Nuveen Exchange-Traded Fund
Providing tax-free income
to help you live your dreams
NUVEEN SELECT MATURITIES
MUNICIPAL FUND
SEMIANNUAL REPORT/NOVEMBER 30, 1994
Photo of man reading statement on porch
<PAGE>
CONTENTS
3 Dear shareholder
5 Answering your questions
8 Fund performance
9 Getting to know your fund
11 Portfolio of investments
16 Statement of net assets
17 Statement of operations
18 Statement of changes in net assets
19 Notes to financial statements
26 Financial highlights
<PAGE>
Dear
shareholder
"Providing secure income remains our top priority"
Photo of Richard J. Franke, Chairman of the Board
One test of any investment is how it performs in challenging markets, and the
Nuveen Select Maturities Municipal Fund met that test well during one of the
most challenging periods the bond markets have seen in decades.
During the six months ended November 30, 1994, the Federal Reserve Board
continued its efforts to fend off inflation by aggressively raising short-term
interest rates. Through it all, the Nuveen Select Maturities Municipal Fund
provided an attractive, dependable level of income free from federal income
taxes.
At November 30, the Fund's current yield was 6.48%. To equal this yield, an
investor in the 36% federal income tax bracket would have had to earn at least
10.13% on a taxable investment of comparable maturity and quality.
Like all bonds and bond funds, your Fund's net asset value and share price
were affected by rising interest rates. Over the six months covered by this
report, long-term municipal bonds declined by 7.4% in value as measured by the
Bond Buyer 40 index, while the Fund's net asset value declined by only 4.8%.
One reason for the Fund's performance involves its focus on municipal bonds
maturing in 8 to 12 years. Historically, intermediate maturity bonds have
captured most of the yield of longer-term bonds, while being much less
affected by changing interest rates than 20- to 30-year bonds.
This was certainly true over the last six months. While the Fed's actions
pushed all interest rates up and caused the prices of all bonds to decline,
long-term interest rates rose much further than intermediate rates. As a
result, your Fund held its value relatively well compared to the bond market
as a whole, while delivering an attractive stream of tax-free income.
And as we look ahead, we view several positive developments. The Fed's
attempt to fight inflation seems to be having its desired effect. At this
writing, the economy continues to expand at a moderate pace and inflation
remains under control. Second, the market's supply and demand characteristics
are positive. The supply of new municipal bonds in 1994 was 40% below 1993's
pace. Supply will be reduced further by the high volume of bond calls expected
in 1995. At the same time, the personal savings rate--the amount of disposable
income available for investment--is virtually unchanged from 1993, while tax
burdens at the federal, state, and local levels have risen. This combination
of positive economic fundamentals suggests a growing need for tax-free income.
Also, the financial strength of municipal issuers continues to improve.
Combined with our value approach to investing--a disciplined approach to
security selection and portfolio construction supported by one of the largest
and most respected research teams in the municipal industry--these factors
suggest that the prospects for the municipal market and your Fund remain
attractive.
In closing, I want to welcome new investors to the Fund and thank those who
have been with us for some time.
All of us at Nuveen appreciate your confidence in our family of municipal
bond funds, and we look forward to helping you reach your tax-free investment
objectives in the future.
Sincerely,
Richard J. Franke
Chairman of the Board
January 16, 1995
<PAGE>
Answering your questions
In January, we spoke with Tom Spalding, head of Nuveen's portfolio management
team, and asked him about recent developments in the municipal market and the
outlook for Nuveen's funds.
From time to time, my fund's market price can be lower or
higher than its net asset value per share. What accounts for that?
Although changes in a fund's market price generally track changes in the
portfolio value over the long term, short-term market price movements can be
unpredictable. The Federal Reserve's moves to raise short-term interest rates
over the past several months brought some uncertainties to the bond markets,
which were reflected in lower prices for bonds and exchange-traded bond funds
in general.
Share prices reflect temporary trading patterns, and can move higher or
lower than a fund's net asset value per share. Given the market's overall
efficiency in the long term, however, extreme differences between share values
and net asset values, either positive or negative, tend to be short-lived.
Over time, a fund's share price and its net asset value tend to move together.
With interest rates at today's levels, do you expect the volume of bond calls
to decline?
Interest rates today are substantially higher than a year ago, but they remain
much lower than they were when many bonds outstanding today were originally
issued. As a result, we expect the market to continue to experience a high
level of bond calls over the next 12 months.
