N-30D 1 nv25794.txt FSA-1-11-01 SEMIANNUAL REPORT November 30, 2001 [LOGO: NUVEEN Investments] MUNICIPAL CLOSED-END EXCHANGE-TRADED FUNDS Dependable, tax-free income to help you keep more of what you earn. Select maturities NIM [PHOTO: image of walking couple] Invest well. Look ahead. LEAVE YOUR MARK.SM [PHOTO: image of mother and daughter with starfish] LESS MAIL, MORE FREEDOM WITH ONLINE FUND REPORTS 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 at 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 Access Account tab. Select the E-REPORT ENROLLMENT section. Click on Enrollment Page. 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 Enroll. 4 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. 5 Use this same process if you need to change your registration information or cancel internet viewing. Dear Shareholder In the aftermath of September 11, the financial markets have reacted with volatility and uncertainty as investors attempt to better understand how the U.S. and world economies are likely to perform in the months ahead. It's too soon to tell what the long-term impact will be on the markets or your Fund, but one thing that is increasingly clear to us is that a diversified portfolio that includes high quality municipal bonds can leave you well positioned to reduce overall investment volatility. For example, during the period covered by this report, all of these Nuveen Funds continued to meet their primary objectives of providing attractive monthly income from a portfolio of high quality municipal bonds. Detailed information on your Fund's performance can be found in the Portfolio Manager's Comments and Performance Overview sections of 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 judicious 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 [PHOTO: Timothy R. Schwertfeger] Timothy R. Schwertfeger Chairman of the Board Sidebar Text: "A diversified portfolio can leave you well positioned to reduce overall investment risk." 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." understand the importance of diversification, balance, and risk management, all attributes your Nuveen Fund can bring to your portfolio. For more than 100 years, Nuveen has specialized in offering quality investments such as these Nuveen Funds to those seeking to accumulate and preserve wealth and establish a lasting legacy. Our mission continues to be to assist you and your financial advisor by offering the investment services and products that can help you invest well and leave your mark for future generations. 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 January 15, 2002 Nuveen Select Maturities Municipal Fund (NIM) Portfolio Manager's Comments Portfolio manager Steve Krupa reviews economic and market conditions, key strategies, and the recent performance of the Nuveen Select Maturities Municipal Fund (NIM). Steve, who has 22 years of experience as an investment professional at Nuveen, 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 two major forces at work during the twelve months ended November 30, 2001, were the continued slowdown in economic growth and the Federal Reserve's aggressive approach to easing short-term interest rates. While these two factors had an impact over the entire period covered in this report, the events of September 11, 2001, and its aftermath also had a profound effect on the economy and the markets. In January 2001, the Fed embarked on a series of rate cuts designed to stimulate the sluggish U.S. economy. During the first eleven months of 2001, the Fed announced ten reductions totaling 450 basis points. (On December 11, 2001, following the end of the period covered in this report, the Fed cut the target rate by an additional 25 basis points, bringing the federal funds rate to 1.75%, its lowest level since 1961.) The consensus among market observers is that the Fed could decide to cut rates yet again if signs of a significant economic slowdown continue. However, 2000 and 2001 represent one of the best two-year periods for total returns in the municipal bond markets since the late 1980s. The Fed's interest rate cuts created favorable conditions for both new municipal issuance and refundings, which together totaled $252.1 billion nationwide during the first eleven months of 2001, an increase of almost 37% over January-November 2000. On the demand side, municipal bonds continued to be highly sought after by individual investors looking for diversification, tax-free income, quality, and an alternative to a volatile stock market. Institutional investors also have been active buyers in the new issue market. In general, improved supply and strong demand helped to keep municipal bond prices higher than they were twelve months ago, while municipal yields have been correspondingly lower. Nevertheless, we believe the municipal market continues to represent good value. HOW DID NIM PERFORM OVER THE PAST TWELVE MONTHS? For the year ended November 30, 2001, the Nuveen Select Maturities Municipal Fund produced a total annual return on net asset value (NAV) as shown in the accompanying table. The annual returns for the Lehman Brothers 7-Year Municipal Bond Index1 and relevant Lipper Peer Group2 are also presented. TOTAL RETURN LEHMAN LIPPER MARKET YIELD ON NAV TOTAL RETURN1 AVERAGE2 --------------------------------------------------------------------------- 1 YEAR 1 YEAR 1 YEAR TAXABLE- ENDED ENDED ENDED 11/30/01 EQUIVALENT3 11/30/01 11/30/01 11/30/01 --------------------------------------------------------------------------- NIM 5.64% 8.12% 2.73% 8.13% 6.91% --------------------------------------------------------------------------- Past performance is not predictive of future results. For additional information, see the Performance Overview page in this report. Over the past twelve months, the Fed's change in interest rate policy from tightening to easing, combined with favorable market technicals, created a generally positive total return environment for municipal bonds. NIM's participation in the market's gains is reflected in the total return on NAV listed in the previous table. In a market characterized by rising bond values and falling yields, funds with shorter durations4 would typically be expected to underperform the market, as represented by the Lehman 7-Year Municipal Bond Index. As of November 30, 2001, the duration of NIM was 4.66, compared with 5.34 for the unleveraged Lehman index. 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 NIM's total return is compared with the average annualized 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 represents 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 market yield on the indicated date and a federal income tax rate of 30.5%. 4 Duration is a measure of a Fund's NAV volatility in reaction to interest rate movements. While duration was one primary driver of total return over the past twelve months, NIM's performance also was influenced by its structure and several individual holdings. For example, the Fund was impacted by credit-related concerns involving two holdings in the utilities and multifamily housing sectors, which will be discussed in more detail later. HOW DID THE MARKET ENVIRONMENT AFFECT NIM'S DIVIDEND AND SHARE PRICE? Over the past twelve months, excellent levels of call protection helped to protect the income stream of NIM. As of November 30, 2001, the Fund had provided shareholders with 47 consecutive months of steady or increasing dividends. In coming months, NIM's dividend will continue to be influenced by the Fund's bond call exposure, especially if refundings increase as the result of lower interest rates. Over the past year, as the stock market remained volatile and the bond market continued to perform well, many investors turned to tax-free fixed-income investments as a way to add balance to their portfolios and reduce overall risk. As a result, the share price of NIM improved (see the chart on the Performance Overview page), causing the Fund's discount (share price below NAV) to move to a premium (share price above NAV) over the past twelve months. WHAT KEY STRATEGIES WERE USED TO MANAGE NIM DURING THE YEAR ENDED NOVEMBER 30, 2001? During the past twelve months, the Nuveen Select Maturities Municipal Fund continued to provide shareholders with attractive, dependable tax-free monthly income generated by a diversified portfolio of quality municipal investments geared to investors seeking an intermediate-term risk profile. In purchasing bonds over this period, we focused on attractive credits with the potential to support NIM's long-term dividend-payment capabilities and enhance its value and diversification. Among the sectors where we found value were those regarded as providers of essential services, particularly healthcare. We added several quality hospital issues, including Detroit Medical Center, Silver Cross Hospital and Medical Centers in Illinois, and Maryland University Medical System. As of November 30, 2001, healthcare was the largest sector weighting in NIM, accounting for 24% of the Fund's portfolio, up from 13% a year ago. As mentioned earlier, NIM's total return performance over the past twelve months was also influenced by credit issues involving two of the Fund's holdings. The first was Erie County (New York) Industrial Development Agency bonds issued for CanFibre of Lackawanna. This project, which was adversely affected by the bankruptcy filing of the general contractor, is currently operating and functioning as designed. We continue to monitor the project very closely and are working diligently to achieve a resolution that will maximize shareholder value. NIM also continued to hold bonds issued for the Keystone at Fall Creek Apartments project in Indianapolis, Indiana. This multifamily housing project is now in default and has fallen behind in interest payments. Nuveen is actively pursuing a resolution to this situation that we believe will best serve the interests of shareholders. NIM also had some exposure to issues and sectors affected by the events of September 11, 2001, including bonds issued for projects involving United Airlines. Although these bonds experienced a decline immediately after the terrorist attacks, their valuations have since improved. While Standard & Poor's placed major air carriers and North American airports on credit watch following September 11, Moody's current median rating for airports is A2, which is solidly investment grade. In addition, the federal government's commitment to the air transportation sector was demonstrated by the approval of a $15 billion airline aid package of grants and loan guarantees. Overall, airline