Nuveen Exchange-Traded Funds
May 31, 1997
Annual Report
Dependable, tax-free income to help you keep more of what you earn.
NIM
Select Maturities
Photographic image of woman gardening, family sitting on porch.
<PAGE>
Build Your Wealth Automatically
Managing your portfolio takes skill, experience, and informed judgment, but our
efforts to help you build your wealth don't stop there. At Nuveen, we offer a
number of convenient ways to add to your tax-free portfolio and earn the
tax-free income you need to achieve your financial goals.
Nuveen exchange-traded funds dividend reinvestment plan Your Nuveen
exchange-traded fund allows you to conveniently reinvest dividends and/or
capital gains distributions in additional fund shares. If you do not elect to
reinvest distributions, all distributions are paid by check, or can be deposited
directly into your bank or brokerage account.
By choosing to reinvest, you'll be able to set aside money regularly and
automatically, and watch your investment grow through the power of tax-free
compounding. You'll also benefit from dollar-cost averaging, a technique of
investing at regular intervals, which allows you to build a high-quality,
tax-free portfolio conveniently and cost effectively over time. All
reinvestments are invested in full fractional shares and are kept in
non-certificated form by the Plan Agent, Chase Manhattan Bank.
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. Income or capital gains taxes may be payable on dividends or
distributions that are reinvested.
The shares you acquire by reinvesting will either be purchased on the open
market or be 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 be
invested within 30 days of the dividend payment date; no interest will be paid
on dividends and distributions awaiting reinvestment. Because the market price
of shares may increase
(continued on inside back cover)
<PAGE>
Contents
2 Dear Shareholder
4 Answering Your Questions
6 Select Maturities Overview
7 Independent Auditor's Report
8 Portfolio of Investments
14 Statement of Net Assets
15 Statement of Operations
16 Statement of Changes in Net Assets
17 Notes to Financial Statements
22 Financial Highlights
24 Fund Information
Screen of photo on cover (woman gardening, family sitting on porch)
<PAGE>
Dear Shareholder
Photographic image of Timothy R. Schwertfeger, CEO.
"In addition to solid returns, shareholders continue to enjoy very attractive
current yields generated by portfolios of quality bonds."
It's a pleasure to report to you on the performance of the Nuveen Select
Maturities Municipal Fund. For the fiscal year ended May 31, 1997, the value of
your investment rose 6.98% if you chose to reinvest your tax-free income
dividends.
Over this 12-month period, the total return performance for this fund outpaced
the 6.83% increase (with income reinvested) produced by the Lehman Brothers
7-year Municipal Bond Index, which represents the limited-term municipal bond
market on an unmanaged basis.
In addition to solid returns, shareholders in the fund continued to enjoy
very attractive current yields generated by a portfolio of quality bonds with
intermediate-term effective maturities that provide excellent income for
investors. As of May 31, 1997, shareholders were receiving an annual tax-free
yield on net asset value of 5.75%. To match this yield, investors in the 31%
federal income tax bracket would have had to earn at least 8.33% on taxable
alternatives of comparable quality.
These results were produced against a backdrop of continued economic
expansion and the lowest unemployment rates in almost two decades, a combination
that in the past has foreshadowed an increase in inflation. In March, the
Federal Reserve made a preemptive strike by raising short-term interest rates by
0.25%, but then maintained the status quo at its May and July meetings. Overall
market returns continue to be good, but fear of inflation has hampered the
performance of municipals and led to increased volatility in both the equity and
bond markets.
In the first six months of the year, the markets also focused on fiscal issues,
including the federal budget accord and discussion of plans to reduce taxes and
eliminate the deficit. The economy appeared to be moderating, corporate earnings
reports continued to exhibit strength, and interest rates fell in the second
quarter. All of this was positive news. The net effect is that the markets are
better off now than at beginning of year, but the volatility in getting there
has been significant.
<PAGE>
Currently, the need for diversification and a renewed emphasis on asset
allocation - as well as attractive yields - have sparked increased interest in
tax-free investments. The rapid rise in the stock market reminds investors to
re-allocate profits to other segments of the market in order to limit risk.
Nuveen exchange-traded funds provide an excellent alternative, and their current
yields make them very attractive in relation to the rest of the market.
Your fund's management continues to look for ways to keep your fund competitive.
Currently, shareholders of the Select Maturities fund are being asked to vote on
a proposal to redefine the average maturity of the portfolio and the securities
in the portfolio. The proposal will help fund management ensure the continued
competitiveness of the fund by allowing greater flexibility while still
retaining the essence of the fund's risk-averse approach.
