nio.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-06379

Nuveen Municipal Opportunity Fund, Inc.
(Exact name of registrant as specified in charter)

Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
(Address of principal executive offices) (Zip code)

Kevin J. McCarthy
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
(Name and address of agent for service)

Registrant's telephone number, including area code: (312) 917-7700

Date of fiscal year end: October 31

Date of reporting period: October 31, 2012

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507.


 
 

 


ITEM 1. REPORTS TO STOCKHOLDERS.


 
 

 

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Table of Contents
 
Chairman’s Letter to Shareholders
4
   
Portfolio Managers’ Comments
5
   
Fund Leverage and Other Information
12
   
Common Share Dividend and Price Information
14
   
Performance Overviews
16
   
Shareholder Meeting Report
22
   
Report of Independent Registered Public Accounting Firm
24
   
Portfolios of Investments
25
   
Statement of Assets and Liabilities
90
   
Statement of Operations
92
   
Statement of Changes in Net Assets
94
   
Statement of Cash Flows
97
   
Financial Highlights
100
   
Notes to Financial Statements
108
   
Annual Investment Management Agreement Approval Process
122
   
Board Members and Officers
131
   
Reinvest Automatically, Easily and Conveniently
136
   
Glossary of Terms Used in this Report
138
   
Additional Fund Information
143

 
 

 
 
Chairman’s
Letter to Shareholders
 
 
Dear Shareholders,
 
Investors have many reasons to remain cautious. The challenges in the Euro area continue to cast a shadow over global economies and financial markets. The political support for addressing fiscal issues is eroding as the economic and social impacts become more visible. Despite strong action by the European Central Bank, member nations appear unwilling to surrender sufficient sovereignty to unify the Euro area financial system or strengthen its banks. The gains made in reducing deficits, and the hard-won progress on winning popular acceptance of the need for economic austerity, are at risk. To their credit, European political leaders press on to find compromise solutions, but there is increasing concern that time is running out.
 
In the U.S., the extended period of increasing corporate earnings that enabled the equity markets to withstand the downward pressures coming from weakening job creation and slower economic growth appears to be coming to an end. The Fed remains committed to low interest rates and announced a third phase of quantitative easing (QE3) scheduled to continue until mid-2015. The recent election results have removed a major element of uncertainty in the U.S. political picture, but it remains to be seen whether the outcome will reduce the highly partisan atmosphere in Congress and enable progress on the many pressing fiscal and budgetary issues that must be resolved in the coming months.
 
During the last twelve months, U.S. investors have experienced a solid recovery in the domestic equity markets with increasing volatility as the “fiscal cliff” approaches. The experienced investment teams at Nuveen keep their eye on a longer time horizon and use their practiced investment disciplines to negotiate through market peaks and valleys to achieve long-term goals for investors. Experienced professionals pursue investments that will weather short-term volatility and at the same time, seek opportunities that are created by markets that overreact to negative developments. Monitoring this process is an important consideration for the Fund Board as it oversees your Nuveen Fund on your behalf.
 
As always, I encourage you to contact your financial consultant if you have any questions about your investment in a Nuveen Fund. On behalf of the other members of your Fund Board, we look forward to continuing to earn your trust in the months and years ahead.
 
Sincerely,
 
 
Robert P. Bremner
Chairman of the Board
December 20, 2012
 
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Portfolio Managers’ Comments
 
Nuveen Quality Municipal Fund, Inc. (NQI)
Nuveen Municipal Opportunity Fund, Inc. (NIO)
Nuveen Premier Municipal Opportunity Fund, Inc. (NIF)
Nuveen Premium Income Municipal Opportunity Fund (NPX)
Nuveen Dividend Advantage Municipal Income Fund (NVG)
Nuveen AMT-Free Municipal Income Fund (NEA)
 
Portfolio managers Paul Brennan and Douglas White review U.S. economic and municipal market conditions, key investment strategies and the twelve-month performance of these six national Funds. Paul has managed NIO, NIF, NVG, and NEA since 2006 and Douglas assumed portfolio management responsibility for NQI and NPX in January 2011.
 
What factors affected the U.S. economy and municipal market during the twelve-month reporting period ended October 31, 2012?
 
During this period, the U.S. economy’s progress toward recovery from recession continued at a moderate pace. The Federal Reserve (Fed) maintained its efforts to improve the overall economic environment by holding the benchmark fed funds rate at the record low level of zero to 0.25% that it established in December 2008. Subsequent to the reporting period, the central bank decided during its December 2012 meeting to keep the fed funds rate at “exceptionally low levels” until either the unemployment rate reaches 6.5% or expected inflation goes above 2.5%. The Fed also affirmed its decision, announced in September 2012, to purchase $40 billion of mortgage-backed securities each month in an effort to stimulate the housing market. In addition to this new, open-ended stimulus program, the Fed plans to continue its program to extend the average maturity of its holdings of U.S. Treasury securities through the end of December 2012. The goals of these actions, which together will increase the Fed’s holdings of longer-term securities by approximately $85 billion a month through the end of the year, are to put downward pressure on longer term interest rates, make broader financial conditions more accommodative and support a stronger economic recovery as well as continued progress toward the Fed’s mandates of maximum employment and price stability.
 
In the third quarter 2012, the U.S. economy, as measured by the U.S. gross domestic product (GDP), grew at an annualized rate of 2.7%, up from 1.3% in the second quarter, marking 13 consecutive quarters of positive growth. The Consumer Price Index (CPI) rose 2.2% year-over-year as of October 2012, while the core CPI (which excludes food and energy) increased 2.0% during the period, staying just within the Fed’s unofficial objective of 2.0% or lower for this inflation measure. As of November 2012, (subsequent to this reporting period), the national unemployment rate was 7.7%, the lowest unemployment rate since December 2008 and below the 8.7% level recorded in
 
Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Funds disclaim any obligation to update publicly or revise any forward-looking statements or views expressed herein.
 
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s, Moody’s Investors Service, Inc., or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C, and D are below investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.
 
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November 2011. The slight decrease in unemployment from 7.9% in October 2012 was primarily due to workers who are no longer counted as part of the workforce. The housing market, long a major weak spot in the economic recovery, showed signs of improvement, with the average home price in the S&P/Case-Shiller Index of 20 major metropolitan areas rising 3.0% for the twelve months ended September 2012 (most recent data available at the time this report was prepared). This marked the largest annual percentage gain for the index since July 2010, although housing prices continued to be off approximately 30% from their mid-2006 peak. The outlook for the U.S. economy remained clouded by uncertainty about global financial markets as well as the impending “fiscal cliff,” the combination of tax increases and spending cuts scheduled to take effect beginning January 2013 and their potential impact on the economy.
 
Municipal bond prices generally rallied during this period, as strong demand and tight supply combined to create favorable market conditions for municipal bonds. Although the total volume of tax-exempt supply improved over that of the same period a year earlier, the issuance pattern remained light compared with long-term historical trends, and new money issuance was relatively flat. This supply/demand dynamic served as a key driver of performance. Concurrent with rising prices, yields continued to decline across most maturities, especially at the longer end of the municipal yield curve, and the curve flattened. In addition to the lingering effects of the Build America Bonds (BAB) program, which expired at the end of 2010 but impacted issuance well into 2012, the low level of municipal issuance reflected the current political distaste for additional borrowing by state and local governments facing fiscal constraints and the prevalent atmosphere of municipal budget austerity. During this period, we saw an increased number of borrowers come to market seeking to take advantage of the low rate environment through refunding activity, with approximately 60% of municipal paper issued by borrowers that were calling existing debt and refinancing at lower rates.
 
