N-30D 1 nuv26947edg.txt NUVEEN INVESTMENTS - NIM Nuveen Municipal Closed-End Exchange-Traded Fund ANNUAL REPORT May 31, 2002 SELECT MATURITIES NIM [photo of mother and daughter] [photo of man and wife] Dependable, tax-free income because IT'S NOT WHAT YOU EARN, IT'S WHAT YOU KEEP.(R) THE NUVEEN INVESTOR SEE PAGE 5 [LOGO: NUVEEN Investments] RECEIVE YOUR NUVEEN FUND UPDATES FASTER THAN EVER! By registering for online access, you can view and save on your computer the Fund information you currently receive in the mail. This information then can be retrieved any time, and you can select only the specific pages you want to view or print. Once you sign up, 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 on the Internet address provided. You'll be saving time, as well as saving printing and distribution expenses for your Fund. Registering for electronic access is easy and only takes a few minutes. (see instructions at right) Your e-mail address 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. [LOGO: NUVEEN Investments] SIGN UP TODAY-- HERE'S ALL YOU NEED TO DO... IF YOUR NUVEEN FUND DIVIDENDS AND STATEMENTS COME FROM YOUR FINANCIAL ADVISOR 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 AND STATEMENTS 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 [photo of Timothy R. Schwertfeger] Timothy R. Schwertfeger Chairman of the Board "I URGE YOU TO CONSIDER RECEIVING FUTURE FUND REPORTS AND OTHER INFORMATION ELECTRONICALLY ...SEE THE INSIDE FRONT COVER OF THIS REPORT FOR DETAILED INSTRUCTIONS." I am pleased to report that during the period covered by this report, your Fund continued to meet its primary objective of providing monthly tax-free income. 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. I also urge you to consider receiving future Fund reports and other information electronically via the Internet and e-mail rather than in hard copy. Not only will you be able to receive the information faster, but this also may help lower your Fund's expenses. Sign up is quick and easy - see the inside front cover of this report for detailed instructions. In addition to providing you with 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 uncertain markets like these, prudent investors 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 to those seeking to accumulate and preserve wealth. Our mission continues to be to assist you and your financial advisor by offering the investment services and products that can help you meet your financial objectives. We thank you for continuing to choose Nuveen Investments as a partner as you work toward that goal. Sincerely, /s/ TIMOTHY R. SCHWERTFEGER TIMOTHY R. SCHWERTFEGER Chairman of the Board June 25, 2002 1 Nuveen Select Maturities Municipal Fund (NIM) Portfolio Manager's COMMENTS Portfolio manager John Miller reviews economic and market conditions, key strategies, and the recent performance of the Nuveen Select Maturities Municipal Fund (NIM). John, who has 6 years of experience as an investment professional at Nuveen, assumed management of NIM in December 2001. -------------------------------------------------------------------------------- [sidebar footnotes]: 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 11 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%. 4 Duration is a measure of a Fund's NAV volatility in reaction to interest rate movements. -------------------------------------------------------------------------------- WHAT WERE THE MAJOR DRIVERS OF THE U.S. ECONOMY AND THE MUNICIPAL MARKET DURING THIS REPORTING PERIOD? The two major forces at work during the twelve months ended May 31, 2002, were the general slowdown in economic growth and the Federal Reserve's aggressive easing of short-term interest rates. In addition, the events of September 11, 2001, and the uncertain geopolitical climate that followed also impacted the economy and the markets. In the municipal markets, the generally sluggish economic environment of the past twelve months helped many securities perform well. In addition, the trend toward increased issuance remained strong. Looking at the first four months of 2002, new issue supply reached $121 billion, up about 14% over January-May 2001. On the demand side, municipal bonds continued to be highly sought after by individual investors looking for diversification, tax-free income and an alternative to a volatile stock market. Institutional investors, especially traditional purchasers such as property/casualty insurance companies and arbitrage funds, also have been active buyers in the new issue market. HOW DID NIM PERFORM OVER THE PAST TWELVE MONTHS? For the year ended May 30, 2002, 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 5/31/02 EQUIVALENT3 5/31/02 5/31/02 5/31/02 -------------------------------------------------------------------------------- NIM 5.28% 7.54% -0.06% 6.43% 4.91% -------------------------------------------------------------------------------- Past performance is not predictive of future results. For additional information, see the Performance Overview page in this report. Over the past twelve months, NIM's performance was affected by several factors. First, the Fund maintained a shorter duration4 than the Lehman index. This positioning would have helped the Fund perform relatively well in a rising interest rate environment, but it also meant that the Fund was likely to underperform when compared with longer duration investments during the generally declining interest rate environment of the past year. In addition, credit issues involving several individual holdings also influenced NIM's performance. One was Erie County (New York) Industrial Development Agency bonds issued for CanFibre of Lackawanna. These bonds were adversely affected by the bankruptcy filing of the general contractor. We continue to monitor the project very closely and are working diligently to achieve a resolution that we believe will maximize shareholder value. NIM also held bonds issued for the Keystone at Fall Creek Apartments project in Indianapolis, Indiana during the reporting period. This multifamily housing project went into default by falling behind on interest payments. We exited this investment by exercising our rights to sell the apartment building. While this allowed us to reposition the money generated by the sale into better performing assets, the proceeds received from this sale were below the par value of the outstanding bonds. This had an impact on the Fund's performance during this reporting period. The Fund also holds bonds backed by United and American Airlines. While we believe these carriers are fundamentally sound, the value of these bonds has been impacted by the slowdown in air traffic in the wake of September 11. Until January 2002, the Fund also held natural gas revenue bonds issued by the Energy America of Nebraska. These bonds were negatively affected by the Enron bankruptcy filing. The fall in price of these airline- and ener- 2 gy-backed bonds have had an impact on the Fund's total return during this reporting period. HOW DID THESE DEVELOPMENTS AND THE GENERAL MARKET ENVIRONMENT AFFECT NIM'S DIVIDEND AND SHARE PRICE? Over the twelve months ended May 31, 2002, the Fund made two dividend adjustments to reflect the market conditions and credit issues outlined above. In coming months, NIM's dividend will continue to be influenced by the general environment for fixed-income investments as well as by any progress made in resolving the CanFibre and United Airlines situations. Over the year ended May 31, 2002, the share price of NIM remained relatively stable (see the chart on the Performance Overview page). As of end of the reporting period, the Fund's share price was slightly below its net asset value per share. WHAT KEY STRATEGIES WERE USED TO MANAGE NIM DURING THE YEAR ENDED MAY 31, 2002? During the period, we worked to reduce call risk within the Fund and improve its dividend-paying capabilities going forward. In purchasing bonds over this period, we