Currently, the fund can purchase only municipal bonds having remaining effective
maturities of no more than 15 years, and the fund's investment adviser must
adjust the fund's portfolio to maintain an average effective maturity of between
eight and twelve years. During certain market environments, the municipal yield
curve provides opportunities beyond the stated maturity limit of 15 years which,
on a risk/reward basis, provide good investment opportunities consistent with
the fund's goal of moderating volatility.
The fund's management is recommending that the fund be allowed to invest up to
20% of its assets in bonds with longer effective maturities (while always
adhering to the 12-year maximum average effective maturity), and to allow the
fund's manager to purchase bonds that could bring the fund's average effective
maturity constraint to less than eight years.
On behalf of everyone at Nuveen, I thank you for your confidence in us and our
family of investments. We will continue to strive to provide you with
high-quality investments that withstand the test of time. We look forward to
reporting to you again in six months.
Sincerely,
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1997
<PAGE>
Answering Your Questions
Photographic image of Ted Neild, Portfolio Manager.
Ted Neild, head of Nuveen's Dayton-based portfolio management team, talks about
the municipal bond market and offers insights into factors that affected fund
performance over the past year.
What are the investment objectives of the fund?
The primary investment objective is to maintain a high level of current tax-free
income consistent with preservation of capital. Its secondary objective is to
enhance portfolio value through investments in tax-exempt municipal bonds that
are either underrated or undervalued, or that represent undervalued sectors of
the municipal market.
What is your strategy for meeting these objectives?
To meet the fund's objectives of income and enhanced value, our portfolio
management strategy relies on conservative value investing principles, sound
research and credit surveillance activities, and senior management involvement.
At Nuveen, value investing means taking a fundamental approach to finding bonds
that offer the best balance of return with low risk regardless of the direction
of interest rates. This approach focuses on the character istics of individual
bonds, such as the sector, geographic region, structure and intrinsic credit
quality. The idea behind this philosophy is that we, as investment managers, can
control the selection process, but not the direction of the market overall.
Our goal is to determine whether an issue is undervalued by the market,
that is, whether the bond's current market value, or price, is lower than its
long-term value, as evidenced by yield, maturity and credit quality. We also
assess whether the issue has the potential to reach that intrinsic value. For
example, we may find an opportunity to purchase bonds that offer extended call
protection at prices similar to those with shorter calls. If rates move down,
the bonds with longer call protection will appreciate in value more than those
with shorter calls. Value determinations require in-depth knowl edge and
understanding of the municipal market, the issuers, and the characteristics of
specific issues. Proper implementation of this strategy creates well-constructed
portfolio designed to provide shareholders with a dependable stream of tax-free
income.
What role does research play in helping you achieve the fund's objectives?
As an integral part of our portfolio management strategy, Nuveen Research
provides portfolio managers with objective appraisals of the creditworthiness of
new municipal issues, while maintaining surveillance of the credit performance
for all portfolio holdings. Creditworthiness is evaluated through our research
into factors such as the credit history of the issuer, capital structure, total
debt load, revenue sources and projections, call provisions, and local economic
forecasts. To track the credit performance of individual holdings, each Nuveen
Research analyst is responsible for a specific surveillance portfolio, which is
defined in terms of geography and sector (e.g., healthcare, housing).
Specialization by sector enables our Research team to focus their credit quality
evaluation efforts and complement the vantage point of each portfolio manager.
<PAGE>
What is the current outlook for the municipal market?
As we make our way through the seventh year of the current economic expansion,
some observers believe that a fundamental shift may have occurred in our
economy. Based on past experience and months of reports of economic growth,
especially employment statistics, the markets have long been anticipating an
increase in inflation. However, even with almost full employment, we have not
seen the expected rise in hourly wages that would be considered inflationary.
This change in the traditional economic cause-and-effect relationship has been
variously attributed to the globalization of the economy, to increased use of
technology and to corporations' recent ability to downsize as necessary.
Whatever the cause, inflation has not ignited. Although structural changes in
the economy appear to have suspended the relationship between faster growth and
higher inflation, the risk remains that inflation may reassert itself if
capacity constraints are reached and resources are stretched too thin.
Speculation of Fed tightening may continue. If the Fed does act to increase
rates, it will be perceived as a pre-emptive move against inflation. If the Fed
does not tighten, it will be seen as an indication that the economy is moving at
a moderate, non-inflationary pace.