Over the twelve months ended October 31, 2012, municipal bond issuance nationwide totaled $379.6 billion, an increase of 18.6% over the issuance for the twelve-month period ended October 31, 2011. As previously discussed, the majority of this increase was attributable to refunding issues, rather than new money issuance. During this period, demand for municipal bonds remained consistently strong, especially from individual investors, (as evidenced in part by flows into mutual funds) and also from banks, and crossover buyers such as hedge funds.
 
What key strategies were used to manage these Funds during the twelvemonth reporting period ended October 31, 2012?
 
In an environment characterized by tight supply, strong demand and lower yields, we continued to take a bottom-up approach to discovering sectors that appeared undervalued as well as individual credits that had the potential to perform well over the long term. During the first two months of this period, finding appropriate bonds, especially new insured issues with longer maturities, remained a challenge for these Funds due to their insured mandate and the continued severe decline in insured issuance. In view of this situation, in October 2011 the Funds’ Board of Directors/Trustees approved changes to the Funds’ investment policy. Effective January 2, 2012, the Funds eliminated the policy requiring them to invest at least 80% of their managed assets in municipal
 
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securities covered by insurance. While each Fund continues to invest substantially all of its assets in a portfolio of investment-grade quality municipal securities, this change provides more flexibility regarding the types of securities available for investment.
 
Following this change, we were active in working to enhance the Funds’ diversification and transition their portfolios to reflect their uninsured status, adding a variety of sectors across the credit spectrum, particularly mid-tier and lower rated bonds. During this period, we found value in health care, substantially increasing our exposure to this sector in all of the Funds, especially NIO, NEA and NIF. NQI and NPX also added bonds secured by revenues from sales and use taxes as well as water and sewer bonds, primarily in the A and BBB credit sectors. Over the past few years, when there were fewer purchase opportunities due to the insured mandate, the Funds’ durations had drifted lower as bonds matured or were called from their portfolios, and we were unable to replace them with insured bonds with longer maturities. Consequently, during this period, we emphasized extending the Funds’ durations through the purchase of bonds with longer maturities. This also enabled us to take advantage of more attractive yields at the longer end of the municipal yield curve and helped to provide additional protection for the Funds’ duration and yield curve positioning. Our opportunities in these areas were somewhat constrained by the structure of bonds typically issued as part of refinancing deals, which tend to be characterized by higher quality and shorter maturities.
 
We also took advantage of short-term opportunities created by the supply/demand dynamics in the municipal market. While demand for tax-exempt paper remained consistently strong throughout the period, supply fluctuated widely. We found that periods of substantial supply provided good short-term buying opportunities not only because of the increased number of issues available, but also because some investors became more hesitant in their buying as supply grew, causing spreads to widen temporarily. At times when supply was more plentiful, we were proactive in focusing on anticipating cash flows from bond calls and maturing bonds and closely monitored opportunities for reinvestment.
 
Cash for new purchases during this period was generated primarily by the proceeds from an increased number of bond calls resulting from the growth in refinancings. During this period, we worked to redeploy these proceeds as well as those from maturing bonds to keep the Funds as fully invested as possible. As part of the proposed reorganization of NEA, NIF and NPX, we also sold holdings of alternative minimum tax (AMT) bonds in NIF and NPX, closing out our positions in these bonds by March 31, 2012, which gave us additional cash to redeploy out longer on the yield curve. We also engaged in some tactical selling, that is, taking advantage of attractive bids for certain issues resulting from strong demand to sell a specific issue and reinvest the proceeds into bonds that we thought offered more potential. Overall, however, selling was relatively limited because the bonds in our portfolios generally offered higher yields than those available in the current marketplace.
 
As of October 31, 2012, all of these Funds continued to use inverse floating rate securities. We employ inverse floaters for a variety of reasons, including duration management, income enhancement and total return enhancement.
 
Nuveen Investments
 
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How did the Funds perform during the twelve-month reporting period ended October 31, 2012?
 
Individual results for these Funds, as well as relevant index and peer group information, are presented in the accompanying table.
 
Average Annual Total Returns on Common Share Net Asset Value
For periods ended 10/31/12
 
Fund
1-Year
5-Year
10-Year
NQI
16.06%
6.97%
5.99%
NIO
15.03%
7.01%
6.08%
NIF
15.67%
7.33%
6.23%
NPX
16.07%
7.27%
6.11%
NVG
15.30%
7.40%
6.59%
S&P Municipal Bond Index**
9.56%
5.83%
5.35%
S&P Municipal Bond Insured Index**
9.50%
5.83%
5.31%
Lipper General & Insured Leveraged Municipal Debt Funds Classification Average**
18.77%
7.73%
6.99%
       
     
Since
 
1-Year
5-Year
Inception*
NEA
11.32%
6.68%
6.42%
S&P Municipal Bond Index**
9.56%
5.83%
5.35%
S&P Municipal Bond Insured Index**
9.50%
5.83%
5.31%
Lipper General & Insured Leveraged Municipal Debt Funds Classification Average**
18.77%
7.73%
6.99%
 
For the twelve months ended October 31, 2012, the total returns on common share net asset value (NAV) for all six of these Nuveen Funds exceeded the returns for the S&P Municipal Bond Index, as well as the S&P Municipal Bond Insured Index. For this same period, the Funds lagged the average return for the Lipper General & Insured Leveraged Municipal Debt Funds Classification Average.
 
Key management factors that influenced the Funds’ returns during this period included duration and yield curve positioning, credit exposure and sector allocation. In addition, the use of regulatory leverage was an important positive factor affecting the Funds’ performance over this period. Leverage is discussed in more detail later in this report.
 
In an environment of declining rates and a flattening yield curve, results for municipal maturity categories were positive across the yield curve, with longer maturities generally outperforming those with shorter maturities during this period. Overall, credits at the longest end of the municipal yield curve posted the strongest returns, while bonds at the shortest end produced the weakest results. For this period, duration and yield curve positioning was a major factor in the performance of these Funds, with the net impact varying according to each Fund’s individual weightings along the curve. As previously mentioned, the Funds’ durations had shortened over the last several years as bonds matured or were called from their portfolios, and the lack of insured issuance hampered replacing them with bonds with longer maturities. With the investment policy change in January 2012, we worked to give these Funds better access to the longer segment of
 
 
Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares.
   
 
For additional information, see the Performance Overview page for your Fund in this report.
   
*
Since inception returns for NEA and its comparative indexes and benchmark and from 11/20/02.
   
**
Refer to the Glossary of Terms Used in this Report for definitions. Indexes and Lipper averages are not available for direct investment.
 
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the yield curve. Overall for the period, NIF and NPX were the most advantageously positioned in terms of duration and yield curve. All of the Funds benefited from their holdings of long duration bonds, many of which had zero percent coupons, which generally outperformed the market during this period. This was especially true in NQI and NPX, which were overweight in zero coupon bonds. NEA, which reaches its 10-year anniversary in November 2012, had the increased exposure to bonds with short call dates typically associated with that milestone, and its shorter effective duration constrained its participation in the market rally during this period.
 
Credit exposure was another important factor in the Funds’ performance during these twelve months, as lower quality bonds generally outperformed higher quality bonds. This outperformance was due in part to the greater demand for lower rated bonds as investors looked for investment vehicles offering higher yields. As investors became more comfortable taking on additional investment risk, credit spreads, or the difference in yield spreads between U.S. Treasury securities and comparable investments such as municipal bonds, narrowed through a variety of rating categories. As a result of this spread compression, these Funds benefited from their holdings of lower rated credits, especially NQI and NVG, which had the largest allocations of bonds rated BBB and the fewest AAA bonds as of October 31, 2012. NEA, on the other hand, had the heaviest weighting of bonds rated AAA and the smallest weighting of BBB bonds, which detracted from its performance.
 
