-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B3CUoceh6p2B1gORPbh+iFuJZYVieZ7rmiDbxnE/P8p4O6uldb/v7R4UHKdIOLLG EutFKDvpXf3hURP83s/rPw== 0000891804-99-002093.txt : 19991018 0000891804-99-002093.hdr.sgml : 19991018 ACCESSION NUMBER: 0000891804-99-002093 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19991004 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NUVEEN ARIZONA PREMIUM INCOME MUNICIPAL FUND INC CENTRAL INDEX KEY: 0000892992 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MN FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07278 FILM NUMBER: 99722413 BUSINESS ADDRESS: STREET 1: 333 W WACKER DR CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3129178200 N-30D 1 NUVEEN ARIZONA PREM INCOME MUNI FUND INC(NAZ) NUVEEN Exchange-Traded Funds July 31, 1999 Annual Report Dependable, tax-free income to help you keep more of what you earn. NAZ Arizona NUM NMP Michigan NUO Ohio NTX Texas Photo of: People looking into canyon. Highlights As of July 31, 1999 Contents 1 Dear Shareholder 4 NAZ's Portfolio Manager's Comments & Performance Overview 7 NUM and NMP'sPortfolio Manager's Comments & Performance Overview 11 NUO's Portfolio Manager's Comments & Performance Overview 14 NTX'sPortfolio Manager's Comments & Performance Overview 17 Report of Independent Auditors 18 Portfolio of Investments 39 Statement of Net Assets 40 Statement of Operations 41 Statement of Changes in Net Assets 43 Notes to Financial Statements 49 Financial Highlights 52 Build Your Wealth Automatically 53 Fund Information Credit Quality Performance Highlights Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ) o Outperformed the one-year total return of its Lipper Peer Group* o Has provided steady or increasing dividends for 69 consecutive months Pie Chart: AAA/U.S. Guaranteed 66% AA 19% A 7% BBB/NR 8% Nuveen Michigan Quality Income Municipal Fund, Inc. (NUM) o Outperformed the one-year total return of its Lipper Peer Group* o Ranked first out of five funds in its Lipper Peer Group for one-year total return performance Pie Chart: AAA/U.S. Guaranteed 80% AA 12% A 4% BBB/NR 4% Nuveen Michigan Premium Income Municipal Fund, Inc. (NMP) o Outperformed the one-year total return of its Lipper Peer Group* o Has provided steady or increasing dividends for 51 consecutive months Pie Chart: AAA/U.S. Guaranteed 61% AA 25% A 7% BBB/NR 7% Nuveen Ohio Quality Income Municipal Fund, Inc. (NUO) o Outperformed the one-year total return of its Lipper Peer Group* and paralleled the performance of the Lehman Brothers Municipal Bond Index ** over the same period o HHHH Four-star Morningstar RatingTM*** Pie Chart: AAA/U.S. Guaranteed 70% AA 14% A 4% BBB/NR 12% Nuveen Texas Quality Income Municipal Fund (NTX) o Increased its dividend in May 1999 o Taxable-equivalent yield of 8.70%**** Pie Chart: AAA/U.S. Guaranteed 60% AA 13% A 12% BBB/NR 15% * The Lipper Peer Group return represents the average annualized return of the funds in the appropriate Lipper Municipal Debt category. The return assumes reinvestment of dividends and does not reflect any applicable sales charge. ** The Lehman Brothers Municipal Bond Index is an unleveraged index covering a broad range of investment grade municipal bonds. The return for the index does not reflect any initial or ongoing expenses. *** Morningstar proprietary ratings reflect historical risk-adjusted performance as of July 31, 1999. The ratings are subject to change every month. Past performance is no guarantee of future results. Morningstar ratings are calculated from the Fund's three-, five-, and 10-year average annual returns (if applicable) in excess of 90-day Treasury bill returns with appropriate fee adjustments, and a risk factor that reflects fund performance below 90-day T-bill returns. NUO received 3 stars for the three-year period and four stars for the five-year period, respectively. The top 10% of the funds in a broad asset class receive 5 stars, the next 22.5% receive 4 stars, and the next 35% receive 3 stars. The Fund was rated among 194 funds for the three-year period, 193 funds for the five-year period, and 30 funds for the 10-year period. **** For investors in the 31% federal income tax bracket. See your fund's performance overview in this report for more information. Photo of: Timothy R. Schwertfeger Chairman of the Board sidebar text: Wealth takes a lifetime to build. Once achieved, it should be preserved. Dear Shareholder I am pleased to report to you on the annual performance of your Nuveen Exchange-Traded Fund. Providing an attractive tax-free dividend is the Fund's main objective, and over the past year, your Fund has continued to achieve this goal, especially in comparison with taxable fixed-income investments. During the period covered by this report, we have seen some shifts in U.S. economic trends and the fixed-income environment in which your Nuveen Exchange-Traded Fund operates. I appreciate the opportunity to discuss these changes with you, as does the portfolio manager of your fund, who reviews fund performance later in this report. A Challenging Investment Environment Over the past 12 months, the U.S. economy continued to be characterized by robust growth, generally low interest rates, and unemployment levels that remained among the lowest in three decades. However, concerns about the persistent pace of the economy's expansion tested the new paradigm that holds that improvements in productivity enable us to have both economic growth and low inflation at the same time. With investors and the various markets watching and reacting to every announcement concerning economic statistics, volatility increased, especially in the equity markets, and the spectre of inflation seemed to lurk behind every report. In an effort to pre-empt this threat of inflation, the Federal Reserve moved to raise interest rates by a quarter-point at the end of June and again in late August. This brought the federal funds rate, which represents the amount banks charge one another on overnight loans, from 4.75% to 5.25%, reversing two of the three rate cuts made by the Fed in the fall of 1998. Despite the Fed's statement that it would return to a neutral bias concerning future interest rate action, comments by Fed Chairman Alan Greenspan about the need for closer attention to activity in the financial markets kept open the possibility of additional rate hikes. Municipal Bond Performance Over the past year, our exchange-traded municipal bond funds continued to offer attractive, stable income in a market that places a high premium on yield. At the end of July 1999, the ratio between long-term municipal yields and 30-year Treasury yields stood at 93%, compared with the historical average of 86% for the period 1986-1999. For investors, this meant that quality long-term municipal bonds offered yields comparable to those of long Treasury bonds - even before the tax advantages of municipals were taken into account. On an after-tax basis, municipal bonds continued to present an exceptionally attractive investment option relative to Treasuries. In the coming months, we expect to see a good supply of new municipal bonds, although total volume is expected to drop from the near-record levels of 1998. This is due to the dramatic decrease in refundings, as interest rates moved above last year's levels and removed much of the incentive for issuers to refund existing bonds. To date, municipal supply has declined by approximately 25% from the levels of a year ago. This, in turn, has enhanced the attractiveness of the municipal bonds that are brought to market, as demand especially from individual investors - remains strong. We anticipate that this demand will continue to strengthen as investors increasingly look at rebalancing their portfolios. With the outlook for tighter supply and continued demand in the months ahead, Nuveen's established market position as the leading sponsor of exchange-traded municipal bond funds ensures that we will have excellent access to the bond offerings that have the potential to add value for our shareholders. A Balanced Portfolio: Enhanced Growth with Reduced Risk Like most investors in the marketplace today, one of your goals for tax-free investing is probably to capture high after-tax total returns while moderating risk. Using the appropriate securities' indices and tax rates, Nuveen compared the hypothetical investment performance of a balanced portfolio consisting of equities and municipal bonds with that of a balanced portfolio composed of equities and taxable bonds. Our research showed that, over the past 20 years, the pairing of equities with municipal bonds had provided both superior after-tax total returns and lower levels of risk than the combination of equities and taxable bonds. Incorporating even a 20% allocation of municipal bonds into an all-equity portfolio cut risk substantially, with only a small reduction in after-tax total return. Purchasing shares of a Nuveen Exchange-Traded Municipal Bond Fund provides an easy way to incorporate the benefits of municipal bonds into a balanced portfolio. Nuveen Funds: An Answer to Your Investment Needs In light of the recent shifts in the economic environment, your financial adviser can serve as a valuable resource in helping you determine if adjustments are needed in your current asset allocation plan. By investing in other Nuveen funds, you can bring balance to your portfolio and give yourself proper exposure to the different types of investments needed to enhance your potential for success. In addition, if you are satisfied with the performance of your Nuveen Exchange-Traded Fund, your adviser can set up a reinvestment plan designed to purchase additional shares of that fund. For more information on all of Nuveen's funds, contact your financial adviser for a prospectus containing all charges and expenses, or call Nuveen at (800) 621-7227. Please read the prospectus carefully before you invest or send money. Since 1898, Nuveen has been synonymous with investments that stand the test of time. As we look ahead to a new millennium, we are committed to maintaining that reputation and finding the best ways to serve your evolving investment needs. Thank you for your continued confidence. Sincerely, /s/Timothy R. Schwertfeger Timothy R. Schwertfeger Chairman of the Board September 15, 1999 sidebar text: "The solid track record of a proven investment manager plays an important role in taking advantage of the exceptional value currently available in the municipal markets." Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ) Portfolio Manager's Comments Portfolio manager Mike Davern reviews the Arizona municipal market, fund performance, and key strategies for the Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ). With 17 years of experience as an investment professional, including eight years with Nuveen, Mike has managed NAZ since July 1998. WHAT FACTORS CONTRIBUTED TO THE PERFORMANCE OF THE ARIZONA MUNICIPAL MARKET DURING THE PAST 12 MONTHS? The Arizona economy continued to perform well, with most key indicators accelerating at a strong pace. With a job growth rate of 4.7% in 1998, Arizona can boast about having the highest employment growth in the nation. In July 1999, unemployment in the state was 4.4%, which was slightly higher than the national average of 4.3%. Population growth over the past 12 months - at 2.5% - also continued, although at a slightly slower pace than in previous years. The strong population growth of the past decade resulted in increased housing starts and rising retail sales. Continued growth, low business costs, and the state's favorable economic climate are helping Arizona diversify away from the state's historically dominant industries - agriculture, mining, and real estate - into the services and manufacturing sectors. As a result of the state's strong growth patterns, Arizona has an ongoing need for both infrastructure financing for housing, schools, hospitals, and other municipal projects and effective planning to maintain its current momentum. Like the national market, the Arizona municipal market saw supply decline over the past year as interest rates rose. During the first seven months of 1999, new state issuance fell 41% from 1998's January-July levels, compared with a 23% drop in the national supply. Over the past year, we saw a resurgence in the demand for Arizona municipal bond funds, however, as state residents continued to seek tax-free income even as municipal supply declined. Both the tighter supply scenario and the increased demand worked to support prices and help fund performance. HOW DID NAZ PERFORM IN THIS ENVIRONMENT? For the 12 months ended July 31, 1999, NAZ produced a total return on net asset value (NAV) of 1.92%, providing a taxable-equivalent total return(1) of 4.85% for share-holders in the combined 34.5% federal and state income tax bracket. While the Fund underperformed the Lehman Brothers Municipal Bond Index's(2) annual total return of 2.88%, it outpaced the average total return of 1.55% for its Lipper peer group(3). The underperformance of the Fund's total return on NAV relative to the Lehman index can be attributed to its fund duration(4). As of July 31, 1999, NAZ had a fund duration of 8.95, compared with 7.30 for the Lehman index. Duration measures a bond fund's price volatility, or reaction to interest rate movements. The longer the duration, the more sensitive the fund's NAV is to changes in interest rates. During a period of falling interest rates, longer duration enables a fund's NAV to participate more fully in market gains. However, when interest rates rise, longer duration can make the Fund's NAV more vulnerable to price declines. Between August 1, 1998, and July 31, 1999, the yield on the Bond Buyer Revenue Bond Index(5) rose from 5.36% to 5.65%. This meant that funds with longer fund durations, like NAZ, were more likely to underperform in the rising interest rate environment of the past year. Over the past year, active demand for NAZ - bolstered by the Fund's recent dividend increase and outstanding record of dividend stability - resulted in solid share price performance. At the same time, the prevailing interest rate environment, which was generally higher than that of July 1998, led to a decline in the Fund's NAV. As a result of these factors, NAZ saw its premium (share price above NAV) widen by more than 7.5% over the past 12 months. Total Return Market Yield Premium(6) on Share Price - -------------------------------------------------------------------------------- Taxable- 1-Year Ended Taxable- 7/31/99 Equivalent(1) 7/31/98 7/31/99 7/31/99 Equivalent(1) - -------------------------------------------------------------------------------- NAZ 4.98% 7.60% 6.53% 14.09% 8.67% 11.42% - -------------------------------------------------------------------------------- HOW WAS THE FUND'S DIVIDEND AFFECTED? During the past 12 months, good call protection helped support NAZ's dividend and shield the Fund's income from erosion. In addition, excellent dividend management strategies, including the prudent use of leverage, enabled us to increase NAZ's dividend effective February 1999. As of July 31, 1999, the Fund had provided shareholders with steady or increasing dividends for 69 consecutive months. As a leveraged fund, NAZ issues preferred shares that pay short-term interest rates to investors seeking short-term liquidity. The proceeds from the preferred shares are used to buy additional long-term bonds for the Fund's portfolio, which may increase volatility. When short-term interest rates remain below long-term rates, common shareholders can potentially earn extra income from the difference between the rate earned on the Fund's long-term portfolio and the short-term rate paid to preferred shareholders. WHAT KEY STRATEGIES WERE USED TO MANAGE NAZ DURING THE PAST 12 MONTHS? The market environment of the past 12 months enabled us to work on several goals for the Fund, including increasing the tax-exempt income earned by the Fund's portfolio; increasing call protection, which we were able to do at attractive prices; and taking advantage of opportunities to enhance the Fund's tax efficiency by trading bonds that offset capital gains. Another focus was lengthening the Fund's duration, which had shortened during the previous market rally. As mentioned earlier, NAZ's fund duration was 8.95 as of July 31, 1999, up from 8.29 in July 1998. This longer duration should help position the Fund to regain net asset value as the bond market recovers. Nuveen Research, which was instrumental in helping to identify the bonds that could accomplish these goals, also assisted in monitoring events in the municipal market and analyzing the effect of those events on national as well as individual state markets. Based on our research and in anticipation of current market conditions, we increased our exposure in the multifamily housing sector, which offered the potential for higher yields. Our position in this sector, which had been underweighted at 4% as of July 31, 1998, stood at 8% as of the end of July 1999. As interest rates went up and municipal bond prices dropped in recent months, this sector has performed well. Overall, the Fund continued to offer excellent credit quality. At the end of July 1999, NAZ had 85% of its portfolio invested in bonds rated AAA/U.S. guaranteed and AA. The Fund also had an 8% allocation in BBB and non-rated bonds, which have generally provided enhanced levels of yield. In the area of bond calls, NAZ currently offers excellent levels of call protection, with no calls scheduled prior to 2002. This should provide additional protection for the Fund's dividend over this period. WHAT IS NUVEEN'S OUTLOOK FOR NAZ? Our focus in the coming months will be on taking advantage of market conditions to purchase well-structured bonds that offer more aggressive yields at attractive prices. Our goals in making these purchases will continue to be increasing tax-free income, extending call protection, and enhancing tax efficiency by offsetting potential capital gains with capital losses. We will continue to watch all sectors of the market for opportunities and situations that offer higher yields. The ability to implement strategies like these demonstrates the value that can be added by an active bond manager such as Nuveen. As an experienced investment manager knowledgeable about the unique aspects of the Arizona municipal market, we are in the marketplace every day, monitoring market dynamics, looking for opportunities, and capitalizing on them to the benefit of our shareholders. 1 The taxable-equivalent yield/total return represents the yield/total return that must be earned on a taxable investment in order to equal the yield/total return of the Nuveen fund on an after-tax basis. The taxable-equivalent yield is based on the Fund's market yield and the combined federal and state income tax rate of 34.5%. The taxable-equivalent total return is based on the annualized total return and the 34.5% federal and state income tax rate. 2 NAZ is compared with the Lehman Brothers Municipal Bond Index, an unleveraged index comprising a broad range of investment-grade municipal bonds. The return for the Lehman index does not reflect any initial or ongoing expenses. 3 The Lipper Peer Group return represents the average annualized return of the 18 funds in the Lipper Other States Municipal Debt category. The return assumes reinvestment of dividends and does not reflect any applicable sales charges. 4 Fund duration, also known as leverage-adjusted duration, takes into account the leveraging process for the Fund and therefore differs from the duration of the actual portfolio of individual bonds that make up the Fund. Unless otherwise noted, references to duration in this commentary are intended to indicate fund duration. 5 The Bond Buyer Revenue Bond Index is an unmanaged index of long-term municipal revenue bonds. 6 A fund's premium represents the percentage difference between the fund's share price and its NAV. Nuveen Arizona Premium Income Municipal Fund, Inc. Performance Overview As of July 31, 1999 NAZ Portfolio Statistics Inception Date 11/92 - -------------------------------------------------- Share Price $17 - -------------------------------------------------- Net Asset Value $14.90 - -------------------------------------------------- Market Yield 4.98% - -------------------------------------------------- Taxable-Equivalent Yield (Federal Tax Rate)(1) 7.22% - -------------------------------------------------- Taxable-Equivalent Yield (Federal and State Tax Rate)(1) 7.60% - -------------------------------------------------- Fund Net Assets ($000) $94,775 - -------------------------------------------------- Average Effective Maturity (Years) 16.09 - -------------------------------------------------- Leverage-Adjusted Duration 8.95 - -------------------------------------------------- Annualized Total Return On Share Price On NAV - -------------------------------------------------- 1-Year 8.67% 1.92% - -------------------------------------------------- 5-Year 11.29% 7.59% - -------------------------------------------------- Since Inception 7.54% 6.50% - -------------------------------------------------- Taxable-Equivalent Total Return(2) On Share Price On NAV - -------------------------------------------------- 1-Year 11.42% 4.85% - -------------------------------------------------- 5-Year 14.33% 10.59% - -------------------------------------------------- Since Inception 10.45% 9.44% - -------------------------------------------------- Top Five Sectors (as a % of total investments) U.S. Guaranteed 25% - -------------------------------------------------- Healthcare 12% - -------------------------------------------------- Tax Obligation/Limited 12% - -------------------------------------------------- Utilities 11% - -------------------------------------------------- Housing/Multifamily 8% - -------------------------------------------------- 1 Taxable-equivalent yield represents the yield on a taxable investment necessary to equal the yield of the Nuveen fund on an after-tax basis. The federal only rate is based on the current market yield and a federal income tax rate of 31%. The rate shown for federal and state highlights the added value of owning shares that are also exempt from state income taxes. It is based on a combined federal and state income tax rate of 34.5%. 2 Taxable-equivalent total return is based on the annualized total return and a combined federal and state income tax rate of 34.5%. It represents the return on a taxable investment necessary to equal the return of the Nuveen fund on an after-tax basis. Bar Chart: 1998-1999 Monthly Tax-Free Dividends 8/98 0.069 9/98 0.069 10/98 0.069 11/98 0.069 12/98 0.069 1/99 0.069 2/99 0.0705 3/99 0.0705 4/99 0.0705 5/99 0.0705 6/99 0.0705 7/99 0.0705 Line Chart: Share Price Performance Weekly Closing Price Past performance is not predictive of future results. 8/7/98 16.313 16.438 16.625 16.563 16.625 16.375 16.563 16.5 16.625 16.563 16.75 16.75 16.69 16.81 16.94 17.06 16.81 16.88 17.06 17.13 16.69 16.25 16.31 16.31 16.75 16.56 16.69 16.5 16.69 16.81 16.75 17.06 17.31 17.25 17.56 17.69 17.44 17.31 17.13 17.19 17.19 16.88 17.25 17.06 17.06 17.13 16.94 16.94 7/31/99 17 Weekly Closing Price Past performance is not predictive of future results. Nuveen Michigan Exchange-Traded Funds (NUM) (NMP) Portfolio Manager's Comments Portfolio manager Mike Davern talks about the Michigan municipal market, recent fund performance, and the outlook for the Nuveen Michigan Quality Income Municipal Fund, Inc. (NUM) and the Nuveen Michigan Premium Income Municipal Fund, Inc. (NMP). Mike has 17 years of experience as an investment professional, including eight years with Nuveen, and has managed NUM and NMP since July 1998. WHAT FACTORS CONTRIBUTED TO THE PERFORMANCE OF THE MICHIGAN MUNICIPAL MARKET DURING THE PAST 12 MONTHS? The Michigan economy continues to expand, with a brisk job growth of 4.2% over the past 12 months, primarily in the services sector. Unemployment in the state was 3.4% as of July 1999, well below the national average of 4.3%. While improving auto sales have recently had a positive impact on the state's economy, Michigan continues to reduce its reliance on its traditional manufacturing base, including the auto sector. In recent years, state residents have seen personal income grow significantly. The strength of Michigan's economy is reflected in ratings of Aa1 by Moody's and AA+ by Standard & Poor's and Fitch. As interest rates rose over the past 12 months, the Michigan municipal market experienced a dramatic decline in issuance. A comparison between the first seven months of 1999 and the same period in 1998 showed that new state supply had fallen by 53%, more than twice the 23% drop in the national supply. Given the tighter supply, demand for in-state municipal bonds remained generally strong. HOW DID NUM AND NMP PERFORM IN THIS ENVIRONMENT? For the 12 months ended July 31, 1999, NUM and NMP produced total returns on net asset value (NAV) of 1.62% and 1.23%, respectively, providing taxable-equivalent total returns(1) of 4.67% and 4.06% for shareholders in the combined 34% federal and state income tax bracket. While both funds underperformed the Lehman Brothers Municipal Bond Index's(2) annual total return of 2.88%, they outpaced the average total return of 0.94% for the Lipper Michigan Municipal Debt category(3) by a wide margin, ranking as the top two funds in their Lipper peer group. The underperformance of the Funds' total returns on NAV relative to the Lehman index can be attributed to their fund durations(4). As of July 31, 1999, NUM and NMP had fund durations of 9.46 and 9.88, respectively, compared with 7.30 for the Lehman index. Duration measures a bond fund's price volatility, or reaction to interest rate movements. The longer the duration, the more sensitive the fund's NAV is to changes in interest rates. During a period of falling interest rates, longer duration enables a fund's NAV to participate more fully in market gains. However, when interest rates rise, longer duration can make the fund's NAV more vulnerable to price declines. Between August 1, 1998, and July 31, 1999, the yield on the Bond Buyer Revenue Bond Index(5) rose from 5.36% to 5.65%. This meant that funds with longer fund durations, like NUM and NMP, were more likely to underperform the market, as represented by the unleveraged Lehman index. Over the past year, active demand for NMP - bolstered by the Fund's recent dividend increase and outstanding record of dividend stability - resulted in solid share price performance. The demand for NUM, however, was impacted by a dividend cut in August 1998, and the Fund experienced a decline in share price. At the same time, the prevailing interest rate environment, which was generally higher than that of July 1998, led to a decline in the NAVs of both funds. As a result of these factors, NMP moved from trading at a discount (share price below NAV) to a premium, while NUM's premium (share price above NAV) widened by almost 1% over the past 12 months. Total Return Market Yield Premium/Discount(6) on Share Price - -------------------------------------------------------------------------------- Taxable- 1-Year Ended Taxable- 7/31/99 Equivalent(1) 7/31/98 7/31/99 7/31/99 Equivalent(1) - -------------------------------------------------------------------------------- NUM 5.50% 8.33% 8.82% 9.79% 2.18% 4.98% - -------------------------------------------------------------------------------- NMP 5.50% 8.33% -1.96% 2.61% 5.95% 8.84% - -------------------------------------------------------------------------------- HOW WERE THE FUNDS' DIVIDENDS