-----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, Mjkv2zUKussXUS/zAEMI0HzPPDbixKS3p7g1QdOJkCCKfWMB/W2eK+V6Ik4PD3Xe BaGaEU3ckDGzLmXUj0dORg== 0000891804-01-501449.txt : 20021122 0000891804-01-501449.hdr.sgml : 20021122 20010808090238 ACCESSION NUMBER: 0000891804-01-501449 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010531 FILED AS OF DATE: 20010808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NUVEEN SELECT MATURITIES MUNICIPAL FUND CENTRAL INDEX KEY: 0000890119 STATE OF INCORPORATION: MA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-07056 FILM NUMBER: 01700353 BUSINESS ADDRESS: STREET 1: 333 WEST WACKER DRIVE CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3129177200 FORMER COMPANY: FORMER CONFORMED NAME: NUVEEN INTERMEDIATE OPPORTUNITY MUNICIPAL FUND DATE OF NAME CHANGE: 19600201 N-30D 1 nv24754.txt FAN-1-5-01 Annual Report May 31, 2001 Nuveen Investments Municipal Closed-End Exchange-Traded Funds Dependable, tax-free income to help you keep more of what you earn. Select maturities NIM photos: man & woman on beach two women looking at starfish Invest well. Look ahead. Leave your mark. (sm) LESS MAIL, MORE FREEDOM WITH ONLINE FUND REPORTS photos: clouds, computer mouse There is a new way to receive your Nuveen Fund updates faster than ever. Nuveen now can link you with electronic versions of the important financial information we send you by regular mail. By registering for online access via the internet, you will be able to view and save the Fund information you currently receive in the mail. This information can be stored on your computer and retrieved any time. In addition, you can select only the specific pages you want to view or print. With this new service, you'll receive an e-mail notice the moment Fund reports are ready. This notice will contain a link to the report - all you have to do is click your computer mouse on the internet address provided. You'll be saving time, as well as saving your Fund paper, printing and distribution expenses. Registering for electronic access is easy and only takes a few minutes. (see box on right) The e-mail address you provide is strictly confidential and will not be used for anything other than notifications of shareholder information. And if you decide you don't like receiving your reports electronically, it's a simple process to go back to regular mail delivery. SIGN UP TODAY--HERE'S WHAT YOU NEED TO DO... If your Nuveen Fund dividends are PAID TO YOUR BROKERAGE ACCOUNT, follow the steps outlined below: 1 Go to WWW.INVESTORDELIVERY.COM 2 Look at the address sheet that accompanied this report. Enter the personal 13-CHARACTER ENROLLMENT NUMBER imprinted near your name on the address sheet. 3 You'll be taken to a page with several options. Select the NEW ENROLLMENT-CREATE screen. Once there, enter your e-mail address (e.g. yourID@providerID.com), and a personal, 4-digit PIN of your choice. (Pick a number that's easy to remember.) 4 Click Submit. Confirm the information you just entered is correct, then click Submit again. 5 You should get a confirmation e-mail within 24 hours. If you do not, go back through these steps to make sure all the information is correct. 6 Use this same process if you need to change your registration information or cancel internet viewing. If your Nuveen Fund dividends COME DIRECTLY TO YOU FROM NUVEEN, follow the steps outlined below: 1 Go to WWW.NUVEEN.COM 2 Select the Exchange-Traded Funds section, then click on Tools. Select the E-REPORT ENROLLMENT option. 3 You'll be taken to a screen that asks for your social security number and e-mail address. Fill in this information, then click Submit. 4 Confirm the information you entered is correct, then click Submit again. 5 You should get a confirmation e-mail within 24 hours. If you do not, go back through these steps to make sure all the information is correct. 6 Use this same process if you need to change your registration information or cancel internet viewing. Photo of: Timothy R. Schwertfeger Chairman of the Board Sidebar text: "Your Nuveen Fund also features several characteristics that can help make it an essential part of your overall investment strategy." Dear Shareholder I am pleased to have this opportunity to report on the recent performance of your Nuveen Fund. During the period covered by this report, your Fund continued to meet its primary objective of providing you with attractive monthly tax-free income from a portfolio of quality municipal bonds. Detailed information on your Fund can be found in the Portfolio Managers' Comments and Performance Overview sections later in this report. I urge you to take the time to read them. In addition to providing you with steady tax-free income, your Nuveen Fund also features several characteristics that can help make it an essential part of your overall investment strategy. These include careful research, constant surveillance and judi cious trading by Nuveen's seasoned portfolio management team, with every action designed to supplement income, improve Fund structure, better adapt to current market conditions or increase diversification. In turbulent times like these, prudent investors understand the importance of diversification, balance, and risk management, all attributes your Nuveen Fund can bring to your portfolio. With strong long-term performance achieved through consistent, disciplined professional management, your Nuveen Fund also illustrates the power of taking a long-term view toward financial growth and success. Invest Well.Look Ahead.Leave Your Mark. Today, perhaps more than ever, investors have the ability to make a lasting impact on their families and their world for generations to come. For more than 100 years, Nuveen has specialized in offering quality investments such as the Nuveen Funds to those seeking to accumulate and preserve wealth and establish a lasting legacy. Our mission continues to be to provide assistance to you and your financial advisor by offering the investment services and products that can help