Nonetheless, for the remainder of 1997, the municipal market will continue to
offer the attractive yields and tax advantages that make it a good alternative
if and when a correction in the stock market occurs. While money continues to
flow into equity mutual funds, investors are also beginning to evaluate the
effect of the huge run-up in stock prices on their asset allocation, and many
are rebalancing their portfolios by shifting some assets into bonds.
<PAGE>
Select Maturities
NIM
Fund Highlights
- --------------------------------------------------------
Inception Date 9/92
- --------------------------------------------------------
Share Price 10 3/4
- --------------------------------------------------------
Net Asset Value $11.70
- --------------------------------------------------------
Current Yield 5.75%
- --------------------------------------------------------
Taxable Equivalent Yield (31% Tax Bracket) 8.33%
- --------------------------------------------------------
Annualized Total Return at NAV
- --------------------------------------------------------
1-Year 6.98%
- --------------------------------------------------------
3-Year 7.05%
- --------------------------------------------------------
Inception 6.50%
- --------------------------------------------------------
Taxable Equivalent Total Return(1)
- --------------------------------------------------------
1-Year 9.55%
- --------------------------------------------------------
3-Year 9.63%
- --------------------------------------------------------
Inception 8.98%
- --------------------------------------------------------
1 Taxable equivalent total return is based on the annualized total return
figures above and a federal income tax rate of 31%. It represents the return
on a taxable investment necessary to equal the after-tax return of the Nuveen
fund.
Pie Chart:
Credit Quality
BBB/NR 15%
A 17%
AA 22%
AAA 46%
Pie Chart:
Diversification
Escrowed Bonds 6%
General Obligations 13%
Transportation 7%
Housing Facilities 15%
Utilities 16%
Lease Rental 4%
Other 8%
Pollution Control 13%
Educational Facilities 5%
Health Care Facilities 13%
Bar Chart for Dividend History
Capital Gain
June 1996 .054
July 1996 .054
August 1996 .054
September 1996 .054
October 1996 .054
November 1996 .054
December 1996 .054 .0352
January 1997 .054
February 1997 .054
March 1997 .054
April 1997 .054
May 1997 .0515
<PAGE>
Independent Auditor's Report
The Boards of Trustees and Shareholders
Nuveen Select Maturities Municipal Fund
We have audited the accompanying statement of net assets, including the
portfolio of investments, of Nuveen Select Maturities Municipal Fund as of May
31, 1997, and the related statements of operations, changes in net assets and
the financial highlights for the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, 1997, by correspondence with the custodian. 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, 1997, and the results of its
operations, changes in its net assets and financial highlights for the periods
indicated therein in conformity with generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
July 14, 1997
<PAGE>
Portfolio of Investments
Nuveen Select Maturities Municipal Fund
<TABLE>
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C>
ARIZONA - 1.8%
$ 2,470,000 Arizona Educational Loan Marketing Corporation, 9/02 at 101 Aa $ 2,598,119
Educational Loan Revenue Bonds, 6.375%, 9/01/05
(Alternative Minimum Tax)
ARKANSAS - 0.8%
1,070,000 Arkansas Student Loan Authority, Student Loan 6/01 at 102 A 1,134,896
Revenue Bonds, Series 1992A-2 (Subordinate),
6.750%, 6/01/06 (Alternative Minimum Tax)