AFFECTED? During the past 12 months, good call protection helped support the dividend of NMP and shield the income of this fund from erosion. In addition, excellent dividend management strategies, including the prudent use of leverage, enabled us to increase NMP's dividend effective February 1999. As of July 31, 1999, this fund had provided shareholders with steady or increasing dividends for 51 consecutive months. For NUM, however, the income-eroding effect of a small number of bond calls led to a dividend reduction in August 1998. Even with this single dividend adjustment, NUM continued to provide an attractive market yield. As leveraged funds, both NUM and NMP issue preferred shares that pay short-term interest rates to investors seeking short-term liquidity. The proceeds from the preferred shares are used to buy additional long-term bonds for the Funds' portfolios, which may increase volatility. When short-term interest rates remain below long-term rates, common shareholders can potentially earn extra income from the difference between the rate earned on the Fund's long-term portfolio and the short-term rate paid to preferred shareholders. Though leveraged funds carry higher risk than non-leveraged funds, they are compensated for this additional risk in the form of higher yields. In June, new MuniPreferred shares were issued for NUM due to the fact that the leverage ratio for the Fund had fallen below its Nuveen guideline of 35%. Nuveen re-leveraged the Fund both to restore the original leverage ratio of 35% and to provide the potential for increased incremental tax-free income for common shareholders. NMP was not affected because its leverage ratio remained in line with expectations. WHAT KEY STRATEGIES WERE USED TO MANAGE THE NUVEEN MICHIGAN FUNDS DURING THE PAST 12 MONTHS? The focus of our management strategies over the past year was on taking advantage of the present market environment to purchase well-structured bonds that could help us achieve our current goals for the Michigan funds: increasing tax-exempt income, increasing call protection at attractive prices, enhancing tax efficiency, and adding bonds with longer durations to counteract the effects of the previous market rally. As mentioned earlier, NUM's fund duration was 9.46 as of July 31, 1999, up from 7.10 in July 1998. For NMP, the July 31, 1999, duration was 9.88, compared with 8.19 12 months earlier. These longer durations should help position the Funds to regain net asset value as the bond market recovers. Overall, the Funds continued to offer excellent credit quality. At the end of July 1999, NUM and NMP had 80% and 61%, respectively, of their portfolios invested in bonds rated AAA/U.S. guaranteed. This represented an increase of 22% and 8%, respectively, over the July 1998 allocation of AAA/U.S. guaranteed bonds. The increase was due to two factors: First, the high number of prerefunded bonds (bonds backed by U.S. government securities) during 1998, which also helped the Funds' performance, and second, the greater availability of AAA bonds in the marketplace, with insured bonds making up the majority of new Michigan supply. The two funds also had allocations of 4% and 7%, respectively, in BBB and non-rated bonds, which generally provide enhanced levels of yield. As yield spreads (or the difference between higher credit quality securities and those of lower credit quality) widened in recent months, lower-rated securities became more attractive on a risk-adjusted basis. With interest rates at a higher level, and the widening differential among credit sectors, we took the opportunity to investigate lower-rated new issues, though they were scarce, as they became available in the market. Using the expertise of Nuveen Research, we were able to discover those bonds that offered adequate compensation for their risk levels. For example, in NUM, we purchased bonds issued by Michigan Memorial Healthcare for Owosso Hospital. These bonds, which are rated Baa1/BBB+ with a maturity date of 2021, offered an above-market 6% yield, thereby adding incremental income to the Fund as well as lengthening the Fund's duration and enhancing call protection. Another strategy was to move out of sectors with abundant supply, such as schools, and buy when prices were attractive in sectors where supply was scarce, which enhances the value of the bonds. We were able to purchase a number of such bonds for NUM, especially in the water and sewer sector. Both funds continue to hold substantial allocations of bonds issued by the Michigan State Hospital Finance Authority for the Detroit Medical Center, which were downgraded from A3/A- to Baa2/BBB in December 1998. The medical center, which encountered larger-than-expected operational losses in the process of merging and closing excess facilities, subsequently called in an outside healthcare consultant to help reverse the situation and stem losses. The downgrade of these bonds had an impact on the performance of the healthcare sector not only in Michigan, but across the country. However, in view of the cost-cutting measures put into place and the improvements in operational costs already experienced, we have maintained our position in the belief that these bonds still represent value for our shareholders and that any impact on the Funds, to this point, has been negligible. In addition, we continue to have confidence in the issuer's ability to resolve the situation and achieve a positive outcome. As of July 31, 1999, NUM held $4.5 million of these bonds (representing 1.4% of the fund's net assets), while NMP had a $7.7 million investment (4.4% of assets). In the area of bond calls, both NUM and NMP currently offer good levels of call protection. NUM has no bond calls scheduled prior to 2001, while less than 7% of NMP's portfolio is subject to calls before 2002. This should provide additional protection for the Funds' dividends over this period. As NUM and NMP, which were assembled in 1991 and 1992, respectively, approach the 10-year mark, they are also approaching the normal part of the bond market cycle when bond calls are more likely to occur. To minimize the effect of calls, we are already at work on strategies for managing through this period. Currently, we plan to hold high-yielding bonds for as long as possible to maximize income. We refer to these bonds as "museum pieces" based on their high yields and good quality, which place them at a premium in today's market. As these bonds approach their call dates, we will look at selling selected bonds and reinvesting the proceeds into bonds that have the potential to support the Funds' dividends and enhance portfolio structure. WHAT IS NUVEEN'S OUTLOOK FOR NUM AND NMP? Looking ahead, our focus in both funds will remain on taking advantage of attractive prices to purchase well-structured bonds offering attractive yields. These bonds will support the Funds' dividends while extending call protection and enhancing tax efficiency by offsetting potential capital gains with capital losses. From a sector perspective, we plan to watch all market sectors for opportunities where scarcity can be used to the Funds' advantage. Implementing these strategies demonstrates the value that can be added by an active bond manager such as Nuveen. As an experienced investment manager knowledgeable about the unique aspects of the Michigan municipal market, we are in the marketplace every day, monitoring market dynamics, looking for opportunities, and capitalizing on them to the benefit of shareholders. 1 The taxable-equivalent yield/total return represents the yield/total return that must be earned on a taxable investment in order to equal the yield/total return of the Nuveen fund on an after-tax basis. The taxable-equivalent yield is based on the Fund's market yield and the combined federal and state income tax rate of 34%. The taxable-equivalent total return is based on the annualized total return and the 34% federal and state income tax rate. 2 NUM and NMP are compared with the Lehman Brothers Bond Index, an unleveraged index comprising a broad range of investment-grade municipal bonds. The return for the Lehman index does not reflect any initial or ongoing expenses. 3 The Lipper Michigan Peer Group return represents the average annualized return of the five funds in the Lipper Michigan Municipal Debt category. The return assumes reinvestment of dividends and does not reflect any applicable sales charges. 4 Fund duration, also known as leverage-adjusted duration, takes into account the leveraging process for each fund and therefore differs from the duration of the actual portfolio of individual bonds that make up the Funds. Unless otherwise noted, references to duration in this commentary are intended to indicate fund duration. 5 The Bond Buyer Revenue Bond Index is an unmanaged index of long-term municipal revenue bonds. 6 A fund's premium or discount represents the percentage difference between the Fund's share price and its NAV. Nuveen Michigan Quality Income Municipal Fund, Inc. Performance Overview As of July 31, 1999 NUM Portfolio Statistics Inception Date 10/91 - -------------------------------------------------- Share Price $16 11/16 - -------------------------------------------------- Net Asset Value $15.20 - -------------------------------------------------- Market Yield 5.50% - -------------------------------------------------- Taxable-Equivalent Yield (Federal Tax Rate)(1) 7.97% - -------------------------------------------------- Taxable-Equivalent Yield (Federal and State Tax Rate)(1) 8.33% - -------------------------------------------------- Fund Net Assets ($000) $268,591 - -------------------------------------------------- Average Effective Maturity (Years) 16.58 - -------------------------------------------------- Leverage-Adjusted Duration 9.46 - -------------------------------------------------- Annualized Total Return On Share Price On NAV - -------------------------------------------------- 1-Year 2.18% 1.62% - -------------------------------------------------- 5-Year 8.42% 6.92% - -------------------------------------------------- Since Inception 7.78% 7.59% - -------------------------------------------------- Taxable-Equivalent Total Return(2) On Share Price On NAV - -------------------------------------------------- 1-Year 4.98% 4.67% - -------------------------------------------------- 5-Year 11.62% 10.20% - -------------------------------------------------- Since Inception 10.95% 10.86% - -------------------------------------------------- Top Five Sectors (as a % of total investments) U.S. Guaranteed 30% - -------------------------------------------------- Tax Obligation/General 18% - -------------------------------------------------- Utilities 15% - -------------------------------------------------- Healthcare 7% - -------------------------------------------------- Water and Sewer 7% - -------------------------------------------------- 1 Taxable-equivalent yield represents the yield on a taxable investment necessary to equal the yield of the Nuveen fund on an after-tax basis. The federal only rate is based on the current market yield and a federal income tax rate of 31%. The rate shown for federal and state highlights the added value of owning shares that are also exempt from state income taxes. It is based on a combined federal and state income tax rate of 34%. 2 Taxable-equivalent total return is based on the annualized total return and a combined federal and state income tax rate of 34%. It represents the return on a taxable investment necessary to equal the return of the Nuveen fund on an after-tax basis. 3 The Fund also paid shareholders capital gains distributions in December of $0.0611 per share. Bar Chart: 8/98 0.0765 9/98 0.0765 10/89 0.0765 11/98 0.0765 12/98 0.0765 1/99 0.0765 2/99 0.0765 3/99 0.0765 4/99 0.0765 5/99 0.0765 6/99 0.0765 7/99 0.0765 Line Chart: Share Price Performance 8/7/98 17.188 17 17.125 17 16.625 16.438 16.313 16.188 17 16.5 16.625 16.56 16.75 17.06 17.13 17.25 17.25 17.44 17.5 17.63 16.94 16.56 16.06 16.44 16.81 16.88 16.75 16.75 16.75 16.5 16.69 16.75 16.63 16.56 16.5 16.56 16.94 16.75 16.75 16.94 16.94 16.38 16.44 16.38 16.56 16.63 16.75 16.69 7/31/99 16.69 Weekly Closing Price Past performance is not predictive of future results. Nuveen Michigan Premium Income Municipal Fund, Inc. Performance Overview As of July 31, 1999 NMP Portfolio Statistics Inception Date 12/92 - -------------------------------------------------- Share Price $15 1/16 - -------------------------------------------------- Net Asset Value $14.68 - -------------------------------------------------- Market Yield 5.50% - -------------------------------------------------- Taxable-Equivalent Yield (Federal Tax Rate)(1) 7.97% - -------------------------------------------------- Taxable-Equivalent Yield (Federal and State Tax Rate)(1) 8.33% - -------------------------------------------------- Fund Net Assets ($000) $168,851 - -------------------------------------------------- Average Effective Maturity (Years) 15.55 - -------------------------------------------------- Leverage-Adjusted Duration 9.88 - -------------------------------------------------- Annualized Total Return On Share Price On NAV - -------------------------------------------------- 1-Year 5.95% 1.23% - -------------------------------------------------- 5-Year 10.11% 7.56% - -------------------------------------------------- Since Inception 5.95% 6.31% - -------------------------------------------------- Taxable-Equivalent Total Return(2) On Share Price On NAV - -------------------------------------------------- 1-Year 8.84% 4.06% - -------------------------------------------------- 5-Year 13.34% 10.52% - -------------------------------------------------- Since Inception 9.00% 9.19% - -------------------------------------------------- Top Five Sectors (as a % of total investments) Healthcare 20% - -------------------------------------------------- Utilities 19% - -------------------------------------------------- Tax Obligation/General 12% - -------------------------------------------------- Tax Obligation/Limited 12% - -------------------------------------------------- Housing/Multifamily 10% - -------------------------------------------------- 1 Taxable-equivalent yield represents the yield on a taxable investment necessary to equal the yield of the Nuveen fund on an after-tax basis. The federal only rate is based on the current market yield and a federal income tax rate of 31%. The rate shown for federal and state highlights the added value of owning shares that are also exempt from state income taxes. It is based on a combined federal and state income tax rate of 34%. 2 Taxable-equivalent total return is based on the annualized total return and a combined federal and state income tax rate of 34%. It represents the return on a taxable investment necessary to equal the return of the Nuveen fund on an after-tax basis. Bar Chart:: 1998-1999 Monthly Tax-Free Dividends 8/98 0.068 9/98 0.068 10/98 0.068 11/98 0.068 12/98 0.068 1/99 0.068 2/99 0.069 3/99 0.069 4/99 0.069 5/99 0.069 6/99 0.069 7/99 0.069 Line Chart: Share Price Performance 8/7/98 15.188 15.188 15.188 15 15 15.063 14.938 14.938 15.25 15.375 15.188 15.31 15.63 15.69 15.69 15.63 15.88 15.69 15.94 15.63 15.5 15.19 14.75 14.75 15.19 15.13 15.25 15.19 15.19 15.25 15 15.38 15.25 15.19 15.31 15.38 15.56 15.19 15.13 15.19 15.38 15.06 15.19 15 15.31 15.31 15.38 15.19 7/31/99 15.06 Weekly Closing Price Past performance is not predictive of future results. Nuveen Ohio Quality Income Municipal Fund, Inc. (NUO) Portfolio Manager's Comments Portfolio manager Tom Futrell reviews the Ohio municipal market, fund performance, and key strategies for the Nuveen Ohio Quality Income Municipal Fund, Inc. (NUO). A 16-year veteran of Nuveen, Tom has managed NUO since July 1998. WHAT FACTORS CONTRIBUTED TO THE PERFORMANCE OF THE OHIO MUNICIPAL MARKET DURING THE PAST 12 MONTHS? Although Ohio is still heavily reliant on manufacturing, especially in the auto and steel sectors, the state's economy continues to diversify, with job growth concentrated in construction, services, and technology, particularly in the northern part of the state. Employ-ment growth, however, lags the national rate, due to the state's tight labor markets and sluggish population growth, which ranks as the slowest in the Great Lakes region. As of July 1999, Ohio's unemployment rate was 4.6%, down from 4.8% in July 1998 and above the national average of 4.3%. Job growth forecasts indicate that the state will continue to trail the nation - although not significantly with the technology, healthcare, and retail sectors providing the greatest growth. The importance of industrial exports to the Ohio economy has increased the state's exposure to the global economy. While the improved outlook in Southeast Asia erased many of the concerns experienced during 1998's Asian financial crisis, analysts continue to watch the state's export activity closely. Recently, for example, steel exports experienced declines in the face of stiff competition abroad, and lower priced imports of steel continue to place pressure on U.S. prices. Like the national municipal market, the Ohio market experienced a decline in supply over the past year, although the state remains ninth in the nation in terms of total new issuance. A comparison between the 12 months ended July 1999 and the previous 12-month period showed that new state issuance fell 21%, mirroring the 23% drop in the national new-issue supply. Overall, demand for Ohio-issued municipal bonds remains strong, especially from individual investors. HOW DID NUO PERFORM IN THIS ENVIRONMENT? For the 12 months ended July 31, 1999, NUO produced a total return on net asset value (NAV) of 2.74%, providing a taxable-equivalent total return(1) of 6.16% for shareholders in the combined 36% federal and state income tax bracket. NUO's total return performance was slightly lower than the annual total return of 2.88% posted by the Lehman Brothers Municipal Bond Index(2). This slight underperformance can be attributed to the fact that NUO is state specific while the Lehman index focuses on bonds issued throughout the country. When compared to other funds, NUO outpaced the average total return of 1.55% for the Lipper Other States Municipal Debt category(3). For the year, NUO ranked first among the 18 funds in its Lipper peer group. In recognition of its strong risk-adjusted performance, the Fund was awarded four stars by Morningstar(4), which is an overall rating among 194 funds as of July 31, 1999. Over the past year, increasing concerns about the pace of U.S. economic growth and its implications for higher inflation and interest rates negatively impacted the demand for NUO. This, in turn, hampered the Fund's share price performance. At the same time, the prevailing interest rate environment, which was generally higher than that of July 1998, led to a decline in the Fund's NAV. As a result of these factors, NUO saw its premium (share price above NAV) widen by more than 3% over the past 12 months. Total Return Market Yield Premium(5) on Share Price - -------------------------------------------------------------------------------- Taxable- 1-Year Ended Taxable- 7/31/99 Equivalent(1) 7/31/98 7/31/99 7/31/99 Equivalent(1) - -------------------------------------------------------------------------------- NUO 5.47% 8.55% 8.48% 11.59% 5.09% 8.23% - -------------------------------------------------------------------------------- HOW WAS THE FUND'S DIVIDEND AFFECTED? During the past 12 months, good call protection helped support the dividend of NUO and shield the income of this fund from erosion. In addition, excellent dividend management strategies, including the prudent use of leverage, enabled us to increase NUO's dividend effective August 1998. As of July 31, 1999, this fund had provided shareholders with steady or increasing dividends each month since its inception in October 1991. In addition, as a leveraged fund, NUO issues preferred shares that pay short-term interest rates to investors seeking short-term liquidity. The proceeds from the preferred shares are used to buy additional long-term bonds for the Fund's portfolio, which may increase volatility. When short-term interest rates remain below long-term rates, common shareholders can potentially earn extra income from the difference between the rate earned on the Fund's long-term portfolio and the short-term rate paid to preferred shareholders. WHAT KEY STRATEGIES WERE USED TO MANAGE NUO DURING THE PAST 12 MONTHS? NUO is a well-structured leveraged fund that continued to achieve its goal of generating dependable tax-free income for shareholders. Because the Fund was assembled in the higher interest rate environment of 1991, the yields on the bonds currently held in the portfolio exceed the yields that can be purchased in the market today. As a result, the market environment of the past year did not provide many opportunities to purchase bonds that would have further enhanced the Fund's yield. The focus of our management strategies remained on maintaining the Fund's structure, including its relatively short fund duration(6). As of July 31, 1999, NUO had a fund duration of 7.49, compared with 7.51 in July 1998. Overall, the Fund continued to offer excellent credit quality. At the end of July 1999, NUO had 84% of its portfolio invested in bonds rated AAA/U.S. guaranteed and AA. The Fund also had a 12% allocation in BBB and non-rated bonds, which generally provide enhanced levels of yield. In the area of bond calls, NUO currently offers good levels of call protection, with only 4% of its portfolio subject to calls before 2001. This should provide additional protection for the Fund's dividend over this period. At that time, NUO will enter the normal part of the bond market cycle where we begin to see the potential for increased bond calls. To minimize the effect of these calls, we are already at work on strategies for managing through this period. Currently, we plan to hold high-yielding bonds for as long as possible to maximize income. We call these bonds "museum pieces" due to their high yields and good quality, which place them at a premium in today's market. As these bonds approach their call dates, we will look at selling selected bonds and reinvesting the proceeds into bonds that have the potential to support the Fund's dividend and enhance portfolio structure. WHAT IS NUVEEN'S OUTLOOK FOR NUO? Our focus in NUO will remain on supporting the income stream of this fund at the highest levels consistent with capital preservation. As one strategy for achieving this, we will consider increasing the Fund's exposure to the healthcare and housing sectors, especially in lower-rated investment-grade issues that provide the opportunity to add incremental yield. The Fund's current 12% weighting in BBB and non-rated bonds gives us the flexibility to explore this option. We will continue to watch both the new issuance and secondary markets for opportunities to purchase bonds that offer higher income and stronger long-term total return potential. Enhancing the Fund's tax efficiency will also continue to be a goal in the months ahead as we look to offset potential capital gains with capital losses. Implementing strategies like these demonstrates the value that can be added by an active bond manager such as Nuveen. As an experienced investment manager knowledgeable about the unique aspects of the Ohio municipal market, we are in the marketplace every day, monitoring market dynamics, looking for opportunities, and capitalizing on them to the benefit of shareholders. 1 The taxable-equivalent yield/total return represents the yield/total return that must be earned on a taxable investment in order to equal the yield/total return of the Nuveen fund on an after-tax basis. The taxable-equivalent yield is based on the Fund's market yield and the combined federal and state income tax rate of 36%. The taxable-equivalent total return is based on the annualized total return and the 36% federal and state income tax rate. 2 NUO is compared with the Lehman Brothers Municipal Bond Index, an unleveraged index comprising a broad range of investment-grade municipal bonds. The return for the Lehman index does not reflect any initial or ongoing expenses. 3 The Lipper Peer Group return represents the average annualized return of the 18 funds in the Lipper Other States Municipal Debt category. The return assumes reinvestment of dividends and does not reflect any applicable sales charges. 4 Overall rating within the Morningstar Municipal Bond Category for the period ended July 31, 1999. Morningstar proprietary ratings reflect historical risk-adjusted performance. The ratings are subject to change every month. Past performance is no guarantee of future results. Morningstar ratings are calculated using a fund's three-, five-, and ten-year average annual returns (if applicable) in excess of 90-day Treasury bill returns with appropriate fee adjustments and a risk factor that reflects fund performance below 90-day T-bill returns. NUO received 3 stars for the three-year period and 4 stars for the five-year period. The top 10% of the funds in an investment class receive 5 stars, and the next 22.5% receive 4 stars. The Fund was rated among 194 funds for the three-year period, 193 funds for the five-year period, and 30 funds for the 10-year period. 5 A fund's premium represents the percentage difference between the Fund's share price and its NAV. 6 Fund duration, also known as leverage-adjusted duration, takes into account the leveraging process for each fund and therefore differs from the duration of the actual portfolio of individual bonds that make up the Funds. Unless otherwise noted, references to duration in this commentary are intended to indicate fund duration. Nuveen Ohio Quality Income Municipal Fund, Inc. Performance Overview As of July 31, 1999 NUO Portfolio Statistics Inception Date 10/91 - -------------------------------------------------- Share Price $18 - -------------------------------------------------- Net Asset Value $16.13 - -------------------------------------------------- Market Yield 5.47% - -------------------------------------------------- Taxable-Equivalent Yield (Federal Tax Rate)(1) 7.93% - -------------------------------------------------- Taxable-Equivalent Yield (Federal and State Tax Rate)(1) 8.55% - -------------------------------------------------- Fund Net Assets ($000) $228,961 - -------------------------------------------------- Average Effective Maturity (Years) 15.53 - -------------------------------------------------- Leverage-Adjusted Duration 7.49 - -------------------------------------------------- Annualized Total Return On Share Price On NAV - -------------------------------------------------- 1-Year 5.09% 2.74% - -------------------------------------------------- 5-Year 9.75% 7.99% - -------------------------------------------------- Since Inception 8.51% 8.12% - -------------------------------------------------- Taxable-Equivalent Total Return(2) On Share Price On NAV - -------------------------------------------------- 1-Year 8.23% 6.16% - -------------------------------------------------- 5-Year 13.17% 11.52% - -------------------------------------------------- Since Inception 11.90% 11.61% - -------------------------------------------------- Top Five Sectors (as a % of total investments) U.S. Guaranteed 25% - -------------------------------------------------- Tax Obligation/General 14% - -------------------------------------------------- Utilities 10% - -------------------------------------------------- Healthcare 9% - -------------------------------------------------- Education and Civic Organizations 9% - -------------------------------------------------- 1 Taxable-equivalent yield represents the yield on a taxable investment necessary to equal the yield of the Nuveen fund on an after-tax basis. The federal only rate is based on the current market yield and a federal income tax rate of 31%. The rate shown for federal and state highlights the added value of owning shares that are also exempt from state income taxes. It is based on a combined federal and state income tax rate of 36%. 