Nuveen Exchange-Traded Funds
Providing tax-free income to help you live your dreams.
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
NUVEEN PREMIUM INCOME MUNICIPAL FUND 2, INC.
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
ANNUAL REPORT/OCTOBER 31, 1995
Photographic image of man seated at breakfast table with wife standing behind
him.
Photographic image of Nuveen Research Department. Four people around a table
working.
<PAGE>
Research: a foundation
Your financial plan is in place. You and your adviser have made asset
allocation decisions. For the tax-free portion of your portfolio, you want
dependable income, safety of principal, and diversification. Solid, reliable
Nuveen research helps to keep your tax-free investments on the path you have
chosen.
Paul Williams, Vice President and Manager of Investment Strategies and
Research, emphasizes fundamental research as a strategy for finding value.
<PAGE>
The strength of Nuveen's Research Department is illustrated by the numerous
awards and press coverage we receive. Annual industry polls consistently
recognize the quality and depth of Nuveen Research.
Photographic image of a grouping of awards/statuettes.
At Nuveen, we believe that attention to detail combined with years of
experience is the foundation for sound research. Sound research means finding
quality bonds that deliver timely and dependable income over many decades.
Beyond this, it means adding value by identifying bonds whose credit strengths
are not yet understood by the market.
USING RESEARCH TO TRACK QUALITY AND VALUE
With tens of thousands of bonds available for investment today, the municipal
market is one of the nation's largest--and most complex--securities markets.
At the same time, the number of analysts devoted to researching the municipal
market is comparatively small. While more than 12,000 analysts at nearly 2,000
firms and investment organizations research the 7,500 common stocks available
in the equity market, approximately 1,000 analysts at 400 firms and rating
agencies cover 60,000 municipal bond issues.
Selecting those bonds that will outperform the market and help you achieve
your investment goals depends upon an ability to analyze and understand
complexities ranging from the demand for a new highway or airport to the
impact of an industry closure on the financial position of a town's water and
sewer system.
At Nuveen, we can provide this depth because we have the largest research
staff in the investment banking industry devoted exclusively to the analysis
of municipal bonds. Our award-winning team of more than 30 research
professionals provides invaluable support to our portfolio managers, assisting
them in careful analysis of bond issues considered for purchase--even those
rated AAA.
On a daily basis, our research analysts prepare credit reviews to assist in
the selection of bonds that offer the best combination of yield and security,
monitor the continued creditworthiness of portfolio holdings, and analyze
economic, political, and demographic trends affecting the markets.
The scope of this analysis is broad. We understand the beneficial insights
that can be obtained by assessing the impact of local elections in small towns
or gaining an understanding of the global wood pulp market to accurately
evaluate a municipal issue in Alaska. Recently a financial adviser noticed a
large number of clippings on salmon fishing on one Nuveen analyst's desk. The
analyst explained that the articles provided information on salmon spawning, a
conservation issue having a major impact on public hydroelectric projects in
the Pacific Northwest. With the largest research staff in the industry, we can
analyze subtle but essential details such as this--and apply our findings to
enhance the performance of your portfolio.
<PAGE>
BENEFITING OUR INVESTORS
The Nuveen Research Department supports the investment goals of fund investors
through three major activities:
Primary research and surveillance
Every year, our research staff reviews thousands of tax-exempt issues valued
at more than $100 billion to help our portfolio managers select the most
appropriate bonds based on current yield, price, credit quality, and future
prospects.
A recent example of the way Nuveen Research benefits our shareholders was
our successful investment in Philadelphia water and sewer bonds. When the city
decided to issue bonds to fund badly needed capital improvements, the city's
fiscal difficulties resulted in an issue that was priced below that of other
cities for similar bonds, generating higher income. However, Nuveen's own
research performed independently from the rating agencies indicated that the
city water and sewer system was economically sound and that adequate legal
safeguards would be in place to protect the investment. Following the
completion of the improvements, the prices of these bonds resulted in a
sizable portfolio gain to our shareholders.
Research reports
Just as you rely on your financial adviser for seasoned, prudent advice,
financial advisers depend on Nuveen's research reports to keep current on
market developments. Reports cover issues ranging from credit analysis of
specific states to comprehensive examinations of tax-free investment
strategies and the impact of national and state elections on municipal issues.
(For a list of research reports currently available to you and your adviser,
please refer to the attached reply card.)
Investor interests
We take our responsibility to our shareholders seriously by actively
representing their interests before the industry and government groups that
oversee and regulate the markets. We testified before a U.S. Senate
subcommittee to support better disclosure of financial information by bond
issuers. Our analysis of the effect of the Orange County bankruptcy on other
California issuers helped a California Senate subcommittee understand the
importance of fiscal conservatism and prudent policy decisions. By providing
informed opinions backed by years of experience, we help to define and set
policy that benefits you.
At Nuveen, quality research is one of the core elements of our disciplined
approach to providing you with dependable income, credit quality, and
diversification--key elements of a successful investment program.
Nuveen's research reports are often used by the press as background when
covering the municipal market in depth.
Photographic image of a grouping of research reports and newspapers.
<PAGE>
Photographic image of man seated at breakfast table with wife standing behind
him.
CONTENTS
6 Municipal market perspective
7 Dear shareholder
9 Answering your questions
14 Fund performance
16 Commonly used terms
18 Shareholder meeting report
19 Portfolio of investments
42 Statement of net assets
43 Statement of operations
44 Statement of changes in net assets
46 Notes to financial statements
58 Financial highlights
60 Report of independent auditors
61 Nuveen Exchange-Traded Funds dividend reinvestment program
<PAGE>
Municipal market perspective
The start of 1995 brought with it a turnaround in the bond market, concluding
one of the worst periods in recent bond market history. This rebound reflects
a general consensus that inflation is under control following an unprecedented
series of seven interest rate hikes by the Federal Reserve Board over a
twelve-month period.
In early July, the Federal Reserve reacted to the slowing economy by making a
much-anticipated move to ease short-term rates, the first such reduction in
nearly three years. Further rate cuts remain a possibility, as the Fed keeps a
close eye on the strength of the expanding economy and the outcome of
Congressional efforts to balance the federal budget.
In the municipal bond market, prospects of another Fed easing helped
municipals gain momentum toward year end, despite an exceptionally strong
stock market and continued debate about potential tax reform legislation.
Inflation for the year remained low, a benefit to bondholders.
<PAGE>
Dear shareholder
Photographic image of Richard Franke, Chairman of Nuveen.
"Over time, municipal bonds have proven to be a valuable and dependable
component of successful investment programs."
Since the beginning of 1995, we have enjoyed a welcome rebound in the bond
markets, as we put behind us 1994--a very volatile period in bond market
history. This period serves as a reminder that weathering the ups and downs of
the markets is a normal part of the investment process. We can gain a better
perspective on this process if we remember one of the basic principles of
investing: A financial plan that focuses on your long-term goals can minimize
the impact of any short-term market volatility.
Municipal bond funds continue to be an attractive way to invest for the long
term, offering steady tax-free income and diversification across market
sectors. Throughout the past year, we have kept our sights focused on
successfully meeting these objectives, providing you with a solid source of
current income, credit quality, and enhanced share price relative to the
market as a whole.
As of October 31, 1995, current yields on share prices for the funds covered
in this report ranged from 6.73% to 7.10%. To match these yields, an investor
in the 36% federal income tax bracket would have had to earn at least 10.52%
on taxable alternatives of comparable quality. Without question, taxable
yields at these levels on investments of comparable quality are difficult to
achieve in today's markets.
Reflecting the rebound in the bond market, each of these funds reported
gains in net asset value over October 31, 1994, as well as substantial
increases in share price. The 12-month total returns on net asset value,
reflecting share price gains plus reinvested dividend income, ranged from
14.84% to 22.41%, which translates to 19.19% to 26.44% on a taxable-equivalent
basis. These performance results remind us of the important role that
municipal bonds--and the tax-free income they provide--can play as part of an
investment strategy focused on diversification and long-term performance.
The value and dependability of your municipal bond investments are enhanced
by the fact that you have chosen tax-free exchange-traded funds managed by
Nuveen. We offer a combination of professional management, award-winning
research, and shareholder service that distinguishes Nuveen as a fund manager.
<PAGE>
Our portfolio management strategy, which we call value investing, relies on
a disciplined approach to security selection and portfolio construction
designed to deliver above-market performance by emphasizing securities that
are underpriced or undervalued by the market. This approach is supported by
the strength of Nuveen Research, which provides the insights and experience to
assist portfolio managers in identifying and selecting bonds with strong
credit quality. Our research professionals continually monitor our holdings in
order to alert portfolio managers about changes that may affect quality.
Nuveen also prides itself on its exceptional service to shareholders.
Through annual and semiannual reports, regular statements, as well as our
toll-free information lines, our communication programs help us stay in touch
with your needs and concerns. We also provide support to financial advisers
across the nation by supplying them with the information they need to answer
your questions and ensure that products are selected to meet your needs. Our
educational reports--covering issues such as credit analyses, tax-free
investment strategies, and tax reform proposals--are available to both you and
your adviser to keep you current on market developments.
As you review the following pages detailing the solid performance of your
funds, we trust you will come away with the feeling that these results,
coupled with Nuveen's continued pledge of premium service, add up to a
rewarding investment experience. We look forward to serving your tax-free
investment needs in the future.
Sincerely,
Richard J. Franke
Chairman of the Board
December 15, 1995
<PAGE>
Answering your questions
Photographic image of montage of letters received by Nuveen.
Tom Spalding, head of Nuveen's portfolio management team, offers insights into
value investing and the bond market recovery.
How has the recovery of the municipal bond market affected Nuveen funds?
In short, the market recovery has helped most Nuveen funds regain some of the
share price they lost during 1994's market. To put this in perspective, the
setback in the bond market last year--which goes on record as one of the most
volatile periods in decades--was the first downturn experienced by many Nuveen
exchange-traded fund investors, and some reacted by selling their shares.
This, in turn, drove share prices down even further. Since the beginning of
the recovery in early 1995, however, municipal bond prices have increased and
most Nuveen funds have seen their prices rise.
Because of their capital structure, leveraged funds such as the ones covered
in this report experienced greater price declines in 1994 than unleveraged
funds, and they generally responded more quickly to the stabilizing interest
rate environment with recovering prices.
Photographic image of Tom Spalding, Portfolio Manager at Nuveen.
Tom Spalding, head of Nuveen's portfolio management team, answers investors'
questions on developments in the municipal market.
<PAGE>
Why do these funds continue to trade at a discount despite the recovery?
To understand why this is happening, it may be helpful to remember that each
share has two prices: the net asset value (NAV), which represents the
underlying value--or the sum of assets and liabilities--of the fund, and the
share price, which reflects the market's assessment of the fund.
As the market turned around in 1995, net asset values appreciated more
quickly than share prices. This is typical of a market that sometimes takes a
while to recognize underlying value balanced against the various factors that
affect share price, such as interest rates, inflation forecasts, the relative
strength of the stock market, or the legislative and tax outlook. The fact
that gains in NAVs are currently outpacing the rate of change in share prices
means that the market is lagging in recognizing the value currently offered by
municipal bonds.
Investors in the Nuveen national funds should be aware that the net asset
values for these funds, as shown in this report, remain quite strong. For
long-term investors, in fact, the current period may present a buying
opportunity, as shares can be purchased at prices lower than their underlying
value--and at a time when the bond market is strong.
What does Nuveen mean by "value investing"? Where are Nuveen analysts finding
value today?
At Nuveen, we define value investing as a disciplined approach to security
selection and portfolio construction designed to deliver above-market
performance. We emphasize securities that offer good intrinsic value but that
are underpriced or undervalued by the market. Our value investing approach
concentrates on identifying individual bonds with current yields, prices,
credit quality, and future prospects that are exceptionally attractive in
relation to other bonds in the market.
As we search for value in the market today, our analysts continue to assess
investment potential across the entire spectrum of geographical and sector
opportunities. During 1995, we have seen many credit upgrades on portfolio
holdings, meaning that our judgments about credit quality have been rewarded.
We currently favor revenue bonds, which offer a dedicated revenue stream--such
as tollways or recycling plants, over general obligation bonds, which rely on
the taxing power of a state or municipality. One example of revenue bonds that
have performed exceptionally well for us recently are those issued for the
Denver International Airport.
<PAGE>
What does Nuveen see as the impact of the flat tax proposals?
We have been closely monitoring the various flat tax proposals currently being
debated in Congress and their implications for tax-free funds. Four major tax
reform proposals are currently under discussion, all with the common goal of
simplifying the federal tax code and increasing incentives for saving and
investment. It is important to note that none of the proposals has gained a
strong consensus and implementation of any measure that manages to pass both
houses is at least two years away. We believe that some action on the tax
reform front is likely, as the federal tax laws are constantly being
reevaluated and revised, although changes of the magnitude outlined in current
proposals are rare.
As we look at the bond market today, we can see some evidence that the
market is already compensating investors for the uncertainty of tax reform.
Yields on municipal bonds are currently at a level equal to 90% or more of
Treasury bond yields, a historically high level. These yields are comparable
to taxable yields in the 10% range, providing good value that is tough to
match.
Once the tax issue is resolved, we're confident that municipal
bonds--because of their high credit quality and attractive yields--will
continue to hold a strategic place in the prudent investor's portfolio. The
importance of municipal bonds is enhanced by the integral role they play in
maintaining our way of life in this country. Our cities, counties, and states
will always have a need for financing to build and upgrade projects such as
roads, hospitals, and water treatment systems. And municipal bonds will
continue to be an essential way to match America's long-term needs for capital
improvements with investors' long-term needs for secure income.
What is Nuveen's outlook as we head into 1996?
Inflation remains low and the economy seems to be expanding at a reasonable
pace; and, while both of these factors can change and have an impact on the
bond market, the current environment is favorable for bonds. While municipal
supply is down from past years, demand from institutional investors such as
insurance companies has been strong in 1995, contributing to the rebound in
municipal prices. If we experience continued slow and steady economic growth,
combined with low inflation and stable interest rates, that may attract
greater numbers of individual investors as well.
<PAGE>
<TABLE>
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
NPI
While the dividend income remained attractive compared with other funds, the
dividend was reduced during the 12 months as older, higher coupon bonds were
called and replaced with today's lower-yielding bonds.