you leave your mark. We thank you for continuing to choose Nuveen Investments as your partner as you work toward that goal. Sincerely, /s/ Timothy R. Schwertfeger Timothy R. Schwertfeger Chairman of the Board July 15, 2001 Sidebar text: "Today, perhaps more than ever, investors have the ability to make a lasting impact on their families and their world for generations to come." Nuveen Select Maturities Municipal Fund (NIM) Portfolio Manager's Comments Portfolio manager Steve Krupa examines national economic and market conditions, key investment strategies, and the performance of the Nuveen Select Maturities Municipal Fund (NIM). A 22-year veteran of Nuveen, Steve has managed NIM since August 2000. WHAT FACTORS HAD THE GREATEST INFLUENCE ON THE U.S. ECONOMY AND THE MUNICIPAL MARKET DURING THIS REPORTING PERIOD? The major factors affecting the economy and the municipal market over the past 12 months ended May 31, 2001, were the Federal Reserve's interest rate policies and the slower rate of economic growth. Over the first five months of 2001, the Fed announced five interest rates cuts of 50 basis points each. (A sixth cut of 25 basis points was announced in late June, after the end of the reporting period.) The consensus among market observers is that the Fed is poised to continue easing as long as signs of a significant economic slowdown remain. In the municipal market, new issue supply has started to pick up in 2001. During the first five months of the calendar year, new municipal issuance nationwide totaled $102.6 billion, an increase of 41% over January-May 2000. On the demand side, municipal bonds continued to be highly sought after by individual investors looking for diversification, income, and an alternative to a volatile stock market. For the most part, improving supply and continued strong demand has helped keep municipal bond prices higher than they were at this time last year. As a result, municipal bond yields are correspondingly lower. Nevertheless, we believe the municipal market continues to represent good value. As of May 31, 2001, long-term municipal yields were 98% of 30-year Treasury yields, compared with 103% in May 2000. HOW DID NIM PERFORM OVER THE PAST 12 MONTHS? For the year ended May 31, 2001, the Nuveen Select Maturities Municipal Fund produced a total return on net asset value (NAV) as shown in the accompanying table. These returns are compared to the Lehman Brothers 7-Year Municipal Bond Index1 and the Fund's Lipper Peer Group2. TOTAL LEHMAN RETURN TOTAL LIPPER MARKET YIELD ON NAV RETURN1 AVERAGE2 - --------------------------------------------------------- 1 YEAR 1 YEAR 1 YEAR TAXABLE- ENDED ENDED ENDED 5/31/01 EQUIVALENT3 5/31/01 5/31/01 5/31/01 - --------------------------------------------------------- NIM 5.80% 8.41% 6.19% 11.07% 9.44% - --------------------------------------------------------- Past performance is not predictive of future results. For additional information, see the individual Performance Overview for your Fund in this report. Over the past 12 months, the performance of NIM relative to its benchmarks was driven largely by two credit-related events, which are discussed under "Key Investment Strategies" later in this report. HOW WERE NIM'S DIVIDEND AND SHARE PRICE AFFECTED BY THIS ENVIRONMENT? During the past year, Nuveen's dividend management strategies and good levels of call protection helped us maintain NIM's dividend. As of May 31, 2001, NIM has provided shareholders with 41 consecutive months of steady or increasing dividends. As the stock market remained volatile and the bond market continued to perform well during this period, many investors turned to tax-free fixed-income alternatives as a way to add balance to their portfolios and reduce overall risk. As a result, NIM's share price improved (see the chart on the individual Performance Overview page). WHAT KEY STRATEGIES WERE USED TO MANAGE NIM DURING THE YEAR ENDED MAY 31, 2001? Despite the tight supply of new municipal issuance during most of the past year, NIM continued to meet its goal of keeping assets fully invested and working for shareholders. As new issuance became available in the marketplace, we focused on strengthening the Fund's long-term dividend-payment capabilities, enhancing structure, and purchasing bonds with the potential to add value and diversification to NIM's portfolio. 1 NIM's performance is compared with that of the Lehman Brothers 7-Year Municipal Bond Index, an unleveraged index comprising a broad range of investment-grade municipal bonds with maturities ranging from six to eight years. Results for the Lehman index do not reflect any expenses. 2 The Fund's total return is com pared with the average annual ized return of the 12 funds in the Lipper General and Insured (Unleveraged) Municipal Debt Funds category. Fund and Lipper returns assume reinvestment of dividends. 3 The taxable-equivalent yield rep resents the yield that must be earned on a taxable investment in order to equal the yield of the Nuveen fund on an after-tax basis. The taxable-equivalent yield is based on the fund's mar ket yield on the indicated date and a federal income tax rate of 31%. 