During this period, revenue bonds as a whole outperformed the general municipal market. Holdings that generally made positive contributions to the Funds’ returns included health care (together with hospitals), transportation, education and water and sewer bonds. All of these Funds had strong weightings in health care, while their transportation holdings, especially toll roads, also added to performance, with NQI having the heaviest weighting in this sector and NEA the smallest. Tobacco credits backed by the 1998 master tobacco settlement agreement also performed extremely well, helped in part by their longer effective durations. These bonds also benefited from market developments, including increased demand for higher yielding investments by investors who had become less risk-averse. In addition, based on recent data showing that cigarette sales had fallen less steeply than anticipated, the 46 states participating in the agreement stand to receive increased payments from the tobacco companies. Benefiting from the recent change in investment policy, NIO, NIF, NVG and NEA now have allocations of lower rated tobacco bonds, while NQI and NPX do not hold any tobacco credits.
 
In contrast, pre-refunded bonds, which are often backed by U.S. Treasury securities, were the poorest performing market segment during this period. The underperformance of these bonds can be attributed primarily to their shorter effective maturities and higher credit quality. As of October 31, 2012, NEA held the heaviest weighting of pre-refunded bonds, which significantly detracted from its performance during this period, while NVG had the smallest exposure to these bonds. General obligation (GO) bonds and housing and utilities (e.g., resource recovery, public power) credits also lagged the performance of the general municipal market for this period.
 
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FUND POLICY CHANGES
 
On October 28, 2011, the Funds’ Board of Directors/Trustees approved changes to each Fund’s investment policy regarding its investment in insured municipal securities. These changes were intended to increase the Funds’ flexibility regarding the types of securities available for investment.
 
Effective January 2, 2012, each Fund eliminated its investment policy requiring it, under normal circumstances, to invest at least 80% of its managed assets in municipal securities that are covered by insurance guaranteeing the timely payment of principal and interest. Over the past few years, most municipal bond insurers have had their credit ratings downgraded and only one insurer is currently insuring new municipal bonds. As a result, the supply of insured municipal securities has decreased dramatically and the long-term viability of the municipal bond insurance market is uncertain. The Funds have not changed their investment objective and will continue to invest substantially all of their assets in a portfolio of investment grade quality municipal securities.
 
Concurrent with the investment policy changes, the Funds changed their names as follows:
 
Nuveen Insured Quality Municipal Fund, Inc. (NQI) changed to Nuveen Quality Municipal Fund, Inc. (NQI);
   
Nuveen Insured Municipal Opportunity Fund, Inc. (NIO) changed to Nuveen Municipal Opportunity Fund, Inc. (NIO);
   
Nuveen Premier Insured Municipal Income Fund, Inc. (NIF) changed to Nuveen Premier Municipal Opportunity Fund, Inc. (NIF);
   
Nuveen Insured Premium Income Municipal Fund 2 (NPX) changed to Nuveen Premium Income Municipal Opportunity Fund (NPX);
   
Nuveen Insured Dividend Advantage Municipal Fund (NVG) changed to Nuveen Dividend Advantage Municipal Income Fund (NVG); and
   
Nuveen Insured Tax-Free Advantage Municipal Fund (NEA) changed to Nuveen AMT-Free Municipal Income Fund (NEA).
 
In addition, each Fund changed its non-fundamental investment policy requiring each Fund to invest in municipal securities rated at least investment grade at the time of investment. Each Fund adopted a new policy to, under normal circumstances, invest at least 80% of its managed assets in investment grade securities that, at the time of investment, are rated within the four highest grades (Baa or BBB or better) by at least one nationally recognized statistical ratings organization or are unrated but judged to be of comparable quality by the Fund’s investment adviser. Under the new policy, each Fund may invest up to 20% of its managed assets in municipal securities that at the time of investment are rated below investment grade or are unrated but judged to be of comparable quality by the Fund’s investment adviser. No more than 10% of each Fund’s managed assets may be invested in municipal securities rated below B3/B- or that are unrated but judged to be of comparable quality by the Fund’s investment adviser.
 
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APPROVED FUND REORGANIZATIONS
 
On June 22, 2012, the Funds’ Board of Directors/Trustees approved a series of reorganizations for certain Funds included in this report. The reorganizations are intended to create a single larger Fund, which would potentially offer shareholders the following benefits:
 
Lower Fund expense ratios (excluding the effects of leverage), as fixed costs are spread over a larger asset base;
   
Enhanced secondary market trading, as larger Funds potentially make it easier for investors to buy and sell Fund shares;
   
Lower per share trading costs through reduced bid/ask spreads due to a larger common share float; and
   
Increased Fund flexibility in managing the structure and cost of leverage over time.
 
The approved reorganizations are as follows:
 
Acquired Funds
Symbol
Acquiring Fund
Symbol
Nuveen Premier Municipal
NIF
Nuveen AMT-Free Municipal
NEA
 
Opportunity Fund, Inc.
 
Income Fund
 
Nuveen Premium Income
NPX
   
 
Municipal Opportunity Fund
     
 
If shareholders approve the reorganizations, and upon the closing of the reorganizations, the Acquired Funds will transfer their assets to the Acquiring Fund in exchange for common and preferred shares of the Acquiring Fund, and the assumption by the Acquiring Fund of the liabilities of the Acquired Funds. The Acquired Funds will then be liquidated, dissolved and terminated in accordance with their Declaration of Trust.
 
In addition, shareholders of the Acquired Funds will become shareholders of the Acquiring Fund. Holders of common shares will receive newly issued common shares of the Acquiring Fund, the aggregate net asset value of which will be equal to the aggregate net asset value of the common shares of the Acquired Funds held immediately prior to the reorganizations (including for this purpose fractional Acquiring Fund shares to which shareholders would be entitled). Fractional shares will be sold on the open market and shareholders will receive cash in lieu of such fractional shares. Holders of preferred shares of each Acquired Fund will receive on a one-for-one basis newly issued preferred shares of the Acquiring Fund, in exchange for preferred shares of their Acquired Fund held immediately prior to the reorganization.
 
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Fund Leverage and
Other Information
 
IMPACT OF THE FUNDS’ LEVERAGE STRATEGIES ON PERFORMANCE
 
One important factor impacting the returns of all these Funds relative to the comparative indexes was the Funds’ use of leverage. The Funds use leverage because their managers believe that, over time, leveraging provides opportunities for additional income and total return for common shareholders. However, use of leverage also can expose common shareholders to additional volatility. For example, as the prices of securities held by a Fund decline, the negative impact of these valuation changes on common share net asset value and common shareholder total return is magnified by the use of leverage. Conversely, leverage may enhance common share returns during periods when the prices of securities held by a Fund generally are rising. Leverage made a positive contribution to the performance of these Funds over this reporting period.
 
THE FUNDS’ REGULATORY LEVERAGE
 
As of October 31, 2012, the Funds have issued and outstanding MuniFund Term Preferred (MTP) Shares, Variable Rate MuniFund Term Preferred (VMTP) Shares and/or Variable Rate Demand Preferred (VRDP) Shares as shown in the accompanying tables.
 
