NUVEEN Exchange-Traded Funds
May 31, 1999
Annual Report
Dependable, tax-free income to help you keep more of what you earn.
NIM
Select Maturities
Photo of: Couple Canoeing
<PAGE>
Highlights
As of May 31, 1999
Contents
1 Dear Shareholder
3 Portfolio Manager's Comments
5 Performance Overview
6 Shareholder Meeting Report
7 Report of Independent Auditors
8 Portfolio of Investments
12 Statement of Net Assets
13 Statement of Operations
14 Statement of Changes in Net Assets
15 Notes to Financial Statements
18 Financial Highlights
20 Build Your Wealth Automatically
21 Fund Information
Credit Quality Performance Highlights
Nuveen Select Maturities Municipal Fund (NIM)
o HHHH Four-star Morningstar Rating TM *
o Outperformed the one-year total return of its
Lipper Peer Group and paralleled the one-year
performance of the Lehman Brothers 7-Year
Municipal Bond Index**
o Increased its dividend in February 1999
Pie Chart:
AAA/U.S. Guaranteed 38%
AA 20%
A 15%
BBB/NR 27%
* Morningstar proprietary ratings reflect historical risk-adjusted performance
as of May 31, 1999. The ratings are subject to change every month. Past
performance is no guarantee of future results. Morningstar ratings are
calculated from the fund's three-, five-, and 10-year average annual returns
(if applicable) in excess of 90-day Treasury bill returns with appropriate fee
adjustments, and a risk factor that reflects fund performance below 90-day
T-bill returns. NIM received 4 stars for the three and five-year periods,
respectively. The top 10% of the funds in a broad asset class receive 5 stars
and the next 22.5% receive 4 stars. The funds were rated among 194 funds for
the three-year period, 192 funds for the five-year period, and 27 funds for
the 10-year period.
**The Lipper Peer Group return represents the average annualized returns of the
funds in the appropriate Lipper Municipal Debt category. The return assumes
reinvestment of dividends and does not reflect any applicable sales charge.
The Lehman Brothers Municipal Bond Index is an unleveraged index covering a
broad range of investment grade municipal bonds. The return for the index does
not reflect any initial or ongoing expenses.
<PAGE>
Photo of: Timothy R. Schwertfeger
Chairman of the Board
Sidebar text: Wealth takes a lifetime to build. Once achieved, it should be
preserved.
Dear Shareholder
It's a pleasure to report to you on the performance of your Nuveen
Exchange-Traded Fund. This type of fund - with its exceptional history of stable
tax-free income and its competitive market yield - offers investors an ideal way
to achieve balance in their overall investment portfolio while fulfilling its
primary objective of providing stable tax-free income.
Over the period covered by this report, we have seen some shifts in U.S.
economic trends and the fixed-income market environment in which your Nuveen
fund operates. I appreciate the opportunity to discuss these changes with you.
A Challenging Investment Environment
Over the past 12 months, the U.S. economy has continued to be characterized by
robust growth, generally low interest rates, and unemployment levels that remain
among the lowest in three decades. However, concerns about the continued
persistent pace of the economy's expansion have tested the new paradigm that
says improvements in productivity enable us to have both economic growth and low
inflation at the same time. With investors and the various markets watching -
and reacting to - every announcement concerning economic statistics, volatility
has increased, especially in the equity markets.
While most current indicators continue pointing to a relatively strong economy,
we have entered a different environment from what we saw 12 months ago. It is a
more uncertain environment, where confidence in a continued positive economic
outlook is less assured. This shift has occurred primarily in response to two
factors: First, the Asian financial crisis of 1998 did not produce the slowdown
that was widely expected to keep economic growth from becoming too robust.
Second, evidence of accelerating prices, most obvious in the sudden spike in
April's Consumer Price Index, contributed to the reemergence of the specter of
inflation, accompanied by the likelihood of higher interest rates. In fact, the
Fed raised interest rates by 0.25% on June 30, 1999 to combat the threat of
inflation. This adjustment to the federal funds rate, which is the rate that
banks charge each other on overnight loans, is a stark contrast to the three
reductions to interest rates made last fall. The fed funds rate now stands at
5%, as of this report.
Municipal Bond Performance
Over the past year, our exchange-traded municipal bond funds continued to offer
attractive, stable income in a market that places a high premium on yield. At
the end of May 1999, the ratio between long-term municipal yields and 30-year
Treasury yields stood at 93%, compared with the historical average of 86%
between 1986-1999. For investors, this meant that quality long-term municipal
bonds offered yields comparable to those of long Treasury bonds - even before
the tax advantages of municipal bonds were taken into account. On an after-tax
basis, municipal bonds continued to present an exceptionally attractive
investment option relative to Treasuries.
In the coming months, we expect to see a healthy supply of new municipal bonds,
although total volume is expected to drop from the near-record levels of 1998.
This is due to the dramatic decrease in the refunding of existing bonds in the
wake of higher interest rates. To date, municipal supply has declined by
approximately 25% from the levels of a year ago. This, in turn, has enhanced the
attractiveness of the municipal bonds that are brought to market, as demand -
especially from individual investors - remains strong. We anticipate that this
demand will continue to strengthen as investors increasingly look at rebalancing
their portfolios. With the outlook for tighter supply and continued demand in
the months ahead, Nuveen's established market position as the leading sponsor of
exchange-traded municipal bond funds ensures that we will have exceptional
access to the bond offerings that have the potential to add value for our
shareholders.
A Balancing Act
Volatility and uncertain markets highlight the importance of maintaining balance
in your investment portfolio. With a properly balanced portfolio of equities,
bonds, and cash, your assets will be better positioned to weather the markets'
ups and downs. A balanced portfolio can also help you increase your
opportunities for capital growth while reducing risk. Your Nuveen
Exchange-Traded Fund, with its holdings of quality tax-free municipal bonds,
makes an excellent counterpart to your equity holdings and provides diversity in
your quest to achieving a balanced portfolio.
