NUVEEN Exchange-Traded Funds
OCTOBER 31, 1999
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 deck.
<PAGE>
Highlights
As of October 31, 1999
Credit Quality
Nuveen Municipal Value Fund, Inc. (NUV)
o HHHH Four-star overall Morningstar Rating *
o Taxable-equivalent yield on share price of 8.57% **
Pie Chart:
AAA/U.S. Guaranteed 46%
AA 19%
A 14%
BBB/NR 21%
Below Investment Grade 1%
Nuveen Municipal Income Fund, Inc. (NMI)
o HHHHH Five-star overall Morningstar Rating *
o Taxable-equivalent yield on share price of 9.09% **
Pie Chart:
AAA/U.S. Guaranteed 20%
AA 9%
A 8%
BBB/NR 63%
Contents
1 Dear Shareholder
3 Portfolio Managers' Comments
7 NUV's Performance Overview
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
30 Financial Highlights
32 Build Your Wealth Automatically
33 Fund Information
* Morningstar proprietary ratings reflect historical risk-adjusted performance
as of October 31, 1999. The ratings are subject to change every month. Past
performance is no guarantee of future results. Morningstar ratings are
calculated from the fund's three-, five-, and 10-year average annual returns
(if applicable) in excess of 90-day Treasury bill returns with appropriate
fee adjust-ments, and a risk factor that reflects fund performance below
90-day T-bill returns. NUV received 4, 4, and 3 stars for the three-, five-
and 10-year periods, respectively. NMI received 5, 5, and 4 stars for the
three-, five- and 10-year periods, respectively. The top 10% of the funds in
a broad asset class receive 5 stars, the next 22.5% receive 4 stars, and the
next 35% receive 3 stars. The funds were rated among 193 for the three-year
period, 193 funds for the five-year period, and 32 funds for the 10-year
period.
** For investors in the 31% federal income tax bracket. See your fund's
performance overview in this report for more information.
<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 am pleased to report to you on the annual performance of your Nuveen
Exchange-Traded Fund. Providing a stable, attractive tax-free dividend is the
Fund's main objective, andover the past year, your Fund continued to achieve
this goal. During the period covered by this report, we have seen some shifts in
the U.S. investment climate and the fixed-income environment in which your
Nuveen Exchange-Traded Fund operates. I appreciate the opportunity to review the
current investment environment with you, as does the portfolio manager of your
Fund, who discusses fund performance later in this report.
A CHALLENGING INVESTMENT ENVIRONMENT
Over the past 12 months, the U.S. economy continued to be characterized by
surprisingly robust growth, benign inflation, and unemployment levels that
remained among the lowest in three decades. However, concerns about the
persistent pace of the economy's expansion continued to test the new paradigm,
which holds that the improvements in productivity achieved through technology
enable us to have both economic growth and low inflation at the same time. With
investors watching and reacting to each announcement concerning economic
statistics, volatility increased, especially in the equity markets, and the
spectre of inflation seemed to lurk behind every report. Especially worrisome to
the Federal Reserve was the possibility that tight labor markets would
eventually have an inflationary effect on wages and, consequently, on consumer
prices.
In an effort to pre-empt this threat of inflation, the Fed moved to raise
interest rates by a quarter-point on three separate occasions between June and
November 1999. This brought the federal funds rate - which represents the amount
banks charge one another on overnight loans, establishing the standard for other
short-term rates - from 4.75% to 5.50%, thereby erasing the three rate cuts
enacted by the Fed a year earlier. At its November meeting, the Fed announced
that it would shift to a neutral stance following the latest interest rate
increase. With Y2K on the horizon, followed by the politics of an election year,
investors had some hope that the Fed would put any additional rate hikes on
hold. However, the Fed's indication that it would renew its close attention to
the rate of economic growth left the door open for another tightening.
MUNICIPAL BOND PERFORMANCE
Over the past fiscal year, our exchange-traded municipal bond funds continued to
offer attractive, stable income in a market that places a high premium on yield.
At the end of October 1999, the ratio between long-term municipal yields and
30-year Treasury yields stood at 100.3%, compared with the historical average of
86% for the period 1986-1999. For investors, this meant that quality long-term
municipal bonds offered yields slightly higher than those of long Treasury bonds
- - even before the tax advantages of municipals were taken into account. On an
after-tax basis, municipal bonds continued to present an exceptionally
attractive investment option relative to Treasuries.
During 1999, we have seen the supply of municipal bonds drop off from the
near-record levels of 1998. This was largely due to the increase in interest
rates, which deterred municipal governments from issuing new debt and removed
much of the incentive to refund existing bonds. To date, municipal supply has
declined by approximately 20% from the levels of a year ago. This, in turn,
enhanced the attractiveness of the municipal bonds that were brought to market,
as demand - especially from individual investors - remained strong. We
anticipate that this demand will continue to
<PAGE>
strengthen as investors increasingly look at rebalancing their portfolios. With
the outlook for tighter supply and continued demand in the months ahead,
Nuveen's established market position as the leading sponsor of exchange-traded
municipal bond funds enables us to have excellent access to the bond offerings
that have the potential to add value for our shareholders.
A BALANCED PORTFOLIO: ENHANCED GROWTH WITH REDUCED RISK
If you are like most investors in the market-place today, your goals for
tax-free investing probably include capturing high after-tax total returns while
moderating risk. To demonstrate the role that municipal bonds can play in
achieving this goal, Nuveen tracked a balanced portfolio consisting of equities
and municipal bonds and compared its hypothetical investment performance - based
on appropriate market indexes and tax rates - with that of a balanced portfolio
composed of equities and taxable bonds.
Our research showed that, over the past 20 years, the pairing of equities with
municipal bonds provided both superior after-tax total returns and lower levels
of risk than the combination of equities and taxable bonds. Incorporating even a
20% allocation of municipal bonds into an all-equity portfolio cut risk
substantially, with only a small reduction in after-tax total return. Purchasing
shares of a Nuveen Exchange-Traded Municipal Bond Fund provides an easy way to
incorporate the benefits of municipal bonds into a balanced portfolio.
NUVEEN FUNDS: AN ANSWER TO YOUR INVESTMENT NEEDS
In light of the recent shifts in the investment environment, your financial
adviser can serve as a valuable resource in helping you determine if adjustments
are needed in your current asset allocation plan and suggesting investments that
can help diversify your portfolio. By investing in other Nuveen funds, you can
bring balance to your portfolio and provide exposure to the different types of
investments that may enhance your potential for success. Your adviser can also
set up a reinvestment plan designed to purchase additional shares of your Nuveen
Exchange-Traded Fund. For more information on Nuveen's expanding array of funds,
contact your financial adviser for a prospectus detailing all charges and
expenses, or call Nuveen at (800) 621-7227. Please read the prospectus carefully
before you invest or send money.
THE NEW MILLENNIUM
Since this is my last opportunity to talk with you before we enter the new
millennium, I wanted to take a moment to discuss the status of Nuveen's
preparations for that event. We believe that Nuveen is fully prepared for the
upcoming transition, from an operational as well as an investment perspective.
During 1999, Nuveen tested all critical operating systems, and we anticipate no
problems with year-end processing. As we evaluated potential investments over
the year, Nuveen carefully reviewed the progress of each issuer toward Y2K
compliance. Last summer, we requested information from the issuers of all bonds
in the Funds' portfolios, with special attention to the largest and more
volatile holdings. In the following months, we continued to monitor issuers'
progress in this area, assisted by securities industry oversight organizations,
including the Municipal Securities Rulemaking Board and the Securities and
Exchange Commission, as well as rating agencies and insurance companies. Based
on our review, we believe that the majority of issuers are Y2K-compliant. The
diligence of the financial industry as a whole in dealing with this transition
should prove to have ongoing benefits for investors.
Since 1898, Nuveen has been synonymous with investments that stand the test of
time. As we enter the new millennium, we remain committed to maintaining that
reputation and finding the best ways to serve your evolving investment needs.
Thank you for your continued confidence.
Sincerely,
/s/ TIMOTHY R. SCHWERTFEGER
TIMOTHY R. SCHWERTFEGER
Chairman of the Board
December 15, 1999
Sidebar text: "Purchasing shares of a Nuveen Exchange-Traded Municipal Bond Fund
provides an easy way to incorporate the benefits of municipal bonds into a
balanced portfolio."
<PAGE>
Portfolio Managers' Comments
Portfolio managers Tom Spalding and Steve Peterson discuss the municipal market
environment, fund performance, and the outlook for the Nuveen Municipal Value
Fund, Inc. (NUV) and the Nuveen Municipal Income Fund, Inc. (NMI). Tom, who has
more than 23 years of experience as an investment professional at Nuveen, has
managed NUV since its inception in 1987, while Steve, who joined Nuveen in 1988,
has managed NMI since July 1998.
WHAT FACTORS CONTRIBUTED TO THE PERFORMANCE OF THE MUNICIPAL MARKET DURING THE
PAST 12 MONTHS?
Over the past year, the U.S. economy continued to forge ahead with few signs of
slowing. Among the statistics showing surprising strength in recent months was
gross domestic product (GDP) growth, which rose 5.5% in the third quarter, well
ahead of projections. The growth in GDP was fueled by rising inventories, an
improved trade balance, and strong consumer spending, which continues to serve
as the main engine powering U.S. economic expansion. Commodity prices,
particularly oil and gold, and raw material prices also continued to rise. For
the most part, however, these increases did not translate into higher consumer
prices. Through the end of October 1999, the Consumer Price Index showed
inflation maintaining its low profile, with an annualized increase of 2.8%.
Labor markets remained among the tightest in 30 years, as the national
unemployment average dropped to 4.1% in October 1999, down from 4.5% in October
1998. Also in October, U.S. personal income surged 1.3%, its biggest jump in
more than five years.
Concerned about the potential for an overheated economy, the Federal Reserve
raised short-term interest rates twice during the fiscal year covered in this
report. A third increase, announced November 16, occurred after the reporting
period for the Funds. According to the Fed's theory, the impact of the two rate
increases on the stock market during the period covered by this report should
have caused consumer confidence to fall and consumer spending to slow, thereby
pre-empting any reemergence of inflation. Despite the evidence of the Fed's
continued vigilance on the inflation front, the cumulative effect of 1999's
economic events has been negative for the fixed-income markets, including
municipal bonds.
HOW DID THESE EVENTS IMPACT SUPPLY AND DEMAND IN THE MUNICIPAL MARKET?
For the first 10 months of 1999, municipal supply across the nation fell just
over 20% from the levels recorded during the same period in 1998. Some of this
decline can be attributed to the rise in interest rates, which discouraged
municipalities from issuing long-term debt at higher interest costs. In
addition, the refunding activity involving older debt typically declines in a
rising interest rate environment. Among the states, California and New York
remained the most active issuers in the nation. Although we expect to see
adequate municipal supply for the remainder of the year, Y2K concerns are
expected to affect the new issuance calendar to some extent. To avoid any
potential problems as 1999 turns to 2000, some municipal bond issuers have
accelerated this year's issuance, while others have decided to delay issues
until next year. Issuance should gradually return to a more normal level
following January, with issuance in 2000 expected to be on par with that of
1999.
Over recent months, institutional demand for municipal paper has been weakened
by several events outside the municipal market that have limited the cashflow
available for bond purchases. Insurance companies, which have historically been
major buyers of municipal bonds, have been hit hard by claims from natural
disasters and further hampered by price cutting on insurance premiums in the
property casualty sector, which has hurt earnings. At the same time, fund
redemptions have limited the demand from mutual fund companies, another major
source of institutional demand. In addition, an accelerated corporate bond
issuance calendar, timed to avoid any problems with Y2K, resulted in heavy
corporate bond supply, which vied with municipal bonds for institutional
investor attention.
