,364 6,915,393
================================================================================
William J. Schneider
For -- --
Withhold -- --
- --------------------------------------------------------------------------------
Total -- --
================================================================================
Timothy R. Schwertfeger
For 165,630,923 6,880,474
Withhold 1,610,441 34,919
- --------------------------------------------------------------------------------
Total 167,241,364 6,915,393
================================================================================
Judith M. Stockdale
For -- --
Withhold -- --
- --------------------------------------------------------------------------------
Total -- --
================================================================================
Ratification of auditors was reached as follows:
For 165,284,781 6,859,418
Against 543,549 19,481
Abstain 1,413,034 36,494
- --------------------------------------------------------------------------------
Total 167,241,364 6,915,393
================================================================================
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors and Shareholders
Nuveen Municipal Value Fund, Inc.
Nuveen Municipal Income Fund, Inc.
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Municipal Value Fund, Inc. and Nuveen
Municipal Income Fund, Inc. as of October 31, 1998, and the related statements
of operations, changes in net assets and the financial highlights for the
periods indicated therein. 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 investments owned as of
October 31, 1998, by correspondence with the custodian and brokers. 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 financial positions of
Nuveen Municipal Value Fund, Inc. and Nuveen Municipal Income Fund, Inc. at
October 31, 1998, and the results of their operations, changes in their net
assets and financial highlights for the periods indicated therein in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
December 11, 1998
<PAGE>
<TABLE>
Portfolio of Investments
Nuveen Municipal Value Fund, Inc. (NUV)
October 31, 1998
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alabama - 1.1%
$ 5,000,000 The Board of Trustees of Alabama Agricultural and Mechanical University,
Revenue Bonds, Series 1995, 6.500%, 11/01/25 (Pre-refunded to 11/01/05) 11/05 at 102 AAA $5,844,400
3,460,000 Alabama Housing Finance Authority, Single Family Mortgage Revenue Bonds
(Collateralized Home Mortgage Revenue Bond Program), 1998 Series A-2,
5.450%, 10/01/28 (Alternative Minimum Tax) 4/08 at 102 Aaa 3,526,155
8,000,000 The Water Works and Sewer Board of the City of Birmingham (Alabama),
Water and Sewer Revenue Bonds, Series 1994, 5.500%, 1/01/20 1/04 at 102 AA 8,298,880
4,000,000 The Medical Clinic Board of the City of Jasper (Alabama), Hospital Revenue
Bonds, Series 1993 (Walker Regional Medical Center, Inc. Project),
6.375%, 7/01/18 7/02 at 102 A3 4,221,760
- ------------------------------------------------------------------------------------------------------------------------------------
Arizona - 0.5%
3,735,000 Hospital District No. One, Maricopa County, Arizona, General Obligation
Bonds, Series 1996, 6.000%, 6/01/21 6/06 at 101 A 3,970,791
5,400,000 Yuma Regional Medical Center on behalf of Hospital District No. 1 of Yuma
County, Arizona, Hospital Revenue Improvement and Refunding Bonds (Yuma
Regional Medical Center Project), Series 1992, 8.000%, 8/01/17
(Pre-refunded to 8/01/02) 8/02 at 101 1/2 N/R*** 6,277,392
- ------------------------------------------------------------------------------------------------------------------------------------
Arkansas - 0.4%
1,500,000 Arkansas Development Finance Authority, Wastewater System Revolving Loan
Fund Revenue Bonds, 1996 Series A, 5.850%, 12/01/19 6/06 at 101 AA 1,625,970
4,070,000 City of Conway, Arkansas, Sales and Use Tax Capital Improvement Bonds,
Series 1997A, 5.350%, 12/01/17 12/06 at 101 AAA 4,202,519
2,750,000 Jefferson County, Arkansas, Pollution Control Revenue Refunding Bonds
(Energy Arkansas, Inc. Project), Series 1997, 5.600%, 10/01/17 12/02 at 102 BBB- 2,781,185
- ------------------------------------------------------------------------------------------------------------------------------------
California - 5.7%
13,120,000 State of California, Veterans General Obligation Bonds, Series BH,
5.200%, 12/01/11 (Alternative Minimum Tax) 12/08 at 101 AAA 13,385,418
9,000,000 State of California, Department of Water Resources, Central Valley
Project, Water System Revenue Bonds, Series L, 5.750%, 12/01/19 12/03 at 101 1/2 AA 9,569,250
16,500,000 State of California, Department of Water Resources, Central Valley
Project, Water System Revenue Bonds, Series M, 4.750%, 12/01/24 12/03 at 101 AA 15,913,425
16,755,000 State Public Works Board of the State of California, Lease Revenue
Refunding Bonds (The Regents of the University of California), 1993
Series A (Various University of California Projects), 5.500%, 6/01/21 6/03 at 102 Aa3 17,462,564
2,500,000 California Statewide Communities Development Authority, Series A,
Certificates of Participation, Pacific Homes, 6.000%, 4/01/17 4/03 at 102 A+ 2,669,475
6,530,000 California Statewide Communities Development Authority, Certificates
of Participation, St. Joseph Health System Obligated Group,
5.500%, 7/01/14 7/03 at 102 AA 6,718,325
Foothill/Eastern Transportation Corridor Agency (California), Toll Road
Revenue Bonds, Series 1995A:
30,000,000 0.000%, 1/01/22 No Opt. Call Baa 8,847,900
10,000,000 6.000%, 1/01/34 1/05 at 102 Baa 10,707,800
30,470,000 Los Angeles County Public Works Financing Authority, Lease Revenue Bonds
(Multiple Capital Facilities Project IV), 4.750%, 12/01/13 12/03 at 102 AAA 30,660,133
- ------------------------------------------------------------------------------------------------------------------------------------
Colorado - 9.9%
12,515,000 Colorado Health Facilities Authority, Revenue Bonds, Series 1994 (Sisters
of Charity Health Care Systems, Inc.), 5.250%, 5/15/14 5/04 at 102 AA 12,744,650
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Colorado (continued)
City and County of Denver, Colorado, Airport System Revenue Bonds,
Series 1992B:
$ 3,680,000 7.000%, 11/15/03 (Alternative Minimum Tax) 11/02 at 102 Baa1 $4,090,946
2,125,000 7.250%, 11/15/23 (Pre-refunded to 11/15/02) (Alternative Minimum Tax) 11/02 at 102 Aaa 2,442,220
8,290,000 7.250%, 11/15/23 (Alternative Minimum Tax) 11/02 at 102 Baa1 9,244,262
City and County of Denver, Colorado, Airport System Revenue Bonds,
Series 1992C:
655,000 6.750%, 11/15/13 (Pre-refunded to 11/15/02) (Alternative Minimum Tax) 11/02 at 102 Aaa 740,058
5,045,000 6.750%, 11/15/13 (Alternative Minimum Tax) 11/02 at 102 Baa1 5,553,233
7,515,000 6.750%, 11/15/22 (Pre-refunded to 11/15/02) (Alternative Minimum Tax) 11/02 at 102 Aaa 8,490,898
29,870,000 6.750%, 11/15/22 (Alternative Minimum Tax) 11/02 at 102 Baa1 32,704,663
City and County of Denver, Colorado, Airport System Revenue Bonds,
Series 1990A:
790,000 8.250%, 11/15/12 (Pre-refunded to 11/15/00) (Alternative Minimum Tax) 11/00 at 102 Aaa 878,354