traffic appears to be improving, and we continue to be positive about the long-term prospects. As of November 30, 2001, NIM had a 55% allocation of bonds rated AAA/U.S. guaranteed and AA, providing a strong base for building and maintaining shareholder value. WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET IN GENERAL AND NIM IN PARTICULAR? In general, our outlook for the fixed-income markets ver the next twelve months remains positive. While the long-term economic effects of September 11, 2001, are still to be determined, we believe the U.S. economy is headed for a recovery, but one characterized by a slower pace of growth, with inflation and interest rates remaining low over the near term. We expect new municipal issuance to remain at current strong levels, with annual totals for municipal issuance in 2001 now anticipated to be the largest since 1998. In 2002, declining tax revenues could cause many states and municipalities to access the debt markets to finance budget deficits. At the same time, demand for tax-exempt municipal bonds is expected to remain strong, as investors continue to look for ways to rebalance their portfolios and reduce risk. The federal government's recent decision to discontinue the 30-year Treasury bond removed one of the pricing benchmarks for the municipal market, which could result in some pricing uncertainty and create additional opportunities for Nuveen to add value to the portfolio. Overall, we continue to watch the fixed-income markets carefully, especially those sectors that were directly impacted by the events of September 11 or that would be affected by any further deceleration in the economy. We believe that NIM is currently well diversified and well positioned for the market environment ahead, and we will continue to respond to events as appropriate. In September 2002, NIM will reach its 10-year anniversary, a point in the bond market cycle typically associated with increased bond calls. In 2002 and 2003, NIM could see calls of up to 14% and 17%, respectively, of its portfolio. The number of actual calls will depend largely on market interest rates over this time. Given the current level of rates, our approach has been to hold higher-yielding bonds as long as possible to support the Fund's dividend, while we look for attractive replacement opportunities. In general, we believe our call exposure over the next two years is manageable, and we foresee no problems in working through it. Over the next six months, we plan to remain focused on the strategies that add value for our shareholders, provide support for NIM's dividend, and fully utilize Nuveen's experience and research expertise to adjust to any shifts in market conditions. Strong issuance could present us with a number of opportunities to implement such strategies. Overall, we believe NIM will continue to play an important role in investors' financial programs, providing balance and diversification, dependable tax-free income, quality investments, and a measure of security in uncertain times such as these. Nuveen Select Maturities Municipal Fund Performance OVERVIEW As of November 30, 2001 Credit Quality [pie chart] AAA/U.S. Guaranteed 38% AA 17% A 19% BBB 10% NR 11% Other 5% PORTFOLIO STATISTICS Share Price $11.18 -------------------------------------------------- Net Asset Value $10.91 -------------------------------------------------- Market Yield 5.64% -------------------------------------------------- Taxable-Equivalent Yield (Federal Income Tax Rate)1 8.12% -------------------------------------------------- Fund Net Assets ($000) $135,198 -------------------------------------------------- Average Effective Maturity (Years) 11.98 -------------------------------------------------- Average Duration 4.66 -------------------------------------------------- ANNUALIZED TOTAL RETURN (Inception 9/92) -------------------------------------------------- ON SHARE PRICE ON NAV -------------------------------------------------- 1-Year 18.28% 2.73% -------------------------------------------------- 5-Year 6.54% 4.11% -------------------------------------------------- Since Inception 5.16% 5.38% -------------------------------------------------- TOP FIVE SECTORS (as a % of total investments) -------------------------------------------------- Healthcare 24% -------------------------------------------------- Utilities 20% -------------------------------------------------- U.S.Guaranteed 13% -------------------------------------------------- Housing/Multifamily 8% -------------------------------------------------- Long-Term Care 6% -------------------------------------------------- 2000-2001 MONTHLY TAX-FREE DIVIDENDS PER SHARE [BAR CHART] Dec 0.0525 Jan 0.0525 Feb 0.0525 Mar 0.0525 Apr 0.0525 May 0.0525 Jun 0.0525 Jul 0.0525 Aug 0.0525 Sep 0.0525 Oct 0.0525 Nov 0.0525 SHARE PRICE PERFORMANCE [LINE CHART] 12/1/00 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 10.9 11.06 11.13 11.03 11.19 11.17 11.16 11.19 11.01 11.1 11.44 11.51 11.3 11.35 11.4 11.36 10.91 11.05 11.04 11.11 11.09 11.15 11.46 11.76 11.31 11.31 11/30/01 11.18 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 30.5%. Shareholder MEETING REPORT The Shareholder Meeting was held August 1, 2001 in Chicago at Nuveen's headquarters. NIM -------------------------------------------------------------------------------- APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS: Common Shares ================================================================================ Robert P. Bremner For 10,838,850 Withhold 60,428 -------------------------------------------------------------------------------- Total 10,899,278 ================================================================================ Lawrence H. Brown For 10,840,800 Withhold 58,478 -------------------------------------------------------------------------------- Total 10,899,278 ================================================================================ Anne E. Impellizzeri For 10,836,300 Withhold 62,978 -------------------------------------------------------------------------------- Total 10,899,278 ================================================================================ Peter R. Sawers For 10,840,800 Withhold 58,478 -------------------------------------------------------------------------------- Total 10,899,278 ================================================================================ Judith M. Stockdale For 10,835,134 Withhold 64,144 -------------------------------------------------------------------------------- Total 10,899,278 ================================================================================ William J. Schneider For 10,839,350 Withhold 59,928 -------------------------------------------------------------------------------- Total 10,899,278 ================================================================================ Timothy R. Schwertfeger For 10,839,350 Withhold 59,928 -------------------------------------------------------------------------------- Total 10,899,278 ================================================================================ RATIFICATION OF AUDITORS WAS REACHED AS FOLLOWS: For 10,815,823 Against 45,619 Abstain 37,836 -------------------------------------------------------------------------------- Total 10,899,278 ================================================================================ Nuveen Select Maturities Municipal Fund (NIM) Portfolio of INVESTMENTS November 30, 2001 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ ARIZONA - 6.1% $ 2,470 Arizona Educational Loan Marketing Corporation, Educational 9/02 at 101 Aa2 $2,538,543 Loan Revenue Bonds, 6.375%, 9/01/05 (Alternative Minimum Tax) 4,090 Industrial Development Authority of the City of Phoenix, 4/08 at 101 1/2 AAA 4,519,205 Arizona, Statewide Single Family Mortgage Revenue Bonds, 1998 Series C, 6.650%, 10/01/29 (Alternative Minimum Tax) 1,185 Industrial Development Authority of the City of Winslow, No Opt. Call N/R 1,133,761 Arizona, 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, 12/01 at 102 A 786,817 Series 1992A-2 (Subordinate), 6.750%, 6/01/06 (Alternative Minimum Tax) ------------------------------------------------------------------------------------------------------------------------------------ CALIFORNIA - 1.4% 1,905 City of Los Angeles, California, Multifamily Housing Revenue 7/11 at 102 AAA 1,914,411 Bonds (GNMA Mortgage-Backed Securities Program - Park Plaza West Senior Apartments Project), Series 2001B, 5.300%, 1/20/21 ------------------------------------------------------------------------------------------------------------------------------------ COLORADO - 4.1% 1,000 Denver Health and Hospital Authority, Colorado, Healthcare 12/11 at 100 BBB+ 1,011,240 Revenue Bonds, Series 2001A, 6.000%, 12/01/23 478 El Paso County, Colorado, Tax-Exempt Single Family Mortgage No Opt. Call Aaa 513,919 Revenue 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+ 1,143,550 Bonds (Keystone Resorts Management, Inc. Project), Series 1990, 7.750%, 9/01/06 2,845 University of Colorado Hospital Authority, Hospital Revenue 11/11 at 100 A3 2,826,337 Bonds, Series 2001A, 5.600%, 11/15/21 ------------------------------------------------------------------------------------------------------------------------------------ DISTRICT OF COLUMBIA - 4.1% District of Columbia, Washington, D.C., General Obligation Refunding Bonds, Series 1993A: 900 6.000%, 6/01/07 No Opt. Call AAA 1,002,447 4,105 6.000%, 6/01/07 No Opt. Call AAA 4,531,427 ------------------------------------------------------------------------------------------------------------------------------------ FLORIDA - 2.7% 3,500 Hillsborough County Industrial Development Authority, Florida, 5/02 at 103 A1 3,666,950 Pollution Control Revenue Refunding Bonds (Tampa Electric Company Project), Series 1992, 8.000%, 5/01/22 ------------------------------------------------------------------------------------------------------------------------------------ GEORGIA - 7.2% 405 Urban Residential Finance Authority of the City of Atlanta, No Opt. Call N/R*** 429,887 Georgia, 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 6,289,985 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 No Opt. Call AAA 2,964,409 Revenue Bonds, Series 1992B, 7.500%, 1/01/07 ------------------------------------------------------------------------------------------------------------------------------------ ILLINOIS - 11.3% 2,245 Chicago Metropolitan Housing Development Corporation, 7/03 at 100 AAA 2,263,252 Illinois, 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 B2 2,143,575 Special Facility Revenue Bonds (United Air