4 Income from the Fund may be subject to state and local taxes, and income from all Nuveen Municipal Closed-End Exchange-Traded Funds may be subject to the federal alternative minimum tax. Capital gains, if any, well be subject to capital gains taxes. For example, the corporate-backed bonds we purchased over the past 12 months when credit spreads were at cyclical highs performed well as spreads later narrowed, enhancing the value of the Fund's holdings. Some of the names in our portfolio include American Airlines, Waste Management, and Central Power and Light Company. Another sector where we found value was healthcare, where change has created opportunities in select hospital issues. During the past 12 months ended May 31, 2001, we purchased several BBB hospital bonds at wider spreads, increasing our allocation to this credit quality sector and raising our healthcare allocation to 17% from 12% a year ago. The recent additions to our port-folio included bonds issued by the Michigan State Hospital Finance Authority for Detroit Medical Center. This purchase provides an excellent example of how the expertise of Nuveen research analysis is instrumental in helping us find and understand the credits offering the best upside potential for our Funds. Some of the recent purchases for NIM's portfolio were financed with the proceeds from calls of U.S. guaran teed, or pre-refunded bonds. At the end of May 2001, NIM's allocation to this type of credit was 7%, down from 13% a year earlier. As mentioned earlier in this report, NIM's performance over the past 12 months was hampered by its holdings of two issues that were affected by credit problems. In the November 2000 semiannual report, we outlined the situation with bonds issued by Erie County, New York, for the CanFibre of Lackawanna project. The Fund continues to hold these bonds, and Nuveen remains fully involved in seeking a resolution that serves the best interests of our shareholders. The Lackawanna project now appears to be on track to achieve its targets, and we believe the prospects look good for near-term profitability. The second holding consists of multifamily housing bonds issued by the city of Indianapolis for the Keystone at Fall Creek Apartments. The credit problems encountered by this project have hurt the performance of the Fund in the near term and we continue to fully monitor the holding very closely. Despite these credit-related issues, shareholders should note that NIM continued to offer strong credit quality, with 56% of its assets invested in bonds rated AAA/U.S. guaranteed and AA as of May 31, 2001. The Fund also had a 30% allocation of BBB and non-rated bonds, which generally provided higher yields during 2000. WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET IN GENERAL AND NIM IN PARTICULAR? Overall, our outlook for fixed-income markets during the next 12 months continues to be positive. Demand for tax-exempt municipal bonds is anticipated to remain strong, as investors look for ways to rebalance their portfolios and reduce potential risk. If interest rates continue to fall and the pace of refundings accelerates, new municipal issuance nationwide in 2001 could exceed $200 billion. Following the decline in municipal supply in both 1999 and 2000, any year-over-year increase in 2001 should still result in supply-and-demand dynamics that support municipal market prices. Looking specifically at NIM, the Fund offers excellent levels of call protection for the remainder of 2001, with only 3% of its portfolio subject to calls over the next seven months. In September 2002, however, NIM marks the 10-year anniversary of its inception, and the Fund will soon enter the part of the bond market cycle when it will experience a typical increase in call exposure. During 2002 and 2003, NIM could see up to 32% of its portfolio affected by bond calls, depending on market interest rates during that time. In general, this position appears to be manageable, and we foresee no problems in working through any calls. We also plan to continue to look for areas of the market that can add value for our shareholders and support the Fund's dividend. Based on our research, during the next six months we expect these areas to include the healthcare sector and corporate-backed industrial development bonds. We are currently looking at several A rated small hospital deals of the type that come to market cyclically. Depending on the interest rate envi ronment going forward, bond calls could also create opportunities to enhance NIM's structure. We believe NIM will continue to play an important role in investors' long-range financial programs, providing balance and diversification, dependable tax-free income4, and quality investments. NIM Nuveen Select Maturities Municipal Fund Performance Overview As of May 31, 2001 pie chart: CREDIT QUALITY AAA/U.S. Guaranteed 42% AA 14% A 14% BBB 13% NR 17% PORTFOLIO STATISTICS - -------------------------------------------------- Share Price $10.87 - -------------------------------------------------- Net Asset Value $11.21 - -------------------------------------------------- Market Yield 5.80% - -------------------------------------------------- Taxable-Equivalent Yield (Federal Income Tax Rate)1 8.41% - -------------------------------------------------- Fund Net Assets ($000) $138,804 - -------------------------------------------------- Average Effective Maturity (Years) 10.92 - -------------------------------------------------- Average Duration 5.24 - -------------------------------------------------- ANNUALIZED TOTAL RETURN (Inception 9/92) - -------------------------------------------------- ON SHARE PRICE ON NAV - -------------------------------------------------- 1-Year 13.15% 6.19% - -------------------------------------------------- 5-Year 5.72% 5.19% - -------------------------------------------------- Since Inception 4.79% 5.69% - -------------------------------------------------- TOP FIVE SECTORS (as a % of total investments) - -------------------------------------------------- Utilities 19% - -------------------------------------------------- Healthcare 17% - -------------------------------------------------- Transportation 14% - -------------------------------------------------- Tax Obligation/General 7% - -------------------------------------------------- Housing/Multifamily 7% ================================================== bar chart: 2000-2001 MONTHLY TAX-FREE DIVIDENDS PER SHARE Jun 0.0525 July 0.0525 Aug 0.0525 Sep 0.0525 Oct 0.0525 Nov 0.0525 Dec 0.0525 Jan 0.0525 Feb 0.0525 Mar 0.0525 Apr 0.0525 May 0.0525 line chart: SHARE PRICE PERFORMANCE 10.75 6/2/00 10.25 10.13 10.19 10.56 10.56 10.69 10.38 10.25 10.31 10.44 10.56 10.44 10.44 10.44 10.44 10.25 10.31 10.31 10.13 10.19 10.19 10.25 9.94 10.13 9.94 10 10.06 10.56 10.5 10.88 10.88 11.31 11 11.06 11.14 10.92 11 11.04 11.08 11 10.8 11.15 10.84 10.66 10.8 10.72 11.05 11.15 11.04 10.89 5/31/01 Weekly Closing Price Past performance is not predictive of future results. 