8,360,000 8.250%, 11/15/12 (Alternative Minimum Tax) 11/00 at 102 Baa1 9,151,023
2,705,000 8.500%, 11/15/23 (Pre-refunded to 11/15/00) (Alternative Minimum Tax) 11/00 at 102 Aaa 3,020,755
29,090,000 8.500%, 11/15/23 (Alternative Minimum Tax) 11/00 at 102 Baa1 31,983,291
City and County of Denver, Colorado, Airport System Revenue Bonds,
Series 1991A:
3,475,000 8.750%, 11/15/23 (Pre-refunded to 11/15/01) (Alternative Minimum Tax) 11/01 at 102 Aaa 4,041,912
9,635,000 8.750%, 11/15/23 (Alternative Minimum Tax) 11/01 at 102 Baa1 10,986,020
City and County of Denver, Colorado, Airport System Revenue Bonds,
Series 1991D:
1,820,000 7.750%, 11/15/21 (Pre-refunded to 11/15/01) (Alternative Minimum Tax) 11/01 at 102 Aaa 2,064,990
6,930,000 7.750%, 11/15/21 (Alternative Minimum Tax) 11/01 at 102 Baa1 7,704,358
10,275,000 7.000%, 11/15/25 (Pre-refunded to 11/15/01) (Alternative Minimum Tax) 11/01 at 100 Aaa 11,257,290
39,745,000 7.000%, 11/15/25 (Alternative Minimum Tax) 11/01 at 100 Baa1 42,649,962
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut - 0.9%
8,925,000 Connecticut Housing Finance Authority, Housing Mortgage Finance
Program Bonds, 1995 Series E, Subseries E-2, 6.500%, 5/15/20
(Alternative Minimum Tax) 5/05 at 102 AA 9,652,566
7,850,000 Connecticut Housing Finance Authority, Housing Mortgage Finance
Program Bonds, 1996 Series D, Subseries D-2, 6.200%, 11/15/27
(Alternative Minimum Tax) 5/06 at 102 AA 8,385,684
- ------------------------------------------------------------------------------------------------------------------------------------
Florida - 1.8%
5,000,000 Orlando Utilities Commission, Water and Electric Subordinated
Revenue Bonds, Series 1992A, 5.500%, 10/01/27 10/02 at 100 Aa2 5,133,350
5,500,000 Orlando Utilities Commission, Water and Electric Subordinated Revenue
Refunding Bonds, Series 1993A, 10/03 at 102 Aa2 5,587,395
5.250%, 10/01/23
24,475,000 Palm Beach County Health Facilities Authority (Florida), Hospital
Revenue Refunding Bonds, Series 1988 (JFK Medical Center, Inc. Projects),
8.875%, 12/01/18 (Pre-refunded to 12/01/98) 12/98 at 102 N/R*** 25,080,757
- ------------------------------------------------------------------------------------------------------------------------------------
Georgia - 1.6%
Coffee County Hospital Authority (Georgia), Revenue Anticipation
Certificates (Coffee Regional Medical Center, Inc. Project), Series 1997A:
2,700,000 6.250%, 12/01/06 No Opt. Call N/R 2,831,679
21,100,000 6.750%, 12/01/26 12/06 at 102 N/R 22,015,318
8,000,000 George L. Smith II World Congress Center Authority, Refunding Revenue
Bonds (Domed Stadium Project), Series 2000, 5.500%, 7/01/20
(Alternative Minimum Tax) (DD, settling on 4/04/00) 7/10 at 101 AAA 7,980,320
- ------------------------------------------------------------------------------------------------------------------------------------
Illinois - 11.4%
5,000,000 City of Chicago, General Obligation Bonds, Project Series A of 1992,
6.250%, 1/01/12 (Pre-refunded to 1/01/02) 1/02 at 102 AAA 5,445,500
City of Chicago, General Obligation Bonds, Project and Refunding
Series 1998:
10,700,000 5.250%, 1/01/20 7/08 at 102 AAA 10,862,640
12,550,000 5.250%, 1/01/28 7/08 at 102 AAA 12,740,760
2,000,000 Chicago School Reform Board of Trustees of the Board of Education of the
City of Chicago, Illinois, Unlimited Tax General Obligation Bonds
(Dedicated Tax Revenues), Series 1997A, 5.250%, 12/01/22 12/07 at 102 AAA 2,029,300
Chicago School Reform Board of Trustees of the Board of
Education of the City of Chicago, Illinois, Unlimited Tax
General Obligation Bonds (Dedicated Tax Revenues), Series 1998A:
15,000,000 0.000%, 12/01/24 No Opt. Call AAA 3,923,100
47,500,000 0.000%, 12/01/28 No Opt. Call AAA 10,078,075
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois (continued)
$ 1,125,000 Metropolitan Water Reclamation District of Greater Chicago, General
Obligation Capital Improvement Bonds, Series of June, 1991,
7.000%, 1/01/11 No Opt. Call AA $1,384,459
17,500,000 Public Building Commission of Chicago (Illinois), Building Revenue Bonds,
Series A of 1993 (Board of Education of the City of Chicago),
5.750%, 12/01/18 12/03 at 102 AAA 18,743,900
9,520,000 City of Chicago, Illinois, Tax Increment Allocation Bonds
(Stockyards Industrial-Commercial Redevelopment Project),
Series 1991, 9.000%, 1/01/11 (Pre-refunded to 1/01/01) 1/01 at 102 N/R*** 10,423,924
5,655,000 Illinois Development Finance Authority, Industrial Development Revenue
Bonds, Series 1992 (Plano Molding Company Project), 7.750%, 6/01/12
(Alternative Minimum Tax) 6/02 at 102 N/R 6,000,521
3,000,000 Illinois Development Finance Authority, Pollution Control
Revenue Refunding Bonds, Series 1994 (Commonwealth Edison
Company Project), 5.850%, 1/15/14 No Opt. Call BBB 3,144,900
13,350,000 Illinois Development Finance Authority, Local Government Program
Revenue Bonds, Series 1998 (St. Charles Community Unit School District
Number 303 Project), 5.100%, 1/01/17 7/08 at 100 Aaa 13,418,886
7,485,000 Illinois Development Finance Authority (The Presbyterian Home
Lake Forest Place Project), Revenue Bonds, Series 1996 B,
6.400%, 9/01/31 9/06 at 102 AA- 8,417,107
14,000,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, Series 1993
(Illinois Masonic Medical Center), 5.500%, 10/01/19 10/03 at 102 A- 14,359,380
7,000,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1993 (
Swedish American Hospital), 5.375%, 11/15/23 11/03 at 102 AAA 7,106,330
18,015,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1993
(Rush-Presbyterian-St. Lukes Medical Center Obligated Group),
5.250%, 11/15/20 11/03 at 102 AAA 18,093,365
Illinois Health Facilities Authority, Revenue and Revenue Refunding Bonds,
Series 1990C (Hinsdale Hospital):
8,735,000 9.500%, 11/15/19 (Pre-refunded to 11/15/00) 11/00 at 102 AAA 9,924,358
1,285,000 9.500%, 11/15/19 11/00 at 102 AAA 1,461,212
Illinois Health Facilities Authority, Revenue Bonds, Series 1992
(South Suburban Hospital):
1,150,000 7.000%, 2/15/18 (Pre-refunded to 2/15/02) 2/02 at 102 A*** 1,283,849
4,350,000 7.000%, 2/15/18 No Opt. Call A 5,351,196
8,000,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1997
(Sherman Health Systems), 5.250%, 8/01/22 8/07 at 101 AAA 8,048,320
30,415,000 State of Illinois, Build Illinois Bonds (Sales Tax Revenue Refunding
Bonds), Series Q, 5.500%, 6/15/20 6/02 at 101 AAA 31,395,580
13,775,000 Metropolitan Pier and Exposition Authority (Illinois), Dedicated State
Tax Revenue Bonds, Series 1997, 5.125%, 6/01/13 6/07 at 101 AAA 14,253,681
11,650,000 Regional Transportation Authority, Cook, DuPage, Kane, Lake, McHenry
and Will Counties (Illinois), General Obligation Bonds, Series 1994A,
6.250%, 6/01/24 6/04 at 102 AAA 12,959,926
1,980,000 Tri-City Regional Port District (Illinois), Port and Terminal Facilities
Revenue Bonds (1998 Refunding and Dock #2 Enhancement Project),
Series 1998B, 5.875%, 7/01/08 (Alternative Minimum Tax) No Opt. Call N/R 2,031,955
- ------------------------------------------------------------------------------------------------------------------------------------