12 MONTH DIVIDEND HISTORY
<CAPTION>
Date Monthly Dividends Supplemental Dividends Capital Gains
<S> <C> <C> <C>
11/94 $0.0910
12/94 $0.0910
1/95 $0.0910
2/95 $0.0880
3/95 $0.0880
4/95 $0.0880
5/95 $0.0880
6/95 $0.0880
7/95 $0.0880
8/95 $0.0850
9/95 $0.0850
10/95 $0.0850
<CAPTION>
FUND HIGHLIGHTS 10/31/95
<S> <C>
Yield 7.10%
Taxable-equivalent yield 11.09%
Annual total return on NAV 14.84%
Taxable-equivalent total return 19.19%
Federal tax rate 36.00%
Share price $14.375
NAV $15.11
The price, net asset value and dividend history used in this chart constitute
past performance and do not necessarily predict the future price, net asset
value or dividends of the Fund or of any other Nuveen Fund.
</TABLE>
<PAGE>
<TABLE>
NUVEEN PREMIUM INCOME MUNICIPAL FUND 2, INC.
NPM
In keeping with the Fund's objective of providing attractive tax-free income,
shareholders enjoyed 12 months of stable dividends.
12 MONTH DIVIDEND HISTORY
<CAPTION>
Date Monthly Dividends Supplemental Dividends Capital Gains
<S> <C> <C> <C>
11/94 $0.0765
12/94 $0.0765
1/95 $0.0765
2/95 $0.0765
3/95 $0.0765
4/95 $0.0765
5/95 $0.0765
6/95 $0.0765
7/95 $0.0765
8/95 $0.0765
9/95 $0.0765
10/95 $0.0765
<CAPTION>
FUND HIGHLIGHTS 10/31/95
<S> <C>
Yield 6.99%
Taxable-equivalent yield 10.92%
Annual total return on NAV 22.06%
Taxable-equivalent total return 26.15%
Federal tax rate 36.00%
Share price $13.125
NAV $14.89
The price, net asset value and dividend history used in this chart constitute
past performance and do not necessarily predict the future price, net asset
value or dividends of the Fund or of any other Nuveen Fund.
</TABLE>
<PAGE>
<TABLE>
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
NPT
While the dividend income remained attractive compared with other funds, the
dividend was reduced during the 12 months to more closely reflect the earnings
of the bonds in the portfolio.
12 MONTH DIVIDEND HISTORY
<CAPTION>
Date Monthly Dividends Supplemental Dividends Capital Gains
<S> <C> <C> <C>
11/94 $0.0720
12/94 $0.0720
1/95 $0.0720
2/95 $0.0720
3/95 $0.0720
4/95 $0.0720
5/95 $0.0680
6/95 $0.0680
7/95 $0.0680
8/95 $0.0680
9/95 $0.0680
10/95 $0.0680
<CAPTION>
FUND HIGHLIGHTS 10/31/95
<S> <C>
Yield 6.73%
Taxable-equivalent yield 10.52%
Annual total return on NAV 22.41%
Taxable-equivalent total return 26.44%
Federal tax rate 36.00%
Share price $12.125
NAV $13.87
The price, net asset value and dividend history used in this chart constitute
past performance and do not necessarily predict the future price, net asset
value or dividends of the Fund or of any other Nuveen Fund.
</TABLE>
<PAGE>
Commonly used terms
Yield
An exchange-traded fund's annualized monthly dividend on a given date (in the
case of this report, October 31, 1995) divided by its closing price per share
on that date.
Taxable equivalent yield
The return an investor subject to a given federal income tax rate would need
to obtain from a fully taxable investment to equal the fund's stated
annualized yield on share price. In this report, the tax rate is assumed to be
36.0% for shareholders, based on incomes of $117,950-$256,500 for investors
filing singly, $143,600-$256,500 for those filing jointly.
Net Asset Value (NAV)
The market value of all securities and other assets held by an exchange-traded
fund, minus any liabilities. The NAV per share is the fund's net assets, less
the value of its preferred shares, divided by the total number of common
shares outstanding.
Total return on NAV
The percentage change in a fund's NAV per common share for a given period,
assuming reinvestment of all dividends and capital gains distributions, if
any.
Taxable equivalent total return
The total return an investor subject to a given state and federal income tax
rate would need to obtain from a fully taxable investment to equal the Fund's
stated total return on NAV.
Leverage
A technique used to enhance the income produced for common shareholders by a
long-term municipal bond fund through the issuance of short-term preferred
shares. The proceeds from the sale of the preferred shares can be used to
purchase additional long-term bonds, thus increasing the portfolio's income
stream. Changes in net asset value per share, both up and down, are also
magnified by leverage.
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, 1995. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
<PAGE>
<TABLE>
SHAREHOLDER MEETING REPORT
On July 26, 1995, Nuveen Exchange-Traded Funds held an Annual Meeting of
Shareholders. At the meeting, shareholders voted to elect directors of the
Funds and to ratify selection of the auditors for the Funds. The directors
elected at the meeting include: Lawrence H. Brown, Richard J. Franke, Royce A.
Hoyle, Anne E. Impellizzeri, and Peter R. Sawers.
<CAPTION>
NPI NPM NPT
<S> <C> <C> <C>
Approval of the DIRECTORS
was reached as follows:
Lawrence H. Brown
For 55,889,093 37,406,627 36,366,828
Abstain 783,434 536,251 520,261
---------- ---------- ----------
Total 56,672,527 37,942,878 36,887,089
========== ========== ==========
Richard J. Franke
For 55,900,561 37,407,091 36,380,954
Abstain 771,966 535,787 506,135
---------- ---------- ----------
Total 56,672,527 37,942,878 36,887,089
========== ========== ==========
Royce A. Hoyle
For 55,871,467 N/A N/A
Abstain 801,060 N/A N/A
---------- ---------- ----------
Total 56,672,527 N/A N/A
========== ========== ==========
Anne E. Impellizzeri
For 55,838,358 37,407,623 36,355,598
Abstain 834,169 535,255 531,491
---------- ---------- ----------
Total 56,672,527 37,942,878 36,887,089
========== ========== ==========
Peter R. Sawers
For 55,890,420 37,405,871 36,366,904
Abstain 782,107 537,007 520,185
---------- ---------- ----------
Total 56,672,527 37,942,878 36,887,089
========== ========== ==========
Ratification of auditors
was reached as follows:
For 55,564,248 37,221,024 36,305,746
Against 247,622 222,416 139,481
Abstain 860,657 499,438 441,862
---------- ---------- ----------
Total 56,672,527 37,942,878 36,887,089
========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI)
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
ALASKA - 0.8%
$ 2,070,000 Alaska Housing Finance Corporation, Collateralized
Home Mortgage, 8.750%, 12/01/16 6/98 at 102 Aaa $ 2,194,759
1,950,000 Alaska Housing Finance Corporation, Insured Mortgage
Program, 7.800%, 12/01/30 12/00 at 102 Aa 2,062,496
6,000,000 North Slope Borough General Obligation,
8.350%, 6/30/98 No Opt. Call A- 6,525,000
ARIZONA - 0.6%
3,645,000 Phoenix Industrial Development Authority, Home
Purchase Mortgage (GNMA), Alternative Minimum
Tax, 8.200%, 4/01/22 10/98 at 102 AAA 3,910,648
4,260,000 Pima Industrial Development Authority, Single Family
Mortgage (GNMA), Alternative Minimum Tax,
8.125%, 9/01/20 3/99 at 102 AAA 4,535,366
CALIFORNIA - 12.3%
13,000,000 California General Obligation, 5.150%, 10/01/19 10/03 at 102 A1 11,765,780
17,000,000 California Health Facilities Financing Authority (Kaiser
Permanente), 5.550%, 8/15/25 2/02 at 101 Aa3 15,842,300
13,425,000 California Public Works Board (Regents of the University
of California), 5.500%, 6/01/21 6/03 at 102 Con(A1) 12,461,219
11,395,000 California Public Works Board (California State Prison-
Madera County), 5.500%, 6/01/15 No Opt. Call A 10,913,789
14,900,000 Los Angeles Convention and Exhibition Center Authority,
5.375%, 8/15/18 8/03 at 102 Aaa 14,257,661
12,250,000 Los Angeles County Transportation Commission, Sales
Tax, 5.750%, 7/01/18 7/01 at 100 AA- 11,850,038
1,285,000 Martinez Home Mortgage, 10.750%, 2/01/16 No Opt. Call Aaa 2,036,879
4,125,000 Moorpark Redevelopment Agency, Tax Allocation,
6.125%, 10/01/18 10/03 at 102 A- 4,054,958
20,000,000 Pomona Single Family Mortgage (GNMA and FNMA),
7.600%, 5/01/23 No Opt. Call Aaa 24,598,200
1,360,000 Rancho Cucamonga Redevelopment Agency, Tax
Allocation, 7.125%, 9/01/19 (Pre-refunded to 9/01/99) 9/99 at 102 Aaa 1,525,158
5,955,000 Redlands (Loma Linda University Medical Center),
5.000%, 12/01/22 12/03 at 102 Aaa 5,326,569
5,000,000 Sacramento Municipal Utility District, 5.250%, 11/15/20 11/03 at 102 Aaa 4,692,300
San Bernardino Joint Powers Finance Authority,
Tax Allocation:
5,675,000 5.750%, 10/01/15 10/05 at 102 Aaa 5,592,032
12,500,000 5.750%, 10/01/25 10/05 at 102 Aaa 12,109,375
3,000,000 San Francisco City and County Redevelopment Agency,
GNMA (South Beach Marina), 5.700%, 3/01/29 3/04 at 102 Aaa 2,837,670
University of California:
6,455,000 5.000%, 9/01/11 9/03 at 102 Aaa 6,099,910
17,540,000 4.750%, 9/01/21 9/03 at 102 Aaa 15,098,783
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
COLORADO - 2.9%
City and County of Denver Airport System, Alternative
Minimum Tax:
$ 9,325,000 7.750%, 11/15/13 No Opt. Call Baa $ 10,965,361
8,250,000 7.750%, 11/15/21 11/01 at 102 Baa 9,089,768
8,700,000 6.750%, 11/15/22 11/02 at 102 Baa 8,790,393
3,500,000 7.250%, 11/15/23 11/02 at 102 Baa 3,720,185
4,250,000 Colorado Local Single Family Mortgage (GNMA),
Alternative Minimum Tax, 8.125%, 12/01/20 12/98 at 102 AAA 4,556,383
1,358,502 El Paso County, Single Family Mortgage (FNMA),
8.750%, 6/01/11 No Opt. Call Aaa 1,500,940
DISTRICT OF COLUMBIA - 2.1%
11,280,000 District of Columbia Hospital (Daughters of Charity),
7.875%, 12/01/15 12/98 at 102 Aa 12,460,790
14,800,000 District of Columbia Housing Finance Agency, Single
Family Mortgage (GNMA), Alternative Minimum
Tax, 6.375%, 6/01/26 12/04 at 103 AAA 14,991,808
FLORIDA - 4.0%
11,990,000 Florida Housing Finance Agency, Home Mortgage
(GNMA), Alternative Minimum Tax, 8.300%, 6/01/20 12/98 at 103 Aaa 12,850,642
Greater Orlando Aviation Authority, Alternative
Minimum Tax:
1,470,000 8.375%, 10/01/16 (Pre-refunded to 10/01/98) 10/98 at 102 A1 1,661,526
13,530,000 8.375%, 10/01/16 10/98 at 102 A1 15,127,622
Pensacola Health Facilities Authority (Daughters of
Charity):
11,655,000 7.875%, 1/01/08 (Pre-refunded to 1/01/98) 1/98 at 101 1/2 Aaa 12,768,519
9,435,000 7.875%, 1/01/11 (Pre-refunded to 1/01/98) 1/98 at 101 1/2 Aaa 10,336,420
GEORGIA - 6.1%
Georgia Municipal Electric Authority:
7,700,000 8.375%, 1/01/16 1/98 at 102 A 8,437,583
5,850,000 8.125%, 1/01/17 1/98 at 102 A 6,394,577
2,820,000 Atlanta Urban Residential Finance Authority, Single
Family (GNMA), Alternative Minimum Tax,
8.250%, 10/01/21 10/98 at 103 AAA 2,975,890
40,000,000 Burke County Development Authority, Pollution Control
(Georgia Power Company), 5.750%, 9/01/23 9/98 at 102 A1 38,494,400
23,420,000 Monroe County Development Authority, Pollution
Control (Georgia Power Company), 6.750%, 10/01/24 10/99 at 102 A1 24,200,120
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
ILLINOIS - 5.4%
$ 8,230,000 Illinois Development Finance Authority, Pollution
Control (Illinois Power Company), 5.700%, 2/01/24 2/04 at 102 Aaa $ 7,987,627
8,500,000 Illinois Educational Facilities Authority (The University
of Chicago), 5.600%, 7/01/24 7/03 at 102 Aaa 8,154,305
5,000,000 Illinois Health Facilities Authority (Highland Park
Hospital), 6.200%, 10/01/22 10/02 at 102 Aaa 5,100,800
13,905,000 Illinois Health Facilities Authority (Evangelical Hospitals
Corporation), 8.100%, 1/01/08 (Pre-refunded to 1/01/99) 1/99 at 102 Aaa 15,179,393