On the other hand, demand from individual investors has been a bright spot for
municipal bonds during most of 1999, as investors actively worked to rebalance
their portfolios by redirecting assets from equity investments into the
fixed-income market. In 1998, individual investors held more than 30% of
outstanding municipal debt, making them the largest owner class, and statistics
indicate that municipal bond sales to retail investors in 1999 are on track to
beat 1998's record levels.
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HOW DID THE FUNDS PERFORM IN THIS ENVIRONMENT?
For the 12 months ended October 31, 1999, NUV produced a total return on net
asset value (NAV) of -2.94%, providing a taxable-equivalent total return1 of
- -0.66% for shareholders in the 31% federal income tax bracket. While the Fund
underperformed the -1.78% annual total return posted by the Lehman Brothers
Municipal Bond Index2, NUV outpaced the total return of its Lipper Peer Groups3,
which had an average annual total return of -3.15% as of October 31, 1999.
NMI, for the 12 months ended October 31, 1999, produced a total return on net
asset value (NAV) of 0.74%, providing a taxable-equivalent total return1 of
3.38% for shareholders in the 31% federal income tax bracket. The Fund
outperformed both the -1.78% annual total return posted by the Lehman Brothers
Municipal Bond Index2 and the -3.15% average annual return of its Lipper Peer
Group3.
In recognition of their risk-adjusted performance, NUV was awarded a
Morningstar4 rating of four stars and NMI was awarded a Morningstar4 rating of
five stars, representing the Funds' overall ratings as of October 31, 1999.
The underperformance of NUV's total return on NAV relative to its Lehman
benchmark can be attributed largely to duration. As of October 31, 1999, NUV's
average duration was 8.56, compared with the Lehman index's 7.52. Duration
measures a bond fund's price volatility, or reaction to interest rate movements.
The longer the duration, the more sensitive the fund's NAV is to changes in
interest rates. During a period of falling interest rates, longer duration
enables a fund's NAV to participate more fully in market gains. However, when
interest rates rise, longer duration can make the fund's NAV more vulnerable to
price declines. Between November 1, 1998, and October 31, 1999, the yield on the
Bond Buyer Revenue Bond Index5 rose from 5.28% to 6.18%. This meant that funds
with longer durations, like NUV, were more likely to underperform the market, as
represented by the Lehman Brothers Municipal Bond Index.
Duration also played a role in the outperformance of NMI's total return on NAV
compared to its Lehman benchmark due to the fact that NMI's duration during most
of the fiscal year was shorter than that of the Lehman index's. As of October
31, 1999, NMI's average duration was 7.96, compared with the Lehman index's
7.52. The shorter the duration, the less sensitive the fund's NAV is to changes
in interest rates. During a period of falling interest rates, shorter duration
can limit the ability of a fund's NAV to participate fully in market gains.
However, when interest rates rise, shorter duration can help to shelter the
fund's NAV from price declines. The rise in yield on the Bond Buyer Revenue Bond
Index meant that funds with relatively short durations, like NMI, were more
likely to outperform the market, as represented by the Lehman index.
Over the past 12 months, NUV and NMI saw their durations lengthen (from 5.97 and
5.35, respectively) due to market action, trading activity, and bond calls that
removed shorter bonds from the Funds. Proceeds from sold or called bonds were
reinvested in issues with longer durations, which provided attractive yields and
better call protection. Lengthening the Funds' durations should help position
the Funds to regain net asset value as the bond market recovers.
HOW WERE NUV AND NMI'S DIVIDENDS AND SHARE PRICES AFFECTED?
During the past year, good call protection helped support NUV and NMI's
dividends and shield the income of the Funds from erosion. As of October 31,
1999, NUV had provided shareholders with 12 consecutive months of steady
dividends while NMI had provided 16, as of the same date. At the end of October,
the market yields for NUV and NMI were a competitive 5.91% and 6.27%,
respectively, equivalent to taxable yields1 of 8.57% and 9.09%, respectively,
for investors in the 31% federal income tax bracket.
In 1999, rising interest rates, inflation worries, and the uncertainty
surrounding the timing of the Federal Reserve's moves created a negative
environment in the fixed-income markets. In addition, concerns about the impact
of the transition to the year 2000 have precipitated an early start to tax-swap
season, as investors attempt to offset profits in the equity markets by selling
fixed-income investments at a loss. All of these factors have negatively
impacted the market demand for exchange-traded funds such as NUV, and especially
NMI, since NMI was trading at a premium to its net asset value through September
1999. The negative impact resulted in a decline in the Funds' share prices.
Since the prevailing interest rate environment in October 1999 was higher than
that of a year earlier, the Funds' NAVs also declined, as bond prices fell while
interest rates rose.
1 The taxable-equivalent yield/total return represents the yield/total return
that must be earned on a taxable investment in order to equal the yield/total
return of the Nuveen fund on an after-tax basis. The taxable-equivalent yield
is based on the fund's current market yield and a federal income tax rate of
31%, while the taxable-equivalent total return is based on the annual-ized
total return and the 31% federal income tax rate.
2 NUV and NMI are compared with the Lehman Brothers Municipal Bond Index, an
unleveraged index comprising a broad range of investment-grade municipal
bonds. Returns for the index do not reflect any initial or ongoing expenses.
3 The total returns for NUV and NMI are compared with the average annualized
return of the 21 funds in the Lipper General and Insured Unleveraged Municipal
Debt Funds category. Fund and Lipper returns assume reinvestment of dividends.
4 Morningstar proprietary ratings reflect historical risk-adjusted performance
as of October 31, 1999. The ratings are subject to change every month. Past
performance is no guarantee of future results. Morningstar ratings are
calculated from the fund's three-, five-, and 10-year average annual returns
(if applicable) in excess of 90-day Treasury bill returns with appro-priate
fee adjustments, and a risk factor that reflects fund performance below 90-day
T-bill returns. NUV received 4, 4, and 3 stars for the three-, five- and
10-year periods, respectively. NMI received 5, 5, and 4 stars for the three-,
five- and 10-year periods, respectively. The top 10% of the funds in a broad
asset class receive 5 stars, the next 22.5% receive 4 stars, and the next 35%
receive 3 stars. The funds were rated among 193 for the three-year period, 193
funds for the five-year period, and 32 funds for the 10-year period.
5 The Bond Buyer Revenue Bond Index is an unmanaged index of long-term municipal
revenue bonds.
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As a result of these factors, NUV's discount (share price below NAV) widened,
while NMI saw its premium (share price above NAV) move to a discount.
Premium/Discount6 Total Return on Share Price
-------------------- --------------------------------
1-Year Ended Taxable-
10/31/98 10/31/99 10/31/99 Equivalent1
--------- -------- --------------------------------
NUV -4.17% -9.02% -7.50% -5.12%
--------- -------- --------------------------------
NMI 2.79% -3.76% -5.77% -3.20%
--------- -------- --------------------------------
Past performance is not predictive of future results.
For additional information on these Funds, see their individual Performance
Overview in this report.
WHAT KEY STRATEGIES WERE USED TO MANAGE NUV AND NMI DURING THE PAST 12 MONTHS?
Over the past year, NUV and NMI were managed with the goals of supporting and
strengthening their long-term dividend capabilities, improving call protection,
and enhancing the Funds' tax efficiency by offsetting potential capital gains
with capital losses.
Enhanced tax efficiency has been an increasing focus for us over the past six
months, as the rising interest rate environment offered opportunities to benefit
the Funds through active trading. The increased level of recent trading activity
is reflected in the transaction volume figure for the Nuveen Exchange-Traded
Funds for the third quarter of 1999, which was 10 times that of the same period
in 1998. The strategy we are employing involves selling selected bonds that are
trading at a loss, recognizing the capital losses, and then rolling the proceeds
into bonds with similar characteristics, but offering current market yields and
better call protection. Some of the bonds we sold were due to mature or
scheduled to be called within the next few months, while others were bonds that
we had purchased earlier this year that were now producing a lower income stream
than that recently available in the market. This trading not only gave us
capital losses with which to offset current and future capital gains, thereby
protecting shareholders from additional taxes, but also-in most cases-increased
the net earnings of the Funds. If current market conditions continue, we will
continue to focus on implementing this strategy.
Among the issues we sold out of NUV were bonds issued by Travis County Hospital
in Texas, which we managed to sell at a profit despite the weak bond market.
Even with this sale, NUV has maintained its 12% allocation to the healthcare
sector, a dynamic and volatile area of the market that has been beset with
concerns about deregulation and profitability. This has created credit and
rating pressures for certain healthcare organizations and caused some investors
to avoid the sector entirely. Since one of Nuveen's strategies is to discover
value in sectors and bonds that have been overlooked by the rest of the market,
the healthcare sector has been an area where Nuveen research and our prudent
investment approach have enabled us to find and exploit opportunities that can
add value for our shareholders. As credit spreads widened, rewarding investors
with higher yields for assuming incremental risk, we have continued to watch
this sector for attractive lower-rated issues with good future return prospects.
From a regional perspective, we continue to focus on issues in the Midwest,
which offer a diversified economy based on a good blend of basic manufacturing,
commercial, and expanding technology industries. This area of the country
continues to perform well, and we expect the region to hold up performance-wise
even if the economy slows.
As of October 31, 1999, NUV had a large allocation (20%) of BBB and non-rated
investment-grade bonds. The Fund also had 1% of its portfolio invested in below
investment-grade bonds. This combination of lower-rated bonds generally provided
enhanced levels of yield and helped to support the dividend, even though credit
spreads (or the difference between higher credit quality securities and those of
lower credit quality) widened in recent months. Additional purchases in the BBB
sector are being evaluated.
For NMI, we increased its allocation of BBB and non-rated bonds from 51% in
October 1998 to 63% in October 1999. These lower-rated bonds generally provided
enhanced levels of yield, as investors were compensated with higher yields for
taking on the incremental risk associated with lower-rated credits. NMI's
investment guidelines allow us to further exploit credit spread differentials by
investing up to 25% of the Fund's net assets in non-investment grade bonds rated
BB and B. One example of the purchases we made in this sector involved non-rated
project finance bonds issued by the Erie County (New York) Industrial
Development Authority
6 A fund's premium/discount represents the percentage difference between the
fund's share price and its NAV.
<PAGE>
for CanFibre of Lackawanna, which recycles wood to make fire-resistant particle
board. In addition to offering above-market yields, these bonds, which represent
about 6% of the Fund, became one of the best performing issues of the past year,
outperforming the market by approximately 220 basis points. This performance was
due to project construction that remained on schedule and government
certification of CanFibre's product, which enhanced its marketability.
Nuveen's research expertise, along with our presence in the municipal market,
means that shareholders can be assured that the creditworthiness of all issuers
of non-investment grade bonds is subjected to Nuveen's stringent review process
before these bonds are included in NUV and NMI's portfolios.
In the area of bond calls, NUV currently provides excellent levels of
protection, with only 7% of its portfolio subject to calls in 2000 and 10% in
2001. NMI, which was first offered in April 1988, has largely completed the
period when bond calls are most likely to occur, a normal part of a bond's life
that typically takes place around a fund's 10-year anniversary. NMI currently
provides excellent levels of call protection, with about 11% of its portfolio
subject to calls between now and the end of 2001. These factors should provide
additional protection and stability for the Funds' dividends over this period.
To minimize the effect of any calls, we continuously work on strategies designed
to enhance call protection. As mentioned earlier, we have been active buyers in
the current market as we try to take advantage of the higher interest rate
environment. These recent purchases can also benefit the Funds by extending call
protection. Given the current level of bond yields, we have been evaluating
suitable replacements for older bonds, focusing on undervalued bonds that have
the potential to support the Funds' dividends and enhance portfolio structure.
This should enable us to continue providing competitive levels of dividends for
our shareholders.