focused on essential services, particularly healthcare providers and utilities. We also found values in the education sector and with several state bonds backed by revenues from the master agreement between the various states and the major tobacco companies. As noted, NIM had some exposure to airline-backed issues that were affected by the events of September 11. Although these bonds experienced a decline immediately after the terrorist attacks, their valuations have since improved. These bonds have continued to perform, and we are seeing signs of improving conditions at both American and United Airlines. Overall, we continue to be generally positive about the long-term prospects of these carriers. Call risk within the Fund was reduced during the reporting period, with 26% of the portfolio subject to calls in the next two years. We think this call exposure is very manageable. WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL MARKET IN GENERAL AND NIM IN PARTICULAR? In general, our outlook for the fixed-income markets over the next twelve months remains positive. We believe the U.S. economy is headed for recovery, but one that may take longer and see a slower pace of growth than some are now predicting. We believe inflation and interest rates should remain relatively low over the near term, and we think new municipal issuance should continue to be strong. We anticipate the demand for tax-exempt municipal bonds will remain firm as investors look for ways to rebalance their portfolios and reduce risk. We think that NIM's intermediate-term positioning puts the Fund in a favorable position on the municipal yield curve. The Fund is now able to capture about 90% or more of the yield available from a longer-term portfolio while exposing shareholders to less interest rate risk than a longer-term fund. We think this positioning will serve shareholders well in the period ahead, and we believe that as the economy improves and as some of the current concerns within the portfolio are resolved, the Fund is positioned to provide attractive performance for shareholders in the future. 3 NIM Nuveen Select Maturities Municipal Fund Performance OVERVIEW As of May 31, 2002 [pie chart data]: Credit Quality AAA/U.S. Guaranteed 38 AA 13 A 18 BBB 19 NR 9 Other 3 PORTFOLIO STATISTICS ----------------------------------------------------- Share Price $10.45 ----------------------------------------------------- Net Asset Value $10.57 ----------------------------------------------------- Market Yield 5.28% ----------------------------------------------------- Taxable-Equivalent Yield (Federal Income Tax Rate)1 7.54% ----------------------------------------------------- Fund Net Assets ($000) $130,959 ----------------------------------------------------- Average Effective Maturity (Years) 11.56 ----------------------------------------------------- Average Duration 4.88 ----------------------------------------------------- ANNUALIZED TOTAL RETURN (Inception 9/92) ----------------------------------------------------- ON SHARE PRICE ON NAV ----------------------------------------------------- 1-Year 1.87% -0.06% ----------------------------------------------------- 5-Year 5.56% 3.76% ----------------------------------------------------- Since Inception 4.48% 5.08% ----------------------------------------------------- TOP FIVE SECTORS (as a % of total investments) ----------------------------------------------------- Healthcare 22% ----------------------------------------------------- Utilities 18% ----------------------------------------------------- U.S. Guaranteed 8% ----------------------------------------------------- Long-Term Care 8% ----------------------------------------------------- Education and Civic Organizations 6% ----------------------------------------------------- [bar chart data]: 2001-2002 Monthly Tax-Free Dividends Per Share2 Jun $0.0525 Jul 0.0525 Aug 0.0525 Sep 0.0525 Oct 0.0525 Nov 0.0525 Dec 0.051 Jan 0.051 Feb 0.051 Mar 0.046 Apr 0.046 May 0.046 [line chart data]: Share Price Performance Weekly Closing Price 6/1/01 $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 11.18 10.89 10.75 10.67 10.7 10.62 10.95 11 10.95 11.14 11.05 10.94 10.91 11.12 11 10.77 10.35 10.33 10.1 10.18 10.1 10.15 10.22 10.25 10.33 10.2 5/31/02 10.45 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%. 2 The Fund also paid shareholders a capital gains distribution in December 2001 of $0.0283 per share. 4 VI THE NUVEEN INVESTOR [photo of two boys walking] BOND SURVEILLANCE - A HIGH PRIORITY AT NUVEEN The Enron scandal has raised numerous questions about the real value of American securities. Investors want to know what safeguards are in place to inspire their trust and ensure their holdings are dependable. The Nuveen Investor recently spoke with David Blair, Assistant Vice President and Senior Analyst at Nuveen, about the research and surveillance processes used for Nuveen funds. HOW DO NUVEEN'S RESEARCH ANALYSTS EVALUATE BONDS PRIOR TO PURCHASE? We evaluate factors impacting market sectors, issuers and specific bonds and assign credit ratings to bonds we consider for purchase. We seek to purchase bonds with stable and improving credit characteristics, which have attractive prices and yields relative to other bonds in their sectors. HOW DO YOU CONDUCT YOUR RESEARCH? We conduct detailed analyses that often involve site visits and discussions with managers of the projects being financed. Since Nuveen is a major investor with large buying power, issuers and project managers are willing to listen to us and respond to our concerns. IS THE RESEARCH AND ANALYSIS PROCESS ANY DIFFERENT WHEN CONSIDERING HIGH-YIELD BONDS? Up to 20 percent of some funds can be invested in below investment grade bonds to help the fund attain a higher yield. This underscores the need for research. If one of our 16 analysts believes a high-yield bond should be purchased, a second analyst reviews the issue as well. HOW DO YOU MONITOR THE VARIOUS BONDS ONCE THEY'VE BEEN PURCHASED? We have a proprietary database with information and analysis on the bonds Nuveen holds in its funds. Among other things, we are able to evaluate risk exposure to sectors, issuers and specific bonds on an on-going basis. HOW DOES THE RESEARCH DEPARTMENT COMMUNICATE THE INFORMATION GATHERED? We conduct biweekly meetings within the research department and weekly meetings with portfolio managers. We also write-up our findings and distribute them with "buy," "hold" or "sell" recommendations to portfolio managers. (continued on page 7) Volume one 2002 INSIDE 5 Bond Surveillance - A High Priority at Nuveen 6 Is it Time to Rethink Your Bond Strategy? 7 Many Investors Continue to Find Solutions with Professional Advice 8 Fund Reports Available Online 8 ETFConnect: The Source for All Exchange-Traded Funds (C)2002 Nuveen Investments. All rights reserved. [LOGO: NUVEEN Investments] 5 VI IS IT TIME TO RETHINK YOUR BOND STRATEGY? Significant stock market losses in recent history have sent many investors toward bonds as a way to potentially cut their losses and balance equity- dominated portfolios. While many consider bonds a set-and-forget investment, there are several circumstances that might prompt you to reassess -- and perhaps revamp -- your bond holdings. TAX BRACKET CHANGES The Economic Growth and Tax Relief Reconciliation Act of 2001 has dropped tax brackets a percentage point this year, but a higher salary, large bonus, sale of assets or retirement may push you into a higher tax bracket for 2002. If you are in a higher tax bracket and want to generate an income stream without raising your tax burden, tax-free municipal bonds may be a prudent option. Even if you are in a lower tax bracket, municipal bonds could make sense. The question is whether municipal or taxable bonds will deliver a better taxable yield. RETIREMENT PLANS CHANGE Whether you are near retirement or are currently enjoying it, you may want to consider rebalancing your retirement accounts with less stock