Lines, Inc. Project), Series 2001A, 6.375%, 11/01/35 (Alternative Minimum Tax) (Mandatory put 5/01/13) 215 City of Danville, Vermilion County, Illinois, Single Family 11/03 at 102 A1 222,583 Mortgage Revenue Refunding Bonds, Series 1993, 7.300%, 11/01/10 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ ILLINOIS (continued) $ 5,000 Illinois Development Finance Authority, Revenue Bonds (Greek 4/11 at 105 Aaa $6,007,150 American Nursing Home Project), Series 2000A, 7.600%, 4/20/40 1,915 Illinois Development Finance Authority, Child Care Facility 9/02 at 102 N/R 1,977,448 Revenue Bonds (Illinois Facilities Fund Project), Series 1992, 7.400%, 9/01/04 1,000 Illinois Health Facilities Authority, Revenue Refunding Bonds 8/09 at 101 A- 965,360 (Silver Cross Hospital and Medical Centers), Series 1999, 5.500%, 8/15/19 1,555 Illinois Housing Development Authority, Section 8 Elderly 11/02 at 102 A 1,608,772 Housing Revenue Bonds (Skyline Towers Apartments), Series 1992B, 6.625%, 11/01/07 245 City of Rock Island, Illinois, Residential Mortgage Revenue 9/02 at 102 Aa2 252,039 Refunding Bonds, Series 1992, 7.700%,9/01/08 ------------------------------------------------------------------------------------------------------------------------------------ INDIANA - 3.5% 410 Hospital Authority of Elkhart County, Indiana, Hospital Revenue 7/02 at 102 A1 428,044 Bonds (Elkhart General Hospital, Inc.), Series 1992, 7.000%, 7/01/08 1,000 Indianapolis Local Public Improvement Bond Bank, Indiana, No Opt. Call AA 1,120,120 Series 1992D Bonds, 6.600%, 2/01/07 2,100 Indianapolis Local Public Improvement Bond Bank, Indiana, 7/03 at 102 Aa2*** 2,256,492 Transportation Revenue Bonds, Series 1992, 6.000%, 7/01/10 (Pre-refunded to 7/01/03) 3,435 City of Indianapolis, Indiana, Multifamily Housing First Mortgage 5/09 at 102 N/R 893,100 Revenue Bonds (Keystone at Fall Creek Apartments), Series 1999A, 6.400%, 5/01/19 (Alternative Minimum Tax)# ------------------------------------------------------------------------------------------------------------------------------------ KANSAS - 2.6% 3,500 Wichita, Kansas, Hospital Revenue Refunding and Improvement 11/11 at 101 A+ 3,501,330 Bonds (Via Christi Health System), 2001 Series III, 5.500%, 11/15/21 ------------------------------------------------------------------------------------------------------------------------------------ MARYLAND - 4.6% 2,000 Anne Arundel County, Maryland, Multifamily Housing Revenue No Opt. Call BBB- 2,084,940 Bonds (Woodside Apartments Project), Series 1994, 7.450%, 12/01/24 (Alternative Minimum Tax) (Mandatory put 12/01/03) 4,000 Maryland Health and Higher Educational Facilities Authority, 7/11 at 100 A 4,144,360 Revenue Bonds (University of Maryland Medical System), Series 2001, 5.750%, 7/01/21 (WI, settling 12/05/01) ------------------------------------------------------------------------------------------------------------------------------------ MICHIGAN - 2.0% 2,728 Michigan State Hospital Finance Authority, Detroit Medical No Opt. Call Baa2 2,758,415 Center Collateralized Loan, Series 2001, 7.360%, 4/01/07 ------------------------------------------------------------------------------------------------------------------------------------ MINNESOTA - 0.8% 1,000 White Earth Band of Chippewa Indians, Minnesota, Revenue No Opt. Call A 1,101,600 Bonds, Series 2000A, 7.000%, 12/01/11 ------------------------------------------------------------------------------------------------------------------------------------ NEBRASKA - 2.9% 5,500 Energy America, Nebraska, Natural Gas Revenue Bonds, No Opt. Call N/R 3,855,940 1998 Series A, 5.700%, 7/01/08 ------------------------------------------------------------------------------------------------------------------------------------ NEW YORK - 7.2% 5,000 Industrial Development Agency, Erie County, New York, 12/10 at 103 N/R 2,050,000 Solid Waste Disposal Facility Revenue Bonds (1998 CanFibre of Lackawanna Project), 8.875%, 12/01/13 (Alternative Minimum Tax)# 3,000 New York Housing Corporation, Senior Revenue Refunding 11/03 at 102 AAA 3,049,980 Bonds, Series 1993, 5.500%, 11/01/20 1,870 New York State Medical Care Facilities Finance Agency, 2/06 at 102 AA+ 2,023,789 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 No Opt. Call AAA 2,630,657 Treatment Plant Bonds (Serial), Series 1994, 8.500%, 11/01/07 (Alternative Minimum Tax) ------------------------------------------------------------------------------------------------------------------------------------ NORTH CAROLINA - 1.1% 1,480 North Carolina Medical Care Commission, Hospital Revenue 12/08 at 101 AA- 1,436,296 Bonds (Pitt County Memorial Hospital), Series 1998A, 5.000%, 12/01/18 Nuveen Select Maturities Municipal Fund (NIM) (continued) Portfolio of INVESTMENTS November 30, 2001 (Unaudited) PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ OHIO - 7.4% $ 2,000 Akron, Bath and Copley Joint Township Hospital District, 11/02 at 102 Baa1 $2,065,380 Ohio, Hospital Facilities Revenue Bonds (Summa Health System Project), Series 1992, 6.250%, 11/15/07 4,500 Hamilton County, Ohio, Hospital Facilities Revenue No Opt. Call A*** 4,905,630 Refunding Bonds (Bethesda Hospital, Inc.), Series 1992A, 6.250%, 1/01/06 1,970 Ohio Water Development Authority, Revenue Bonds (USA 3/02 at 102 N/R 2,022,264 Waste 