COLORADO - 6.2%
5,500,000 City and County of Denver, Colorado, Airport System 11/01 at 102 Baa 6,430,930
Revenue Bonds, Series 1991A, 8.750%, 11/15/23
(Alternative Minimum Tax)
1,318,148 El Paso County, Colorado, Single Family Mortgage No Opt. Call Aaa 1,425,234
Revenue Tax-Exempt Refunding Bonds, Series
1992A Class A-2, 8.750%, 6/01/11
1,000,000 Summit County, Colorado, Sports Facilities No Opt. Call A- 1,171,800
Refunding Revenue Bonds (Keystone Resorts
Management, Inc. Project), Series 1990,
7.750%, 9/01/06
DISTRICT OF COLUMBIA - 4.7%
1,000,000 District of Columbia (Washington, D.C.), General No Opt. Call Aaa 1,053,390
Obligation Refunding Bonds, Series 1994A,
6.000%, 6/01/11
5,400,000 District of Columbia (Washington, D.C.), General No Opt. Call Aaa 5,733,612
Obligation Refunding Bonds, Series 1993A,
6.000%, 6/01/07
FLORIDA - 4.2%
2,000,000 State of Florida, Faith and Credit, State Board of No Opt. Call Aaa 2,050,760
Education, Public Education Capital Outlay Bonds,
Series 1986-C, 7.100%, 6/01/07
3,500,000 Hillsborough County Industrial Development 5/02 at 103 AA 4,060,980
Authority, Pollution Control Revenue Refunding
Bonds (Tampa Electric Company Project) Series
1992, 8.000%, 5/01/22
GEORGIA - 8.8%
2,540,000 Municipal Electric Authority of Georgia, General No Opt. Call Aaa 2,996,489
Power Revenue Bonds, 1992B Series,
7.500%, 1/01/07
1,800,000 State of Georgia, General Obligation Bonds, Series No Opt. Call Aaa 2,070,072
1994-D, 6.700%, 8/01/09
890,000 Urban Residential Finance Authority, of The City No Opt. Call N/R 924,372
of Atlanta, Revenue Bonds (Landrum Arms Project),
Series 1994, 6.750%, 7/01/04
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C>
GEORGIA (CONTINUED)
$ 5,755,000 Development Authority of Burke County, Georgia, 1/03 at 103 Aaa $ 6,800,453
Pollution Control Revenue Bonds (Oglethorpe Power
Corporation Vogtle Project), Series 1992,
8.000%, 1/01/15
ILLINOIS - 9.5%
4,300,000 Illinois Development Finance Authority, Child Care 9/02 at 102 N/R 4,521,880
Facility Revenue Bonds, Series 1992 (Illinois
Facilities Fund Project), 7.400%, 9/01/04
2,465,000 Illinois Housing Development Authority, Section 8 11/02 at 102 A 2,586,056
Elderly Housing Revenue Bonds (Skyline Towers
Apartments), Series 1992B, 6.625%, 11/01/07
1,000,000 Chicago School Reform Board of Trustee of the Board No Opt. Call Aaa 1,095,830
of Education of the City of Chicago, Illinois,
Unlimited Tax General Obligation Bonds,
Series 1996, 6.250%, 12/01/11
1,300,000 General Obligation Lease Certificates, 1992 Series A No Opt. Call Aaa 1,411,787
(Board of Education of the City of Chicago),
Illinois, 6.125%, 1/01/07
2,675,000 Chicago Metropolitan Housing Development Corporation 7/03 at 100 Aaa 2,677,568
(Chicago, Illinois), Housing Development Revenue
Refunding Bonds (FHA-Insured Mortgage Loan-
Section 8 Assisted Project), Series 1993B,
5.700%, 1/01/13
635,000 City of Danville, Vermilion County, Illinois, 11/03 at 102 A1 668,338
Single Family Mortgage Revenue Refunding
Bonds, Series 1993, 7.300%, 11/01/10
735,000 City of Rock Island, Illinois, Residential Mortgage 9/02 at 102 Aa 783,539
Revenue Refunding Bonds, Series 1992,
7.700%, 9/01/08
INDIANA - 3.8%
1,000,000 The Indianapolis Local Public Improvement Bond Bank, No Opt. Call A+ 1,112,160
Series 1992 D Bonds, 6.600%, 2/01/07
2,100,000 The Indianapolis Local Public Improvement Bond Bank, 7/03 at 102 Aa 2,199,057
Transportation Revenue Bonds, Series 1992,
6.000%, 7/01/10
2,000,000 Hospital Authority of Elkhart County, Indiana, 7/02 at 102 A1 2,186,480
Hospital Revenue Bonds, Series 1992 (Elkhart