7,305,000 Illinois Housing Development Authority, Alternative
Minimum Tax, 8.100%, 2/01/22 8/98 at 102 Aa 7,744,834
9,255,000 Illinois Housing Development Authority,
8.100%, 8/01/17 8/98 at 103 Aa 9,956,251
5,900,000 Chicago O'Hare International Airport, 5.000%, 1/01/18 1/04 at 102 Aaa 5,338,733
5,710,000 Regional Transportation Authority, 9.000%, 6/01/06 No Opt. Call Aaa 7,560,668
3,470,000 Schaumburg Park District General Obligation,
5.450%, 12/01/11 12/03 at 100 Aaa 3,420,518
INDIANA - 3.6%
30,000,000 Indianapolis Redevelopment District, Local Improvement
Bond Bank, 8.500%, 2/01/18 (Pre-refunded to 2/01/98) 2/98 at 102 A+ 33,357,600
8,000,000 Steuben County Middle School Building Corporation,
6.375%, 7/15/16 7/05 at 102 Aaa 8,389,520
5,300,000 Whitley County Middle School Building Corporation,
6.250%, 7/15/15 1/04 at 102 Aaa 5,483,274
IOWA - 0.6%
5,885,000 Iowa Finance Authority (Urbandale Hotel Corporation),
Alternative Minimum Tax, 8.500%, 8/01/16
(Pre-refunded to 7/15/14) 7/14 at 100 AAA 7,787,209
KANSAS - 0.9%
11,130,000 Sedgwick County and Shawnee County Mortgage
(GNMA), Alternative Minimum Tax, 8.250%, 11/01/20 11/98 at 103 AAA 12,017,618
LOUISIANA - 0.9%
7,660,000 Louisiana Public Facilities Authority Extended Care
(Comm-Care Corporation), 11.000%, 2/01/14 No Opt. Call BBB 10,206,490
1,795,000 East Baton Rouge Mortgage Finance Authority (GNMA
and FNMA), 5.300%, 10/01/14 10/03 at 102 Aaa 1,629,411
MASSACHUSETTS - 0.3%
3,000,000 Massachusetts Industrial Finance Agency, Resource
Recovery (SEMASS Project), Alternative Minimum Tax,
9.250%, 7/01/15 7/01 at 103 N/R 3,304,860
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
MICHIGAN - 1.7%
$ 6,695,000 Michigan Building Authority (University of Michigan
Adult General Hospital), 7.875%, 12/01/04
(Pre-refunded to 12/01/96) 12/96 at 102 AAA $ 7,114,576
11,550,000 Michigan State Hospital Finance Authority (St. John
Hospital), 9.200%, 12/01/10 (Pre-refunded to 12/01/95) 12/95 at 102 N/R 11,830,781
4,000,000 Detroit City School District, General Obligation,
5.400%, 5/01/13 5/03 at 102 AA 3,857,480
MINNESOTA - 3.5%
15,130,000 Minnesota Housing Finance Agency, Alternative
Minimum Tax, 8.500%, 7/01/19 7/98 at 102 Aa 16,267,020
15,500,000 Minneapolis/St. Paul Housing Finance Board (FNMA and
GNMA), Alternative Minimum Tax, 7.500%, 11/01/27 11/04 at 102 AAA 16,717,370
2,900,000 St. Paul Housing and Redevelopment Authority, Single
Family Mortgage, 7.250%, 9/01/11 No Opt. Call A 3,145,775
9,055,000 St. Paul Port Authority, 8.000%, 12/01/07
(Pre-refunded to 12/01/98) 12/98 at 102 AAA 10,193,666
MISSOURI - 1.1%
11,120,000 St. Charles County, Francis Howell School District,
General Obligation, 7.800%, 3/01/08 No Opt. Call Aaa 13,848,292
NEVADA - 0.8%
10,000,000 Clark County School District, General Obligation,
8.000%, 3/01/08 (Pre-refunded to 3/01/98) 3/98 at 102 N/R 11,035,800
NEW HAMPSHIRE - 1.5%
10,000,000 New Hampshire Business Finance Authority, Pollution
Control (United Illuminating Company),
5.875%, 10/01/33 10/03 at 102 Baa3 9,109,900
11,000,000 New Hampshire Housing Finance Authority, Single
Family Mortgage, 6.050%, 7/01/25 7/03 at 102 Aa 10,820,150
NEW MEXICO - 0.5%
6,345,000 New Mexico Mortgage Finance Authority, Single Family
Mortgage, 6.900%, 7/01/24 7/02 at 102 Aa 6,642,961
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
NEW YORK - 6.6%
$ 12,065,000 New York State Energy Research and Development
Authority, Electric Facilities (Consolidated Edison
Company), Alternative Minimum Tax, 6.000%, 3/15/28 3/03 at 102 A1 $ 11,794,503
15,925,000 New York State Medical Care Facilities Finance Agency,
Hospital and Nursing Home (FHA-Insured),
5.500%, 2/15/22 2/04 at 102 AAA 15,262,361
18,000,000 Metropolitan Transportation Authority, 8.000%, 7/01/18
(Pre-refunded to 7/01/98) 7/98 at 102 Aaa 20,126,520
New York City Municipal Assistance Corporation:
11,540,000 7.000%, 7/01/06 7/97 at 102 Aa 12,305,102
7,060,000 6.875%, 7/01/07 7/97 at 102 Aa 7,528,219
7,500,000 New York City General Obligation, 9.500%, 6/01/03 No Opt. Call Baa1 9,226,575
10,730,000 New York City Municipal Water Finance Authority,
Water and Sewer System, 5.500%, 6/15/20 6/02 at 100 A 10,102,617
NORTH CAROLINA - 4.3%
North Carolina Eastern Municipal Power Agency:
13,655,000 7.750%, 1/01/15 (Pre-refunded to 1/01/96) 1/96 at 103 Aaa 14,153,544
16,415,000 8.000%, 1/01/21 (Pre-refunded to 1/01/98) 1/98 at 102 Aaa 18,100,984
395,000 7.250%, 1/01/21 (Pre-refunded to 1/01/97) 1/97 at 102 Aaa 418,420
2,605,000 7.250%, 1/01/21 1/97 at 102 A 2,689,923
North Carolina Municipal Power Agency No. 1 (Catawba):
13,000,000 8.500%, 1/01/17 (Pre-refunded to 1/01/96) 1/96 at 102 Aaa 13,360,750
7,555,000 7.000%, 1/01/18 (Pre-refunded to 1/01/96) 1/96 at 101 Aaa 7,671,347
605,000 7.000%, 1/01/18 1/96 at 101 A 612,690
OHIO - 2.1%
6,000,000 Ohio Air Quality Development Authority (Dayton Power
and Light Company), 9.500%, 12/01/15 12/95 at 102 1/2 A3 6,177,180
8,840,000 Ohio Housing Finance Agency, Single Family Mortgage
(GNMA), Alternative Minimum Tax, 8.250%, 12/15/19 12/98 at 102 AAA 9,458,358
11,300,000 Ohio Turnpike Commission, 5.750%, 2/15/24 2/04 at 102 AA- 11,346,782
OKLAHOMA - 1.7%
14,355,000 Oklahoma Housing Finance Agency, Single Family
Mortgage (GNMA), Alternative Minimum Tax,
8.250%, 12/01/20 12/98 at 102 AAA 15,190,317
6,750,000 Washington County Medical Authority (Jane Phillips
Episcopal Hospital), 8.500%, 11/01/10 5/99 at 102 BBB 7,419,128
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
PENNSYLVANIA - 3.8%
$ 10,000,000 Pennsylvania Housing Finance Agency, Single Family
Mortgage, 5.450%, 10/01/17 10/03 at 102 Aa $ 9,333,700
14,500,000 Allegheny County, Greater Pittsburgh International
Airport, Alternative Minimum Tax, 8.250%, 1/01/16 1/98 at 102 Aaa 15,851,980
12,875,000 Allegheny County Hospital Development Authority
(Presbyterian University Health System),
6.250%, 11/01/23 11/02 at 100 Aaa 13,230,479
10,180,000 Philadelphia Water and Sewer, 7.500%, 8/01/10 (Pre-
refunded to 8/01/01) (DD) 8/01 at 102 AAA 11,908,360
SOUTH CAROLINA - 2.4%
5,000,000 Oconee County Pollution Control (Duke Power Company),
5.800%, 4/01/14 4/03 at 102 Aa2 4,982,900
25,540,000 Piedmont Municipal Power Agency, 8.000%, 1/01/23
(Pre-refunded to 1/01/96) 1/96 at 101 1/2 Aaa 26,099,837
TEXAS - 9.6%
10,305,000 Alliance Airport Authority, (American Airlines),
Alternative Minimum Tax, 7.500%, 12/01/29 12/00 at 102 Baa2 10,934,532
10,000,000 Brazos River Authority (Houston Light and Power
Company), 8.250%, 5/01/19 5/98 at 102 A3 11,001,300
5,000,000 Brownsville Utilities System, 8.000%, 9/01/06
(Pre-refunded to 9/01/96) 9/96 at 102 N/R 5,266,750
5,500,000 Dallas-Fort Worth International Airport (American
Airlines, Inc.), Alternative Minimum Tax,
7.500%, 11/01/25 11/00 at 102 Baa2 5,814,875
40,000,000 Harris County Health Facilities Development Corporation,
7.375%, 12/01/25 (Mandatory put 12/01/98) 11/95 at 101 Aa2 40,495,200
Harris County Toll Road, Senior Lien:
15,000,000 5.300%, 8/15/13 8/04 at 102 Aaa 14,448,450
3,385,000 8.700%, 8/15/17 (Pre-refunded to 8/15/97) 8/97 at 103 AAA 3,750,986
12,700,000 8.300%, 8/15/17 (Pre-refunded to 8/15/98) 8/98 at 103 AAA 14,418,437
14,500,000 San Antonio Electric and Gas Systems, 8.625%, 2/01/14
(Pre-refunded to 2/01/96) 2/96 at 101 1/2 Aaa 14,887,875
4,500,000 Tyler Health Facilities Development Corporation (East
Texas Hospital), 8.250%, 11/01/06 (Pre-refunded to
11/01/98) 11/98 at 102 AA 5,085,045
UTAH - 3.0%
Intermountain Power Agency:
7,500,000 7.875%, 7/01/14 7/96 at 102 Aa 7,833,975
20,000,000 7.200%, 7/01/19 7/97 at 102 Aa 21,116,200
3,000,000 8.625%, 7/01/21 (Pre-refunded to 7/01/97) 7/97 at 102 Aaa 3,279,450
6,550,000 8.625%, 7/01/21 7/97 at 102 Aa 7,087,428
VIRGINIA - 0.8%
Virginia Housing Development Authority, Alternative
Minimum Tax:
2,445,000 5.600%, 7/01/21 1/02 at 102 AA+ 2,248,715
7,605,000 5.650%, 1/01/27 1/02 at 102 AA+ 6,971,732
1,000,000 8.375%, 1/01/28 1/99 at 102 AA+ 1,069,670
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
WASHINGTON - 10.7%
$ 5,000,000 Washington Health Care Facilities Authority (Virginia
Mason Medical Center), 8.000%, 7/01/15 7/97 at 102 Aaa $ 5,381,700
Washington Public Power Supply System, Nuclear
Project No. 1:
4,060,000 7.500%, 7/01/15 (Pre-refunded to 7/01/99) 7/99 at 102 Aaa 4,577,325
2,640,000 7.500%, 7/01/15 7/99 at 102 Aa 2,883,355
4,300,000 7.250%, 7/01/15 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 4,857,925
13,650,000 5.600%, 7/01/15 7/03 at 102 Aaa 13,338,780
4,695,000 15.000%, 7/01/17 (Pre-refunded to 7/01/96) 7/96 at 103 Aaa 5,173,890
10,900,000 5.700%, 7/01/17 7/03 at 102 Aaa 10,666,958
Washington Public Power Supply System, Nuclear
Project No. 2:
7,500,000 6.000%, 7/01/12 7/01 at 100 Aa 7,536,750
14,440,000 5.750%, 7/01/12 7/03 at 102 Aa 13,965,646
6,770,000 5.625%, 7/01/12 7/03 at 102 Aa 6,514,568
Washington Public Power Supply System, Nuclear
Project No. 3:
13,500,000 7.250%, 7/01/15 (Pre-refunded to 1/01/00) 1/00 at 102 Aaa 15,251,625
21,200,000 5.375%, 7/01/15 7/03 at 102 Aa 19,691,831
17,050,000 Seattle Metropolitan Municipality Sewer System,
5.500%, 1/01/33 1/03 at 102 Aaa 16,384,709
6,360,000 Snohomish County Public Utility District No. 1,
5.500%, 1/01/14 1/03 at 100 Aaa 6,171,234
7,000,000 Spokane Solid Waste System, Alternative Minimum Tax,
7.750%, 1/01/11 1/99 at 102 Aaa 7,738,290
WEST VIRGINIA - 1.2%
15,000,000 West Virginia Housing Development Fund,
7.050%, 11/01/24 5/02 at 102 Aa1 15,924,150
PUERTO RICO - 0.4%
5,250,000 Puerto Rico Electric Power Authority, 5.500%, 7/01/25 7/05 at 100 A- 5,038,529
$1,216,158,502 Total Investments - (cost $1,208,295,464) - 96.2% 1,263,977,160
==============
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 0.3%
$ 2,500,000 Maricopa County Pollution Control Corporation (Arizona
Public Service Company Palo Verde Project), Variable
Rate Demand Bonds, 3.850%, 5/01/29t A-1 2,500,000
1,000,000 North Carolina Medical Care Commission Hospital Pooled
Financing (Duke University Hospital), Variable Rate
Demand Bonds, 3.950%, 10/01/20t VMIG-1 1,000,000
$ 3,500,000 Total Temporary Investments - 0.3% 3,500,000
==============
Other Assets Less Liabilities - 3.5% 46,195,608
Net Assets - 100% $1,313,672,768
==============
<PAGE>
<CAPTION>
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 65 $ 621,879,783 49%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 29 301,425,288 24
PORTFOLIO OF A+ A1 8 148,862,770 12
INVESTMENTS A, A- A, A2, A3 12 75,093,921 6
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 10 85,277,207 7
TEMPORARY Non-rated Non-rated 4 31,438,191 2
INVESTMENTS):
TOTAL 128 $1,263,977,160 100%
<FN>
* 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.
N/R - Investment is not rated.
Con. Rating is conditional. Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings by projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
t The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed
is that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
(DD) Security purchased on a delayed delivery basis (note 1).