WHAT IS NUVEEN'S OUTLOOK FOR NUV AND NMI?
For NUV, in the months ahead, we will try to take advantage of the higher yields
currently available in the municipal market to enhance our portfolio holdings
and the dividend capabilities of the Fund. From a sector perspective, we expect
to find most of our purchases in the essential services area, including water
and sewer bonds, utility issues, and bonds backed by sales and property taxes.
As the Federal Reserve works to accomplish its goal of a slower economy, these
bonds should continue to perform well. Our Nuveen Research capabilities will
help us explore opportunities in the essential services sector as well as other
areas of the market to maintain the Fund's diversification.
For NMI, we also plan to continue trying to exploit the higher yields currently
available in the municipal market to enhance our portfolio holdings and the
dividend capabilities of the Fund. As long as credit spreads remain at current
levels, we will continue to invest in attractively priced lower-rated credits
that enhance the Fund's yield. We will also continue working on strategies
designed to minimize the impact of any bond calls.
Implementing strategies with the potential to benefit NUV and NMI demonstrates
the value that can be added by an active bond manager such as Nuveen. As an
experienced investment manager knowledgeable about the unique aspects of the
municipal market, we are in the marketplace every day, monitoring market
dynamics, looking for opportunities, and trying to capitalize on them to the
benefit of shareholders.
<PAGE>
Nuveen Municipal Value Fund, Inc.
Performance Overview
As of October 31, 1999
NUV
Portfolio Statistics
Inception Date 6/87
- --------------------------------------------------
Share Price $8 5/8
- --------------------------------------------------
Net Asset Value $9.48
- --------------------------------------------------
Market Yield 5.91%
- --------------------------------------------------
Taxable-Equivalent Yield (Federal Tax Rate)1 8.57%
- --------------------------------------------------
Fund Net Assets ($000) $1,847,333
- --------------------------------------------------
Average Effective Maturity (Years) 18.35
- --------------------------------------------------
Average Duration 8.56
- --------------------------------------------------
Annualized Total Return
On Share Price On NAV
- --------------------------------------------------
1-Year -7.50% -2.94%
- --------------------------------------------------
5-Year 5.31% 5.90%
- --------------------------------------------------
10-Year 5.50% 6.30%
- --------------------------------------------------
Taxable-Equivalent Total Return2
On Share Price On NAV
- --------------------------------------------------
1-Year -5.12% -0.66%
- --------------------------------------------------
5-Year 8.10% 8.52%
- --------------------------------------------------
10-Year 8.43% 9.18%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
Utilities 28%
- --------------------------------------------------
U.S. Guaranteed 14%
- --------------------------------------------------
Transportation 12%
- --------------------------------------------------
Healthcare 12%
- --------------------------------------------------
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 tax 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 capital gains distributions in December 1998
of $0.0932 per share.
Bar Chart:
1998-1999 Monthly Tax-Free Dividends Per Share(3)
11/98 0.0425
12/98 0.0425
1/99 0.0425
2/99 0.0425
3/99 0.0425
4/99 0.0425
5/99 0.0425
6/99 0.0425
7/99 0.0425
8/99 0.0425
9/99 0.0425
10/99 0.0425
Line Chart:
Share Price Performance
11/6/98 10
9.81
9.88
9.88
9.94
10.06
9.88
9.81
9.69
9.81
9.81
9.94
9.75
9.88
9.88
9.81
9.75
9.81
9.81
9.75
9.69
9.69
9.69
9.69
9.5
9.38
9.38
9.25
9.19
9.19
9.19
9.19
9.13
9.19
9.13
9.06
9.06
8.81
8.69
8.69
8.63
8.44
8.56
8.38
8.38
8.19
8.31
10/31/99 8.63
Weekly Closing Price
Past performance is not predictive of future results.
<PAGE>
Nuveen Municipal Income Fund, Inc.
Performance Overview
As of October 31, 1999
NMI
Portfolio Statistics
Inception Date 4/88
- --------------------------------------------------
Share Price $11
- --------------------------------------------------
Net Asset Value $11.43
- --------------------------------------------------
Market Yield 6.27%
- --------------------------------------------------
Taxable-Equivalent Yield (Federal Tax Rate)1 9.09%
- --------------------------------------------------
Fund Net Assets ($000) $91,123
- --------------------------------------------------
Average Effective Maturity (Years) 18.36
- --------------------------------------------------
Average Duration 7.96
- --------------------------------------------------
Annualized Total Return
On Share Price On NAV
- --------------------------------------------------
1-Year -5.77% 0.74%
- --------------------------------------------------
5-Year 6.89% 6.49%
- --------------------------------------------------
10-Year 6.11% 6.78%
- --------------------------------------------------
Taxable-Equivalent Total Return2
On Share Price On NAV
- --------------------------------------------------
1-Year -3.20% 3.38%
- --------------------------------------------------
5-Year 9.80% 9.38%
- --------------------------------------------------
10-Year 9.13% 9.84%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
Utilities 20%
- --------------------------------------------------
Tax Obligation/General 12%
- --------------------------------------------------
U.S. Guaranteed 10%
- --------------------------------------------------
Basic Materials 10%
- --------------------------------------------------
Long TermCare 9%
- --------------------------------------------------
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 tax 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 capital gains distributions in December 1998
of $0.0748 per share.
Bar Chart:
1998-1999 Monthly Tax-Free Dividends Per Share(3)
11/98 0.0575
12/98 0.0575
1/99 0.0575
2/99 0.0575
3/99 0.0575
4/99 0.0575
5/99 0.0575
6/99 0.0575
7/99 0.0575
8/99 0.0575
9/99 0.0575
10/99 0.0575
Line Chart:
Share Price Performance
11/6/98 12.5
12.75
12.81
12.81
12.69
12.56
12.5
12.38
12.31
12.38
12.06
12.13
12.25
12.38
12.19
12.19
12.25
12.13
12.19
12.31
12.06
12
12
11.94
12.06
11.94
12
12
11.5
11.75
11.75
12
12.19
11.88
11.75
11.81
11.75
11.44
11.75
11.81
11.94
11.75
11.31
11.19
11.25
10.63
10.75
10/31/99 11
Weekly Closing Price
Past performance is not predictive of future results.
<PAGE>
Shareholder Meeting Report
The Shareholder Meeting was held July 28, 1999.
NUV NMI
- --------------------------------------------------------------------------------
Approval of Class II Nominee was reached as follows:
Common Common
Shares Shares
================================================================================
Anne E. Impellizzeri
For 149,674,454 6,757,331
Against 755,227 13,590
Abstain 2,494,081 125,034
- --------------------------------------------------------------------------------
Total 152,923,762 6,895,955
================================================================================
Ratification of auditors was reached as follows:
For 150,641,943 6,765,600
Against 691,943 37,436
Abstain 1,589,876 92,919
- --------------------------------------------------------------------------------
Total 152,923,762 6,895,955
================================================================================
<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, 1999, and the related statements
of operations, changes in net assets and the financial highlights for the years
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, 1999, 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, 1999, and the results of their operations, changes in their net
assets and financial highlights for the years indicated therein in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
December 15, 1999
<PAGE>
<TABLE>
Portfolio of Investments
NUVEEN MUNICIPAL VALUE FUND, INC. (NUV)
October 31, 1999
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alabama - 2.2%
$ 3,460,000 Alabama Housing Finance Authority, Single Family Mortgage Revenue 4/08 at 102 Aaa $3,075,629
Bonds (Collateralized Home Mortgage Revenue Bond Program),
1998 Series A-2, 5.450%, 10/01/28 (Alternative Minimum Tax)
4,000,000 The Water Works and Sewer Board of the City of Birmingham (Alabama), 1/04 at 102 Aa3 4,184,800
Water and Sewer Revenue Bonds, Series 1994, 5.500%, 1/01/20
5,000,000 The Industrial Development Board of the Town of Cortland (Alabama), 11/09 at 101 Baa1 5,000,000
Solid Waste Disposal Revenue Bonds (Champion International
Corporation Project), Series 1999A, 6.700%, 11/01/29 (Alternative
Minimum Tax) (WI)
4,000,000 The Medical Clinic Board of the City of Jasper (Alabama), Hospital 7/02 at 102 A3 4,002,720
Revenue Bonds, Series 1993 (Walker Regional Medical Center, Inc.