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 1,048,650 Refunding Bonds, Series 1992, 6.000%, 12/01/14 ------------------------------------------------------------------------------------------------------------------------------------ OKLAHOMA - 3.0% 4,500 Trustees of the Tulsa Municipal Airport Trust, Oklahoma, No Opt. Call BB 4,022,280 Revenue Bonds, Refunding Series 2000B, 6.000%, 6/01/35 (Alternative Minimum Tax) (Mandatory put 12/01/08) ------------------------------------------------------------------------------------------------------------------------------------ PENNSYLVANIA - 4.3% 3,800 Pennsylvania Higher Education Assistance Agency, Student 1/03 at 102 AAA 3,899,256 Loan Revenue Bonds, 1988 Series D, 6.050%, 1/01/19 (Alternative Minimum Tax) 1,620 Pennsylvania Higher Educational Facilities Authority, College No Opt. Call Aaa 1,951,695 and University Revenue Bonds, 9th Series, 7.625%, 7/01/15 ------------------------------------------------------------------------------------------------------------------------------------ RHODE ISLAND - 0.2% 215 Rhode Island Housing and Mortgage Finance Corporation, 4/02 at 102 AA+ 217,247 Homeownership Opportunity Bonds, Series 7, 6.500%, 4/01/25 (Alternative Minimum Tax) ------------------------------------------------------------------------------------------------------------------------------------ SOUTH CAROLINA - 1.8% 2,400 South Carolina Jobs and Economic Development Authority, 8/11 at 100 AA 2,375,520 Hospital Revenue Bonds (Georgetown Memorial Hospital), Series 2001, 5.250%, 2/01/21 ------------------------------------------------------------------------------------------------------------------------------------ TEXAS - 5.9% 525 Mental Health and Mental Retardation Center, Austin-Travis 3/05 at 101 AAA 574,539 County, Texas, Revenue Bonds (MHMR Facilities Acquisition Program), Series 1995-A, 6.500%, 3/01/15 475 Property Finance Authority, Inc., City of Galveston, Texas, 3/02 at 103 A3 491,084 Single Family Mortgage Revenue Bonds, Series 1991A, 8.500%, 9/01/11 915 Mental Health and Mental Retardation Center, Texas, Revenue 3/05 at 101 AAA 1,001,339 Bonds (MHMR Center Facilities Acquisition Program), Series 1995A-E, 6.500%, 3/01/15 3,500 Navigation District No. 1 of Matagorda County, Texas, Pollution No Opt. Call BBB+ 3,490,865 Control Revenue Bonds (Central Power and Light Company), Refunding Series 2001A, 4.550%, 11/01/29 (Optional put 11/01/06) 900 Health Facilities Development Corporation, Tom Green County, No Opt. Call Baa3 923,274 Texas, Hospital Revenue Bonds (Shannon Health System Project), Series 2001, 5.600%, 5/15/06 700 Health Facilities Development Corporation, Travis County, Texas, 11/03 at 102 Aaa 749,770 Hospital Revenue Bonds (Daughters of Charity National Health System - Daughters of Charity Health Services of Austin), Series 1993B, 5.900%, 11/15/07 715 Mental Health and Mental Retardation Services, Tri-County, 3/05 at 101 AAA 782,467 Texas, Revenue Bonds (MHMR Center Facilities Acquisition Program), Series 1995-E, 6.500%, 3/01/15 ------------------------------------------------------------------------------------------------------------------------------------ UTAH - 1.5% 2,055 Davis County, City of Bountiful, Utah, Hospital Revenue No Opt. Call N/R 2,027,093 Refunding Bonds (South Davis Community Hospital Project), Series 1998, 6.000%, 12/15/10 ------------------------------------------------------------------------------------------------------------------------------------ VIRGINIA - 1.6% 2,000 Hampton Redevelopment and Housing Authority, Virginia, 7/02 at 104 A-1+ 2,117,840 Multifamily Housing Revenue Refunding Bonds (Chase Hampton II Apartments), Series 1994, 7.000%, 7/01/24 (Mandatory put 7/01/04) PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ WASHINGTON - 8.1% 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 $1,716,342 3,000 7.000%, 7/01/08 No Opt. Call Aa1 3,464,820 7,000 Washington Public Power Supply System, Nuclear Project No Opt. Call Aa1 5,876,850 No. 3 Refunding Revenue Bonds, Series 1990B, 0.000%, 7/01/06 ------------------------------------------------------------------------------------------------------------------------------------ WISCONSIN - 3.5% 3,500 Wisconsin Health and Educational Facilities Authority, 2/03 at 102 AAA 3,689,490 Revenue Bonds (Sisters of the Sorrowful Mother Ministry Corporation), Series 1993A, 6.125%, 8/15/13 1,000 Wisconsin Health and Educational Facilities Authority, 7/11 at 100 A- 1,023,720 Revenue Bonds (Agnesian Healthcare, Inc.), Series 2001, 6.000%, 7/01/21 ------------------------------------------------------------------------------------------------------------------------------------ $ 137,566 Total Investments (cost $137,910,196) - 99.5% 134,485,545 =============----------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 0.5% 712,477 -------------------------------------------------------------------------------------------------------------------- Net Assets - 100% $135,198,022 ==================================================================================================================== * Optional Call Provisions: 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: 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. (WI) Security purchased on a when-issued basis. See accompanying notes to financial statements.