Like most investors in the marketplace today, your goal is to capture the
highest returns possible while minimizing risk. According to Nuveen research,
balanced portfolios that combine equities with municipal bonds are the most
successful in achieving that goal, providing both superior after-tax total
returns and lower levels of risk. Over the past 20 years, portfolios containing
both equities and municipal bonds produced better results with lower volatility
than similar blends of equities with either Treasury or corporate bonds.
Incorporating even a 20% allocation of municipal bonds into an all-equity
portfolio cuts risk substantially, with only a small reduction in return.
Purchasing shares of Nuveen's Exchange-Traded Funds provides an easy way to
incorporate the benefits of municipal bonds into a balanced portfolio.
Nuveen Funds: An Answer to Your Investment Needs
In light of the recent shifts in the economic environment, you may want to
discuss your current asset allocation with your financial adviser to determine
if adjustments are needed in your portfolio. As part of this process, your
financial adviser can set up a reinvestment plan designed to purchase additional
shares of your Nuveen Exchange-Traded Fund. Additionally, your financial adviser
can also help you invest in Nuveen Defined Portfolios to give you the proper
equity exposure needed to potentially enhance your opportunities for success. A
Nuveen Defined Portfolio is a fixed portfolio of securities designed to
accomplish a specific investment objective. Unlike a mutual fund which is
actively managed, the stocks or bonds in a defined portfolio do not change over
the life of the investment.
Nuveen's Defined Portfolios provide the benefits of an individual equity
security enhanced by diversification and professional selection. These
specialized equity portfolios concentrate on specific sectors of the market and
invest in stocks we consider to have the best potential for capital appreciation
within each sector. Whether the objective for your equity investment is growth,
aggressive growth, or growth and income, you'll find a Nuveen Defined Portfolio
designed to meet your needs. Our defined portfolios provide an excellent
complement to your Nuveen Exchange-Traded Fund in structuring a balanced
portfolio designed to build and sustain long-term financial security. For more
information on any of the Nuveen funds, contact your adviser for a prospectus,
or call Nuveen at (800) 621-7227. Please read the prospectus carefully before
you invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test of
time. As we look ahead to a new millennium, we are committed to maintaining that
reputation and finding the best ways to serve your evolving investment needs.
Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 15, 1999
sidebar text: "Volatility and uncertain markets highlight the importance of
maintaining a balance in your investment portfolio."
<PAGE>
Nuveen Select Maturities Municipal Fund (NIM)
Portfolio Manager's Comments
Ted Neild, managing director of Nuveen Investment Advisory and portfolio manager
for the Nuveen Select Maturities Municipal Fund, discusses the municipal market,
recent fund performance, and the outlook for the fund. Ted, who joined Nuveen in
1989, has managed NIM since its inception in September 1992.
What factors contributed to the performance of the municipal market during the
past 12 months?
As Tim described in his letter to shareholders, we have seen a shift in the U.S.
economic environment over the past year. Despite the continuation of favorable
fundamentals in the fixed-income markets - with strong growth, benign inflation,
low unemployment, and higher yields - a degree of uncertainty has crept into the
economy and affected both the equity and bond markets. A temporary spike in
April consumer prices, propelled by higher energy costs, was enough to reawaken
inflation worries, even though the May report showed no further price changes.
The hint of inflation prompted the Federal Reserve to raise interest rates 0.25%
on June 30th. Many bond market investors welcome the Fed's current stance as an
indication that it remains vigilant in fighting inflation and that general price
levels will remain under control.
The strength of the U.S. economy continued to benefit municipal issuers with
higher tax revenues, and many states and municipalities can now boast of healthy
balance sheets that should enable them to undertake a variety of infrastructure
projects. The volatile healthcare sector accounted for 50% of the downgraded
issues, as improved projections regarding Medicare solvency were countered by
medical costs that outpaced inflation. Continued pressure on hospitals by health
insurers and the federal government also contributed to the sector's problems.
Over the past 12 months, quality long-term municipal bonds offered yields that
rivaled and even surpassed those offered by 30-year Treasury bonds. At times,
this municipal-to-Treasury ratio ranged as high as 104%. As of May 31, 1999, the
ratio remained above-average at 93%, compared to the historical average of 86%
between 1986-1999, providing municipal bond investors with yields comparable to
those of Treasuries, even before the tax advantages of municipals were taken
into account.
For the remainder of 1999, the municipal market will be heavily influenced by
the direction of interest rates and inflation. Whether interest rates remain
stable or increase, we expect to see a continuation of lower refinancing volume
and the tighter supply scenario of the first five months of 1999. Demand should
remain strong, as individual investors look to balance their port folios by
reallocating profits from the equity market into fixed-income investments. These
reallocation efforts will be expanded if the volatility in equities continues.
Even with lower supply and high demand in the municipal market, Nuveen's market
position ensures that we will have access to the best offerings, while our
research capabilities will be geared toward helping us uncover and assess
overlooked market opportunities.
How did the Nuveen Select Maturities Municipal Fund (NIM) perform in this
environment?
For the 12 months ended May 31, 1999, NIM produced a total return on net
asset value (NAV) of 4.64%, providing a taxable-equivalent total return(1) of
6.99% for shareholders in the 31% federal income tax bracket. The Fund's total
return outperformed the 3.76% average total return for the Fund's Lipper peer
group(2), ranking NIM fourth among the group's 21 funds, and paralleled the
annual total return of 4.72% for the Fund's benchmark, the Lehman Brothers
7-Year Municipal Bond Index(3). In recognition of the Fund's strong
risk-adjusted performance, NIM was awarded a four-star overall rating by
Morningstar(4) for the three-year and five-year periods ended May 31, 1999.