Of course, we're continuing to manage all of our portfolios with call dates
in mind. As part of our basic management process, we continually evaluate
opportunities to sell bonds approaching their call dates and to reinvest the
proceeds in bonds we think have high potential to provide above-market
returns.
Will bond calls affect my income?
Bond calls can mean some reduction in income for investors in both individual
bonds and bond funds, because bonds issued when interest rates were higher
need to be replaced with lower yielding bonds. Since this Fund is relatively
new and primarily holds bonds that can't be called for several years, calls
shouldn't significantly affect its income.
I've read a lot recently about the Orange County, CA bankruptcy. Was the Fund
affected?
No. The Nuveen Select Maturities Municipal Fund wasn't affected by the Orange
County situation, because it holds no Orange County bonds.
Events in Orange County underscore the benefits of holding a professionally
selected, professionally managed and monitored portfolio of bonds, well
diversified by issuer, geography, and security type. Events affecting a single
issuer or set of issuers don't have a huge impact on performance of a well
diversified portfolio.
<PAGE>
NUVEEN SELECT MATURITIES
MUNICIPAL FUND
NIM
In line with the Fund's objective of providing attractive, dependable tax-free
income and relative price stability, shareholders enjoyed 12 months of steady
dividends following a capital gains distribution in December 1993.
<TABLE>
12 MONTH DIVIDEND HISTORY
<CAPTION>
Date Monthly Dividends Supplemental Dividends Capital Gains
<S> <C> <C> <C>
12/93 $0.0540 $.0348
1/94 $0.0540
2/94 $0.0540
3/94 $0.0540
4/94 $0.0540
5/94 $0.0540
6/94 $0.0540
7/94 $0.0540
8/94 $0.0540
9/94 $0.0540
10/94 $0.0540
11/94 $0.0540
<CAPTION>
FUND HIGHLIGHTS 11/30/94
<S> <C>
Yield 6.48%
Taxable-equivalent yield 10.13%
Annual total return on NAV -3.41%
Taxable-equivalent total return -0.26%
Share price $10.00
NAV $10.82
The dividend history used in this chart constitutes past performance and does
not necessarily predict the future dividends of the Fund.
</TABLE>
<PAGE>
Getting to know your fund
Yield
An exchange-traded fund's annualized monthly dividend on a given date (in the
case of this report, November 30, 1994) divided by its closing price per share
on that date.
Taxable equivalent yield
The return an investor who is subject to a given income tax rate would need to
obtain from a fully taxable investment to equal the fund's stated annualized
yield on share price. For shareholders in the Nuveen Select Maturities
Municipal Fund, this rate is assumed to be 36%, based on incomes of
$115,000-$250,000 for investors filing singly, $140,000-$250,000 for those
filing jointly.
Net Asset Value (NAV)
The market value of all securities and other assets held by an exchange-traded
fund, minus any liabilities. The NAV per share is the fund's net assets,
divided by its total number of shares outstanding.
Annual total return on NAV
The percentage change in a fund's NAV per share over the previous 12 months,
assuming reinvestment of all dividends and capital gains distributions, if
any.
Taxable equivalent total return
The total return an investor who is subject to a given income tax rate would
need to obtain from a fully taxable investment to equal the Fund's stated
total return on NAV.