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. It is calculated using the current market yield and a federal income tax rate of 31%. Report of Independent Auditors THE BOARD OF TRUSTEES AND SHAREHOLDERS NUVEEN SELECT MATURITIES MUNICIPAL FUND We have audited the accompanying statement of net assets, including the portfolio of investments, of Nuveen Select Maturities Municipal Fund as of May 31, 2001, and the related statement of operations, statement of changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's 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 auditing standards generally accepted in the 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. 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 May 31, 2001, by correspondence with the custodian and brokers, or alternative procedures for confirmations not received. 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 position of Nuveen Select Maturities Municipal Fund at May 31, 2001, and the results of its operations, changes in its net assets and financial highlights for the periods indicated therein in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Chicago, Illinois July 13, 2001 Nuveen Select Maturities Municipal Fund (NIM) Portfolio of INVESTMENTS May 31, 2001
PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ ARIZONA - 6.1% $ 2,470 Arizona Educational Loan Marketing Corporation, Educational Loan 9/02 at 101 Aa2 $ 2,550,967 Revenue Bonds, 6.375%, 9/01/05 (Alternative Minimum Tax) 4,345 The Industrial Development Authority of the City of Phoenix, Arizona, 4/08 at 101 1/2 AAA 4,777,154 Statewide Single Family Mortgage Revenue Bonds, 1998 Series C, 6.650%, 10/01/29 (Alternative Minimum Tax) 1,185 The Industrial Development Authority of the City of Winslow, Arizona, No Opt. Call N/R 1,122,657 Hospital Revenue Bonds (Winslow Memorial Hospital Project), Series 1998, 5.750%, 6/01/08 - ------------------------------------------------------------------------------------------------------------------------------------ ARKANSAS - 0.6% 770 Arkansas Student Loan Authority, Student Loan Revenue Bonds 6/01 at 102 A 786,555 (Subordinate), Series 1992A-2, 6.750%, 6/01/06 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ COLORADO - 1.2% 535 El Paso County, Colorado, Single Family Mortgage Revenue Tax-Exempt No Opt. Call Aaa 572,283 Refunding Bonds, Series 1992A (Class A-2), 8.750%, 6/01/11 1,000 Summit County, Colorado, Sports Facilities Refunding Revenue No Opt. Call BBB+ 1,141,830 Bonds (Keystone Resorts Management, Inc. Project), Series 1990, 7.750%, 9/01/06 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRICT OF COLUMBIA - 4.0% 5,005 District of Columbia, Washington, D.C., General Obligation No Opt. Call AAA 5,490,935 Refunding Bonds, Series 1993A, 6.000%, 6/01/07 - ------------------------------------------------------------------------------------------------------------------------------------ FLORIDA - 2.7% 3,500 Hillsborough County Industrial Development Authority, Pollution 5/02 at 103 A1 3,716,475 Control Revenue Refunding Bonds (Tampa Electric Company Project), Series 1992, 8.000%, 5/01/22 - ------------------------------------------------------------------------------------------------------------------------------------ GEORGIA - 7.1% 525 Urban Residential Finance Authority of the City of Atlanta, No Opt. Call N/R*** 551,077 Revenue Bonds (Landrum Arms Project), Series 1994, 6.750%, 7/01/04 5,755 Development Authority of Burke County, Georgia, Pollution 1/03 at 103 AAA 6,339,766 Control Revenue Bonds (Oglethorpe Power Corporation-Vogtle Project), Series 1992, 8.000%, 1/01/15 (Pre-refunded to 1/01/03) 2,540 Municipal Electric Authority of Georgia, General Power Revenue No Opt. Call AAA 2,959,379 Bonds, Series 1992B, 7.500%, 1/01/07 - ------------------------------------------------------------------------------------------------------------------------------------ ILLINOIS - 16.3% 2,295 Chicago Metropolitan Housing Development Corporation, Illinois, 7/03 at 100 AAA 2,314,645 Housing Development Revenue Refunding Bonds (FHA-Insured Mortgage Loan - Section 8 Assisted Project), Series 1993B, 5.700%, 1/01/13 3,500 City of Chicago, Illinois, Chicago O'Hare International Airport, No Opt. Call N/R 3,443,965 Special Facility Revenue Bonds (United Air Lines, Inc. Project), Series 2001A, 6.375%, 11/01/35 (Alternative Minimum Tax) (Mandatory put 5/01/13) 245 City of Danville, Vermilion County, Illinois, Single Family 11/03 at 102 A1 253,548 Mortgage Revenue Refunding Bonds, Series 1993, 7.300%, 11/01/10 2,500 Illinois Development Finance Authority, Solid Waste Disposal No Opt. Call BBB 2,523,725 Refunding Revenue Bonds (Waste Management, Inc. Project), Series 2000, 5.850%, 2/01/07 (Alternative Minimum Tax) 5,000 Illinois Development Finance Authority, Revenue Bonds 4/11 at 105 Aaa 5,918,250 (Greek American Nursing Home Project), Series 2000A, 7.600%, 4/20/40 2,505 Illinois Development Finance Authority, Child Care Facility 9/02 at 102 N/R 2,564,970 Revenue Bonds (Illinois Facilities Fund Project), Series 1992, 7.400%, 9/01/04 3,835 Illinois Health Facilities Authority, Revenue Refunding Bonds 8/09 at 101 A- 3,613,989 (Silver Cross Hospital and Medical Centers), Series 1999, 5.250%, 8/15/15 Nuveen Select Maturities Municipal Fund (NIM) (continued) Portfolio of INVESTMENTS May 31, 2001 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ ILLINOIS (continued) $ 1,760 Illinois Housing Development Authority, Section 8 Elderly Housing 11/02 at 102 A $ 1,828,182 Revenue Bonds (Skyline Towers Apartments), Series 1992B, 6.625%, 11/01/07 320 City of Rock Island, Illinois, Residential Mortgage Revenue 9/02 at 102 Aa 330,566 Refunding Bonds, Series 1992, 7.700%, 9/01/08 - ------------------------------------------------------------------------------------------------------------------------------------ INDIANA - 4.0% 410 Hospital Authority of