MTP Shares
 
           
MTP Shares Issued
   
Annual
   
NYSE
Fund
   
Series
   
at Liquidation Value
   
Interest Rate
   
Ticker
NVG
   
2014
 
$
108,000,000
   
2.95
%
 
NVG PrC
NEA
   
2015
 
$
83,000,000
   
2.85
%
 
NEA PrC
 
VMTP Shares
 
         
VMTP Shares Issued
Fund
   
Series
 
at Liquidation Value
NQI
   
2014
 
$
240,400,000
NVG
   
2014
 
$
92,500,000
NEA
   
2014
 
$
67,600,000
 
VRDP Shares

   
VRDP Shares Issued
Fund
 
at Liquidation Value
NIO
 
$
667,200,000
NIF
 
$
130,900,000
NPX
 
$
219,000,000
 
Subsequent to the close of this reporting period, NQI successfully exchanged of all its outstanding 2,404 Series 2014 VMTP Shares for 2,404 Series 2015 VMTP Shares. This transaction was completed in a privately negotiated offering.
 
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The Fund completed the exchange offer in which it refinanced its existing VMTP Shares with new VMTP Shares at a reduced cost and with a term redemption date of December 1, 2015. Dividends on the VMTP Shares will be set weekly at a fixed spread to the Securities Industry and Financial Markets Association Municipal Swap Index (SIFMA).
 
(Refer to Notes to Financial Statements, Footnote 1 – General Information and Significant Accounting Policies for further details on MTP Shares, VMTP Shares and VRDP Shares.)
 
RISK CONSIDERATIONS
 
Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation. Past performance is no guarantee of future results. Fund common shares are subject to a variety of risks, including:
 
Investment and Market Risk. An investment in common shares is subject to investment risk, including the possible loss of the entire principal amount that you invest. Your investment in common shares represents an indirect investment in the municipal securities owned by the Fund, which generally trade in the over-the-counter markets. Your common shares at any point in time may be worth less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions.
 
Price Risk. Shares of closed-end investment companies like these Funds frequently trade at a discount to their NAV. Your common shares at any point in time may be worth less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions.
 
Tax Risk. The tax treatment of Fund distributions may be affected by new IRS interpretations of the Internal Revenue Code and future changes in tax laws and regulations.
 
Issuer Credit Risk. This is the risk that a security in a Fund’s portfolio will fail to make dividend or interest payments when due.
 
Interest Rate Risk. Fixed-income securities such as bonds, preferred, convertible and other debt securities will decline in value if market interest rates rise.
 
Reinvestment Risk. If market interest rates decline, income earned from a Fund’s portfolio may be reinvested at rates below that of the original bond that generated the income.
 
Call Risk or Prepayment Risk. Issuers may exercise their option to prepay principal earlier than scheduled, forcing a Fund to reinvest in lower-yielding securities.
 
Inverse Floater Risk. The Funds may invest in inverse floaters. Due to their leveraged nature, these investments can greatly increase a Fund’s exposure to interest rate risk and credit risk. In addition, investments in inverse floaters involve the risk that the Fund could lose more than its original principal investment.
 
Derivatives Risk. The Funds may use derivative instruments which involve a high degree of financial risk, including the risk that the loss on a derivative may be greater than the principal amount investment.
 
Leverage Risk. Each Fund’s use of leverage creates the possibility of higher volatility for the Fund’s per share NAV, market price, distributions and returns. There is no assurance that a Fund’s leveraging strategy will be successful.
 
Nuveen Investments
 
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Common Share Dividend and
Price Information
 
DIVIDEND INFORMATION
 
The monthly dividends of all six Funds in this report remained stable throughout the twelve-month reporting period ended October 31, 2012.
 
Due to normal portfolio activity, common shareholders of the following Funds received capital gains and/or net ordinary income distributions in December 2011 as follows:
 
         
Short-Term Capital Gains
    Long-Term Capital Gains  
and/or Ordinary Income
Fund
   
(per share)
   
(per share)
NQI
   
 
$
0.0026
NIO
 
$
0.0026
   
NVG
 
$
0.0413
   
 
All of the Funds in this report seek to pay stable dividends at rates that reflect each Fund’s past results and projected future performance. During certain periods, each Fund may pay dividends at a rate that may be more or less than the amount of net investment income actually earned by the Fund during the period. If a Fund has cumulatively earned more than it has paid in dividends, it holds the excess in reserve as undistributed net investment income (UNII) as part of the Fund’s NAV. Conversely, if a Fund has cumulatively paid dividends in excess of its earnings, the excess constitutes negative UNII that is likewise reflected in the Fund’s NAV. Each Fund will, over time, pay all of its net investment income as dividends to shareholders. As of October 31, 2012, all of the Funds in this report had positive UNII balances for both tax and financial reporting purposes.
 
COMMON SHARE REPURCHASES AND PRICE INFORMATION
 
As of October 31, 2012, and since the inception of the Funds’ repurchase programs, the Funds have cumulatively repurchased and retired their common shares as shown in the accompanying table. Since the inception of the Funds’ repurchase programs, NQI, NIF and NPX have not repurchased any of their outstanding common shares.
 
 
Common Shares
% of Outstanding
Fund
Repurchased and Retired
Common Shares
NIO
2,900
0.0%
NVG
10,400
0.0%
NEA
19,300
0.1%
 
During the twelve-month reporting period, the Funds did not repurchase any of their outstanding common shares.
 
14
 
Nuveen Investments

 
 

 
 
As of October 31, 2012, and during the twelve-month reporting period, the Funds’ common share prices were trading at (+) premiums and/or (-) discounts to their common share NAVs as shown in the accompanying table.
 
 
10/31/12
Twelve-Month Average
Fund
(+)Premium/(-)Discount
(+)Premium/(-)Discount
NQI
(+)0.00%
(-)1.02%
NIO
(-)2.76%
(-)3.35%
NIF
(-)1.99%
(+)0.45%
NPX
(-)0.20%
(-)2.55%
NVG
(-)3.12%
(-)3.47%
NEA
(+)2.00%
(-)1.92%
 
Nuveen Investments
 
15

 
 

 

NQI
 
Nuveen Quality
Performance
 
Municipal
OVERVIEW
 
Fund, Inc.
   
as of October 31, 2012
 
 
Fund Snapshot
       
Common Share Price
 
$
15.49
 
Common Share Net Asset Value (NAV)
 
$
15.49
 
Premium/(Discount) to NAV
   
%
Market Yield
   
5.81
%
Taxable-Equivalent Yield1
   
8.07
%
Net Assets Applicable to Common Shares ($000)
 
$
595,740
 
         
Leverage
       
Regulatory Leverage
   
28.75
%
Effective Leverage
   
36.68
%

Average Annual Total Returns
             
(Inception 12/19/90)
             
   
On Share Price
 
On NAV
1-Year
   
16.65
%
 
16.06
%
5-Year
   
9.09
%
 
6.97
%
10-Year
   
6.31
%
 
5.99
%

States3
       
(as a % of total investments)
       
California
   
14.5
%
Florida
   
9.9
%
Washington
   
7.0
%
Texas
   
6.3
%
Arizona
   
6.2
%
Illinois
   
6.1
%
Pennsylvania
   
5.4
%
Colorado
   
3.8
%
Kentucky
   
3.6
%
Massachusetts
   
3.3
%
Michigan
   
2.7
%
New York
   
2.7
%
Louisiana
   
2.5
%
Indiana
   
2.5
%
Ohio
   
2.3
%
Wisconsin
   
2.3
%
Other
   
18.9
%

Portfolio Composition3
       
(as a % of total investments)
       
Tax Obligation/Limited
   
25.2
%
Transportation
   
14.5
%
Health Care
   
14.5
%
Tax Obligation/General
   
13.2
%
Water and Sewer
   
11.3
%
U.S. Guaranteed
   
11.1
%
Other
   
10.2
%
 
 
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund’s Performance Overview page.
1
Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a federal income tax rate of 28%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower.
2
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s, Moody’s Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by any of these national rating agencies.
3
Holdings are subject to change.
4
The Fund paid shareholders a net ordinary income distribution in December 2011 of $0.0026 per share.
5
Rounds to less than 1%.
 