The Fund intends to repurchase shares of its common stock in the future at
such times and in such amounts as is deemed advisable. No shares were
repurchased during the 6-month period ended November 30, 1994. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
<PAGE>
PORTFOLIO OF INVESTMENTS
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
ALASKA - 1.0%
$ 1,500,000 Alaska State Housing Finance Corporation,
5.900%, 12/01/04 No Opt. Call Aa $ 1,392,885
ARIZONA - 7.2%
2,470,000 Arizona Educational Loan Marketing Corporation,
Alternative Minimum Tax, 6.375%, 9/01/05 9/02 at 101 Aa 2,455,476
3,830,000 Maricopa County School District No. 4 (Mesa
Unified), General Obligation, 5.550%, 7/01/04 7/95 at 102 Aaa 3,599,166
3,000,000 Maricopa County Unified School District No. 48,
General Obligation, 9.000%, 7/01/05 No Opt. Call AA- 3,557,130
ARKANSAS - 1.5%
2,000,000 Arkansas Student Loan Authority, Alternative
Minimum Tax, 6.750%, 6/01/06 6/01 at 102 A 1,974,880
COLORADO - 5.8%
5,500,000 City and County of Denver Airport System,
Alternative Minimum Tax, 8.750%, 11/15/23 11/01 at 102 Con(Baa) 5,664,340
2,076,922 El Paso County, Single Family Mortgage (FNMA),
8.750%, 6/01/11 No Opt. Call Aaa 2,104,109
DISTRICT OF COLUMBIA - 3.7%
5,400,000 District of Columbia General Obligation,
6.000%, 6/01/07 No Opt. Call Aaa 4,967,568
FLORIDA - 4.4%
2,000,000 Florida State Board of Education, 7.100%, 6/01/07 No Opt. Call Aaa 2,041,540
3,500,000 Hillsborough County Industrial Development
Authority, Pollution Control (Tampa Electric),
8.000%, 5/01/22 5/02 at 103 Aa2 3,785,145
GEORGIA - 8.3%
2,540,000 Georgia Municipal Electric Authority,
7.500%, 1/01/07 No Opt. Call A+ 2,745,740
2,155,000 Atlanta Airport Facilities, 6.300%, 1/01/07 1/95 at 101 A 2,124,442
5,755,000 Burke County Development Authority, Pollution
Control (Oglethorpe Power Corporation),
8.000%, 1/01/15 1/03 at 103 Aaa 6,250,908
ILLINOIS - 14.4%
5,000,000 Illinois Development Finance Authority (Child Care
Facility), 7.400%, 9/01/04 9/02 at 102 N/R 4,851,000
2,000,000 Illinois Health Facilities Authority (Fairview
Obligated Group), 8.250%, 10/01/99 10/95 at 103 N/R 2,008,280
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
$ 2,755,000 Illinois Housing Development Authority (Skyline
Towers), 6.625%, 11/01/07 11/02 at 102 A $ 2,720,728
1,300,000 Chicago Board of Education, General Obligation,
Lease Certificates, 6.125%, 1/01/07 No Opt. Call Aaa 1,264,809
2,915,000 Chicago Metropolitan Housing Development
Corporation, FHA-Insured Projects,
5.700%, 1/01/13 7/03 at 100 Aaa 2,508,037
980,000 Danville Single Family Mortgage, 7.300%, 11/01/10 11/03 at 102 A 992,407
1,225,000 Rock Island Residential Mortgage, 7.700%, 9/01/08 9/02 at 102 A 1,277,638
Winnebago County School District No. 122,
General Obligation:
1,100,000 6.350%, 6/01/05 No Opt. Call Aaa 1,108,371
1,225,000 6.350%, 6/01/06 No Opt. Call Aaa 1,219,071
1,350,000 6.350%, 6/01/07 No Opt. Call Aaa 1,338,525
INDIANA - 7.1%
1,540,000 Indiana University Parking System,
6.000%, 11/15/06 No Opt. Call Aaa 1,475,366
Indianapolis Local Public Improvement Bond Bank:
1,000,000 6.400%, 2/01/05 No Opt. Call A+ 979,450
1,000,000 6.600%, 2/01/07 No Opt. Call A+ 973,030
2,100,000 6.000%, 7/01/10 7/03 at 102 AA- 1,932,357
2,000,000 Elkhart County Hospital Authority (Elkhart
General Hospital), 7.000%, 7/01/08 7/02 at 102 A1 1,998,080
2,200,000 Muncie School Building Corporation,
6.600%, 7/15/07 7/01 at 102 A(p) 2,159,234
LOUISIANA - 1.5%
2,000,000 Louisiana Public Facilities Authority, Student Loan,
Alternative Minimum Tax, 6.750%, 9/01/06 9/02 at 102 Aa 1,953,840
MAINE - 1.5%
2,000,000 Maine Educational Loan Marketing Corporation,
Alternative Minimum Tax, 6.600%, 5/01/05 5/02 at 101 A 1,963,040
MARYLAND - 3.7%
6,000,000 Maryland General Obligation, 4.600%, 7/15/06 7/03 at 101 Aaa 5,001,660
MASSACHUSETTS - 1.1%
1,760,000 Massachusetts Municipal Wholesale Electric
Company, 4.700%, 7/01/06 No Opt. Call Aaa 1,457,526