Project), 6.375%, 7/01/18
12,000,000 Jefferson County, Alabama, Sewer Revenue Capital Improvement 2/09 at 101 AAA 10,702,200
Warrants, Series 1999-A, 5.375%, 2/01/36
16,850,000 BMC Special Care Facilities Financing Authority of the City of 11/08 at 101 AAA 14,079,186
Montgomery (Alabama), Revenue Bonds, Series 1998-B (Baptist Health),
5.000%, 11/15/29
- -----------------------------------------------------------------------------------------------------------------------------------
Arizona - 0.5%
3,735,000 Hospital District No. One, Maricopa County, Arizona, General 6/06 at 101 A 3,584,367
Obligation Bonds, Series 1996, 6.000%, 6/01/21
5,270,000 Yuma Regional Medical Center on Behalf of Hospital 8/02 at 101 1/2 N/R*** 5,823,245
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)
- -----------------------------------------------------------------------------------------------------------------------------------
Arkansas - 0.4%
1,500,000 Arkansas Development Finance Authority, Wastewater System 6/06 at 101 AA 1,492,020
Revolving Loan Fund Revenue Bonds, 1996 Series A,
5.850%, 12/01/19
2,900,000 City of Conway, Arkansas, Sales and Use Tax Capital Improvement 12/06 at 101 AAA 2,691,983
Bonds, Series 1997A, 5.350%, 12/01/17
2,750,000 Jefferson County, Arkansas, Pollution Control Revenue Refunding 12/02 at 102 BBB- 2,456,658
Bonds (Energy Arkansas, Inc. Project), Series 1997,
5.600%, 10/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
California - 5.6%
6,120,000 State of California, Veterans General Obligation Bonds, Series BH, 12/08 at 101 AAA 5,998,763
5.200%, 12/01/11 (Alternative Minimum Tax)
9,000,000 State of California, Department of Water Resources, Central 6/03 at 101 1/2 AA 8,847,000
Valley Project, Water System Revenue Bonds, Series L,
5.750%, 12/01/19
16,500,000 State of California, Department of Water Resources, Central Valley 12/03 at 101 AA 13,610,355
Project, Water System Revenue Bonds, Series M, 4.750%, 12/01/24
17,155,000 State Public Works Board of the State of California, Lease Revenue 6/03 at 102 Aa3 16,015,393
Refunding Bonds (The Regents of the University of California),
1993 Series A (Various University of California Projects),
5.500%, 6/01/21
2,500,000 California Statewide Communities Development Authority, Certificates 4/03 at 102 N/R*** 2,673,325
of Participation, Pacific Homes, Series A, 6.000%, 4/01/17
(Pre-refunded to 4/01/03)
6,530,000 California Statewide Communities Development Authority, 7/03 at 102 AA 6,198,537
Certificates of Participation, St. Joseph Health System Obligated
Group, 5.500%, 7/01/14
3,000,000 Community Facilities District No. 98-2 of the Capistrano Unified 9/09 at 102 N/R 2,674,320
School District (Ladera), California, Series 1999 Special Tax Bonds,
5.750%, 9/01/29
Foothill/Eastern Transportation Corridor Agency (California), Toll Road
Revenue Bonds, Series 1995A:
30,000,000 0.000%, 1/01/22 No Opt. Call Aaa 8,010,300
10,000,000 6.000%, 1/01/34 (Pre-refunded to 1/01/07) 1/07 at 100 Aaa 10,748,400
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California (continued)
$ 30,470,000 Los Angeles County Public Works Financing Authority, Lease Revenue 12/03 at 102 AAA $27,925,755
Bonds (Multiple Capital Facilities Project IV), 4.750%, 12/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
Colorado - 10.2%
12,515,000 Colorado Health Facilities Authority, Revenue Bonds, Series 1994 5/04 at 102 AA 11,492,775
(Sisters of Charity Health Care Systems, Inc.), 5.250%, 5/15/14
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 BBB+ 3,896,016
2,125,000 7.250%, 11/15/23 (Alternative Minimum Tax) 11/02 at 102 Aaa 2,330,105
(Pre-refunded to 11/15/02)
8,290,000 7.250%, 11/15/23 (Alternative Minimum Tax) 11/02 at 102 BBB+ 8,827,026
City and County of Denver, Colorado, Airport System
Revenue Bonds, Series 1992C:
655,000 6.750%, 11/15/13 (Alternative Minimum Tax) 11/02 at 102 Aaa 709,378
(Pre-refunded to 11/15/02)
5,045,000 6.750%, 11/15/13 (Alternative Minimum Tax) 11/02 at 102 BBB+ 5,215,168
7,515,000 6.750%, 11/15/22 (Alternative Minimum Tax) 11/02 at 102 Aaa 8,138,895
(Pre-refunded to 11/15/02)
29,870,000 6.750%, 11/15/22 (Alternative Minimum Tax) 11/02 at 102 BBB+ 30,147,194
City and County of Denver, Colorado, Airport System
Revenue Bonds, Series 1990A:
790,000 8.250%, 11/15/12 (Alternative Minimum Tax) 11/00 at 102 Aaa 839,778
(Pre-refunded to 11/15/00)
8,360,000 8.250%, 11/15/12 (Alternative Minimum Tax) 11/00 at 102 BBB+ 8,774,238
2,705,000 8.500%, 11/15/23 (Alternative Minimum Tax) 11/00 at 102 Aaa 2,882,232
(Pre-refunded to 11/15/00)
29,090,000 8.500%, 11/15/23 (Alternative Minimum Tax) 11/00 at 102 BBB+ 30,600,935
City and County of Denver, Colorado, Airport System Revenue
Bonds, Series 1991A:
3,475,000 8.750%, 11/15/23 (Alternative Minimum Tax) 11/01 at 102 Aaa 3,840,918
(Pre-refunded to 11/15/01)
9,635,000 8.750%, 11/15/23 (Alternative Minimum Tax) 11/01 at 102 BBB+ 10,445,978
City and County of Denver, Colorado, Airport System Revenue
Bonds, Series 1991D:
1,820,000 7.750%, 11/15/21 (Alternative Minimum Tax) 11/01 at 102 Aaa 1,977,011
(Pre-refunded to 11/15/01)
6,930,000 7.750%, 11/15/21 (Alternative Minimum Tax) 11/01 at 102 BBB+ 7,380,727
10,275,000 7.000%, 11/15/25 (Alternative Minimum Tax) 11/01 at 100 Aaa 10,825,535
(Pre-refunded to 11/15/01)
39,745,000 7.000%, 11/15/25 (Alternative Minimum Tax) 11/01 at 100 BBB+ 40,928,606
- -----------------------------------------------------------------------------------------------------------------------------------
Connecticut - 0.4%
7,850,000 Connecticut Housing Finance Authority, Housing Mortgage Finance 5/06 at 102 AA 7,943,023
Program Bonds, 1996 Series D, Subseries D-2, 6.200%, 11/15/27
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 0.3%
8,000,000 Washington Convention Center Authority (Washington, D.C.), 10/08 at 100 AAA 6,389,920
Senior Lien Dedicated Tax Revenue Bonds, Series 1998,
4.750%, 10/01/28
- -----------------------------------------------------------------------------------------------------------------------------------
Florida - 0.8%
5,000,000 Orange County Health Facilities Authority, Hospital Revenue Bonds 10/09 at 101 A2 4,790,850
(Orlando Regional Healthcare System), Series 1999E,
6.000%, 10/01/26
5,000,000 Orlando Utilities Commission, Water and Electric Subordinated 10/02 at 100 Aa2 4,666,250
Revenue Bonds, Series 1992A, 5.500%, 10/01/27
5,500,000 Orlando Utilities Commission, Water and Electric Subordinated 10/03 at 102 Aa2 4,963,255
Revenue Refunding Bonds, Series 1993A, 5.250%, 10/01/23
- -----------------------------------------------------------------------------------------------------------------------------------
Georgia - 2.8%
22,850,000 City of Atlanta (Georgia), Water and Wastewater Revenue Bonds, 5/09 at 101 AAA 19,081,121
Series 1999A, 5.000%, 11/01/38
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 2,673,378
21,100,000 6.750%, 12/01/26 12/06 at 102 N/R 20,392,095
8,000,000 George L. Smith II World Congress Center Authority, Refunding 7/10 at 101 AAA 7,363,440
Revenue Bonds (Domed Stadium Project), Series 2000,
5.500%, 7/01/20 (Alternative Minimum Tax) (DD, settling on
4/04/00)
2,250,000 Hospital Authority of the City of Royston (Georgia), Revenue 7/09 at 102 N/R 2,136,600
Anticipation Certificates (Ty Cobb Healthcare System, Inc.
Project), Series 1999, 6.500%, 7/01/27
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois - 10.3%
$ 5,000,000 City of Chicago, General Obligation Bonds, Project Series A of 1992, 1/02 at 102 AAA $5,257,300
6.250%, 1/01/12 (Pre-refunded to 1/01/02)
City of Chicago, General Obligation Bonds, Project and Refunding
Series 1998:
10,700,000 5.250%, 1/01/20 7/08 at 102 AAA 9,634,494
5,700,000 5.250%, 1/01/28 7/08 at 102 AAA 5,006,424
2,000,000 Chicago School Reform Board of Trustees of the Board of Education 12/07 at 102 AAA 1,787,380
of the City of Chicago, Illinois, Unlimited Tax General
Obligation Bonds (Dedicated Tax Revenues), Series 1997A,
5.250%, 12/01/22
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 3,179,400
47,500,000 0.000%, 12/01/28 No Opt. Call AAA 7,795,700
1,125,000 Metropolitan Water Reclamation District of Greater Chicago, No Opt. Call Aa1 1,273,905
General Obligation Capital Improvement Bonds, Series of
June 1991, 7.000%, 1/01/11
17,500,000 Public Building Commission of Chicago (Illinois), Building Revenue 12/03 at 102 AAA 18,576,075
Bonds, Series A of 1993 (Board of Education of the City
of Chicago), 5.750%, 12/01/18 (Pre-refunded to 12/01/03)
9,300,000 City of Chicago, Illinois, Tax Increment Allocation Bonds 1/01 at 102 N/R*** 9,762,861
(Stockyards Industrial-Commercial Redevelopment Project),
Series 1991, 9.000%, 1/01/11 (Pre-refunded to 1/01/01)
5,430,000 Illinois Development Finance Authority, Industrial Development 6/02 at 102 N/R 5,562,438
Revenue Bonds, Series 1992 (Plano Molding Company Project),
7.750%, 6/01/12 (Alternative Minimum Tax)
3,000,000 Illinois Development Finance Authority, Pollution Control Revenue No Opt. Call BBB+ 2,812,620
Refunding Bonds, Series 1994 Edison Company Project),
5.850%, 1/15/14
Illinois Development Finance Authority (The Presbyterian Home
Lake Forest Place Project), Fixed Rate Revenue Bonds, Series 1996B:
6,495,000 6.400%, 9/01/31 (Pre-refunded to 9/01/06) 9/06 at 102 A1*** 7,126,184
990,000 6.400%, 9/01/31 9/06 at 102 A1 1,040,936
14,000,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, 10/03 at 102 A- 12,454,680
Series 1993 (Illinois Masonic Medical Center), 5.500%, 10/01/19
7,000,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1993 11/03 at 102 AAA 6,262,830
(Swedish American Hospital), 5.375%, 11/15/23
18,015,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1993 11/03 at 102 AAA 15,950,121
(Rush-Presbyterian-St. Luke's Medical Center Obligated Group),
5.250%, 11/15/20
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 9,396,764
1,165,000 9.500%, 11/15/19 11/00 at 102 AAA 1,256,720
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*** 1,232,673
4,350,000 7.000%, 2/15/18 No Opt. Call A*** 4,819,539
8,000,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1997 8/07 at 101 AAA 7,047,920
(Sherman Health Systems), 5.250%, 8/01/22
30,415,000 State of Illinois, Build Illinois Bonds, Sales Tax Revenue Refunding 6/02 at 101 AAA 28,643,935
Bonds, Series Q, 5.500%, 6/15/20
12,525,000 Metropolitan Pier and Exposition Authority (Illinois), Dedicated 6/07 at 101 AAA 11,788,530
State Tax Revenue Bonds, Series 1997, 5.125%, 6/01/13
11,650,000 Regional Transportation Authority, Cook, DuPage, Kane, Lake, 6/04 at 102 AAA 12,587,825
McHenry and Will Counties (Illinois), General Obligation Bonds,
Series 1994A, 6.250%, 6/01/24
1,830,000 Tri-City Regional Port District (Illinois), Port and Terminal No Opt. Call N/R 1,761,924
Facilities Revenue Bonds (1998 Refunding and Dock #2
Enhancement Project), Series 1998B, 5.875%, 7/01/08
(Alternative Minimum Tax)
2,295,000 School District Number 161, Will County, Illinois, Capital No Opt. Call Aaa 751,360
Appreciation School Bonds, Series 1999, 0.000%, 1/01/18
- -----------------------------------------------------------------------------------------------------------------------------------
Indiana - 2.5%
10,000,000 Indiana Health Facility Financing Authority, Hospital Revenue 11/07 at 102 AAA 8,959,800
Bonds, Series 1997A (Sisters of St. Francis' Health Services, Inc.