Elkhart County, Indiana, Hospital Revenue Bonds 7/02 at 102 A1 433,231 (Elkhart General Hospital, Inc.), Series 1992, 7.000%, 7/01/08 1,000 The Indianapolis Local Public Improvement Bond Bank, No Opt. Call AA 1,118,080 Series 1992D Bonds, 6.600%, 2/01/07 3,435 City of Indianapolis, Indiana, Multifamily Housing First 5/09 at 102 N/R 1,717,500 Mortgage Revenue Bonds (Keystone at Fall Creek Apartments), Series 1999A, 6.400%, 5/01/19 (Alternative Minimum Tax)# 2,100 The Indianapolis Local Public Improvement Bond Bank, 7/03 at 102 Aa2 2,244,921 Transportation Revenue Bonds, Series 1992, 6.000%, 7/01/10 - ------------------------------------------------------------------------------------------------------------------------------------ MARYLAND - 1.5% 2,000 Anne Arundel County, Maryland, Multifamily Housing Revenue Bonds No Opt. Call BBB- 2,083,320 (Woodside Apartments Project), Series 1994, 7.450%, 12/01/24 (Alternative Minimum Tax) (Mandatory put 12/01/03) - ------------------------------------------------------------------------------------------------------------------------------------ MICHIGAN - 2.1% 2,967 Michigan State Hospital Finance Authority, Detroit Medical No Opt. Call N/R 2,968,988 Center Collateralized Loan, Series 2001, 7.360%, 4/01/07 - ------------------------------------------------------------------------------------------------------------------------------------ MINNESOTA - 0.7% 1,000 White Earth Band of Chippewa Indians, Revenue Bonds, No Opt. Call A 1,029,580 Series 2000A, 7.000%, 12/01/11 - ------------------------------------------------------------------------------------------------------------------------------------ NEBRASKA - 5.7% 5,500 Energy America, Nebraska, Natural Gas Revenue Bonds, No Opt. Call N/R 5,408,095 1998 Series A, 5.700%, 7/01/08 2,400 Airport Authority of the City of Omaha, Nebraska, Airport 1/02 at 102 A1 2,510,664 Facilities Revenue Refunding Bonds, Series 1991, 8.375%, 1/01/14 - ------------------------------------------------------------------------------------------------------------------------------------ NEW YORK - 9.9% 5,000 Erie County Industrial Development Agency, New York, Solid Waste 12/10 at 103 N/R 2,500,000 Disposal Facility Revenue Bonds (1998 CanFibre of Lackawanna Project), 8.875%, 12/01/13 (Alternative Minimum Tax) 3,000 Housing New York Corporation, Senior Revenue Refunding Bonds, 11/03 at 102 AAA 3,033,210 Series 1993, 5.500%, 11/01/20 3,440 New York City Industrial Development Agency, Amended and Restated 11/04 at 102 Aaa 3,598,240 Industrial Development Revenue Bonds (1991 Japan Airlines Company, Ltd. Project), 6.000%, 11/01/15 (Alternative Minimum Tax) 1,925 New York State Medical Care Facilities Finance Agency, 2/06 at 102 AA+ 2,057,825 FHA-Insured Mortgage Hospital and Nursing Home Revenue Bonds, 1995 Series C, 6.100%, 8/15/15 2,130 City of Niagara Falls, Niagara County, New York, Water Treatment No Opt. Call AAA 2,637,686 Plant (Serial) Bonds, Series 1994, 8.500%, 11/01/07 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ OHIO - 7.3% 2,000 Akron, Bath and Copley Joint Township Hospital District, Ohio, 11/02 at 102 Baa1 2,026,500 Hospital Facilities Revenue Bonds (Summa Health System Project), Series 1992, 6.250%, 11/15/07 4,500 County of Hamilton, Ohio, Hospital Facilities Revenue Refunding No Opt. Call A 4,766,310 Bonds (Bethesda Hospital, Inc.), Series 1992A, 6.250%, 1/01/06 2,180 Ohio Water Development Authority, Revenue Bonds (USA Waste 3/02 at 102 N/R 2,253,858 Services), Series 1992, 7.750%, 9/01/07 (Alternative Minimum Tax) 1,000 City of Oxford, Ohio, Water Supply System Mortgage Revenue 12/02 at 102 AAA 1,048,850 Refunding Bonds, Series 1992, 6.000%, 12/01/14 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ OKLAHOMA - 7.2% $ 2,000 Oklahoma City, Oklahoma, Airport Trust Junior Lien Tax-Exempt Bonds, 7/10 at 100 AAA $ 1,973,560 Twenty-Seventh Series 2000A, 5.125%, 7/01/20 4,500 Trustees of the Tulsa Municipal Airport Trust, Oklahoma, No Opt. Call Baa1 4,580,910 Revenue Bonds, Refunding Series 2000B, 6.000%, 6/01/35 (Alternative Minimum Tax) (Mandatory put 12/01/08) 3,500 Trustees of the Tulsa Municipal Airport Trust, Oklahoma, No Opt. Call BBB- 3,506,370 Revenue Bonds (American Airlines, Inc.), Refunding Series 2001B, 5.650%, 12/01/35 (Mandatory put 12/01/08) (DD, settling 6/01/01) - ------------------------------------------------------------------------------------------------------------------------------------ PENNSYLVANIA - 4.3% 3,800 Pennsylvania Higher Education Assistance Agency, Student Loan 1/03 at 102 AAA 3,913,620 Revenue Bonds, 1988 Series D, 6.050%, 1/01/19 (Alternative Minimum Tax) 1,680 Pennsylvania Higher Educational Facilities Authority, College No Opt. Call Aaa 2,020,754 and University Revenue Bonds, 9th Series, 7.625%, 7/01/15 - ------------------------------------------------------------------------------------------------------------------------------------ RHODE ISLAND - 1.0% 1,340 Rhode Island Housing and Mortgage Finance Corporation, 4/02 at 102 AA+ 1,343,819 Homeownership Opportunity Bonds, Series 7, 6.500%, 4/01/25 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ TEXAS - 7.0% 525 Austin-Travis County Mental Health and Mental Retardation 3/05 at 101 AAA 570,465 Center, Revenue Bonds (MHMR Center Facilities Acquisition Program), Series 1995-A, 6.500%, 3/01/15 915 Texas Community Mental Health and Mental Retardation Centers, 3/05 at 101 AAA 994,239 Revenue Bonds (MHMR Center Facilities Acquisition Program), Series 1995A-E, 6.500%, 3/01/15 510 City of Galveston Property Finance Authority, Inc., Single 9/01 at 103 A3 530,823 Family Mortgage Revenue Bonds, Series 1991A, 8.500%, 9/01/11 3,000 Matagorda County Navigation, District Number One, Texas, 7/01 at 101 AAA 3,043,560 Pollution Control Revenue Refunding Bonds (Central Power and Light Company Project), Series 1995, 6.100%, 7/01/28 900 Tom Green County Health Facilities Development Corporation, No Opt. Call Baa3 901,512 Texas, Hospital Revenue Bonds (Shannon Health System