2 Taxable-equivalent total return is based on the annualized total return and a combined federal and state income tax rate of 36%. It represents the return on a taxable investment necessary to equal the return of the Nuveen fund on an after-tax basis. Bar Chart: 1998-1999 Monthly Tax-Free Dividends 8/98 0.082 9/98 0.082 10/98 0.082 11/98 0.082 12/98 0.082 1/99 0.082 2/99 0.082 3/99 0.082 4/99 0.082 5/99 0.082 6/99 0.082 7/99 0.082 Line Chart: Share Price Performance 8/7/98 18.313 18.438 18.5 18.75 18.375 18.438 18.313 18.375 19 19.125 19.125 18.81 19 19.06 19.5 19.31 19.63 19.69 19.81 19.75 19.38 18.69 18.25 18.19 18.5 18.5 18.69 18.63 19 18.69 18.63 18.56 18.69 18.56 18.69 18.56 18.56 18.63 18.5 18.25 17.5 17.44 17.44 17.5 17.5 17.31 17.69 17.81 17.81 18 7/31/99 18 Weekly Closing Price Past performance is not predictive of future results. Nuveen Texas Quality Income Municipal Fund (NTX) Portfolio Manager's Comments Portfolio manager Mike Davern discusses the Texas municipal market, recent fund performance, and key strategies for the Nuveen Texas Quality Income Municipal Fund (NTX). With 17 years of experience as an investment professional, including eight years with Nuveen, Mike has managed NTX since July 1998. WHAT FACTORS CONTRIBUTED TO THE PERFORMANCE OF THE TEXAS MUNICIPAL MARKET DURING THE PAST 12 MONTHS? Texas continued to demonstrate strong economic performance, as the state's reliance on the oil and gas sector diminished and the economy continued to diversify into services, construction, and manufacturing. Most of the growth in manufacturing is concentrated in the high-tech sector, which benefits from the state's central location and status as a major trading partner with Mexico. One indication of the reduced role of the oil and gas industry in the state's economy can be garnered from statistics showing that, in the 1980s, oil and gas accounted for 25% of the state's tax revenues, while that contribution is now less than 4%. Unemployment in the state was 4.5% in July 1999, compared with the national average of 4.3%. In June, Texas-issued bonds were upgraded to Aa1 from Aa2 by Moody's, which cited the state's strong economy, balanced financial operations, sizable cash balances, and maintenance of moderate debt levels. Unlike the national and most state markets, the Texas municipal market enjoyed stable supply over the past year. A comparison for the first seven months of 1999 with the same period in 1998 showed that new state supply rose 4%, compared with a 23% decline in the national supply. This can be attributed in part to the fact that, despite higher interest rates, Texas issuers continued to bring large deals to market. The relative strength of the Texas municipal supply served to depress the prices of state paper slightly. HOW DID NTX PERFORM IN THIS ENVIRONMENT? For the 12 months ended July 31, 1999, NTX produced a total return on net asset value (NAV) of 1.21%, providing a taxable-equivalent total return(1) of 3.83% for shareholders in the 31% federal income tax bracket. The total return trails the Lehman Brothers Municipal Bond Index's(2) annual total return of 2.88% and an average total return of 1.55% for the Fund's Lipper peer group(3). The underperformance of the Fund's total return on NAV relative to the Lehman index can be attributed to its fund duration(4). As of July 31, 1999, NTX had a fund duration of 9.73, compared with 7.30 for the Lehman index. Duration measures a bond fund's price volatility, or reaction to interest rate movements. The longer the duration, the more sensitive the fund's NAV is to changes in interest rates. During a period of falling interest rates, longer duration enables a fund's NAV to participate more fully in market gains. However, when interest rates rise, longer duration can make the fund's NAV more vulnerable to price declines. Between August 1, 1998 and July 31, 1999, the yield on the Bond Buyer Revenue Bond Index(5) rose from 5.36% to 5.65%. This meant that funds with longer fund durations, like NTX, were more likely to underperform the market, as represented by the unleveraged Lehman index. Over the past year, demand for NTX was hampered by rising interest rates and the relatively strong supply of municipal bonds in the Texas market. This, in turn, impacted share price performance. Although the Fund increased its dividend in May 1999, two months before the Fund's fiscal year end, the positive effect of such an increase takes longer to be seen in share price performance. The prevailing interest rate environment also led to a decline in the Fund's NAV. As a result of these factors, NTX moved from trading at a discount (share price below NAV) to a slight premium (share price above NAV). Total Return Market Yield Premium/Discount(6) on Share Price - -------------------------------------------------------------------------------- Taxable- 1-Year Ended Taxable- 7/31/99 Equivalent(1) 7/31/98 7/31/99 7/31/99 Equivalent(1) - -------------------------------------------------------------------------------- NTX 6.00% 8.70% -1.34% 0.38% 2.97% 5.63% - -------------------------------------------------------------------------------- HOW WAS THE FUND'S DIVIDEND AFFECTED? During the past 12 months, good call protection helped support the dividend of NTX and shield the income of this fund from erosion. In addition, excellent dividend management strategies, including the prudent use of leverage, enabled us to increase NTX's dividend, effective May 1999. As of July 31, 1999, this fund had provided shareholders with steady or increasing dividends for 15 consecutive months. In addition, as a leveraged fund, NTX issues preferred shares that pay short-term interest rates to investors seeking short-term liquidity. The proceeds from the preferred shares are used to buy additional long-term bonds for the Fund's portfolio, which may increase volatility. When short-term interest rates remain below long-term rates, common shareholders can potentially earn extra income from the difference between the rate earned on the Fund's long-term portfolio and the short-term rate paid to preferred shareholders. WHAT KEY STRATEGIES WERE USED TO MANAGE NTX DURING THE PAST 12 MONTHS? NTX is well-structured and has continued to meet its objective of generating high levels of tax-free income for shareholders. As a result, the main strategy for NTX focused on taking advantage of the current market environment to enhance various aspects of the Fund's structure, such as: working to increase the level of tax-exempt income earned by the Fund, increasing call protection at attractive prices, and improving the Fund's tax efficiency. Another strategy focused on duration, which we worked to extend after it had shortened during the previous market rally. As mentioned earlier, NTX's fund duration was 9.73 as of July 31, 1999, up from 8.63 in July 1998. This longer duration should help position the Fund to regain net asset value as the bond market recovers. Nuveen Research was instrumental in helping us identify the bonds that have the potential to achieve these goals. We reduced our exposure in the healthcare sector, where supply was abundant, and increased our exposure in areas of the Texas municipal market where less paper was issued, such as the education and civic organizations sector. This strategy helps to enhance the value of the bonds in our portfolio. Overall, the Fund continued to offer excellent credit quality. At the end of July 1999, NTX had 73% of its portfolio invested in bonds rated AAA/U.S. guaranteed and AA. The Fund also had a 15% allocation in BBB and non-rated bonds, which have generally provided enhanced levels of yield. As the yield spread, or the difference between higher credit quality securities and those of lower credit quality, widened in recent months, lower-rated securities became more attractive on a risk-adjusted basis. With interest rates at a higher level, and the widening differential in yield between credit sectors, we took the opportunity to investigate lower-rated issues. Using the expertise of Nuveen Research, we were able to discover those bonds that offered adequate compensation for their risk level. An example of the types of securities we bought during the past year to take advantage of this situation was our purchase of $5 million in bonds issued by the Gulf Coast Waste Disposal Authority for the Valero Energy Corporation Project. These BBB- rated bonds, which have a maturity date of 2031, offered an above-market yield and also helped us achieve our goals of lengthening the Fund's duration and enhancing call protection. In the area of call protection, only 6% of NTX's portfolio is currently subject to bond calls prior to 2001. This should provide additional protection for the Fund's dividend over this period. WHAT IS NUVEEN'S OUTLOOK FOR NTX? Over the next 12 months, our focus for NTX will be on taking advantage of market conditions to purchase well-structured bonds offering attractive yields that help support the Fund's dividend. Our goals in making these purchases will continue to be increasing tax-free income, extending call protection, and increasing tax efficiency by offsetting potential capital gains with capital losses. We will continue to watch all sectors of the market for opportunities and situations that offer higher yields at attractive prices. The implementation of these strategies demonstrates the value that can be added by an active bond manager such as Nuveen. As an experienced investment manager knowledgeable about the unique aspects of the Texas municipal market, we are in the marketplace every day, monitoring market dynamics, looking for opportunities, and capitalizing on them to the benefit of shareholders. 1 The taxable-equivalent yield/total return represents the yield/total return that must be earned on a taxable investment in order to equal the yield/total return of the Nuveen fund on an after-tax basis. The taxable-equivalent yield is based on the Fund's market yield and the federal income tax rate of 31%. The taxable-equivalent total return is based on the annualized total return and the 31% federal income tax rate. 2 NTX is compared with the Lehman Brothers Municipal Bond Index, an unleveraged index comprising a broad range of investment-grade Texas municipal bonds. The return for the Lehman index does not reflect any initial or ongoing expenses. 3 The Lipper Peer Group return represents the average annualized return of the 18 funds in the Lipper Other States Municipal Debt category. The return assumes reinvestment of dividends and does not reflect any applicable sales charges. 4 Fund duration, also known as leverage-adjusted duration, takes into account the leveraging process for the Fund and therefore differs from the duration of the actual portfolio of individual bonds that make up the Fund. Unless otherwise noted, references to duration in this commentary are intended to indicate fund duration. 5 The Bond Buyer Revenue Bond Index is an unmanaged index of long-term municipal revenue bonds. 6 A fund's premium or discount represents the percentage difference between the Fund's share price and its NAV. Nuveen Texas Quality Income Municipal Fund Performance Overview As of July 31, 1999 NTX Portfolio Statistics Inception Date 10/91 - -------------------------------------------------- Share Price $15 3/16 - -------------------------------------------------- Net Asset Value $15.13 - -------------------------------------------------- Market Yield 6.00% - -------------------------------------------------- Taxable-Equivalent Yield(1) 8.70% - -------------------------------------------------- Fund Net Assets ($000) $211,784 - -------------------------------------------------- Average Effective Maturity (Years) 18.63 - -------------------------------------------------- Leverage-Adjusted Duration 9.73 - -------------------------------------------------- Annualized Total Return On Share Price On NAV - -------------------------------------------------- 1-Year 2.97% 1.21% - -------------------------------------------------- 5-Year 7.23% 7.33% - -------------------------------------------------- Since Inception 6.69% 7.49% - -------------------------------------------------- Taxable-Equivalent Total Return(1) On Share Price On NAV - -------------------------------------------------- 1-Year 5.63% 3.83% - -------------------------------------------------- 5-Year 10.14% 10.18% - -------------------------------------------------- Since Inception 9.55% 10.35% - -------------------------------------------------- Top Five Sectors (as a % of total investments) U.S. Guaranteed 19% - -------------------------------------------------- Healthcare 13% - -------------------------------------------------- Transportation 11% - -------------------------------------------------- Tax Obligation/General 11% - -------------------------------------------------- Education and Civic Organizations 9% - -------------------------------------------------- 1 A taxable-equivalent represents the yield or return on a taxable investment necessary to equal that of the Nuveen fund on an after-tax basis. Taxable equivalent yield is based on current market yield and a federal income tax rate of 31%. Taxable equivalent total return is based on the annualized total return and a federal income tax rate of 31%. 2 The Fund also paid shareholders capital gains distributions in December of $0.0745 per share. Bar Chart: 1998-1999 Monthly Tax-Free Dividends(2) 8/98 0.075 9/98 0.075 10/98 0.075 11/98 0.075 12/98 0.075 1/99 0.075 2/99 0.075 3/99 0.075 4/99 0.075 5/99 0.076 6/99 0.076 7/99 0.076 Line Chart: Share Price Performance 8/7/98 15.75 15.688 15.75 15.875 15.625 15.5 15.625 15.625 16 15.875 15.813 15.88 15.94 15.94 16.25 16.13 16.44 16.44 16.25 16.06 15.75 15.63 15.44 15.69 15.88 15.94 16.06 16.06 16.06 16.06 15.88 15.81 15.81 15.38 15.5 15.5 15.69 15.44 15.25 15.38 15.38 15.25 15.5 15.13 15.38 15.5 15.44 15.31 7/31/99 15.19 Weekly Closing Price Past performance is not predictive of future results. Report of Independent Auditors The Boards of Directors, Trustees and Shareholders Nuveen Arizona Premium Income Municipal Fund, Inc. Nuveen Michigan Quality Income Municipal Fund, Inc. Nuveen Michigan Premium Income Municipal Fund, Inc. Nuveen Ohio Quality Income Municipal Fund, Inc. Nuveen Texas Quality Income Municipal Fund We have audited the accompanying statements of net assets, including the portfolios of investments, of Nuveen Arizona Premium Income Municipal Fund, Inc., Nuveen Michigan Quality Income Municipal Fund, Inc., Nuveen Michigan Premium Income Municipal Fund, Inc., Nuveen Ohio Quality Income Municipal Fund, Inc. and Nuveen Texas Quality Income Municipal Fund as of July 31, 1999, and the related statements of operations, changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of July 31, 1999, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of Nuveen Arizona Premium Income Municipal Fund, Inc., Nuveen Michigan Quality Income Municipal Fund, Inc., Nuveen Michigan Premium Income Municipal Fund, Inc., Nuveen Ohio Quality Income Municipal Fund, Inc. and Nuveen Texas Quality Income Municipal Fund at July 31, 1999, and the results of their operations, changes in their net assets and financial highlights for the periods indicated therein in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Chicago, Illinois September 11, 1999
Portfolio of Investments Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ) July 31, 1999 Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Basic Materials - 4.9% $ 5,000,000 The Industrial Development Authority of the County of Gila, Arizona, 1/08 at 102 Baa2 $4,676,600 Environmental Revenue Refunding Bonds (ASARCO Incorporated Project), Series 1998, 5.550%, 1/01/27 - --------------------------------------------------------------------------------------------------------------------------------- Education and Civic Organizations - 3.2% 1,750,000 Student Loan Acquisition Authority of Arizona, Student Loan 5/04 at 102 Aa 1,857,538 Revenue Bonds, Series 1994B, Subordinated Fixed Rate Bonds, 6.600%, 5/01/10 (Alternative Minimum Tax) 100,000 University of Arizona Telecommunications System, Certificates of 7/02 at 102 A+ 106,902 Participation, Series 1991, 6.500%, 7/15/12 1,000,000 Arizona Board of Regents, University of Arizona, System Revenue 6/02 at 102 AA 1,065,600 Refunding Bonds, Series 1992, 6.250%, 6/01/11 - --------------------------------------------------------------------------------------------------------------------------------- Health Care - 12.3% 1,500,000 The Industrial Development Authority of the County of Maricopa, 7/02 at 102 AAA 1,568,400 Arizona, Insured Health Facility Revenue Bonds (Catholic Healthcare West), Series 1992A, 5.750%, 7/01/11 3,500,000 The Industrial Development Authority of the County of Maricopa, No Opt. Call AAA 4,202,415 Arizona, Samaritan Health Services Hospital System Revenue Refunding Bonds, Series 1990A, 7.000%, 12/01/16 600,000 The Industrial Development Authority of the County of Maricopa, 9/05 at 101 AAA 602,106 Arizona, Baptist Hospital System Revenue Refunding Bonds, Series 1995, 5.500%, 9/01/16 2,000,000 Hospital District No. One, Mohave County, Arizona, Refunding 6/02 at 101 AAA 2,119,300 General Obligation Bonds (Kingman Regional Medical Center Project), Series 1992, 6.500%, 6/01/15 2,000,000 University Medical Center Corporation, Tucson, Arizona, 7/02 at 102 AAA 2,120,460 Hospital Revenue Refunding Bonds, Series 1992, 6.250%, 7/01/16 1,055,000 The Industrial Development Authority of the City of Winslow, Arizona, 6/08 at 101 N/R 987,543 Hospital Revenue Bonds (Winslow Memorial Hospital Project), Series 1998, 5.500%, 6/01/22 - --------------------------------------------------------------------------------------------------------------------------------- Housing/Multifamily - 7.6% 1,500,000 The Industrial Authority of the County of Maricopa, Arizona, 10/09 at 102 Aaa 1,420,020 Multifamily Housing Revenue Bonds (Arborwood Apartments Project), Series 1999A, 5.050%, 10/01/29 1,670,000 The Industrial Development Authority of the City of Phoenix, Arizona, 12/05 at 103 AAA 1,612,101 Multifamily Housing Revenue Bonds, Series 1998A (Heather Ridge Apartments Project), 5.200%, 12/15/21 (Alternative Minimum Tax) 4,000,000 The Industrial Development Authority of the City of Tucson, 12/06 at 102 AAA 4,160,440 Arizona, Tax-Exempt Multifamily Housing Revenue Refunding Bonds, Series 1996, 5.900%, 12/20/31 - --------------------------------------------------------------------------------------------------------------------------------- Housing/Single Family - 3.3% 415,000 The Industrial Development Authority of the City of Phoenix, 6/05 at 102 AAA 428,114 Arizona, Statewide Single Family Mortgage Revenue Bonds, Series 1995, 6.150%, 6/01/08 (Alternative Minimum Tax) 335,000 The Industrial Development Authority of the County of Pima, 8/05 at 102 A 351,810 Arizona, Single Family Mortgage Revenue Refunding Bonds, Series 1995A, 6.500%, 2/01/17 2,205,000 The Industrial Development Authority of the County of Pima, 5/07 at 102 AAA 2,313,045 Arizona, Single Family Mortgage Revenue Bonds, Series 1997A, 6.250%, 11/01/30 (Alternative Minimum Tax) - --------------------------------------------------------------------------------------------------------------------------------- Long-Term Care - 1.1% 1,000,000 The Industrial Development Authority of the County of Mohave, 5/06 at 103 AAA 1,054,370 Arizona, Health Care Revenue Refunding Bonds, Series 1996 (GNMA Collateralized - Chris Ridge and Silver Ridge Village Projects), 6.375%, 11/01/31 - --------------------------------------------------------------------------------------------------------------------------------- Tax Obligation/General - 6.7% 1,500,000 Paradise Valley Unified School District No. 69 of Maricopa 7/03 at 102 AAA 1,612,245 County, Arizona, School Improvement Bonds, Project of 1990, Series 1993D, 5.875%, 7/01/12 Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Tax Obligation/General (continued) $ 1,400,000 Chandler Unified School District No. 80 of Maricopa County, 7/03 at 101 AAA $1,480,794 Arizona, General Obligation Refunding Bonds, Series 1993, 5.950%, 7/01/10 2,500,000 City of Phoenix, Arizona, General Obligation Refunding Bonds, 7/02 at 102 AA+ 2,671,400 Series 1992, 6.375%, 7/01/13 585,000 Tempe Union High School District No. 213 of Maricopa County, 7/04 at 101 AAA 619,644 Arizona, School Improvement and Refunding Bonds, Series 1994, 6.000%, 7/01/12 - --------------------------------------------------------------------------------------------------------------------------------- Tax Obligation/Limited - 11.9% City of Bullhead, Bullhead Parkway Improvement District Improvement Bonds: 910,000 6.100%, 1/01/08 1/03 at 103 Baa2 952,652 970,000 6.100%, 1/01/09 1/03 at 103 Baa2 1,015,464 1,600,000 City of Lake Havasu, City Municipal Property Corporation 6/02 at 101 AAA 1,693,664 Facilities Revenue Bonds, Series 1993, 6.000%, 6/01/08 2,000,000 Hospital District No. One, Maricopa County, Arizona, 6/08 at 102 AAA 1,896,760 General Obligation Bonds, Series 1998, 5.000%, 6/01/21 2,150,000 Phoenix Civic Plaza Building Corporation, Senior Lien Excise 7/05 at 101 AA+ 2,289,148 Tax Revenue Bonds, Series 1994, 6.000%, 7/01/14 1,750,000 City of Phoenix Civic Improvement Corporation, Arizona, 7/09 at 101 AA+ 1,721,773 Senior Lien Excise Tax Revenue Bonds, Series 1999A (Phoenix Municipal Courthouse Project), 5.375%, 7/01/29 1,000,000 Puerto Rico Highway and Transportation Authority, Transportation 7/08 at 101 A 910,420 Revenue Bonds, Series A, 5.000%, 7/01/38 725,000 City of Tucson, Arizona, Certificates of Participation, 7/04 at 100 AA 776,765 Series 1994, 6.375%, 7/01/09 - --------------------------------------------------------------------------------------------------------------------------------- Transportation - 5.4% 5,000,000 Tucson Airport Authority, Inc. (Arizona), Airport Revenue Bonds, 6/03 at 102 AAA 5,145,600 Refunding Series 1993, 5.700%, 6/01/13 - --------------------------------------------------------------------------------------------------------------------------------- U.S. Guaranteed - 24.8% 3,195,000 Kyrene Elementary School District No. 28 of Maricopa County, 7/02 at 100 AAA 3,358,073 Arizona, School Improvement Bonds, Project of 1990, Series 1993-E, 6.000%, 7/01/12 (Pre-refunded to 7/01/02) The Industrial Development Authority of the County of Mohave, Arizona, Hospital System Revenue Refunding Bonds (Medical Environments, Inc. and Phoenix Baptist Hospital and Medical Center Inc.), Series 1993: 5,000,000 6.750%, 7/01/08 (Pre-refunded to 7/01/03) 7/03 at 102 Aaa 5,522,900 1,000,000 7.000%, 7/01/16 (Pre-refunded to 7/01/03) 7/03 at 102 Aaa 1,113,510 3,700,000 City of Phoenix, Arizona, Civic Improvement Corporation, 7/03 at 102 AAA 4,009,949 Wastewater System Lease Revenue Bonds, Series 1993, 6.125%, 7/01/23 (Pre-refunded to 7/01/03) 1,510,000 Metropolitan Domestic Water Improvement District of Pima 1/03 at 101 AAA 1,616,062 County, Arizona, Special Assessment and Water Revenue Bonds, Series 1992, 6.200%, 1/01/12 (Pre-refunded to 1/01/03) 1,415,000 Tempe Union High School District No. 213 of Maricopa County, 7/04 at 101 AAA 1,528,469 Arizona, School Improvement and Refunding Bonds, Series 1994, 6.000%, 7/01/12 (Pre-refunded to 7/01/04) 3,000,000 City of Tucson, Arizona, General Obligation Bonds, 7/04 at 101 AAA 3,273,450 Series 1984-G, 6.250%, 7/01/18 (Pre-refunded to 7/01/04) 1,290,000 City of Tucson, Arizona, General Obligation Bonds, Series 1994-B, 7/06 at 101 AA*** 1,387,627 5.750%, 7/01/18 (Pre-refunded to 7/01/06) 1,500,000 City of Tucson, Arizona, Water System Revenue Bonds, 7/06 at 101 AAA 1,639,260 Series 1994-A, 6.000%, 7/01/21 (Pre-refunded to 7/01/06) - --------------------------------------------------------------------------------------------------------------------------------- Utilities - 11.2% 2,000,000 The Industrial Development Authority of the County of Mohave, 11/03 at 101 A-1 2,112,460 Arizona, Industrial Development Revenue Bonds, 1994 Series (Citizen Utilities Company Projects), 6.600%, 5/01/29 (Alternative Minimum Tax) 1,000,000 Navajo County, Arizona, Pollution Control Corporation, Pollution 8/03 at 102 A- 1,009,570 Control Revenue Refunding Bonds (Arizona Public Service Company), 1993 Series A, 5.875%, 8/15/28 Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Utilities (continued) $ 1,710,000 The Industrial Development Authority of the County of Pima, 1/02 at 103 AAA $1,858,770 Arizona, Industrial Development Lease Obligation Refunding Revenue Bonds, 1988 Series A (Irvington Project), 7.250%, 7/15/10 2,030,000 Salt River Project, Agricultural Improvement and Power District, 1/02 at 100 AA 2,067,677 Arizona, Salt River Project Electric System Revenue Bonds, 1992 Series D, 5.750%, 1/01/19 1,650,000 Salt River Project, Agricultural Improvement and Power District, 1/04 at 102 AA 1,588,224 Arizona, Electric System Revenue Refunding Bonds, 1993 Series C, 5.000%, 1/01/16 2,000,000 The Industrial Development Authority of the County of Yavapai, 6/07 at 101 A-1 1,997,940 Arizona, Industrial Development Revenue Bonds, 1998 Series (Citizens Utilities Company Project), 5.450%, 6/01/33 (Alternative Minimum Tax) - --------------------------------------------------------------------------------------------------------------------------------- Water and Sewer - 7.2% 2,150,000 Arizona Municipal Financing Program of 1992, Refunding Certificates 8/02 at 101 AAA 2,238,472 of Participation, Series 1, 6.000%, 8/01/17 500,000 Wastewater Management Authority of Arizona, Wastewater 7/05 at 102 AAA 518,790 Treatment Financial Assistance Revenue Bonds, Series 1995, 5.750%, 7/01/15 500,000 The Industrial Development Authority of the County of Maricopa, 12/07 at 102 AAA 483,550 Arizona, Water System Improvement Revenue Bonds (Chaparral City Water Company Project), Series 1997A, 5.400%, 12/01/22 (Alternative Minimum Tax) 3,500,000 City of Tucson, Arizona, Water System Revenue Refunding Bonds, 7/02 at 102 A+ 3,600,030 Series 1992A, 5.750%, 7/01/18 - --------------------------------------------------------------------------------------------------------------------------------- $ 90,370,000 Total Investments - (cost $89,730,530) - 99.6% 94,357,876 ============= Other Assets Less Liabilities - 0.4% 417,071 ----------------------------------------------------------------------------------------------------------------- Net Assets - 100% $94,774,947 ================================================================================================================= * Optional Call Provisions (not covered by the report of independent auditors): Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings (not covered by the report of independent auditors): Using the higher of Standard & Poor's or Moody's rating. *** Securities are backed by an escrow or trust containing sufficient U.S. government or U.S. government agency securities which ensures the timely payment of principal and interest. Securities are normally considered to be equivalent to AAA rated securities. N/R Investment is not rated. See accompanying notes to financial statements.