Project), 5.375%, 11/01/27
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indiana (continued)
$ 17,105,000 Indiana Health Facility Financing Authority, Hospital Revenue 2/07 at 102 AA $16,652,402
Bonds (Clarian Health Partners, Inc.), Series 1996A,
6.000%, 2/15/21
4,500,000 Indianapolis Airport Authority, Special Facilities Revenue Bonds, 7/04 at 102 BBB 4,798,665
Series 1994 (Federal Express Corporation Project), 7.100%, 1/15/17
(Alternative Minimum Tax)
The Indianapolis Local Public Improvement Bond Bank, Series 1999E:
12,500,000 0.000%, 2/01/21 No Opt. Call AAA 3,337,500
10,000,000 0.000%, 2/01/27 No Opt. Call AAA 1,824,700
9,155,000 City of South Bend, Indiana, Multifamily Housing Revenue Refunding 12/03 at 100 N/R 8,797,863
Bonds (The Pointe at St. Joseph Project), Issue of 1994, Series A,
6.200%, 12/15/18
500,000 City of South Bend, Indiana, Multifamily Housing Revenue Refunding 12/03 at 100 N/R 480,860
Bonds (The Pointe at St. Joseph Project), Issue of 1994, Series B,
6.450%, 12/15/18 (Alternative Minimum Tax)
3,168,570 City of South Bend, Indiana, Multifamily Housing Revenue Refunding 12/03 at 100 N/R 1,948,480
Bonds (The Pointe at St. Joseph Project), Issue of 1994, Series C,
3.850%, 12/15/18
- -----------------------------------------------------------------------------------------------------------------------------------
Iowa - 0.4%
27,435,000 Iowa Housing Finance Authority, Single Family Housing Bonds, No Opt. Call AAA 4,207,706
1984 Issue A, 0.000%, 9/01/16
3,380,000 Iowa Finance Authority, Hospital Facilities Revenue Bonds, 7/08 at 102 AAA 2,894,598
Series 1998 A (Iowa Health System), 5.125%, 1/01/28
- -----------------------------------------------------------------------------------------------------------------------------------
Kansas - 0.4%
6,650,000 City of Newton, Kansas, Hospital Revenue Bonds (Newton 11/04 at 102 N/R*** 7,567,966
Healthcare Corporation), Series 1994A, 7.750%, 11/15/24
(Pre-refunded to 11/15/04)
- -----------------------------------------------------------------------------------------------------------------------------------
Kentucky - 1.2%
12,500,000 County of Carroll, Kentucky, Collateralized Pollution Control 9/02 at 102 Aa2 13,546,625
Revenue Bonds (Kentucky Utilities Company Project),
1992 Series A, 7.450%, 9/15/16
9,000,000 Greater Kentucky Housing Assistance Corporation, Mortgage Revenue 1/03 at 100 AAA 9,014,490
Refunding Bonds, Series 1997A (FHA-Insured Mortgage Loans -
Section 8 Assisted Projects), 6.100%, 1/01/24
- -----------------------------------------------------------------------------------------------------------------------------------
Louisiana - 1.3%
20,425,000 Louisiana Public Facilities Authority, Hospital Revenue No Opt. Call AAA 23,725,680
Refunding Bonds (Southern Baptist Hospitals, Inc. Project),
Series 1986, 8.000%, 5/15/12
- -----------------------------------------------------------------------------------------------------------------------------------
Maine - 1.9%
14,365,000 Maine State Housing Authority, Mortgage Purchase Bonds, 2/04 at 102 AA 13,812,378
1994 Series A, 5.550%, 11/15/14
20,815,000 Maine State Housing Authority, Mortgage Purchase Bonds, 5/05 at 102 AA 21,246,287
1995 Series A-2, 6.650%, 11/15/25 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Maryland - 0.6%
10,900,000 Community Development Administration of Maryland, Department 3/07 at 101 1/2 Aa2 10,679,166
of Housing and Community Development, Residential Revenue Bonds,
Series 1997B, 5.875%, 9/01/25 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 4.7%
1,290,000 Massachusetts Municipal Wholesale Electric Company, Power Supply No Opt. Call BBB+ 1,454,271
System Revenue Bonds, 1987 Series A, 8.750%, 7/01/18
5,000,000 Massachusetts Industrial Finance Agency, Resource Recovery Revenue 7/01 at 103 N/R 5,385,950
Bonds (SEMASS Project), Series 1991A, 9.000%, 7/01/15
16,400,000 Massachusetts Turnpike Authority, Metropolitan Highway System 1/07 at 102 AAA 13,669,072
Revenue Bonds, 1997 Series C (Senior), 5.000%, 1/01/37
10,000,000 Massachusetts Turnpike Authority, Metropolitan Highway System 1/07 at 102 AAA 8,519,300
Revenue Bonds, 1997 Series B, 5.125%, 1/01/37
Massachusetts Turnpike Authority, Metropolitan Highway System
Revenue Bonds, 1999 Series A (Subordinated):
5,000,000 4.750%, 1/01/34 1/09 at 101 AAA 3,984,250
10,000,000 5.000%, 1/01/39 1/09 at 101 AAA 8,309,900
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts (continued)
$ 9,510,000 Massachusetts Water Resources Authority, General Revenue Bonds, 4/00 at 100 AAA $9,596,066
1990 Series A, 6.000%, 4/01/20 (Pre-refunded to 4/01/00)
36,580,000 Massachusetts Water Resources Authority, General Revenue Refunding 11/02 at 102 A+ 35,205,689
Bonds, 1992 Series B, 5.500%, 11/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Michigan - 5.1%
3,790,000 City of Adrian Hospital Finance Authority, Hospital Revenue Bonds 7/00 at 102 N/R*** 3,966,349
(Emma L. Bixby Medical Center), Series 1989A, 8.500%, 7/01/09
(Pre-refunded to 7/01/00)
6,000,000 The Economic Development Corporation of the City of Dearborn 8/04 at 102 AAA 5,385,720
(Michigan), Hospital Revenue Refunding Bonds (Oakwood
Obligated Group), Series 1994A, 5.250%, 8/15/21
10,000,000 City of Detroit Local Development Finance Authority, Tax Increment 5/09 at 101 N/R 8,699,300
Bonds, Series 1998A, 5.500%, 5/01/21
1,400,000 City of Detroit, Michigan, Sewage Disposal System Revenue 7/05 at 101 AAA 1,305,612
Refunding Bonds, Series 1995-B, 5.250%, 7/01/15
County of Grand Traverse Hospital Finance Authority, Hospital
Revenue Refunding Bonds (Munson Healthcare Obligated Group),
Series 1992A:
2,700,000 6.250%, 7/01/12 (Pre-refunded to 7/01/02) 7/02 at 102 AAA 2,871,450
1,300,000 6.250%, 7/01/12 7/02 at 102 AAA 1,367,366
7,000,000 Michigan State Hospital Finance Authority, Hospital Revenue 8/01 at 102 Aaa 7,521,430
Bonds (The Detroit Medical Center Obligated Group), Series 1991A,
7.500%, 8/15/11 (Pre-refunded to 8/15/01)
18,755,000 Michigan State Hospital Finance Authority, Hospital Revenue Bonds 8/08 at 101 BBB 14,653,657
(The Detroit Medical Center Obligated Group), Series 1998A,
5.250%, 8/15/28
5,820,000 Michigan State Housing Development Authority, Rental Housing Revenue 4/03 at 102 AAA 5,816,450
Bonds, 1993 Series A, 5.875%, 10/01/17
15,750,000 Michigan State Housing Development Authority, Rental Housing Revenue 6/05 at 102 AAA 16,151,468
Bonds, 1995 Series B, 6.150%, 10/01/15
25,000,000 Michigan Strategic Fund, Limited Obligation Refunding Revenue Bonds 9/05 at 102 AAA 25,860,250
(Detroit Edison Company Pollution Control Bonds Project),
Collateralized Series 1995AA, 6.400%, 9/01/25
- -----------------------------------------------------------------------------------------------------------------------------------
Minnesota - 0.4%
7,280,000 Minnesota Housing Finance Agency, Rental Housing Bonds, 2/05 at 102 AAA 7,279,199
1995 Series D, 5.900%, 8/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
Mississippi - 0.7%
13,000,000 Mississippi Hospital Equipment and Facilities Authority, Revenue 5/03 at 102 AAA 12,615,200
Refunding and Improvement Bonds (North Mississippi Health
Services), 1993 Series 1, 5.750%, 5/15/16
- -----------------------------------------------------------------------------------------------------------------------------------
Missouri - 0.1%
1,450,000 The Industrial Development Authority of the City of West Plains, 11/09 at 101 N/R 1,392,537
Missouri Hospital Facilities Revenue Bonds (Ozark Medical Center),
Series 1999, 6.750%, 11/15/24
- -----------------------------------------------------------------------------------------------------------------------------------
Nebraska - 0.3%
4,695,000 Consumers Public Power District, Nebraska, Nuclear Facility 1/00 at 100 A+ 4,696,362
Revenue Bonds, 1968 Series, 5.100%, 1/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 1.5%
5,070,000 The Industrial Development Authority of the State of New Hampshire, 12/99 at 103 BBB+ 5,229,604
Pollution Control Revenue Bonds (The United Illuminating Company
Project), 1989 Series A, 8.000%, 12/01/14 (Alternative Minimum Tax)
24,625,000 Business Finance Authority of the State of New Hampshire, Pollution 10/03 at 102 BBB+ 21,990,371
Control Refunding Revenue Bonds (The United Illuminating
Company Project), 1993 Series A, 5.875%, 10/01/33
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey - 1.3%
25,625,000 New Jersey Economic Development Authority, Special Facility 9/09 at 101 BB 23,954,506
Revenue Bonds (Continental Airlines, Inc. Project), Series 1999,
6.250%, 9/15/29 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
New York - 9.1%
5,360,000 Village of East Rochester Housing Authority (New York), FHA-Insured 8/07 at 102 AAA 5,111,993
Mortgage Revenue Bonds (St. John's Meadows Project) Series 1997A,
5.600%, 8/01/17
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York (continued)
$ 10,480,000 Long Island Power Authority (New York), Electric System General 6/03 at 101 A- $9,425,607
Revenue Bonds, Series 1998A, 5.500%, 12/01/29
1,250,000 Metropolitan Transportation Authority (New York), Commuter 7/00 at 102 AAA 1,304,300
Facilities 1987 Service Contract Bonds, Series 3, 7.500%, 7/01/16
(Pre-refunded to 7/01/00)
5,000,000 The City of New York, General Obligation Bonds, 8/03 at 101 1/2 A- 5,067,000
Fiscal 1994 Series D, 5.750%, 8/15/10
9,000,000 The City of New York, General Obligation Bonds, 2/06 at 101 1/2 A- 8,891,460
Fiscal 1996 Series G, 5.750%, 2/01/14
10,000,000 The City of New York, General Obligation Bonds, 8/06 at 101 1/2 A- 9,993,700
Fiscal 1997 Series E, 6.000%, 8/01/16
23,395,000 The City of New York, General Obligation Bonds, 8/07 at 101 A- 23,436,643
Fiscal 1998 Series D, 5.500%, 8/01/10
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-*** 419,176
39,610,000 6.000%, 10/15/26 10/07 at 101 A- 39,268,958
15,000,000 New York City Municipal Water Finance Authority, Water and 6/06 at 101 AAA 14,512,950
Sewer System Revenue Bonds, Fiscal 1996 Series B, 5.750%, 6/15/26