General Hospital, Inc.), 7.000%, 7/01/08
LOUISIANA - 1.5%
2,000,000 Louisiana Public Facilities Authority, Student Loan 9/02 at 102 Aaa 2,113,980
Revenue Bonds, 6.750%, 9/01/06 (Alternative
Minimum Tax)
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C>
MAINE - 0.9%
$ 1,190,000 Maine Educational Loan Marketing Corporation, 5/02 at 101 A $ 1,246,156
Student Loan Revenue Refunding Bonds, Series 1992,
Student Loan Revenue Refunding Bonds, Subordinate
Series 1992A-2, 6.600%, 5/01/05 (Alternative
Minimum Tax)
MARYLAND - 1.4%
2,000,000 Anne Arundel County, Maryland, Multifamily Housing No Opt. Call BBB+ 2,098,380
Revenue Bonds, (Woodside Apartments Project),
Series 1994, 7.450%, 12/01/24 (Alternative Minimum
Tax) (Mandatory put 12/01/03)
MASSACHUSETTS - 1.2%
1,760,000 Massachusetts Municipal Wholesale Electric Company, No Opt. Call Aaa 1,716,352
Power Supply System Revenue Bonds, 1994 Series B,
4.700%, 7/01/06
MICHIGAN - 4.5%
6,000,000 Greater Detroit Resource Recovery Authority, No Opt. Call Aaa 6,577,440
Michigan, Resource Revenue Refunding Bonds,
Series 1996-A, 6.250%, 12/13/07
NEBRASKA - 4.1%
Nebraska Public Gas Agency, Gas Supply System
Revenue Bonds, 1995 Series A:
1,000,000 5.250%, 4/01/02 No Opt. Call Baa1 1,003,740
1,250,000 5.300%, 4/01/03 No Opt. Call Baa1 1,251,150
1,000,000 5.400%, 4/01/04 No Opt. Call Baa1 1,002,190
2,400,000 Airport Authority of the City of Omaha (Nebraska), 1/02 at 102 A1 2,743,560
Airport Facilities Revenue Refunding Bonds,
Series 1991, 8.375%, 1/01/14
NEW YORK - 8.9%
2,000,000 New York State Medical Care, Facilities Finance 2/06 at 102 AA+ 2,056,000
Agency, FHA-Insured Mortgage Project Revenue
Bonds, 1995 Series C, 6.100%, 8/15/15
4,000,000 New York City Housing Development Corporation, 5/03 at 102 Aa 3,999,800
Multi-Family Housing Revenue Bonds, 1993
Series A, 5.700%, 11/01/13
4,000,000 New York City Industrial Development Agency, Amended 11/04 at 102 Aaa 4,124,920
and Restated Industrial Development Revenue Bonds
(1991 Japan Airlines Company, Ltd. Project),
6.000%, 11/01/15 (Alternative Minimum Tax)
2,130,000 City of Niagara Falls, Niagara County, New York, No Opt. Call Aaa 2,701,671
Water Treatment Plant (Serial), Bonds, 1994,
8.500%, 11/01/07 (Alternative Minimum Tax)
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C>
OHIO 7.1%
$ 2,350,000 Ohio Water Development Authority, Revenue Bonds, 3/02 at 102 N/R $ 2,520,234
USA Waste Services, Series 1992, 7.750%, 9/01/07
(Alternative Minimum Tax)
2,000,000 Akron, Bath and Copley Joint Township Hospital 11/02 at 102 A3 2,064,180
District, Ohio, Hospital Facilities Revenue
Bonds, Series 1992 (Summa Health System Project),
6.250%, 11/15/07
4,500,000 County of Hamilton, Ohio, Hospital Facilities No Opt. Call A1 4,717,260
Revenue, Refunding Bonds, Series 1992A
(Bethesda Hospital, Inc.), 6.250%, 1/01/06
1,000,000 City of Oxford, Ohio, Water Supply System Mortgage 12/02 at 102 Aaa 1,035,680
Revenue, Series 1992 Refunding Bonds,
6.000%, 12/01/14
PENNSYLVANIA - 1.5%
1,890,000 Pennsylvania Higher Educational Facilities Authority, No Opt. Call Aaa 2,211,451
College and University Revenue Bonds, 9th Series,
7.625%, 7/01/15
RHODE ISLAND - 2.2%
3,000,000 Rhode Island Housing and Mortgage, Finance 4/02 at 102 AA+ 3,063,060
Corporation, Homeownership Opportunity Bonds,
Series 7, 6.500%, 4/01/25 (Alternative Minimum Tax)
SOUTH CAROLINA - 0.8%
1,000,000 Piedmont Municipal Power Agency (South Carolina), No Opt. Call Aaa 1,071,440
Electric Revenue Bonds, 1996B Refunding Series,
6.000%, 1/01/07
TEXAS - 8.1%
1,800,000 City of Austin, Texas, Water, Sewer and Electric No Opt. Call A 2,276,046