and more bonds, to potentially reduce risk and try to preserve the assets that you have accumulated. If you are just entering retirement you may want to make tax-free municipal bonds a part of your portfolio to emphasize income generation and protection from taxation. RISK TOLERANCE CHANGES The recent market volatility and market downturn may have caused many investors to reevaluate their tolerance for risk. On the other hand, your portfolio might have performed well over the last few years and you may not need to take on extra risk to meet your long-term goals. In either situation you could take a look at your bond portfolio and determine whether you need to make changes to correspond with your tolerance for risk. PORTFOLIO CHANGES If you make significant changes to one or more of your investments, you'll want to look at your portfolio as a whole, particularly with regard to overall asset allocation. You may need to do some rebalancing to stay on track with your investment strategy. Your financial advisor can help. Regardless of how your circumstances change, he or she can provide up-to-date information on the bond market and various funds to help you decide how to maximize your returns consistent with your short- and long-term financial goals. No investment is risk free and some investments carry more risk than others. It is important to know what the risks are, to evaluate them against any potential rewards, and to determine your tolerance for risk when selecting an investment. [photo of bridge to lighthouse] [photo of toddlers playing] The Nuveen Investor Vol 02.1 [LOGO: NUVEEN Investments] 6 VI [photo of clouds in sky] [photo of woman reading with child] MANY INVESTORS CONTINUE TO FIND SOLUTIONS WITH PROFESSIONAL ADVICE For many investors, current financial markets are confusing and frustrating. According to research conducted for the Forum for Investor Advice*, that's the number one reason many turn to a financial advisor. They want someone to suggest ideas and provide consultation, dialogue and professional advice. Investors say their advisors are helpful in other key ways, including... o Saving time. After consultation, investors note that the second most important reason for using an advisor is to have someone else monitor their portfolio, reducing the amount of time they spend on investing. o Help in sorting through information. Investors in the 21st century have more products from which to choose than in the past. For example, there are approximately 8,000 mutual funds today, up from 3,000 in 1990. o Assistance in setting financial goals. According to investors who use a financial advisor, they are more likely to have a plan for a specific financial goal than do-it-yourself investors. o Staying focused. Advisor-assisted investors are more likely than do-it-yourself investors to have developed a comprehensive investment program. o Peace of mind. Investors say their comfort level in all types of markets is higher when using an advisor for a "second opinion" on an investment decision. *The survey of 324 investors was conducted in December of 2000 by Market Facts and analyzed by New York based Neuwirth Research. Of the 324, 166 said they had an ongoing relationship with a financial advisor, while 157 described themselves as do-it-yourselfers. -------------------------------------------------------------------------------- (continued from page 5) HOW ARE PROBLEM BONDS IDENTIFIED AND HANDLED? We conduct surveillance on our bonds on a regular basis to ensure, among other things, that deteriorating bonds are identified early. We then discuss any emerging problems and potential courses of action with the portfolio manager. HOW MANY ISSUES DOES THE RESEARCH DEPARTMENT FOLLOW? We follow 12 sectors and 1,500 uninsured bonds, worth about $18 billion of Nuveen's $45 billion in total municipal assets. The remaining $27 billion in municipal assets are insured or escrowed (backed by Treasury bonds). For the insured bonds, we monitor closely on a regular basis the insurers guaranteeing the bonds. WILL RESEARCH AND SURVEILLANCE CHANGE IN LIGHT OF PROBLEMS WITH ENRON SECURITIES? Overall, our investment process and surveillance have worked well and been effective. However, we meet as a group on a regular basis and are constantly evaluating ways to improve the process to respond to issues and the market environment. The Nuveen Investor Vol 02.1 [LOGO: NUVEEN Investments] 7 VI LOOK AHEAD... FUND REPORTS AVAILABLE ONLINE Nuveen Fund information is now available online. Once you register, you'll receive an e-mail notice with a link to your Fund's reports and other information just as soon as it is ready. Registering takes only a few minutes. If you receive statements from a brokerage firm or financial advisor, go to WWW.INVESTORDELIVERY.COM. Enter your personal 13-character enrollment number imprinted on the address sheet of this report near your name. From the options on the follow-up page, select the New Enrollment-Create screen. Once there, enter your e-mail address and a personal, four-digit PIN. Hit the Submit button. Confirm the information you entered is correct, then hit Submit again. [graphic of InvestorDelivery.com website] If you receive statements directly from Nuveen, go to WWW.NUVEEN.COM. Select the Access Your Account tab, then select E-Report Enrollment. Finally, click on the Enrollment Page. Once there, you'll need to provide your social security number and e-mail address. Click on Enroll. After registering, you should receive a confirming e-mail within 24 hours. If not, repeat these steps to ensure all information is accurate. You can use this same process if you need to change your registration information or want to cancel Internet viewing. The e-mail address you provide is strictly confidential and will only be used to notify you of shareholder information. [graphic of nuveen.com website] The information in this newsletter should not be construed as specific tax or investment advice. Contact your advisor for information about your particular situation. ETFCONNECT: THE SOURCE FOR ALL EXCHANGE-TRADED FUNDS Last fall, Nuveen launched ETFConnect, the industry's first website featuring all-encompassing information on exchanged-traded funds. Whatever you're looking for in the world of Index ETFs or Closed-End Exchange-Traded Funds - prices, NAVs, dividend information, performance histories, new developments - this is the place. Highlights include Quick Facts sheets for more than 500 funds, a multi-fund search capability, website links, a list of fund sponsors, tools for portfolio tracking, and a continually updated education center. Check out WWW.ETFCONNECT.COM. [graphic of eftconnect.com website] The Nuveen Investor Vol 02.1 [LOGO: NUVEEN Investments] 8 Nuveen Select Maturities Municipal Fund (NIM) TRUSTEES AND OFFICERS The management of the Fund, including general supervision of the duties performed for the Fund under the Management Agreement, is the responsibility of the Board of Trustees of the Fund. The number of trustees of the Fund is currently set at seven, one of whom is an "interested person" (as the term is defined in the Investment Company Act of 1940) and six of whom are not interested persons. None of the trustees who are not interested persons of the Fund have ever been a director or employee of, or consultant to, Nuveen or its affiliates. The names and business addresses of the trustees and officers of the Fund, their principal occupations and other affiliations during the past five years, the number of portfolios each oversees and other directorships they hold are set forth below.