Over the past year, active demand for NIM - bolstered by the Fund's competitive
yield and outstanding dividend record - resulted in solid share price
performance. At the same time, however, the Fund's NAV was lower than it was a
year ago due to the prevailing economic environment of relatively higher
interest rates compared to May 1998. As a result of these factors, NIM saw its
discount (share price under NAV) narrow by almost 2% over the past 12 months. As
of May 31, 1999, NIM was trading at a discount of 2.34%, and the Fund's one-year
total return on share price was 6.87%, providing a taxable-equivalent total
return of 9.33% for investors in the 31% federal income tax bracket.
How was the Fund's dividend affected?
Good call protection helped support the dividend of NIM and shield the income of
this fund from erosion. In addition, excellent dividend management strategies -
including our ability to capture the additional yield offered by BBB and
non-rated bonds - enabled us to increase the Fund's dividend in February 1999,
enhancing the competitiveness of its market yield. As of May 31, 1999, NIM had
provided shareholders with 17 consecutive months of steady or increasing income.
The market yield for the Fund was 5.34%, equivalent to a taxable yield5 of 7.74%
for investors in the 31% federal income tax bracket.
What key strategies were used to manage NIM during the past 12 months?
The objective of NIM is to invest in bonds with intermediate maturities that
have the potential to provide the highest possible yields and total returns
consistent with the lower risk profile of an intermediate maturity fund. In
keeping with this objective, our management strategies focused primarily on
increasing the yield of the portfolio by buying BBB and non-rated bonds as
appropriate and on improving portfolio structure through yield curve positioning
on the intermediate part of the curve.
To support the Fund's dividend and pick up incremental yield, NIM has the
flexibility to invest in a higher percentage of lower-rated securities, which
generally offer a yield advantage over their more highly rated counterparts. As
an intermediate fund, NIM has a shorter target maturity than our other
exchange-traded funds. The intermediate BBB/non-rated bonds we select for our
portfolio carry less credit risk than a similarly rated 30-year bond, enabling
us to invest a higher percentage of the Fund in these bonds without adding undue
levels of risk. Because fewer investors are looking for bonds on the shorter end
of the intermediate part of the yield curve, we also found more opportunities to
purchase viable municipal bond deals at wider spreads. At the end of May 1999,
NIM had 27% of its portfolio invested in BBB and non-rated bonds, which provided
excellent balance for the 58% of the portfolio allocated to bonds rated AAA
and AA.
Yield curve positioning is also very important in NIM, as this strategy helps us
maximize yields while dramatically reducing volatility. The positioning strategy
takes advantage of the fact that, generally speaking, the further out on the
yield curve (i.e., the longer the maturity), the higher the yield. This is true
until about the 25-year point, after which the curve is relatively flat. Of
course, bonds with longer maturities also usually carry additional risk,
reflecting the long-term commitment of assets and the potential impact of
interest rate fluctuations over the bond's term. To take advantage of this
risk/reward scenario, our focus has been on purchasing noncallable bonds that
mature in 2012 to 2015. These bonds offer approximately 80-90% of the yield of
longer bonds, but with approximately 50-60% of the interest rate volatility.
From a sector perspective, we found single family housing bonds to be very
attractive, purchasing a number of sinking fund ("super sinker") and planned
amortization class (PAC) bonds. These premium bonds, which are used to provide
home financing, offer higher long-term yields and less interest rate volatility
than bonds with longer effective maturities. When homeowners, using financing
provided by these bonds, sell their homes and prepay their mortgages, bond
holders can be repaid in as little as three to five years, rather than the
standard 30 years for mortgages. In addition to incremental yield, these bonds
also work toward maintaining the portfolio's intermediate maturity. Our research
capabilities help us understand these bonds and anticipate any pre payment risk.
We are also finding value in multi-family housing on the longer end of the yield
curve. Our largest sector allocation (23% as of May 31, 1999) continues to be
utilities, where deregulation, consolidation, and the interest in alternative
energy sources are creating opportunities.
In the area of bond calls, NIM continues to offer good levels of protection,
with only 9% of its portfolio subject to calls prior to 2002. As part of our
yield curve positioning strategy, the 13 to 15-year maturity bonds we have added
to our portfolio have been, for the most part, noncallable, which should further
enhance the Fund's call protection and provide protection for the Fund's
dividend.
What is Nuveen's outlook for NIM?
Looking ahead for NIM, our focus will remain on supporting its income stream at
the highest level consistent with the Fund's risk profile. As part of our
strategies for achieving this goal, we will actively look to reinvest assets
back out on the yield curve and position them appropriately to boost the
potential for both income and total return. As we see appreciation in our BBB
and non-rated holdings, we will also take advantage of opportunities to capture
that value and reinvest in high-yielding securities. These strategies
demonstrate the value that can be added by an active bond manager such as
Nuveen. As an experienced investment manager knowledgeable about the unique
aspects of the municipal market, we are in the marketplace every day, monitoring
market dynamics, looking for opportunities, and capitalizing on them to the
benefit of shareholders.
1 Taxable-equivalent total return is based on the annualized total return and a
federal income tax rate of 31% It represents the return on a taxable
investment necessary to equal the return of the Nuveen fund on an after-tax
basis.
2 The Lipper Peer Group return represents the average annual ized total return
of the 21 funds in the Lipper General and Insured Unleveraged Municipal Debt
category. The return assumes reinvestment of divi dends and does not reflect
any applicable sales charges.
3 NIM, an unleveraged fund, is compared with the Lehman Brothers 7-Year
Municipal Bond Index, an unleveraged index comprising a broad range of
investment-grade municipal bonds with an average maturity of seven years. The
return for the Lehman index does not reflect any initial or ongoing expenses.