Refunding Revenue Bonds, Series 1982,
14.000%, 11/15/01
610,000 Austin-Travis County MHMR Center Revenue Bonds 3/05 at 102 Aaa 655,421
(Mental Health and Mental Retardation Center
Facilities Acquisition Program), Series 1995-A,
6.500%, 3/01/15
1,120,000 City of Galveston Property Finance Authority, Inc., 9/01 at 103 A 1,211,011
Single Family Mortgage Revenue Bonds,
Series 1991A, 8.500%, 9/01/11
1,150,000 Texas Community MHMR Centers Revenue Bonds 3/05 at 102 Aaa 1,234,870
(Mental Health and Mental Retardation Center
Facilities Acquisition Program), Series 1995 A-E,
6.500%, 3/01/15
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C>
TEXAS (CONTINUED)
$ 3,135,000 Ratama Development Corporation, Special Facilities No Opt. Call Aaa $ 4,196,919
Revenue Bonds (Retama Park Racetrack Project),
Series 1993, 8.750%, 12/15/11
1,200,000 Travis County Health Facilities Development 11/03 at 102 Aa 1,257,960
Corporation,Hospital Revenue Bonds (Daughters
of Charity National Health System - Daughters
of Charity Health Services of Austin), Series 1993B,
5.900%, 11/15/07
830,000 Tri-County MHMR Services Revenue Bonds (Mental 3/05 at 102 Aaa 891,254
Health and Mental Retardation Center Facilities
Acquisition Program), Series 1995-E, 6.500%, 3/01/15
VIRGINIA - 1.5%
2,000,000 Hampton Redevelopment and Housing Authority 7/02 at 104 Baa2 2,147,300
Multifamily Housing Revenue Refunding Bonds,
Series 1994 (Chase Hampton II Apartments),
7.000%, 7/01/24 (Mandatory put 7/01/04)
WASHINGTON - 10.7%
Washington Health Care Facilities Authority, Revenue
Bonds, Series 1996 (Yakima Valley Memorial Hospital
Association, Yakima):
1,880,000 6.000%, 12/01/09 No Opt. Call AAA 1,995,657
1,500,000 6.000%, 12/01/10 No Opt. Call AAA 1,582,545
Washington Public Power Supply System, Nuclear
Project No. 1 Refunding Revenue Bonds, Series 1993A:
2,500,000 7.000%, 7/01/07 No Opt. Call Aa1 2,822,325
3,000,000 7.000%, 7/01/08 No Opt. Call Aa1 3,417,840
7,000,000 Washington Public Power Supply System, Nuclear No Opt. Call Aa1 4,298,350
Project No. 3 Refunding Revenue Bonds,
Series 1990B, 0.000%, 7/01/06
1,255,000 Public Utility District No. 1, of Douglas County, 9/00 at 102 A+ 1,364,347
Washington, Wells Hydroelectric Revenue Bonds,
Series of 1990, 7.700%, 9/01/08 (Alternative
Minimum Tax)
PUERTO RICO - 3.6%
5,000,000 Commonwealth of Puerto Rico, Public Improvement No Opt. Call Aaa 5,226,950
Bonds of 1997 (General Obligation Bonds),
5.500%, 7/01/05
- ----------------------------------------------------------------------------------------------------------
$132,903,148 Total Investments - (cost $135,214,287) - 97.8% 141,591,241
============ ------------
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
Temporary Investments in Short-Term
Municipal Securities - 0.8%
$ 1,000,000 Harris County Industrial Development Corporation A-1+ $ 1,000,000
Pollution Control (Exxon Project), Variable Rate
Demand Bonds, 4.000%, 3/01/24+
200,000 Washington Health Care Facilities Authority, Variable VMIG-1 200,000
Rate Demand Revenue Bonds (Sisters of Providence),
Series 1985E, 4.000%, 10/01/05+
- ----------------------------------------------------------------------------------------------------------
$ 1,200,000 Total Temporary Investments - 0.8% 1,200,000
- ----------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.4% 1,983,428
------------
Net Assets - 100% $144,774,669
===========================================================================================
<FN>
* 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.
N/R - Investment is not rated.
+ 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.
</FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Net Assets
May 31, 1997
<CAPTION>
<S> <C>
Assets
Investments in municipal securities,
at market value (note 1) $141,591,241
Temporary investments in short-term municipal
securities, at amortized cost, which approximates
market value (note 1) 1,200,000
Cash 71,397
Receivables:
Interest 2,526,768
Investments sold 130,193
Other assets 15,800
- -------------------------------------------------------------------
Total assets 145,535,399
- -------------------------------------------------------------------
Liabilities
Accrued expenses:
Management fees (note 6) 61,029
Other 62,613
Dividends payable 637,088
- -------------------------------------------------------------------
Total liabilities 760,730
- -------------------------------------------------------------------
Net assets (note 7) $144,774,669
===================================================================
Shares outstanding 12,370,635
===================================================================
Net asset value per share outstanding
(net assets divided by shares outstanding) $ 11.70
===================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Operations
Year Ended May 31, 1997
<CAPTION>
<S> <C>
Investment Income
Tax-exempt interest income (note 1) $ 8,643,380
- -------------------------------------------------------------------
Expenses:
Management fees (note 6) 719,372
Shareholders' servicing agent fees and expenses 23,535
Custodian's fees and expenses 41,501
Trustees' fees and expenses (note 6) 1,889
Professional fees 16,644
Shareholders' reports - printing and mailing expenses 70,431
Stock exchange listing fees 30,369
Investor relations expense 11,288
Other expenses 8,054
- -------------------------------------------------------------------
Total expenses 923,083
- -------------------------------------------------------------------
Net investment income 7,720,297
- -------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions
(notes 1 and 4) 259,465
Net change in unrealized appreciation or depreciation
of investments 1,851,855
- -------------------------------------------------------------------
Net gain from investments 2,111,320
- -------------------------------------------------------------------
Net increase in net assets from operations $ 9,831,617
===================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
Year ended Year ended
5/31/97 5/31/96
<S> <C> <C>
Operations
Net investment income $ 7,720,297 $ 7,938,793
Net realized gain from investment transactions
(notes 1 and 4) 259,465 922,639
Net change in unrealized appreciation or depreciation
of investments 1,851,855 (2,000,905)
- --------------------------------------------------------------------------------------------
Net increase in net assets from operations 9,831,617 6,860,527
- --------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income (8,022,356) (8,031,140)
From accumulated net realized gains from investment
transactions (398,327) (517,776)
- --------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (8,420,683) (8,548,916)
- --------------------------------------------------------------------------------------------
Capital Share Transactions (note 2)
Net proceeds from shares issued to shareholders
due to reinvestment of distributions -- 65,320
- --------------------------------------------------------------------------------------------
Net increase in net assets from capital share transactions -- 65,320
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 1,410,934 (1,623,069)
Net assets at beginning of year 143,363,735 144,986,804
- --------------------------------------------------------------------------------------------
Net assets at end of year $144,774,669 $143,363,735
============================================================================================
Balance of undistributed net investment income at end of year $ 46,181 $ 348,240
============================================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
At May 31, 1997, 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.
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
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. The securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of its when-issued and delayed delivery purchase commitments. At May
31, 1997, there were no such purchase commitments in the Fund.
Interest 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
as required for federal income tax purposes.
<PAGE>
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
tax-exempt net investment income, in addition to any significant amounts of net
realized capital gains and/or market discount from investment transactions. The
Fund currently considers significant net realized capital gains and/or market
discount as amounts in excess of $.001 per share. 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 income dividends paid
during the fiscal year ended May 31, 1997, have been designated Exempt Interest
Dividends. Net realized capital gain and market discount distributions are
subject to federal taxation.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryovers.
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 generally accepted accounting
principles. 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, 1997.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
2. Fund Shares
There were no share transactions during the fiscal year ended May 31, 1997. The
Fund issued 5,489 shares due to reinvestment of distributions during the fiscal
year ended May 31, 1996.
<PAGE>
3. Distributions to Shareholders
On June 2, 1997, the Fund declared a dividend distribution of $.0515 per share
from its tax-exempt net investment income which was paid July 1, 1997, to
shareholders of record on June 15, 1997.
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments during the fiscal year ended May
31, 1997, were as follows:
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------
Purchases:
Investments in municipal securities $23,755,385
Temporary municipal investments 7,500,000
Sales:
Investments in municipal securities 23,646,472
Temporary municipal investments 8,000,000
==============================================================================
</TABLE>
At May 31, 1997, the identified cost of investments owned for federal income tax
purposes may differ from the cost used for financial reporting purposes.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 1997, were as follows:
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------
Gross unrealized:
appreciation $6,497,041
depreciation (120,087)
- ------------------------------------------------------------------------------
Net unrealized appreciation $6,376,954
==============================================================================
</TABLE>
6. Management Fees and Other Transactions with Affiliates
Under the Fund's investment management agreement with Nuveen Advisory Corp. (the
"Adviser"), a wholly owned subsidiary of The John Nuveen Company, the Fund pays
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 as follows:
<TABLE>
<CAPTION>
Average daily net asset value Management fee
- ------------------------------------------------------------------------------
<S> <C>
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
- -----------------------------------------------------------------------------
</TABLE>
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.