YEAR FIRST PRINCIPAL OCCUPATION(S) NUMBER OF PORTFOLIOS NAME, BIRTHDATE POSITION(S) HELD ELECTED OR APPOINTED INCLUDING OTHER DIRECTORSHIPS IN FUND COMPLEX AND ADDRESS WITH THE FUND AND TERM OF OFFICE DURING PAST 5 YEARS OVERSEEN BY TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEE WHO IS AN INTERESTED PERSON OF THE FUND: ------------------------------------------------------------------------------------------------------------------------------------ Timothy R. Schwertfeger (1) Chairman of the 1994 Chairman and Director (since July 1996) of The 129 3/28/49 Board, President Term John Nuveen Company and Nuveen Investments; 333 West Wacker Drive and Trustee Indefinite (2) prior thereto, Executive Vice President Chicago, IL 60606 and Director of The John Nuveen Company and Nuveen Investments; Director (since 1992) and Chairman (since 1996) of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.; Chairman and Director (since January 1997) of Nuveen Asset Management, Inc.; Director (since 1996) of Institutional Capital Corporation; Chairman and Director (since 1999) of Rittenhouse Financial Services Inc.; Chief Executive Officer (since September 1999) of Nuveen Senior Loan Asset Management Inc. TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE FUND: ------------------------------------------------------------------------------------------------------------------------------------ ROBERT P. BREMNER Trustee 1997 Private Investor and Management Consultant. 112 8/22/1940 Term 333 W. Wacker Drive Indefinite (2) Chicago, IL 60606 ------------------------------------------------------------------------------------------------------------------------------------ LAWRENCE H. BROWN Trustee 1993 Retired (August 1989) as Senior Vice President 112 7/29/1934 Term of The Northern Trust Company. 333 W. Wacker Drive Indefinite (2) Chicago, IL 60606 ------------------------------------------------------------------------------------------------------------------------------------ ANNE E. IMPELLIZZERI Trustee 1994 Retired (2002); formerly, Executive Director 112 1/26/1933 Term (since 1998) of Manitoga (Center for Russel 333 W. Wacker Drive Indefinite (2) Wright's Design with Nature); prior thereto, Chicago, IL 60606 President and Chief Executive Officer of Blanton-Peale Institutes of Religion and Health (since December 1990); prior thereto, Vice President, Metropolitan Life Insurance Co. ------------------------------------------------------------------------------------------------------------------------------------ PETER R. SAWERS Trustee 1991 Adjunct Professor of Business and Economics, 112 4/3/1933 Term University of Dubuque, Iowa; Director, Executive 333 W. Wacker Drive Indefinite (2) Service Corp. of Chicago (not-for-profit); Director, Chicago, IL 60606 Hadley School for the Blind (not-for-profit); formerly (1991-2000) Adjunct Professor, Lake Forest Graduate School of Management, Lake Forest, Illinois; prior thereto, Executive Director, Towers Perrin Australia, a management consulting firm; Chartered Financial Analyst; Certified Management Consultant. 9 Nuveen Select Maturities Municipal Fund (NIM) TRUSTEES AND OFFICERS (CONTINUED) YEAR FIRST PRINCIPAL OCCUPATION(S) NUMBER OF PORTFOLIOS NAME, BIRTHDATE POSITION(S) HELD ELECTED OR APPOINTED INCLUDING OTHER DIRECTORSHIPS IN FUND COMPLEX AND ADDRESS WITH THE FUND AND TERM OF OFFICE DURING PAST 5 YEARS OVERSEEN BY TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE FUND (CONTINUED): ------------------------------------------------------------------------------------------------------------------------------------ WILLIAM J. SCHNEIDER Trustee 1997 Senior Partner and Chief Operating Officer, 112 9/24/1944 Term Miller-Valentine Group, Vice President, 333 W. Wacker Drive Indefinite (2) Miller-Valentine Realty, a development and Chicago, IL 60606 contract company; Chair, Miami Valley Hospital; Vice Chair, Miami Valley Economic Development Coalition; formerly, Member, Community Advisory Board, National City Bank, Dayton, Ohio; and Business Advisory Council, Cleveland Federal Reserve Bank. ------------------------------------------------------------------------------------------------------------------------------------ JUDITH M. STOCKDALE Trustee 1997 Executive Director, Gaylord and Dorothy 112 12/29/1947 Term Donnelley Foundation (since 1994); prior 333 W. Wacker Drive Indefinite (2) thereto, Executive Director, Great Lakes Chicago, IL 60606 Protection Fund (from 1990 to 1994). PRINCIPAL OCCUPATION(S) NUMBER OF PORTFOLIOS NAME, BIRTHDATE POSITION(S) HELD YEAR FIRST ELECTED INCLUDING OTHER DIRECTORSHIPS IN FUND COMPLEX AND ADDRESS WITH THE FUND OR APPOINTED (3) DURING PAST 5 YEARS OVERSEEN BY OFFICER ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS OF THE FUND: ------------------------------------------------------------------------------------------------------------------------------------ MICHAEL T. ATKINSON Vice President 2002 Vice President (since January 2002), formerly, 129 2/3/1966 Assistant Vice President (since 2000), previously, 333 W. Wacker Drive Associate of Nuveen Investments. Chicago, IL 60606 ------------------------------------------------------------------------------------------------------------------------------------ PAUL L. BRENNAN Vice President 2002 Vice President (since January 2002), formerly, 127 11/10/1966 Assistant Vice President, of Nuveen 333 W. Wacker Drive Advisory Corp. Chicago, IL 60606 ------------------------------------------------------------------------------------------------------------------------------------ PETER H. D'ARRIGO Vice President and 1999 Vice President of Nuveen Investments (since 129 11/28/1967 Treasurer January 1999), prior thereto, Assistant Vice 333 W. Wacker Drive President (from January 1997); formerly, Chicago, IL 60606 Associate of Nuveen Investments; Vice President and Treasurer (since September 1999) of Nuveen Senior Loan Asset Management Inc.; Chartered Financial Analyst. ------------------------------------------------------------------------------------------------------------------------------------ MICHAEL S. DAVERN Vice President 1997 Vice President of Nuveen Advisory Corp. 127 6/26/1957 333 W. Wacker Drive Chicago, IL 60606 ------------------------------------------------------------------------------------------------------------------------------------ SUSAN M. DESANTO Vice President 2001 Vice President of Nuveen Advisory Corp. (since 129 9/8/1954 August 2001); previously, Vice President of 333 W. Wacker Drive Van Kampen Investment Advisory Corp. Chicago, IL 60606 (since 1998); prior thereto, Assistant Vice President of Van Kampen Investment Advisory Corp. 10 PRINCIPAL OCCUPATION(S) NUMBER OF PORTFOLIOS NAME, BIRTHDATE POSITION(S) HELD YEAR FIRST ELECTED INCLUDING OTHER DIRECTORSHIPS IN FUND COMPLEX AND ADDRESS WITH THE FUND OR APPOINTED (3) DURING PAST 5 YEARS OVERSEEN BY OFFICER ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS OF THE FUND (CONTINUED): ------------------------------------------------------------------------------------------------------------------------------------ JESSICA R. DROEGER Vice President 2002 Vice President (since January 2002), formerly 129 9/24/1964 Assistant Vice President and Assistant General 333 W. Wacker Drive Counsel (since May 1998) of Nuveen Investments; Chicago, IL 60606 Assistant Vice President and Assistant Secretary (since 1998) of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.; prior thereto, Associate at the law firm D'Ancona Partners LLC ------------------------------------------------------------------------------------------------------------------------------------ LORNA C. FERGUSON Vice President 1998 Vice President of Nuveen Investments; Vice 129 10/24/1945 President (since January 1998) of Nuveen 333 W. Wacker Drive Advisory Corp. and Nuveen Institutional Chicago, IL 60606 Advisory Corp. ------------------------------------------------------------------------------------------------------------------------------------ WILLIAM M. FITZGERALD Vice President 1995 Managing Director of Nuveen Advisory Corp. and 127 3/2/1964 Nuveen Institutional Advisory Corp. (since February 333 W. Wacker Drive 2001); prior thereto, Vice President of Nuveen Chicago, IL 60606 Advisory Corp.; Chartered Financial Analyst. ------------------------------------------------------------------------------------------------------------------------------------ STEPHEN D. FOY Vice President and 1998 Vice President of Nuveen Investments and 129 5/31/1954 Controller (since May 1998) The John Nuveen Company; Vice 333 W. Wacker Drive President (since September 1999) of Nuveen Chicago, IL 60606 Senior Loan Asset Management Inc.; Certified Public Accountant. ------------------------------------------------------------------------------------------------------------------------------------ J. THOMAS FUTRELL Vice President 1992 Vice President of Nuveen Advisory Corp.; 127 7/5/1955 Chartered Financial Analyst. 