4 Morningstar proprietary ratings reflect historical risk-adjusted performance
as of May 31,1999. The ratings are subject to change every month. Past per
formance is no guarantee of future results. Morningstar rat ings are
calculated from the fund's three-, five-, and ten-year average annual returns
(if applicable) in excess of 90-day Treasury bill returns with appropriate fee
adjustments and a risk factor that reflects fund perfor mance below 90-day
T-bill returns. NIM received 4 stars for both the three-year and five-year
periods. The top 10% of the funds in an investment class receive 5 stars, and
the next 22.5% receive 4 stars. The Fund was rated among 194 funds for the
three-year period and 192 funds for the five-year period.
5 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis. The
rate is based on the current market yield and a federal income tax rate of
31%.
<PAGE>
Nuveen Select Maturities Municipal Fund
Performance Overview
As of May 31, 1999
NIM
Portfolio Statistics
Inception Date 9/92
- --------------------------------------------------
Share Price $11 9/16
- --------------------------------------------------
Net Asset Value $11.84
- --------------------------------------------------
Market Yield 5.34%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal Tax Rate)(1) 7.74%
- --------------------------------------------------
Fund Net Assets ($000) $146,630
- --------------------------------------------------
Effective Maturity (Years) 12.17
- --------------------------------------------------
Average Effective Duration 5.63
- --------------------------------------------------
Annualized Total Return
On Share Price On NAV
- --------------------------------------------------
1-Year 6.87% 4.64%
- --------------------------------------------------
5-Year 7.11% 6.72%
- --------------------------------------------------
Since Inception 5.21% 6.42%
- --------------------------------------------------
Taxable-Equivalent Total Return(2)
On Share Price On NAV
- --------------------------------------------------
1-Year 9.33% 6.99%
- --------------------------------------------------
5-Year 9.75% 9.22%
- --------------------------------------------------
Since Inception 7.73% 8.87%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
Utilities 23%
- --------------------------------------------------
Healthcare 14%
- --------------------------------------------------
U.S. Guaranteed 12%
- --------------------------------------------------
Transportation 10%
- --------------------------------------------------
Housing/Single Family 10%
- --------------------------------------------------
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. The
rate is based on the current market yield and a federal income tax rate of
31%.
2 Taxable-equivalent total return is based on the annualized total return and a
federal income tax rate of 31%. It represents the return on a taxable
investment necessary to equal the return of the Nuveen fund on an after-tax
basis.
3 The Fund also paid shareholders capital gains and net ordinary income
distributions in December of $0.0461 per share.
Bar Chart:
1998-1999 Monthly Tax-Free Dividends Per Share(3)
6/98 0.0505
7/98 0.0505
8/98 0.0505
9/98 0.0505
10/98 0.0505
11/98 0.0505
12/98 0.0505
1/99 0.0505
2/99 0.0515
3/99 0.0515
4/99 0.0515
5/99 0.0515
Line Chart:
Share Price Performance
6/5/99 11.563
11.5
11.438
11.5
11.563
11.813
11.75
11.625
11.813
11.75
11.625
11.5
11.625
11.438
11.313
11.563
11.5
11.75
11.688
11.875
11.81
11.88
12
12.13
12.13
12.13
11.94
12
12
11.75
11.5
11.44
11.5
11.75
11.88
11.81
11.81
11.63
11.63
11.56
11.69
11.63
11.5
11.63
11.69
11.94
11.69
11.5
5/31/99 11.56
Weekly Closing Price
Past performance is not predictive of future results.
<PAGE>
Shareholder Meeting Report
The Shareholder Meeting was held July 22, 1998 in Chicago, Il. The results for
the 1999 meeting will be in the semiannual report, which will be dated November
30, 1999.
NIM
- -----------------------------------------------------------------------------
Approval of the Trustees was reached as follows:
Common
Shares
=============================================================================
Robert P. Bremner
For 11,472,769
Withhold 29,192
- -----------------------------------------------------------------------------
Total 11,501,961
=============================================================================
Lawrence H. Brown
For 11,476,484
Withhold 25,477
- -----------------------------------------------------------------------------
Total 11,501,961
=============================================================================
Anthony T. Dean*
For 11,476,484
Withhold 25,477
- -----------------------------------------------------------------------------
Total 11,501,961
=============================================================================
Anne E. Impellizzeri
For 11,471,825
Withhold 30,136
- -----------------------------------------------------------------------------
Total 11,501,961
=============================================================================
Peter R. Sawers
For 11,475,543
Withhold 26,418
- -----------------------------------------------------------------------------
Total 11,501,961
=============================================================================
William J. Schneider
For 11,472,643
Withhold 29,318
- -----------------------------------------------------------------------------
Total 11,501,961
=============================================================================
Timothy R. Schwertfeger
For 11,473,451
Withhold 28,510
- -----------------------------------------------------------------------------
Total 11,501,961
=============================================================================
Judith M. Stockdale
For 11,470,128
Withhold 31,833
- -----------------------------------------------------------------------------
Total 11,501,961
=============================================================================
Ratification of auditors was reached as follows:
For 11,463,763
Against 12,444
Abstain 25,754
- -----------------------------------------------------------------------------
Total 11,501,961
=============================================================================
* Mr. Dean retired from the Board, effective May 1, 1999.
<PAGE>
Report of Independent Auditors
The Board of Trustees and Shareholders
Nuveen Select Maturities Municipal Fund
We have audited the accompanying statement of net assets, including the
portfolio of investments, of Nuveen Select Maturities Municipal Fund as of May
31, 1999, 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
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, 1999, 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, 1999, 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.