Portfolio of Investments Nuveen Michigan Quality Income Municipal Fund, Inc. (NUM) July 31, 1999
Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Capital Goods - 0.4% $ 1,000,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds 12/03 at 102 BBB $1,038,540 (WMX Technologies, Inc. Project), Series 1993, 6.000%, 12/01/13 (Alternative Minimum Tax) - --------------------------------------------------------------------------------------------------------------------------------- Education and Civic Organizations - 5.0% Board of Trustees of Ferris State University, Michigan, General Revenue Bonds, Series 1998: 5,020,000 5.000%, 10/01/23 4/08 at 100 AAA 4,683,058 2,000,000 5.000%, 10/01/28 No Opt. Call AAA 1,851,280 Michigan Higher Education Student Loan Authority, Student Loan and Refunding Revenue Bonds, Series XV-A: 1,000,000 6.800%, 10/01/07 (Alternative Minimum Tax) 10/02 at 102 A 1,059,030 1,250,000 6.800%, 10/01/08 (Alternative Minimum Tax) 10/02 at 102 A 1,323,788 990,000 6.800%, 10/01/09 (Alternative Minimum Tax) 10/02 at 102 A 1,046,955 2,000,000 Board of Trustees of Oakland University, Michigan, General 5/05 at 102 AAA 2,071,500 Revenue Bonds, Series 1995, 5.750%, 5/15/15 1,450,000 Board of Trustees of Western Michigan University, General 7/03 at 102 AAA 1,355,562 Revenue Bonds, Series 1993A, 5.000%, 7/15/21 - --------------------------------------------------------------------------------------------------------------------------------- Health Care - 6.7% 2,235,000 City of Hancock Hospital Finance Authority, FHA-Insured Mortgage 8/08 at 100 AAA 2,237,347 Hospital Revenue Bonds (Portage Health System, Inc.), Series 1998, 5.450%, 8/01/47 8,800,000 Michigan State Hospital Finance Authority, Hospital Revenue 5/01 at 100 AA- 8,914,400 Bonds (Mercy Mount Clemens Corporation), Series 1992, 6.000%, 5/15/17 4,500,000 Michigan State Hospital Finance Authority, Hospital Revenue 8/08 at 101 BBB 3,841,965 Bonds (The Detroit Medical Center Obligated Group), Series 1998A, 5.250%, 8/15/28 1,000,000 Michigan State Hospital Finance Authority, Hospital Revenue 5/09 at 101 AA+ 911,440 Bonds (Charity Obligated Group), Series 1999A, 5.125%, 11/01/29 1,000,000 Michigan State Hospital Finance Authority, Revenue and 11/09 at 101 BBB+ 994,370 Refunding Bonds (Memorial Healthcare Center Obligated Group), Series 1999, 5.875%, 11/15/21 2,195,000 Regents of the University of Michigan, Medical Service No Opt. Call Aa2 1,223,888 Plan Revenue Bonds, Series 1991, 0.000%, 12/01/10 - --------------------------------------------------------------------------------------------------------------------------------- Housing/Multifamily - 6.3% 5,250,000 Michigan State Housing Development Authority, Limited 10/02 at 103 AAA 5,597,235 Obligation Revenue Bonds (Parkway Meadows Project), Series 1991, 6.850%, 10/15/18 760,000 Michigan State Housing Development Authority, Rental 1/02 at 102 AA- 808,275 Housing Revenue Bonds, 1991 Series A, 7.150%, 4/01/10 (Alternative Minimum Tax) 3,695,000 Michigan State Housing Development Authority, Rental 1/02 at 102 AA- 3,903,878 Housing Revenue Bonds, 1991 Series B, 7.100%, 4/01/21 6,795,000 Michigan State Housing Development Authority, Rental 4/09 at 101 AAA 6,526,258 Housing Revenue Bonds, 1999 Series A, 5.300%, 10/01/37 (Alternative Minimum Tax) - --------------------------------------------------------------------------------------------------------------------------------- Housing/Single Family - 1.1% 2,160,000 Michigan State Housing Development Authority, Single 12/01 at 102 AA+ 2,253,528 Family Mortgage Revenue Bonds, 1991 Series B, 6.950%, 12/01/20 740,000 Michigan State Housing Development Authority, Single Family 6/02 at 102 AA+ 754,704 Mortgage Revenue Bonds, 1992 Series A, 6.875%, 6/01/23 Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Long-Term Care - 3.7% $ 2,000,000 The Economic Development Corporation of the Charter Township 7/09 at 101 A $1,838,760 of Grand Rapids (Michigan), Limited Obligation Revenue Bonds (Porter Hills Obligated Group, Cook Valley Estates Project), Series 1999, 5.450%, 7/01/29 1,250,000 Michigan State Hospital Finance Authority, Revenue Bonds 1/07 at 102 N/R 1,296,013 (Presbyterian Villages of Michigan Obligated Group), Series 1997, 6.375%, 1/01/25 1,300,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds 7/08 at 101 A 1,211,730 (Porter Hills Presbyterian Village Inc. Project), Series 1998, 5.375%, 7/01/28 5,280,000 The Economic Development Corporation of the City of Warren, 3/02 at 101 Aaa 5,487,926 Nursing Home Revenue Refunding Bonds (GNMA Mortgage-Backed Security - Autumn Woods Project), Series 1992, 6.900%, 12/20/22 - --------------------------------------------------------------------------------------------------------------------------------- Tax Obligation/General - 18.0% 1,000,000 Belding Area Schools, Counties of Ionia, Kent and Montcalm, 5/08 at 100 AAA 928,320 State of Michigan, 1998 Refunding Bonds (General Obligation - Unlimited Tax), 5.000%, 5/01/26 1,200,000 Berkley School District, County of Oakland, State of Michigan, 1/05 at 101 AAA 1,296,600 1995 School Building and Site Bonds (General Obligation - Unlimited Tax), 6.000%, 1/01/19 1,000,000 Chippewa Valley Schools, County of Macomb, State of Michigan, 5/03 at 102 AAA 935,130 1993 Refunding Bonds (General Obligation - Unlimited Tax), 5.000%, 5/01/21 2,250,000 Clarkston Community Schools, County of Oakland, State of 5/07 at 100 AAA 2,168,505 Michigan, 1997 School Building and Site Bonds (General Obligation - Unlimited Tax), 5.250%, 5/01/23 1,250,000 Coopersville Area Public Schools, Counties of Ottawa and 5/09 at 100 AAA 1,154,588 Muskegon, State of Michigan, 1999 School Building and Site Bonds (General Obligation - Unlimited Tax), 5.000%, 5/01/29 5,720,000 School District of the City of Detroit, Wayne County, 5/09 at 101 AAA 5,032,399 State of Michigan, School Building and Site Improvement Bonds (General Obligation - Unlimited Tax), Series 1998A, 4.750%, 5/01/28 1,355,000 Township of Blair, County of Grand Traverse, State of Michigan, 11/10 at 100 AAA 1,296,423 1998 Water System Improvements Project (General Obligation - Unlimited Tax), 5.200%, 11/01/23 3,725,000 Lake Orion Community School District, County of Oakland, 5/05 at 101 AAA 3,704,140 State of Michigan, 1995 Refunding Bonds (General Obligation - Unlimited Tax), 5.500%, 5/01/20 1,000,000 School District of the City of Lincoln Park, County of Wayne, 5/07 at 100 AAA 959,570 State of Michigan, 1997 Refunding Bonds (Unlimited Tax), 5.000%, 5/01/17 1,000,000 Mancelona Public School District, General Obligation Bonds, 5/06 at 100 AAA 982,300 Series 1997 (Antrim and Kalkaska Counties), 5.200%, 5/01/17 6,650,000 Mattawan Consolidated School, Counties of Van Buren and 5/02 at 102 AA+ 7,067,554 Kalamazoo, State of Michigan, 1992 Refunding Bonds (General Obligation - Unlimited Tax), 6.300%, 5/01/17 2,500,000 Montrose Township School District, State of Michigan, No Opt. Call AAA 2,700,050 School Building and Site Bonds, Series 1997, 6.000%, 5/01/22 1,045,000 Nice Community School District, Counties of Marquette and 5/04 at 101 AAA 1,008,425 Baraga, State of Michigan, 1995 School Building and Site Bonds (General Obligation - Unlimited Tax), 5.250%, 5/01/20 1,225,000 North Branch Area Schools, County of Lapeer, State of Michigan, 5/03 at 101 1/2 AAA 1,200,280 1993 Refunding Bonds (General Obligation - Unlimited Tax), 5.375%, 5/01/21 1,470,000 Parchment School District, County of Kalamazoo, State of Michigan, No Opt. Call AAA 1,391,531 1998 School Building and Site Bonds (General Obligation - Unlimited Tax), 5.000%, 5/01/25 685,000 Reeths-Puffer Schools, County of Muskegon, State of 5/05 at 101 AAA 709,078 Michigan, 1995 School Building and Site Refunding Bonds, 5.750%, 5/01/15 600,000 Rockford Public Schools, Kent County, 1997 School Building and 5/07 at 100 AAA 575,844 Site Bonds (General Obligation - Unlimited Tax), 5.250%, 5/01/27 Western Townships Utilities Authority, Sewage Disposal System Refunding Bonds, Series 1991: 1,500,000 6.750%, 1/01/15 1/02 at 100 AAA 1,575,960 5,040,000 6.500%, 1/01/19 1/02 at 100 AAA 5,266,649 1,725,000 Williamston Community School District (General No Opt. Call AAA 1,745,079 Obligation - Unlimited Tax), Series 1996, 5.500%, 5/01/25 1,000,000 Wyoming Public Schools, County of Kent, State of Michigan, 5/09 at 100 AAA 934,840 1999 Refunding Bonds (General Obligation - Unlimited Tax), 5.000%, 5/01/22 Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Tax Obligation/General (continued) Zeeland Public Schools, Counties of Ottawa and Allegan, State of Michigan, 1999 School Building and Site Bonds (General Obligation - Unlimited Tax): $ 3,000,000 5.250%, 5/01/22 (WI) 5/09 at 100 AAA $2,889,870 3,000,000 5.375%, 5/01/25 (DD) 5/09 at 100 AAA 2,930,250 - --------------------------------------------------------------------------------------------------------------------------------- Tax Obligation/Limited - 4.3% 2,000,000 Michigan Municipal Bond Authority, Local Government 5/02 at 102 A 2,126,860 Loan Program Revenue Bonds, Series 1992D, 6.650%, 5/01/12 3,800,000 State Building Authority, State of Michigan, 1991 Revenue 10/01 at 102 AA 3,992,166 Refunding Bonds, Series I, 6.250%, 10/01/20 1,825,000 State Building Authority, State of Michigan, 1991 Revenue Bonds, 10/01 at 102 AA 1,934,464 Series II, 6.800%, 10/01/21 1,000,000 State Building Authority, State of Michigan, 1998 Revenue 10/09 at 100 AA 894,410 Bonds, Series I (Facilities Program), 4.750%, 10/15/21 State of Michigan, State Trunk Line Fund Refunding Bonds, Series 1998A: 1,350,000 4.750%, 11/01/20 11/08 at 101 AAA 1,216,863 1,500,000 5.000%, 11/01/26 11/08 at 101 AAA 1,391,595 - --------------------------------------------------------------------------------------------------------------------------------- Transportation - 1.0% 2,505,000 Charter County of Wayne, Michigan, Airport Revenue Bonds 12/01 at 102 AAA 2,668,602 (Detroit Metropolitan Wayne County Airport), Subordinate Lien, Series 1991B, 6.750%, 12/01/21 (Alternative Minimum Tax) - --------------------------------------------------------------------------------------------------------------------------------- U.S. Guaranteed - 29.8% 3,935,000 Anchor Bay School District, Counties of Macomb and 5/03 at 101 1/2 AAA 4,157,328 St. Clair, State of Michigan, 1993 School Building and Site Bonds (General Obligation - Unlimited Tax), 5.550%, 5/01/19 (Pre-refunded to 5/01/03) 1,930,000 Central Michigan University, Revenue Bonds, Series 1997, 4/07 at 101 AAA 2,046,321 5.500%, 10/01/17 (Pre-refunded to 4/01/07) 2,000,000 School District of the City of Detroit, Wayne County, 5/06 at 102 AAA 2,155,120 State of Michigan, School Building and Site Improvement Bonds (General Obligation - Unlimited Tax), Series 1996A, 5.700%, 5/01/25 (Pre-refunded to 5/01/06) 180,000 City of Detroit, County of Wayne, State of Michigan, Sewage No Opt. Call Aaa 182,360 Disposal System Revenue Bonds, Series 1979, 6.900%, 12/15/99 1,000,000 Essexville-Hampton Public Schools, County of Bay, State of 5/07 at 100 AAA 1,053,720 Michigan, 1997 School Building and Site Bonds (General Obligation - Unlimited Tax), 5.500%, 5/01/17 (Pre-refunded to 5/01/07) 1,600,000 Gaylord Community Schools, Counties of Ostego and Antrim, 5/02 at 102 AA+*** 1,727,904 State of Michigan, 1992 School Building and Site Refunding Bonds, 6.600%, 5/01/21 (Pre-refunded to 5/01/02) 1,325,000 Greenville Public Schools, Counties of Montcalm, Kent and Ionia, 5/04 at 101 AAA 1,413,099 State of Michigan, 1995 School Building and Site Bonds (General Obligation - Unlimited Tax), 5.750%, 5/01/14 (Pre-refunded to 5/01/04) 1,000,000 Grosse Ile Township School District, School Improvement 5/07 at 100 AAA 1,085,930 Refunding Bonds, General Obligation, Series 1996, 6.000%, 5/01/22 (Pre-refunded to 5/01/07) 1,250,000 Gull Lake Community Schools, Counties of Kalamazoo, Barry and 5/01 at 102 AAA 1,332,162 Calhoun, State of Michigan, 1991 School Building and Site Bonds, 6.800%, 5/01/21 (Pre-refunded to 5/01/01) 3,100,000 Hemlock Public School District, Counties of Saginaw and Midland, 5/02 at 102 AA+*** 3,365,701 State of Michigan, 1992 School Building and Site Refunding Bonds, 6.750%, 5/01/21 (Pre-refunded to 5/01/02) 1,000,000 Huron Valley School District, Counties of Oakland and Livingston, 5/07 at 100 AAA 1,077,880 State of Michigan, 1996 School Building and Site Bonds (General Obligation - Unlimited Tax), 5.875%, 5/01/16 (Pre-refunded to 5/01/07) 2,000,000 Lincoln Park School District, General Obligation Bonds, 5/06 at 101 AAA 2,168,240 Series 1996, 5.900%, 5/01/26 (Pre-refunded to 5/01/06) 1,000,000 Marquette Area Public Schools, County of Marquette, 5/01 at 102 AAA 1,064,060 State of Michigan, 1991 School Building and Site Bonds, Series B (General Obligation - Unlimited Tax), 6.700%, 5/01/21 (Pre-refunded 5/01/01) Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- U.S. Guaranteed (continued) $ 3,100,000 Michigan Municipal Bond Authority, State Revolving Fund Revenue 10/02 at 102 AA+*** $3,373,730 Bonds, Series 1992A, 6.600%, 10/01/18 (Pre-refunded to 10/01/02) 3,035,000 Michigan State Hospital Finance Authority, Hospital Revenue 12/02 at 102 AAA 3,340,928 Bonds (Mid-Michigan Obligated Group), Series 1992, 6.900%, 12/01/24 (Pre-refunded to 12/01/02) 1,450,000 Michigan State Hospital Finance Authority, Hospital Revenue 9/01 at 102 Aaa 1,577,760 Bonds (McLaren Obligated Group), Series 1991A, 7.500%, 9/15/21 (Pre-refunded to 9/15/01) 9,355,000 Michigan State Hospital Finance Authority, Hospital Revenue 11/01 at 102 Aa2*** 10,106,86 Bonds (Daughters of Charity National Health System- Providence Hospital), Series 1991, 7.000%, 11/01/21 (Pre-refunded to 11/01/01) 2,150,000 North Branch Area Schools, County of Lapeer, State of Michigan, 5/02 at 102 AA+*** 2,321,871 1992 School Building and Site Refunding Bonds (General Obligation - Unlimited Tax), 6.600%, 5/01/17 (Pre-refunded to 5/01/02) 1,500,000 Perry Public Schools, Counties of Shiawassee and Ingham, 5/02 at 101 1/2 AAA 1,606,155 State of Michigan, 1992 School Building and Site Bonds (General Obligation - Unlimited Tax), 6.375%, 5/01/22 (Pre-refunded to 5/01/02) 4,650,000 Plymouth-Canton Community Schools, Counties of Wayne and 5/01 at 101 AA+*** 4,909,005 Washtenaw, State of Michigan, 1991 School Building and Site Refunding Bonds, Series B, 6.800%, 5/01/11 (Pre-refunded to 5/01/01) 620,000 Reeths-Puffer Schools, County of Muskegon, State of Michigan, 5/05 at 101 AAA 664,460 1995 School Building and Site Refunding Bonds, 5.750%, 5/01/15 (Pre-refunded to 5/01/05) 6,385,000 City of Royal Oak Hospital Finance Authority, State of Michigan, 1/01 at 102 Aaa 6,747,668 Hospital Revenue Bonds (William Beaumont Hospital), Series 1991D, 6.750%, 1/01/20 (Pre-refunded to 1/01/01) 4,845,000 Saginaw-Midland Municipal Water Supply Corporation, 9/04 at 102 A*** 5,460,024 State of Michigan, Water Supply Revenue Bonds (General Obligation - Unlimited Tax), Series 1992, 6.875%, 9/01/16 (Pre-refunded to 9/01/04) 2,400,000 Three Rivers Community Schools, Counties of Cass and 5/06 at 102 AAA 2,615,712 St. Joseph, State of Michigan, 1996 School Building and Site Bonds (General Obligation - Unlimited Tax), 6.000%, 5/01/23 (Pre-refunded to 5/01/06) 9,250,000 Regents of the University of Michigan, Medical Service 12/01 at 102 Aa2*** 9,911,005 Plan Revenue Bonds, Series 1991, 6.500%, 12/01/21 (Pre-refunded to 12/01/01) 4,200,000 Warren Consolidated Schools, Counties of Macomb and Oakland, 5/01 at 102 Aa*** 4,466,070 State of Michigan, 1991 School Building and Site Refunding Bonds (General Obligation - Unlimited Tax), 6.700%, 5/01/21 (Pre-refunded to 5/01/01) - --------------------------------------------------------------------------------------------------------------------------------- Utilities - 15.0% 6,425,000 The Economic Development Corporation of the City of Detroit, 5/01 at 102 AAA 6,790,968 Resource Recovery Revenue Bonds, Series 1991A, 6.875%, 5/01/09 (Alternative Minimum Tax) 2,390,000 Michigan South Central Power Agency, Power Supply System Revenue 11/01 at 102 Baa1 2,517,172 Refunding Bonds, 1991 Series, 6.750%, 11/01/10 3,630,000 Michigan Strategic Fund, Adjustable Rate Demand Limited No Opt. Call AAA 4,365,002 Obligation Refunding Revenue Bonds (The Detroit Edison Company Pollution Control Bonds Project), Series 1990BB, 7.000%, 5/01/21 4,330,000 Michigan Strategic Fund, Limited Obligation Refunding Revenue 9/01 at 102 AAA 4,616,603 Bonds (The Detroit Edison Company Pollution Control Bonds Project), Collateralized Series 1991CC, 6.950%, 9/01/21 7,600,000 Michigan Strategic Fund Limited Obligation Refunding Revenue 12/01 at 102 AAA 8,125,920 Bonds (The Detroit Edison Company Pollution Control Bonds Project), Collateralized Series 1991DD, 6.875%, 12/01/21 7,000,000 County of Monroe, Michigan, Pollution Control Revenue Bonds 9/02 at 102 AAA 7,550,410 (The Detroit Edison Company Monroe and Fermi Plants Project), Collateralized Series 1992-1, 6.875%, 9/01/22 (Alternative Minimum Tax) 1,000,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/05 at 100 BBB+ 993,800 Series X, 5.500%, 7/01/25 5,000,000 City of Wyandotte, County of Wayne, State of Michigan, 10/02 at 102 AAA 5,324,650 1992 Electric Revenue Refunding Bonds, 6.250%, 10/01/17 - --------------------------------------------------------------------------------------------------------------------------------- Water and Sewer - 6.6% 5,250,000 City of Detroit, Michigan, Sewage Disposal System Revenue 7/05 at 100 AAA 4,872,364 Refunding Bonds, Series 1995-B, 5.000%, 7/01/25 7,000,000 City of Detroit, Michigan, Sewage Disposal System Revenue 7/07 at 101 AAA 6,489,140 Bonds, Series 1997-A, 5.000%, 7/01/27 Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Water and Sewer (continued) $ 6,000,000 City of Detroit, Michigan, Water Supply System Revenue and 7/04 at 102 AAA $5,591,940 Revenue Refunding Bonds, Series 1993, 5.000%, 7/01/23 1,000,000 City of Grand Rapids, Michigan, Sanitary Sewer System 7/08 at 101 AAA 885,580 Improvement and Refunding Revenue Bonds, Series 1998-A, 4.750%, 1/01/28 - --------------------------------------------------------------------------------------------------------------------------------- $ 257,475,000 Total Investments - (cost $250,417,617) - 97.9% 262,964,398 ============= Short-Term Investments - 0.4% $ 1,000,000 The Economic Development Corporation of the County of P-1 1,000,000 ============= Delta, Michigan, Environmental Improvement Revenue Refunding Bonds, 1985 Series E (Mead-Escanaba Paper Company Project), Variable Rate Demand Bonds, 3.400%, 12/01/23+ ----------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 1.7% 4,626,759 ----------------------------------------------------------------------------------------------------------------- Net Assets - 100% $268,591,157 ================================================================================================================= * Optional Call Provisions (not covered by the report of independent auditors): Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings (not covered by the report of independent auditors): Using the higher of Standard & Poor's or Moody's rating. *** Securities are backed by an escrow or trust containing sufficient U.S. government or U.S. government agency securities which ensures the timely payment of principal and interest. Securities are normally considered to be equivalent to AAA rated securities. N/R Investment is not rated. (DD) Security purchased on a delayed delivery basis (note 1). (WI) Security purchased on a when-issued basis (note 1). + 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.