16
 
Nuveen Investments

 
 

 

NIO
 
Nuveen Municipal
Performance
 
Opportunity
OVERVIEW
 
Fund, Inc.
   
as of October 31, 2012
 
 
Fund Snapshot
       
Common Share Price
 
$
15.53
 
Common Share Net Asset Value (NAV)
 
$
15.97
 
Premium/(Discount) to NAV
   
-2.76
%
Market Yield
   
5.64
%
Taxable-Equivalent Yield1
   
7.83
%
Net Assets Applicable to Common Shares ($000)
 
$
1,526,792
 
         
Leverage
       
Regulatory Leverage
   
30.41
%
Effective Leverage
   
36.13
%

Average Annual Total Returns
             
(Inception 9/19/91)
             
   
On Share Price
 
On NAV
1-Year
   
15.92
%
 
15.03
%
5-Year
   
9.01
%
 
7.01
%
10-Year
   
6.48
%
 
6.08
%

States3
       
(as a % of total investments)
       
Florida
   
15.1
%
California
   
13.1
%
Illinois
   
5.7
%
New York
   
4.9
%
Texas
   
4.7
%
Washington
   
4.5
%
South Carolina
   
3.7
%
Pennsylvania
   
3.6
%
Nevada
   
3.5
%
Indiana
   
3.5
%
New Jersey
   
3.3
%
Ohio
   
3.2
%
Louisiana
   
2.9
%
Colorado
   
2.7
%
Michigan
   
2.3
%
Massachusetts
   
2.2
%
Arizona
   
2.1
%
Other
   
19.0
%

Portfolio Composition3
       
(as a % of total investments)
       
Tax Obligation/Limited
   
24.4
%
Transportation
   
13.9
%
U.S. Guaranteed
   
13.9
%
Health Care
   
13.0
%
Water and Sewer
   
10.9
%
Tax Obligation/General
   
10.1
%
Utilities
   
7.1
%
Education and Civic Organizations
   
5.0
%
Other
   
1.7
%
 
 
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund’s Performance Overview page.
1
Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a federal income tax rate of 28%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower.
2
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s, Moody’s Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by any of these national rating agencies.
3
Holdings are subject to change.
4
The Fund paid shareholders a capital gains distribution in December 2011 of $0.0026 per share.
 
Nuveen Investments
 
17

 
 

 

NIF
 
Nuveen Premier
Performance
 
Municipal Opportunity
OVERVIEW
 
Fund, Inc.
   
as of October 31, 2012
 
 
Fund Snapshot
       
Common Share Price
 
$
15.75
 
Common Share Net Asset Value (NAV)
 
$
16.07
 
Premium/(Discount) to NAV
   
-1.99
%
Market Yield
   
5.75
%
Taxable-Equivalent Yield1
   
7.99
%
Net Assets Applicable to Common Shares ($000)
 
$
313,735
 
         
Leverage
       
Regulatory Leverage
   
29.44
%
Effective Leverage
   
36.49
%

Average Annual Total Returns
             
(Inception 12/19/91)
             
   
On Share Price
 
On NAV
1-Year
   
17.06
%
 
15.67
%
5-Year
   
9.71
%
 
7.33
%
10-Year
   
6.41
%
 
6.23
%

States3
       
(as a % of total investments)
       
California
   
15.8
%
Illinois
   
11.5
%
Washington
   
6.8
%
Colorado
   
5.1
%
Texas
   
5.1
%
Indiana
   
4.6
%
Pennsylvania
   
4.6
%
New York
   
4.6
%
Florida
   
4.5
%
Arizona
   
3.5
%
Ohio
   
3.4
%
Massachusetts
   
3.2
%
Oregon
   
2.9
%
North Carolina
   
2.8
%
New Jersey
   
2.6
%
Other
   
19.0
%

Portfolio Composition3
       
(as a % of total investments)
       
Tax Obligation/Limited
   
20.4
%
U.S. Guaranteed
   
17.0
%
Tax Obligation/General
   
16.3
%
Health Care
   
12.3
%
Transportation
   
11.6
%
Water and Sewer
   
10.1
%
Utilities
   
5.1
%
Other
   
7.2
%
 
 
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund’s Performance Overview page.
1
Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a federal income tax rate of 28%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower.
2
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s, Moody’s Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having given an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by any of these national rating agencies.
3
Holdings are subject to change.
 
18
 
Nuveen Investments

 
 

 

NPX
 
Nuveen Premium
Performance
 
Income Municipal
OVERVIEW
 
Opportunity Fund
   
as of October 31, 2012
 
 
Fund Snapshot
       
Common Share Price
 
$
14.90
 
Common Share Net Asset Value (NAV)
 
$
14.93
 
Premium/(Discount) to NAV
   
-0.20
%
Market Yield
   
4.99
%
Taxable-Equivalent Yield1
   
6.93
%
Net Assets Applicable to Common Shares ($000)
 
$
557,623
 
         
Leverage
       
Regulatory Leverage
   
28.20
%
Effective Leverage
   
33.86
%

Average Annual Total Returns
             
(Inception 7/22/93)
             
   
On Share Price
 
On NAV
1-Year
   
22.39
%
 
16.07
%
5-Year
   
10.22
%
 
7.27
%
10-Year
   
6.72
%
 
6.11
%

States3
       
(as a % of total investments)
       
California
   
17.4
%
New York
   
7.2
%
Pennsylvania
   
6.6
%
New Jersey
   
6.5
%
Colorado
   
6.2
%
Illinois
   
6.1
%
Texas
   
6.1
%
Florida
   
5.7
%
Indiana
   
3.8
%
Louisiana
   
3.7
%
Washington
   
3.7
%
Arizona
   
3.3
%
Puerto Rico
   
2.9
%
Georgia
   
2.6
%
Other
   
18.2
%

Portfolio Composition3
       
(as a % of total investments)
       
Tax Obligation/Limited
   
19.9
%
Health Care
   
13.6
%
U.S. Guaranteed
   
13.3
%
Transportation
   
13.0
%
Water and Sewer
   
12.0
%
Tax Obligation/General
   
8.9
%
Utilities
   
8.8
%
Education and Civic Organizations
   
8.0
%
Other
   
2.5
%
 
 
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund’s Performance Overview page.
1
Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a federal income tax rate of 28%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower.
2
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s, Moody’s Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by any of these national rating agencies.
3
Holdings are subject to change.
4
Rounds to less than 1%.
 
Nuveen Investments
 
19

 
 

 

NVG
 
Nuveen Dividend
Performance
 
Advantage Municipal
OVERVIEW
 
Income Fund
   
as of October 31, 2012
 
 
Fund Snapshot
       
Common Share Price
 
$
15.82
 
Common Share Net Asset Value (NAV)
 
$
16.33
 
Premium/(Discount) to NAV
   
-3.12
%
Market Yield
   
5.69
%
Taxable-Equivalent Yield1
   
7.90
%
Net Assets Applicable to Common Shares ($000)
 
$
486,750
 
         
Leverage
       
Regulatory Leverage
   
29.17
%
Effective Leverage
   
35.38
%

Average Annual Total Returns
             
(Inception 3/25/02)
             
   
On Share Price
 
On NAV
1-Year
   
17.44
%
 
15.30
%
5-Year
   
9.18
%
 
7.40
%
10-Year
   
6.88
%
 
6.59
%

States3
       
(as a % of total municipal bonds)
       
California
   
13.2
%
Texas
   
12.1
%
Washington
   
8.7
%
Florida
   
7.2
%
Illinois
   
7.1
%
Pennsylvania
   
4.5
%
Colorado
   
4.3
%
Indiana
   
4.3
%
New York
   
3.8
%
Louisiana
   
3.3
%
Ohio
   
2.9
%
Michigan
   
2.5
%
Massachusetts
   
2.5
%
South Carolina
   
2.5
%
Arizona
   
1.9
%
Other
   
19.2
%

Portfolio Composition3
       
(as a % of total investments)
       
Tax Obligation/Limited
   
24.6
%
Health Care
   
17.3
%
Transportation
   
12.8
%
Tax Obligation/General
   
11.0
%
U.S. Guaranteed
   
8.6
%
Water and Sewer
   
7.6
%
Education and Civic Organizations
   
7.0
%
Other
   
11.1
%
 
 
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund’s Performance Overview page.
1
Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a federal income tax rate of 28%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower.
2
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s, Moody’s Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by any of these national rating agencies.
3
Holdings are subject to change.
4
The Fund paid shareholders a capital gains distribution in December 2011 of $0.0413 per share.
 