/s/ Ernst & Young LLP
Chicago, Illinois
July 16, 1999
<PAGE>
<TABLE>
Portfolio of Investments
Nuveen Select Maturities Municipal Fund (NIM)
May 31, 1999
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona - 6.4%
$ 2,470,000 Arizona Educational Loan Marketing Corporation, Educational Loan 9/02 at 101 Aa $ 2,642,480
Revenue Bonds, 6.375%, 9/01/05 (Alternative Minimum Tax)
5,000,000 The Industrial Development Authority of the City of Phoenix, Arizona, 4/08 at 101 1/2 AAA 5,554,000
Statewide Single Family Mortgage Revenue Bonds, 1998 Series C,
6.650%, 10/01/29 (Alternative Minimum Tax)
1,185,000 The Industrial Development Authority of the City of Winslow, No Opt. Call N/R 1,192,276
Arizona, Hospital Revenue Bonds (Winslow Memorial Hospital
Project), Series 1998, 5.750%, 6/01/08
- ---------------------------------------------------------------------------------------------------------------------------------
Arkansas - 1.5%
1,400,000 Arkansas Development Finance Authority, Single Family Mortgage 7/05 at 102 AAA 1,457,386
Revenue Bonds, 1995 Series B (Mortgage-Backed Securities Program),
6.200%, 1/01/21 (Alternative Minimum Tax)
770,000 Arkansas Student Loan Authority, Student Loan Revenue Bonds, 6/01 at 102 A 810,556
Series 1992A-2 (Subordinate), 6.750%, 6/01/06
(Alternative Minimum Tax)
- ---------------------------------------------------------------------------------------------------------------------------------
Colorado - 5.6%
City and County of Denver, Colorado, Airport System Revenue
Bonds, Series 1991A:
1,460,000 8.750%, 11/15/23 (Alternative Minimum Tax) (Pre-refunded to 11/15/01) 11/01 at 102 Aaa 1,655,290
4,040,000 8.750%, 11/15/23 (Alternative Minimum Tax) 11/01 at 102 BBB+ 4,496,964
810,869 El Paso County, Colorado, Single Family Mortgage Revenue Tax-Exempt No Opt. Call Aaa 893,334
Refunding Bonds, Series 1992A, Class A-2, 8.750%, 6/01/11
1,000,000 Summit County, Colorado, Sports Facilities Refunding Revenue No Opt. Call A- 1,183,610
Bonds (Keystone Resorts Management, Inc. Project), Series 1990,
7.750%, 9/01/06
- ---------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 3.7%
5,005,000 District of Columbia, General Obligation Refunding Bonds, No Opt. Call AAA 5,457,703
Series 1993A, 6.000%, 6/01/07
- ---------------------------------------------------------------------------------------------------------------------------------
Florida - 4.1%
2,000,000 State of Florida, Full Faith and Credit, State Board of Education, No Opt. Call AAA 2,025,620
Public Education Capital Outlay Bonds, Series 1986-C,
7.100%, 6/01/07
3,500,000 Hillsborough County Industrial Development Authority, Pollution 5/02 at 103 AA 3,948,560
Control Revenue Refunding Bonds (Tampa Electric Company Project),
Series 1992, 8.000%, 5/01/22
- ---------------------------------------------------------------------------------------------------------------------------------
Georgia - 7.1%
725,000 Urban Residential Finance Authority of the City of Atlanta, Revenue No Opt. Call N/R 757,857
Bonds (Landrum Arms Project), Series 1994, 6.750%, 7/01/04
5,755,000 Development Authority of Burke County, Georgia, Pollution Control 1/03 at 103 AAA 6,670,678
Revenue Bonds (Oglethorpe Power Corporation, Vogtle Project),
Series 1992, 8.000%, 1/01/15 (Pre-refunded to 1/01/03)
2,540,000 Municipal Electric Authority of Georgia, General Power Revenue No Opt. Call AAA 3,016,326
Bonds, 1992B Series, 7.500%, 1/01/07
- ---------------------------------------------------------------------------------------------------------------------------------
Illinois - 12.8%
1,300,000 General Obligation Lease Certificates, 1992 Series A, Board of No Opt. Call AAA 1,435,837
Education of the City of Chicago, Illinois, 6.125%, 1/01/07
1,000,000 Chicago School Reform Board of Trustees of the Board of No Opt. Call AAA 1,130,640
Education of the City of Chicago, Illinois, Unlimited Tax General
Obligation Bonds, Series 1996, 6.250%, 12/01/11
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois (continued)
$ 2,495,000 Chicago Metropolitan Housing Development Corporation, Chicago, 7/03 at 100 AAA $ 2,540,309
Illinois, Housing Development Revenue Refunding Bonds
(FHA-Insured Mortgage Loan - Section 8 Assisted Project),
Series 1993B, 5.700%, 1/01/13
390,000 City of Danville, Vermilion County, Illinois, Single Family Mortgage 11/03 at 102 A1 414,036
Revenue Refunding Bonds, Series 1993, 7.300%, 11/01/10
3,000,000 Illinois Development Finance Authority, Adjustable Rate Solid Waste No Opt. Call Aa2 2,986,740
Disposal Revenue Bonds (Waste Management, Inc. Project),
Series 1997, 5.050%, 1/01/10 (Alternative Minimum Tax)
3,450,000 Illinois Development Finance Authority, Child Care Facility 9/02 at 102 N/R 3,636,369
Revenue Bonds, Series 1992 (Illinois Facilities Fund Project),
7.400%, 9/01/04
4,000,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, 8/09 at 101 A- 3,816,920
Series 1999 (Silver Cross Hospital and Medical Centers),
5.250%, 8/15/15
2,135,000 Illinois Housing Development Authority, Section 8 Elderly 11/02 at 102 A 2,251,251
Housing Revenue Bonds (Skyline Towers Apartments),
Series 1992B, 6.625%, 11/01/07
435,000 City of Rock Island, Illinois, Residential Mortgage Revenue 9/02 at 102 Aa 461,492
Refunding Bonds, Series 1992, 7.700%, 9/01/08
- ---------------------------------------------------------------------------------------------------------------------------------
Indiana - 6.2%
2,000,000 Hospital Authority of Elkhart County, Indiana, Hospital Revenue 7/02 at 102 A1 2,207,240
Bonds, Series 1992 (Elkhart General Hospital, Inc.), 7.000%, 7/01/08
1,000,000 The Indianapolis Local Public Improvement Bond Bank, No Opt. Call AA 1,126,990
Series 1992 D Bonds, 6.600%, 2/01/07
3,435,000 City of Indianapolis, Indiana, Multifamily Housing First Mortgage 5/09 at 102 N/R 3,419,474
Revenue Bonds, Series 1999A (Keystone at Fall Creek Apartments),
6.400%, 5/01/19 (Alternative Minimum Tax)
2,100,000 The Indianapolis Local Public Improvement Bond Bank, Transportation 7/03 at 102 Aa 2,273,607
Revenue Bonds, Series 1992, 6.000%, 7/01/10
- ---------------------------------------------------------------------------------------------------------------------------------