Portfolio of Investments Nuveen Michigan Premium Income Municipal Fund, Inc. (NMP) July 31, 1999
Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Capital Goods - 2.8% $ 3,050,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Waste 12/02 at 102 BBB $3,235,074 Management, Inc. Project), Series 1992, 6.625%, 12/01/12 (Alternative Minimum Tax) 1,370,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds 12/03 at 102 BBB 1,422,800 (WMX Technologies, Inc. Project), Series 1993, 6.000%, 12/01/13 (Alternative Minimum Tax) - --------------------------------------------------------------------------------------------------------------------------------- Education and Civic Organizations - 6.0% 1,950,000 Board of Regents of Eastern Michigan University, General 12/06 at 101 AAA 1,970,417 Revenue Bonds, Series 1997, 5.500%, 6/01/17 1,250,000 Michigan Higher Education Student Loan Authority, Student Loan 10/02 at 102 A 1,300,850 and Refunding Revenue Bonds, Series XV-A, 6.700%, 10/01/05 (Alternative Minimum Tax) 1,130,000 Board of Trustees of Oakland University, Michigan, General Revenue 5/05 at 102 AAA 1,170,398 Bonds, Series 1995, 5.750%, 5/15/15 2,530,000 Board of Control of Saginaw Valley University, General Revenue 7/08 at 102 AAA 2,479,375 Bonds, Series 1998, 5.250%, 7/01/19 3,250,000 Board of Trustees of Western Michigan University, General 7/03 at 102 AAA 3,272,035 Revenue Bonds, Series 1993A, 5.500%, 7/15/16 - --------------------------------------------------------------------------------------------------------------------------------- Health Care - 19.4% 2,200,000 City of Hancock Hospital Finance Authority, FHA-Insured 8/08 at 100 AAA 2,202,310 Mortgage Hospital Revenue Bonds (Portage Health System, Inc.), Series 1998, 5.450%, 8/01/47 4,000,000 City of Kalamazoo Hospital Finance Authority Hospital Revenue 5/06 at 102 AAA 4,067,200 Refunding and Improvement Bonds (Bronson Methodist Hospital), Series 1996, 5.750%, 5/15/16 3,000,000 Michigan State Hospital Finance Authority, Hospital Revenue 5/03 at 102 AAA 3,146,670 Refunding Bonds (St. John's Hospital), Series 1993A, 6.000%, 5/15/13 Michigan State Hospital Finance Authority, Revenue and Refunding Bonds (The Detroit Medical Center Obligated Group), Series 1993A: 3,000,000 6.250%, 8/15/13 8/03 at 102 BBB 2,969,550 3,200,000 6.500%, 8/15/18 8/03 at 102 BBB 3,222,048 1,500,000 Michigan State Hospital Finance Authority, Hospital Revenue 8/08 at 101 BBB 1,280,655 Bonds (The Detroit Medical Center Obligated Group), Series 1998A, 5.250%, 8/15/28 4,000,000 Michigan State Hospital Finance Authority, Hospital Revenue 11/03 at 102 AAA 4,023,800 Refunding Bonds (Oakwood Hospital Obligated Group), Series 1993A, 5.500%, 11/01/13 4,000,000 Michigan State Hospital Finance Authority, Hospital 9/02 at 102 AA- 4,048,040 Revenue and Refunding Bonds (Henry Ford Health System), Series 1992A, 5.750%, 9/01/17 2,000,000 Michigan State Hospital Finance Authority (Gaylord, Michigan), 1/05 at 102 AA- 2,113,320 Hospital Revenue and Refunding Bonds (Otsego Memorial Hospital), Series 1995, 6.250%, 1/01/20 2,000,000 Michigan State Hospital Finance Authority, Hospital Revenue 5/09 at 101 AA+ 1,822,880 Bonds (Charity Obligated Group), Series 1999A, 5.125%, 11/01/29 1,000,000 City of Saginaw Hospital Finance Authority (Michigan), 7/09 at 101 AAA 984,340 Hospital Revenue and Refunding Bonds (Covenant Medical Center, Inc.), Series 1999E, 5.375%, 7/01/19 3,000,000 Regents of the University of Michigan, Hospital Revenue Refunding 12/02 at 102 AA 2,941,170 Bonds, Series 1993A, 5.500%, 12/01/21 - --------------------------------------------------------------------------------------------------------------------------------- Housing/Multifamily - 9.5% 2,400,000 Michigan State Housing Development Authority, Limited 4/04 at 103 AAA 2,489,592 Obligation Revenue Bonds (Walled Lake Villa Project), Series 1993, 6.000%, 4/15/18 1,500,000 Michigan State Housing Development Authority, Limited 10/03 at 103 AAA 1,520,685 Obligation Revenue Bonds (Brenton Village Green Project), Series 1993, 5.625%, 10/15/18 Michigan State Housing Development Authority, Rental Housing Revenue Bonds, 1992 Series A: 4,000,000 6.500%, 4/01/06 10/02 at 102 AA- 4,256,480 4,075,000 6.600%, 4/01/12 10/02 at 102 AA- 4,333,274 Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Housing/Multifamily (continued) $ 790,000 Michigan State Housing Development Authority, Rental Housing 4/03 at 102 AAA $ 820,541 Revenue Bonds, 1993 Series A, 5.875%,10/01/17 Mount Clemens Housing Corporation, Multifamily Housing Refunding Revenue Bonds, Series 1992A (FHA-Insured Mortgage Loan - Section 8 Assisted Project): 1,000,000 6.600%, 6/01/13 6/03 at 102 AAA 1,056,570 1,500,000 6.600%, 6/01/22 6/03 at 102 AAA 1,579,515 - --------------------------------------------------------------------------------------------------------------------------------- Housing/Single Family - 1.7% 2,695,000 Michigan State Housing Development Authority, Single Family 6/05 at 102 AA+ 2,800,132 Mortgage Revenue Bonds, 1995 Series A, 6.800%, 12/01/16 - --------------------------------------------------------------------------------------------------------------------------------- Tax Obligation/General - 11.4% 730,000 Clarkston Community Schools, County of Oakland, State of Michigan, 5/03 at 102 AA+ 758,331 1993 School Building and Site Refunding Bonds, 5.900%, 5/01/16 2,500,000 School District of the City of Detroit, Wayne County, State of 5/01 at 102 AA+ 2,641,300 Michigan, School Building and Site Bonds (General Obligation - Unlimited Tax), Series 1992, 6.250%, 5/01/12 1,500,000 School District of the City of Detroit, Wayne County, State of 5/09 at 101 AAA 1,319,685 Michigan, School Building and Site Improvement Bonds (General Obligation - Unlimited Tax), Series 1998A, 4.750%, 5/01/28 3,000,000 Dexter Community Schools, Counties of Washtenaw and 5/03 at 102 AA+ 2,865,480 Livingston, State of Michigan, 1993 School Building and Site and Refunding Bonds (General Obligation - Unlimited Tax), 5.000%, 5/01/17 4,100,000 Commonwealth of Puerto Rico, Public Improvement Bonds 7/07 at 101 1/2 A 4,268,018 of 1997, 5.750%, 7/01/17 5,625,000 Commonwealth of Puerto Rico, Public Improvement Refunding No Opt. Call AAA 5,936,906 Bonds, Series 1993 (General Obligation Bonds), 5.375%, 7/01/06 380,000 Reeths-Puffer Schools, County of Muskegon, State of Michigan, 5/05 at 101 AAA 393,357 1995 School Building and Site Refunding Bonds, 5.750%, 5/01/15 1,000,000 Western Townships Utilities Authority, Sewage Disposal System 1/02 at 100 AAA 1,046,250 Refunding Bonds, Series 1991, 6.500%, 1/01/10 - --------------------------------------------------------------------------------------------------------------------------------- Tax Obligation/Limited - 11.6% 6,500,000 City of Detroit, State of Michigan, Convention Facility Limited 9/03 at 102 AAA 6,472,050 Tax Revenue Refunding Bonds (Cobo Hall Expansion Project), Series 1993, 5.250%, 9/30/12 1,400,000 City of Detroit, State of Michigan, Downtown Development 7/08 at 100 AAA 1,239,084 Authority, Tax Increment Refunding Bonds (Development Area No. 1 Projects), Series 1998A, 4.750%, 7/01/25 2,750,000 State Building Authority, State of Michigan, 1991 Revenue 10/01 at 102 AA 2,889,068 Refunding Bonds, Series I, 6.250%, 10/01/20 1,000,000 State Building Authority, State of Michigan, 1991 Revenue 10/01 at 102 AA 1,050,570 Bonds, Series II, 6.250%, 10/01/20 3,275,000 State of Michigan, Comprehensive Transportation Bonds, 5/02 at 100 AA- 3,377,115 Series 1992A, 5.750%, 5/15/12 1,000,000 Puerto Rico Highway and Transportation Authority, Highway 7/16 at 100 A 1,004,880 Revenue Bonds, Series 1996Y, 5.500%, 7/01/36 3,615,000 Saginaw-Midland Municipal Water Supply Corporation, 9/02 at 101 1/2 A 3,541,001 State of Michigan, Water Supply System Revenue Bonds (General Obligation - Limited Tax), Series 1993, 5.250%, 9/01/16 - --------------------------------------------------------------------------------------------------------------------------------- Transportation - 1.7% 1,000,000 Puerto Rico Port Authority, Special Facilities Revenue Bonds, 6/03 at 102 BBB- 1,041,410 Series 1993A (American Airlines, Inc. Project), 6.300%, 6/01/23 (Alternative Minimum Tax) 2,000,000 Charter County of Wayne, Michigan, Detroit Metropolitan Wayne 12/08 at 101 AAA 1,810,660 County Airport, Airport Revenue Bonds, Series 1998A, 5.000%, 12/01/28 (Alternative Minimum Tax) - --------------------------------------------------------------------------------------------------------------------------------- U.S. Guaranteed - 8.7% 2,270,000 Clarkston Community Schools, County of Oakland, State of Michigan, 5/03 at 102 AA+** 2,431,942 1993 School Building and Site Refunding Bonds, 5.900%, 5/01/16 (Pre-refunded to 5/01/03) 2,000,000 Board of Control of Ferris State University, General Revenue Bonds, 10/03 at 102 AAA 2,182,780 Series 1993, 6.250%, 10/01/19 (Pre-refunded to 10/01/03) Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- U.S. Guaranteed (continued) $ 1,950,000 Michigan Municipal Bond Authority, State Revolving Fund Revenue No Opt. Call AA+*** $2,147,691 Bonds, Series 1994, 7.000%, 10/01/03 2,500,000 Michigan State Hospital Finance Authority, Hospital Revenue 11/01 at 102 Aa2*** 2,700,925 Bonds (Daughters of Charity National Health System-Providence Hospital), Series 1991, 7.000%, 11/01/21 (Pre-refunded to 11/01/01) 1,750,000 State of Michigan, State Trunk Line Fund Bonds, Series 1994A, 11/04 at 102 AAA 1,886,185 5.700%, 11/15/15 (Pre-refunded to 11/15/04) 620,000 Reeths-Puffer Schools, County of Muskegon, State of Michigan, 5/05 at 101 AAA 664,460 1995 School Building and Site Refunding Bonds, 5.750%, 5/01/15 (Pre-refunded to 5/01/05) 2,650,000 Regents of the University of Michigan, Hospital Revenue Bonds, 12/00 at 100 AA*** 2,737,874 Series 1990, 6.375%, 12/01/24 (Pre-refunded to 12/01/00) - --------------------------------------------------------------------------------------------------------------------------------- Utilities - 18.7% 6,750,000 The City of Grand Haven, Michigan, Electric System Revenue Refunding 7/03 at 102 AAA 6,664,073 Bonds, 1993 Series, 5.250%, 7/01/16 4,020,000 Michigan Public Power Agency, Belle River Project Refunding Revenue 1/03 at 102 AA- 3,897,551 Bonds, 1993 Series A, 5.250%, 1/01/18 1,500,000 Michigan Public Power Agency, Belle River Project Refunding Revenue 1/03 at 100 AA- 1,405,170 Bonds, 1993 Series B, 5.000%, 1/01/19 8,500,000 Michigan Strategic Fund, Limited Obligation Refunding Revenue 6/03 at 102 AAA 8,902,645 Bonds (Consumers Power Company Project), Collateralized Series 1993B, 5.800%, 6/15/10 County of Monroe, Michigan, Pollution Control Revenue Bonds (The Detroit Edison Company Project), 1992 Series CC: 2,500,000 6.550%, 6/01/24 (Alternative Minimum Tax) 6/03 at 102 AAA 2,687,175 1,500,000 6.550%, 9/01/24 (Alternative Minimum Tax) 9/03 at 102 AAA 1,617,210 6,000,000 County of Monroe, Michigan, Pollution Control Revenue Bonds No Opt. Call AAA 6,461,100 (The Detroit Edison Company Project), 1994 Series A, 6.350%, 12/01/04 (Alternative Minimum Tax) - --------------------------------------------------------------------------------------------------------------------------------- Water and Sewer - 7.4% 1,500,000 City of Ann Arbor, County of Washtenaw, Michigan, Water 2/03 at 101 1/2 AAA 1,527,450 Supply System Revenue Bonds, Series T, 5.500%, 2/01/13 1,730,000 City of Detroit, Michigan, Sewage Disposal System Revenue 7/07 at 101 AAA 1,616,927 Bonds, Series 1997-A, 5.000%, 7/01/22 3,755,000 City of Detroit, Michigan, Sewage Disposal System Revenue 7/03 at 102 AAA 3,846,546 Refunding Bonds, Series 1993-A, 5.700%, 7/01/13 4,500,000 City of Detroit, Michigan, Water Supply System Revenue Refunding 7/04 at 102 AAA 4,076,684 Bonds, Series 1993, 4.750%, 7/01/19 1,600,000 City of Grand Rapids, Michigan, Sanitary Sewer System Improvement 7/08 at 101 AAA 1,416,927 and Refunding Revenue Bonds, Series 1998-A, 4.750%, 1/01/28 - --------------------------------------------------------------------------------------------------------------------------------- $ 164,360,000 Total Investments - (cost $160,112,154) - 98.9% 167,056,201 ============= Other Assets Less Liabilities - 1.1% 1,795,290 ----------------------------------------------------------------------------------------------------------------- Net Assets - 100% $168,851,491 ================================================================================================================= * Optional Call Provisions (not covered by the report of independent auditors): Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings (not covered by the report of independent auditors): Using the higher of Standard & Poor's or Moody's rating. *** Securities are backed by an escrow or trust containing sufficient U.S. government or U.S. government agency securities which ensures the timely payment of principal and interest. Securities are normally considered to be equivalent to AAA rated securities. See accompanying notes to financial statements.
Portfolio of Investments Nuveen Ohio Quality Income Municipal Fund, Inc. (NUO) July 31, 1999
Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Capital Goods - 1.2% $ 2,655,000 Ohio Water Development Authority, Revenue Bonds, USA Waste 3/02 at 102 N/R $2,806,786 Services, Series 1992, 7.750%, 9/01/07 (Alternative Minimum Tax) - --------------------------------------------------------------------------------------------------------------------------------- Education and Civic Organizations - 8.9% 825,000 Bowling Green State University, Ohio, General Receipts Bonds, 6/01 at 102 A 872,834 Series 1991, 6.700%, 6/01/07 3,665,000 State of Ohio, Education Loan Revenue Bonds, Series 1997A 6/07 at 102 AAA 3,720,781 (Supplemental Student Loan Program), 1997A1, 5.850%, 12/01/19 (Alternative Minimum Tax) 1,000,000 State of Ohio (Ohio Higher Educational Facility Commission), Higher 12/04 at 102 AAA 1,035,820 Educational Facility Revenue Bonds (University of Dayton, 1994 Project), 5.800%, 12/01/14 2,400,000 State of Ohio (Ohio Higher Educational Facility Commission), Higher 12/03 at 102 AAA 2,624,472 Educational Facility Revenue Bonds (University of Dayton, 1992 Project), 6.600%, 12/01/17 1,200,000 State of Ohio (Ohio Higher Educational Facility Commission), 9/06 at 101 N/R 1,226,364 Higher Educational Facility Revenue Bonds (The University of Findlay, 1996 Project), 6.125%, 9/01/16 1,500,000 State of Ohio (Ohio Higher Educational Facility Commission), No Opt. Call AA 1,682,790 Higher Educational Facility Revenue Bonds (Case Western Reserve University Project), 1997 Series D, 6.250%, 7/01/14 1,000,000 State of Ohio (Ohio Higher Educational Facility Commission), 10/02 at 102 AA 1,047,060 Higher Educational Facility Revenue Bonds (Case Western Reserve University Project), Series 1992, 6.000%, 10/01/22 1,575,000 The Ohio State University, General Receipts Bonds, 12/02 at 102 AA 1,662,649 Series 1992 A1, 5.875%, 12/01/12 2,000,000 Puerto Rico Industrial, Tourist, Educational, Medical and 10/08 at 101 AAA 1,903,680 Environmental Control Facilities Financing Authority, Higher Education Revenue Bonds, 1998 Series A (Inter American University of Puerto Rico Project), 5.000%, 10/01/22 3,185,000 The Student Loan Funding Corporation, Cincinnati, Ohio, Student 7/02 at 100 A 3,233,157 Loan Subordinated Revenue Refunding Bonds, Series 1992 D, 6.600%, 7/01/05 (Alternative Minimum Tax) 1,400,000 University of Cincinnati, Ohio, General Receipts Bonds, 6/07 at 100 AAA 1,384,334 Series AB, 5.375%, 6/01/20 - --------------------------------------------------------------------------------------------------------------------------------- Energy - 2.0% 2,000,000 County of Ashtabula, Ohio, Industrial Development Refunding 5/02 at 102 Baa2 2,125,180 Revenue Bonds, 1992 Series A (Ashland Oil, Inc. Project), 6.900%, 5/01/10 2,250,000 Ohio Air Quality Development Authority, Air Quality Development 4/01 at 102 Baa1 2,367,878 Refunding Revenue Bonds, Series 1992 (Ashland Oil, Inc. Project), 6.850%, 4/01/10 - --------------------------------------------------------------------------------------------------------------------------------- Health Care - 9.1% 1,300,000 Akron, Bath and Copley Joint Township Hospital District, Ohio, 11/03 at 102 Baa1 1,258,777 Hospital Facilities Revenue Bonds, Series 1993A (Summa Health System Project), 5.500%, 11/15/13 County of Butler, Ohio, Hospital Facilities Revenue Refunding and Improvement Bonds, Series 1991 (Fort Hamilton-Hughes Memorial Hospital Center): 240,000 7.250%, 1/01/01 No Opt. Call Baa1 243,120 1,000,000 7.500%, 1/01/10 1/02 at 102 Baa1 1,057,880 City of Cambridge, Ohio, Hospital Revenue Refunding Bonds, Series 1991 (Guernsey Memorial Hospital Project): 1,680,000 8.000%, 12/01/06 12/01 at 102 BBB 1,804,522 750,000 8.000%, 12/01/11 12/01 at 102 BBB 801,405 Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Health Care (continued) $ 2,675,000 County of Clermont, Ohio, Hospital Facilities Revenue Refunding 1/03 at 102 AAA $2,744,604 Bonds, Series 1993A (Mercy Health System), 5.875%, 1/01/15 1,000,000 County of Cuyahoga, Ohio, Hospital Improvement and Refunding 2/07 at 102 AAA 1,009,520 Revenue Bonds, Series 1997 (The MetroHealth System Project), 5.625%, 2/15/17 1,500,000 County of Cuyahoga, Ohio, Hospital Improvement Revenue Bonds, 1/02 at 102 AA- 1,608,405 Series 1992 (University Hospitals Health System, Inc. Project), 6.500%, 1/15/19 1,170,000 County of Cuyahoga, Ohio, Hospital Facilities Revenue Bonds, 2/03 at 102 AA- 1,229,647 Series 1993, Health Cleveland, Inc. (Fairview General Hospital Project), 6.300%, 8/15/15 County of Franklin, Ohio, Hospital Refunding and Improvement Revenue Bonds, Series 1996A (The Children's Hospital Project): 1,000,000 5.750%, 11/01/20 11/06 at 101 Aa 1,012,010 1,500,000 5.875%, 11/01/25 11/06 at 101 Aa 1,536,270 1,500,000 County of Franklin, Ohio, Hospital Revenue Refunding and Improvement 11/02 at 102 Aa 1,619,445 Bonds, Series 1992A (The Children's Hospital Project), 6.600%, 5/01/13 2,500,000 County of Marion, Ohio, Hospital Refunding and Improvement 5/06 at 102 BBB+ 2,559,625 Revenue Bonds, Series 1996 (The Community Hospital), 6.375%, 5/15/11 1,500,000 County of Montgomery, Ohio, Hospital Facilities Revenue Refunding 4/06 at 102 AAA 1,515,240 and Improvement Bonds, Series 1996 (Kettering Medical Center), 5.625%, 4/01/16 750,000 County of Tuscarawas, Ohio, Hospital Facilities Revenue Bonds, 10/03 at 102 Baa2 781,560 Series 1993A (Union Hospital Project), 6.500%, 10/01/21 - --------------------------------------------------------------------------------------------------------------------------------- Housing/Multifamily - 8.1% 1,385,000 County of Clermont, Ohio, Mortgage Revenue Bonds, Series 1994 8/03 at 103 Aaa 1,417,741 (GNMA Collateralized - S.E.M. Villa II Project), Series 1994-A, 5.950%, 2/20/30 1,435,000 County of Cuyahoga, Ohio, Multifamily Housing Revenue Bonds 6/08 at 105 Aaa 1,520,368 (Water Street Associates Project), Series 1997, 6.150%, 12/20/26 (Alternative Minimum Tax) 990,000 County of Franklin, Ohio, Multifamily Housing Mortgage Revenue 1/05 at 103 Aa 975,497 Bonds, Series 1994A (FHA-Insured Mortgage Loan - Hamilton Creek Apartments Project), 5.550%, 7/01/24 (Alternative Minimum Tax) 6,170,000 County of Franklin, Ohio, Mortgage Revenue Bonds, Series 1992A 1/02 at 103 Aa 6,510,214 (FHA-Insured Mortgage Loan - Kensington Place Project), 6.750%, 1/01/34 5,200,000 Hamilton County, Multifamily Housing Revenue Bonds (Huntington 1/07 at 102 AAA 5,278,416 Meadows Project), Series 1997, 5.700%, 1/01/27 (Alternative Minimum Tax) 2,885,000 Ohio Capital Corporation for Housing, Mortgage Revenue Refunding 1/02 at 100 AAA 2,899,050 Bonds, FHA-Insured Section 8 Assisted Project, Series 1997C, 5.700%, 1/01/24 - --------------------------------------------------------------------------------------------------------------------------------- Housing/Single Family - 5.5% 3,980,000 Ohio Housing Finance Agency, Residential Mortgage Revenue 9/07 at 102 AAA 4,022,268 Bonds, 1996 Series B3 (Mortgage-Backed Securities Program), 5.750%, 9/01/28 (Alternative Minimum Tax) 3,000,000 Ohio Housing Finance Agency, Residential Mortgage Revenue 9/08 at 101 AAA 2,841,810 Bonds, 1999 Series A1 (Mortgage-Backed Securities Program), 5.250%, 9/01/30 (Alternative Minimum Tax) 5,580,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue 9/99 at 102 N/R 5,710,907 Bonds (GNMA Mortgage-Backed Securities Program), 1989 Series A, 7.650%, 3/01/29 (Alternative Minimum Tax) - --------------------------------------------------------------------------------------------------------------------------------- Long-Term Care - 1.0% 1,365,000 County of Franklin, Ohio, Health Care Facilities Revenue Bonds, 7/03 at 102 N/R 1,354,107 Series 1993 (Ohio Presbyterian Retirement Services), 6.500%, 7/01/23 1,000,000 County of Marion, Ohio, Health Care Facilities Refunding and 11/03 at 102 BBB- 1,029,120 Improvement Revenue Bonds, Series 1993 (United Church Homes, Inc. Project), 6.300%, 11/15/15 Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Tax Obligation/General - 13.6% Berea City School District, Ohio, School Improvement Bonds, Series 1993 (General Obligation - Unlimited Tax): $ 650,000 7.500%, 12/15/06 12/03 at 102 AAA $ 738,979 680,000 7.450%, 12/15/07 12/03 at 102 AAA 771,752 1,750,000 Brecksville-Broadview Heights City School District, Ohio, School 12/06 at 102 AAA 1,921,850 Improvement Bonds, Series 1996 (General Obligation - Unlimited Tax), 6.500%, 12/01/16 2,000,000 City of Columbus, Ohio, General Obligation Refunding Bonds, 1/02 at 102 Aaa 2,137,040 Series 1992B, 6.500%, 1/01/10 1,300,000 County of Franklin, Ohio, Refunding Bonds, Series 1993 12/08 at 102 AAA 1,298,258 (General Obligation - Limited Tax), 5.375%, 12/01/20 1,505,000 Greater Cleveland Regional Transit Authority, General Obligation, 12/06 at 101 Aaa 1,617,514 Capital Improvement Bonds, Series 1996, 5.650%, 12/01/16 North Canton City School District, Ohio, School Improvement Bonds, Series 1994 (General - Obligation-Unlimited Tax): 650,000 9.750%, 12/01/03 No Opt. Call AAA 786,136 715,000 9.700%, 12/01/04 No Opt. Call AAA 889,367 2,000,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1996 7/06 at 101 1/2 A 1,954,900 (General Obligation Bonds), 5.400%, 7/01/25 1,300,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997 7/07 at 101 1/2 A 1,353,274 (General Obligation Bonds), 5.750%, 7/01/17 2,400,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1998 7/08 at 101 A 2,221,632 (General Obligation Bonds), 5.000%, 7/01/27 1,000,000 Revere Local School District, Ohio, School Improvement Bonds, 12/03 at 102 AAA 1,047,300 Series 1993 (General Obligation - Unlimited Tax), 6.000%, 12/01/16 2,870,000 City of Strongsville, Ohio, Various Purpose Improvement 12/06 at 102 Aa3 2,998,232 Bonds, Series 1996 (General Obligation - Limited Tax), 5.950%, 12/01/21 1,000,000 Sylvania City School District (General Obligation - Unlimited Tax), 12/05 at 101 AAA 1,040,640 Series 1995, 5.800%, 12/01/15 1,135,000 City of Toledo, Ohio (General Obligation - Limited Tax), Various No Opt. Call AAA 1,254,254 Purpose Improvement Bonds, Series 1994, 7.000%, 12/01/03 1,000,000 Upper Arlington City School District, General Obligation Bonds, 12/06 at 101 AAA 973,050 Series 1996, Improvement Bonds, 5.250%, 12/01/22 2,000,000 Board of Education, Wayne Local School District, County 12/06 at 101 AAA 2,121,040 of Warren, Ohio, School Improvement Bonds, Series 1996 (General Obligation - Unlimited Tax), 6.100%, 12/01/24 3,000,000 Board of Education, West Clermont Local School District, 12/05 at 100 AAA 3,138,600 County of Clermont, Ohio, School Improvement Bonds, Series 1995 (General Obligation - Unlimited