Indiana - 2.3%
10,000,000 Indiana Health Facility Financing Authority, Hospital Revenue Bonds,
Series 1997A (Sisters of St. Francis Health Services, Inc. Project),
5.375%, 11/01/27 11/07 at 102 AAA 10,166,200
17,105,000 Indiana Health Facility Financing Authority, Hospital Revenue Bonds
(Clarian Health Partners, Inc.), Series 1996A, 6.000%, 2/15/21 2/07 at 102 AA 18,571,412
4,500,000 Indianapolis Airport Authority, Special Facilities Revenue Bonds,
Series 1994 (Federal Express Corporation Project), 7.100%, 1/15/17
(Alternative Minimum Tax) 7/04 at 102 BBB 5,024,565
City of South Bend, Indiana, Multifamily Housing Revenue Refunding Bonds
(The Pointe at St. Joseph Project), Issue of 1994, Series A:
500,000 7.750%, 12/15/18 (Alternative Minimum Tax) 12/03 at 100 N/R 502,650
9,155,000 7.500%, 12/15/18 12/03 at 100 N/R 9,192,261
3,168,570 City of South Bend, Indiana, Multifamily Housing Revenue Refunding Bonds
(The Pointe at St. Joseph Project), Issue of 1994, Series C,
3.850%, 12/15/18 12/03 at 100 N/R 2,076,427
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Iowa - 0.6%
$ 44,690,000 Iowa Housing Finance Authority, Single Family Housing Bonds,
1984 Issue A, 0.000%, 9/01/16 No Opt. Call AAA $6,160,963
5,880,000 Iowa Finance Authority, Hospital Facilities Revenue Bonds, Series 1998 A
(Iowa Health System), 5.125%, 1/01/28 7/08 at 102 AAA 5,835,547
- ------------------------------------------------------------------------------------------------------------------------------------
Kansas - 0.4%
6,650,000 City of Newton, Kansas, Hospital Revenue Bonds (Newton Healthcare
Corporation), Series 1994A, 7.750%, 11/15/24 (Pre-refunded to 11/15/04) 11/04 at 102 BBB-*** 8,063,192
- ------------------------------------------------------------------------------------------------------------------------------------
Kentucky - 1.2%
12,500,000 County of Carroll, Kentucky, Collateralized Pollution Control Revenue
Bonds (Kentucky Utilities Company Project), 1992 Series A,
7.450%, 9/15/16 9/02 at 102 Aa2 14,158,000
9,000,000 Greater Kentucky Housing Assistance Corporation, Mortgage Revenue
Refunding Bonds, Series 1997A (FHA-Insured Mortgage Loans - Section 8
Assisted Projects), 6.100%, 1/01/24 1/03 at 100 AAA 9,275,580
- ------------------------------------------------------------------------------------------------------------------------------------
Louisiana - 1.3%
21,315,000 Louisiana Public Facilities Authority, Hospital Revenue Refunding Bonds
(Southern Baptist Hospitals, Inc. Project), Series 1986, 8.000%, 5/15/12 No Opt. Call AAA 26,432,945
- ------------------------------------------------------------------------------------------------------------------------------------
Maine - 2.0%
14,365,000 Maine State Housing Authority, Mortgage Purchase Bonds, 1994 Series A,
5.550%, 11/15/14 2/04 at 102 AA 14,655,604
24,775,000 Maine State Housing Authority, Mortgage Purchase Bonds, 1995 Series A-2,
6.650%, 11/15/25 (Alternative Minimum Tax) 5/05 at 102 AA 26,584,318
- ------------------------------------------------------------------------------------------------------------------------------------
Maryland - 0.6%
10,900,000 Community Development Administration of Maryland, Department of Housing
and Community Development, Residential Revenue Bonds, Series 1997B,
5.875%, 9/01/25 (Alternative Minimum Tax) 3/07 at 101 1/2 Aa2 11,437,261
- ------------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 4.3%
1,410,000 Massachusetts Municipal Wholesale Electric Company, Power Supply System
Revenue Bonds, 1987 Series A, 8.750%, 7/01/18 No Opt. Call BBB+ 1,664,405
5,000,000 Massachusetts Industrial Finance Agency, Resource Recovery Revenue Bonds
(SEMASS Project), Series 1991A, 9.000%, 7/01/15 7/01 at 103 N/R 5,564,750
16,400,000 Massachusetts Turnpike Authority, Metropolitan Highway System Revenue
Bonds, 1997 Series C (Senior), 5.000%, 1/01/37 1/07 at 102 AAA 16,029,852
24,510,000 Massachusetts Water Resources Authority, General Revenue Bonds,
1990 Series A, 6.000%, 4/01/20 (Pre-refunded to 4/01/00) 4/00 at 100 AAA 25,379,860
36,580,000 Massachusetts Water Resources Authority, General Revenue Refunding Bonds,
1992 Series B, 5.500%, 11/01/15 11/02 at 102 A1 37,814,941
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan - 5.3%
3,790,000 City of Adrian (Michigan), Hospital Finance Authority, Hospital Revenue
Bonds (Emma L. Bixby Medical Center), Series 1989A, 8.500%, 7/01/09 7/00 at 102 N/R 3,940,046
6,000,000 The Economic Development Corporation of the City of Dearborn (Michigan),
Hospital Revenue Refunding Bonds (Oakwood Obligated Group),
Series 1994A, 5.250%, 8/15/21 8/04 at 102 AAA 6,039,540
10,000,000 City of Detroit, Local Development Finance Authority, Tax Increment Bonds,
Series 1998A, 5.500%, 5/01/21 5/09 at 101 N/R 9,879,200
5,000,000 City of Detroit, Michigan, Sewage Disposal System Revenue Refunding Bonds,
Series 1995-B, 5.250%, 7/01/15 7/05 at 101 AAA 5,155,900
4,000,000 County of Grand Traverse (Michigan), Hospital Finance Authority, Hospital
Revenue Refunding Bonds (Munson Healthcare Obligated Group), Series 1992A,
6.250%, 7/01/12 7/02 at 102 AAA 4,361,040
2,500,000 County of Kent, Michigan, Airport Revenue Bonds, Series 1998 (Kent County
International Airport), 5.000%, 1/01/28 (Alternative Minimum Tax) 1/08 at 101 AAA 2,423,350
7,000,000 Michigan State Hospital Finance Authority, Hospital Revenue Bonds (The
Detroit Medical Center Obligated Group), Series 1991A, 7.500%, 8/15/11
(Pre-refunded to 8/15/01) 8/01 at 102 AAA 7,840,700
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michigan (continued)
$ 15,255,000 Michigan State Hospital Finance Authority, Hospital Revenue Bonds
(The Detroit Medical Center Obligated Group), Series 1998A,
5.250%, 8/15/28 8/08 at 101 A- $14,883,541
7,350,000 Michigan State Housing Development Authority, Rental Housing Revenue
Bonds, 1993 Series A, 5.875%, 10/01/17 4/03 at 102 AAA 7,748,591
15,750,000 Michigan State Housing Development Authority, Rental Housing Revenue Bonds,
1995 Series B, 6.150%, 10/01/15 6/05 at 102 AAA 16,831,080
25,000,000 Michigan Strategic Fund, Limited Obligation Refunding Revenue
Bonds (Detroit Edison Company Pollution Control Bonds Project),
Collateralized Series 1995AA, 6.400%, 9/01/25 9/05 at 102 AAA 28,413,250
- ------------------------------------------------------------------------------------------------------------------------------------
Minnesota - 0.4%
7,870,000 Minnesota Housing Finance Agency, Rental Housing Bonds, 1995 Series D
(Non-AMT), 5.900%, 8/01/15 2/05 at 102 AAA 8,327,090
- ------------------------------------------------------------------------------------------------------------------------------------
Mississippi - 0.7%
13,000,000 Mississippi Hospital Equipment and Facilities Authority, Revenue Refunding
and Improvement Bonds (North Mississippi Health Services), 1993 Series 1,
5.750%, 5/15/16 5/03 at 102 AAA 13,645,060
- ------------------------------------------------------------------------------------------------------------------------------------
Missouri - 0.1%