Maryland - 1.5%
2,000,000 Anne Arundel County, Maryland, Multifamily Housing Revenue No Opt. Call BBB 2,172,940
Bonds (Woodside Apartments Project), Series 1994,
7.450%, 12/01/24 (Alternative Minimum Tax) (Mandatory put 12/01/03)
- ---------------------------------------------------------------------------------------------------------------------------------
Mississippi - 0.8%
1,230,000 Mississippi Home Corporation, Single Family Mortgage Revenue 6/09 at 102 Aaa 1,222,534
Bonds, Series 1999A, 5.250%, 12/01/30 (Alternative Minimum Tax)
- ---------------------------------------------------------------------------------------------------------------------------------
Nebraska - 6.7%
1,500,000 American Public Energy Agency, Gas Supply Revenue Bonds No Opt. Call AAA 1,554,810
(Nebraska Public Gas Agency, Western A Project), 1999 Series A,
5.250%, 6/01/11
5,500,000 Energy America, Nebraska, Natural Gas Revenue Note No Opt. Call N/R 5,521,450
(Metropolitan Utility District Project), Series 1997B, 5.700%, 7/01/08
2,400,000 Airport Authority of the City of Omaha, Nebraska, Airport 1/02 at 102 A1 2,685,000
Facilities Revenue Refunding Bonds, Series 1991, 8.375%, 1/01/14
- ---------------------------------------------------------------------------------------------------------------------------------
New York - 9.4%
5,000,000 Erie County, New York, Industrial Development Agency, 12/10 at 103 N/R 5,048,300
Solid Waste Disposal Facility Revenue Bonds (1998 CanFibre
of Lackawanna Project), 8.875%, 12/01/13 (Alternative Minimum Tax)
3,700,000 New York City Industrial Development Agency, Amended and 11/04 at 102 AAA 3,944,015
Restated Industrial Development Revenue Bonds (1991 Japan
Airlines Company, Ltd. Project), 6.000%, 11/01/15
(Alternative Minimum Tax)
2,000,000 New York State Medical Care Facilities Finance Agency, 2/06 at 102 AA+ 2,150,920
FHA-Insured Mortgage Project Revenue Bonds, 1995 Series C,
6.100%, 8/15/15
2,130,000 City of Niagara Falls, Niagara County, New York, Water No Opt. Call AAA 2,707,230
Treatment Plant Serial Bonds, Series 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 - 7.9%
$ 2,000,000 Akron, Bath and Copley Joint Township Hospital District, Ohio, 11/02 at 102 Baa1 $ 2,113,460
Hospital Facilities Revenue Bonds, Series 1992 (Summa Health
System Project), 6.250%, 11/15/07
1,000,000 City of Dayton, Ohio, Special Facilities Revenue Refunding Bonds, No Opt. Call BBB 1,071,380
1993 Series F (Emery Air Freight Corporation and Emery
Worldwide Airlines, Inc., Guarantors), 6.050%, 10/01/09
4,500,000 County of Hamilton, Ohio, Hospital Facilities Revenue No Opt. Call A 4,899,465
Refunding Bonds, Series 1992A (Bethesda Hospital, Inc.),
6.250%, 1/01/06
2,280,000 Ohio Water Development Authority, Revenue Bonds, 3/02 at 102 N/R 2,426,809
USA Waste Services, Series 1992, 7.750%, 9/01/07
(Alternative Minimum Tax)
1,000,000 City of Oxford, Ohio, Water Supply System Mortgage Revenue 12/02 at 102 AAA 1,076,970
Refunding Bonds, Series 1992, 6.000%, 12/01/14
- ---------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 1.5%
1,790,000 Pennsylvania Higher Educational Facilities Authority, College and No Opt. Call Aaa 2,146,192
University Revenue Bonds, 9th Series, 7.625%, 7/01/15
- ---------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 2.1%
3,000,000 Rhode Island Housing and Mortgage Finance Corporation, 4/02 at 102 AA+ 3,089,850
Homeownership Opportunity Bonds, Series 7, 6.500%, 4/01/25
(Alternative Minimum Tax)
- ---------------------------------------------------------------------------------------------------------------------------------
Texas - 8.6%
2,000,000 Alliance Airport Authority, Inc., Texas, Special Facilities Revenue No Opt. Call Baa2 2,336,080
Bonds, Series 1991 (American Airlines, Inc. Project),
7.000%, 12/01/11 (Alternative Minimum Tax)
City of Austin, Texas, Water, Sewer and Electric Refunding Revenue
Bonds, Series 1982:
1,245,000 14.000%, 11/15/01 No Opt. Call A 1,421,740
10,000 14.000%, 11/15/01 5/00 at 100 A*** 11,797
570,000 Austin-Travis County, Mental Health and Mental Retardation Center, 3/05 at 101 AAA 627,513
Revenue Bonds (Mental Health and Mental Retardation Facilities
Acquisition Program), Series 1995-A, 6.500%, 3/01/15
820,000 City of Galveston Property Finance Authority, Inc., 9/01 at 103 A3 876,129
Single Family Mortgage Revenue Bonds, Series 1991A,
8.500%, 9/01/11
1,000,000 Texas Community Mental Health and Mental Retardation 3/05 at 101 AAA 1,100,900
Center, Revenue Bonds (Mental Health and Mental Retardation
Facilities Acquisition Program), Series 1995A-E, 6.500%, 3/01/15
3,135,000 Retama Development Corporation, Special Facilities Revenue 12/11 at 100 AAA 4,320,155
Bonds (Retama Park Racetrack Project), Series 1993,
8.750%, 12/15/11 (Pre-refunded to 12/15/11)
1,000,000 Travis County Health Facilities Development Corporation, 11/03 at 102 Aa 1,066,960
Hospital Revenue Bonds (Daughters of Charity National Health
System - Daughters of Charity Health Services of Austin),
Series 1993B, 5.900%, 11/15/07
775,000 Tri-County Mental Health and Mental Retardation Services, 3/05 at 101 AAA 853,198
Revenue Bonds (Mental Health and Mental Retardation Center
Facilities Acquisition Program), Series 1995-E, 6.500%, 3/01/15
- ---------------------------------------------------------------------------------------------------------------------------------
Utah - 1.4%
2,055,000 City of Bountiful, Davis County, Utah, Hospital Revenue No Opt. Call N/R 2,067,679
Refunding Bonds (South Davis Community Hospital Project),
Series 1998, 6.000%, 12/15/10
- ---------------------------------------------------------------------------------------------------------------------------------
Virginia - 1.5%
2,000,000 Hampton Redevelopment and Housing Authority, Multifamily 7/02 at 104 Baa2 2,175,860
Housing Revenue Refunding Bonds, Series 1994
(Chase Hampton II Apartments), 7.000%, 7/01/24
(Mandatory put 7/01/04)
- ---------------------------------------------------------------------------------------------------------------------------------
Washington - 8.7%
1,255,000 Public Utility District No. 1 of Douglas County, Washington, 9/00 at 102 A+ 1,333,588