8,750,000 New York City Municipal Water Finance Authority, Water and 6/01 at 101 AAA 9,183,650
Sewer System Revenue Bonds, Fiscal 1992 Series A,
6.750%, 6/15/17 (Pre-refunded to 6/15/01)
7,000,000 Dormitory Authority of the State of New York, Mental Health 8/09 at 101 A- 6,118,770
Services Facilities Improvement Revenue Bonds, Series 1999D,
5.250%, 2/15/29
15,000,000 New York Local Government Assistance Corporation, 4/01 at 102 AAA 15,859,350
Series 1991A Bonds, 7.000%, 4/01/16 (Pre-refunded to 4/01/01)
9,645,000 New York State Medical Care Facilities Finance Agency, 8/03 at 102 AAA 9,692,839
St. Luke's-Roosevelt Hospital Center, FHA-Insured Mortgage
Revenue Bonds, 1993 Series A, 5.600%, 8/15/13
10,000,000 New York State Thruway Authority, Local Highway and Bridge 4/08 at 101 AAA 9,352,000
Service Contract Bonds, Series 1998A-2, 5.250%, 4/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
North Carolina - 3.3%
6,100,000 City of Charlotte, North Carolina, Refunding Certificates of 12/03 at 102 AAA 5,593,822
Participation (Convention Facility Project), Series 1993C,
5.250%, 12/01/20
11,865,000 North Carolina Eastern Municipal Power Agency, Power System 9/03 at 102 1/2 BBB 10,772,115
Revenue Bonds, Series 1985-G, 5.750%, 12/01/16
11,610,000 North Carolina Eastern Municipal Power Agency, Power System 1/03 at 102 BBB 10,892,270
Revenue Bonds, Series 1993-D, 5.875%, 1/01/14
1,000,000 North Carolina Eastern Municipal Power Agency, Power System 1/07 at 102 AAA 994,880
Revenue Bonds, Refunding Series 1996 A, 5.700%, 1/01/13
13,850,000 North Carolina Municipal Power Agency Number 1, Catawba 1/03 at 100 BBB+ 12,855,985
Electric Revenue Bonds, Series 1992, 5.750%, 1/01/15
10,910,000 North Carolina Municipal Power Agency Number 1, Catawba 1/00 at 100 BBB+ 10,161,683
Electric Revenue Bonds, Series 1985B, 6.000%, 1/01/20
10,000,000 North Carolina Municipal Power Agency Number 1, Catawba 1/10 at 101 BBB+ 9,877,200
Electric Revenue Bonds, Series 1999B, 6.500%, 1/01/20 (WI)
- -----------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.7%
9,900,000 The Comanche County Hospital Authority (Lawton, Oklahoma), 1/00 at 102 AAA 10,182,645
Certificates of Participation, Series 1990, 9.000%, 7/01/21
(Pre-refunded to 1/01/00)
2,350,000 Midwest City Memorial Hospital Authority (Midwest City, 4/02 at 102 BBB+*** 2,542,395
Oklahoma), Hospital Revenue Bonds, Series 1992, 7.375%, 4/01/22
(Pre-refunded to 4/01/02)
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 4.0%
5,955,000 Pennsylvania Convention Center Authority, Refunding Revenue Bonds, 9/04 at 102 BBB 6,323,257
1994 Series A, 6.750%, 9/01/19
11,175,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 10/03 at 102 AA+ 10,841,650
Revenue Bonds, Series 1993-36, 5.450%, 10/01/14
9,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 4/06 at 102 AA+ 9,148,770
Revenue Bonds, Series 1996-51, 6.375%, 4/01/28
(Alternative Minimum Tax)
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pennsylvania (continued)
$ 18,850,000 Pennsylvania Intergovernmental Cooperation Authority, Special Tax 6/03 at 100 AAA $16,229,285
Revenue Refunding Bonds (City of Philadelphia Funding Program),
Series of 1993A, 5.000%, 6/15/22
City of Philadelphia, Pennsylvania, Water and Wastewater Revenue Bonds,
Series 1993:
12,745,000 5.500%, 6/15/14 (Pre-refunded to 6/15/03) 6/03 at 102 AAA 13,372,436
19,255,000 5.500%, 6/15/14 6/03 at 102 AAA 18,753,792
- -----------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 0.8%
6,250,000 Rhode Island Health and Educational Building Corporation, Hospital 5/07 at 102 AAA 5,470,500
Financing Revenue Bonds, Lifespan Obligated Group Issue,
Series 1996, 5.250%, 5/15/26
10,000,000 State of Rhode Island, Providence Plantations, Lease Participation 10/07 at 101 AAA 9,315,700
Certificates (Howard Center Improvements), 1997 Series,
5.375%, 10/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
South Carolina - 0.6%
13,000,000 Piedmont Municipal Power Agency, Electric Revenue Bonds, 1/00 at 100 BBB- 10,164,440
1986 Refunding Series, 5.000%, 1/01/25
- -----------------------------------------------------------------------------------------------------------------------------------
Tennessee - 0.1%
2,125,000 Municipal Energy Acquisition Corporation (Tennessee), Gas Revenue No Opt. Call AAA 1,926,886
Bonds, Series 1999, 4.125%, 3/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
Texas - 5.6%
11,990,000 Alliance Airport Authority, Inc., Special Facilities Revenue Bonds, 12/00 at 102 Baa2 12,478,233
Series 1990 (American Airlines, Inc. Project), 7.500%, 12/01/29
(Alternative Minimum Tax)
12,525,000 City of Austin, Texas, Combined Utility Systems Revenue Bonds, 5/01 at 100 AAA 13,226,275
Series 1986A, 8.000%, 11/15/16 (Pre-refunded to 5/15/01)
24,265,000 City of Austin, Texas, Combined Utility Systems Revenue Refunding No Opt. Call AAA 35,646,256
Bonds, Series 1992A, 12.500%, 11/15/07
3,365,000 Corpus Christi Housing Finance Corporation, Single Family Mortgage 7/01 at 103 AAA 3,573,529
Senior Revenue Refunding Bonds, Series 1991A, 7.700%, 7/01/11
10,000,000 Harris County, Texas, Toll Road Unlimited Tax and Subordinate Lien 8/01 at 102 AA 10,512,100
Revenue Refunding Bonds, Series 1991, 6.750%, 8/01/14
3,470,000 Irving Independent School District, Unlimited Tax School Building No Opt. Call AAA 1,839,274
Bonds, Series 1997, 0.000%, 2/15/11
5,685,000 Irving Independent School District, Unlimited Tax Refunding Bonds, No Opt. Call AAA 3,219,643
Series 1997 A, 0.000%, 2/15/10
14,625,000 Matagorda County Navigation District Number One (Texas), 10/00 at 102 AAA 14,407,819
Collateralized Revenue Refunding Bonds (Houston Lighting and
Power Company Project), Series 1995, 5.800%, 10/15/15
4,000,000 Industrial Development Corporation of Port of Corpus Christi 4/08 at 102 BBB- 3,463,640
(Texas), Revenue Refunding Bonds (Valero Refining and Marketing
Company Project), 5.400%, 4/01/18
1,370,000 The Southeast Texas Housing Finance Corporation, Single Family No Opt. Call AA- 288,755
Mortgage Revenue Bonds, 1983 Series A, 0.000%, 11/01/14
5,750,000 Weslaco Health Facilities Development Corporation, Hospital Revenue 1/04 at 102 AAA 5,182,188
Bonds (Knapp Medical Center Project), Series 1994, 5.375%, 6/01/23
- -----------------------------------------------------------------------------------------------------------------------------------
Utah - 4.6%
10,670,000 Intermountain Power Agency, Power Supply Revenue Refunding 7/03 at 102 A+ 9,831,765
Bonds, 1993 Series B, 5.250%, 7/01/17
3,510,000 Intermountain Power Agency, Power Supply Revenue Refunding Bonds, No Opt. Call A+ 3,312,422
1993 Series C, 5.250%, 7/01/14
Intermountain Power Agency, Power Supply Revenue Refunding Bonds,
1993 Series A:
24,130,000 5.500%, 7/01/20 7/03 at 102 A+ 22,293,224
47,180,000 5.000%, 7/01/23 7/03 at 100 A+ 40,222,365
10,000,000 Intermountain Power Agency, Power Revenue Refunding Bonds, 7/06 at 102 A+ 8,584,300
1996 Series D, 5.000%, 7/01/21
- -----------------------------------------------------------------------------------------------------------------------------------
Washington - 10.8%
430,000 Washington Public Power Supply System, Nuclear Project No. 1 No Opt. Call AAA 478,887
Revenue Bonds, 14.375%, 7/01/01
9,450,000 Washington Public Power Supply System, Nuclear Project No. 1 7/03 at 102 AAA 9,173,871
Refunding Revenue Bonds, Series 1993A, 5.700%, 7/01/17
<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. 1
Refunding Revenue Bonds, Series 1993C:
$ 27,000,000 5.400%, 7/01/12 7/03 at 102 Aa1 $26,274,240
2,870,000 5.375%, 7/01/15 7/03 at 102 Aa1 2,668,497
11,390,000 Washington Public Power Supply System, Nuclear Project 7/03 at 102 Aa1 11,418,931
No. 2 Refunding Revenue Bonds, Series 1993A, 5.750%, 7/01/12
17,500,000 Washington Public Power Supply System, Nuclear Project 7/04 at 102 Aa1 17,344,600
No. 2 Refunding Revenue Bonds, Series 1994A, 5.375%, 7/01/10
2,000,000 Washington Public Power Supply System, Nuclear Project 1/00 at 102 AAA 2,051,000
No. 3 Refunding Revenue Bonds, Series 1989B, 7.250%, 7/01/15
(Pre-refunded to 1/01/00)
20,975,000 Washington Public Power Supply System, Nuclear Project 7/01 at 102 Aaa 22,123,801
No. 3 Refunding Revenue Bonds, Series 1991A, 6.500%, 7/01/18
(Pre-refunded to 7/01/01)
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 11,436,912
9,000,000 5.600%, 7/01/17 7/03 at 102 AAA 8,633,880
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 78,822,720
11,850,000 5.375%, 7/01/15 7/03 at 102 Aa1 11,018,012
- -----------------------------------------------------------------------------------------------------------------------------------
West Virginia - 0.4%
7,180,000 West Virginia Housing Development Fund, Housing Finance Bonds, 11/06 at 102 AAA 7,279,371
Series 1997-A, 6.050%, 5/01/27
- -----------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 2.2%
20,385,000 The Wisconsin Public Power Incorporated System, Power Supply System 7/03 at 102 AAA 18,236,216
Revenue Bonds, Series 1993 A, 5.250%, 7/01/21
4,015,000 Wisconsin Housing and Economic Development Authority, 3/04 at 102 AA 4,111,960
Homeownership Revenue Bonds, 1994 Series B, 6.750%, 9/01/25
(Alternative Minimum Tax)
17,020,000 Wisconsin Health and Educational Facilities Authority, Revenue 8/03 at 102 AAA 15,734,307
Bonds (Sisters of the Sorrowful Mother - Ministry), Series 1993D,
5.500%, 8/15/19
1,750,000 Wisconsin Health and Educational Facilities Authority, Revenue Bonds 8/03 at 102 AAA 1,681,906
(Sisters of the Sorrowful Mother- Ministry), Series 1993C, 5.400%, 8/15/13
- -----------------------------------------------------------------------------------------------------------------------------------
$1,983,498,570 Total Investments - (cost $1,804,377,196) - 98.1% 1,812,223,442
==============
Other Assets Less Liabilities - 1.9% 35,109,622
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $1,847,333,064
===================================================================================================================
* 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).