2,500,000 The Industrial Development Authority of the County of Taney, Missouri,
Hospital Revenue Bonds (The Skaggs Community Hospital Association),
Series 1998, 5.400%, 5/15/28 5/08 at 101 BBB+ 2,510,600
- ------------------------------------------------------------------------------------------------------------------------------------
Nebraska - 0.3%
5,765,000 Consumers Public Power District, Nebraska, Nuclear Facility Revenue Bonds,
1968 Series, 5.100%, 1/01/03 1/99 at 100 A+ 5,767,421
- ------------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 1.5%
5,070,000 The Industrial Development Authority of the State of New Hampshire,
Pollution Control Revenue Bonds (The United Illuminating Company
Project 1989 Series A), 8.000%, 12/01/14 (Alternative Minimum Tax) 12/99 at 103 BBB- 5,358,939
24,625,000 Business Finance Authority of the State of New Hampshire, Pollution
Control Refunding Revenue Bonds (The United Illuminating Company
Project 1993 Series A), 5.875%, 10/01/33 10/03 at 102 BBB- 25,133,506
- ------------------------------------------------------------------------------------------------------------------------------------
New York - 10.5%
5,360,000 Village of East Rochester (New York), Housing Authority, FHA-Insured
Mortgage Revenue Bonds (St. Johns Meadows Project), Series 1997A,
5.600%, 8/01/17 8/07 at 102 AAA 5,717,834
1,250,000 Metropolitan Transportation Authority (New York), Commuter Facilities
1987 Service Contract Bonds, Series 3, 7.500%, 7/01/16
(Pre-refunded to 7/01/00) 7/00 at 102 AAA 1,355,938
5,000,000 The City of New York, General Obligation Bonds, Fiscal 1994 Series D,
5.750%, 8/15/10 8/03 at 102 A- 5,323,600
9,000,000 The City of New York, General Obligation Bonds, Fiscal 1996 Series G,
5.750%, 2/01/14 2/06 at 101 1/2 A- 9,639,180
10,000,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series E,
6.000%, 8/01/16 8/06 at 101 1/2 A- 10,868,800
23,395,000 The City of New York, General Obligation Bonds, Fiscal 1998 Series D,
5.500%, 8/01/10 8/07 at 101 A- 25,132,079
The City of New York, General Obligation Bonds, Fiscal 1997 Series G:
390,000 6.000%, 10/15/26 (Pre-refunded to 10/15/07) 10/07 at 101 A-*** 448,582
39,610,000 6.000%, 10/15/26 10/07 at 101 A- 43,159,848
15,000,000 New York City (New York), Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, Fiscal 1996, Series B, 5.750%, 6/15/26 6/06 at 101 AAA 16,140,900
8,750,000 New York City (New York), Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, Fiscal 1992, Series A, 6.750%, 6/15/17
(Pre-refunded to 6/15/01) 6/01 at 101 Aaa 9,521,750
15,000,000 New York Local Government Assistance Corporation, Series 1991A Bonds,
7.000%, 4/01/16 (Pre-refunded to 4/01/01) 4/01 at 102 AAA 16,455,450
9,815,000 New York State Medical Care Facilities Finance Agency, St. Lukes-Roosevelt
Hospital Center FHA-Insured Mortgage Revenue Bonds, 1993 Series A,
5.600%, 8/15/13 8/03 at 102 AAA 10,311,737
11,750,000 Power Authority of the State of New York, General Purpose Bonds, Series CC,
5.000%, 1/01/14 (Pre-refunded to 1/01/03) 1/03 at 102 Aa2*** 12,472,743
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York (continued)
$ 26,105,000 Power Authority of the State of New York, Revenue Bonds, Series 1998 C,
5.000%, 2/15/18 2/08 at 101 AA- $26,185,664
10,000,000 New York State Thruway Authority, General Revenue Refunding Bonds,
Series E, 4.750%, 1/01/19 1/08 at 101 AA- 9,677,800
10,000,000 New York State Thruway Authority, Local Highway and Bridge Service
Contract Bonds, Series 1998A-2, 5.250%, 4/01/15 4/08 at 101 AAA 10,387,200
- ------------------------------------------------------------------------------------------------------------------------------------
North Carolina - 2.8%
6,100,000 City of Charlotte, North Carolina, Refunding Certificates of Participation
(Convention Facility Project), Series 1993C, 5.250%, 12/01/20 12/03 at 102 AAA 6,180,703
11,865,000 North Carolina Eastern Municipal Power Agency, Power System Revenue
Bonds, Series 1985-G, 5.750%, 12/01/16 9/03 at 102 1/2 Baa1 12,366,178
11,610,000 North Carolina Eastern Municipal Power Agency, Power System Revenue Bonds,
Series 1993-D, 5.875%, 1/01/14 1/03 at 102 Baa1 12,102,032
4,300,000 North Carolina Eastern Municipal Power Agency, Power System Revenue Bonds,
Refunding Series 1996-A, 5.700%, 1/01/13 1/07 at 102 AAA 4,700,631
11,300,000 North Carolina Municipal Power Agency, Number 1, Catawba Electric
Revenue Bonds, Series 1992, 5.750%, 1/01/15 1/03 at 100 A- 11,642,390
10,015,000 North Carolina Municipal Power Agency, Number 1, Catawba Electric
Revenue Bonds, Series 1985B, 6.000%, 1/01/20 1/99 at 100 A- 10,038,335
- ------------------------------------------------------------------------------------------------------------------------------------
Ohio - 0.4%
Kensington (Ohio), Housing Development Corporation, Multifamily
Housing Revenue Bonds - Series 1989 (GNMA Collateralized
Kensington Apartments Project):
1,285,000 8.000%, 12/20/08 (Alternative Minimum Tax) 12/98 at 103 AAA 1,328,394
6,365,000 8.125%, 12/20/31 (Alternative Minimum Tax) 12/98 at 103 AAA 6,575,872
- ------------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.7%
10,030,000 The Comanche County Hospital Authority (Lawton, Oklahoma), Certificates
of Participation, Series 1990, 9.000%, 7/01/21 (Pre-refunded to 1/01/00) 1/00 at 102 AAA 10,860,083
2,350,000 Midwest City Memorial Hospital Authority (Midwest City, Oklahoma), Hospital
Revenue Bonds, Series 1992, 7.375%, 4/01/22 (Pre-refunded to 4/01/02) 4/02 at 102 BBB+*** 2,659,448
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 4.0%
5,955,000 Pennsylvania Convention Center Authority, Refunding Revenue Bonds,
1994 Series A, 6.750%, 9/01/19 9/04 at 102 BBB 6,683,237
11,175,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue
Bonds, Series 1993-36, 5.450%, 10/01/14 10/03 at 102 AA+ 11,459,069
9,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue
Bonds, Series 1996-51, 6.375%, 4/01/28 (Alternative Minimum Tax) 4/06 at 102 AA+ 9,654,480
18,850,000 Pennsylvania Intergovernmental Cooperation Authority, Special Tax
Revenue Refunding Bonds (City of Philadelphia Funding Program),
Series of 1993A, 5.000%, 6/15/22 6/03 at 100 AAA 18,604,573
32,000,000 City of Philadelphia, Pennsylvania, Water and Wastewater Revenue Bonds,
Series 1993, 5.500%, 6/15/14 6/03 at 102 AAA 33,931,840
- ------------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 0.8%
6,250,000 Rhode Island Health and Educational Building Corporation, Hospital
Financing Revenue Bonds, Lifespan Obligated Group Issue, Series 1996,
5.250%, 5/15/26 5/07 at 102 AAA 6,287,563
10,000,000 State of Rhode Island and Providence Plantations, Lease Participation
Certificates (Howard Center Improvements 1997 Series), 5.375%, 10/01/16 10/07 at 101 AAA 10,376,100
- ------------------------------------------------------------------------------------------------------------------------------------
South Carolina - 0.6%
13,000,000 Piedmont Municipal Power Agency, Electric Revenue Bonds, 1986 Refunding
Series, 5.000%, 1/01/25 1/99 at 100 BBB 12,459,200
- ------------------------------------------------------------------------------------------------------------------------------------