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
NUVEEN PREMIUM INCOME MUNICIPAL FUND 2, INC. (NPM)
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
ALASKA - 0.6%
$ 3,500,000 Anchorage Parking Authority (5th Avenue Garage Project),
6.750%, 12/01/08 12/02 at 102 Baa1 $ 3,675,280
1,460,000 Valdez Home Mortgage, 7.900%, 2/01/10 8/02 at 102 A1 1,603,036
ARIZONA - 7.2%
Mohave County Industrial Development Authority
(Medical Environments Inc. and Phoenix Baptist Hospital):
5,705,000 6.250%, 7/01/03 No Opt. Call Baa 6,222,272
3,000,000 6.750%, 7/01/08 (Pre-refunded to 7/01/03) 7/03 at 102 Baa 3,408,840
20,090,000 Navajo County Pollution Control Corporation (Arizona
Public Service Company), 5.875%, 8/15/28 8/03 at 102 Baa1 19,096,148
Phoenix Civic Improvement Corporation Wastewater
System:
9,000,000 6.125%, 7/01/14 (Pre-refunded to 7/01/03) 7/03 at 102 AAA 10,023,210
14,980,000 4.750%, 7/01/23 7/04 at 102 A1 12,870,367
6,510,000 Pima County Industrial Development Authority (Tucson
Electric), 7.250%, 7/15/10 1/02 at 103 Aaa 7,290,354
6,875,000 Salt River Project Agricultural Improvement and Power
District Electric System, 4.750%, 1/01/17 1/04 at 100 Aa 6,081,213
CALIFORNIA - 15.0%
California Public Works Board (California State University):
15,480,000 6.625%, 10/01/10 10/02 at 102 A 16,286,818
10,500,000 6.700%, 10/01/17 10/02 at 102 A 11,064,165
7,150,000 6.375%, 10/01/19 10/04 at 102 A 7,296,003
17,500,000 California State Public Works Board (California State
Prison-Monterey County), 6.875%, 11/01/14 11/04 at 102 A 18,962,300
30,000,000 Foothill/Eastern Transportation Corridor Agency,
0.000%, 1/01/21 No Opt. Call BBB- 5,414,700
5,000,000 Loma Linda (Loma Linda University Medical Center),
6.500%, 12/01/18 12/03 at 102 BBB 4,871,550
12,980,000 Los Angeles Community College District, Certificates of
Participation, 6.000%, 8/15/20 2/02 at 102 Aaa 13,096,560
3,815,000 Los Angeles Community Redevelopment Agency
(Crenshaw Redevelopment Project), 7.000%, 9/01/14 9/02 at 102 Baa 3,945,092
7,000,000 Los Angeles State Building Authority (California
Department of General Services), 5.625%, 5/01/11 No Opt. Call A 6,907,530
5,000,000 Los Angeles County Public Works Finance Authority
(Los Angeles County Regional Park and Open Space),
6.125%, 10/01/10 10/04 at 102 Aa 5,199,500
10,000,000 Los Angeles County Transportation Commission,
6.750%, 7/01/19 (Pre-refunded to 7/01/02) 7/02 at 102 Aaa 11,456,400
2,035,000 Parlier Redevelopment Agency, Tax Allocation,
6.750%, 8/01/22 8/02 at 102 BBB 2,063,429
San Francisco City and County Redevelopment Agency:
2,390,000 6.750%, 7/01/15 7/04 at 102 Aaa 2,587,271
6,865,000 6.750%, 7/01/25 7/04 at 102 Aaa 7,397,518
5,605,000 San Joaquin County, Certificates of Participation,
6.600%, 4/01/19 4/04 at 102 A 5,682,517
Santa Clara County, Certificates of Participation (American
Baptist Homes of the West):
6,000,000 6.125%, 3/01/11 3/02 at 102 A 6,089,220
7,760,000 6.125%, 3/01/18 3/02 at 102 A 7,731,133
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
COLORADO - 8.4%
$ 9,970,000 Colorado Health Facilities Authority (PSL Healthcare
System), 6.250%, 2/15/21 2/01 at 102 Aaa $ 10,673,882
2,920,000 Colorado Housing Finance Authority Single Family
Mortgage, Alternative Minimum Tax, 8.125%, 12/01/24 12/04 at 105 Aa 3,279,686
Colorado Housing Finance Authority:
6,310,000 6.850%, 8/01/24 8/02 at 102 A 6,535,583
2,490,000 6.875%, 8/01/30 8/02 at 102 A 2,578,096
City and County of Denver, Airport System, Alternative
Minimum Tax:
18,245,000 6.750%, 11/15/13 11/02 at 102 Baa 18,546,225
15,270,000 7.750%, 11/15/21 11/01 at 102 Baa 16,824,333
7,080,000 7.250%, 11/15/23 11/02 at 102 Baa 7,525,403
7,240,000 8.000%, 11/15/25 11/01 at 100 Baa 8,082,446
2,510,000 7.500%, 11/15/25 11/97 at 102 Baa 2,621,971
CONNECTICUT - 0.7%
6,300,000 Connecticut Health and Educational Facilities Authority
(University of Hartford), 6.750%, 7/01/12 7/02 at 102 Baa 6,400,296
FLORIDA - 1.7%
1,750,000 Alachua County Health Facilities Authority and Bradford
County Health Facilities Authority (Santa Fe Healthcare),
7.600%, 11/15/13 10/00 at 102 Baa1 1,881,093
12,500,000 Tampa (The Florida Aquarium Project), 7.750%, 5/01/27 5/02 at 102 N/R 13,175,250
GEORGIA - 2.2%
Georgia Housing and Finance Authority, Single Family
Mortgage, Alternative Minimum Tax:
5,720,000 6.650%, 12/01/20 9/04 at 102 AA+ 5,856,765
5,735,000 6.700%, 12/01/25 9/04 at 102 AA+ 5,894,376
7,000,000 Burke County Development Authority, Pollution Control
(Oglethorpe Power Corporation), 8.000%, 1/01/15 1/03 at 103 Aaa 8,382,080
ILLINOIS - 11.3%
3,000,000 Illinois Health Facilities Authority (Lutheran General
Health System), 6.000%, 4/01/18 No Opt. Call A+ 2,906,490
7,150,000 Illinois Health Facilities Authority (Illinois Masonic
Medical Center), 5.500%, 10/01/19 10/03 at 102 A 6,431,354
11,510,000 Illinois Toll Highway Authority, Toll Highway Priority,
6.375%, 1/01/15 1/03 at 102 A1 11,797,520
15,000,000 Central Lake County Joint Action Water Agency,
General Obligation, 7.350%, 2/01/19 (Pre-refunded
to 8/01/99) 8/99 at 100 Aaa 16,611,300
Chicago General Obligation:
17,000,000 6.250%, 1/01/12 1/02 at 102 Aaa 17,596,530
5,000,000 5.625%, 1/01/23 1/03 at 102 Aaa 4,910,800
8,650,000 Chicago Gas Supply (People's Gas Light and Coke
Company), Alternative Minimum Tax,
5.750%, 12/01/23 12/03 at 102 Aa3 8,233,849
8,270,000 Chicago, FHA-Insured (Lakeview Towers Project),
6.650%, 12/01/33 6/02 at 102 AAA 8,553,165
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 20,900,000 Chicago Public Building Commission (Board of
Education), 5.750%, 12/01/18 12/03 at 102 Aaa $ 20,648,991
2,850,000 East St. Louis, FHA Insured (Dawson Manor),
6.500%, 7/01/24 7/03 at 102 Aaa 2,955,194
1,970,000 Wheeling Single Family Mortgage, 6.850%, 11/01/09 11/02 at 102 Aaa 2,147,339
INDIANA - 6.1%
5,200,000 Indiana Bond Bank, 6.250%, 2/01/09 2/03 at 102 A 5,558,956
2,875,000 Indiana Bond Bank State Revolving Fund,
6.750%, 2/01/17 2/05 at 102 A 3,124,090
5,250,000 Indiana Transportation Finance Authority (Aviation
Technology Center), 6.500%, 3/01/18 3/03 at 102 A 5,425,508
8,000,000 East Chicago Elementary School Building Corporation,
7.000%, 1/15/16 1/03 at 102 A 8,841,040
13,630,000 Fort Wayne Hospital Authority (Parkview Memorial
Hospital), 6.400%, 11/15/22 11/02 at 102 A1 13,844,264
10,675,000 Highland School Building Corporation, 6.750%, 1/15/20
(Pre-refunded to 1/15/02) 1/02 at 102 AAA 12,105,343
5,905,000 Muncie School Building Corporation, 6.625%, 7/15/14
(Pre-refunded to 7/15/01) 7/01 at 102 A 6,630,902
KANSAS - 0.7%
3,000,000 Johnson County, Single Family Mortgage,
7.100%, 5/01/12 5/04 at 103 A 3,280,140
2,600,000 Sedgwick and Shawnee Counties, Single Family Mortgage,
Alternative Minimum Tax, 7.900%, 5/01/24 No Opt. Call Aaa 2,979,834
LOUISIANA - 5.3%
Louisiana Public Facilities Authority (Pendleton Memorial
Methodist Hospital):
5,500,000 6.750%, 6/01/10 6/02 at 102 Baa1 5,627,710
9,130,000 6.750%, 6/01/22 6/02 at 102 Baa1 9,118,131
12,000,000 Louisiana Public Facilities Authority (General Health),
6.000%, 11/01/22 11/02 at 102 Aaa 12,053,760
12,750,000 East Baton Rouge Mortgage Finance Authority, Single
Family Mortgage (GNMA/FNMA), Alternative
Minimum Tax, 6.350%, 10/01/28 10/05 at 102 Aaa 12,662,025
3,000,000 Mississippi River Bridge Authority, 6.750%, 11/01/12 11/02 at 102 A 3,268,380
5,000,000 New Orleans Home Mortgage Authority, Single Family
Mortgage (GNMA/FNMA), Alternative Minimum
Tax, 6.300%, 6/01/28 6/05 at 102 Aaa 4,985,900
MAINE - 0.9%
7,925,000 Maine State Housing Authority, Alternative Minimum
Tax, 6.400%, 11/15/24 8/02 at 102 AA- 7,971,837
MARYLAND - 0.5%
4,000,000 Maryland Community Development Administration,
Multi-Family Housing, 6.625%, 5/15/23 5/03 at 102 Aa 4,147,120
MASSACHUSETTS - 2.0%
Massachusetts Water Resources Authority:
6,900,000 5.250%, 12/01/20 12/04 at 102 Aaa 6,518,637
8,000,000 5.000%, 3/01/22 3/03 at 100 A 7,096,480
5,000,000 Boston City Hospital, 5.750%, 2/15/23 8/00 at 102 Aa 4,806,750
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
MICHIGAN - 2.7%
Michigan Housing Development Authority, Rental
Housing:
$ 9,200,000 6.600%, 4/01/12 10/02 at 102 A+ $ 9,524,944
6,750,000 6.650%, 4/01/23 10/02 at 102 A+ 6,931,980
8,000,000 Michigan Hospital Finance Authority (Oakwood
Hospital), 5.625%, 11/01/18 11/03 at 102 Aaa 7,838,320
MINNESOTA - 1.5%
3,560,000 Minneapolis/St. Paul Housing and Redevelopment
Authority (Group Health Plan Project),
6.900%, 10/15/22 12/02 at 102 A 3,791,863
4,000,000 Washington County Housing and Redevelopment
Authority, 7.200%, 1/01/22 1/03 at 102 BBB 4,196,240
5,170,000 Washington County Housing and Redevelopment
Authority (South Washington County Schools Project),
7.400%, 12/01/14 12/02 at 100 Baa1 5,482,992
MISSISSIPPI - 1.3%
Mississippi Hospital Equipment and Facilities Authority
(Wesley Health Systems):
4,000,000 6.050%, 4/01/12 10/02 at 102 AAA 4,056,120
8,000,000 6.100%, 4/01/22 10/02 at 102 AAA 8,067,840
MISSOURI - 1.9%
5,500,000 St. Louis County Industrial Development Authority
(Kiel Center Multipurpose Arena), Alternative
Minimum Tax, 7.625%, 12/01/09 12/02 at 102 N/R 5,776,705
11,000,000 St. Louis Municipal Finance Corporation (Cervantes
Center and NFL Stadium), 6.000%, 7/15/13 7/03 at 102 Aa3 11,075,240
NEVADA - 1.1%
10,000,000 Clark County (Las Vegas-McCarran International Airport),
Passenger Facility, 6.000%, 7/01/22 7/02 at 102 Aaa 10,069,500
NEW JERSEY - 0.8%
7,425,000 New Jersey Housing and Mortgage Finance Agency,
6.700%, 11/01/28 11/02 at 102 A+ 7,709,229
NEW YORK - 6.8%
16,200,000 New York State Energy Research and Development
Authority, Electric Facilities (Consolidated Edison
Company of new York), Alternative Minimum Tax,
6.375%, 12/01/27 12/01 at 101 Aaa 16,735,410
New York City General Obligation:
10,750,000 6.600%, 2/01/03 No Opt. Call Baa1 11,388,765
7,695,000 6.600%, 8/01/03 No Opt. Call Baa1 8,177,552
10,000,000 6.375%, 8/01/08 8/02 at 101 1/2 Baa1 10,213,700
15,000,000 6.500%, 8/01/11 8/02 at 101 1/2 Baa1 15,426,000
NORTH CAROLINA - 1.1%
Pitt County (Pitt County Memorial Hospital):
5,000,000 5.500%, 12/01/15 12/05 at 102 Aa 4,916,250
5,000,000 5.250%, 12/01/21 12/05 at 102 Aa 4,702,600
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
NORTH DAKOTA - 0.5%
$ 4,280,000 Mercer County Pollution Control (Basin Electric Power
Co-op), 7.000%, 1/01/19 1/99 at 103 A2 $ 4,561,624
OKLAHOMA - 0.8%
1,590,000 Tulsa County Industrial Authority, Recreational Facilities,
6.600%, 9/01/08 9/02 at 102 A- 1,689,215
4,990,000 Tulsa County Public Facilities Authority, Recreational
Facilities, 6.600%, 11/01/08 11/02 at 102 A- 5,300,976
OREGON - 2.4%
Oregon General Obligation:
13,350,000 6.375%, 8/01/24 8/02 at 102 Aa 14,099,069
7,500,000 6.000%, 4/01/27 10/05 at 102 Aa 7,585,500
PENNSYLVANIA - 0.6%
5,950,000 Beaver County Industrial Development Authority,
5.450%, 9/15/33 9/03 at 102 Aaa 5,644,765
SOUTH CAROLINA - 0.8%
4,900,000 South Carolina Public Service Authority, 5.500%, 7/01/21 1/03 at 102 Aaa 4,745,846
2,135,000 Lexington County School District No. 4, Certificates of
Participation, 7.000%, 7/01/12 7/04 at 102 Baa 2,283,810
SOUTH DAKOTA - 1.3%
10,370,000 South Dakota Building Authority, 6.700%, 9/01/17 9/02 at 102 Aaa 11,810,186
TEXAS - 3.2%
10,925,000 Texas Veterans Housing, General Obligation, Alternative
Minimum Tax, 6.800%, 12/01/23 12/03 at 102 Aa 11,269,793
6,000,000 texas Veterans Land Board, General Obligation,
6.500%, 12/01/21 12/01 at 102 Aa 6,332,880
2,415,000 Baytown Housing Finance Corporation, Single Family
Mortgage, 8.500%, 9/01/11 9/02 at 103 A1 2,678,838
3,500,000 Harris County Toll Road, Unlimited Tax and Subordinate
Lien, 6.500%, 8/15/15 8/02 at 102 AA+ 3,742,235
1,595,000 Hidalgo County Housing Finance Corporation, Single
Family Mortgage (GNMA/FNMA), Alternative
Minimum Tax, 7.000%, 10/01/27 4/04 at 102 Aaa 1,625,560
3,485,000 Port Arthur Housing Finance Corporation, Single Family
Mortgage, 8.700%, 3/01/12 9/02 at 103 A 3,842,910
UTAH - 1.5%
4,055,000 Utah Housing Finance Agency, 6.450%, 7/01/14 7/04 at 102 Aa 4,232,567
6,000,000 Salt Lake City Redevelopment Agency (Central Business
District), 5.800%, 3/01/15 3/02 at 102 A 5,880,000
3,000,000 Weber County Municipal Building Authority,
7.500%, 12/15/19 12/04 at 102 AA 3,428,370
VERMONT - 0.9%
8,000,000 Vermont Housing Finance Agency, 6.400%, 11/01/25 5/02 at 102 A1 8,103,600
WASHINGTON - 2.0%
15,000,000 Washington General Obligation, 5.800%, 7/01/20 7/05 at 100 Aa 15,121,200
3,000,000 Washington Public Power Supply System, Nuclear
Project No. 3, 6.000%, 7/01/18 7/99 at 100 Aaa 3,001,170
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
WEST VIRGINIA - 0.8%
$ 7,000,000 Harrison County Commission, Solid Waste (Potomac
Edison Company), Alternative Minimum Tax,
6.250%, 5/01/23 5/03 at 102 Aaa $ 7,209,580
WISCONSIN - 2.2%
18,500,000 Wisconsin Housing and Economic Development
Authority, Alternative Minimum Tax, 7.100%, 9/01/15 1/05 at 102 Aa 19,656,434
PUERTO RICO - 1.1%
10,875,000 Puerto Rico Electric Power Authority, 5.500%, 7/01/25 7/05 at 100 A- 10,436,954
$885,545,000 Total Investments - (cost $844,448,482) - 97.9% 887,783,582
============
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 0.6%
$ 5,500,000 Chicago O'Hare International Airport (American
============
Airlines), Variable Rate Demand Bonds,
4.000%, 12/01/17t P-1 5,500,000
Other Assets Less Liabilities - 1.5% 13,263,429
Net Assets - 100% $906,547,011
============
<CAPTION>
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 32 $276,440,390 31%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 21 157,633,234 18
PORTFOLIO OF A+ A1 10 77,970,268 9
INVESTMENTS A, A- A, A2, A3 26 174,293,757 20
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 24 182,493,978 20
TEMPORARY Non-rated Non-rated 2 18,951,955 2
INVESTMENTS):
TOTAL 115 $887,783,582 100%
<FN>
* 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.