20
 
Nuveen Investments

 
 

 

NEA
 
Nuveen AMT-Free
Performance
 
Municipal Income
OVERVIEW
 
Fund
   
as of October 31, 2012
 
 
Fund Snapshot
       
Common Share Price
 
$
15.80
 
Common Share Net Asset Value (NAV)
 
$
15.49
 
Premium/(Discount) to NAV
   
2.00
%
Market Yield
   
5.32
%
Taxable-Equivalent Yield1
   
7.39
%
Net Assets Applicable to Common Shares ($000)
 
$
344,487
 
         
Leverage
       
Regulatory Leverage
   
30.42
%
Effective Leverage
   
38.19
%

Average Annual Total Returns
             
(Inception 11/21/02)
             
   
On Share Price
 
On NAV
1-Year
   
20.64
%
 
11.32
%
5-Year
   
7.96
%
 
6.68
%
Since Inception
   
6.33
%
 
6.42
%

States3
       
(as a % of total investments)
       
Florida
   
12.2
%
California
   
11.1
%
Illinois
   
6.9
%
Michigan
   
6.6
%
Washington
   
6.6
%
Texas
   
6.5
%
Indiana
   
5.6
%
Pennsylvania
   
5.1
%
Colorado
   
4.1
%
New York
   
3.6
%
Wisconsin
   
3.2
%
North Carolina
   
3.1
%
South Carolina
   
2.7
%
Ohio
   
2.5
%
Massachusetts
   
2.5
%
Other
   
17.7
%

Portfolio Composition3
       
(as a % of total investments)
       
U.S. Guaranteed
   
27.9
%
Tax Obligation/Limited
   
20.7
%
Health Care
   
15.9
%
Water and Sewer
   
11.3
%
Tax Obligation/General
   
7.0
%
Utilities
   
5.4
%
Education and Civic Organizations
   
5.1
%
Other
   
6.7
%
 
 
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund’s Performance Overview page.
1
Taxable-Equivalent Yield represents the yield that must be earned on a fully taxable investment in order to equal the yield of the Fund on an after-tax basis. It is based on a federal income tax rate of 28%. When comparing this Fund to investments that generate qualified dividend income, the Taxable-Equivalent Yield is lower.
2
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor’s, Moody’s Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by any of these national rating agencies.
3
Holdings are subject to change.
 
Nuveen Investments
 
21

 
 

 

NQI
 
Shareholder Meeting Report
NIO
   
NIF
 
The annual meeting of shareholders was held on July 31, 2012 in the Lobby Conference Room, 333 West Wacker Drive, Chicago, IL 60606; at this meeting the shareholders were asked to vote on the election of Board Members.
 
   
NQI
 
NIO
 
NIF
 
   
Common and
       
Common and
       
Common and
       
     
Preferred
   
Preferred
   
Preferred
   
Preferred
   
Preferred
   
Preferred
 
     
shares voting
   
shares voting
   
shares voting
   
shares voting
   
shares voting
   
shares voting
 
     
together
   
together
   
together
   
together
   
together
   
together
 
     
as a class
   
as a class
   
as a class
   
as a class
   
as a class
   
as a class
 
Approval of the Board Members was reached as follows:
                                     
John P. Amboian
                                     
For
   
32,527,790
   
   
83,666,240
   
   
17,730,366
   
 
Withhold
   
1,260,488
   
   
2,305,783
   
   
276,130
   
 
Total
   
33,788,278
   
   
85,972,023
   
   
18,006,496
   
 
Robert P. Bremner
                                     
For
   
32,491,513
   
   
83,589,188
   
   
17,699,200
   
 
Withhold
   
1,296,765
   
   
2,382,835
   
   
307,296
   
 
Total
   
33,788,278
   
   
85,972,023
   
   
18,006,496
   
 
Jack B. Evans
                                     
For
   
32,523,192
   
   
83,673,053
   
   
17,678,000
   
 
Withhold
   
1,265,086
   
   
2,298,970
   
   
328,496
   
 
Total
   
33,788,278
   
   
85,972,023
   
   
18,006,496
   
 
William C. Hunter
                                     
For
   
   
2,404
   
   
4,822
   
   
919
 
Withhold
   
   
   
   
   
   
150
 
Total
   
   
2,404
   
   
4,822
   
   
1,069
 
David J. Kundert
                                     
For
   
32,477,103
   
   
83,550,805
   
   
17,685,792
   
 
Withhold
   
1,311,175
   
   
2,421,218
   
   
320,704
   
 
Total
   
33,788,278
   
   
85,972,023
   
   
18,006,496
   
 
William J. Schneider
                                     
For
   
   
2,404
   
   
4,822
   
   
919
 
Withhold
   
   
   
   
   
   
150
 
Total
   
   
2,404
   
   
4,822
   
   
1,069
 
Judith M. Stockdale
                                     
For
   
32,498,077
   
   
83,601,833
   
   
17,687,693
   
 
Withhold
   
1,290,201
   
   
2,370,190
   
   
318,803
   
 
Total
   
33,788,278
   
   
85,972,023
   
   
18,006,496
   
 
Carole E. Stone
                                     
For
   
32,494,013
   
   
83,572,556
   
   
17,663,617
   
 
Withhold
   
1,294,265
   
   
2,399,467
   
   
342,879
   
 
Total
   
33,788,278
   
   
85,972,023
   
   
18,006,496
   
 
Virginia L. Stringer
                                     
For
   
32,519,787
   
   
83,649,701
   
   
17,676,046
   
 
Withhold
   
1,268,491
   
   
2,322,322
   
   
330,450
   
 
Total
   
33,788,278
   
   
85,972,023
   
   
18,006,496
   
 
Terence J. Toth
                                     
For
   
32,523,594
   
   
83,626,483
   
   
17,706,525
   
 
Withhold
   
1,264,684
   
   
2,345,540
   
   
299,971
   
 
Total
   
33,788,278
   
   
85,972,023
   
   
18,006,496
   
 
 
22
 
Nuveen Investments

 
 

 
 
   
NPX
 
NVG
 
NEA
 
   
Common and
       
Common and
       
Common and
       
     
Preferred
   
Preferred
   
Preferred
   
Preferred
   
Preferred
   
Preferred
 
     
shares voting
   
shares voting
   
shares voting
   
shares voting
   
shares voting
   
shares voting
 
     
together
   
together
   
together
   
together
   
together
   
together
 
     
as a class
   
as a class
   
as a class
   
as a class
   
as a class
   
as a class
 
Approval of the Board Members was reached as follows:
                                     
John P. Amboian
                                     
For
   
   
   
   
   
   
 
Withhold
   
   
   
   
   
   
 
Total
   
   
   
   
   
   
 