South Dakota - 0.3%
6,000,000 South Dakota Housing Development Authority, Homeownership Mortgage Bonds,
1997 Series F, 5.800%, 5/01/28 (Alternative Minimum Tax) 5/07 at 102 AAA 6,273,660
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Texas - 6.1%
$ 11,990,000 Alliance Airport Authority, Inc., Special Facilities Revenue Bonds,
Series 1990 (American Airlines, Inc. Project), 7.500%, 12/01/29
(Alternative Minimum Tax) 12/00 at 102 Baa2 $12,856,757
12,525,000 City of Austin, Texas, Combined Utility Systems Revenue Bonds, Series 1986A,
8.000%, 11/15/16 (Pre-refunded to 5/15/01) 5/01 at 100 AAA 13,850,270
24,265,000 City of Austin, Texas, Combined Utility Systems Revenue Refunding Bonds,
Series 1992A, 12.500%, 11/15/07 No Opt. Call AAA 38,990,943
4,300,000 Corpus Christi (Texas), Housing Finance Corporation, Single Family
Mortgage Senior Revenue Refunding Bonds, Series 1991A, 7.700%, 7/01/11 7/01 at 103 AAA 4,725,614
10,000,000 Harris County, Texas, Toll Road Unlimited Tax and Subordinate Lien Revenue
Refunding Bonds, Series 1991, 6.750%, 8/01/14 8/01 at 102 AA 10,936,800
3,470,000 Irving Independent School District, Unlimited Tax School Building Bonds,
Series 1997, 0.000%, 2/15/11 No Opt. Call AAA 1,972,175
5,685,000 Irving Independent School District, Unlimited Tax Refunding Bonds,
Series 1997 A, 0.000%, 2/15/10 No Opt. Call AAA 3,420,608
14,625,000 Matagorda County Navigation District Number One (Texas), Collateralized
Revenue Refunding Bonds (Houston Lighting and Power Company Project),
Series 1995, 5.800%, 10/15/15 10/00 at 102 AAA 15,371,168
4,000,000 Industrial Development Corporation of Port of Corpus Christi (Texas),
Revenue Refunding Bonds (Valero Refining and Marketing Company Project),
5.400%, 4/01/18 4/08 at 102 BBB- 3,999,320
9,380,000 City of San Antonio, Texas, Electric and Gas Systems Revenue Refunding
Bonds, New Series 1991-B, 5.000%, 2/01/16 2/01 at 100 Aa1 9,380,281
5,780,000 The Southeast Texas Housing Finance Corporation, Single Family Mortgage
Revenue Bonds, 1983 Series A, 0.000%, 11/01/14 No Opt. Call AA- 1,148,024
5,750,000 Weslaco Health Facilities Development Corporation, Hospital Revenue Bonds
(Knapp Medical Center Project), Series 1994, 5.375%, 6/01/23 1/04 at 102 AAA 5,846,370
- ------------------------------------------------------------------------------------------------------------------------------------
Utah - 4.6%
10,670,000 Intermountain Power Agency (Utah), Power Supply Revenue Refunding Bonds,
1993 Series B, 5.250%, 7/01/17 7/03 at 102 A+ 10,858,326
3,510,000 Intermountain Power Agency (Utah), Power Supply Revenue Refunding Bonds,
1993 Series C, 5.250%, 7/01/14 No Opt. Call A+ 3,688,273
4,250,000 Intermountain Power Agency (Utah), Power Supply Revenue Refunding Bonds,
Series 1989 A, 6.000%, 7/01/23 (Pre-refunded to 7/01/99) 7/99 at 100 A+*** 4,336,360
5,000,000 Intermountain Power Agency (Utah), Power Supply Revenue Refunding Bonds,
1989 Series B, 6.000%, 7/01/23 7/99 at 100 A+ 5,064,250
Intermountain Power Agency (Utah), Power Supply Revenue Refunding Bonds,
1993 Series A:
21,735,000 5.500%, 7/01/20 7/03 at 102 A+ 22,486,379
47,180,000 5.000%, 7/01/23 7/03 at 100 A+ 45,841,503
- ------------------------------------------------------------------------------------------------------------------------------------
Washington - 10.6%
640,000 Washington Public Power Supply System, Nuclear Project No. 1 Revenue
Bonds, 14.375%, 7/01/01 No Opt. Call AAA 748,774
9,450,000 Washington Public Power Supply System, Nuclear Project No. 1 Refunding
Revenue Bonds, Series 1993A, 5.700%, 7/01/17 7/03 at 102 AAA 9,854,838
27,000,000 Washington Public Power Supply System, Nuclear Project No. 1 Refunding
Revenue Bonds, Series 1993C, 5.400%, 7/01/12 7/03 at 102 Aa1 28,193,400
2,870,000 Washington Public Power Supply System (Bonneville), Nuclear Project
No. 1 Refunding Revenue Bonds, Series 1993C, 5.375%, 7/01/15 7/03 at 102 Aa1 2,949,011
11,390,000 Washington Public Power Supply System, Nuclear Project No. 2 Refunding
Revenue Bonds, Series 1993A, 5.750%, 7/01/12 7/03 at 102 Aa1 12,250,401
17,500,000 Washington Public Power Supply System, Nuclear Project No. 2 Refunding
Revenue Bonds, Series 1994A, 5.375%, 7/01/10 7/04 at 102 Aa1 18,030,425
2,000,000 Washington Public Power Supply System, Nuclear Project No. 3 Refunding
Revenue Bonds, Series 1989B, 7.250%, 7/01/15 (Pre-refunded to 1/01/00) 1/00 at 102 AAA 2,125,740
20,975,000 Washington Public Power Supply System, Nuclear Project No. 3, Refunding
Revenue Bonds, Series 1991A, 6.500%, 7/01/18 (Pre-refunded to 7/01/01) 7/01 at 102 Aa1*** 22,864,847
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Washington (continued)
Washington Public Power Supply System, Nuclear Project No. 3 Refunding
Revenue Bonds, Series 1993B:
$ 11,510,000 5.625%, 7/01/12 7/03 at 102 Aa1 $12,102,649
9,000,000 5.600%, 7/01/17 7/03 at 102 AAA 9,323,549
Washington Public Power Supply System, Nuclear Project No. 3 Refunding
Revenue Bonds, Series 1993C:
81,000,000 5.400%, 7/01/12 7/03 at 102 Aa1 84,580,199
11,850,000 5.375%, 7/01/15 7/03 at 102 Aa1 12,108,685
- ------------------------------------------------------------------------------------------------------------------------------------
West Virginia - 0.4%
7,180,000 West Virginia Housing Development Fund, Housing Finance Bonds,
Series 1997-A, 6.050%, 5/01/27 11/06 at 102 AAA 7,703,421
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 2.6%
20,085,000 The Wisconsin Public Power Incorporated System, Power Supply System
Revenue Bonds, Series 1993 A, 5.250%, 7/01/21 7/03 at 102 AAA 20,291,674
11,325,000 Wisconsin Housing and Economic Development Authority, Homeownership
Revenue Bonds, 1994 Series B, 6.750%, 9/01/25 (Alternative Minimum Tax) 3/04 at 102 AA 12,118,655
17,020,000 Wisconsin Health and Educational Facilities Authority, Revenue Bonds
(Sisters of the Sorrowful Mother-Ministry Corporation), Series 1993D,
5.500%, 8/15/19 8/03 at 102 AAA 17,647,356
1,750,000 Wisconsin Health and Educational Facilities Authority, Revenue Bonds
(Sisters of the Sorrowful Mother-Ministry), Series 1993C,
5.400%, 8/15/13 8/03 at 102 AAA 1,858,237
- ------------------------------------------------------------------------------------------------------------------------------------
$ 2,003,013,570 Total Investments - (cost $1,831,095,265) - 98.7% 1,995,339,282
===============---------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.3% 26,942,235
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $2,022,281,517
====================================================================================================================
* Optional Call Provisions (not covered by the report of independent auditors):
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 auditors): Using the higher
of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely payment
of principal and interest. Securities are normally considered to be equivalent
to AAA rated securities.
N/R Investment is not rated.
(DD) Security purchased on a delayed delivery basis (note 1).