Tax), 6.000%, 12/01/18 1,000,000 City of Westlake, Ohio, General Obligation, Various Purpose 12/08 at 101 Aaa 1,025,050 Improvement and Refunding Bonds (Series 1997), 5.550%, 12/01/17 1,820,000 Worthington City School District, Franklin County, Ohio, General 6/02 at 102 AAA 1,939,847 Obligation Refunding Bonds (Unlimited Tax), 6.375%, 12/01/12 - --------------------------------------------------------------------------------------------------------------------------------- Tax Obligation/Limited - 3.5% 1,250,000 City of Columbus, Ohio, Tax Increment Financing Bonds, Series 1999 6/09 at 101 AAA 1,144,587 (Easton Project), 4.875%, 12/01/24 1,000,000 State of Ohio, Ohio Building Authority, State Facilities Bonds 10/02 at 102 Aa2 1,071,290 (Juvenile Correctional Building Fund Projects), 1992 Series B, 6.000%, 10/01/12 3,000,000 State of Ohio, Ohio Building Authority, State Facilities Bonds 10/03 at 102 Aa2 3,189,960 (Adult Correctional Building Fund Projects), 1993 Series A, 6.125%, 10/01/12 1,040,000 State of Ohio, Department of Transportation, Certificates of 10/99 at 103 AA- 1,054,050 Participation (Rickenbacker Port Authority Improvements), 6.125%, 4/15/15 (Alternative Minimum Tax) 1,500,000 State of Ohio (OPFC), Higher Education Capital Facilities Bonds, 12/01 at 102 Aa2 1,556,625 Series II-1992A, 5.500%, 12/01/06 Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Technology - 0.7% $ 500,000 County of Franklin, Ohio, Revenue Bonds, Series 1993 (Online 4/03 at 100 N/R $ 505,730 Computer Library Center, Incorporated Project), 6.000%, 4/15/13 1,000,000 Puerto Rico Industrial, Medical and Environmental Pollution 1/02 at 103 Aa3 1,077,560 Control Facilities Financing Authority, Adjustable Rate Industrial Revenue Bonds, 1983 Series A (Motorola Inc. Project), 6.750%, 1/01/14 - --------------------------------------------------------------------------------------------------------------------------------- Transportation - 3.0% 3,430,000 City of Cleveland, Ohio, Parking Facilities Refunding Revenue Bonds, 9/06 at 102 AAA 3,438,301 Series 1996, 5.500%, 9/15/22 Columbus Municipal Airport Authority, Airport Improvement Revenue Bonds, Series 1994A (Port Columbus International Airport Project): 830,000 5.950%, 1/01/08 (Alternative Minimum Tax) 1/04 at 102 AAA 873,500 1,000,000 6.000%, 1/01/14 (Alternative Minimum Tax) 1/04 at 102 AAA 1,038,450 1,500,000 City of Dayton, Ohio, Special Facilities Revenue Refunding Bonds, 2/08 at 102 BBB 1,457,205 Series 1998A (Emery Air Freight Corporation and Emery Worldwide Airlines, Inc., Guarantors), 5.625%, 2/01/18 - --------------------------------------------------------------------------------------------------------------------------------- U.S. Guaranteed - 25.0% 1,500,000 City of Akron, Ohio, Waterworks System Mortgage Revenue 3/01 at 102 AAA 1,587,570 Improvement Bonds, Series 1991, 6.550%, 3/01/12 (Pre-refunded to 3/01/01) 2,000,000 City of Barberton, Ohio, Hospital Facilities Revenue Bonds, 1/02 at 102 N/R*** 2,172,840 Series 1992 (The Barberton Citizens Hospital Company Project), 7.250%, 1/01/12 (Pre-refunded to 1/01/02) 2,000,000 County of Carroll, Ohio, Hospital Improvement Revenue Bonds, 12/01 at 102 AAA 2,173,320 Series 1991 (Timken Mercy Medical Center), 7.125%, 12/01/18 (Pre-refunded to 12/01/01) 2,500,000 County of Clermont, Ohio, Waterworks System Revenue Bonds, 12/01 at 102 AAA 2,691,375 Series 1991, Clermont County Sewer District, 6.625%, 12/01/14 (Pre-refunded to 12/01/01) 2,075,000 City of Cleveland, Ohio, Airport System Revenue Bonds, 1/00 at 102 AAA 2,150,655 Series 1990A, 7.400%, 1/01/20 (Alternative Minimum Tax) (Pre-refunded to 1/01/00) 2,000,000 City of Cleveland, Ohio, Public Power System First Mortgage 11/04 at 102 AAA 2,278,260 Revenue Bonds, Series 1994A, 7.000%, 11/15/24 (Pre-refunded to 11/15/04) 1,575,000 City of Cleveland, Ohio, Waterworks Improvement First Mortgage 1/02 at 102 AAA 1,689,140 Revenue Bonds, Series F, 1992 A, 6.500%, 1/01/21 (Pre-refunded to 1/01/02) 2,745,000 City of Cleveland, Ohio, First Mortgage Revenue Refunding Bonds, 1/02 at 102 AAA 2,943,930 Series F, 1992-B, 6.500%, 1/01/11 (Pre-refunded to 1/01/02) 3,960,000 City of Cleveland, Ohio, Waterworks Improvement and Refunding 1/06 at 102 AAA 4,280,008 First Mortgage Revenue Bonds, Series 1996H, 5.750%, 1/01/26 (Pre-refunded to 1/01/06) 1,950,000 City School District of Columbus, Franklin County, Ohio, School 12/02 at 102 AAA 2,135,387 Building Renovation and Improvement Bonds, Series 1992 (General Obligation - Unlimited Tax), 6.650%, 12/01/12 (Pre-refunded to 12/01/02) 3,250,000 County of Cuyahoga, Ohio, Hospital Revenue Bonds, Series 1991 8/01 at 102 AAA 3,500,738 (Meridia Health System), 7.000%, 8/15/23 (Pre-refunded to 8/15/01) 2,000,000 Dublin City School District, Franklin, Delaware and Union Counties, 12/02 at 102 AAA 2,159,760 Ohio, Various Purpose School Building Construction and Improvement Bonds (General Obligation - Unlimited Tax), 6.200%, 12/01/19 (Pre-refunded to 12/01/02) 2,905,000 County of Franklin, Ohio, First Mortgage Revenue Bonds, No Opt. Call AAA 3,252,699 Series 1979 (Online Computer Library Center, Incorporated Project), 7.500%, 6/01/09 3,250,000 City of Garfield Heights, Ohio, Hospital Improvement and Refunding 11/02 at 102 AA-*** 3,547,570 Revenue Bonds, Series 1992B (Marymount Hospital Project), 6.650%, 11/15/11 (Pre-refunded to 11/15/02) 1,000,000 Hamilton County, Ohio, Sewer System Improvement and Refunding 6/01 at 102 AAA 1,066,380 Revenue Bonds, Series 1991A (The Metropolitan Sewer District of Greater Cincinnati), 6.700%, 12/01/13 (Pre-refunded to 6/01/01) 3,000,000 Kent State University (A State University of Ohio), General 5/02 at 102 AAA 3,237,000 Receipts Bonds, Series 1992, 6.500%, 5/01/22 (Pre-refunded to 5/01/02) 1,000,000 City of Lakewood, Ohio, Various Purpose General Obligation Bonds, 12/02 at 102 Aa3*** 1,089,130 Series 1992 (Limited Tax Obligation Bonds), 6.500%, 12/01/12 (Pre-refunded to 12/01/02) Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- U.S. Guaranteed (continued) $ 2,100,000 Lakota Local School District, County of Butler, Ohio, School 12/05 at 100 AAA $2,304,729 Improvement Unlimited Tax General Obligation Bonds, Series 1994, 6.250%, 12/01/14 (Pre-refunded to 12/01/05) 1,400,000 City of Middleburg Heights, Ohio, Hospital Improvement Revenue 8/01 at 102 AAA 1,498,924 Bonds, Series 1991 (Southwest General Hospital Project), 6.750%, 8/15/21 (Pre-refunded to 8/15/01) 1,000,000 City of Newark, Ohio, Water System Improvement Bonds 12/03 at 102 AAA 1,084,610 (General Obligation - Limited Tax), 6.000%, 12/01/18 (Pre-refunded to 12/01/03) 205,000 Ohio Water Development Authority, Water Development 12/00 at 100 AAA 215,129 Revenue Refunding Bonds, Refunding and Improvement Series, 8.000%, 12/01/18 (Pre-refunded to 12/01/00) 2,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1992 7/02 at 101 1/2 AAA 2,711,100 (General Obligation Bonds), 6.600%, 7/01/13 (Pre-refunded to 7/01/02) 1,400,000 Reynoldsburg City School District, Ohio, General Obligation Bonds, 12/02 at 102 AAA 1,528,772 School Building Construction and Improvement, 6.550%, 12/01/17 (Pre-refunded to 12/01/02) 1,000,000 Solon City School District, Ohio, School Improvement Bonds, 12/01 at 102 N/R*** 1,085,100 Series 1990, General Obligation-Unlimited Tax Bonds, 7.150%, 12/01/13 (Pre-refunded to 12/01/01) 3,500,000 University of Cincinnati, General Receipts Bonds, Series O, 12/02 at 102 AA*** 3,790,360 6.300%, 6/01/12 (Pre-refunded to 12/01/02) 1,000,000 University of Toledo, Ohio, General Receipts Bonds, Series B, 12/02 at 102 AAA 1,071,920 5.900%, 6/01/20 (Pre-refunded to 12/01/02) - --------------------------------------------------------------------------------------------------------------------------------- Utilities - 9.6% 3,000,000 City of Cleveland, Ohio, Public Power System Improvement 11/01 at 102 AAA 3,225,600 First Mortgage Revenue Bonds, Series 1991B, 7.000%, 11/15/17 2,000,000 City of Cleveland, Ohio, Public Power System Revenue Bonds, 11/08 at 101 AAA 1,992,260 Series 1998, 5.250%, 11/15/15 1,250,000 City of Hamilton, Ohio, Electric System Mortgage Revenue Bonds, 10/02 at 102 AAA 1,339,450 Series 1992B, 6.300%, 10/15/25 4,000,000 State of Ohio, Ohio Air Quality Development Authority, Collateralized 6/02 at 103 AAA 4,455,440 Pollution Control Revenue Refunding Bonds, Series 1992 (The Cleveland Electric Illuminating Company Project), 8.000%, 12/01/13 State of Ohio, Ohio Air Quality Development Authority, Air Quality Development Revenue Refunding Bonds (JMG Funding Limited Partnership Project), Series 1994: 2,000,000 6.375%, 1/01/29 (Alternative Minimum Tax) 10/04 at 102 AAA 2,142,900 4,000,000 6.375%, 4/01/29 (Alternative Minimum Tax) 10/04 at 102 AAA 4,285,800 3,000,000 State of Ohio, Ohio Air Quality Development Authority, Air Quality 4/07 at 102 AAA 3,006,390 Development Revenue Bonds (JMG Funding, Limited Partnership Project), Series 1997, 5.625%, 1/01/23 (Alternative Minimum Tax) 1,500,000 Puerto Rico Electric Power Authority, Power Revenue Refunding 7/09 at 101 1/2 AAA 1,521,855 Bonds, Series FF, 5.250%, 7/01/13 - --------------------------------------------------------------------------------------------------------------------------------- Water and Sewer - 8.0% 1,000,000 City of Cleveland, Ohio, Waterworks Improvement First Mortgage No Opt. Call AAA 1,020,870 Refunding Revenue Bonds, Series G of 1993, 5.500%, 1/01/21 City of Cleveland, Ohio, Waterworks Improvement First Mortgage Revenue Refunding Bonds, Series F of 1992B: 255,000 6.500%, 1/01/11 1/02 at 102 AAA 272,473 3,720,000 6.250%, 1/01/16 1/02 at 102 AAA 3,928,580 2,000,000 City of Cleveland, Ohio, Waterworks Improvement and Refunding 1/08 at 101 AAA 1,863,780 Revenue Bonds, Series I of 1998, 5.000%, 1/01/28 40,000 City of Cleveland, Ohio, Waterworks Improvement and Refunding 1/06 at 102 AAA 40,846 First Mortgage Revenue Bonds, Series H of 1996, 5.750%, 1/01/26 2,500,000 City of Columbus, Ohio, Sewerage System Revenue Refunding Bonds, 6/02 at 102 Aa2 2,659,375 Series 1992, 6.250%, 6/01/08 Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Water and Sewer (continued) $ 1,000,000 Greene County, Ohio, Sewer System Revenue Bonds, Series 1998 12/08 at 102 AAA $ 968,730 (Governmental Enterprise Revenue Bonds), 5.250%, 12/01/25 1,000,000 County of Montgomery, Ohio, Water Revenue Bonds, Greater Moraine 11/02 at 102 AAA 1,068,110 Beavercreek Sewer District, Series 1992, 6.250%, 11/15/17 2,000,000 Northeast Ohio Regional Sewer District, Wastewater Improvement 11/05 at 101 AAA 2,044,640 Revenue Refunding Bonds, Series 1995, 5.600%, 11/15/16 1,000,000 Ohio Water Development Authority, Water Development Revenue 6/05 at 102 AAA 1,033,910 Bonds, 1995 Fresh Water Series, 5.900%, 12/01/21 1,250,000 City of Oxford, Ohio, Water Supply System Mortgage Revenue 12/02 at 102 AAA 1,325,135 Refunding Bonds, Series 1992, 6.000%, 12/01/14 2,000,000 Southwest Regional Water District, Ohio, Waterworks System 12/05 at 101 AAA 2,103,240 Revenue Bonds, Series 1995, 6.000%, 12/01/20 - --------------------------------------------------------------------------------------------------------------------------------- $ 216,865,000 Total Investments - (cost $216,709,830) - 99.2% 227,217,076 ============= Other Assets Less Liabilities - 0.8% 1,743,715 ----------------------------------------------------------------------------------------------------------------- Net Assets - 100% $228,960,791 ================================================================================================================= * Optional Call Provisions (not covered by the report of independent auditors): Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings (not covered by the report of independent auditors): Using the higher of Standard & Poor's or Moody's rating. *** Securities are backed by an escrow or trust containing sufficient U.S. government or U.S. government agency securities which ensures the timely payment of principal and interest. Securities are normally considered to be equivalent to AAA rated securities. N/R Investment is not rated. See accompanying notes to financial statements.
Portfolio of Investments Nuveen Texas Quality Income Municipal Fund (NTX) July 31, 1999
Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Basic Materials - 1.5% $ 3,000,000 Guadalupe-Blanco River Authority, Sewage and Solid Waste Disposal 4/06 at 102 AA- $3,116,640 Facility Bonds (E.I. du Pont de Nemours and Company Project), Series 1996, 6.400%, 4/01/26 (Alternative Minimum Tax) - --------------------------------------------------------------------------------------------------------------------------------- Education and Civic Organizations - 8.7% 2,255,000 Brazos Higher Education Authority, Inc., Student Loan Revenue 3/02 at 102 A 2,399,636 Refunding Bonds, Series 1992A, 6.875%, 9/01/04 (Alternative Minimum Tax) 1,055,000 Brazos Higher Education Authority, Inc., Student Loan Revenue No Opt. Call Aa 1,133,534 Refunding Bonds, Series 1992C-1, 6.650%, 11/01/04 (Alternative Minimum Tax) 205,000 Brazos Higher Education Authority, Inc. Student Loan Revenue Refunding No Opt. Call A 220,984 Bonds, Subordinate Series 1993A-2, 6.800%, 12/01/04 (Alternative Minimum Tax) 4,035,000 City of Bryan, Brazos County, Texas, Lease Revenue Bonds (Blinn 10/05 at 100 AAA 3,999,250 College Project), Series 1995, 5.300%, 10/01/16 1,000,000 City of Georgetown Higher Education Finance Corporation, Higher 2/04 at 100 A+ 1,045,400 Education Revenue Bonds, Series 1994 (Southwestern University Project), 6.300%, 2/15/14 2,500,000 North Texas Higher Educational Authority, Inc., Student Loan 4/03 at 102 Aa 2,545,825 Revenue Bonds, Series 1993C, 6.100%, 4/01/08 (Alternative Minimum Tax) 1,000,000 Southwest Higher Education Authority, Texas, Higher Educational 10/08 at 101 A+ 920,750 Facilities Revenue Bonds (Southern Methodist University), Series 1998D, 5.000%, 10/01/22 2,500,000 City of Terrell Hills, Texas, Higher Education Facilities Corporation, 3/03 at 101 1/2 AAA 2,654,825 Higher Education Revenue and Refunding Bonds (Incarnate Word College Project), Series 1993, 5.750%, 3/15/13 1,445,000 Tyler Junior College District, Smith and Van Zanlt Counties, 8/04 at 100 AAA 1,509,678 Texas, Combined Fee Improvement Revenue and Refunding Bonds, Series 1994, 5.900%, 8/15/13 2,000,000 Board of Regents of The University of Houston System, 2/05 at 100 AAA 2,082,460 Consolidated Revenue Bonds, Series 1995, 6.000%, 2/15/17 - --------------------------------------------------------------------------------------------------------------------------------- Energy - 5.8% 5,000,000 Gulf Coast Waste Disposal Authority (Valero Energy Corporation 4/08 at 102 BBB- 4,697,550 Project), Series 1998, 5.600%, 4/01/32 (Alternative Minimum Tax) 5,000,000 Gulf Coast Industrial Development Authority, Waste Disposal Revenue 6/08 at 102 BBB- 4,695,200 Bonds (Valero Refining and Marketing Company Project), Series 1997, 5.600%, 12/01/31 (Alternative Minimum Tax) 3,000,000 Gulf Coast Waste Disposal Authority (Texas), Waste Disposal 4/09 at 101 BBB- 2,856,240 Revenue Bonds (Valero Energy Corporation Project), Series 1999, 5.700%, 4/01/32 (Alternative Minimum Tax) - --------------------------------------------------------------------------------------------------------------------------------- Health Care - 12.9% 3,500,000 Abilene Health Facilities Development Corporation (Texas), 9/05 at 102 AAA 3,675,805 Hospital Revenue Refunding and Improvement Bonds (Hendrick Medical Center Project), Series 1995C, 6.150%, 9/01/25 2,000,000 Brazos County (Texas), Health Facilities Development Corporation, 7/07 at 102 AAA 1,923,900 Franciscan Services Corporation Obligated Group Revenue Bonds, Series 1997 B, 5.375%, 1/01/28 1,000,000 Harris County Health Facilities Development Corporation 10/09 at 101 AA 928,010 (Texas Children's Hospital Project), Hospital Revenue Bonds, Series 1999A, 5.250%, 10/01/29 5,750,000 Midland County Hospital District, Hospital Revenue Bonds, No Opt. Call A- 2,916,228 Series 1992, 0.000%, 6/01/11 4,500,000 Port of Corpus Christi Authority of Nueces County (Texas), 4/02 at 102 A+ 4,804,965 Pollution Control Revenue Bonds (Hoechst Celanese Corporation), Series 1992, 6.875%, 4/01/17 (Alternative Minimum Tax) 5,350,000 Richardson Hospital Authority (Texas), Hospital Revenue Refunding 12/08 at 101 BBB+ 4,990,587 and Improvement Bonds (Baylor/Richardson Medical Center Project), Series 1998, 5.625%, 12/01/28 1,050,000 Tarrant County Health Facilities Development Corporation (Texas), 11/08 at 101 A- 958,073 Hospital Revenue Bonds, Series 1998 (Adventist Health System / Sunbelt Obligated Group), 5.375%, 11/15/20 Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Health Care (continued) $ 1,500,000 Texas Health Facilities Development Corporation, Hospital Revenue 8/03 at 102 AAA $1,608,645 Bonds (All Saints Episcopal Hospitals of Fort Worth Project), Series 1993B, 6.250%, 8/15/22 5,400,000 Travis County Health Facilities Development Corporation, 11/03 at 102 Aa 5,579,604 Hospital Revenue Bonds (Daughters of Charity Health Services of Austin), Series 1993B, 6.000%, 11/15/22 - --------------------------------------------------------------------------------------------------------------------------------- Housing/Multifamily - 1.9% 4,115,000 San Antonio Housing Finance Corporation (Texas), Multifamily 12/05 at 103 AAA 3,978,094 Housing Revenue Bonds (Harbor Cove Apartments Project), Series 1991 (Remarketing), 5.250%, 12/15/21 (Alternative Minimum Tax) - --------------------------------------------------------------------------------------------------------------------------------- Housing/Single Family - 7.7% 1,235,000 Baytown Housing Finance Corporation, Single Family Mortgage 9/02 at 103 Aa2 1,357,537 Revenue Refunding Bonds, Series 1992A, 8.500%, 9/01/11 1,025,000 El Paso Housing Finance Corporation, Single Family Mortgage 4/01 at 103 A2 1,099,415 Revenue Refunding Bonds, Series 1991A, 8.750%, 10/01/11 785,000 City of Galveston Property Finance Authority, Inc., Single Family 9/01 at 103 A3 833,929 Mortgage Revenue Bonds, Series 1991A, 8.500%, 9/01/11 1,990,000 Harrison County Finance Corporation, Single Family Mortgage 12/01 at 103 A1 2,088,684 Revenue Refunding Bonds, Series 1991, 8.875%, 12/01/11 1,285,000 Houston Housing Finance Corporation, Single Family Mortgage 6/03 at 102 AAA 1,329,602 Revenue Refunding Bonds, Series 1993A, 5.950%, 12/01/10 780,000 Port Arthur Housing Finance Corporation, Single Family Mortgage 9/02 at 103 A 841,932 Revenue Refunding Bonds, Series 1992, 8.700%, 3/01/12 4,595,000 Texas Department of Housing and Community Affairs, 9/06 at 102 AAA 4,783,992 Single Family Mortgage Revenue Bonds, Series 1996E, 6.000%, 9/01/17 2,565,000 Travis County Housing Finance Corporation (Texas), Residential 12/01 at 103 AAA 2,704,639 Mortgage Bonds (GNMA and FNMA Mortgage-Backed Securities Program), Senior Bonds, Series 1991A, 7.050%, 12/01/25 1,135,000 Victoria Housing Finance Corporation, Single Family Mortgage No Opt. Call Aaa 1,231,362 Revenue Refunding Bonds, Series 1995, 8.125%, 1/01/11 - --------------------------------------------------------------------------------------------------------------------------------- Long-Term Care - 3.4% 3,400,000 Bell County Health Facilities Development Corporation, Retirement 11/08 at 101 A- 3,097,162 Facility Revenue Bonds (Buckner Retirement Services, Inc., Obligated Group Project), Series 1998, 5.250%, 11/15/19 4,000,000 Tarrant County Health Facilities Development Corporation, 1/08 at 105 AAA 4,197,560 Tax-Exempt Mortgage Revenue Bonds (South Central Nursing Homes, Inc. Project), Series 1997A, 6.000%, 1/01/37 (Mandatory put 1/01/26) - --------------------------------------------------------------------------------------------------------------------------------- Tax Obligation/General - 11.1% 1,000,000 Caddo Mills Independent School District (Hunt County, Texas), 2/05 at 100 AAA 1,072,550 Unlimited Tax School Building and Refunding Bonds, Series 1995, 6.375%, 8/15/25 4,130,000 Coppell Independent School District (Dallas County, Texas), 8/09 at 75 11/32 AAA 1,816,044 Unlimited Tax School Building and Refunding Bonds, Series 1992, 0.000%, 8/15/14 1,475,000 City of Corpus Christi (Texas), General Improvement and 3/02 at 100 AAA 1,560,329 Refunding Bonds, Series 1992, 6.700%, 3/01/08 2,800,000 City of Ennis (Ennis County, Texas), General Obligation Refunding 8/02 at 100 AAA 2,954,448 and Improvement Bonds, Series 1992, 6.500%, 8/01/13 1,545,000 Montgomery County (A Political Subdivision of the State of Texas), 9/07 at 72 3/8 AAA 697,228 Refunding Bonds, Series 1997, 0.000%, 3/01/14 1,825,000 Socorro Independent School District (El Pasco County, Texas), 2/06 at 100 Aaa 1,851,225 Unlimited Tax School Building Bonds, Series 1996, 5.750%, 2/15/21 2,000,000 State of Texas, Veterans Land Bonds, Series 1994, General 12/04 at 100 Aa1 2,111,840 Obligation Bonds, 6.400%, 12/01/24 (Alternative Minimum Tax) 3,490,000 State of Texas, Veterans Housing Assistance Bonds, Series 1993, 12/03 at 102 Aa1 3,702,471 General Obligation Bonds, 6.800%, 12/01/23 (Alternative Minimum Tax) Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- Tax Obligation/General (continued) $ 6,290,000 State of Texas, College Student Loan Bonds, Series 1997, 8/10 at 100 Aa1 $5,725,850 5.000%, 8/01/22 (Alternative Minimum Tax) 1,225,000 Weslaco Independent School District (Hidalgo County, Texas), 2/06 at 100 Aaa 1,256,581 Unlimited Tax School Building and Refunding Bonds, Series 1996, 5.700%, 2/15/15 West Independent School District (McLennan and Hill Counties, Texas), Unlimited Tax School Building and Refunding Bonds, Series 1998: 1,000,000 0.000%, 8/15/22 8/13 at 61 7/32 AAA 269,450 1,000,000 0.000%, 8/15/23 8/13 at 57 31/32 AAA 254,070 1,000,000 0.000%, 8/15/24 8/13 at 54 7/8 AAA 239,530 - --------------------------------------------------------------------------------------------------------------------------------- Tax Obligation/Limited - 4.1% 1,450,000 Industrial Development Corporation of the City of Galveston, 9/05 at 100 AAA 1,496,038 Sales Tax Revenue Bonds, Series 1995, 5.750%, 9/01/15 1,575,000 Harris County, Texas, Toll Road Unlimited Tax and Subordinate 8/02 at 102 AA 1,688,054 Lien Revenue Refunding Bonds, Series 1992A, 6.500%, 8/15/15 800,000 City of Laredo, Webb County, Texas, Combination Tax and Waterworks 8/04 at 100 AAA 844,792 System, Revenue Certificates of Obligation, Series 1994, 5.625%, 8/15/11 4,580,000 City of San Antonio, Texas, Hotel Occupancy Tax Revenue 8/06 at 102 AAA 4,659,784 Bonds (Henry B. Gonzalez Convention Center Project), 5.700%, 8/15/26 - --------------------------------------------------------------------------------------------------------------------------------- Transportation - 11.1% 5,295,000 Alliance Airport Authority, Inc., Special Facilities Revenue 12/00 at 102 Baa2 5,587,390 Bonds, Series 1990 (American Airlines, Inc. Project), 7.500%, 12/01/29 (Alternative Minimum Tax) 5,020,000 Dallas-Fort Worth International Airport, Facility Improvement 5/02 at 102 AAA 5,336,059 Corporation Revenue Bonds, United Parcel Service, Inc., Series 1992, 6.600%, 5/01/32 (Alternative Minimum Tax) 3,600,000 Harris County, Texas, Toll Road Senior Lien Revenue Refunding 8/04 at 102 AAA 3,507,012 Bonds, Series 1994, 5.375%, 8/15/20 220,000 Harris County, Texas, Toll Road Senior Lien Revenue Refunding 8/02 at 102 AAA 236,117 Bonds, Series 1992A, 6.500%, 8/15/17 320,000 Harris County, Texas, Toll Road Senior Lien Revenue Refunding 8/99 at 100 AAA 320,742 Bonds, Series 1992B, 6.625%, 8/15/17 5,000,000 City of Houston, Texas, Airport System Subordinate Lien 7/01 at 102 AAA 5,291,950 Revenue Bonds, Series 1991A, 6.750%, 7/01/21 (Alternative