Robert P. Bremner
                                     
For
   
33,282,849
   
   
37,110,423
   
   
27,842,984
   
 
Withhold
   
1,013,001
   
   
904,567
   
   
746,993
   
 
Total
   
34,295,850
   
   
38,014,990
   
   
28,589,977
   
 
Jack B. Evans
                                     
For
   
33,322,775
   
   
37,103,943
   
   
27,862,274
   
 
Withhold
   
973,075
   
   
911,047
   
   
727,703
   
 
Total
   
34,295,850
   
   
38,014,990
   
   
28,589,977
   
 
William C. Hunter
                                     
For
   
   
1,271
   
   
9,779,600
   
   
7,663,225
 
Withhold
   
   
919
   
   
270,961
   
   
195,933
 
Total
   
   
2,190
   
   
10,050,561
   
   
7,859,158
 
David J. Kundert
                                     
For
   
   
   
   
   
   
 
Withhold
   
   
   
   
   
   
 
Total
   
   
   
   
   
   
 
William J. Schneider
                                     
For
   
   
1,271
   
   
9,745,816
   
   
7,627,055
 
Withhold
   
   
919
   
   
304,745
   
   
232,103
 
Total
   
   
2,190
   
   
10,050,561
   
   
7,859,158
 
Judith M. Stockdale
                                     
For
   
   
   
   
   
   
 
Withhold
   
   
   
   
   
   
 
Total
   
   
   
   
   
   
 
Carole E. Stone
                                     
For
   
   
   
   
   
   
 
Withhold
   
   
   
   
   
   
 
Total
   
   
   
   
   
   
 
Virginia L. Stringer
                                     
For
   
   
   
   
   
   
 
Withhold
   
   
   
   
   
   
 
Total
   
   
   
   
   
   
 
Terence J. Toth
                                     
For
   
   
   
   
   
   
 
Withhold
   
   
   
   
   
   
 
Total
   
   
   
   
   
   
 
 
Nuveen Investments
 
23

 
 

 

Report of Independent
Registered Public Accounting Firm
 
The Board of Directors/Trustees and Shareholders
Nuveen Quality Municipal Fund, Inc. (formerly known as Nuveen Insured Quality Municipal Fund, Inc.)
Nuveen Municipal Opportunity Fund, Inc. (formerly known as Nuveen Insured Municipal Opportunity Fund, Inc.)
Nuveen Premier Municipal Opportunity Fund, Inc. (formerly known as Nuveen Premier Insured Municipal Income Fund, Inc.)
Nuveen Premium Income Municipal Opportunity Fund (formerly known as Nuveen Insured Premium Income Municipal Fund 2)
Nuveen Dividend Advantage Municipal Income Fund (formerly known as Nuveen Insured Dividend Advantage Municipal Fund)
Nuveen AMT-Free Municipal Income Fund (formerly known as Nuveen Insured Tax-Free Advantage Municipal Fund)
 
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Nuveen Quality Municipal Fund, Inc., Nuveen Municipal Opportunity Fund, Inc., Nuveen Premier Municipal Opportunity Fund, Inc., Nuveen Premium Income Municipal Opportunity Fund, Nuveen Dividend Advantage Municipal Income Fund, and Nuveen AMT-Free Municipal Income Fund (the “Funds”) as of October 31, 2012, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. 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 Quality Municipal Fund, Inc., Nuveen Municipal Opportunity Fund, Inc., Nuveen Premier Municipal Opportunity Fund, Inc., Nuveen Premium Income Municipal Opportunity Fund, Nuveen Dividend Advantage Municipal Income Fund, and Nuveen AMT-Free Municipal Income Fund at October 31, 2012, and the results of their operations and their cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
 
 
Chicago, Illinois
December 27, 2012
 
24
 
Nuveen Investments
 
 
 

 
   
Nuveen Quality Municipal Fund, Inc.
NQI
 
Portfolio of Investments
October 31, 2012

 
Principal
   
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
Alabama – 1.8% (1.3% of Total Investments)
         
$
1,135
 
Birmingham Waterworks and Sewerage Board, Alabama, Water and Sewerage Revenue Bonds, Series 2002B, 5.250%, 1/01/20 (Pre-refunded 1/01/13) – NPFG Insured
1/13 at 100.00
AA+ (4)
$
1,144,511
 
 
7,000
 
Huntsville Healthcare Authority, Alabama, Revenue Bonds, Series 2005A, 5.000%, 6/01/24 – NPFG Insured
6/15 at 100.00
A1
 
7,381,780
 
     
Opelika Utilities Board, Alabama, Utility Revenue Bonds, Auburn Water Supply Agreement, Series 2011:
         
 
1,250
 
4.000%, 6/01/29 – AGM Insured
6/21 at 100.00
AA–
 
1,340,525
 
 
1,000
 
4.250%, 6/01/31 – AGM Insured
6/21 at 100.00
AA–
 
1,079,410
 
 
10,385
 
Total Alabama
     
10,946,226
 
     
Arizona – 9.0% (6.2% of Total Investments)
         
     
Arizona Health Facilities Authority, Hospital System Revenue Bonds, Phoenix Children’s Hospital, Refunding Series 2012A:
         
 
1,220
 
5.000%, 2/01/20
No Opt. Call
BBB+
 
1,392,118
 
 
1,850
 
5.000%, 2/01/21
No Opt. Call
BBB+
 
2,104,209
 
     
Arizona Sports and Tourism Authority, Senior Revenue Refunding Bonds, Multipurpose Stadium Facility Project, Series 2012A:
         
 
4,180
 
5.000%, 7/01/30
7/22 at 100.00
A1
 
4,739,786
 
 
10,000
 
5.000%, 7/01/31
7/22 at 100.00
A1
 
11,268,800
 
     
Arizona State, Certificates of Participation, Series 2010A:
         
 
1,200
 
5.250%, 10/01/28 – AGM Insured
10/19 at 100.00
AA–
 
1,369,500
 
 
1,500
 
5.000%, 10/01/29 – AGM Insured
10/19 at 100.00
AA–
 
1,674,675
 
 
7,070
 
Arizona State, State Lottery Revenue Bonds, Series 2010A, 5.000%, 7/01/29 – AGC Insured
1/20 at 100.00
AA–
 
8,036,469
 
 
2,750
 
Mesa, Arizona, Utility System Revenue Bonds, Tender Option Bond Trust, Series 11032- 11034, 14.760%, 7/01/26 – AGM Insured (IF)
7/17 at 100.00
Aa2
 
3,234,440
 
 
9,270
 
Phoenix Civic Improvement Corporation, Arizona, Senior Lien Airport Revenue Bonds, Series 2002B, 5.250%, 7/01/32 – FGIC Insured (Alternative Minimum Tax)
11/12 at 100.00
AA–
 
9,282,793
 
 
8,755
 
Phoenix, Arizona, Civic Improvement Revenue Bonds, Civic Plaza, Series 2005B, 0.000%, 7/01/39 – FGIC Insured
No Opt. Call
AA
 
10,539,269
 
 
47,795
 
Total Arizona
     
53,642,059
 
     
Arkansas – 0.4% (0.3% of Total Investments)
         
 
2,250
 
University of Arkansas, Fayetteville, Revenue Bonds, Medical Sciences Campus, Series 2004B, 5.000%, 11/01/24 – NPFG Insured
11/14 at 100.00
Aa2
 
2,420,190
 
     
California – 21.2% (14.5% of Total Investments)
         
     
California Department of Water Resources, Water System Revenue Bonds, Central Valley Project, Series 2005AC:
         