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Portfolio of Investments
Nuveen Municipal Income Fund, Inc. (NMI)
October 31, 1998
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California - 4.6%
$ 3,000,000 California Pollution Control Financing Authority, Solid Waste Disposal
Revenue Bonds (CanFibre of Riverside Project), Tax-Exempt Series 1997A,
9.000%, 7/01/19 (Alternative Minimum Tax) 7/07 at 102 N/R $3,165,510
1,150,000 Foothill/Eastern Transportation Corridor Agency (California), Toll Road
Revenue Bonds, Series 1995A, 6.000%, 1/01/34 1/05 at 102 Baa 1,231,397
- ------------------------------------------------------------------------------------------------------------------------------------
Colorado - 5.1%
City and County of Denver, Colorado, Airport System Revenue Bonds,
Series 1992B:
410,000 7.250%, 11/15/23 (Pre-refunded to 11/15/02) (Alternative Minimum Tax) 11/02 at 102 Aaa 471,205
1,590,000 7.250%, 11/15/23 (Alternative Minimum Tax) 11/02 at 102 Baa1 1,773,025
City and County of Denver, Colorado, Airport System Revenue Bonds,
Series 1990A:
110,000 8.500%, 11/15/23 (Pre-refunded to 11/15/00) (Alternative Minimum Tax) 11/00 at 102 Aaa 122,840
1,195,000 8.500%, 11/15/23 (Alternative Minimum Tax) 11/00 at 102 Baa1 1,313,855
City and County of Denver, Colorado, Airport System Revenue Bonds,
Series 1991A:
285,000 8.750%, 11/15/23 (Pre-refunded to 11/15/01) (Alternative Minimum Tax) 11/01 at 102 Aaa 331,495
780,000 8.750%, 11/15/23 (Alternative Minimum Tax) 11/01 at 102 Baa1 889,372
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut - 5.8%
1,480,000 Capitol Region Education Council (Connecticut), 6.750%, 10/15/15 10/05 at 102 BBB 1,620,881
2,500,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, University of New Haven Issue, Series D, 6.700%, 7/01/26 7/06 at 102 BBB- 2,738,175
1,000,000 Housing Authority of the City of Willimantic, Multi-Family Housing Revenue
Bonds, Series 1995A, GNMA Collateralized Mortgage Loan (Village Heights
Apartments Project), 8.000%, 10/20/30 10/05 at 105 AAA 1,155,710
- ------------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 1.1%
1,015,000 District of Columbia Housing Finance Agency, Collateralized Single
Family Mortgage Revenue Bonds, Series 1988A, 8.375%, 6/01/19
(Alternative Minimum Tax) 6/00 at 100 AAA 1,036,569
- ------------------------------------------------------------------------------------------------------------------------------------
Florida - 3.2%
1,750,000 Dade County (Florida), Industrial Development Authority, Industrial
Development Revenue Bonds, Series 1995 (Miami Cerebral Palsy
Residential Services, Inc. Project), 8.000%, 6/01/22 6/05 at 102 N/R 1,938,983
605,000 Florida Housing Finance Agency, GNMA Collateralized Home Ownership
Mortgage Revenue Bonds, 1988 Series G1, 8.300%, 6/01/20
(Alternative Minimum Tax) 12/98 at 103 Aaa 623,755
490,000 Gateway Centre Development District, Pinellas County, Florida, Special
Assessment Revenue Bonds, Series 1988, 9.125%, 1/01/09 1/00 at 100 N/R 506,547
- ------------------------------------------------------------------------------------------------------------------------------------
Illinois - 19.7%
4,790,000 Illinois Educational Facilities Authority, Revenue Bonds, Midwestern
University, Series 1998B, 5.500%, 5/15/28 5/08 at 101 A 4,857,347
1,300,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1993 (Northern
Illinois Medical Center Project), McHenry, Illinois, 6.000%, 9/01/19 9/03 at 102 A- 1,443,312
2,000,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, Series 1993
(Illinois Masonic Medical Center), 5.500%, 10/01/19 10/03 at 102 A- 2,051,340
Illinois Health Facilities Authority, Revenue and Revenue Refunding Bonds,
Series 1990C (Hinsdale Hospital):
1,010,000 9.500%, 11/15/19 (Pre-refunded to 11/15/00) 11/00 at 102 AAA 1,147,522
500,000 9.500%, 11/15/19 11/00 at 102 AAA 568,565
3,500,000 Illinois Health Facilities Authority, Revenue Bonds (Victory Health
Service), Series 1997A, 5.750%, 8/15/27 8/07 at 101 A- 3,601,290
3,000,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1988
(Friendship Village of Schaumburg Project), 9.000%, 12/01/08
(Pre-refunded to 12/01/98) 12/98 at 102 AAA 3,074,880
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois (continued)
$ 2,000,000 Joliet Regional Port District Airport Facilities, Revenue Bonds, Lewis
University Airport, Series 1997A, 7.250%, 7/01/18
(Alternative Minimum Tax) 7/07 at 103 N/R $2,143,120
- ------------------------------------------------------------------------------------------------------------------------------------
Louisiana - 3.9%
2,675,000 Louisiana Public Facilities Authority, Extended Care Facilities Revenue
Bonds (Comm-Care Corporation Project), Series 1994, 11.000%, 2/01/04 No Opt. Call BBB 3,690,375
- ------------------------------------------------------------------------------------------------------------------------------------
Maryland - 2.2%
2,000,000 Anne Arundel County, Maryland, Multifamily Housing Revenue Bonds
(Twin Coves Apartments Project), Series 1994, 7.450%, 12/01/24
(Alternative Minimum Tax) No Opt. Call BBB 2,123,560
- ------------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 5.3%
3,000,000 Massachusetts Industrial Finance Agency, Resource Recovery Revenue Bonds
(SEMASS Project), Series 1991A, 9.000%, 7/01/15 7/01 at 103 N/R 3,338,850
300,000 Massachusetts Industrial Finance Agency, Resource Recovery Revenue Bonds
(SEMASS Project), Series 1991B, 9.250%, 7/01/15 (Alternative Minimum Tax) 7/01 at 103 N/R 333,891
1,380,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Dana Hall School
Issue, Series 1997, 5.900%, 7/01/27 7/07 at 102 BBB- 1,442,928
- ------------------------------------------------------------------------------------------------------------------------------------
Minnesota - 3.3%
3,000,000 Minnesota Housing Finance Agency, Single Family Mortgage Bonds,
1995 Series M, 5.875%, 1/01/17 7/07 at 102 AA+ 3,182,460
- ------------------------------------------------------------------------------------------------------------------------------------
Montana - 1.7%
1,500,000 Montana Health Facility Authority, Health Care Revenue Bonds, Series 1996
(Community Medical Center, Inc.), 6.375%, 6/01/18 6/06 at 102 BBB- 1,608,240
- ------------------------------------------------------------------------------------------------------------------------------------
Nebraska - 4.2%
3,921,273 Energy America (Nebraska), Natural Gas Revenue Note (Metropolitan
Utility District Project), Series 1997B, 5.700%, 7/01/08 No Opt. Call N/R 3,985,896
- ------------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 1.1%
1,000,000 New Hampshire Higher Educational and Health Facilities Authority,
Revenue Bonds, Series 1997 (New Hampshire College), 6.375%, 1/01/27 1/07 at 102 BBB- 1,081,540
- ------------------------------------------------------------------------------------------------------------------------------------
New Mexico - 2.6%
2,360,000 City of Belen, New Mexico, Nursing Home Refunding Revenue Bonds (Belen
Health Care Limited Project), 10.250%, 10/01/13 10/01 at 100 N/R 2,471,652
- ------------------------------------------------------------------------------------------------------------------------------------
New York - 11.3%
400,000 Village of East Rochester (New York), Housing Authority, FHA-Insured
Mortgage Revenue Bonds (Linden Knoll, Inc. Project),
Series 1998, 5.250%, 2/01/17 8/08 at 102 AA 405,400
The City of New York, General Obligation Bonds, Fiscal 1996 Series F:
500,000 5.750%, 2/01/15 2/06 at 101 1/2 A- 532,335
1,400,000 5.750%, 2/01/19 2/06 at 101 1/2 A- 1,488,774
1,000,000 The City of New York, General Obligation Bonds, Fiscal 1996 Series G,
5.750%, 2/01/14 2/06 at 101 1/2 A- 1,071,020
1,250,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series D,
Tax Exempt Bonds, 5.875%, 11/01/11 11/06 at 101 1/2 A- 1,373,588
2,500,000 New York State Medical Care Facilities Finance Agency, Hospital Medical
Center, Secured Hospital Revenue Bonds, Series 1995-A, 6.800%, 8/15/12
(Pre-refunded to 2/15/05) 2/05 at 102 AAA 2,928,275
2,760,000 UFA Development Corporation, Utica, New York, FHA-Insured Mortgage
Revenue Bonds, Series 1997A (Loretto-Utica Project), 6.125%, 7/01/35 1/07 at 102 Aa2 3,023,304
- ------------------------------------------------------------------------------------------------------------------------------------
Ohio - 2.2%
1,000,000 County of Franklin, Ohio, Health Care Facilities Revenue Bonds, Series 1993
(Ohio Presbyterian Retirement Services), 6.500%, 7/01/23 7/03 at 102 N/R 1,022,860
1,000,000 County of Franklin, Ohio, Hospital Facilities Mortgage Revenue Bonds,
1991 Series A (Ohio Presbyterian Retirement Services), 8.750%, 7/01/21 7/01 at 103 N/R 1,112,130
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oklahoma - 5.0%
$ 3,585,000 The Comanche County Hospital Authority (Lawton, Oklahoma), Hospital
Revenue Bonds, Series 1989, 8.050%, 7/01/16 (Pre-refunded to 7/01/99) 7/99 at 102 AAA $3,776,762
1,045,000 Oklahoma County Industrial Authority, Revenue Bonds, Oklahoma Blood
Institute Project, Series 1988, 9.000%, 7/01/03 No Opt. Call N/R 1,050,894
- ------------------------------------------------------------------------------------------------------------------------------------
Oregon - 2.2%
2,000,000 State of Oregon, Housing and Community Services Department, Mortgage
Revenue Bonds (Single-Family Mortgage Program), 1997 Series H,
5.650%, 7/01/28 (Alternative Minimum Tax) 7/07 at 101 1/2 Aa2 2,069,520
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 1.2%
1,000,000 Pennsylvania Convention Center Authority, Refunding Revenue Bonds,
1994 Series A, 6.750%, 9/01/19 9/04 at 102 BBB 1,122,290
- ------------------------------------------------------------------------------------------------------------------------------------
Texas - 4.6%
1,055,000 Alliance Airport Authority, Inc., Special Facilities Revenue Bonds,