333 W. Wacker Drive Chicago, IL 60606 ------------------------------------------------------------------------------------------------------------------------------------ RICHARD A. HUBER Vice President 1997 Vice President of Nuveen Institutional Advisory 127 3/26/1963 Corp. (since March 1998) and Nuveen Advisory 333 W. Wacker Drive Corp. Chicago, IL 60606 ------------------------------------------------------------------------------------------------------------------------------------ STEVEN J. KRUPA Vice President 1990 Vice President of Nuveen Advisory Corp. 127 8/21/1957 333 W. Wacker Drive Chicago, IL 60606 ------------------------------------------------------------------------------------------------------------------------------------ DAVID J. LAMB Vice President 2000 Vice President (since March 2000) of Nuveen 129 3/22/1963 Investments, previously Assistant Vice 333 W. Wacker Drive President (since January 1999); prior thereto, Chicago, IL 60606 Associate of Nuveen Investments; Certified Public Accountant. ------------------------------------------------------------------------------------------------------------------------------------ LARRY W. MARTIN Vice President and 1992 Vice President, Assistant Secretary and 129 7/27/1951 Assistant Secretary Assistant General Counsel of Nuveen 333 W. Wacker Drive Investments; Vice President and Assistant Chicago, IL 60606 Secretary of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.; Vice President and Assistant Secretary of The John Nuveen Company and Nuveen Asset Management, Inc.; Vice President and Assistant Secretary (since September 1999) of Nuveen Senior Loan Asset Management Inc. 11 Nuveen Select Maturities Municipal Fund (NIM) Trustees AND OFFICERS (CONTINUED) PRINCIPAL OCCUPATION(S) NUMBER OF PORTFOLIOS NAME, BIRTHDATE POSITION(S) HELD YEAR FIRST ELECTED INCLUDING OTHER DIRECTORSHIPS IN FUND COMPLEX AND ADDRESS WITH THE FUND OR APPOINTED (3) DURING PAST 5 YEARS OVERSEEN BY OFFICER ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS OF THE FUND (CONTINUED): ------------------------------------------------------------------------------------------------------------------------------------ EDWARD F. NEILD, IV Vice President 1996 Managing Director (since September 1997), previously 129 7/7/1965 Vice President of Nuveen Advisory Corp. and 333 W. Wacker Drive Nuveen Institutional Advisory Corp.; Chartered Chicago, IL 60606 Financial Analyst. ------------------------------------------------------------------------------------------------------------------------------------ THOMAS J. O'SHAUGHNESSY Vice President 2002 Vice President (since January 2002), formerly, 127 9/4/1960 Assistant Vice President (1998), of Nuveen 333 W. Wacker Drive Advisory Corp.; prior thereto, Portfolio Manager. Chicago, IL 60606 ------------------------------------------------------------------------------------------------------------------------------------ THOMAS C. SPALDING, JR. Vice President 1982 Vice President of Nuveen Advisory Corp. and 127 7/31/1951 Nuveen Institutional Advisory Corp.; Chartered 333 W. Wacker Drive Financial Analyst. Chicago, IL 60606 ------------------------------------------------------------------------------------------------------------------------------------ GIFFORD R. ZIMMERMAN Vice President and 1992 Managing Director (since January 2002; formerly 129 9/9/1956 Secretary Vice President), Assistant Secretary and 333 W. Wacker Drive Associate General Counsel, formerly Assistant Chicago, IL 60606 General Counsel, of Nuveen Investments; Managing Director (since January 2002; formerly Vice President) and Assistant Secretary of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.; Vice President and Assistant Secretary of The John Nuveen Company; Managing Director (since January 2002; formerly Vice President) and Assistant Secretary (since September 1999) of Nuveen Senior Loan Asset Management Inc.; Chartered Financial Analyst.
(1) Mr. Schwertfeger is an "interested person" of the Fund, as defined in the Investment Company Act of 1940, because he is an officer and director of Nuveen Advisory Corp. (2) Trustees serve an indefinite term until his/her successor is elected. (3) Officers serve one year terms through July of each year. 12 REPORT OF INDEPENDENT AUDITORS THE BOARD OF TRUSTEES AND SHAREHOLDERS NUVEEN SELECT MATURITIES MUNICIPAL FUND We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Nuveen Select Maturities Municipal Fund as of May 31, 2002, 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, 2002, 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, 2002, 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 June 28, 2002 13
Nuveen Select Maturities Municipal Fund (NIM) Portfolio of INVESTMENTS May 31, 2002 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ ALABAMA - 1.9% $ 2,000 Alabama 21st Century Authority, Tobacco Settlement Revenue 12/11 at 101.00 Aa1 $ 1,976,800 Bonds, Series 2001, 5.750%, 12/01/17 500 Marshall County Healthcare Authority, Alabama, Revenue Bonds, 1/12 at 101.00 A- 518,580 Series 2002A, 6.250%, 1/01/22 ------------------------------------------------------------------------------------------------------------------------------------ ARIZONA - 5.7% 2,470 Arizona Educational Loan Marketing Corporation, Educational 9/02 at 101.00 Aa2 2,511,150 Loan Revenue Bonds, 6.375%, 9/01/05 (Alternative Minimum Tax) 3,600 Phoenix Industrial Development Authority, Arizona, Statewide 4/08 at 101.50 AAA 3,905,712 Single Family Mortgage Revenue Bonds, Series 1998C, 6.650%, 10/01/29 (Alternative Minimum Tax) 1,185 Winslow Industrial Development Authority, Arizona, Hospital No Opt. Call N/R 1,100,829 Revenue Bonds (Winslow Memorial Hospital Project), Series 1998, 5.750%, 6/01/08 ------------------------------------------------------------------------------------------------------------------------------------ ARKANSAS - 1.4% 770 Arkansas Student Loan Authority, Student Loan Revenue Bonds, 6/02 at 101.00 A 779,379 Series 1992A-2 (Subordinate), 6.750%, 6/01/06 (Alternative Minimum Tax) 1,000 City of Fort Smith, Arkansas, Water and Sewer Revenue 10/11 at 100.00 AAA 1,039,950 Refunding Construction Bonds, Series 2002A, 5.250%, 10/01/17 ------------------------------------------------------------------------------------------------------------------------------------ COLORADO - 6.3% 1,500 Colorado Educational and Cultural Facilities Authority, Charter 7/12 at 100.00 BBB 1,464,810 School Revenue Bonds (DCS Montessori Project, Douglas County School District RE-1), Series 2002A, 6.000%, 7/15/22 1,000 Denver Health and Hospital Authority, Colorado, Healthcare 12/11 at 100.00 BBB+ 1,008,280 Revenue Bonds, Series 2001A, 6.000%, 12/01/23 442 El Paso County, Colorado, Single Family Mortgage Revenue No Opt. Call Aaa 470,356 Tax-Exempt Refunding Bonds, Series 1992A, Class A-2, 8.750%, 6/01/11 5,875 Northwest Parkway Public Highway Authority, Colorado, Revenue 6/11 at 38.04 AAA 1,309,185 Bonds, Senior Series 2001B, 0.000%, 6/15/27 1,000 Summit County, Colorado, Sports Facilities Refunding Revenue No Opt. Call AAA 1,167,050 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 100.00 A3 2,848,016 Bonds, Series 2001A, 5.600%, 11/15/21 ------------------------------------------------------------------------------------------------------------------------------------ CONNECTICUT - 0.7% 970 Eastern Connecticut Resource