Minimum Tax) 3,300,000 City of Houston, Texas, Airport System Special Facilities Revenue 7/07 at 100 AAA 3,286,866 Bonds (Automated People Mover Project), Series 1997A, 5.500%, 7/15/17 (Alternative Minimum Tax) - --------------------------------------------------------------------------------------------------------------------------------- U.S. Guaranteed - 18.8% 295,000 Abilene Housing Development Corporation, First Lien Revenue No Opt. Call N/R*** 319,503 Bonds, Series 1978, 7.000%, 7/01/08 4,500,000 Amarillo Health Facilities Corporation, Hospital Revenue Bonds 1/02 at 102 AAA 4,819,635 (High Plains Baptist Hospital Project), Series 1992C, 6.500%, 1/01/07 (Pre-refunded to 1/01/02) 3,500,000 City of Austin, Texas, Combined Utility Systems Revenue 5/01 at 102 A*** 3,725,330 Refunding Bonds, Series 1991, 6.750%, 5/15/12 (Pre-refunded to 5/15/01) 1,000,000 The City of Beaumont, Texas, Public Improvement Bonds, 3/02 at 100 AAA 1,051,150 Series 1992, 6.250%, 3/01/10 (Pre-refunded to 3/01/02) 2,000,000 City of Brownsville, Texas, General Obligation Refunding Bonds, 2/01 at 100 AAA 2,082,620 Series 1991, 6.750%, 2/15/12 (Pre-refunded to 2/15/01) 1,500,000 City of Brownsville, Texas, Utilities System Priority Revenue 9/00 at 102 AAA 1,574,790 Bonds, Series 1990, 6.500%, 9/01/17 (Pre-refunded to 9/01/00) 1,975,000 City of Corpus Christi, Texas, General Improvement and 3/02 at 100 AAA 2,097,608 Refunding Bonds, Series 1992, 6.700%, 3/01/08 (Pre-refunded to 3/01/02) 1,500,000 City of Dallas, Texas (Dallas, Denton and Collin Counties), 1/02 at 100 AAA 1,572,270 Combination Tax and Surplus Revenue, Certificates of Obligation, Series 1992, 6.250%, 1/01/20 (Pre-refunded to 1/01/02) 1,185,000 Fort Bend County, Levee Improvement District No. 11 (A Political 9/04 at 100 AAA 1,321,204 Subdivision of the State of Texas), Unlimited Tax Levee Improvement Bonds, Series 1994, 6.900%, 9/01/17 (Pre-refunded to 9/01/04) Principal Optional Call Market Amount Description Provisions* Ratings** Value - --------------------------------------------------------------------------------------------------------------------------------- U.S. Guaranteed (continued) $ 1,780,000 Harris County, Texas, Toll Road Senior Lien Revenue Refunding Bonds, 8/02 at 102 AAA $1,929,912 Series 1992A, 6.500%, 8/15/17 (Pre-refunded to 8/15/02) 425,000 Harris County, Texas, Toll Road Unlimited Tax and Subordinate Lien 8/02 at 102 AA*** 460,284 Revenue Refunding Bonds, Series 1992, 6.500%, 8/15/15 (Pre-refunded to 8/15/02) 4,000,000 Harris County Health Facilities Development Corporation, Hospital 10/99 at 102 AAA 4,103,280 Revenue Bonds (Texas Children's Hospital Project), Series 1989A, 7.000%, 10/01/19 (Pre-refunded to 10/01/99) 6,110,000 Harris County Health Facilities Development Corporation, Hospital 6/02 at 102 A3*** 6,701,937 Revenue Bonds (Memorial Hospital System Project), Series 1992, 7.125%, 6/01/15 (Pre-refunded to 6/01/02) 250,000 City of Houston, Texas, Water and Sewer System, Junior Lien Revenue 12/01 at 102 AAA 267,640 Refunding Bonds, Series 1991C, 6.375%, 12/01/17 (Pre-refunded to 12/01/01) North Central Texas Health Facilities Development Corporation, Hospital Revenue Bonds (Presbyterian Healthcare System Project), Series 1996B: 1,000,000 5.500%, 6/01/21 6/06 at 102 AAA 1,016,300 1,000,000 5.750%, 6/01/26 No Opt. Call AAA 1,040,460 2,500,000 Retama Development Corporation, Special Facilities Revenue No Opt. Call AAA 3,507,700 Bonds (Retama Park Racetrack Project), Series 1993, 8.750%, 12/15/17 City of San Antonio, Texas, Water System Revenue Refunding Bonds, Series 1992: 1,310,000 6.500%, 5/15/10 (Pre-refunded to 5/15/02) 5/02 at 102 AAA 1,413,804 665,000 6.500%, 5/15/10 No Opt. Call AAA 748,850 - --------------------------------------------------------------------------------------------------------------------------------- Utilities - 7.4% 1,225,000 Brazos River Authority (Texas), Collateralized Pollution Control 2/00 at 102 BBB+ 1,267,630 Revenue Bonds (Texas Utilities Electric Company Project), Series 1990A, 8.125%, 2/01/20 (Alternative Minimum Tax) 2,000,000 Brazos River Authority (Texas), Collateralized Pollution Control 3/01 at 102 BBB+ 2,136,340 Revenue Bonds (Texas Utilities Electric Company Project), Series 1994A, 7.875%, 3/01/21 (Alternative Minimum Tax) 1,500,000 Brazos River Authority (Texas), Collateralized Pollution Control 12/02 at 102 AAA 1,602,510 Revenue Refunding Bonds (Texas Utilities Electric Company Project), Series 1992, 6.500%, 12/01/27 (Alternative Minimum Tax) 4,000,000 Brazos River Authority (Texas), Pollution Control Revenue Refunding 5/08 at 102 AAA 3,878,120 Bonds (Texas Utilities Electric Company Project), Series 1998A, 5.550%, 5/01/33 (Alternative Minimum Tax) 5,500,000 Brazos River Authority (Texas), Revenue Refunding Bonds 4/09 at 101 BBB+ 5,208,885 (Reliant Energy, Incorporated Project), Series 1999A, 5.375%, 4/01/19 1,500,000 Matagorda County Navigation District Number One (Texas), 7/03 at 102 A- 1,534,725 Pollution Control Revenue Refunding Bonds (Central Power and Light Company Project), Series 1993, 6.000%, 7/01/28 - --------------------------------------------------------------------------------------------------------------------------------- Water and Sewer - 4.3% 7,000,000 City of Houston, Texas, Water and Sewer System, Junior Lien No Opt. Call AAA 1,410,150 Revenue Refunding Bonds, Series 1998A, 0.000%, 12/01/27 1,000,000 City of Houston, Texas, Water and Sewer System, Prior Lien 12/02 at 102 A+ 1,063,740 Revenue Refunding Bonds, Series 1992B, 6.375%, 12/01/14 3,750,000 City of Houston, Texas, Water and Sewer System, Junior Lien 12/01 at 102 AAA 3,975,260 Revenue Refunding Bonds, Series 1991C, 6.375%, 12/01/17 2,525,000 City of San Antonio, Texas, Water System Revenue Refunding 5/02 at 102 AAA 2,699,803 Bonds, Series 1992, 6.500%, 5/15/10 - --------------------------------------------------------------------------------------------------------------------------------- $ 217,390,000 Total Investments - (cost $201,604,912) - 98.7% 209,105,557 ============= Other Assets Less Liabilities - 1.3% 2,678,838 ----------------------------------------------------------------------------------------------------------------- Net Assets - 100% $211,784,395 ================================================================================================================= * Optional Call Provisions (not covered by the report of independent auditors): Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings (not covered by the report of independent auditors): Using the higher of Standard & Poor's or Moody's rating. *** Securities are backed by an escrow or trust containing sufficient U.S. government or U.S. government agency securities which ensures the timely payment of principal and interest. Securities are normally considered to be equivalent to AAA rated securities. N/R Investment is not rated. See accompanying notes to financial statements.
Statement of Net Assets July 31, 1999
Arizona Michigan Michigan Ohio Texas Premium Quality Premium Quality Quality - ------------------------------------------------------------------------------------------------------------------------------------ Assets Investments in municipal securities, at market value (note 1) $94,357,876 $262,964,398 $167,056,201 $227,217,076 $209,105,557 Temporary investments in short-term municipal securities, at amortized cost, which approximates market value (note 1) -- 1,000,000 -- -- -- Cash 104,461 4,689 520,643 -- 129,596 Receivables: Interest 751,670 4,034,741 2,100,275 2,752,588 3,447,663 Investments sold 20,051 7,754,000 -- 195,000 116,917 Other assets 15,982 22,892 7,181 11,228 18,415 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets 95,250,040 275,780,720 169,684,300 230,175,892 212,818,148 - ------------------------------------------------------------------------------------------------------------------------------------ Liabilities Cash overdraft -- -- -- 116,801 -- Payable for investments purchased -- 5,885,895 -- -- -- Accrued expenses: Management fees (note 6) 52,435 147,047 93,020 125,571 116,336 Other 111,870 257,362 195,968 183,690 183,186 Preferred share dividends payable 4,440 20,396 13,328 16,725 17,100 Common share dividends payable 306,348 878,863 530,493 772,314 717,131 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 475,093 7,189,563 832,809 1,215,101 1,033,753 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets (note 7) $94,774,947 $268,591,157 $168,851,491 $228,960,791 $211,784,395 ==================================================================================================================================== Preferred shares, at liquidation value $30,000,000 $ 94,000,000 $ 56,000,000 $ 77,000,000 $ 69,000,000 ==================================================================================================================================== Preferred shares outstanding 1,200 3,760 2,240 3,080 2,760 ==================================================================================================================================== Common shares outstanding 4,345,893 11,489,013 7,688,505 9,418,648 9,436,537 ==================================================================================================================================== Net asset value per Common share outstanding (net assets less Preferred shares at liquidation value, divided by Common shares outstanding) $ 14.90 $ 15.20 $ 14.68 $ 16.13 $ 15.13 ==================================================================================================================================== See accompanying notes to financial statements.
Statement of Operations Year Ended July 31, 1999
Arizona Michigan Michigan Ohio Texas Premium Quality Premium Quality Quality - ----------------------------------------------------------------------------------------------------------------------------------- Investment Income (note 1) $ 5,479,853 $15,359,296 $ 9,552,076 $13,374,325 $12,742,461 - ----------------------------------------------------------------------------------------------------------------------------------- Expenses Management fees (note 6) 631,087 1,688,463 1,123,639 1,507,488 1,406,583 Preferred shares - auction fees 75,000 200,002 139,999 192,501 172,499 Preferred shares - dividend disbursing agent fees 10,001 10,001 19,998 29,999 19,998 Shareholders' servicing agent fees and expenses 7,563 34,415 25,177 37,033 18,126 Custodian's fees and expenses 38,211 76,436 52,824 60,575 53,875 Directors'/Trustees' fees and expenses (note 6) 916 2,486 1,646 2,212 2,084 Professional fees 17,236 17,707 17,448 17,619 17,590 Shareholders' reports - printing and mailing expenses 54,817 82,841 93,046 70,020 93,226 Stock exchange listing fees 16,170 24,623 16,170 16,378 16,191 Investor relations expense 7,767 22,765 15,644 20,816 16,596 Other expenses 8,607 18,576 12,484 17,754 16,070 - ----------------------------------------------------------------------------------------------------------------------------------- Total expenses before custodian fee credit 867,375 2,178,315 1,518,075 1,972,395 1,832,838 Custodian fee credit (note 1) (1,258) (22,219) (7,944) (6,365) (2,779) - ----------------------------------------------------------------------------------------------------------------------------------- Net expenses 866,117 2,156,096 1,510,131 1,966,030 1,830,059 - ----------------------------------------------------------------------------------------------------------------------------------- Net investment income 4,613,736 13,203,200 8,041,945 11,408,295 10,912,402 - ----------------------------------------------------------------------------------------------------------------------------------- Realized and Unrealized Gain (Loss) from Investments Net realized gain from investment transactions (notes 1 and 4) 430,224 1,597,218 629,510 76,311 1,295,649 Change in net unrealized appreciation or depreciation of investments (2,826,155) (9,085,760) (5,477,686) (4,993,222) (7,972,278) - ----------------------------------------------------------------------------------------------------------------------------------- Net gain (loss) from investments (2,395,931) (7,488,542) (4,848,176) (4,916,911) (6,676,629) - ----------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets from operations $ 2,217,805 $ 5,714,658 $ 3,193,769 $ 6,491,384 $ 4,235,773 =================================================================================================================================== See accompanying notes to financial statements.
Statement of Changes in Net Assets
Arizona Premium Michigan Quality Michigan Premium - ----------------------------------------------------------------------------------------------------------------------------------- Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended 7/31/99 7/31/98 7/31/99 7/31/98 7/31/99 7/31/98 - ----------------------------------------------------------------------------------------------------------------------------------- Operations Net investment income $ 4,613,736 $ 4,519,847 $ 13,203,200 $ 13,246,845 $ 8,041,945 $ 8,001,062 Net realized gain from investment transactions (notes 1 and 4) 430,224 469,613 1,597,218 444,027 629,510 134,148 Change in net unrealized appreciation or depreciation of investments (2,826,155) (84,432) (9,085,760) (591,805) (5,477,686) 1,238,827 - ----------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets from operations 2,217,805 4,905,028 5,714,658 13,099,067 3,193,769 9,374,037 - ----------------------------------------------------------------------------------------------------------------------------------- Distributions to Shareholders (note 1) From undistributed net investment income: Common shareholders (3,625,685) (3,560,162) (10,504,407) (10,831,644) (6,315,050) (6,264,993) Preferred shareholders (905,767) (1,004,753) (2,399,721) (2,682,487) (1,644,995) (1,933,132) From accumulated net realized gains from investment transactions: Common shareholders -- -- (698,100) (111,138) -- -- Preferred shareholders -- -- (176,288) (27,488) -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Decrease in net assets from distributions to shareholders (4,531,452) (4,564,915) (13,778,516) (13,652,757) (7,960,045) (8,198,125) - ----------------------------------------------------------------------------------------------------------------------------------- Capital Share Transactions (note 2) Net proceeds from Common shares issued to shareholders due to reinvestment of distributions 542,570 474,596 1,645,159 1,566,072 167,049 -- Preferred shares - net proceeds from sale of shares -- -- 13,750,608 -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets from capital share transactions 542,570 474,596 15,395,767 1,566,072 167,049 -- - ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets (1,771,077) 814,709 7,331,909 1,012,382 (4,599,227) 1,175,912 Net assets at the beginning of year 96,546,024 95,731,315 261,259,248 260,246,866 173,450,718 172,274,806 - ----------------------------------------------------------------------------------------------------------------------------------- Net assets at the end of year $94,774,947 $96,546,024 $268,591,157 $261,259,248 $168,851,491 $173,450,718 =================================================================================================================================== Balance of undistributed net investment income at the end of year $ 293,931 $ 211,647 $ 480,424 $ 181,352 $ 388,448 $ 306,548 =================================================================================================================================== See accompanying notes to financial statements.
Statement of Changes in Net Assets (continued)
Ohio Quality Texas Quality - ----------------------------------------------------------------------------------------------------------------------------------- Year Ended Year Ended Year Ended Year Ended 7/31/99 7/31/98 7/31/99 7/31/98 - ----------------------------------------------------------------------------------------------------------------------------------- Operations Net investment income $ 11,408,295 $ 11,399,092 $ 10,912,402 $ 11,041,192 Net realized gain from investment transactions (notes 1 and 4) 76,311 295,006 1,295,649 905,750 Change in net unrealized appreciation or depreciation of investments (4,993,222) 471,590 (7,972,278) (363,610) - ----------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets from operations 6,491,384 12,165,688 4,235,773 11,583,332 - ----------------------------------------------------------------------------------------------------------------------------------- Distributions to Shareholders (note 1) From undistributed net investment income: Common shareholders (9,243,823) (9,077,395) (8,508,627) (8,716,618) Preferred shareholders (2,225,720) (2,397,864) (2,109,132) (2,498,267) From accumulated net realized gains from investment transactions: Common shareholders -- -- (701,466) -- Preferred shareholders -- -- (203,285) -- - ----------------------------------------------------------------------------------------------------------------------------------- Decrease in net assets from distributions to shareholders (11,469,543) (11,475,259) (11,522,510) (11,214,885) - ----------------------------------------------------------------------------------------------------------------------------------- Capital Share Transactions (note 2) Net proceeds from Common shares issued to shareholders due to reinvestment of distributions 998,544 1,018,376 402,016 301,838 Preferred shares - net proceeds from sale of shares -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets from capital share transactions 998,544 1,018,376 402,016 301,838 - ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets (3,979,615) 1,708,805 (6,884,721) 670,285 Net assets at the beginning of year 232,940,406 231,231,601 218,669,116 217,998,831 - ----------------------------------------------------------------------------------------------------------------------------------- Net assets at the end of year $228,960,791 $232,940,406 $211,784,395 $218,669,116 =================================================================================================================================== Balance of undistributed net investment income at the end of year $ 575,680 $ 636,928 $ 394,305 $ 99,662 =================================================================================================================================== See accompanying notes to financial statements.
Notes to Financial Statements 1. General Information and Significant Accounting Policies The state funds (the "Funds") covered in this report and their corresponding New York Stock Exchange symbols are Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ), Nuveen Michigan Quality Income Municipal Fund, Inc. (NUM), Nuveen Michigan Premium Income Municipal Fund, Inc. (NMP), Nuveen Ohio Quality Income Municipal Fund, Inc. (NUO) and Nuveen Texas Quality Income Municipal Fund (NTX). Each Fund invests primarily in a diversified portfolio of municipal obligations issued by state and local government authorities within a single state. The Funds are registered under the Investment Company Act of 1940 as closed-end, diversified management investment companies. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with generally accepted accounting principles. Securities Valuation The prices of municipal bonds in each Fund's investment portfolio are provided by a pricing service approved by the Fund's Board of Directors/Trustees. When price quotes are not readily available (which is usually the case for municipal securities), the pricing service establishes fair market value based on yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, indications of value from securities dealers and general market conditions. Temporary investments in securities that have variable rate and demand features qualifying them as short-term securities are valued at amortized cost, which approximates market value. Securities Transactions Securities transactions are recorded on a trade date basis. Realized gains and losses from such transactions are determined on the specific identification method. Securities purchased or sold on a when-issued or delayed delivery basis may have extended settlement periods. The securities so purchased are subject to market fluctuation during this period. The Funds have instructed the custodian to segregate assets in a separate account with a current value at least equal to the amount of the when-issued and delayed delivery purchase commitments. At July 31, 1999, Michigan Quality had outstanding when-issued and delayed delivery purchase commitments of $5,885,895. There were no such outstanding purchase commitments in any of the other Funds. Investment Income Interest income is determined on the basis of interest accrued, adjusted for amortization of premiums and accretion of discounts on long-term debt securities when required for federal income tax purposes. Income Taxes Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its tax-exempt net investment income, in addition to any significant amounts of net realized capital gains and/or market discount realized from investment transactions. The Funds currently consider significant net realized capital gains and/or market discount as amounts in excess of $.01 per Common share. Furthermore, each Fund intends to satisfy conditions which will enable interest from municipal securities, which is exempt from regular federal and designated state income taxes, to retain such tax-exempt status when distributed to shareholders of the Funds. All monthly tax-exempt income dividends paid during the fiscal year ended July 31, 1999, have been designated Exempt Interest Dividends. Net realized capital gain and market discount distributions are subject to federal taxation. Dividends and Distributions to Shareholders Tax-exempt net investment income is declared as a dividend monthly and payment is made or reinvestment is credited to shareholder accounts after month-end. Net realized capital gains and/or market discount from investment transactions, if any, are distributed to shareholders not less frequently than annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards. Distributions to shareholders of tax-exempt net investment income, net realized capital gains and/or market discount are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. Accordingly, temporary over-distributions as a result of these differences may occur and will be classified as either distributions in excess of net investment income, distributions in excess of net realized gains and/or distributions in excess of net ordinary taxable income from investment transactions, where applicable. Preferred Shares The Funds have issued and outstanding $25,000 stated value Preferred shares. Each Fund's Preferred shares are issued in one or more Series. The dividend rate on each Series may change every seven days, as set by the auction agent. The number of shares outstanding, by Series and in total, for each Fund is as follows:
Arizona Michigan Michigan Ohio Texas Premium Quality Premium Quality Quality - -------------------------------------------------------------------------------- Number of shares: Series M -- -- 840 680 760 Series Th 1,200 3,200 1,400 1,400 2,000 Series Th2 -- -- -- 1,000 -- Series F -- 560 -- -- -- - -------------------------------------------------------------------------------- Total 1,200 3,760 2,240 3,080 2,760 ================================================================================ Effective June 25, 1999, Michigan Quality issued 560 Series F $25,000 stated value Preferred shares.