Series 1990 (American Airlines, Inc. Project), 7.500%, 12/01/29
(Alternative Minimum Tax) 12/00 at 102 Baa2 1,131,266
825,000 Hidalgo County Housing Finance Corporation (Texas), Single Family Mortgage
Revenue Bonds (GNMA and FNMA Collateralized), Series 1994A,
7.000%, 10/01/27 (Alternative Minimum Tax) 4/04 at 102 Aaa 883,328
1,680,000 Tyler Health Facilities Development Corporation (Texas), Hospital
Revenue Bonds (Mother Frances Hospital Regional HealthCare Center
Project), Series 1997A, 5.625%, 7/01/13 7/02 at 100 Baa2 1,696,178
West Independent School District (McLennan and Hill Counties,
Texas), Unlimited Tax School Building and Refunding Bonds,
Series 1998:
1,000,000 0.000%, 8/15/25 8/13 at 51 27/32 AAA 242,650
1,000,000 0.000%, 8/15/26 8/13 at 49 3/32 AAA 229,359
1,000,000 0.000%, 8/15/27 8/13 at 46 15/32 AAA 217,139
- ------------------------------------------------------------------------------------------------------------------------------------
Washington - 1.5%
1,240,000 Housing Authority of the City of Bellingham, Washington, Housing
Revenue Bonds, 1994 (Cascade Meadows Project), 7.100%, 11/01/23
(Pre-refunded to 11/01/04) 11/04 at 100 A1*** 1,439,106
- ------------------------------------------------------------------------------------------------------------------------------------
$ 83,836,273 Total Investments - (cost $81,588,883) - 91.8% 87,882,265
=============-----------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities - 6.7%
Burke County, Georgia, Development Authority, Pollution Control
Revenue Bonds (Georgia Power), Series 1995, Variable Rate Demand Bonds:
3,500,000 3.700%, 4/01/25+ VMIG-1 3,500,000
1,600,000 3.800%, 9/01/34+ VMIG-1 1,600,000
1,300,000 Chattanooga/Hamilton County, Tennessee Hospital Authority, Hospital
Revenue Bonds (Erlanger Medical), Variable Rate Demand Bonds,
3.700%, 10/01/17+ A-1+ 1,300,000
- ------------------------------------------------------------------------------------------------------------------------------------
$ 6,400,000 Total Temporary Investments - 6.7% 6,400,000
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.5% 1,473,415
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 95,755,680
====================================================================================================================
* Optional Call Provisions (not covered by the report of independent auditors):
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 auditors): 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.
+ The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed is
that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
N/R Investment is not rated.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Net Assets
October 31, 1998
<CAPTION>
Municipal Value Municipal Income
<S> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $1,995,339,282 $ 87,882,265
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) -- 6,400,000
Cash 10,181,914 --
Receivables:
Interest 37,730,771 1,745,967
Investments sold 813,880 521,291
Other assets 385,657 4,906
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 2,044,451,504 96,554,429
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 230,953
Payable for investments purchased 11,620,542 --
Accrued expenses:
Management fees (note 6) 933,950 52,972
Other 1,134,756 59,607
Dividends payable 8,480,739 455,217
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 22,169,987 798,749
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $2,022,281,517 $ 95,755,680
====================================================================================================================================
Shares outstanding 194,959,522 7,916,821
====================================================================================================================================
Net asset value per share outstanding (net assets
divided by shares outstanding) $ 10.37 $ 12.10
====================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Operations
Year Ended October 31, 1998
<CAPTION>
Municipal Value Municipal Income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income (note 1) $117,014,449 $ 6,394,900
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 11,109,777 617,860
Shareholders' servicing agent fees and expenses 673,189 35,609
Custodian's fees and expenses 220,223 37,410
Directors' fees and expenses (note 6) 20,585 880
Professional fees 22,157 16,032
Shareholders' reports - printing and mailing expenses 603,079 37,520
Stock exchange listing fees 163,454 16,363
Investor relations expense 194,503 10,006
Other expenses 91,308 5,964
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 13,098,275 777,644
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 103,916,174 5,617,256
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 18,170,510 592,492
Net change in unrealized appreciation or depreciation of investments 24,774,889 274,398
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 42,945,399 866,890
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $146,861,573 $ 6,484,146
====================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
Municipal Value Municipal Income
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
10/31/98 10/31/97 10/31/98 10/31/97
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 103,916,174 $ 112,664,043 $ 5,617,256 $ 5,950,425
Net realized gain from investment transactions
(notes 1 and 4) 18,170,510 25,838,870 592,492 249,613
Net change in unrealized appreciation or
depreciation of investments 24,774,889 16,616,748 274,398 612,937
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 146,861,573 155,119,661 6,484,146 6,812,975
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income (104,108,366) (112,948,000) (5,630,333) (5,961,297)
From accumulated net realized gains from
investment transactions (25,851,632) (21,418,277) (249,880) (425,643)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (129,959,998) (134,366,277) (5,880,213) (6,386,940)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions (note 2)
Net proceeds from shares issued to shareholders due to
reinvestment of distributions -- -- 869,202 607,367
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 16,901,575 20,753,384 1,473,135 1,033,402
Net assets at beginning of year 2,005,379,942 1,984,626,558 94,282,545 93,249,143
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $2,022,281,517 $2,005,379,942 $95,755,680 $94,282,545
- -----------------------------------------------------------------------------------------------------------------------------------
Balance of undistributed net investment
income at end of year $ 219,988 $ 412,180 $ 124,261 $ 137,338
===================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The National Funds (the "Funds") covered in this report and their corresponding
New York Stock Exchange symbols are Nuveen Municipal Value Fund, Inc. (NUV) and
Nuveen Municipal Income Fund, Inc. (NMI).
Each Fund invests primarily in a diversified portfolio of municipal obligations
issued by state and local government authorities. The Funds are registered under
the Investment Company Act of 1940 as closed-end, diversified management
investment companies.
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 Directors. 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. The 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
October 31, 1998, Municipal Value had a delayed delivery purchase commitment of
$7,669,520. There were no such outstanding purchase commitments in Municipal
Income.
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.
Federal 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 realized from investment transactions. The
Funds currently consider significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. Furthermore, each Fund intends
to satisfy conditions which will enable interest from municipal securities,
which is exempt from regular federal income tax, to retain such tax-exempt
status when distributed to shareholders of the Funds. All monthly tax-exempt
income dividends paid during the fiscal year ended October 31, 1998, have been
designated Exempt Interest Dividends. Net realized capital gain and market
discount distributions are subject to federal taxation.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Derivative Financial Instruments
The Funds may invest in transactions 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 October 31, 1998.
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
2. Fund Shares
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Municipal Value Municipal Income
- ---------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
10/31/98 10/31/97 10/31/98 10/31/97
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued to shareholders
due to reinvestment of
distributions -- -- 70,712 49,402
=========================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on December 1, 1998, to shareholders of record on
November 15, 1998, as follows:
<TABLE>
<CAPTION>
Municipal Municipal
Value Income
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dividend per share $.0425 $.0575
=========================================================================================================
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended October
31, 1998, were as follows:
<TABLE>
<CAPTION>
Municipal Municipal
Value Income
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchases:
Investments in municipal securities $ 374,083,110 $ 21,514,108
Temporary municipal investments 220,923,000 15,400,000
Sales and Maturities:
Investments in municipal securities 376,288,813 29,298,075
Temporary municipal investments 222,123,000 9,000,000
=========================================================================================================
</TABLE>
At October 31, 1998, the identified cost of investments owned for federal income
tax purposes was the same as the cost for financial reporting purposes for each
Fund.