N/R - Investment is not rated.
t The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed
is that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC. (NPT)
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
ALABAMA - 3.0%
$ 7,500,000 Alabama General Obligation, 5.900%, 3/01/99 No Opt. Call Aa $ 7,874,400
8,000,000 Alabama Higher Education Loan Corporation,
Student Loan, Alternative Minimum Tax,
5.850%, 9/01/04 No Opt. Call Aaa 8,264,880
11,000,000 DCH Health Care Authority, 5.750%, 6/01/23 12/02 at 102 A1 10,439,440
ARIZONA - 0.8%
6,700,000 Maricopa County School District No. 28, General
Obligation, 5.200%, 7/01/13 (Pre-refunded to 7/01/03) 7/03 at 100 Aaa 6,956,811
ARKANSAS - 0.4%
985,000 Arkansas Development Finance Authority, Single
Family Mortgage, 8.000%, 8/15/11 8/01 at 103 AA 1,078,102
697,508 Jacksonville Resident Housing Facilities Board,
Single Family Mortgage, 7.900%, 1/01/11 7/03 at 103 Aaa 776,327
1,115,970 Lonoke County Residential Housing Facilities Board,
7.900%, 4/01/11 4/05 at 103 Aaa 1,227,980
CALIFORNIA - 5.1%
3,105,000 California Educational Facilities Authority (Loyola
Marymount University), 5.750%, 10/01/24 4/04 at 102 A1 2,972,199
5,000,000 California Health Facilities Financing Authority
(Kaiser Permanente Medical Care Program),
6.500%, 12/01/20 12/00 at 102 Aa2 5,152,400
3,965,000 California Housing Finance Agency, Home Mortgage,
5.650%, 8/01/14 2/04 at 102 Aa 3,775,394
5,000,000 Culver City Redevelopment Finance Authority, Tax
Allocation, 4.600%, 11/01/20 11/03 at 102 Aaa 4,216,150
4,780,000 Foothill/Eastern Transportation Corridor Agency,
0.000%, 1/01/14 No Opt. Call BBB- 1,401,209
500,000 Los Angeles Community Redevelopment Agency,
Multi-Family Housing, Alternative Minimum Tax,
5.750%, 12/01/13 6/03 at 102 A 467,470
3,900,000 Los Angeles Community Redevelopment Agency,
Alternative Minimum Tax, 5.900%, 12/01/26 12/95 at 100 A 3,491,787
3,135,000 Los Angeles Department of Water and Power,
9.000%, 5/15/00 No Opt. Call Aa 3,716,731
4,500,000 Los Angeles County Transportation Commission,
6.750%, 7/01/19 (Pre-refunded to 7/01/02) 7/02 at 102 Aaa 5,155,380
3,000,000 Mountain View Shoreline Regional Park Community,
Tax Allocation, 5.750%, 8/01/18 8/02 at 102 A 2,810,220
2,500,000 Northern California Transmission Agency,
6.500%, 5/01/16 5/02 at 102 Aaa 2,667,075
4,000,000 Riverside County, Single Family Mortgage (GNMA),
Alternative Minimum Tax, 7.800%, 5/01/21 No Opt. Call Aaa 4,909,960
3,545,000 San Leandro Redevelopment Agency, Tax Allocation,
6.125%, 6/01/23 6/03 at 102 A- 3,521,426
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
COLORADO - 3.3%
City and County of Denver Airport System,
Alternative Minimum Tax:
$ 6,000,000 7.500%, 11/15/02 11/01 at 102 Baa $ 6,668,400
3,040,000 7.750%, 11/15/13 No Opt. Call Baa 3,574,766
4,145,000 7.750%, 11/15/21 11/01 at 102 Baa 4,566,920
5,240,000 6.750%, 11/15/22 11/02 at 102 Baa 5,294,444
1,200,000 8.750%, 11/15/23 11/01 at 102 Baa 1,406,892
4,100,000 8.500%, 11/15/23 11/00 at 102 Baa 4,672,852
1,305,000 8.000%, 11/15/25 11/00 at 102 Baa 1,455,388
1,000,000 7.000%, 11/15/25 11/01 at 100 Baa 1,016,890
CONNECTICUT - 1.7%
2,400,000 Connecticut Development Authority, Water Facilities,
6.650%, 12/15/20 12/03 at 102 Aaa 2,602,128
6,500,000 Connecticut Health and Educational Facilities Authority
(Yale-New Haven Hospital), 7.100%, 7/01/25 7/00 at 102 Aaa 7,174,570
4,590,000 Connecticut Housing Finance Authority,
7.550%, 11/15/08 11/00 at 102 Aa 4,889,130
DISTRICT OF COLUMBIA - 4.4%
District of Columbia, General Obligation:
3,890,000 5.500%, 6/01/06 No Opt. Call Aaa 3,942,787
9,500,000 6.000%, 6/01/07 No Opt. Call Aaa 9,943,935
5,000,000 6.000%, 6/01/09 6/03 at 102 Aaa 5,113,000
6,000,000 5.500%, 6/01/10 No Opt. Call Aaa 5,781,840
District of Columbia (Medlantic Health Care Group):
3,240,000 6.750%, 8/15/07 8/02 at 102 Baa1 3,284,518
4,000,000 5.750%, 8/15/14 8/03 at 102 Aaa 3,983,680
2,000,000 District of Columbia (American College of Obstetricians
and Gynecologists), 6.500%, 8/15/18 8/01 at 102 Aaa 2,087,160
4,500,000 District of Columbia (The Howard University),
6.750%, 10/01/12 10/02 at 102 AA- 4,645,260
FLORIDA - 0.7%
2,500,000 Florida Division of Bond Finance (Hillsborough
County Expressway), 5.500%, 10/01/08 4/96 at 102 Aa 2,541,200
3,530,000 Lee County Capital Refunding, 7.300%, 10/01/07 10/99 at 102 Aaa 3,943,822
GEORGIA - 2.6%
5,000,000 Georgia General Obligation, 6.700%, 8/01/09 No Opt. Call Aaa 5,764,450
Georgia Municipal Electric Authority:
2,480,000 8.250%, 1/01/11 No Opt. Call AA- 3,126,313
5,500,000 5.700%, 1/01/19 No Opt. Call Aaa 5,538,335
4,185,000 7.250%, 1/01/24 No Opt. Call Aaa 5,119,511
3,000,000 Burke County Development Authority, Pollution Control
(Oglethorpe Power Corporation), 7.500%, 1/01/03 No Opt. Call Aaa 3,379,080
HAWAII - 0.2%
1,500,000 Hawaii Department of Transportation, Airports System,
Alternative Minimum Tax, 7.300%, 7/01/20 7/00 at 102 Aaa 1,660,080
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
ILLINOIS - 16.8%
$ 6,500,000 Illinois Development Finance Authority, Pollution
Control (Commonwealth Edison Company),
5.300%, 1/15/04 No Opt. Call Baa2 $ 6,490,900
4,325,000 Illinois Development Finance Authority (Child Care
Facility), 7.400%, 9/01/04 9/02 at 102 N/R 4,500,465
2,240,000 Illinois Educational Facilities Authority (Chicago
College of Osteopathic Medicine), 8.750%, 7/01/05 No Opt. Call Aaa 2,643,222
Illinois Educational Facilities Authority (Loyola University):
6,190,000 7.125%, 7/01/21 (Pre-refunded to 7/01/01) 7/01 at 102 A+ 7,083,774
10,360,000 7.125%, 7/01/21 7/01 at 102 A1 11,223,817
Illinois Health Facilities Authority (Lutheran
General Health):
5,705,000 7.000%, 4/01/08 No Opt. Call A+ 6,272,705
4,075,000 7.000%, 4/01/14 No Opt. Call A+ 4,608,703
2,500,000 Illinois Health Facilities Authority (Delnor-Community
Hospital), 5.500%, 5/15/13 5/03 at 102 Aaa 2,423,400
3,500,000 Illinois Health Facilities Authority (Illinois Masonic
Medical Center), 5.500%, 10/01/19 10/03 at 102 A 3,148,215
2,000,000 Illinois Health Facilities Authority, 7.000%, 7/01/12 7/02 at 102 Baa1 2,037,400
5,000,000 Illinois Health Facilities Authority (Riverside Senior
Living Center Project), 7.500%, 11/01/20 11/00 at 102 Baa1 5,195,200
12,490,000 Illinois Health Facilities Authority (Hinsdale Hospital),
9.000%, 11/15/15 11/00 at 102 Baa1 14,383,859
8,190,000 Illinois Housing Development Authority, Multi-Family
Housing, 6.650%, 9/01/14 9/04 at 102 A1 8,398,763
3,410,000 Illinois Housing Development Authority (Skyline Towers),
6.875%, 11/01/17 11/02 at 102 A 3,540,774
4,155,000 Illinois Housing Development Authority, Elderly Housing
(Morningside North), 6.600%, 1/01/07 1/03 at 102 A 4,403,843
8,000,000 Illinois Sales Tax, 5.500%, 6/15/20 6/02 at 101 AAA 7,631,520
9,700,000 Chicago Tax Increment (Stockyards Industrial
Redevelopment), 9.250%, 1/01/12 No Opt. Call N/R 10,566,792
7,850,000 Cook County High School District No. 205 (Thornton
Township), General Obligation, 6.750%, 12/01/01 No Opt. Call Aaa 8,720,958
2,025,000 Long Creek Township Waterworks, 7.250%, 5/01/23 5/03 at 100 N/R 1,939,282
3,050,000 Regional Transportation Authority, General Obligation,
7.200%, 11/01/20 No Opt. Call Aaa 3,662,654
3,400,000 Vermilion County, Community Consolidated School
District No. 118 (Danville), 5.500%, 12/01/11 12/07 at 100 Aaa 3,369,400
14,375,000 Wheeling Multi-Family Housing (Arlington Club),
6.400%, 2/01/40 2/03 at 100 AAA 14,472,463
Wood River Township Hospital, General Obligation:
5,000,000 6.625%, 2/01/14 2/04 at 102 BBB 5,149,250
4,905,000 6.500%, 2/01/14 2/04 at 102 BBB 5,005,454
INDIANA - 3.4%
2,250,000 Indiana Bond Bank, 6.750%, 8/01/12 2/03 at 102 A 2,380,455
3,200,000 Indiana Health Facilities Financing Authority
(Methodist Hospitals), 6.750%, 9/15/09 9/02 at 102 A 3,380,992
2,100,000 Indianapolis Economic Development (The Meadows -
Section 8 Project), 6.000%, 7/01/23 7/03 at 103 A 1,933,050
2,000,000 Kokomo Hospital Authority (Saint Joseph Hospital and
Health Center), 6.250%, 8/15/05 No Opt. Call Baa 2,072,340
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
INDIANA (CONTINUED)
$ 3,615,000 Mooresville School Building Corporation, 6.200%, 7/15/15 1/04 at 101 A $ 3,697,241
5,900,000 Muncie School Building Corporation, 6.625%, 7/15/14
(Pre-refunded to 7/15/01) 7/01 at 102 A 6,625,287
9,500,000 Petersburg Pollution Control (Indianapolis Power and
Light Company), 6.100%, 1/01/16 1/03 at 102 Aa2 9,645,540
IOWA - 1.0%
3,810,000 Iowa Finance Authority (Trinity Hospital),
7.000%, 7/01/12 7/00 at 100 BBB+ 3,901,326
4,000,000 Iowa Student Loan Liquidity Corporation, Alternative
Minimum Tax, 5.950%, 12/01/10 12/02 at 102 Aaa 4,062,840
1,000,000 Davenport Home Ownership, 7.900%, 3/01/10 9/04 at 102 A 1,102,140
KANSAS - 0.6%
2,225,000 Johnson County Single Family Mortgage, 7.100%, 5/01/12 5/04 at 103 A 2,432,771
2,425,000 Labette County Single Family Mortgage, 8.400%, 12/01/11 6/03 at 103 A1 2,644,632
KENTUCKY - 0.1%
1,000,000 Dayton Elderly Housing Corporation, 6.000%, 9/01/24 9/03 at 102 AAA 979,760
LOUISIANA - 1.4%
2,180,000 Louisiana Health Education Authority, Tulane University
Medical Center, 7.875%, 7/01/09 No Opt. Call Aaa 2,459,062
3,500,000 Clover Dale Housing Corporation, 6.550%, 2/01/22 4/01 at 100 AA 3,554,740
6,000,000 New Orleans General Obligation, 6.500%, 10/01/02 No Opt. Call Aaa 6,662,940
MAINE - 1.0%
8,000,000 Maine Educational Loan Marketing Corporation,
Alternative Minimum Tax, 6.250%, 11/01/06 No Opt. Call A 8,442,960
MARYLAND - 1.8%
5,000,000 Maryland General Obligation, 4.600%, 7/15/06 7/03 at 101 Aaa 4,871,000
2,710,000 Maryland Health and Higher Educational Facilities
Authority (Francis Scott Key Medical Center),
5.625%, 7/01/25 7/03 at 102 Aa 2,558,972
2,000,000 Maryland Health and Higher Educational Facilities
Authority (Doctor's Community Hospital),
5.750%, 7/01/13 7/03 at 102 Baa 1,820,120
4,885,000 Maryland Transportation Authority (Baltimore/Washington
International Airport), Alternative Minimum Tax,
6.400%, 7/01/19 7/04 at 102 Aaa 5,147,031
1,000,000 Prince George's County (Dimensions Health Corporation),
5.375%, 7/01/14 7/04 at 102 A 909,410
MASSACHUSETTS - 1.1%
4,195,000 Massachusetts Health and Educational Facilities Authority
(Youville Hospital), 6.000%, 2/15/34 2/04 at 102 Aa 4,108,331
2,000,000 Massachusetts Housing Finance Agency, Housing Project,
6.300%, 10/01/13 4/03 at 102 A1 2,018,220
3,300,000 Massachusetts Industrial Finance Agency, Resource
Recovery (SEMASS Project), Alternative Minimum
Tax, 9.250%, 7/01/15 7/01 at 103 N/R 3,635,346
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
MICHIGAN - 4.1%