Wells Hydro-Electric Revenue Bonds, Series of 1990,
7.700%, 9/01/08 (Alternative Minimum Tax)
<PAGE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Washington (continued)
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 $ 2,891,375
3,000,000 7.000%, 7/01/08 No Opt. Call Aa1 3,492,300
7,000,000 Washington Public Power Supply System, Nuclear Project No. 3, No Opt. Call Aa1 5,063,240
Refunding Revenue Bonds, Series 1990B, 0.000%, 7/01/06
- ---------------------------------------------------------------------------------------------------------------------------------
$ 133,795,869 Total Investments - (cost $135,895,189) - 97.5% 142,933,384
=============
Other Assets Less Liabilities - 2.5% 3,696,922
-----------------------------------------------------------------------------------------------------------------
Net Assets - 100% $146,630,306
=================================================================================================================
* 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.
N/R Investment is not rated.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
May 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in municipal securities, at market value (note 1) $142,933,384
Cash 1,801,044
Receivables:
Interest 2,586,268
Investments sold 80,289
Other assets 18,515
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 147,419,500
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Accrued expenses:
Management fees (note 6) 62,193
Other 89,402
Dividends payable 637,599
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 789,194
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $146,630,306
====================================================================================================================================
Shares outstanding 12,380,786
====================================================================================================================================
Net asset value per share outstanding (net assets divided by shares outstanding) $ 11.84
====================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended May 31, 1999
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Income (note 1) $8,552,033
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 738,057
Shareholders' servicing agent fees and expenses 18,688
Custodian's fees and expenses 52,903
Trustees' fees and expenses (note 6) 1,420
Professional fees 16,232
Shareholders' reports - printing and mailing expenses 65,258
Stock exchange listing fees 24,280
Investor relations expense 11,425
Other expenses 6,859
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit 935,122
Custodian fee credit (9,782)
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses 925,340
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 7,626,693
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain from investment transactions (notes 1 and 4) 1,438,656
Net change in unrealized appreciation or depreciation of investments (2,280,064)
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (841,408)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $6,785,285
===================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
Year Ended Year Ended
5/31/99 5/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 7,626,693 $ 7,625,356
Net realized gain from investment transactions (notes 1 and 4) 1,438,656 549,105
Net change in unrealized appreciation or depreciation of investments (2,280,064) 2,941,305
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 6,785,285 11,115,766
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income (7,597,460) (7,591,325)
From accumulated net realized gains from investment transactions (521,817) (457,013)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (8,119,277) (8,048,338)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions (note 2)
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 122,201 --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (1,211,791) 3,067,428
Net assets at the beginning of year 147,842,097 144,774,669
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 146,630,306 $ 147,842,097
===================================================================================================================================
Balance of undistributed net investment income at the end of year $ 109,445 $ 80,212
===================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
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 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 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 generally
accepted accounting principles.
Securities Valuation
The prices of municipal bonds in the Fund's investment portfolio are provided by
a pricing service approved by the Fund's Board of Trustees. When price quotes
are not readily available (which is usually the case for municipal securities),
the pricing service establishes fair market value based on yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating, indications of value from securities dealers and general market
conditions. Temporary investments in securities that have variable rate and
demand features qualifying them as short-term securities are valued at amortized
cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. The securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At May
31, 1999, 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
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 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 realized 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
monthly tax-exempt income dividends paid during the fiscal year ended May 31,
1999, 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 monthly as a dividend and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from 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 transactions 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, 1999.
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. Actual results may differ
from those estimates.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby the 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.