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
MICHIGAN - 3.5%
$ 1,000,000 Kent Hospital Finance Authority (Butterworth
Hospital), 5.100%, 1/15/07 No Opt. Call A1 $ 885,240
3,790,000 Lansing Tax Increment Finance Authority,
6.200%, 10/01/04 No Opt. Call AA+ 3,767,563
NEBRASKA - 2.0%
2,400,000 Omaha Airport Authority, 8.375%, 1/01/14 1/02 at 102 A- 2,713,320
NEW MEXICO - 0.6%
790,000 New Mexico Educational Assistance Foundation,
Student Loan, Alternative Minimum Tax,
6.850%, 12/01/05 12/02 at 101 A 789,392
NORTH DAKOTA - 0.8%
1,000,000 Mercer County Pollution Control (Basin Electric
Power Cooperative), 7.700% 1/01/19 1/96 at 103 A2 1,034,200
OHIO - 5.3%
2,000,000 Akron, Bath, and Copley Joint Township Hospital
District (Summa Health System),
6.250%, 11/15/07 11/02 at 102 A 1,917,760
4,500,000 Hamilton County Hospital Facilities (Bethesda
Hospital), 6.250%, 1/01/06 No Opt. Call A1 4,229,145
1,000,000 Oxford Water Supply System Mortgage,
6.000%, 12/01/14 12/02 at 102 Aaa 919,350
PENNSYLVANIA - 4.7%
1,965,000 Pennsylvania Higher Educational Facilities Authority,
7.625%, 7/01/15 No Opt. Call Aaa 2,152,265
3,800,000 Allegheny County (Greater Pittsburgh International
Airport), Alternative Minimum Tax,
8.000%, 1/01/03 1/98 at 102 Aaa 4,069,800
RHODE ISLAND - 2.9%
1,040,000 Rhode Island Clean Water Protection Finance
Agency, 7.700%, 10/01/03 No Opt. Call Aaa 1,144,780
3,000,000 Rhode Island Housing and Mortgage Finance
Corporation, Alternative Minimum Tax,
6.500%, 4/01/25 4/02 at 102 AA+ 2,755,800
SOUTH CAROLINA - 0.7%
1,000,000 Piedmont Municipal Power Agency,
6.000%, 1/01/05 No Opt. Call Aaa 974,880
<PAGE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
<S> <C> <C> <C> <C>
TEXAS - 4.5%
$ 1,720,000 Galveston Property Finance Authority, Single Family
Mortgage, 8.500%, 9/01/11 9/01 at 103 A $ 1,788,903
2,800,000 Grapevine Industrial Development Corporation
(American Airlines, Inc.), 9.250%, 12/01/12 12/95 at 102 Baa3 2,910,572
1,500,000 Travis County Health Facilities Development
Corporation (Daughters of Charity Health System),
5.900%, 11/15/07 11/03 at 102 Aa 1,388,520
VIRGINIA - 1.5%
2,000,000 Hampton Redevelopment and Housing Authority
(Chase Hampton II Apartments), 7.000%, 7/01/24
(Mandatory put 7/01/04) 7/02 at 104 N/R 2,027,740
WASHINGTON - 9.0%
Washington Public Power Supply System, Nuclear
Project No. 1:
2,500,000 7.000%, 7/01/07 No Opt. Call AA 2,558,600
3,000,000 7.000%, 7/01/08 No Opt. Call AA 3,052,410
7,000,000 Washington Public Power Supply System, Nuclear
Project No. 3, 0.000%, 7/01/06 No Opt. Call AA 3,154,130
1,255,000 Douglas County Public Utility District No. 1
(Wells Hydroelectric), Alternative Minimum Tax,
7.700%, 9/01/08 9/00 at 102 A+ 1,335,571
Grant County Public Utility District No. 2 (Priest
Rapids Hydro):
990,000 6.125%, 1/01/06 1/02 at 102 A1 953,360
1,050,000 6.125%, 1/01/07 1/02 at 102 A1 996,283
$134,276,922 Total Investments - (cost $134,430,006) - 96.7% 129,365,362
============
TEMPORARY INVESTMENTS IN SHORT-TERM
MUNICIPAL SECURITIES - 1.3%
$ 700,000 Jackson County Port Facility, Refunding Revenue
(Chevron U. S. A. Inc. Proj.), Series 1993,
Variable Rate Demand Bonds, 3.400%, 6/01/23t P-1 700,000
1,000,000 New York City General Obligation, Variable Rate
Demand Bonds, 3.550%, 8/01/22t VMIG-1 1,000,000
$ 1,700,000 Total Temporary Investments - 1.3% 1,700,000
============
Other Assets Less Liabilities - 2.0% 2,713,792
Net Assets - 100% $133,779,154
============
<CAPTION>
NUMBER MARKET MARKET
STANDARD & POOR'S MOODY'S OF ISSUES VALUE PERCENT
<S> <C> <C> <C> <C> <C>
SUMMARY OF AAA Aaa 18 $ 43,597,731 34%
RATINGS** AA+, AA, AA- Aa1, Aa, Aa2, Aa3 12 31,753,856 24%
PORTFOLIO OF A+ A1 9 15,095,899 12%
INVESTMENTS A, A- A, A2, A3 12 21,455,944 16%
(EXCLUDING BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 2 8,574,912 7%
TEMPORARY Non-rated Non-rated 3 8,887,020 7%
INVESTMENTS):
TOTAL 56 $129,365,362 100%
<PAGE>
<FN>
* 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.