$ 2,000,000 Michigan State Hospital Finance Authority (Henry Ford
Health System), 5.750%, 9/01/17 9/02 at 102 Aa $ 1,958,440
2,000,000 Michigan State Hospital Finance Authority (The Detroit
Medical Center), 5.000%, 8/15/03 No Opt. Call A 1,998,580
3,750,000 Michigan Strategic Fund (Consumers Power),
5.800%, 6/15/10 6/03 at 102 Aaa 3,848,400
14,000,000 Michigan Strategic Fund (WMX Technologies),
Alternative Minimum Tax, 6.000%, 12/01/13 12/03 at 102 A1 14,062,160
5,000,000 Detroit Convention Facility (Cobo Hall), 5.250%, 9/30/12 9/03 at 102 A 4,545,300
6,000,000 Monroe County Pollution Control (Detroit Edison),
Alternative Minimum Tax, 6.550%, 9/01/24 9/03 at 103 Aaa 6,321,540
2,750,000 Royal Oak Hospital Finance Authority (William
Beaumont Hospital), 6.750%, 1/01/20 1/01 at 102 Aaa 2,931,885
MINNESOTA - 0.8%
4,000,000 Minneapolis Community Development Agency,
7.375%, 12/01/12 12/02 at 102 BBB+ 4,450,600
2,720,000 Minnetonka Multi-Family Housing (Brier Creek Project),
6.450%, 6/20/24 6/04 at 102 AAA 2,804,755
MISSISSIPPI - 1.3%
1,960,000 Mississippi Educational Facilities Authority
(Tougaloo College), 6.500%, 6/01/18 6/03 at 102 Baa 1,968,859
2,000,000 Mississippi Higher Education Assistance Corporation
Student Loan, Alternative Minimum Tax,
5.800%, 9/01/06 9/02 at 102 Aaa 2,056,160
3,000,000 Mississippi Home Corporation, Single Family Mortgage
(GNMA), Alternative Minimum Tax, 6.550%, 4/01/21 4/05 at 102 Aaa 3,065,100
2,295,000 Mississippi Housing Finance Corporation, Single Family
Mortgage (GNMA), Alternative Minimum Tax,
8.250%, 10/15/18 10/99 at 102 Aaa 2,457,853
1,695,000 Mississippi Regional Housing Authority No. 5
(FHA Insured ), 7.050%, 7/01/21 7/00 at 105 AAA 1,803,463
NEBRASKA - 3.7%
14,000,000 Nebraska Higher Education Loan Program, Alternative
Minimum Tax, 6.250%, 6/01/18 No Opt. Call Aa 14,109,060
1,535,000 Nebraska Investment Finance Authority, Single Family
Mortgage, Alternative Minimum Tax, 8.125%, 8/15/38 8/98 at 102 Aaa 1,629,203
9,000,000 Nebraska Public Power District, 5.000%, 1/01/17 7/03 at 102 Aaa 8,403,300
Omaha Airport Authority:
1,665,000 8.375%, 1/01/14 (Pre-refunded to 1/01/02) 1/02 at 102 A 2,020,228
5,075,000 8.375%, 1/01/14 1/02 at 102 A 6,014,383
NEVADA - 0.8%
1,740,000 Nevada Housing Division, Single Family Program,
6.200%, 10/01/15 4/04 at 102 Aa 1,757,156
4,500,000 Clark County School District, General Obligation,
7.000%, 6/01/10 No Opt. Call Aaa 5,217,570
NEW HAMPSHIRE - 0.5%
4,340,000 New Hampshire Housing Finance Authority, Alternative
Minimum Tax, 7.950%, 7/01/22 7/00 at 102 Aa 4,651,829
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
NEW MEXICO - 0.5%
$ 1,000,000 New Mexico Educational Assistance Foundation, Student
Loan, Alternative Minimum Tax, 6.850%, 12/01/05 12/02 at 101 A $ 1,047,610
3,195,000 New Mexico Mortgage Finance Authority, Single Family,
6.900%, 7/01/24 7/02 at 102 Aa 3,345,037
NEW YORK - 6.6%
10,500,000 New York State Medical Care Facilities Finance Agency,
Hospital and Nursing Home (FHA-Insured),
6.200%, 8/15/22 8/02 at 102 AAA 10,850,595
8,240,000 New York State Medical Care Facilities Finance Agency,
Hospital and Nursing Home (FHA-Insured)
(St. Vincent's Medical Center), 6.200%, 2/15/21 2/04 at 102 AAA 8,550,071
13,500,000 New York State Thruway Authority, 6.000%, 1/01/15 1/05 at 102 Aaa 13,824,270
3,000,000 New York State Urban Development Corporation,
Correctional Facilities, 5.250%, 1/01/14 No Opt. Call Aaa 2,862,930
New York City General Obligation:
4,400,000 9.500%, 8/01/02 8/01 at 101 1/2 Baa1 5,368,616
8,000,000 6.750%, 8/15/03 No Opt. Call Baa1 8,578,640
1,000,000 7.000%, 8/01/04 No Opt. Call Baa1 1,085,600
2,500,000 8.000%, 8/01/05 No Opt. Call Aaa 3,087,100
4,000,000 New York Housing Development Corporation, Multi-
Family Housing, 5.700%, 11/01/13 5/03 at 102 Aa 3,907,680
NORTH DAKOTA - 1.4%
Mercer County Pollution Control (Basin Electric Power
Cooperative):
1,080,000 7.700%, 1/01/19 (Pre-refunded to 1/01/96) 1/96 at 103 A2 1,119,074
8,410,000 7.000%, 1/01/19 1/99 at 103 A2 8,963,378
1,705,000 Minot Single Family Mortgage, 7.700%, 8/01/10 8/03 at 102 Aa 1,857,478
OHIO - 4.4%
3,960,000 Ohio Housing Finance Agency (GNMA), 6.300%, 9/01/17 3/05 at 102 AAA 4,099,115
16,070,000 Ohio Housing Finance Agency, Single Family Mortgage
(GNMA), Alternative Minimum Tax, 7.650%, 3/01/29 9/99 at 102 AAA 16,818,541
4,500,000 Akron Bath Copley Joint Township Hospital District
(Summa Health System), 6.250%, 11/15/07 11/02 at 102 A 4,744,260
2,000,000 Franklin County Multi-Family Housing (Hamilton
Creek Apartments), Alternative Minimum Tax,
5.550%, 7/01/24 1/05 at 103 Aa 1,809,280
6,600,000 Cincinnati Student Loan Funding Corporation,
Alternative Minimum Tax, 5.500%, 12/01/01 No Opt. Call A1 6,739,722
4,370,000 Toledo General Obligation Limited Tax,
5.750%, 12/01/09 12/04 at 102 Aaa 4,520,066
OKLAHOMA - 0.2%
2,000,000 Tulsa Municipal Airport Trust (AMR Corporation),
9.500%, 6/01/20 (Pre-refunded to 12/01/95) 12/95 at 102 Baa2 2,051,000
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
PENNSYLVANIA - 1.6%
$ 5,000,000 Harrisburg Authority Water System, 7.000%, 7/15/10
(Pre-refunded to 7/15/01) 7/01 at 100 Aaa $ 5,641,150
Philadelphia Water and Wastewater:
5,400,000 5.300%, 8/01/06 No Opt. Call Aaa 5,539,806
3,000,000 5.500%, 6/15/14 6/03 at 102 Aaa 2,893,170
RHODE ISLAND - 1.2%
5,500,000 Rhode Island Health and Educational Building
Corporation (Johnson & Wales University),
8.375%, 4/01/20 (Pre-refunded to 4/01/00) 4/00 at 102 AAA 6,464,480
3,950,000 Rhode Island Health and Educational Building Corporation
(Providence College), 5.600%, 11/01/22 11/03 at 102 Aaa 3,808,985
SOUTH CAROLINA - 0.7%
5,615,000 South Carolina Public Service Authority, 7.300%, 7/01/21 7/96 at 102 A1 5,811,469
SOUTH DAKOTA - 0.3%
2,075,000 South Dakota Student Loan Assistance Corporation,
Alternative Minimum Tax, 7.625%, 8/01/06 8/99 at 102 A 2,223,674
TENNESSEE - 0.3%
2,400,000 Tennessee Housing Development Agency, Alternative
Minimum Tax, 6.900%, 7/01/25 7/04 at 102 A1 2,497,104
TEXAS - 6.7%
4,891,379 Texas General Services Commission, 7.500%, 9/01/22 3/96 at 102 1/2 A 5,106,649
8,500,000 Texas Turnpike Authority, 7.250%, 1/01/10 (Pre-refunded
to 1/01/99) 1/99 at 102 Aaa 9,431,005
1,000,000 Alliance Airport Authority (AMR Corporation),
Alternative Minimum Tax, 7.500%, 12/01/29 12/00 at 102 Baa2 1,061,090
6,000,000 Dallas-Fort Worth International Airport (AMR
Corporation, Inc.), Alternative Minimum Tax,
7.500%, 11/01/25 11/00 at 102 Baa2 6,343,500
2,850,000 Dallas Waterworks and Sewer System, 5.000%, 4/01/09 4/03 at 100 Aa 2,738,109
Houston Airport System, Subordinate Lien, Alternative
Minimum Tax:
2,500,000 6.750%, 7/01/08 7/01 at 102 Aaa 2,701,525
2,500,000 6.750%, 7/01/21 7/01 at 102 Aaa 2,672,375
Houston Housing Finance Corporation, Single Family
Mortgage:
3,645,000 5.950%, 12/01/10 6/03 at 102 Aaa 3,708,678
2,668,608 8.450%, 12/01/11 11/05 at 103 Aaa 2,971,655
2,215,000 North Texas Higher Educational Authority, Student Loan,
Alternative Minimum Tax, 6.300%, 4/01/09 4/03 at 102 A 2,291,927
11,000,000 San Antonio Electric and Gas System, 5.000%, 2/01/17 2/02 at 101 Aa1 10,076,330
6,500,000 Travis County Health Facilities Development Corporation
(Daughters of Charity Health System), 6.000%, 11/15/22 11/03 at 102 Aa 6,248,125
2,500,000 University of Texas, 7.000%, 8/15/07 8/01 at 102 Aa1 2,813,550
VIRGINIA - 0.7%
2,000,000 Hampton Roads Sanitation District, 4.500%, 10/01/02 No Opt. Call Aa 1,994,640
1,000,000 Loudoun County Industrial Development Authority
(Loudoun Hospital), 6.000%, 6/01/05 No Opt. Call Aaa 1,071,420
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
VIRGINIA (CONTINUED)
$ 2,645,000 Suffolk Redevelopment Authority Multi-Family Housing
(Chase Heritage Project), 7.000%, 7/01/24 (Mandatory
put 7/01/04) 7/02 at 104 N/R $ 2,849,194
WASHINGTON - 11.1%
9,800,000 Washington General Obligation, 4.500%, 10/01/18 10/03 at 100 Aa 8,121,946
5,750,000 Washington Health Care Facilities Authority (Franciscan
Health System/St. Joseph Hospital and Health Care
of Tacoma), 5.625%, 1/01/13 1/03 at 102 Aaa 5,653,285
Washington Public Power Supply System, Nuclear
Project No. 1:
4,500,000 5.750%, 7/01/13 7/03 at 102 Aa 4,394,790
4,845,000 7.500%, 7/01/15 (Pre-refunded to 7/01/99) 7/99 at 102 Aaa 5,462,350
23,000,000 5.375%, 7/01/15 7/03 at 102 Aa 21,363,780
Washington Public Power Supply System, Nuclear
Project No. 2:
6,475,000 7.250%, 7/01/06 No Opt. Call Aa 7,379,558
3,580,000 7.625%, 7/01/10 (Pre-refunded to 1/01/01) 1/01 at 102 AAA 4,159,853
7,250,000 6.250%, 7/01/12 7/02 at 102 Aa 7,387,533
Washington Public Power Supply System, Nuclear
Project No. 3:
10,000,000 7.000%, 7/01/09 No Opt. Call Aa 11,060,800
2,380,000 5.500%, 7/01/17 1/00 at 100 Aa 2,210,711
3,850,000 Port of Seattle General Obligation, Alternative
Minimum Tax, 5.750%, 5/01/14 5/04 at 102 Aa1 3,774,887
5,000,000 Snohomish County Public Utility District No. 1,
5.500%, 1/01/14 1/03 at 100 Aaa 4,851,600
4,705,000 Tacoma Department of Public Utilities, Sewer System,
8.000%, 12/01/08 No Opt. Call Aaa 5,910,467
5,680,000 Vancouver Housing Authority (Fishers Mill Project),
6.000%, 3/01/23 3/03 at 100 Aa 5,552,653
WEST VIRGINIA - 0.5%
4,255,000 West Virginia Housing Development, Alternative
Minimum Tax, 7.950%, 5/01/17 11/00 at 102 Aa1 4,555,913
WISCONSIN - 0.3%
1,400,000 Wisconsin Health and Educational Facilities Authority
(Wheaton Franciscan Services), 5.750%, 8/15/22 8/03 at 102 Aaa 1,374,533
970,000 Wisconsin Housing and Economic Development Authority,
Alternative Minimum Tax, 7.000%, 5/01/10 5/02 at 102 A1 1,038,520
PUERTO RICO - 0.8%
3,000,000 Puerto Rico Commonwealth, General Obligation,
5.750%, 7/01/24 7/05 at 101 1/2 Aaa 3,008,579
4,000,000 Puerto Rico Highway and Transportation Authority,
5.500%, 7/01/19 7/03 at 101 1/2 A 3,823,919
$825,863,465 Total Investments - (cost $829,955,455) - 97.9% 855,323,185
===========
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 0.3%
$ 2,900,000 Massachusetts Dedicated Income Tax, Variable Rate
============
Demand Bonds, 3.700%, 12/01/97t VMIG-1 $ 2,900,000
Other Assets Less Liabilities - 1.8% 16,113,697
Net Assets - 100% $874,336,882
============
<CAPTION>
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 72 $349,792,024 41%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 36 189,735,798 22
PORTFOLIO OF A+ A1 14 85,811,228 10
INVESTMENTS A, A- A, A2, A3 28 96,187,023 11
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 27 110,306,033 13
TEMPORARY Non-rated Non-rated 5 23,491,079 3
INVESTMENTS):
TOTAL 182 $855,323,185 100%
<FN>
* 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.