Recovery Authority, Solid Waste 1/03 at 102.00 BBB 900,810 Revenue Bonds (Wheelabrator Lisbon Project), Series 1993A, 5.500%, 1/01/15 (Alternative Minimum Tax) ------------------------------------------------------------------------------------------------------------------------------------ DISTRICT OF COLUMBIA - 4.3% District of Columbia, General Obligation Refunding Bonds, Series 1993A: 900 6.000%, 6/01/07 No Opt. Call AAA 1,008,738 4,105 6.000%, 6/01/07 No Opt. Call AAA 4,577,568 ------------------------------------------------------------------------------------------------------------------------------------ FLORIDA - 2.8% 3,500 Hillsborough County Industrial Development Authority, Florida, 11/02 at 103.00 A1 3,619,035 Pollution Control Revenue Refunding Bonds (Tampa Electric Company Project), Series 1992, 8.000%, 5/01/22 ------------------------------------------------------------------------------------------------------------------------------------ GEORGIA - 0.3% 405 Atlanta Urban Residential Finance Authority, Georgia, Revenue No Opt. Call N/R*** 425,023 Bonds (Landrum Arms Project), Series 1994, 6.750%, 7/01/04 14 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ ILLINOIS - 13.7% $ 2,195 Chicago Metropolitan Housing Development Corporation, Illinois, 7/03 at 100.00 AAA $ 2,210,277 Housing Development Revenue Refunding Bonds (FHA-Insured Mortgage Loan Section 8 Assisted Project), Series 1993B, 5.700%, 1/01/13 3,450 City of Chicago, Illinois, Chicago O'Hare International Airport, No Opt. Call N/R 1,822,946 Special Facility Revenue Bonds (United Air Lines, Inc. Project), Series 2001A, 6.375%, 11/01/35 (Alternative Minimum Tax) (Mandatory put 5/01/13) 170 City of Danville, Vermilion County, Illinois, Single Family Mortgage 11/03 at 102.00 A1 174,726 Revenue Refunding Bonds, Series 1993, 7.300%, 11/01/10 2,000 Illinois Development Finance Authority, Revenue Refunding Bonds 4/10 at 102.00 BBB 2,004,280 (Olin Corporation Project), Series 1993D, 6.750%, 3/01/16 5,000 Illinois Development Finance Authority, Revenue Bonds (Greek 4/11 at 105.00 Aaa 5,901,100 American Nursing Home Project), Series 2000A, 7.600%, 4/20/40 1,915 Illinois Development Finance Authority, Child Care Facility 9/02 at 102.00 N/R 1,961,860 Revenue Bonds (Illinois Facilities Fund Project), Series 1992, 7.400%, 9/01/04 1,165 Illinois Health Facilities Authority, Revenue Refunding Bonds 8/09 at 101.00 A- 1,137,681 (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 102.00 A 1,597,965 Housing Revenue Bonds (Skyline Towers Apartments), Series 1992B, 6.625%, 11/01/07 1,000 Illinois Educational Facilities Authority, Student Housing Revenue 5/12 at 101.00 Baa2 1,049,060 Bonds (Educational Advancement Foundation Fund - University Center Project), Series 2002, 6.625%, 5/01/17 185 City of Rock Island, Illinois, Residential Mortgage Revenue 9/02 at 102.00 Aa2 189,150 Refunding Bonds, Series 1992, 7.700%, 9/01/08 ------------------------------------------------------------------------------------------------------------------------------------ INDIANA - 1.9% 1,305 Elkhart County Hospital Authority, Indiana, Hospital Revenue 7/02 at 102.00 A1 1,336,216 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 1,123,820 Revenue Bonds, Series 1992D, 6.600%, 2/01/07 ------------------------------------------------------------------------------------------------------------------------------------ IOWA - 1.2% 1,800 Tobacco Settlement Authority, Iowa, Tobacco Settlement 6/11 at 101.00 A1 1,595,826 Asset-Backed Revenue Bonds, Series 2001B, 5.300%, 6/01/25 ------------------------------------------------------------------------------------------------------------------------------------ KANSAS - 2.7% 3,500 Wichita, Kansas, Hospital Revenue Refunding and Improvement 11/11 at 101.00 A+ 3,489,535 Bonds (Via Christi Health System), 2001 Series III, 5.500%, 11/15/21 ------------------------------------------------------------------------------------------------------------------------------------ MARYLAND - 2.4% 2,000 Anne Arundel County, Maryland, Multifamily Housing Revenue No Opt. Call BBB- 2,061,520 Bonds (Woodside Apartments Project), Series 1994, 7.450%, 12/01/24 (Alternative Minimum Tax) (Mandatory put 12/01/03) 1,100 Maryland Energy Financing Administration, Limited Obligation 9/05 at 102.00 N/R 1,133,055 Cogeneration Revenue Bonds (AES Warrior Run Project), Series 1995, 7.400%, 9/01/19 (Alternative Minimum Tax) ------------------------------------------------------------------------------------------------------------------------------------ MASSACHUSETTS - 0.7% 1,000 Massachusetts Industrial Finance Agency, Resource Recovery No Opt. Call BBB 917,720 Revenue Refunding Bonds (Ogden Haverhill Project), Series 1992A Remarketing, 4.850%, 12/01/05 ------------------------------------------------------------------------------------------------------------------------------------ MICHIGAN - 2.8% 2,551 Michigan State Hospital Finance Authority, Detroit Medical No Opt. Call Baa2 2,573,214 Center Collateralized Loan, Series 2001, 7.360%, 4/01/07 470 Michigan State Hospital Finance Authority, Detroit Medical No Opt. Call BBB- 470,620 Center Revenue Bonds, Series 1988A Refunding, 8.125%, 8/15/12 600 Michigan State Hospital Finance Authority, Hospital Revenue 1/06 at 102.00 Baa3 601,062 Refunding Bonds (Sinai Hospital), Series 1995, 6.625%, 1/01/16 15 Nuveen Select Maturities Municipal Fund (NIM) (continued) Portfolio of INVESTMENTS May 31, 2002 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ MINNESOTA - 0.8% $ 1,000 White Earth Band of Chippewa Indians, Minnesota, Revenue No Opt. Call A $ 1,106,410 Bonds, Series 2000A, 7.000%, 12/01/11 ------------------------------------------------------------------------------------------------------------------------------------ NEW YORK - 4.8% 5,000 Erie County Industrial Development Agency, New York, Solid 12/10 at 103.00 N/R 1,712,500 Waste Disposal Facility Revenue Bonds (1998 CanFibre of Lackawanna Project), 8.875%, 12/01/13 (Alternative Minimum Tax)# 1,805 New York State Medical Care Facilities Finance Agency, 2/06 at 102.00 AA+ 1,947,505 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 2,639,730 Treatment Plant Bonds, Series 1994, 8.500%, 11/01/07 (Alternative Minimum Tax) ------------------------------------------------------------------------------------------------------------------------------------ OHIO - 6.4% 2,000 Akron, Bath and Copley Joint Township Hospital District, Ohio, 11/02 at 102.00 Baa1 2,051,540 Hospital Facilities Revenue Bonds (Summa Health System Project), Series 1992, 6.250%, 11/15/07 3,000 Hamilton County, Ohio, Hospital Facilities Revenue Refunding No Opt. Call A*** 3,258,810 Bonds (Bethesda Hospital, Inc.), Series 1992A, 6.250%, 1/01/06 1,970 Ohio Water Development Authority, Revenue Bonds (USA Waste 9/02 at 102.00 N/R 2,013,123 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 102.00 AAA 1,036,650 Refunding Bonds, Series 1992, 6.000%, 12/01/14 ------------------------------------------------------------------------------------------------------------------------------------ OKLAHOMA - 3.9% 1,000 Oklahoma Industries Authority, Health System Revenue Refunding 8/06 at 102.00 AAA 1,015,650 Bonds (Obligated Group consisting of INTEGRIS Baptist Medical Center, Inc., INTEGRIS South Oklahoma City Hospital Corporation and INTEGRIS Rural Health, Inc.), Series 1995D, 5.000%, 8/15/14 4,500 Trustees of the Tulsa Municipal Airport Trust, Oklahoma, Revenue 12/08 at 100.00 BB 4,136,670 Refunding Bonds, Refunding Series 2000B, 6.000%, 6/01/35 (Alternative Minimum Tax) (Mandatory put 12/01/08) ------------------------------------------------------------------------------------------------------------------------------------ PENNSYLVANIA - 5.7% 1,500 Pennsylvania Economic Development Financing Authority, Resource 12/04 at 102.00 BBB- 1,566,270 Recovery Revenue Bonds (ColverProject), Series 1994D, 7.150%, 12/01/18 (Alternative Minimum Tax) 3,800 Pennsylvania Higher