Derivative Financial Instruments The Funds may invest in transactions in certain derivative financial instruments including futures, forward, swap, and option contracts, and other financial instruments with similar characteristics. Although the Funds are authorized to invest in such financial instruments, and may do so in the future, they did not make any such investments during the fiscal year ended July 31, 1999. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. Custodian Fee Credit Each Fund has an arrangement with the custodian bank whereby the custodian fees and expenses are reduced by credits earned on each Fund's cash on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. 2. Fund Shares Transactions in Common shares were as follows:
Arizona Premium Michigan Quality - ---------------------------------------------------------------------------------------------------------- Year Ended Year Ended Year Ended Year Ended 7/31/99 7/31/98 7/31/99 7/31/98 - ---------------------------------------------------------------------------------------------------------- Shares issued to shareholders due to reinvestment of distributions 32,273 29,905 97,921 93,557 ========================================================================================================== Michigan Premium Ohio Quality - ---------------------------------------------------------------------------------------------------------- Year Ended Year Ended Year Ended Year Ended 7/31/99 7/31/98 7/31/99 7/31/98 - ---------------------------------------------------------------------------------------------------------- Shares issued to shareholders due to reinvestment of distributions 10,819 -- 53,929 57,107 ========================================================================================================== Texas Quality - ---------------------------------------------------------------------------------------------------------- Year Ended Year Ended 7/31/99 7/31/98 - ---------------------------------------------------------------------------------------------------------- Shares issued to shareholders due to reinvestment of distributions 25,102 19,003 ==========================================================================================================
3. Distributions to Common Shareholders The Funds declared Common share dividend distributions from their tax-exempt net investment income which were paid August 2, 1999, to shareholders of record on July 15, 1999, as follows:
Arizona Michigan Michigan Ohio Texas Premium Quality Premium Quality Quality - -------------------------------------------------------------------------------- Dividend per share $.0705 $.0765 $.0690 $.0820 $.0760 ================================================================================
4. Securities Transactions Purchases and sales (including maturities) of investments in long-term municipal securities and short-term municipal securities during the fiscal year ended July 31, 1999, were as follows:
Arizona Michigan Michigan Ohio Texas Premium Quality Premium Quality Quality - --------------------------------------------------------------------------------------------------------- Purchases: Long-term municipal securities $6,857,073 $66,296,388 $16,383,185 $11,238,365 $41,498,865 Short-term municipal securities 4,100,000 10,900,000 4,900,000 8,700,000 6,800,000 Sales and maturities: Long-term municipal securities 5,368,968 53,742,342 15,427,773 7,692,770 40,121,493 Short-term municipal securities 4,100,000 9,900,000 6,000,000 9,400,000 8,300,000 =========================================================================================================
At July 31, 1999, the identified cost of investments owned for federal income tax purposes were as follows:
Arizona Michigan Michigan Ohio Texas Premium Quality Premium Quality Quality - --------------------------------------------------------------------------------------------------------- $89,730,530 $251,432,114 $160,112,154 $216,722,398 $201,604,912 =========================================================================================================
At July 31, 1999, the following Funds had unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as follows:
Arizona Michigan Ohio Premium Premium Quality - -------------------------------------------------------------------------------- Expiration year: 2002 $ -- $ -- $ 780,558 2003 415,901 152,186 16,493 2004 -- 1,807,234 622,243 - ------------------------------------------------------------------------------- Total $415,901 $1,959,420 $1,419,294 ================================================================================
5. Unrealized Appreciation (Depreciation) Gross unrealized appreciation and gross unrealized depreciation of investments for federal income tax purposes at July 31, 1999, were as follows:
Arizona Michigan Michigan Ohio Texas Premium Quality Premium Quality Quality - --------------------------------------------------------------------------------------------------------- Gross unrealized: appreciation $5,226,815 $14,767,428 $7,760,515 $11,101,230 $ 9,747,400 depreciation (599,469) (2,235,144) (816,468) (606,552) (2,246,755) - --------------------------------------------------------------------------------------------------------- Net unrealized appreciation $4,627,346 $12,532,284 $6,944,047 $10,494,678 $ 7,500,645 =========================================================================================================
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 an annual management fee, payable monthly, at the rates set forth below, which are based upon the average daily net assets of each Fund as follows: Average Daily Net Assets Management Fee - -------------------------------------------------------------------------------- For the first $125 million .6500 of 1% For the next $125 million .6375 of 1 For the next $250 million .6250 of 1 For the next $500 million .6125 of 1 For the next $1 billion .6000 of 1 For net assets over $2 billion .5875 of 1 ================================================================================ The fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Funds pay no compensation directly to those of its Directors/Trustees who are affiliated with the Adviser or to their officers, all of whom receive remuneration for their services to the Funds from the Adviser. 7. Composition of Net Assets At July 31, 1999, net assets consisted of:
Arizona Michigan Michigan Premium Quality Premium - --------------------------------------------------------------------------------------------------------- Preferred shares, $25,000 stated value per share, at liquidation value $30,000,000 $ 94,000,000 $ 56,000,000 Common shares, $.01 par value per share 43,459 114,890 76,885 Paid-in surplus 60,226,112 160,358,915 107,401,531 Balance of undistributed net investment income 293,931 480,424 388,448 Accumulated net realized gain (loss) from investment transactions (415,901) 1,090,147 (1,959,420) Net unrealized appreciation of investments 4,627,346 12,546,781 6,944,047 - --------------------------------------------------------------------------------------------------------- Net assets $94,774,947 $268,591,157 $168,851,491 ========================================================================================================= Authorized shares: Common 200,000,000 200,000,000 200,000,000 Preferred 1,000,000 1,000,000 1,000,000 ========================================================================================================= Ohio Texas Quality Quality - --------------------------------------------------------------------------------------------------------- Preferred shares, $25,000 stated value per share, at liquidation value $ 77,000,000 $ 69,000,000 Common shares, $.01 par value per share 94,186 94,365 Paid-in surplus 142,215,541 133,706,568 Balance of undistributed net investment income 575,680 394,305 Accumulated net realized gain (loss) from investment transactions (1,431,862) 1,088,512 Net unrealized appreciation of investments 10,507,246 7,500,645 - --------------------------------------------------------------------------------------------------------- Net assets $228,960,791 $211,784,395 ========================================================================================================= Authorized shares: Common 200,000,000 Unlimited Preferred 1,000,000 Unlimited =========================================================================================================
Financial Highlights Selected data for a Common share outstanding throughout each year:
Investment Operations ---------------------------- Net Realized/ Beginning Net Unrealized Net Asset Investment Investment Value Income Gain (Loss) Total Arizona Premium Year Ended 7/31: 1999 $15.43 $1.07 $ (.55) $ .52 1998 15.34 1.05 .10 1.15 1997 14.51 1.06 .81 1.87 1996 14.12 1.05 .38 1.43 1995 13.61 1.07 .49 1.56 Michigan Quality Year Ended 7/31: 1999 15.91 1.15 (.65) .50 1998 15.95 1.17 (.01) 1.16 1997 15.28 1.18 .72 1.90 1996 15.10 1.19 .27 1.46 1995 15.02 1.21 .19 1.40 Michigan Premium Year Ended 7/31: 1999 15.30 1.05 (.64) .41 1998 15.14 1.04 .19 1.23 1997 14.16 1.05 .97 2.02 1996 13.73 1.05 .41 1.46 1995 13.46 1.04 .31 1.35 Ohio Quality Year Ended 7/31: 1999 16.65 1.21 (.51) .70 1998 16.57 1.22 .09 1.31 1997 15.69 1.23 .88 2.11 1996 15.33 1.23 .35 1.58 1995 14.84 1.22 .52 1.74 Texas Quality Year Ended 7/31: 1999 15.90 1.16 (.72) .44 1998 15.86 1.17 .07 1.24 1997 15.06 1.19 .81 2.00 1996 14.91 1.21 .21 1.42 1995 14.53 1.22 .42 1.64 Less Distributions -------------------------------------------------------------------- Net Net Investment Investment Capital Capital Income Income Gains Gains To Common To Preferred To Common To Preferred Shareholders Shareholders+ Shareholders Shareholders+ Total Arizona Premium Year Ended 7/31: 1999 $ (.84) $(.21) $-- $-- $(1.05) 1998 (.83) (.23) -- -- (1.06) 1997 (.82) (.22) -- -- (1.04) 1996 (.80) (.24) -- -- (1.04) 1995 (.78) (.27) -- -- (1.05) Michigan Quality Year Ended 7/31: 1999 (.92) (.21) (.06) (.02) (1.21) 1998 (.95) (.24) (.01) -- (1.20) 1997 (.95) (.24) (.03) (.01) (1.23) 1996 (.95) (.24) (.07) (.02) (1.28) 1995 (1.00) (.26) (.05) (.01) (1.32) Michigan Premium Year Ended 7/31: 1999 (.82) (.21) -- -- (1.03) 1998 (.82) (.25) -- -- (1.07) 1997 (.80) (.24) -- -- (1.04) 1996 (.78) (.25) -- -- (1.03) 1995 (.80) (.28) -- -- (1.08) Ohio Quality Year Ended 7/31: 1999 (.98) (.24) -- -- (1.22) 1998 (.97) (.26) -- -- (1.23) 1997 (.96) (.27) -- -- (1.23) 1996 (.95) (.27) -- -- (1.22) 1995 (.95) (.30) -- -- (1.25) Texas Quality Year Ended 7/31: 1999 (.90) (.22) (.07) (.02) (1.21) 1998 (.93) (.27) -- -- (1.20) 1997 (.94) (.26) -- -- (1.20) 1996 (.95) (.27) (.04)+++ (.01)+++ (1.27) 1995 (.98) (.28) -- -- (1.26) Total Returns --------------- Based Ending Based on Ending Net Ending on Net Net Asset Market Market Asset Assets Value Value Value* Value* (000) Arizona Premium Year Ended 7/31: 1999 $14.90 $17.0000 8.67% 1.92% $ 94,775 1998 15.43 16.4375 12.18 6.14 96,546 1997 15.34 15.4375 17.81 11.74 95,731 1996 14.51 13.8750 7.83 8.48 92,095 1995 14.12 13.6250 10.42 9.98 90,434 Michigan Quality Year Ended 7/31: 1999 15.20 16.6875 2.18 1.62 268,591 1998 15.91 17.3125 10.27 5.97 261,259 1997 15.95 16.6250 14.02 11.19 260,247 1996 15.28 15.5000 11.32 8.07 251,033 1995 15.10 14.8750 4.77 8.02 247,907 Michigan Premium Year Ended 7/31: 1999 14.68 15.0625 5.95 1.23 168,851 1998 15.30 15.0000 13.74 6.62 173,451 1997 15.14 13.9375 14.95 12.97 172,275 1996 14.16 12.8750 14.00 8.88 164,688 1995 13.73 12.0000 2.59 8.45 161,414 Ohio Quality Year Ended 7/31: 1999 16.13 18.0000 5.09 2.74 228,961 1998 16.65 18.0625 10.14 6.53 232,940 1997 16.57 17.3125 14.70 12.14 231,232 1996 15.69 16.0000 12.39 8.68 222,151 1995 15.33 15.1250 6.80 10.16 218,335 Texas Quality Year Ended 7/31: 1999 15.13 15.1875 2.97 1.21 211,784 1998 15.90 15.6875 6.45 6.27 218,669 1997 15.86 15.6250 11.76 11.93 217,999 1996 15.06 14.8750 14.60 7.72 210,423 1995 14.91 13.8750 1.14 9.89 208,924 Ratios/Supplemental Data --------------------------------------------------------- Before Credit --------------------------------------------------------- Ratio of Net Ratio of Net Ratio of Investment Ratio of Investment Expenses Income to Expenses Income to to Average Average to Average Average Net Assets Net Assets Total Total Applicable Applicable Net Assets Net Assets to Common to Common Including Including Shares++ Shares++ Preferred++ Preferred++ Arizona Premium Year Ended 7/31: 1999 1.29% 6.88% .89% 4.75% 1998 1.28 6.85 .88 4.71 1997 1.29 7.18 .87 4.86 1996 1.33 7.22 .90 4.88 1995 1.30 7.92 .86 5.21 Michigan Quality Year Ended 7/31: 1999 1.20 7.27 .83 5.02 1998 1.19 7.35 .82 5.09 1997 1.21 7.64 .83 5.23 1996 1.21 7.77 .83 5.29 1995 1.26 8.26 .84 5.54 Michigan Premium Year Ended 7/31: 1999 1.29 6.82 .87 4.63 1998 1.29 6.87 .87 4.64 1997 1.29 7.27 .86 4.83 1996 1.32 7.38 .87 4.87 1995 1.57 7.83 1.01 5.02 Ohio Quality Year Ended 7/31: 1999 1.26 7.26 .84 4.88 1998 1.29 7.37 .86 4.92 1997 1.30 7.73 .85 5.08 1996 1.32 7.79 .87 5.09 1995 1.47 8.20 .94 5.24 Texas Quality Year Ended 7/31: 1999 1.23 7.32 .84 5.00 1998 1.22 7.40 .83 5.06 1997 1.22 7.81 .83 5.27 1996 1.23 7.95 .83 5.36 1995 1.38 8.35 .91 5.54 Ratios/Supplemental Data --------------------------------------------------------------------- After Credit** --------------------------------------------------------- Ratio of Net Ratio of Net Ratio of Investment Ratio of Investment Expenses Income to Expenses Income to to Average Average to Average Average Net Assets Net Assets Total Total Applicable Applicable Net Assets Net Assets Portfolio to Common to Common Including Including Turnover Shares++ Shares++ Preferred++ Preferred++ Rate Arizona Premium Year Ended 7/31: 1999 1.29% 6.88% .89% 4.75% 6% 1998 1.28 6.85 .88 4.71 17 1997 1.29 7.18 .87 4.86 11 1996 1.33 7.22 .90 4.88 15 1995 1.30 7.92 .86 5.21 11 Michigan Quality Year Ended 7/31: 1999 1.19 7.28 .82 5.03 21 1998 1.19 7.35 .82 5.09 8 1997 1.21 7.64 .83 5.23 11 1996 1.21 7.77 .83 5.29 15 1995 1.26 8.26 .84 5.54 18 Michigan Premium Year Ended 7/31: 1999 1.28 6.83 .87 4.63 9 1998 1.29 6.87 .87 4.64 6 1997 1.29 7.27 .86 4.83 4 1996 1.32 7.38 .87 4.87 17 1995 1.57 7.83 1.01 5.02 32 Ohio Quality Year Ended 7/31: 1999 1.25 7.27 .84 4.88 3 1998 1.29 7.37 .86 4.92 9 1997 1.30 7.73 .85 5.08 25 1996 1.32 7.79 .87 5.09 19 1995 1.47 8.20 .94 5.24 19 Texas Quality Year Ended 7/31: 1999 1.23 7.32 .84 5.00 19 1998 1.22 7.40 .83 5.06 17 1997 1.22 7.81 .83 5.27 13 1996 1.23 7.95 .83 5.36 17 1995 1.38 8.35 .91 5.54 8 * 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. Total returns are not annualized. ** After custodian fee credit, where applicable (note 1). + The amounts shown are based on Common share equivalents. ++ Ratios do not reflect the effect of dividend payments to Preferred shareholders; income ratios reflect income earned on assets attributable to Preferred shares. +++ The amounts shown include distributions in excess of capital gains of $.008 for Common shareholders and $.002 for Preferred shareholders.
Build Your Wealth Automatically Sidebar text: Nuveen offers a number of convenient ways to add to your portfolio and earn the tax-free income you need to achieve your financial goals. Nuveen makes reinvesting easy. A phone call is all it takes to set up your reinvestment account. NUVEEN EXCHANGE-TRADED FUNDS DIVIDEND REINVESTMENT PLAN Your Nuveen Exchange-Traded Fund allows you to conveniently reinvest dividends and/or capital gains distributions in additional fund shares. If you do not elect to reinvest distributions, all distributions are paid by check or can be deposited directly into your bank or brokerage account. By choosing to reinvest, you'll be able to invest money regularly and automatically, and watch your investment grow through the power of tax-free compounding. You'll also 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. EASY AND CONVENIENT To make recordkeeping easy and convenient, each month you'll receive a statement showing your total dividends and distributions, the date of investment, the shares acquired and the price per share, and the total number of shares you own. Income or capital gains taxes may be payable on dividends or distributions that are reinvested. HOW SHARES ARE PURCHASED The shares you acquire by reinvesting will either be purchased on the open market or newly issued by the Fund. If the shares are trading at or above net asset value at the time of valuation, the Fund will issue new shares at the then-current market price. If the shares are trading at less than net asset value, shares for your account will be purchased on the open market. Dividends and distributions received to purchase shares in the open market will normally be invested shortly after the dividend payment date. No interest will be paid on dividends and distributions awaiting reinvestment. Because the market price of shares may increase before purchases are completed, the average purchase price per share may exceed the market price at the time of valuation, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the fund. A pro rata portion of any applicable brokerage commissions on open market purchases will be paid by Plan participants. These commissions usually will be lower than those charged on individual transactions. FLEXIBILITY You may, of course, change your distribution option or withdraw from the Plan at any time, should your needs or situation change. Should you withdraw, you can receive a certificate for all whole shares credited to your reinvestment account and cash payment for fractional shares, or cash payment for all reinvestment account shares, less brokerage commissions and a $2.50 service fee. You can also reinvest if your shares are registered in the name of a brokerage firm, bank, or other nominee. Just ask your investment adviser if the firm will participate on your behalf. If not, it's easy to have the shares registered in your name and to apply for a reinvestment account directly. Participants whose shares are registered in the name of one firm may not be able to transfer the shares to another firm and continue to participate in the Plan. The Fund reserves the right to amend or terminate the Plan at any time. Although the Fund reserves the right to amend the Plan to include a service charge payable by the participants, there is no direct service charge to participants in the Plan at this time. For more information on the Nuveen Automatic Reinvestment Plan or to enroll in or withdraw from the Plan, speak with your financial adviser or call us at (800) 257-8787. Fund Information BOARD OF DIRECTORS/TRUSTEES Robert P. Bremner Lawrence H. Brown Anne E. Impellizzeri Peter R. Sawers William J. Schneider Timothy R. Schwertfeger Judith M. Stockdale FUND MANAGER Nuveen Advisory Corp. 333 West Wacker Drive Chicago, IL 60606 CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICES The Chase Manhattan Bank 4 New York Plaza New York, NY 10004-2413 (800) 257-8787 LEGAL COUNSEL Morgan, Lewis & Bockius LLP Washington, D.C. INDEPENDENT AUDITORS Ernst & Young LLP Chicago, IL YEAR 2000 The concern that computer systems may have problems processing date-related information in the year 2000 and beyond has challenged businesses and organizations to thoroughly review all aspects of their operations. We have undertaken just such an approach at Nuveen in preparation for the millennium. Over the last 10 years, we have updated or replaced our trading, fund management, and pricing systems at Nuveen - systems that directly affect our investors and their financial advisers - to address Year 2000 concerns. We continue to work closely with our transfer agent, custodian, firms through whom we buy and sell portfolio securities, and other service partners to monitor the Year 2000 readiness of their systems, while addressing other remaining systems issues. In addition, the Funds hold securities of issuers whose business operations leave them susceptible to Year 2000 concerns. We seek to evaluate an issuer's Year 2000 readiness as part of our initial and ongoing research of these issuers. This is only one of the many factors considered in determining whether to buy, sell, or continue holding a particular security. Our Year 2000 review, repair, and testing program has been substantially completed. This program included industry-wide testing of critical systems and receipt of satisfactory assurances from critical service providers, vendors, and issuers regarding their Year 2000 readiness. We will continue more refined testing of our systems and their relationships with other parties' systems and will regularly discuss the results of this testing with those parties. We are also making Year 2000 contingency plans to guide recovery efforts in the event that, despite our remediation attempts, Year 2000 issues adversely affect the Funds. Although we can never have complete assurance that the steps we take will be sufficient to prevent any problems that would impact the Nuveen Exchange-Traded Funds, we can assure you that we will take all reasonable steps to prevent disruption of the services provided by your Fund. FUND POLICIES The Board of Trustees of your Fund recently modified certain investment policies of the Fund. The Fund was formerly not permitted to invest more than 5% of its total assets in Municipal Leases that contain "non-appropriation" clauses. In addition, your Fund was not permitted to invest more than 10% of its total assets in Municipal Leases and securities that are unmarketable, illiquid or not readily marketable. The Municipal Lease market has matured since the Fund's inception, and non-appropriation leases have become more liquid and widely accepted. The Nuveen Exchange-Traded Fund Board has eliminated the restrictions noted above, replacing them with requirements that the Funds limit investments in non-appropriation Municipal Leases to those that meet one or more of six criteria that indicate that the issuer will be motivated to continue to appropriate monies to make the payments under the Municipal Lease. The Board also eliminated the Fund's policy not to invest more than 5% of its total assets in unsecured obligations of issuers which, together with their predecessors, have been in operation for less than three years. Each fund intends to repurchase shares of its own common or preferred stock in the future at such times and in such amounts as is deemed advisable. No shares were repurchased during the 12-month period ended July 31, 1999. Any future repurchases will be reported to shareholders in the next annual or semiannual report. Serving Investors for Generations Photo of: John Nuveen, Sr. Since our founding in 1898, John Nuveen & Co. has been synonymous with investments that withstand the test of time. Today we offer a broad range of quality investments designed for individuals seeking to build and sustain wealth. In fact, more than 1.3 million investors have trusted Nuveen to help them pursue their financial goals. The cornerstone of Nuveen's investment philosophy is a commitment to disciplined long-term investment strategies focused on providing consistent, attractive performance over time - with moderated risk. We emphasize quality securities carefully chosen through in-depth research, and we follow those securities closely over time to ensure that they continue to meet our exacting standards. Whether your focus is long-term growth, dependable current income or sustaining accumulated wealth, Nuveen offers a wide variety of investments and services to help meet your unique circumstances and financial planning needs. Our equity, balanced, and tax-free income funds, along with our defined portfolios and private asset management, can help you build a better, well-diversified portfolio. Talk with your financial adviser to learn more about how Nuveen investment products and services can help you. Or call us at (800) 257-8787 for more information, including a prospectus where applicable. Please read that information carefully before investing. LOGO: NUVEEN helping investors sustain the wealth of a lifetime(tm). John Nuveen & Co. Incorporated 333 West Wacker Drive Chicago, IL 60606-1286 www.nuveen.com FAN-1-7-99 -----END PRIVACY-ENHANCED MESSAGE-----