N/R - Investment is not rated.
t The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed
is that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS
<CAPTION>
NPI NPM NPT
<S> <C> <C> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $1,263,977,160 $887,783,582 $855,323,185
Temporary investments in short-term municipal securities,
at amortized cost (note 1) 3,500,000 5,500,000 2,900,000
Cash 255,449 13,700 91,286
Receivables:
Interest 28,714,954 17,134,827 17,273,899
Investments sold 35,780,885 220,846 2,356,811
Other assets 487,637 22,111 134,301
-------------- ----------- -----------
Total assets 1,332,716,085 910,675,066 878,079,482
-------------- ----------- -----------
Liabilities
Payable for investments purchased 12,059,635 -- --
Accrued expenses:
Management fees (note 6) 688,797 479,477 463,305
Other 352,525 215,199 372,923
Preferred share dividends payable 520,598 317,448 131,396
Common share dividends payable 5,421,762 3,115,931 2,774,976
-------------- ----------- ------------
Total liabilities 19,043,317 4,128,055 3,742,600
-------------- ----------- ------------
Net assets (note 7) $1,313,672,768 $906,547,011 $874,336,882
============== ============ ============
Preferred shares, at liquidation value $ 350,000,000 $300,000,000 $308,400,000
============== ============ ============
Preferred shares outstanding 14,000 12,000 12,336
============== ============ ============
Common shares outstanding 63,785,431 40,731,119 40,808,465
============== ============ ============
Net asset value per Common share outstanding (net assets less
Preferred shares at liquidation value, divided by Common
shares outstanding) $ 15.11 $ 14.89 $ 13.87
============== ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
Year ended October 31, 1995
<CAPTION>
NPI NPM NPT
<S> <C> <C> <C>
Investment Income
Tax-exempt interest income (note 1) $ 88,586,216 $ 55,384,214 $ 51,666,258
------------ ------------ ------------
Expenses:
Management fees (note 6) 7,947,123 5,436,315 5,252,314
Preferred shares--remarketing/auction fees 816,660 625,000 700,838
Preferred shares--dividend disbursing agent fees 75,000 65,000 101,712
Shareholders' servicing agent fees and expenses 270,754 87,702 143,217
Custodian's fees and expenses 136,916 107,874 106,983
Directors' fees and expenses (note 6) 15,714 2,994 2,712
Professional fees 44,085 24,167 72,923
Shareholders' report--printing and mailing expenses 289,613 188,623 146,263
Stock exchange listing fees 53,534 36,259 55,048
Investor relations expense 50,160 51,201 45,017
Other expenses 92,840 70,179 128,612
------------ ------------ ------------
Total expenses 9,792,399 6,695,314 6,755,639
------------ ------------ ------------
Net investment income 78,793,817 48,688,900 44,910,619
------------ ------------ ------------
Realized and Unrealized Gain (Loss)
from Investments
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (notes 1 and 3) 4,129,049 (2,588,592) (6,194,923)
Net change in unrealized appreciation or depreciation
of investments 59,644,723 79,286,649 80,130,266
------------ ------------ ------------
Net gain from investments 63,773,772 76,698,057 73,935,343
------------ ------------ ------------
Net increase in net assets from operations $142,567,589 $125,386,957 $118,845,962
============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
NPI NPM
Year ended Year ended Year ended Year ended
10/31/95 10/31/94 10/31/95 10/31/94
<S> <C> <C> <C> <C>
Operations
Net investment income $ 78,793,817 $ 77,349,172 $ 48,688,900 $ 48,011,778
Net realized gain (loss) from investment transactions,
net of taxes, if applicable 4,129,049 (976,603) (2,588,592) (2,198,448)
Net change in unrealized appreciation or depreciation
of investments 59,644,723 (114,951,624) 79,286,649 (101,035,737)
-------------- -------------- ------------ -------------
Net increase (decrease) in net assets from operations 142,567,589 (38,579,055) 125,386,957 (55,222,407)
-------------- -------------- ------------ -------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Common shareholders (67,357,422) (71,046,899) (37,391,184) (38,299,487)
Preferred shareholders (13,745,101) (9,558,578) (12,048,841) (9,744,389)
From accumulated net realized gains from investment
transactions:
Common shareholders -- (3,806,398) -- (1,307,469)
Preferred shareholders -- -- -- (407,759)
-------------- -------------- ------------ -------------
Decrease in net assets from distributions to shareholders (81,102,523) (84,411,875) (49,440,025) (49,759,104)
-------------- -------------- ------------ -------------
Capital Share Transactions (note 2)
Net proceeds from shares issued in acquisition of NPN, NPU
and NPB (note 1) -- -- -- --
Net proceeds from sale of Common shares -- 149,874,661 -- --
Net proceeds from Common shares issued to shareholders due to
reinvestment of distributions from net investment income
and from net realized gains from investment transactions -- 12,259,938 -- --
Cost of offering Preferred shares (note 1) -- -- -- --
-------------- -------------- ------------ -------------
Net increase in net assets derived from capital share
transactions -- 162,134,599 -- --
-------------- -------------- ------------ -------------
Net increase (decrease) in net assets 61,465,066 39,143,669 75,946,932 (104,981,511)
Net assets at beginning of year 1,252,207,702 1,213,064,033 830,600,079 935,581,590
-------------- -------------- ------------ -------------
Net assets at end of year $1,313,672,768 $1,252,207,702 $906,547,011 $ 830,600,079
============== ============== ============ =============
Balance of undistributed net investment income at end of year $ 847,999 $ 3,156,705 $ 2,163,480 $ 2,914,605
============== ============== ============ =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
NPT
Year ended Year ended
10/31/95 10/31/94
<S> <C> <C>
Operations
Net investment income $ 44,910,619 $ 24,071,031
Net realized gain (loss) from investment transactions,
net of taxes, if applicable (6,194,923) (12,137,697)
Net change in unrealized appreciation or depreciation
of investments 80,130,266 (60,635,386)
------------ ------------
Net increase (decrease) in net assets from operations 118,845,962 (48,702,052)
------------ ------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Common shareholders (34,279,102) (17,956,574)
Preferred shareholders (11,846,699) (4,533,640)
From accumulated net realized gains from investment
transactions:
Common shareholders -- (593,119)
Preferred shareholders -- (118,525)
------------ ------------
Decrease in net assets from distributions to shareholders (46,125,801) (23,201,858)
------------ ------------
Capital Share Transactions (note 2)
Net proceeds from shares issued in acquisition of NPN, NPU
and NPB (note 1) -- 442,239,803
Net proceeds from sale of Common shares -- --
Net proceeds from Common shares issued to shareholders due to
reinvestment of distributions from net investment income
and from net realized gains from investment transactions -- --
Cost of offering Preferred shares (note 1) -- (155,897)
------------ ------------
Net increase in net assets derived from capital share
transactions -- 442,083,906
------------ ------------
Net increase (decrease) in net assets 72,720,161 370,179,996
Net assets at beginning of year 801,616,721 431,436,725
------------ ------------
Net assets at end of year $874,336,882 $801,616,721
============ ============
Balance of undistributed net investment income at end of year $ 1,022,082 $ 2,237,240
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
At October 31, 1995, the National Funds (the "Funds") covered in this report
and their corresponding New York Stock Exchange symbols are Nuveen Premium
Income Municipal Fund, Inc. (NPI), Nuveen Premium Income Municipal Fund 2,
Inc. (NPM), and Nuveen Premium Income Municipal Fund 4, Inc. (NPT).
The Funds are registered under the Investment Company Act of 1940 as
closed-end, diversified management investment companies.
On September 8, 1994, NPT acquired all of the net assets of Nuveen Premium
Income Municipal Fund 3, Inc. (NPN), Nuveen Premium Income Municipal Fund 5
(NPU) and Nuveen Premium Income Municipal Fund 6 (NPB) pursuant to a plan of
reorganization approved by the shareholders of the four Funds on August 12,
1994. The acquisitions were accomplished by a tax-free exchange of 21,551,349
shares of NPT for 7,144,440 shares of NPN, 8,657,118 shares of NPU and
5,745,310 shares of NPB outstanding on September 8, 1994. NPN's, NPU's and
NPB's net assets at that date of $156,784,457, $174,334,455 and $111,120,891,
respectively, include unrealized appreciation (depreciation) of $2,639,443,
$(7,565,487) and $(7,222,010), respectively, as well as $55,000,000,
$66,400,000 and $42,000,000 of Preferred shares at liquidation value,
respectively, which was combined with that of NPT. The combined net assets of
NPT immediately after the acquisition were $836,395,975.
<PAGE>
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
Portfolio securities for which market quotations are readily available are
valued at the mean between the quoted bid and asked prices or the yield
equivalent. Portfolio securities for which market quotations are not readily
available are valued at fair value by consistent application of methods
determined in good faith by the Board of Directors. Temporary investments in
securities that have variable rate and demand features qualifying them as
short-term securities are traded and valued at amortized cost.
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 be settled a month or more after the transaction date. 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 their purchase
commitments. At October 31, 1995, NPI had outstanding purchase commitments of
$12,059,635. There were no such purchase commitments in either NPM or NPT.
Interest 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.
<PAGE>
Federal Income Taxes
The Funds intend to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies by distributing all of their net
investment income, in addition to any significant amounts of net realized
gains from investments, to shareholders. The Funds currently consider
significant net realized gains as amounts in excess of $.01 per Common 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 income dividends paid during the year ended October 31,
1995, have been designated Exempt Interest Dividends.
Dividends and Distributions to Shareholders
Net investment income is declared as a dividend monthly and payment is made or
reinvestment is credited to shareholder accounts after month-end. Net realized
gains from securities transactions are distributed to shareholders not less
frequently than annually only to the extent they exceed available capital loss
carryovers.
Distributions to shareholders of net inv of such distributions are determined
in accordance with federal income taxestment income and net realized capital
gains are recorded on the ex-dividend date. The amount and timing regulations,
which may differ from generally accepted accounting principles. Accordingly,
temporary over-distributions as a result of these differences may result and
will be classified as either distributions in excess of net investment income
or distributions in excess of net realized capital gains, if applicable.
<PAGE>
<TABLE>
Preferred Shares
The Board of Directors of NPI approved a 4 for 1 split of the Fund's Preferred
shares effective as of the close of business on August 9, 1995, which lowered
the stated value from $100,000 to $25,000 per share.
NPI has issued and outstanding 2,800 shares of each Series A, B, C, D and E
$25,000 stated value Preferred shares.The dividend rate on each Series may
change every 28 days as set by the Auction Agent, except for series E which
may change every seven days.
NPM and NPT have issued and outstanding $25,000 stated value Preferred
shares. Each Fund's Preferred shares are issued in more than one Series. The
dividend rate on each Series may change every seven days, as set by the
auction agent, except for NPM Series F which has lengthened its current
dividend period from seven days to three years. The number of shares
outstanding, by Series and in total, for each of the Funds is as follows:
<CAPTION>
NPM NPT
<S> <C> <C>
Number of shares:
Series M 2,000 2,200
Series T 3,000 2,000
Series T2 -- 1,328
Series W 2,000 1,680
Series Th 3,000 2,000
Series F 2,000 1,800
Series F2 -- 1,328
------ ------
Total 12,000 12,336
====== ======
Preferred share auction fees paid in connection with lengthening the dividend
period on NPM Series F has been capitalized and is being amortized over the
three year period.
Derivative Financial Instruments
In October 1994, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 119 Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments which
prescribes disclosure requirements for 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 year ended
October 31, 1995, other than occasional purchases of high quality synthetic
money market securities which were held temporarily pending the re-investment
in long-term portfolio securities.
</TABLE>
<PAGE>
<TABLE>
2. Fund Shares
Transactions in Common shares were as follows:
<CAPTION>
NPI NPM
Year ended Year ended Year ended Year ended
10/31/95 10/31/94 10/31/95 10/31/94
<S> <C> <C> <C> <C>
Common shares:
Shares issued in connection with rights offering* -- 10,062,425 -- --
Shares issued in the acquisition of NPN, NPU and NPB -- -- -- --
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from
net realized gains from investment transactions -- 776,204 -- --
----- ---------- ----- -----
Net increase -- 10,838,629 -- --
===== ========== ===== =====
<CAPTION>
NPT
Year ended Year ended
10/31/95 10/31/94
<S> <C> <C>
Common shares:
Shares issued in connection with rights offering* -- --
Shares issued in the acquisition of NPN, NPU and NPB -- 21,551,349
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from
net realized gains from investment transactions -- --
----- ----------
Net increase -- 21,551,349
===== ==========
<FN>
* NPI issued to shareholders of record on December 20, 1993, one
non-transferable right for each Common share held which entitled shareholders
to subscribe for additional shares at the rate of one share for each three
rights received. In January, 1994, based on subscriptions received, the Fund
issued 10,062,425 additional Common shares and recorded proceeds of
$149,874,661, net of $764,930 costs of the offering.