Educational Assistance Agency, Student Loan 7/03 at 102.00 AAA 3,890,744 Revenue Bonds, Series 1988D, 6.050%, 1/01/19 (Alternative Minimum Tax) 1,620 Pennsylvania Higher Educational Facilities Authority, College and No Opt. Call Aaa 1,949,006 University Revenue Bonds, 9th Series, 7.625%, 7/01/15 ------------------------------------------------------------------------------------------------------------------------------------ SOUTH CAROLINA - 1.4% 1,250 South Carolina Jobs and Economic Development Authority, Hospital No Opt. Call BBB 1,335,463 Improvement Revenue Bonds (Palmetto Health Alliance), Series 2000A, 7.000%, 12/15/10 500 Tobacco Settlement Revenue Management Authority, South 5/11 at 101.00 A1 493,405 Carolina, Tobacco Settlement Asset-Backed Bonds, Series 2001B, 6.000%, 5/15/22 ------------------------------------------------------------------------------------------------------------------------------------ TENNESSEE - 1.5% 2,000 Shelby County Health, Educational and Housing Facility Board, 9/12 at 100.00 BBB+ 2,018,840 Tennessee, Hospital Revenue Bonds (Methodist Healthcare), Series 2002, 6.000%, 9/01/17 ------------------------------------------------------------------------------------------------------------------------------------ TEXAS - 6.4% 500 Austin-Travis County, Texas, MHMR Center Revenue Bonds 3/05 at 101.00 AAA 546,480 (Mental Health and Mental Retardation Center Facilities Acquisition Program), Series 1995-A, 6.500%, 3/01/15 500 Brazos River Harbor Navigation District, Braoria County, Texas, 5/12 at 101.00 A 503,685 Environmental Facilities Revenue Bonds (Dow Chemical Company Project), 2002 Series A-6, 6.250%, 5/15/33 (Alternative Minimum Tax) (Mandatory put 5/15/17) 425 City of Galveston Property Finance Authority, Inc., Texas, Single 9/02 at 102.00 A3 438,944 Family Mortgage Revenue Bonds, Series 1991A, 8.500%, 9/01/11 870 Gulf Coast, Texas, Community MHMR Centers Revenue Bonds 3/05 at 101.00 AAA 950,875 (Mental Health and Mental Retardation Center Facilities Acquisition Program), Series 1995C, 6.500%, 3/01/15 16 PRINCIPAL OPTIONAL CALL MARKET AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE ------------------------------------------------------------------------------------------------------------------------------------ TEXAS (continued) $ 3,500 Navigation District No. 1 of Matagorda County, Texas, Pollution No Opt. Call BBB+ $ 3,522,155 Control Revenue Refunding Bonds (Central Power and Light Company), Series 2001A, 4.550%, 11/01/29 (Mandatory put 11/01/06) 900 Tom Green County Health Facilities Development Corporation, No Opt. Call Baa3 923,814 Texas, Hospital Revenue Bonds (Shannon Health System Project), Series 2001, 5.600%, 5/15/06 700 Travis County Health Facilities Development Corporation, Texas, 11/03 at 102.00 Aaa 748,958 Hospital Revenue Bonds (Daughters of Charity National Health System - Daughters of Charity Health Services of Austin), Series 1993B, 5.900%, 11/15/07 680 Tri-County, Texas, MHMR Services Revenue Bonds (Mental Health 3/05 at 101.00 AAA 743,213 and Mental Retardation Center Facilities Acquisition Program), Series 1995-E, 6.500%, 3/01/15 ------------------------------------------------------------------------------------------------------------------------------------ UTAH - 1.6% 2,055 City of Bountiful, Davis County, Utah, Hospital Revenue Refunding No Opt. Call N/R 2,029,867 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 104.00 A-1+ 2,085,620 Multifamily Housing Revenue Refunding Bonds (Chase Hampton II Apartments), Series 1994, 7.000%, 7/01/24 (Mandatory put 7/01/04) ------------------------------------------------------------------------------------------------------------------------------------ WASHINGTON - 8.7% Washington Public Power Supply System, Nuclear Project No. 1 Refunding Revenue Bonds, Series 1993A: 160 7.000%, 7/01/07 No Opt. Call Aa1 184,136 1,340 7.000%, 7/01/07 No Opt. Call Aa1*** 1,567,840 1,870 7.000%, 7/01/08 No Opt. Call Aa1 2,173,482 1,130 7.000%, 7/01/08 No Opt. Call Aa1*** 1,337,163 7,000 Washington Public Power Supply System, Nuclear Project No. 3 No Opt. Call Aa1 6,067,950 Refunding Revenue Bonds, Series 1990B, 0.000%, 7/01/06 ------------------------------------------------------------------------------------------------------------------------------------ WEST VIRGINIA - 3.5% 2,000 County Commission of Harrison County, West Virginia, Solid Waste 8/04 at 102.00 AAA 2,170,820 Disposal Revenue Bonds (West Penn Power Company Project), Series 1994C, 6.750%, 8/01/24 (Alternative Minimum Tax) 2,450 South Charleston, West Virginia, Industrial Development Revenue 8/02 at 100.00 A 2,462,226 Bonds (Union Carbide Chemicals and Plastics), Series 1990A, 8.000%, 8/01/20 (Alternative Minimum Tax) ------------------------------------------------------------------------------------------------------------------------------------ WISCONSIN - 3.6% 3,500 Wisconsin Health and Educational Facilities Authority, Revenue 2/03 at 102.00 AAA 3,655,120 Bonds (Sisters of the Sorrowful Mother Ministry Corporation), Series 1993A, 6.125%, 8/15/13 1,000 Wisconsin Health and Educational Facilities Authority, Revenue 7/11 at 100.00 A- 1,020,629 Bonds (Agnesian Healthcare Inc.), Series 2001, 6.000%, 7/01/21 ------------------------------------------------------------------------------------------------------------------------------------ $ 134,683 Total Investments (cost $129,994,931) - 98.7% 129,288,197 ------------------------------------------------------------------------------------------------------------------------------------ Other Assets Less Liabilities - 1.3% 1,670,423 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets - 100% $ 130,958,620 ------------------------------------------------------------------------------------------------------------------------------------
* 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, non-income producing generally denotes that the issuer has defaulted on the payment of principal or interest or has filed for bankruptcy. N/R Investment is not rated. See accompanying notes to financial statements. 17
Statement of ASSETS AND LIABILITIES May 31, 2002 ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments in municipal securities, at market value $129,288,197 Receivables: Interest 2,395,162 Investments sold 3,665 Other assets 11,780 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 131,698,804 ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Cash overdraft 29,177 Accrued expenses: Management fees 55,395 Other 85,443 Dividends payable 570,169 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 740,184 ------------------------------------------------------------------------------------------------------------------------------------ Net assets $130,958,620 ------------------------------------------------------------------------------------------------------------------------------------ Shares outstanding 12,394,977 ------------------------------------------------------------------------------------------------------------------------------------ Net asset value per share outstanding (net assets divided by shares outstanding) $ 10.57 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS CONSIST OF: ------------------------------------------------------------------------------------------------------------------------------------ Common shares, $.01 par value per share $ 123,950 Paid-in surplus 138,316,568 Undistributed (Over-distribution of) net investment income (240,437) Accumulated net realized gain (loss) from investment transactions (6,534,727) Net unrealized appreciation (depreciation) of investments (706,734) ------------------------------------------------------------------------------------------------------------------------------------ Net assets $130,958,620 ------------------------------------------------------------------------------------------------------------------------------------ See accompanying notes to financial statements.