N/R - Investment is not rated.
Con. Rating is conditional. Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings by projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
(p) Rating is provisional. A provisional rating assumes the successful
completion of the project being financed by the issuance of the bonds being
rated and indicates that payment of debt service requirements is largely or
entirely dependent upon the successful and timely completion of the project.
t The security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate disclosed
is that currently in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS
(Unaudited)
<CAPTION>
<S> <C>
ASSETS
Investments in municipal securities, at market value (note 1) $129,365,362
Temporary investments in short-term municipal securities,
at market value which equals cost (note 1) 1,700,000
Cash 398,460
Receivables:
Interest 3,069,485
Investments sold 15,289
Other assets 28,421
------------
Total assets 134,577,017
------------
LIABILITIES
Accrued expenses:
Management fees (note 6) 54,834
Other 75,311
Dividends payable 667,718
------------
Total liabilities 797,863
------------
Net assets (note 7) $133,779,154
============
Shares outstanding 12,365,146
============
Net asset value per share outstanding (net assets
divided by shares outstanding) $ 10.82
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
Six months ended November 30, 1994
(Unaudited)
<CAPTION>
<S> <C>
INVESTMENT INCOME
Interest income (note 1) $ 4,354,926
-----------
Expenses:
Management fees (note 6) 347,093
Shareholders' servicing agent fees and expenses 16,709
Custodian's fees and expenses 25,603
Trustees' fees and expenses (note 6) 1,037
Professional fees 9,558
Shareholders' reports--printing and mailing expenses 24,933
Stock exchange listing fees 12,755
Investor relations expense 3,348
Other expenses 11,754
-----------
Total expenses 452,790
-----------
Net investment income 3,902,136
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
FROM INVESTMENTS
Net realized gain from investment transactions (note 3) 266,445
Net change in unrealized appreciation or depreciation
of investments (6,984,644)
-----------
Net gain (loss) from investments (6,718,199)
-----------
Net increase (decrease) in net assets from operations $(2,816,063)
===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
<CAPTION>
6 months ended Year ended
11/30/94 5/31/94
<S> <C> <C>
OPERATIONS
Net investment income $ 3,902,136 $ 7,190,413
Net realized gain (loss) from investment transactions 266,445 (5,399)
Net change in unrealized appreciation or depreciation
of investments (6,984,644) (3,735,342)
------------ ------------
Net increase (decrease) in net assets from operations (2,816,063) 3,449,672
------------ ------------
Distributions to Shareholders (note 1)
From net investment income (4,006,308) (7,241,707)
From net realized gains from investment transactions -- (429,220)
------------ ------------
Decrease in net assets from distributions to shareholders (4,006,308) (7,670,927)
------------ ------------
CAPITAL SHARE TRANSACTIONS (note 2)
Net proceeds from shares issued in acquisition of
Nuveen Select Maturities Municipal Fund 2 (note 1) -- 52,468,819
Net proceeds from shares issued to shareholders due to
reinvestment of distributions from net investment income
and from net realized gains from investment transactions -- 755,235
------------ ------------
Net increase in net assets derived from capital
share transactions -- 53,224,054
------------ ------------
Net increase (decrease) in net assets (6,822,371) 49,002,799
Net assets at beginning of period 140,601,525 91,598,726
------------ ------------
Net assets at end of period $133,779,154 $140,601,525
============= =============
Undistributed net investment income at end of period $ 396,051 $ 500,223
============ =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL
STATEMENTS
(Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
At November 30, 1994, the Fund covered in this report and its
corresponding New York Stock Exchange symbol is Nuveen Select Maturities
Municipal Fund (NIM).