 
4,010
 
5.000%, 12/01/24 – NPFG Insured (UB)
12/14 at 100.00
AAA
 
4,397,607
 
 
3,965
 
5.000%, 12/01/26 – NPFG Insured (UB)
12/14 at 100.00
AAA
 
4,348,257
 
 
1,000
 
California Health Facilities Financing Authority, Revenue Bonds, Children’s Hospital Los Angeles, Series 2012A, 5.000%, 11/15/23
11/22 at 100.00
BBB+
 
1,130,650
 
 
5,000
 
California Health Facilities Financing Authority, Revenue Bonds, Lucile Salter Packard Children’s Hospital, Series 2012A, 5.000%, 8/15/51
8/22 at 100.00
AA
 
5,540,300
 
     
California State, General Obligation Bonds, Series 2002:
         
 
4,455
 
5.000%, 4/01/27 – AMBAC Insured
11/12 at 100.00
A1
 
4,470,192
 
 
4,325
 
5.000%, 10/01/32 – NPFG Insured
11/12 at 100.00
A1
 
4,338,408
 
 
5
 
California State, General Obligation Bonds, Series 2004, 5.000%, 4/01/31 – AMBAC Insured
4/14 at 100.00
A1
 
5,210
 
 
3,745
 
California State, General Obligation Bonds, Series 2004, 5.000%, 4/01/31 (Pre-refunded 4/01/14) – AMBAC Insured
4/14 at 100.00
AA+ (4)
 
3,995,278
 
 
7,000
 
California Statewide Communities Development Authority, Revenue Bonds, Sutter Health, Series 2011A, 6.000%, 8/15/42
8/20 at 100.00
AA–
 
8,424,360
 

Nuveen Investments
 
25

 
 

 


   
Nuveen Quality Municipal Fund, Inc. (continued)
NQI
 
Portfolio of Investments
October 31, 2012
 
 
Principal
 
 
Optional Call
       
 
Amount (000)
 
Description (1)
Provisions (2)
Ratings (3)
 
Value
 
     
California (continued)
         
$
1,000
 
California Statewide Community Development Authority, Revenue Bonds, Childrens Hospital of Los Angeles, Series 2007, 5.000%, 8/15/47
8/17 at 100.00
BBB+
$
1,023,900
 
 
2,340
 
Cerritos Public Financing Authority, California, Tax Allocation Revenue Bonds, Los Cerritos Redevelopment Projects, Series 2002A, 5.000%, 11/01/24 – AMBAC Insured
11/17 at 102.00
A–
 
2,497,576
 
 
5,000
 
Clovis Unified School District, Fresno County, California, General Obligation Bonds, Series 2001A, 0.000%, 8/01/25 – FGIC Insured (ETM)
No Opt. Call
AA+ (4)
 
3,669,200
 
     
Foothill/Eastern Transportation Corridor Agency, California, Toll Road Revenue Refunding Bonds, Series 1999:
         
 
22,985
 
0.000%, 1/15/24 – NPFG Insured
1/13 at 52.13
BBB
 
11,840,953
 
 
22,000
 
0.000%, 1/15/31 – NPFG Insured
1/13 at 34.14
BBB
 
7,420,600
 
 
50,000
 
0.000%, 1/15/37 – NPFG Insured
1/13 at 23.70
BBB
 
11,702,500
 
 
5,000
 
Garden Grove, California, Certificates of Participation, Financing Project, Series 2002A, 5.125%, 3/01/32 – AMBAC Insured
3/13 at 100.50
A
 
5,052,950
 
 
8,500
 
Golden State Tobacco Securitization Corporation, California, Enhanced Tobacco Settlement Asset-Backed Revenue Bonds, Series 2005A, 5.000%, 6/01/35 – FGIC Insured
6/15 at 100.00
A2
 
8,688,530
 
 
5,795
 
Kern Community College District, California, General Obligation Bonds, Series 2006, 0.000%, 11/01/25 – AGM Insured
No Opt. Call
Aa2
 
3,454,168
 
 
1,195
 
Lincoln Public Financing Authority, Placer County, California, Twelve Bridges Limited Obligation Revenue Bonds, Refunding Series 2011A, 4.375%, 9/02/25 – AGM Insured
9/21 at 100.00
AA–
 
1,278,053
 
 
4,100
 
Ontario Redevelopment Financing Authority, San Bernardino County, California, Revenue Bonds, Redevelopment Project 1, Series 1993, 5.850%, 8/01/22 – NPFG Insured (ETM)
2/13 at 100.00
BBB (4)
 
4,769,571
 
 
2,590
 
Riverside County Public Financing Authority, California, Tax Allocation Bonds, Multiple Projects, Series 2004, 5.000%, 10/01/25 – SYNCORA GTY Insured
10/14 at 100.00
BBB
 
2,603,028
 
 
2,000
 
San Diego Redevelopment Agency, California, Subordinate Lien Tax Allocation Bonds, Centre City Project, Series 2004A, 5.000%, 9/01/21 – SYNCORA GTY Insured
9/14 at 100.00
AA–
 
2,057,100
 
     
San Francisco Bay Area Rapid Transit District, California, Sales Tax Revenue Bonds, Refunding Series 2005A:
         
 
2,000
 
5.000%, 7/01/21 – NPFG Insured
7/15 at 100.00
AA+
 
2,236,400
 
 
3,655
 
5.000%, 7/01/22 – NPFG Insured
7/15 at 100.00
AA+
 
4,082,891
 
 
8,965
 
San Jose Redevelopment Agency, California, Tax Allocation Bonds, Merged Area Redevelopment Project, Series 2006C, 4.250%, 8/01/30 – NPFG Insured
8/17 at 100.00
BBB
 
8,581,388
 
 
3,500
 
Saugus Union School District, Los Angeles County, California, General Obligation Bonds, Series 2006, 0.000%, 8/01/23 – FGIC Insured
No Opt. Call
Aa2
 
2,309,230
 
 
1,000
 
Sierra Joint Community College District, Tahoe Truckee, California, General Obligation Bonds, School Facilities Improvement District 1, Series 2005A, 5.000%, 8/01/27 – FGIC Insured
8/14 at 100.00
Aa2
 
1,068,610
 
 
1,525
 
Sierra Joint Community College District, Western Nevada, California, General Obligation Bonds, School Facilities Improvement District 2, Series 2005A, 5.000%, 8/01/27 – FGIC Insured
8/14 at 100.00
Aa2
 
1,629,630
 
 
3,170
 
Ventura County Community College District, California, General Obligation Bonds, Series 2005B, 5.000%, 8/01/28 – NPFG Insured
8/15 at 100.00
AA
 
3,505,291
 
 
189,825
 
Total California
     
126,121,831
 
     
Colorado – 5.6% (3.8% of Total Investments)
         
 
2,015
 
Board of Trustees of the University of Northern Colorado, Revenue Bonds, Series 2005, 5.000%, 6/01/22 – AGM Insured
6/15 at 100.00
AA–
 
2,212,107
 
     
Colorado Health Facilities Authority, Colorado, Revenue Bonds, Covenant Retirement Communities Inc., Refunding Series 2012B:
         
 
1,615
 
5.000%, 12/01/22
No Opt. Call
BBB+
 
1,796,639
 
 
2,895
 
5.000%, 12/01/23
12/22 at 100.00
BBB+
 
3,185,948
 
 
4,200
 
5.000%, 12/01/24
12/22 at 100.00
BBB+
 
4,599,588
 
 
1,000
 
Denver City and County, Colorado, Airport Revenue Bonds, Series 2006, 5.000%, 11/15/24 – FGIC Insured
11/16 at 100.00
A+
 
1,138,260
 
 
5,365
 
Denver City and County, Colorado, Airport Revenue Bonds, Series 2006, 5.000%, 11/15/23 – FGIC Insured (UB)
11/16 at 100.00
A+
 
6,143,086