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Portfolio of Investments
NUVEEN MUNICIPAL INCOME FUND, INC. (NMI)
October 31, 1999
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California - 8.2%
$ 5,530,000 Adelanto School District (San Bernardino County, California), No Opt. Call AAA $1,430,777
General Obligation Bonds (Bank Qualified), 1997 Series A,
0.000%, 9/01/22
Brea Olinda Unified School District (California), General
Obligation Bonds, Election of 1999, Series 1999A:
2,000,000 0.000%, 8/01/21 No Opt. Call AAA 539,420
2,070,000 0.000%, 8/01/22 No Opt. Call AAA 524,497
2,120,000 0.000%, 8/01/23 No Opt. Call AAA 505,726
3,000,000 California Pollution Control Financing Authority, Solid 7/07 at 102 N/R 3,239,700
Waste Disposal Revenue Bonds (CanFibre of Riverside Project),
Tax-Exempt Series 1997A, 9.000%, 7/01/19 (Alternative Minimum Tax)
1,150,000 Foothill/Eastern Transportation Corridor Agency (California), 1/07 at 100 Aaa 1,236,066
Toll Road Revenue Bonds, Series 1995A, 6.000%, 1/01/34
(Pre-refunded to 1/01/07)
- -----------------------------------------------------------------------------------------------------------------------------------
Colorado - 5.1%
City and County of Denver, Colorado, Airport System Revenue Bonds,
Series 1992B:
410,000 7.250%, 11/15/23 (Alternative Minimum Tax) 11/02 at 102 Aaa 449,573
(Pre-refunded to 11/15/02)
1,590,000 7.250%, 11/15/23 (Alternative Minimum Tax) 11/02 at 102 BBB+ 1,693,000
City and County of Denver, Colorado, Airport System Revenue Bonds,
Series 1991A:
285,000 8.750%, 11/15/23 (Alternative Minimum Tax) 11/01 at 102 Aaa 315,011
(Pre-refunded to 11/15/01)
780,000 8.750%, 11/15/23 (Alternative Minimum Tax) 11/01 at 102 BBB+ 845,653
City and County of Denver, Colorado, Airport System Revenue Bonds,
Series 1990A:
110,000 8.500%, 11/15/23 (Alternative Minimum Tax) 11/00 at 102 Aaa 117,207
(Pre-refunded to 11/15/00)
1,195,000 8.500%, 11/15/23 (Alternative Minimum Tax) 11/00 at 102 BBB+ 1,257,068
- -----------------------------------------------------------------------------------------------------------------------------------
Connecticut - 6.2%
1,480,000 Capitol Region Education Council (Connecticut), Revenue Bonds, 10/05 at 102 BBB 1,533,783
6.750%, 10/15/15
3,000,000 State of Connecticut Health and Educational Facilities Authority, 7/06 at 102 BBB- 3,001,380
Revenue Bonds, University of New Haven Issue, Series D,
6.700%, 7/01/26
1,000,000 Housing Authority of the City of Willimantic, Multifamily Housing 10/05 at 105 AAA 1,110,040
Revenue Bonds, Series 1995A, (GNMA Collateralized Mortgage
Loan - Village Heights Apartments Project), 8.000%, 10/20/30
- -----------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 0.9%
770,000 District of Columbia Housing Finance Agency, Collateralized Single 12/99 at 101 AAA 775,459
Family Mortgage Revenue Bonds, Series 1988A, 8.375%, 6/01/19
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Florida - 4.2%
1,670,000 Dade County Industrial Development Authority, Industrial 6/05 at 102 N/R 1,779,502
Development Revenue Bonds, Series 1995 (Miami Cerebral Palsy
Residential Services, Inc. Project), 8.000%, 6/01/22
2,000,000 Martin County Industrial Development Authority (Florida), Industrial 12/04 at 102 BBB- 2,037,040
Development Revenue Bonds (Indianatown Cogeneration. L.P. Project),
Series 1994A, 7.875%, 12/15/25 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Illinois - 12.0%
4,320,000 City of Chicago, Tax Increment Allocation Bonds (Irving/Cicero 1/09 at 100 N/R 4,156,445
Redevelopment Project), Series 1998, 7.000%, 1/01/14
1,300,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1993 9/03 at 102 A- 1,384,409
(Northern Illinois Medical Center Project), 6.000%, 9/01/19
2,000,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, 10/03 at 102 A- 1,779,240
Series 1993 (Illinois Masonic Medical Center), 5.500%, 10/01/19
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 1,086,518
475,000 9.500%, 11/15/19 11/00 at 102 AAA 512,397
<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, 7/07 at 103 N/R $2,000,740
Lewis University Airport, Series 1997A, 7.250%, 7/01/18
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Indiana - 9.5%
9,000,000 Whitley County, Indiana, Solid Waste and Sewage Disposal Revenue 11/10 at 102 N/R 8,671,950
Bonds (Steel Dynamics, Inc. Project), Series 1998, 7.250%, 11/01/18
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Louisiana - 3.6%
Louisiana Public Facilities Authority, Extended Care Facilities
Revenue Bonds (Comm-Care Corporation Project), Series 1994:
625,000 11.000%, 2/01/04 No Opt. Call BBB 699,806
2,000,000 11.000%, 2/01/14 No Opt. Call BBB 2,599,400
- -----------------------------------------------------------------------------------------------------------------------------------
Maryland - 2.3%
2,000,000 Anne Arundel County, Maryland, Multifamily Housing Revenue No Opt. Call BBB 2,116,220
Bonds (Twin Coves Apartments Project), Series 1994,
7.450%, 12/01/24 (Alternative Minimum Tax) (Mandatory put
12/01/03)
- -----------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 4.9%
3,000,000 Massachusetts Industrial Finance Agency, Resource Recovery 7/01 at 103 N/R 3,231,570
Revenue Bonds (SEMASS Project), Series 1991A, 9.000%, 7/01/15
1,380,000 Massachusetts Industrial Finance Agency, Revenue Bonds, 7/07 at 102 BBB- 1,260,520
Dana Hall School Issue, Series 1997, 5.900%, 7/01/27
- -----------------------------------------------------------------------------------------------------------------------------------
Michigan - 1.5%
1,500,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds No Opt. Call BBB 1,338,255
(United Waste Systems, Inc. Project), Series 1995 Remarketing
(Waste Management Inc), 5.200%, 4/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Minnesota - 3.1%
2,840,000 Minnesota Housing Finance Agency, Single Family Mortgage Bonds, 1/07 at 102 AA+ 2,858,744
1995 Series M, 5.875%, 1/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Mississippi - 4.4%
4,500,000 Mississippi Business Finance Corporation, Pollution Control Revenue 10/03 at 102 BBB- 3,979,620
Refunding Bonds (System Energy Resources, Inc. Project),
Series 1998, 5.875%, 4/01/22
- -----------------------------------------------------------------------------------------------------------------------------------
Montana - 1.6%
1,500,000 Montana Health Facility Authority, Health Care Revenue Bonds, 6/06 at 102 BBB- 1,442,340
Series 1996 (Community Medical Center, Inc.), 6.375%, 6/01/18
- -----------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 1.1%
1,000,000 New Hampshire Higher Educational and Health Facilities Authority, 1/07 at 102 BBB- 964,910
Revenue Bonds, Series 1997 (New Hampshire College), 6.375%, 1/01/27
- -----------------------------------------------------------------------------------------------------------------------------------
New York - 16.8%
400,000 Village of East Rochester Housing Authority, FHA-Insured Mortgage 8/08 at 102 AA 378,260
Revenue Bonds (Linden Knoll, Inc. Project), Series 1998, 5.250%, 8/01/17
5,000,000 Erie County Industrial Development Agency, Solid Waste Disposal 12/10 at 103 N/R 5,389,350
Facility Revenue Bonds (1998 CanFibre of Lackawanna Project),
8.875%, 12/01/13 (Alternative Minimum Tax)
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- 489,275
1,400,000 5.750%, 2/01/19 2/06 at 101 1/2 A- 1,348,606
1,000,000 The City of New York, General Obligation Bonds, Fiscal 1996 2/06 at 101 1/2 A- 987,940
Series G, 5.750%, 2/01/14
1,250,000 The City of New York, General Obligation Bonds, Fiscal 1997 11/06 at 101 1/2 A- 1,276,263
Series D, Tax Exempt Bonds, 5.875%, 11/01/11
2,500,000 New York State Medical Care Facilities Finance Agency, Hospital 2/05 at 102 AAA 2,765,150
Medical Center Secured Hospital Revenue Bonds, Series 1995-A,
6.800%, 8/15/12 (Pre-refunded to 2/15/05)
2,710,000 UFA Development Corporation, Utica, New York, FHA-Insured Mortgage 1/07 at 102 Aa2 2,686,423
Revenue Bonds, Series 1997A (Loretto-Utica Project), 6.125%, 7/01/35
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ohio - 1.2%
$ 1,000,000 County of Franklin, Ohio, Hospital Facilities Mortgage Revenue 7/03 at 103 AAA $1,099,380
Bonds, 1991 Series A (Ohio Presbyterian Retirement Services),
8.750%, 7/01/21 (Pre-refunded to 7/01/03)
- -----------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 1.0%
880,000 Oklahoma County Industrial Authority, Revenue Bonds, Oklahoma 1/00 at 100 N/R 882,702
Blood Institute Project, Series 1988, 9.000%, 7/01/03
- -----------------------------------------------------------------------------------------------------------------------------------
Oregon - 2.0%
2,000,000 State of Oregon Housing and Community Services Department, 7/07 at 101 1/2 Aa2 1,840,680
Mortgage Revenue Bonds (Single Family Mortgage Program),
1997 Series H, 5.650%, 7/01/28 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 1.2%
1,000,000 Pennsylvania Convention Center Authority, Refunding Revenue Bonds, 9/04 at 102 BBB 1,061,840
1994 Series A, 6.750%, 9/01/19
- -----------------------------------------------------------------------------------------------------------------------------------
Texas - 5.6%
1,055,000 Alliance Airport Authority, Inc., Special Facilities Revenue Bonds, 12/00 at 102 Baa2 1,097,960
Series 1990 (American Airlines, Inc. Project),
7.500%, 12/01/29 (Alternative Minimum Tax)
765,000 Hidalgo County Housing Finance Corporation (Florida), 4/04 at 102 Aaa 789,618
Single Family Mortgage Revenue Bonds (GNMA and FNMA
Collateralized), Series 1994A, 7.000%, 10/01/27
(Alternative Minimum Tax)
3,000,000 Laredo Independent School District (Webb County, Texas), 8/09 at 100 AAA 2,681,370
Unlimited Tax School Building Bonds, Series 1999, 5.250%, 8/01/24
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 202,410
1,000,000 0.000%, 8/15/26 8/13 at 49 3/32 AAA 189,760
1,000,000 0.000%, 8/15/27 8/13 at 46 15/32 AAA 178,200
- -----------------------------------------------------------------------------------------------------------------------------------
Washington - 1.5%
1,240,000 Housing Authority of the City of Bellingham, Washington, Housing 11/04 at 100 A1*** 1,361,815
Revenue Bonds, Series 1994 (Cascade Meadows Project),
7.100%, 11/01/23 (Pre-refunded to 11/01/04)
- -----------------------------------------------------------------------------------------------------------------------------------
$ 99,310,000 Total Investments - (cost $88,154,445) - 97.9% 89,180,988
=============
Other Assets Less Liabilities - 2.1% 1,941,656
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $91,122,644
===================================================================================================================
* 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.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Net Assets
October 31, 1999
<CAPTION>
Municipal Value Municipal Income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $1,812,223,442 $89,180,988
Cash 5,102,087 147,696
Receivables:
Interest 37,035,363 2,220,022
Investments sold 25,648,664 162,952
Other assets 275,661 6,855
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 1,880,285,217 91,718,513
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Payable for investments purchased 22,435,762 --
Accrued expenses:
Management fees (note 6) 881,321 50,549
Other 1,349,284 86,870
Dividends payable 8,285,786 458,450
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 32,952,153 595,869
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $1,847,333,064 $91,122,644
====================================================================================================================================
Shares outstanding 194,959,522 7,974,678
====================================================================================================================================
Net asset value per share outstanding (net assets
divided by shares outstanding) $ 9.48 $ 11.43
====================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Operations
Year Ended October 31, 1999
<CAPTION>
Municipal Value Municipal Income
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income (note 1) $ 112,387,731 $ 6,321,398
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 10,787,030 613,033
Shareholders' servicing agent fees and expenses 632,616 33,276
Custodian's fees and expenses 233,822 47,200
Directors' fees and expenses (note 6) 19,232 905
Professional fees 21,769 16,078
Shareholders' reports - printing and mailing expenses 590,607 38,570
Stock exchange listing fees 163,454 16,363
Investor relations expense 192,030 9,979
Other expenses 65,024 5,051
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit 12,705,584 780,455
Custodian fee credit (note 1) (13,298) (9,638)
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses 12,692,286 770,817
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 99,695,445 5,550,581
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (notes 1 and 4) (646,778) 461,435
Net change in unrealized appreciation (depreciation) of investments (156,397,771) (5,266,839)
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (157,044,549) (4,805,404)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ (57,349,104) $ 745,177
===================================================================================================================================
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
10/31/99 10/31/98 10/31/99 10/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 99,695,445 $ 103,916,174 $ 5,550,581 $ 5,617,256
Net realized gain (loss) from investment transactions
(notes 1 and 4) (646,778) 18,170,510 461,435 592,492
Net change in unrealized appreciation
(depreciation) of investments (156,397,771) 24,774,889 (5,266,839) 274,398
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (57,349,104) 146,861,573 745,177 6,484,146
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income (99,429,121) (104,108,366) (5,487,947) (5,630,333)
From accumulated net realized gains from
investment transactions (18,170,228) (25,851,632) (592,941) (249,880)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (117,599,349) (129,959,998) (6,080,888) (5,880,213)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions (note 2)
Net proceeds from shares issued to shareholders due to
reinvestment of distributions -- -- 702,675 869,202
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (174,948,453) 16,901,575 (4,633,036) 1,473,135
Net assets at the beginning of year 2,022,281,517 2,005,379,942 95,755,680 94,282,545
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $1,847,333,064 $2,022,281,517 $91,122,644 $95,755,680
===================================================================================================================================
Balance of undistributed net investment income at
the end of year $ 486,312 $ 219,988 $ 186,895 $ 124,261
===================================================================================================================================
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, 1999, Municipal Value had outstanding when-issued and delayed
delivery purchase commitments of $22,435,762.