The Fund has invested 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, that in
the opinion if 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 between eight and twelve years.
The Fund is registered under the Investment Company Act of 1940 as a
closed-end, diversified management investment company.
On July 28, 1993, the Fund acquired all of the net assets of Nuveen
Select Maturities Municipal Fund 2 (NIR) pursuant to a plan of reorganization
approved by NIR shareholders on July 28, 1993. The acquisition was
accomplished by a tax-free exchange of 4,485,257 shares of the Fund (valued at
$52,468,819) for the 4,490,556 shares of NIR outstanding on July 28, 1993.
NIR's net assets at that date of $52,468,819 included $2,543,919 of unrealized
appreciation which was combined with that of the Fund. The combined net assets
of the Fund immediately after the acquisition was $143,967,923.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
Portfolio securities for which market quotations are readily available are
valued at the mean between the quoted bid and asked prices or the yield
equivalent. Portfolio securities for which market quotations are not readily
available are valued at fair value by consistent application of methods
determined in good faith by the Trustees. Temporary investments in securities
that have variable rate and demand features qualifying them as short-term
securities are traded and valued at principal amount.
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 be settled a month or more after the transaction date. 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 its purchase commitments. At
November 30, 1994, there were no such purchase commitments in the Fund.
<PAGE>
Interest Income
Interest income is determined on the basis of interest accrued and discount
earned, adjusted for amortization of premiums or discounts on long-term debt
securities when required for federal income tax purposes.
Federal Income Taxes
The Fund intends to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies by distributing all of its
income, including any net realized gains from investments, to 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.
Dividends and Distributions to Shareholders
Net investment income is declared as a dividend monthly and payment is made or
reinvestment is credited to shareholder accounts after month-end. Net realized
gains from investment transactions are distributed to shareholders not less
frequently than annually only to the extent they exceed available capital loss
carryovers.
Distributions to shareholders of net investment income and net realized
gains from investment transactions are recorded on the ex-dividend date. The
amount and timing of such distributions are determined in accordance with
federal income tax regulations, which may differ from generally accepted
accounting principles. Accordingly, temporary over-distributions as a result
of these differences may result and will be classified as either distributions
in excess of net investment income or distributions in excess of net realized
gains from investment transactions, if applicable.
<PAGE>
<TABLE>
2. FUND SHARES
Transactions in shares were as follows:
<CAPTION>
6 months ended Year ended
11/30/94 5/31/94
<S> <C> <C>
Shares issued in acquisition of NIR -- 4,485,257
Shares issued to shareholders due to reinvestment of
distributions from net investment income and from
net realized gains from investment transactions -- 58,154
-------- ---------
Net increase -- 4,543,411
======== ========
3. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments during the six months ended
November 30, 1994, were as follows:
<S> <C>
PURCHASES
Investments in municipal securities $26,017,769
Temporary municipal investments 4,500,000
SALES AND MATURITIES
Investments in municipal securities 24,986,103
Temporary municipal investments 5,800,000
===========
At November 30, 1994, the identified cost of investments owned for
federal income tax purposes was the same as the cost for financial reporting
purposes of the Fund.
At May 31, 1994, the Fund's last fiscal year end, the Fund had an unused
capital loss carryover of $5,399, available for federal income tax purposes to
be applied against future security gains, if any. If not applied the carryover
will expire in the year 2002.
</TABLE>
<PAGE>
4. Distributions to Shareholders
On December 1, 1994, the Fund declared a dividend distribution of $.0540
per share from its ordinary income and a capital gain distribution of $.0222
per share both of which were paid December 30, 1994, to shareholders of record
on December 15, 1994.
<TABLE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of
investments at November 30, 1994, were as follows:
<S> <C>
Gross unrealized:
Appreciation $ 59,991
Depreciation (5,124,635)
-----------
Net unrealized appreciation (depreciation) $(5,064,644)
===========
6. MANAGEMENT Fees and Other Transactions
with Affiliates
Under the Fund's investment management agreement with the Adviser, the
Fund pays to the Adviser an annual management fee, payable monthly, at the
rates set forth below, which are based upon the average daily net asset value
of the Fund:
<CAPTION>
Average daily net asset value Management fee
<S> <C>
For the first $125,000,000 .5 of 1%
For the next $125,000,000 .4875 of 1
For the next $250,000,000 .475 of 1
For the next $500,000,000 .4625 of 1
For the next $1,000,000,000 .45 of 1
For net assets over $2,000,000,000 .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 Trustees who are affiliated with the Adviser or
to their officers, all of whom receive remuneration for their services to the
Fund from the Adviser.