18
Statement of OPERATIONS Year Ended May 31, 2002 ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME $ 7,987,957 ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES Management fees 674,605 Shareholders' servicing agent fees and expenses 26,410 Custodian's fees and expenses 44,429 Trustees' fees and expenses 1,811 Professional fees 54,881 Shareholders' reports - printing and mailing expenses 59,352 Stock exchange listing fees 28,191 Investor relations expense 28,876 Other expenses 9,212 ------------------------------------------------------------------------------------------------------------------------------------ Total expenses before custodian fee credit 927,767 Custodian fee credit (10,079) ------------------------------------------------------------------------------------------------------------------------------------ Net expenses 917,688 ------------------------------------------------------------------------------------------------------------------------------------ Net investment income 7,070,269 ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS Net realized gain (loss) from investment transactions (6,247,761) Change in net unrealized appreciation (depreciation) of investments (969,471) ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) from investments (7,217,232) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets from operations $ (146,963) ------------------------------------------------------------------------------------------------------------------------------------ See accompanying notes to financial statements.
19
Statement of CHANGES IN NET ASSETS YEAR ENDED YEAR ENDED 5/31/02 5/31/01 ------------------------------------------------------------------------------------------------------------------------------------ OPERATIONS Net investment income $ 7,070,269 $ 7,734,751 Net realized gain (loss) from investment transactions (6,247,761) 308,404 Change in net unrealized appreciation (depreciation) of investments (969,471) 412,312 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets from operations (146,963) 8,455,467 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS From and in excess of net investment income (7,506,788) (7,799,896) From accumulated net realized gains from investment transactions (350,621) -- ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets from distributions to shareholders (7,857,409) (7,799,896) ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Net proceeds from shares issued to shareholders due to reinvestment of distributions 158,873 -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets (7,845,499) 655,571 Net assets at the beginning of year 138,804,119 138,148,548 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at the end of year $130,958,620 $138,804,119 ------------------------------------------------------------------------------------------------------------------------------------ Undistributed (Over-distribution of) net investment income at the end of year $ (240,437) $ 113,183 ------------------------------------------------------------------------------------------------------------------------------------ See accompanying notes to financial statements.
20 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. 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 May 31, 2002, the Fund had no such outstanding purchase commitments. 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. All monthly tax-exempt income dividends paid during the fiscal year ended May 31, 2002, have been designated Exempt Interest Dividends. 21 NOTES TO FINANCIAL STATEMENTS (continued) Dividends and Distributions to Shareholders Tax-exempt net investment income is declared monthly as a dividend. Generally, 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, 2002. 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 (the "Guide") and began accreting taxable market discounts 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 net unrealized depreciation of $82,899, based on securities held by the Fund on June 1, 2001. The Statement of Changes in Net Assets and Financial Highlights for the prior periods have not been restated to reflect this change in presentation. The effect of this change for the fiscal year ended May 31, 2002, was to increase investment income with a corresponding increase in net unrealized depreciation by $18,704. This change had no material effect on the Financial Highlights for the fiscal year ended May 31, 2002. 22 2. FUND SHARES During the fiscal year ended May 31, 2002, 14,191 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 $.0440 per share from its tax-exempt net investment income which was paid on July 1, 2002, to shareholders of record on June 15, 2002. 4. SECURITIES TRANSACTIONS Purchases and sales (including maturities) of investments in intermediate-term municipal securities for the fiscal year ended May 31, 2002, aggregated $64,646,825 and $69,939,906, respectively. Purchases and sales (including maturities) of investments in short-term securities for the fiscal year ended May 31, 2002, aggregated $1,500,000 and $1,500,000, respectively. 5. INCOME TAX INFORMATION The following information is presented on an income tax basis as of May 31, 2002. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in recognizing income on taxable market discount and timing differences in recognizing certain gains and losses on security transactions. The cost of investments owned was $136,418,382. The net unrealized depreciation of investments aggregated $7,130,185 of which $4,977,076 related to appreciated securities and $12,107,261 related to depreciated securities. The tax components of undistributed net investment income and realized gains at May 31, 2002, were as follows: -------------------------------------------------------------------------------- Undistributed tax-exempt income $137,678 Undistributed ordinary income * 4,729 Undistributed long-term capital gains -- -------------------------------------------------------------------------------- The tax character of distributions paid during the fiscal year ended May 31, 2002, were as follows: -------------------------------------------------------------------------------- Distributions from tax-exempt income $7,506,788 Distributions from ordinary income * -- Distributions from long-term capital gains 349,903 -------------------------------------------------------------------------------- * Ordinary income consists of taxable market discount income and short-term capital gains, if any. At May 31, 2002, the Fund had an unused capital loss carryforward of $14,922 available to be applied against future capital gains, if any. If not applied, the carryforward will expire in the year 2010. 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 management 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. 23 NOTES TO FINANCIAL STATEMENTS (continued) 7. INVESTMENT COMPOSITION At May 31, 2002, the revenue sources by municipal purpose, expressed as a percent of intermediate-term investments, were as follows: ----------------------------------------------------------------------------- Basic Materials 4% Consumer Staples 4 Education and Civic Organizations 6 Healthcare 22 Housing/Multifamily 6 Housing/Single Family 4 Long-Term Care 8 Tax Obligation/General 6 Tax Obligation/Limited 4 Transportation 6 U.S. Guaranteed 8 Utilities 18 Other 4 ----------------------------------------------------------------------------- 100% ----------------------------------------------------------------------------- In addition, 30% 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. 24 FINANCIAL HIGHLIGHTS 25 FINANCIAL HIGHLIGHTS Selected data for a share outstanding throughout each year:
INVESTMENT OPERATIONS LESS DISTRIBUTIONS ---------------------------------- ------------------------------------- FROM AND NET IN EXCESS REALIZED/ BEGINNING OF 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 $11.21 $.57 $(.57) $-- $(.61) $(.03) $(.64) $10.57 $10.4500 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 ------------------------------------------------------------------------------------------------------------------------------------ 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: 2002 1.87% (.06)% $130,959 .69% 5.23% .68% 5.23% 48% 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 ------------------------------------------------------------------------------------------------------------------------------------
* 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. 26-27 spread BUILD YOUR WEALTH AUTOMATICALLY NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET UP YOUR REINVESTMENT ACCOUNT. NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS DIVIDEND REINVESTMENT PLAN Your Nuveen Closed-End 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. 28 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 P.O. Box 660086 Dallas, TX 75266-0086 (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 twelve months ended May 31, 2002. Any future repurchases will be reported to shareholders in the next annual or semiannual report. 29 SERVING INVESTORS FOR GENERATIONS [photo of John Nuveen, Sr.] 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. [LOGO: NUVEEN Investments] Nuveen Investments o 333 West Wacker Drive Chicago, IL 60606 o www.nuveen.com FAN-1-5-02