</TABLE>
<PAGE>
<TABLE>
3. Securities Transactions
Purchase and sales (including maturities) of investments in municipal
securities and temporary municipal investments during the year ended October
31, 1995, were as follows:
<CAPTION>
NPI NPM NPT
<S> <C> <C> <C>
PURCHASES
Investments in municipal securities $148,991,968 $234,432,447 $262,217,727
Temporary municipal investments 121,450,000 171,800,000 68,320,000
SALES AND MATURITIES
Investments in municipal securities 168,311,128 248,771,541 264,452,434
Temporary municipal investments 124,150,000 171,300,000 65,970,000
============ ============ ============
At October 31, 1995, 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, 1995, the Funds had unused capital loss carryovers available
for federal income tax purposes to be applied against future security gains,
if any. If not applied, the carryovers will expire as follows:
<CAPTION>
NPM NPT*
<S> <C> <C>
Expiration year:
2000 $ -- $ 12,020
2001 -- 7,278,447
2002 2,198,448 12,137,697
2003 2,588,592 5,211,676
---------- -----------
Total $4,787,040 $24,639,840
========== ===========
<FN>
* Due to the acquisition of NPN, NPU and NPB by NPT (see note 1), NPN, NPU and
NPB had net realized losses from investment transactions of $296,583,
$4,175,127 and $2,818,757, respectively, which were carried forward by NPT, as
permitted under applicable tax regulations.
</TABLE>
<PAGE>
<TABLE>
4. DISTRIBUTIONS TO COMMON SHAREHOLDERS
On November 1, 1995, the Funds declared Common share dividend distributions
from their ordinary income that were paid December 1, 1995, to shareholders of
record on November 15, 1995, as follows:
<CAPTION>
NPI NPM NPT
<S> <C> <C> <C>
Dividend per share $.0830 $.0765 $.0680
====== ====== ======
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of investments
at October 31, 1995, were as follows:
<CAPTION>
NPI NPM NPT
<S> <C> <C> <C>
Gross unrealized:
Appreciation $63,311,784 $44,210,365 $28,457,198
Depreciation (7,630,088) (875,265) (3,089,468)
----------- ----------- -----------
Net unrealized appreciation $55,681,696 $43,335,100 $25,367,730
=========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Funds' investment management agreements with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each
Fund pays to the Adviser an annual management fee, payable monthly, at the
rates set forth below, which are based upon the average daily net asset value
of each Fund:
<CAPTION>
Average daily net asset value Management fee
<S> <C>
For the first $125,000,000 .65 of 1%
For the next $125,000,000 .6375 of 1
For the next $250,000,000 .625 of 1
For the next $500,000,000 .6125 of 1
For the next $1,000,000,000 .6 of 1
For net assets over $2,000,000,000 .5875 of 1
The fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Funds pay no
compensation directly to those 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.
</TABLE>
<PAGE>
<TABLE>
7. COMPOSITION OF NET ASSETS
At October 31, 1995, net assets consisted of:
<CAPTION>
NPI NPM NPT
<S> <C> <C> <C>
Preferred shares, $25,000 stated value per share,
at liquidation value $ 350,000,000 $300,000,000 $308,400,000
Common shares, $.01 par value per share 637,854 407,311 408,085
Paid-in surplus 903,352,773 565,428,160 563,778,825
Balance of undistributed net investment income 847,999 2,163,480 1,022,082
Accumulated net realized gain (loss) from investment transactions 3,152,446 (4,787,040) (24,639,840)
Net unrealized appreciation or depreciation of investments 55,681,696 43,335,100 25,367,730
-------------- ----------- ------------
Net assets $1,313,672,768 $906,547,011 $874,336,882
============== ============ ============
Authorized shares:
Common 200,000,000 200,000,000 200,000,000
Preferred 1,000,000 1,000,000 1,000,000
============== ============ ============
</TABLE>
<PAGE>
<TABLE>
8. Investment Composition
Each Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At October 31, 1995, the revenue sources by
municipal purpose for these investments, expressed as a percent of total
investments, were as follows:
<CAPTION>
NPI NPM NPT
<S> <C> <C> <C>
Revenue Bonds:
Housing Facilities 17% 17% 18%
Health Care Facilities 9 11 13
Electric Utilities 11 3 12
Lease Rental Facilities 2 11 2
Pollution Control Facilities 10 9 8
Transportation 8 9 7
Educational Facilities 3 5 9
Water / Sewer Facilities 2 3 3
Other 6 8 6
General Obligation Bonds 5 17 14
Escrowed Bonds 27 7 8
---- ---- ----
100% 100% 100%
==== ==== ====
Certain long-term and intermediate-term investments owned by the Funds are
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, either of which ensure the timely payment of principal and
interest in the event of default (44% for NPI, 30% for NPM and 32% for NPT).
Such insurance or escrow, however, does not guarantee the market value of the
municipal securities or the value of any of the Funds' shares.
All of the temporary investments in short-term municipal securities have
credit enhancements (letters of credit, guarantees or insurance) issued by
third party domestic or foreign banks or other institutions.
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
</TABLE>
<PAGE>
9. Other Matters
In connection with the Rights Offering described in note 2, certain legal
actions have been filed by NPI shareholders in federal district court in
Chicago against (1) John Nuveen & Co. Incorporated, Nuveen Advisory Corp. and
the directors of the Fund, alleging that the defendants violated federal and
state laws and the Fund's articles of incorporation in connection with the
Rights Offering and (2) the Fund's former outside legal counsel and in-house
counsel to John Nuveen & Co. Incorporated alleging, among other things,
negligence and professional malpractice. Certain of the claims in these
actions are asserted on behalf of the Fund shareholders and certain are
asserted on behalf of the Fund. The defendants have denied the allegations and
are defending the suits which seek unspecified damages. The Fund's Board of
Directors created a committee, comprised of outside directors who are not
defendants in the suits, to investigate the claims being pursued in the Fund's
name and to explore all options. The committee has prepared a report of its
investigation which will remain confidential until the court rules on certain
motions. While there can be no assurance as to the outcome of these suits,
based on their current status, fund management believes that they will not
have a material adverse effect on the Fund.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS
FOLLOWS:
<CAPTION>
Operating performance Dividends from net
investment income
Net
realized and
Net asset unrealized
value Net gain (loss)
beginning investment from To Common To Preferred
of period income investmentsttt shareholders shareholderst
NPI
<S> <C> <C> <C> <C> <C>
Year ended 10/31,
1995 $14.140 $1.235 $ 1.006 $(1.056) $(.215)
1994 16.300 1.256 (2.016)** (1.172) (.156)
1993 15.790 1.431 .612 (1.364) (.169)
5 mos. ended
10/31/92 15.760 .602 .023 (.516) (.079)
Year ended 5/31,
1992 15.180 1.492 .492 (1.135) (.269)
1991 14.600 1.504 .532 (1.080) (.376)
1990 14.720 1.508 (.115) (1.080) (.433)
7/18/88 to
5/31/89 14.050 1.101 .741 (.747) (.268)
<CAPTION>
NPM
<S> <C> <C> <C> <C> <C>
Year ended 10/31,
1995 13.030 1.196 1.878 (.918) (.296)
1994 15.600 1.179 (2.528) (.940) (.239)
1993 13.570 1.143 2.182 (.907) (.250)
7/23/92 to
10/31/92 14.050 .162 (.545) (.076) --
<CAPTION>
NPT
<S> <C> <C> <C> <C> <C>
Year ended 10/31,
1995 12.090 1.100 1.810 (.840) (.290)
1994 14.870 1.069 (2.770) (.835) (.201)
2/19/93 to
10/31/93 14.050 .510 .972 (.416) (.073)
<PAGE>
<CAPTION>
Distributions from capital gains
Organization Per
and offering Common
costs and share
Preferred share Net asset market
To Common To Preferred underwriting value end value end
shareholders shareholderst discounts of period of period
NPI
<S> <C> <C> <C> <C> <C>
Year ended 10/31,
1995 $ -- $ -- $ -- $15.110 $14.375
1994 (.072) -- -- 14.140 13.250
1993 -- -- -- 16.300 17.750
5 mos. ended
10/31/92 -- -- -- 15.790 15.875
Year ended 5/31,
1992 -- -- -- 15.760 16.250
1991 -- -- -- 15.180 15.375
1990 -- -- -- 14.600 15.000
7/18/88 to
5/31/89 -- -- (.157) 14.720 14.875
<CAPTION>
NPM
<S> <C> <C> <C> <C> <C>
Year ended 10/31,
1995 -- -- -- 14.890 13.125
1994 (.032) (.010) -- 13.030 11.375
1993 -- -- (.138) 15.600 14.875
7/23/92 to
10/31/92 -- -- (.021) 13.570 13.375
<CAPTION>
NPT
<S> <C> <C> <C> <C> <C>
Year ended 10/31,
1995 -- -- -- 13.870 12.125
1994 (.031) (.005) (.007) 12.090 10.750
2/19/93 to
10/31/93 -- -- (.173) 14.870 14.250
<PAGE>
<CAPTION>
Ratios/Supplemental data
Ratio
Total of net
investment Total Ratio of investment
return return Net assets expenses to income Portfolio
on market on net asset end of period average net to average turnover
value*** value*** (in thousands) assetstt net assetstt rate
NPI
<S> <C> <C> <C> <C> <C> <C>
Year ended 10/31,
1995 16.88% 14.84% $1,313,673 .76% 6.13% 12%
1994 (19.13) (5.88) 1,252,208 .77 6.08 15
1993 20.96 12.33 1,213,064 .79 6.28 11
5 mos. ended
10/31/92 .73 3.46 1,173,329 .78* 6.33* 2
Year ended 5/31,
1992 13.32 11.72 1,167,042 .66 6.71 2
1991 10.14 11.88 1,127,103 .65 6.97 1
1990 8.39 6.74 1,090,365 .65 6.98 4
7/18/88 to
5/31/89 4.38 10.44 1,089,152 .62* 6.92* 7
<CAPTION>
NPM
<S> <C> <C> <C> <C> <C> <C>
Year ended 10/31,
1995 24.22 22.06 906,547 .77 5.60 27
1994 (17.76) (10.64) 830,600 .76 5.41 26
1993 18.47 22.31 935,582 .73 5.19 20
7/23/92 to
10/31/92 (10.38) (2.89) 552,570 .73* 4.77* 12
<CAPTION>
NPT
<S> <C> <C> <C> <C> <C> <C>
Year ended 10/31,
1995 21.32 22.41 874,337 .80 5.35 32
1994 (19.12) (13.29) 801,617 .88 5.15 47
2/19/93 to
10/31/93 (2.13) 8.94 431,437 .82* 4.04* 10
<FN>
* Annualized.
** Includes ($.187) effect of the Fund's Rights Offering of shares at a price
below NAV and costs of the offering.
*** Total Investment 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.
t The amounts shown are based on Common share equivalents.
tt Ratios do not reflect the effect of dividend payments to Preferred
shareholders.
ttt Net of Taxes, if applicable.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Nuveen Premium Income Municipal Fund, Inc.
Nuveen Premium Income Municipal Fund 2, Inc.
Nuveen Premium Income Municipal Fund 4, Inc.
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Premium Income Municipal Fund, Inc.,
Nuveen Premium Income Municipal Fund 2, Inc. and Nuveen Premium Income
Municipal Fund 4, Inc. as of October 31, 1995, and the related statements of
operations and changes in net assets and the financial highlights for the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of October 31, 1995, 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 Premium Income Municipal Fund, Inc., Nuveen Premium Income Municipal
Fund 2, Inc. and Nuveen Premium Income Municipal Fund 4, Inc. at October 31,
1995, and the results of their operations, changes in their net assets and
their financial highlights for the periods indicated therein in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
December 15, 1995
<PAGE>
Build your wealth automatically
Photographic image of Customer Service Rep at Nuveen.
Managing your portfolio takes skill, experience, and informed judgment, but
our efforts to help you build your wealth don't stop there. At Nuveen, we
offer a number of convenient ways to build your tax-free portfolio and earn
the tax-free income you need to achieve your financial goals.
Nuveen Exchange-traded fund 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 set aside money regularly and
automatically, and watch your investment grow through the power of tax-free
compounding. Income or capital gains taxes may be payable on dividends or
distributions that are reinvested. You'll also 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. All reinvestments are invested in full and fractional shares and
are kept in non-certificated form by the Plan Agent, Chase Manhattan Bank.
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.
The shares you acquire by reinvesting will either be purchased on the open
market or be 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 be invested within 30 days of 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.
<PAGE>
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 also can 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 investment adviser or call us
toll-free at 1.800.257.8787.
Photographic image of Customer Service Rep at Nuveen.
"When it comes to financial planning, your investment adviser knows your
situation best. And when we can give you the account information you need, our
motto is simple: We're here to help."
Photographic image of Customer Service Rep at Nuveen.
"At Nuveen, we make reinvesting easy. A phone call is all it takes to set up
your reinvestment account."
<PAGE>
Useful information
Photographic image of Customer Service Rep at Nuveen.
"When questions come up about your investment, we're happy to provide the
up-to-date information you and your adviser need."
Nuveen Shareholder Services:
1.800.257.8787
Call Monday through Friday, 9 a.m. to 6 p.m., EST for information on your
Nuveen Fund's current account balance, yield, dividend, net asset value,
closing price, and general information.
Dividend Reinvestment:
1.800.257.8787
Monday through Friday, 9 a.m. to 6 p.m., EST
Taking Stock Newsletter:
1.800.257.8787
Call Monday through Friday, 9 a.m. to 6 p.m., EST if you're not currently
getting our quarterly shareholder newsletter and would like to do so. We will
be happy to add your name to our mailing list.
Photographic image of woman seated and man standing behind her representing
Nuveen investors.
Many conservative investors are comfortable with Nuveen's emphasis on long
term value. That's why they depend on Nuveen for the tax-free income they need
to reach their goals.
<PAGE>
Your investment partner
Photographic image of John Nuveen, Sr., founder of Nuveen.
For nearly 100 years, Nuveen has earned its reputation as a tax-free income
specialist by focusing on municipal bonds.
Since 1898, John Nuveen & Co. Incorporated has worked to bring together the
various participants in the municipal bond industry and build strong
partnerships that benefit all concerned. Investors, financial advisers,
municipal officials, investment bankers--Nuveen believes that forging
relationships with these groups based on trust and value is the key to
successful investing.
As the oldest and largest municipal bond specialist in the United States,
Nuveen's investment bankers work with issuers to understand and meet their
needs in structuring and selling their bond issues.
Nuveen also works closely with financial advisers around the country,
including brokerage firms, banks, insurance companies, and independent
financial planners, to bring the benefits of tax-free investing to you. These
advisers are experts at identifying your needs and recommending the best
solutions for your situation. Together we make a powerful team, helping you
create a successful investment plan that meets your needs today and in the
future.
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
ETF5-DEC 95