</TABLE>
<PAGE>
<TABLE>
7. Composition of Net Assets
At November 30, 1994, net assets consisted of:
<S> <C>
Shares, $.01 par value per share $ 123,651
Paid-in surplus 138,063,050
Undistributed net investment income 396,051
Accumulated net realized gain from
investment transactions 261,046
Net unrealized appreciation or depreciation of investments (5,064,644)
------------
Net assets $133,779,154
============
Authorized shares Unlimited
============
8. Investment Composition
The Fund invests in municipal securities which include general
obligation, escrowed and revenue bonds. At November 30, 1994, the revenue
sources by municipal purpose for these investments, expressed as a percent of
total investments, were as follows:
<S> <C>
Revenue Bonds:
Housing Facilities 14%
Transportation 13
Electric Utilities 12
Pollution Control Facilities 11
Health Care Facilities 10
Educational Facilities 7
Lease Rental Facilities 5
Other 5
General Obligation Bonds 20
Escrowed Bonds 3
-----
100%
=====
In addition, 28% of the long-term and intermediate-term investments owned
by the Fund are backed 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, either 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 Fund's
shares
All of the temporary investments in short-term municipal securities have
credit enhancements (letters of credit, guarantees or insurance) issued by
third party domestic or foreign banks or other institutions.
For additional information regarding each investment security, refer to
the Portfolio of Investments of the Fund.
</TABLE>
<PAGE>
<TABLE>
financial highlights
(Unaudited)
<CAPTION>
selected data for a share outstanding throughout each period is as follows:
Operating performance
Net
realized &
Net asset unrealized Dividends
value Net gain (loss) from net Distributions
beginning investment from investment from
of period income investments income capital gains
<S> <C> <C> <C> <C> <C>
6 Mos. ended
11/30/94 $11.370 $.316 $(.542) $(.324) $ --
Year ended
5/31/94 11.710 .616 (.275) (.646) (.035)
9/18/92 to
5/31/93 11.300 .392 .455 (.322) --
<CAPTION>
Total
Per share investment Total
Organization Net asset market return return
and value end value end on market on net asset
offering costs of period of period value** value**
<S> <C> <C> <C> <C> <C>
6 Mos. ended
11/30/94 $ -- $10.820 $10.000 (6.33)% (2.05)%
Year ended
5/31/94 -- 11.370 11.000 (1.90) 2.86
9/18/92 to
5/31/93 (.115) 11.710 11.875 1.74 6.54
<CAPTION>
Ratios/Supplemental data
Ratio of
net
Net assets Ratio of investment
end of expenses income Portfolio
period (in to average to average turnover
thousands) net assets net assets rate
<S> <C> <C> <C> <C>
6 Mos. ended
11/30/94 $133,779 .65*% 5.61*% 18%
Year ended
5/31/94 140,602 .72 5.26 11
9/18/92 to
5/31/93 91,599 .75* 5.11* 25
<FN>
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and changes
in stock price per share. Total Return on Net Asset Value is the combination
of reinvested dividend income, reinvested capital gains distributions, if any,
and changes in net asset value per share.
</TABLE>
<PAGE>
Photo of John Nuveen
The human bond
At John Nuveen & Co. Incorporated, where our tax-free municipal bonds have
helped people live their dreams for nearly 100 years, we still believe our
strongest bond is human.TM
For almost a century, John Nuveen & Company has concentrated its
resources and expertise in one area: municipal bonds. We are the oldest and
largest investment banking firm specializing exclusively in municipal
securities, and we strive to be the best.
Our approach to managing our shareholders' investments endures. We maintain
a sharp focus on the needs of prudent investors and their families, offer
investments of quality, and then work to make them better by seeking out
opportunity. We hold to a dedicated belief in the importance of research.
And we sustain a commitment to sound financial management through value
investing.
Our hope is that by providing quality investments we may foster opportunity
for our investors. Through careful research, attention to detail, and our
philosophy of managing for long-term value, we strive to provide our
shareholders with the attractive level of income they need to achieve their
personal goals and aspirations.
These are the things that matter most, and it's why we say that, at Nuveen,
our strongest bond is human.
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
ETF1-JAN 95