Statement of NET ASSETS November 30, 2001 (Unaudited)
--------------------------------------------------------------------------------------------------- ASSETS Investments in municipal securities, at market value $134,485,545 Cash 2,961,570 Receivables: Interest 2,620,005 Investments sold 49,722 Other assets 8,345 --------------------------------------------------------------------------------------------------- Total assets 140,125,187 --------------------------------------------------------------------------------------------------- LIABILITIES Payable for investments purchased 4,191,882 Accrued expenses: Management fees 56,544 Other 28,444 Dividends payable 650,295 --------------------------------------------------------------------------------------------------- Total liabilities 4,927,165 --------------------------------------------------------------------------------------------------- Net assets $135,198,022 =================================================================================================== Shares outstanding 12,386,576 =================================================================================================== Net asset value per share outstanding (net assets divided by shares outstanding) $ 10.91 =================================================================================================== See accompanying notes to financial statements.
Statement of OPERATIONS Six Months Ended November 30, 2001 (Unaudited)
---------------------------------------------------------------------------------------------- INVESTMENT INCOME $ 4,288,685 ---------------------------------------------------------------------------------------------- EXPENSES Management fees 347,675 Shareholders' servicing agent fees and expenses 6,853 Custodian's fees and expenses 22,456 Trustees' fees and expenses 813 Professional fees 6,756 Shareholders' reports - printing and mailing expenses 21,675 Stock exchange listing fees 14,138 Investor relations expense 14,924 Other expenses 5,065 ---------------------------------------------------------------------------------------------- Total expenses before custodian fee credit 440,355 Custodian fee credit (5,366) ---------------------------------------------------------------------------------------------- Net expenses 434,989 ---------------------------------------------------------------------------------------------- Net investment income 3,853,696 ---------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS Net realized gain from investment transactions 62,840 Change in net unrealized appreciation (depreciation) of investments (3,687,388) ---------------------------------------------------------------------------------------------- Net gain (loss) from investments (3,624,548) ---------------------------------------------------------------------------------------------- Net increase in net assets from operations $ 229,148 ============================================================================================== See accompanying notes to financial statements.
Statement of CHANGES IN NET ASSETS (Unaudited)
SIX MONTHS ENDED YEAR ENDED 11/30/01 5/31/01 -------------------------------------------------------------------------------------------------------------------- OPERATIONS Net investment income $ 3,853,696 $ 7,734,751 Net realized gain from investment transactions 62,840 308,404 Change in net unrealized appreciation (depreciation) of investments (3,687,388) 412,312 -------------------------------------------------------------------------------------------------------------------- Net increase in net assets from operations 229,148 8,455,467 -------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS From undistributed net investment income (3,900,555) (7,799,896) From accumulated net realized gains from investment transactions -- -- -------------------------------------------------------------------------------------------------------------------- Decrease in net assets from distributions to shareholders (3,900,555) (7,799,896) -------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Net proceeds from shares issued to shareholders due to reinvestment of distributions 65,310 -- -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets (3,606,097) 655,571 Net assets at the beginning of period 138,804,119 138,148,548 -------------------------------------------------------------------------------------------------------------------- Net assets at the end of period $135,198,022 $138,804,119 ==================================================================================================================== Balance of undistributed net investment income at the end of period $ 149,223 $ 113,183 ==================================================================================================================== See accompanying notes to financial statements.