<PAGE>
7. Composition of Net Assets
At May 31, 1997, the Fund had an unlimited number of $.01 per value shares
authorized. Net assets consisted of:
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Common shares, $.01 par value per share $ 123,706
Paid-in surplus 138,037,220
Balance of undistributed net investment income 46,181
Accumulated net realized gain from
investment transactions 190,608
Net unrealized appreciation of investments 6,376,954
- ------------------------------------------------------------------------------
Net assets $144,774,669
==============================================================================
</TABLE>
<PAGE>
8. Investment Composition
The Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At May 31, 1997, the revenue sources by municipal
purpose for these investments, expressed as a percent of total investments, were
as follows:
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------
Revenue Bonds:
Electric Utilities 16%
Housing Facilities 15
Health Care Facilities 13
Pollution Control Facilities 13
Transportation 7
Educational Facilities 5
Lease Rental Facilities 4
Water/Sewer Facilities 1
Other 7
General Obligation Bonds 13
Escrowed Bonds 6
- -----------------------------------------------------------------------------
100%
=============================================================================
</TABLE>
In addition, 42% of the long-term and 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.
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.
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Operating performance
Net asset Net realized Dividends
value Net and unrealized from tax-exempt Distributions
beginning investment gain (loss) net investment from
of period income from investments income capital gains
<S> <C> <C> <C> <C> <C>
Year ended 5/31:
1997 $11.590 $.621 $ .170 $(.646) $(.035)
1996 11.730 .641 (.090) (.648) (.043)
1995 11.370 .643 .387 (.648) (.022)
1994 11.710 .616 (.275) (.646) (.035)
9/18/92 to 5/31/93 11.300 .392 .455 (.322) --
<PAGE>
<CAPTION>
Net asset Per share Total investment Total
Organization and value end market value return on return on
offering costs of period end of period market value** net asset value*
<S> <C> <C> <C> <C> <C>
Year ended 5/31:
1997 $ -- $11.700 $10.750 2.68% 6.98%
1996 -- 11.590 11.125 6.14 4.76
1995 -- 11.730 11.125 7.67 9.51
1994 -- 11.370 11.000 (1.90) 2.86
9/18/92 to 5/31/93 (.115) 11.710 11.875 1.74 6.54
<PAGE>
<CAPTION>
Ratios/Supplemental data
Ratio of net
Ratio of investment
Net assets expenses to income to Portfolio
end of period average average turnover
(in thousands) net assets net assets rate
<S> <C> <C> <C> <C>
Year ended 5/31:
1997 $144,775 .64% 5.35% 17%
1996 143,364 .63 5.45 25
1995 144,987 .65 5.64 38
1994 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.
</FN>
</TABLE>
<PAGE>
Fund Information
Board of Directors
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004
Legal Counsel
Fried, Frank, Harris
Shriver & Jacobson
Washington, D.C.
Public Accountants
Ernst & Young LLP
Chicago, IL
<PAGE>
"At Nuveen, we make reinvesting easy. A phone call is all it takes to set
up your reinvestment account."
(continued from inside front cover)
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.
You may, of course, 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 also reinvest if your shares are registered in the name of a brokerage
firm, bank, or other nominee. Just ask your investment adviser if the firm will
participate on your behalf. If not, it's easy to have the shares registered in
your name and to apply for a reinvestment account directly. 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 adviser or call us
toll-free at (800) 257-8787.
<PAGE>
Serving Investors for Generations
Photographic image of John Nuveen, Sr.
Since our founding in 1898, John Nuveen &Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for mature investors whose portfolios are the principal
source of their ongoing financial security. More than 1.3 million investors have
trusted Nuveen to help them maintain the lifestyle they currently enjoy.
A value investing approach - purchasing securities of strong companies and
communities that represent good long-term value - is the cornerstone of Nuveen's
investment philosophy. It is a careful, long-term strategy that offers the
potential for attractive returns with moderated risk. Successful value investing
begins with in-depth research and a discerning eye for marketplace opportunity.
Nuveen's team of investment professionals is backed by the discipline, resources
and expertise of almost a century of investment experience, including one of the
most recognized research departments in the industry.
To meet the unique circumstances and financial planning needs of mature
investors, Nuveen offers a wide array of equity and fixed-income mutual funds,
unit trusts, exchange-traded funds, individual managed account services, and
cash management products, including many that generate tax-free income.
To find out more about how Nuveen investment products and services can help
you preserve your financial security, talk with your financial adviser, or call
us at (800) 621-7227 for more information, including a prospectus where
applicable. Please read that information carefully before you invest.
Nuveen
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
FAN-1 5-97