<PAGE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at October 31, 1998, were as follows:
<TABLE>
<CAPTION>
Municipal Municipal
Value Income
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $167,249,600 $6,293,382
depreciation (3,005,583) --
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation $164,244,017 $6,293,382
=========================================================================================================
</TABLE>
6. Management Fees and Other Transactions with Affiliates
Under the Funds' investment management agreements with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays to the Adviser an annual management fee, payable monthly, at the rates set
forth below, which are based upon the average daily net asset value of each Fund
as follows:
Average Daily Net Asset Value Municipal Value
- --------------------------------------------------------------------------------
For the first $500 million .3500 of 1%
For the next $500 million .3250 of 1
For net assets over $1 billion .3000 of 1
================================================================================
Average Daily Net Asset Value Municipal Income
- --------------------------------------------------------------------------------
For the first $125 million .6500 of 1%
For the next $125 million .6375 of 1
For the next $250 million .6250 of 1
For the next $500 million .6125 of 1
For the next $1 billion .6000 of 1
For net assets over $2 billion .5875 of 1
================================================================================
In addition, Municipal Value pays an annual management fee, payable monthly,
based on gross interest income as follows:
Gross Interest Income Municipal Value
- --------------------------------------------------------------------------------
For the first $50 million 4.125%
For the next $50 million 4.000
For gross income over $100 million 3.875
================================================================================
The fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Funds pay no
compensation directly to those of its Directors who are affiliated with the
Adviser or to their officers, all of whom receive remuneration for their
services to the Funds from the Adviser.
7. Composition of Net Assets
At October 31, 1998, net assets consisted of:
<TABLE>
<CAPTION>
Municipal Municipal
Value Income
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares, $.01 par value per share $ 1,949,595 $ 79,168
Paid-in surplus 1,837,715,649 88,666,903
Balance of undistributed net investment income 219,988 124,261
Accumulated net realized gain from investment transactions 18,152,268 591,966
Net unrealized appreciation of investments 164,244,017 6,293,382
- ---------------------------------------------------------------------------------------------------------
Net assets $2,022,281,517 $95,755,680
=========================================================================================================
Authorized Common Shares 350,000,000 200,000,000
=========================================================================================================
</TABLE>
<PAGE>
8. Investment Composition
At October 31, 1998, the revenue sources by municipal purpose, expressed as a
percent of total investments, were as follows:
<TABLE>
<CAPTION>
Municipal Municipal
Value Income
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Education and Civic Organizations 1% 11%
Health Care 11 13
Housing/Multifamily 4 4
Housing/Single Family 6 9
Long Term Care 1 15
Tax Obligation/General 8 6
Tax Obligation/Limited 10 4
Transportation 11 10
U.S. Guaranteed 14 16
Utilities 28 12
Water and Sewer 6 --
- ---------------------------------------------------------------------------------------------------------
100% 100%
=========================================================================================================
</TABLE>
Certain long-term and intermediate-term investments owned by the Funds are
either covered by insurance issued by several private insurers or are backed by
an escrow or trust containing U.S. government or U.S. government agency
securities, both of which ensure the timely payment of principal and interest in
the event of default (42% for Municipal Value and 21% for Municipal Income).
Such insurance or escrow, however, does not guarantee the market value of the
municipal securities or the value of the Funds' shares.
All of the temporary investments in short-term municipal securities have credit
enhancements (letters of credit, guarantees or insurance) issued by third party
domestic or foreign banks or other institutions.
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
<PAGE>
<TABLE>
Financial Highlights
Selected data for a common share outstanding throughout each period is
as follows:
<CAPTION>
Investment Operations
------------------------------------
Net Realized/
Beginning Net Unrealized
Net Asset Investment Investment
Value Income Gain (Loss) Total
<S> <C> <C> <C> <C>
Municipal Value
Year Ended 10/31:
1998 $10.29 $.53 $ .21 $ .74
1997 10.18 .58 .22 .80
1996 10.29 .61 (.03) .58
1995 9.87 .64 .46 1.10
1994 10.89 .65 (.94)* (.29)
Municipal Income
Year Ended 10/31:
1998 12.02 .71 .11 .82
1997 11.96 .76 .11 .87
1996 11.97 .77 (.02) .75
1995 11.54 .77 .44 1.21
1994 12.49 .78 (.91) (.13)
<PAGE>
<CAPTION>
Less Distributions
------------------------------------
Net Ending
Investment Capital Net Asset Ending
Income Gains Total Value Market Value
<S> <C> <C> <C> <C> <C>
Municipal Value
Year Ended 10/31:
1998 $(.53) $(.13) $(.66) $10.37 $ 9.9375
1997 (.58) (.11) (.69) 10.29 9.6250
1996 (.61) (.08) (.69) 10.18 9.3750
1995 (.65) (.03) (.68) 10.29 9.7500
1994 (.67) (.06) (.73) 9.87 9.3750
Municipal Income
Year Ended 10/31:
1998 (.71) (.03) (.74) 12.10 12.4375
1997 (.76) (.05) (.81) 12.02 12.5625
1996 (.76) -- (.76) 11.96 12.0000
1995 (.78) -- (.78) 11.97 11.3750
1994 (.82) -- (.82) 11.54 10.8750
<PAGE>
<CAPTION>
Total Returns Ratios/Supplemental Data
----------------------------- --------------------------------------------------------
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Based on Based on Net Net Assets Average Average Turnover
Market Value+ Asset Value+ (000) Net Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Municipal Value
Year Ended 10/31:
1998 10.55% 7.49% $2,022,282 .65% 5.18% 19%
1997 10.39 8.18 2,005,380 .68 5.71 19
1996 3.10 5.84 1,984,627 .69 5.98 18
1995 11.50 11.51 2,006,450 .70 6.35 13
1994 (12.59) (2.81) 1,919,011 .70 6.31 7
Municipal Income
Year Ended 10/31:
1998 5.21 7.06 95,756 .82 5.91 23
1997 11.96 7.60 94,283 .83 6.39 9
1996 12.42 6.49 93,249 .80 6.49 10
1995 11.95 10.86 92,850 .84 6.53 15
1994 (14.77) (1.08) 88,999 .85 6.45 26
* Includes $(.18) effect of the Fund's Rights Offering of shares at a price
below NAV and costs associated with the offering.
+ Total Return on Market Value is the combination of reinvested dividend income,
reinvested capital gains distributions, if any, and changes in stock price per
share. Total Return on Net Asset Value is the combination of reinvested dividend
income, reinvested capital gains distributions, if any, and changes in net asset
value per share. Total returns are not annualized.
</TABLE>
<PAGE>
Building a Better Portfolio Can Make You a Successful Investor
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
GROWTH
Nuveen Rittenhouse
Growth Fund
GROWTH AND INCOME
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
TAX-FREE INCOME
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier AdvisersSM including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
<PAGE>
Fund Information
Board of Directors
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Custodian, Transfer Agent and Shareholder Services
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Auditors
Ernst & Young LLP
Chicago, IL
Year 2000
The concern that computer systems may have problems processing date-related
information in the year 2000 and beyond has challenged businesses and
organizations to thoroughly review all aspects of their operations. We have
undertaken just such an approach at Nuveen in preparation for the millennium.
Over the last 10 years, our trading, fund management and pricing systems at
Nuveen - the systems that directly affect our investors and their financial
advisers - have been updated or replaced to address the Year 2000 concerns.
We continue to work closely with our transfer agent, custodian and other service
partners to monitor readiness and address other remaining systems issues. Our
initial testing indicates we are on schedule, and we have targeted year-end 1998
to complete verification of vendor compliance and service partner readiness.
However, we can give no complete assurance at this time that the steps we have
taken will be sufficient to prevent any problems that would impact the Nuveen
Exchange-Traded Funds.
Each fund intends to repurchase shares of its own common stock in the future at
such times and in such amounts as is deemed advisable. No shares were
repurchased during the 12-month period ended October 31, 1998. Any future
repurchases will be reported to shareholders in the next annual or
semiannual report.
<PAGE>
Serving Investors for Generations
Photo of: John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
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 current income or sustaining
accumulated wealth, Nuveen offers a wide variety of products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 257-8787 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
FAN-1-10-98
LOGO:
NUVEEN
1898 1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime(tm).
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