Project), Series 2001, 5.600%, 5/15/06 (WI, settling 6/13/01) 800 Travis County Health Facilities Development Corporation, 11/03 at 102 Aaa 853,880 Hospital Revenue Bonds (Daughters of Charity National Health System - Daughters of Charity Health Services of Austin), Series 1993B, 5.900%, 11/15/07 715 Tri-County Mental Health and Mental Retardation Services, 3/05 at 101 AAA 776,919 Revenue Bonds (MHMR Center Facilities Acquisition Program), Series 1995-E, 6.500%, 3/01/15 6,425 Weatherford Independent School District, Parker County, Texas, 2/11 at 56 41/64 AAA 2,008,070 Unlimited Tax School Building and Refunding Bonds, Series 2001, 0.000%, 2/15/21 - ------------------------------------------------------------------------------------------------------------------------------------ UTAH - 1.4% 2,055 City of Bountiful, Davis County, Utah, Hospital Revenue No Opt. Call N/R 1,919,062 Refunding Bonds (South Davis Community Hospital Project), Series 1998, 6.000%, 12/15/10 - ------------------------------------------------------------------------------------------------------------------------------------ VIRGINIA - 1.5% 2,000 Hampton Redevelopment and Housing Authority, Multifamily Housing 7/02 at 104 Baa2 2,090,220 Revenue Refunding Bonds (Chase Hampton II Apartments), Series 1994, 7.000%, 7/01/24 (Mandatory put 7/01/04) - ------------------------------------------------------------------------------------------------------------------------------------ WASHINGTON - 7.8% Washington Public Power Supply System, Nuclear Project No. 1 Refunding Revenue Bonds, Series 1993A: 1,500 7.000%, 7/01/07 No Opt. Call Aa1 1,715,984 3,000 7.000%, 7/01/08 No Opt. Call Aa1 3,465,210 7,000 Washington Public Power Supply System, Nuclear Project No. 3 No Opt. Call Aa1 5,602,310 Refunding Revenue Bonds, Series 1990B, 0.000%, 7/01/06 Nuveen Select Maturities Municipal Fund (NIM) (continued) Portfolio of INVESTMENTS May 31, 2001 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE - ------------------------------------------------------------------------------------------------------------------------------------ WISCONSIN - 2.7% $ 3,500 Wisconsin Health and Educational Facilities Authority, 2/03 at 102 AAA $ 3,684,520 Revenue Bonds (Sisters of the Sorrowful Mother - Ministry Corporation), Series 1993A, 6.125%, 8/15/13 - ------------------------------------------------------------------------------------------------------------------------------------ $ 145,242 Total Investments (cost $141,387,947) - 102.1% 141,733,583 =============----------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - (2.1)% (2,929,464) -------------------------------------------------------------------------------------------------------------------- Net Assets - 100% $ 138,804,119 ==================================================================================================================== * 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. # Non-income producing security, in the case of a bond, generally denotes that issuer has defaulted on the payment of principal or interest or has filed for bankruptcy. N/R Investment is not rated. (DD) Security purchased on a delayed delivery basis. (WI) Security purchased on a when-issued basis. See accompanying notes to financial statements.
Statement of NET ASSETS May 31, 2001 - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments in municipal securities, at market value $141,733,583 Interest receivable 2,588,041 Other assets 23,596 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets 144,345,220 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Cash overdraft 375,301 Payable for investments purchased 4,404,469 Accrued expenses: Management fees 58,777 Other 52,718 Dividends payable 649,836 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 5,541,101 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets $138,804,119 ==================================================================================================================================== Shares outstanding 12,380,786 ==================================================================================================================================== Net asset value per share outstanding (net assets divided by shares outstanding) $ 11.21 ==================================================================================================================================== See accompanying notes to financial statements.
Statement of OPERATIONS Year Ended May 31, 2001 - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME $8,583,939 - ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES Management fees 697,933 Shareholders' servicing agent fees and expenses 12,031 Custodian's fees and expenses 71,417 Trustees' fees and expenses 1,695 Professional fees 5,211 Shareholders' reports - printing and mailing expenses 36,753 Stock exchange listing fees 24,189 Investor relations expense 30,406 Other expenses 9,265 - ------------------------------------------------------------------------------------------------------------------------------------ Total expenses before custodian fee credit 888,900 Custodian fee credit (39,712) - ------------------------------------------------------------------------------------------------------------------------------------ Net expenses 849,188 - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income 7,734,751 - ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN FROM INVESTMENTS Net realized gain from investment transactions 308,404 Change in net unrealized appreciation (depreciation) of investments 412,312 - ------------------------------------------------------------------------------------------------------------------------------------ Net gain from investments 720,716 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets from operations $8,455,467 ==================================================================================================================================== See accompanying notes to financial statements.