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, 1999, have been
designated Exempt Interest Dividends. Net realized capital gain and market
discount distributions are subject to federal taxation.
<PAGE>
Notes to Financial Statements (continued)
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
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, 1999.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on each Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
2. Fund Shares
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Municipal Value Municipal Income
- ---------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
10/31/99 10/31/98 10/31/99 10/31/98
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued to shareholders
due to reinvestment of
distributions -- -- 57,857 70,712
=========================================================================================================
</TABLE>
3. Distributions to Shareholders
The Funds declared dividend distributions from their tax-exempt net investment
income which were paid on December 1, 1999, to shareholders of record on
November 15, 1999, as follows:
<TABLE>
<CAPTION>
Municipal Municipal
Value Income
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dividend per share $.0425 $.0575
=========================================================================================================
</TABLE>
<PAGE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in long-term municipal
securities and short-term municipal securities for the fiscal year ended October
31, 1999, were as follows:
<TABLE>
<CAPTION>
Municipal Municipal
Value Income
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchases:
Long-term municipal securities $251,816,473 $33,745,063
Short-term municipal securities 109,920,000 22,500,000
Sales and maturities:
Long-term municipal securities 278,201,100 27,650,873
Short-term municipal securities 109,920,000 28,900,000
=========================================================================================================
</TABLE>
At October 31, 1999, the identified cost of investments owned for federal income
tax purposes was the same as the cost for financial reporting purposes for each
Fund.
At October 31, 1999, Municipal Value had unused capital loss carryforwards of
$646,777 available for federal income tax purposes to be applied against future
capital gains, if any. If not applied, the carryforwards will expire in the year
2007.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at October 31, 1999, were as follows:
<TABLE>
<CAPTION>
Municipal Municipal
Value Income
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $57,011,567 $2,802,021
depreciation (49,165,321) (1,775,478)
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation $ 7,846,246 $1,026,543
=========================================================================================================
</TABLE>
<PAGE>
Notes to Financial Statements (continued)
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 assets of each Fund as
follows:
<TABLE>
<CAPTION>
Average Daily Net Assets Municipal Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
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
==================================================================================================================
<CAPTION>
Average Daily Net Assets Municipal Income
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
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:
<CAPTION>
Gross Interest Income Municipal Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
For the first $50 million 4.125%
For the next $50 million 4.000
For gross income over $100 million 3.875
==================================================================================================================
</TABLE>
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, 1999, net assets consisted of:
<TABLE>
<CAPTION>
Municipal Municipal
Value Income
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares, $.01 par value per share $ 1,949,595 $ 79,744
Paid-in surplus 1,837,697,688 89,369,000
Balance of undistributed net investment income 486,312 186,895
Accumulated net realized gain (loss) from investment transactions (646,777) 460,462
Net unrealized appreciation of investments 7,846,246 1,026,543
- -----------------------------------------------------------------------------------------------------------
Net assets $1,847,333,064 $91,122,644
===========================================================================================================
Authorized Shares 350,000,000 200,000,000
===========================================================================================================
</TABLE>
<PAGE>
8. Investment Composition
At October 31, 1999, the revenue sources by municipal purpose, expressed as a
percent of long-term investments, were as follows:
<TABLE>
<CAPTION>
Municipal Municipal
Value Income
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Basic Materials --% 10%
Education and Civic Organizations 1 6
Health Care 12 6
Housing/Multifamily 3 4
Housing/Single Family 5 7
Long-Term Care -- 9
Tax Obligation/General 7 12
Tax Obligation/Limited 10 8
Transportation 12 8
U.S. Guaranteed 14 10
Utilities 28 20
Water and Sewer 7 --
Other 1 --
- ---------------------------------------------------------------------------------------------------------
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 (43% for Municipal Value and 13% 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.
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
<PAGE>
<TABLE>
Financial Highlights
Selected data for a share outstanding throughout each year:
<CAPTION>
Investment Operations
-----------------------------------
Net Realized/
Beginning Net Unrealized
Net Asset Investment Investment
Value Income Gain (Loss) Total
Municipal Value
<S> <C> <C> <C> <C>
Year Ended 10/31:
1999 $10.37 $.51 $ (.80) $ (.29)
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
<CAPTION>
Municipal Income
<S> <C> <C> <C> <C>
Year Ended 10/31:
1999 12.10 .70 (.61) .09
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
<PAGE>
<CAPTION>
Less Distributions Total Returns
Net Ending
Investment Capital Net Asset Ending Based on Based on Net
Income Gains Total Value Market Value Market Value+ Asset Value+
Municipal Value
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended 10/31:
1999 $(.51) $(.09) $(.60) $ 9.48 $ 8.6250 (7.50)% (2.94)%
1998 (.53) (.13) (.66) 10.37 9.9375 10.55 7.49
1997 (.58) (.11) (.69) 10.29 9.6250 10.39 8.18
1996 (.61) (.08) (.69) 10.18 9.3750 3.10 5.84
1995 (.65) (.03) (.68) 10.29 9.7500 11.50 11.51
<CAPTION>
Municipal Income
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended 10/31:
1999 (.69) (.07) (.76) 11.43 11.0000 (5.77) .74
1998 (.71) (.03) (.74) 12.10 12.4375 5.21 7.06
1997 (.76) (.05) (.81) 12.02 12.5625 11.96 7.60
1996 (.76) -- (.76) 11.96 12.0000 12.42 6.49
1995 (.78) -- (.78) 11.97 11.3750 11.95 10.86
<PAGE>
<CAPTION>
Ratios/Supplemental Data
Before Credit After Credit*
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to Portfolio
Net Assets to Average Average to Average Average Turnover
(000) Net Assets Net Assets Net Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Municipal Value
Year Ended 10/31:
1999 $1,847,333 .65% 5.10% .65% 5.10% 13%
1998 2,022,282 .65 5.18 .65 5.18 19
1997 2,005,380 .68 5.71 .68 5.71 19
1996 1,984,627 .69 5.98 .69 5.98 18
1995 2,006,450 .70 6.35 .70 6.35 13
<CAPTION>
Municipal Income
<S> <C> <C> <C> <C> <C> <C>
Year Ended 10/31:
1999 91,123 .83 5.88 .82 5.89 31
1998 95,756 .82 5.91 .82 5.91 23
1997 94,283 .83 6.39 .83 6.39 9
1996 93,249 .80 6.49 .80 6.49 10
1995 92,850 .84 6.53 .84 6.53 15
* After custodian fee credit, where applicable (note 1).
+ 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>
Build Your Wealth Automatically
Sidebar text: Nuveen offers a number of convenient ways to add to your portfolio
and earn the tax-free income you need to achieve your financial goals.
Nuveen makes reinvesting easy. A phone call is all it takes to set up your
reinvestment account.
Nuveen Exchange-Traded Funds Dividend Reinvestment Plan
Your Nuveen Exchange-Traded Fund allows you to conveniently reinvest dividends
and/or capital gains distributions in additional fund shares. If you do not
elect to reinvest distributions, all distributions are paid by check or can be
deposited directly into your bank or brokerage account.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of tax-free
compounding. You'll also potentially benefit from dollar-cost averaging, a
technique of investing at regular intervals, which allows you to build a
high-quality, tax-free portfolio conveniently and cost effectively over time.
To be effective, dollar cost averaging requires that you invest over a long
period of time and does not assure that you will profit.
Easy and convenient
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
Income or capital gains taxes may be payable on dividends or distributions that
are reinvested.
How shares are purchased
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
then-current market price. If the shares are trading at less than net asset
value, shares for your account will be purchased on the open market. Dividends
and distributions received to purchase shares in the open market will normally
be invested shortly after the dividend payment date. No interest will be paid on
dividends and distributions awaiting reinvestment. Because the market price of
shares may increase before purchases are completed, the average purchase price
per share may exceed the market price at the time of valuation, resulting in the
acquisition of fewer shares than if the dividend or distribution had been paid
in shares issued by the fund. A pro rata portion of any applicable brokerage
commissions on open market purchases will be paid by Plan participants. These
commissions usually will be lower than those charged on individual transactions.
Flexibility
You may, of course, change your distribution option or withdraw from the Plan at
any time, should your needs or situation change. Should you withdraw, you can
receive a certificate for all whole shares credited to your reinvestment account
and cash payment for fractional shares, or cash payment for all reinvestment
account shares, less brokerage commissions and a $2.50 service fee.
You can also reinvest if your shares are registered in the name of a brokerage
firm, bank, or other nominee. Just ask your investment adviser if the firm will
participate on your behalf. If not, it's easy to have the shares registered in
your name and to apply for a reinvestment account directly. Participants whose
shares are registered in the name of one firm may not be able to transfer the
shares to another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial adviser or call us at (800)
257-8787.
<PAGE>
Fund Information
BOARD OF DIRECTORS
Robert P. Bremner
Lawrence H. Brown
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
FUND MANAGER
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
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, we have updated or replaced our trading, fund
management, and pricing systems at Nuveen - systems that directly affect our
investors and their financial advisers - to address Year 2000 concerns.
We continue to work closely with our transfer agent, custodian, firms through
whom we buy and sell portfolio securities, and other service partners to monitor
the Year 2000 readiness of their systems, while addressing other remaining
systems issues.
In addition, the Funds hold securities of issuers whose business operations
leave them susceptible to Year 2000 concerns. We seek to evaluate an issuer's
Year 2000 readiness as part of our initial and ongoing research of these
issuers. This is only one of the many factors considered in determining whether
to buy, sell, or continue holding a particular security.
Our Year 2000 review, repair, and testing program has been substantially
completed. This program included industry-wide testing of critical systems and
receipt of satisfactory assurances from critical service providers, vendors, and
issuers regarding their Year 2000 readiness. We will continue more refined
testing of our systems and their relationships with other parties' systems and
will regularly discuss the results of this testing with those parties. We are
also making Year 2000 contingency plans to guide recovery efforts in the event
that, despite our remediation attempts, Year 2000 issues adversely affect the
Funds. Although we can never have complete assurance that the steps we take will
be sufficient to prevent any problems that would impact the Nuveen
Exchange-Traded Funds, we can assure you that we will take all reasonable steps
to prevent disruption of the services provided by your Fund.
FUND POLICIES
The Board of Trustees of your Fund recently modified certain investment policies
of the Fund. The Fund was formerly not permitted to invest more than 5% of its
total assets in Municipal Leases that contain "non-appropriation" clauses. In
addition, your Fund was not permitted to invest more than 10% of its total
assets in Municipal Leases and securities that are unmarketable, illiquid or not
readily marketable. The Municipal Lease market has matured since the Fund's
inception, and non-appropriation leases have become more liquid and widely
accepted. The Nuveen Exchange-Traded Fund Board has eliminated the restrictions
noted above, replacing them with requirements that the Funds limit investments
in non-appropriation Municipal Leases to those that meet one or more of six
criteria that indicate that the issuer will be motivated to continue to
appropriate monies to make the payments under the Municipal Lease.
The Board also eliminated the Fund's policy not to invest more than 5% of its
total assets in unsecured obligations of issuers which, together with their
predecessors, have been in operation for less than three years.
Each fund intends to repurchase shares of its own common or preferred 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, 1999. 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
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time - 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 investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
FAN-1-10-99