Notes to FINANCIAL STATEMENTS (Unaudited) 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. If it is determined that market prices for a security are unavailable or inappropriate, the Board of Trustees of the Fund may establish a fair value for the security. 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 November 30, 2001, the Fund had an outstanding when-issued purchase commitment of $4,191,882. 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 for financial reporting purposes. 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. Notes to FINANCIAL STATEMENTS (Unaudited) (continued) Dividends and Distributions to Shareholders Tax-exempt net investment income is declared monthly as a dividend and payment is made or reinvestment is credited to shareholder accounts on the first business day after month-end. Net realized capital gains and/or market discount from investment transactions, if any, are distributed to shareholders not less frequently than annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards. Distributions to shareholders of tax-exempt net investment income, net realized capital gains and/or market discount are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from 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 six months ended November 30, 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. Change in Accounting Policy As required, effective June 1, 2001, the Fund has adopted the provisions of the new AICPA Audit and Accounting Guide for Investment Companies and began accreting taxable market discount on debt securities. Prior to June 1, 2001, the Fund did not accrete taxable market discounts on debt securities until they were sold. The cumulative effect of this accounting change had no impact on the total net assets or the net asset value of the Fund, but resulted in an increase in the cost of securities and a corresponding increase in unrealized depreciation of $82,899, based on securities held by the Fund on June 1, 2001. The effect of this change for the six months ended November 30, 2001, was to increase net investment income with a corresponding increase in net unrealized depreciation by $6,026. The Statement of Changes in Net Assets and Financial Highlights for the prior periods have not been restated to reflect this change in presentation. 2. FUND SHARES During the six months ended November 30, 2001, 5,790 shares were issued to shareholders due to reinvestment of distributions. There were no such transactions during the fiscal year ended May 31, 2001. 3. DISTRIBUTIONS TO SHAREHOLDERS The Fund declared a dividend distribution of $.0510 per share from its tax-exempt net investment income which was paid on December 28, 2001, to shareholders of record on December 15, 2001. At the same time, the Fund also declared an ordinary taxable income distribution of $.0283 per share. 4. SECURITIES TRANSACTIONS Purchases and sales (including maturities) of investments in intermediate-term municipal securities for the six months ended November 30, 2001, aggregated $35,091,424 and $38,768,191, respectively. At November 30, 2001, the cost of investments owned for federal income tax purposes was $138,112,326. 5. UNREALIZED APPRECIATION (DEPRECIATION) At November 30, 2001, net unrealized depreciation of investments for federal income tax purposes aggregated $3,626,781 of which $5,873,858 related to appreciated securities and $9,500,639 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. 7. COMPOSITION OF NET ASSETS At November 30, 2001, the Fund had an unlimited number of $.01 par value shares authorized. Net assets consisted of: -------------------------------------------------------------------------------- Common shares, $.01 par value per share $ 123,866 Paid-in surplus 138,223,807 Undistributed net investment income 149,223 Accumulated net realized gain from investment transactions 125,777 Net unrealized appreciation (depreciation) of investments (3,424,651) ------------------------------------------------------------------------------- Net assets $135,198,022 =============================================================================== 8. INVESTMENT COMPOSITION At November 30, 2001, the revenue sources by municipal purpose, expressed as a percent of intermediate-term investments, were as follows: -------------------------------------------------------------------------------- Education and Civic Organizations 5% Healthcare 24 Housing/Multifamily 8 Housing/Single Family 5 Long-Term Care 6 Tax Obligation/General 5 Tax Obligation/Limited 5 Transportation 5 U.S. Guaranteed 13 Utilities 20 Other 4 -------------------------------------------------------------------------------- 100% =============================================================================== In addition, 33% 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 (Unaudited) Selected data for a share outstanding throughout each period:
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: 2002(a) $11.21 $.31 $(.29) $.02 $(.32) $ -- $(.32) $10.91 $11.1800 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+ (0.00) Net Assets Net Assets Net Assets Net Assets Rate ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 5/31: 2002(a) 5.78% .10% $135,198 .63%* 5.52%* .62%* 5.53%* 25% 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 ==================================================================================================================================== * Annualized. ** 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. (a) For the six months ended November 30, 2001. See accompanying notes to financial statements.
Build Your Wealth AUTOMATICALLY Sidebar Text: Nuveen makes reinvesting easy. A phone call is all it takes to set up your reinvestment account. NUVEEN EXCHANGE-TRADED FUNDS DIVIDEND REINVESTMENT PLAN Your Nuveen Exchange-Traded Fund allows you to conveniently reinvest dividends and/or capital gains distributions in additional fund shares. 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 distributions that are reinvested. It is important to note that an automatic reinvestment 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. 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 JPMorgan Chase Bank 4 New York Plaza New York, NY 10004-2413 (800) 257-8787 LEGAL COUNSEL Morgan, Lewis & Bockius LLP Washington, D.C. INDEPENDENT AUDITORS Ernst & Young LLP Chicago, IL 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 six months ended November 30, 2001. Any future repurchases will be reported to shareholders in the next annual or semiannual report. Serving Investors FOR GENERATIONS 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. [PHOTO: John Nuveen, Sr.] John Nuveen, Sr. 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 FSA-1-11-01