Statement of CHANGES IN NET ASSETS YEAR ENDED YEAR ENDED 5/31/01 5/31/00 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATIONS Net investment income $ 7,734,751 $ 7,757,354 Net realized gain (loss) from investment transactions 308,404 (170,549) Change in net unrealized appreciation (depreciation) of investments 412,312 (7,104,871) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets from operations 8,455,467 481,934 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From undistributed net investment income (7,799,896) (7,688,471) From accumulated net realized gains from investment transactions -- (1,275,221) - ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets from distributions to shareholders (7,799,896) (8,963,692) - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Net proceeds from shares issued to shareholders due to reinvestment of distributions -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets 655,571 (8,481,758) Net assets at the beginning of year 138,148,548 146,630,306 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets at the end of year $138,804,119 $138,148,548 ==================================================================================================================================== Balance of undistributed net investment income at the end of year $ 113,183 $ 178,328 ==================================================================================================================================== See accompanying notes to financial statements.
NOTES TO FINANCIAL STATEMENTS 1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES The Fund covered in this report and its corresponding New York Stock Exchange symbol is Nuveen Select Maturities Municipal Fund (NIM) (the "Fund"). The Fund seeks to provide current income exempt from regular federal income tax, consistent with the preservation of capital by investing in a diversified, investment-grade quality portfolio of municipal obligations with intermediate characteristics having an initial average effective maturity of approximately ten years. In assembling and managing its portfolio, the Fund has purchased municipal obligations having remaining effective maturities of no more than fifteen years with respect to 80% of its total assets that, in the opinion of the Fund's investment adviser, represent the best value in terms of the balance between yield and capital preservation currently available from the intermediate sector of the municipal market. The Fund's investment adviser, Nuveen Advisory Corp. (the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, will actively monitor the effective maturities of the Fund's investments in response to prevailing market conditions, and will adjust its portfolio consistent with its investment policy of maintaining an average effective remaining maturity for the Fund's portfolio of twelve years or less. The Fund is registered under the Investment Company Act of 1940 as a closed-end, diversified management investment company. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements in accordance with accounting principles generally accepted in the United States. Securities Valuation The prices of municipal bonds in the Fund's investment portfolio are provided by a pricing service approved by the Fund's Board of 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 Fund has 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 May 31, 2001, the Fund had outstanding when-issued and delayed delivery purchase commitments of $4,404,469. 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. Federal Income Taxes The Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its net investment income to its shareholders. Therefore, no federal income tax provision is required. Furthermore, the Fund intends to satisfy conditions which will enable interest from municipal securities, which is exempt from regular federal income tax, to retain such tax-exempt status when distributed to shareholders of the Fund. All monthly tax-exempt income dividends paid during the fiscal year ended May 31, 2001, have been designated Exempt Interest Dividends. Dividends and Distributions to Shareholders Tax-exempt net investment income is declared monthly as a dividend and payment is made or reinvestment is credited to shareholder accounts on the first business day after month-end. Net realized capital gains and/or market discount from investment transactions, if any, are distributed to shareholders not less frequently than annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards. Distributions to shareholders of tax-exempt net investment income, net realized capital gains and/or market discount are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States. Accordingly, temporary over-distributions as a result of these differences may occur and will be classified as either distributions in excess of net investment income, distributions in excess of net realized gains and/or distributions in excess of net ordinary taxable income from investment transactions, where applicable. Derivative Financial Instruments The Fund may invest in certain derivative financial instruments including futures, forward, swap and option contracts, and other financial instruments with similar characteristics. Although the Fund is authorized to invest in such financial instruments, and may do so in the future, it did not make any such investments during the fiscal year ended May 31, 2001. Custodian Fee Credit The Fund has an arrangement with the custodian bank whereby certain custodian fees and expenses are reduced by credits earned on the Fund's cash on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. Audit Guide In November 2000, the American Institute of Certified Public Accountants (AICPA) issued a revised version of the AICPA Audit and Accounting Guide for Investment Companies (the "Guide"). The Guide is effective for annual financial statements issued for fiscal years beginning after December 15, 2000. It is not anticipated that the adoption of the Guide will have a significant effect on the financial statements. 2. FUND SHARES There were no share transactions during the fiscal year ended May 31, 2001, nor during the fiscal year ended May 31, 2000. 3. DISTRIBUTIONS TO SHAREHOLDERS The Fund declared a dividend distribution of $.0525 per share from its tax-exempt net investment income which was paid on July 2, 2001, to shareholders of record on June 15, 2001. 4. SECURITIES TRANSACTIONS Purchases and sales (including maturities) of investments in intermediate-term municipal securities for the fiscal year ended May 31, 2001, aggregated $54,161,044 and $48,306,710, respectively. Purchases and sales (including maturities) of investments in short-term municipal securities for the fiscal year ended May 31, 2001, aggregated $20,150,000 and $20,150,000, respectively. At May 31, 2001, the cost of investments owned for federal income tax purposes was $141,674,913. 5. UNREALIZED APPRECIATION (DEPRECIATION) At May 31, 2001, net unrealized appreciation of investments for federal income tax purposes aggregated $58,670 of which $5,413,808 related to appreciated securities and $5,355,138 related to depreciated securities. 6. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Under the Fund's investment management agreement with the Adviser, the Fund pays an annual management fee, payable monthly, at the rates set forth below, which are based upon the average daily net assets of the Fund as follows: AVERAGE DAILY NET ASSETS MANAGEMENT FEE - -------------------------------------------------------------------------------- For the first $125 million .5000 of 1% For the next $125 million .4875 of 1 For the next $250 million .4750 of 1 For the next $500 million .4625 of 1 For the next $1 billion .4500 of 1 For net assets over $2 billion .4375 of 1 ================================================================================ The fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Fund pays no compensation directly to those of its Trustees who are affiliated with the Adviser or to its officers, all of whom receive remuneration for their services to the Fund from the Adviser. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 7. COMPOSITION OF NET ASSETS At May 31, 2001, the Fund had an unlimited number of $.01 par value shares authorized. Net assets consisted of: - -------------------------------------------------------------------------------- Common shares, $.01 par value per share $ 123,808 Paid-in surplus 138,158,555 Balance of undistributed net investment income 113,183 Accumulated net realized gain from investment transactions 62,937 Net unrealized appreciation of investments 345,636 - -------------------------------------------------------------------------------- Net assets $138,804,119 ================================================================================ 8. INVESTMENT COMPOSITION At May 31, 2001, the revenue sources by municipal purpose, expressed as a percent of intermediate-term investments, were as follows: - -------------------------------------------------------------------------------- Capital Goods 3% Education and Civic Organizations 5 Healthcare 17 Housing/Multifamily 7 Housing/Single Family 6 Long-Term Care 6 Tax Obligation/General 7 Tax Obligation/Limited 7 Transportation 14 U.S. Guaranteed 7 Utilities 19 Other 2 - -------------------------------------------------------------------------------- 100% ================================================================================ In addition, 31% of the intermediate-term investments owned by the Fund are either covered by insurance issued by several private insurers or are backed by an escrow or trust containing U.S. Government or U.S. Government agency securities, both of which ensure the timely payment of principal and interest in the event of default. Such insurance or escrow, however, does not guarantee the market value of the municipal securities or the value of the Fund's shares. For additional information regarding each investment security, refer to the Portfolio of Investments of the Fund.
FINANCIAL HIGHLIGHTS Selected data for a share outstanding throughout each year: INVESTMENT OPERATIONS LESS DISTRIBUTIONS ------------------------------------- ---------------------------------- NET REALIZED/ BEGINNING NET UNREALIZED NET ENDING ENDING NET ASSET INVESTMENT INVESTMENT INVESTMENT CAPITAL NET ASSET MARKET VALUE INCOME GAIN (LOSS) TOTAL INCOME GAINS TOTAL VALUE VALUE - ---------------------------------------------------------------------------------------------------------------------------------- Year Ended 5/31: 2001 $11.16 $.62 $ .06 $.68 $(.63) $ -- $(.63) $11.21 $10.8700 2000 11.84 .63 (.59) .04 (.62) (.10) (.72) 11.16 10.1875 1999 11.95 .61 (.07) .54 (.61) (.04) (.65) 11.84 11.5625 1998 11.70 .61 .29 .90 (.61) (.04) (.65) 11.95 11.4375 1997 11.59 .62 .18 .80 (.65) (.04) (.69) 11.70 10.7500 ================================================================================================================================== TOTAL RETURNS RATIOS/SUPPLEMENTAL DATA ----------------------------- ----------------------------------------------------------------------------- BEFORE CREDIT AFTER CREDIT* ------------------------ ------------------------ RATIO OF NET RATIO OF NET RATIO OF INVESTMENT RATIO OF INVESTMENT BASED ON ENDING EXPENSES TO INCOME TO EXPENSES TO INCOME TO PORTFOLIO BASED ON NET ASSET NET ASSETS AVERAGE AVERAGE AVERAGE AVERAGE TURNOVER MARKET VALUE+ VALUE+ (000) NET ASSETS NET ASSETS NET ASSETS NET ASSETS RATE - ---------------------------------------------------------------------------------------------------------------------------------- Year Ended 5/31: 2001 13.15% 6.19% $138,804 .64% 5.50% .61% 5.53% 35% 2000 (5.48) .43 138,149 .61 5.48 .61 5.49 6 1999 6.87 4.64 146,630 .63 5.14 .62 5.15 31 1998 12.60 7.85 147,842 .65 5.17 .65 5.17 13 1997 2.68 6.98 144,775 .64 5.35 .64 5.35 17 ================================================================================================================================== * After custodian fee credit, where applicable. + Total Return on Market Value is the combination of reinvested dividend income, reinvested capital gain 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 gain distributions, if any, and changes in net asset value per share. Total returns are not annualized. See accompanying notes to financial statements.
Build Your Wealth Automatically 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. 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. Just like dividends or distributions in cash, there may be times when income or capital gains taxes may be payable on dividends or distrib utions that are reinvested. It is important to note that an automatic reinvest ment plan does not ensure a profit, nor does it protect you against loss in a declining market. 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. 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 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 reinvest whether your shares are registered in your name, or in the name of a brokerage firm, bank, or other nominee. Ask your investment advisor if his or her firm will participate on your behalf. 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 advisor or call us at (800) 257-8787. Sidebar text: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET UP YOUR REINVESTMENT ACCOUNT. FUND INFORMATION BOARD OF 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 J.P. Morgan Chase & Co. 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 The Fund intends to repurchase shares of its own common stock in the future at such times and in such amounts as is deemed advisable. No shares were repurchased during the 12-month period ended May 31, 2001. Any future repurchases will be reported to shareholders in the next annual or semiannual report. Serving Investors for Generations Photo of John Nuveen, Sr. For over a century, generations of Americans have relied on Nuveen Investments to help them grow and keep the money they've earned. Financial advisors, investors and their families have associated Nuveen Investments with quality, expertise and dependability since 1898. That is why financial advisors have entrusted the assets of more than 1.3 million investors to Nuveen. With the know-how that comes from a century of experience, Nuveen continues to build upon its reputation for quality. Now, financial advisors and investors can count on Nuveen Investments to help them design customized solutions that meet the far-reaching financial goals unique to family wealth strategies - solutions that can translate into legacies. To find out more about how Nuveen Investments' products and services can help you preserve your financial security, talk with your financial advisor, or call us at (800) 257-8787 for more information, including a prospectus where applicable. Please read that information carefully before you invest. Invest well. Look ahead. LEAVE YOUR MARK. sm logo: Nuveen Investments Nuveen Investments o 333 West Wacker Drive Chicago, IL 60606 o www.nuveen.com FAN-1-5-01 -----END PRIVACY-ENHANCED MESSAGE-----