2. Fund Shares
During the fiscal year ended May 31, 1999, 10,151 shares were issued to
shareholders due to reinvestment of distributions. There were no such
transactions during the fiscal year ended May 31, 1998.
3. Distributions to Shareholders
The Fund declared a dividend distribution of $.0515 per share from its
tax-exempt net investment income which was paid on July 1, 1999, to shareholders
of record on June 15, 1999.
4. Securities Transactions
Purchases and sales (including maturities) of investments in intermediate-term
municipal securities for the fiscal year ended May 31, 1999, aggregated
$45,648,917 and $47,212,353, respectively. Purchases and sales (including
maturities) of investments in short-term municipal securities for the fiscal
year ended May 31, 1999, aggregated $8,900,000 and $8,900,000, respectively.
At May 31, 1999, the identified cost of investments owned for federal income tax
purposes was the same as the cost for financial reporting purposes.
5. Unrealized Appreciation (Depreciation)
At May 31, 1999, net unrealized appreciation of investments aggregated
$7,038,195 of which $7,370,325 related to appreciated securities and $332,130
related to depreciated securities.
6. Management Fees and Other Transactions with Affiliates
Under the Fund's investment management agreement with the Adviser, the Fund pays
an annual management fee, payable monthly, at the rates set forth below, which
are based upon the average daily net assets of the Fund as follows:
Average Daily Net Assets Management Fee
- -------------------------------------------------------------------------------
For the first $125 million .5000 of 1%
For the next $125 million .4875 of 1
For the next $250 million .4750 of 1
For the next $500 million .4625 of 1
For the next $1 billion .4500 of 1
For net assets over $2 billion .4375 of 1
================================================================================
The fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Fund pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to their officers, all of whom receive remuneration for their
services to the Fund from the Adviser.
7. Composition of Net Assets
At May 31, 1999, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
- --------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 123,808
Paid-in surplus 138,159,319
Balance of undistributed net investment income 109,445
Accumulated net realized gain from investment transactions 1,199,539
Net unrealized appreciation of investments 7,038,195
- --------------------------------------------------------------------------------
Net assets $146,630,306
================================================================================
8. Investment Composition
At May 31, 1999, the revenue sources by municipal purpose, expressed as a
percent of intermediate-term investments, were as follows:
- --------------------------------------------------------------------------------
Capital Goods 4%
Health Care 14
Housing/Multifamily 9
Housing/Single Family 10
Tax Obligation/General 7
Tax Obligation/Limited 6
Transportation 10
U.S. Guaranteed 12
Utilities 23
Other 5
- --------------------------------------------------------------------------------
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.
<TABLE>
Financial Highlights
Selected data for a share outstanding throughout each year is as follows:
<CAPTION>
Investment Operations
---------------------------------------
Net
Realized/
Beginning Net Unrealized
Net Asset Investment Investment
Value Income Gain (Loss) Total
<S> <C> <C> <C> <C>
Year Ended 5/31:
1999 $11.95 $.61 $(.07) $.54
1998 11.70 .61 .29 .90
1997 11.59 .62 .18 .80
1996 11.73 .64 (.09) .55
1995 11.37 .64 .39 1.03
<CAPTION>
Less Distributions
--------------------------------------
Net Ending Ending
Investment Capital Net Asset Market
Income Gains Total Value Value
<S> <C> <C> <C> <C> <C>
Year Ended 5/31:
1999 $(.61) $(.04) $(.65) $11.84 $11.5625
1998 (.61) (.04) (.65) 11.95 11.4375
1997 (.65) (.04) (.69) 11.70 10.7500
1996 (.65) (.04) (.69) 11.59 11.1250
1995 (.65) (.02) (.67) 11.73 11.1250
<CAPTION>
Total Returns
--------------------------
Based on
Based on Net Asset
Market Value+ Value+
Year Ended 5/31:
<S> <C> <C>
1999 6.87% 4.64%
1998 12.60 7.85
1997 2.68 6.98
1996 6.14 4.76
1995 7.67 9.51
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------------------------------------------
Before Credit After Credit*
----------------------------- -----------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses to Income to Expenses to Income to Portfolio
Net Assets Average Average Average Average Turnover
(000) Net Assets Net Assets Net Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Year Ended 5/31:
1999 $146,630 .63% 5.14% .62% 5.15% 31%
1998 147,842 .65 5.17 .65 5.17 13
1997 144,775 .64 5.35 .64 5.35 17
1996 143,364 .63 5.45 .63 5.45 25
1995 144,987 .65 5.64 .65 5.64 38
* After custodian fee credit, where applicable (note 1).
+ 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.
</TABLE>
<PAGE>
Build Your Wealth Automatically
sidebar text: Nuveen offers a number of convenient ways to add to your portfolio
and earn the tax-free income you need to achieve your financial goals.
sidebar text: Nuveen makes reinvesting easy. A phone call is all it takes to
set up your reinvestment account.
Nuveen Exchange-Traded Funds Dividend Reinvestment Plan
Your Nuveen Exchange-Traded Fund allows you to conveniently reinvest dividends
and/or capital gains distributions in additional fund shares. 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 invest 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.
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.
Income or capital gains taxes may be payable on dividends or distributions that
are reinvested.
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, 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 at (800)
257-8787.
<PAGE>
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
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Auditors
Ernst & Young LLP
Chicago, IL
Year 2000
The concern that computer systems may have problems processing date-related
information in the year 2000 and beyond has challenged businesses and
organizations to thoroughly review all aspects of their operations. We have
undertaken just such an approach at Nuveen in preparation for the millennium.
Over the last 10 years, we have updated or replaced our trading, fund
management, and pricing systems at Nuveen - systems that directly affect our
investors and their financial advisers - to address Year 2000 concerns.
We continue to work closely with our transfer agent, custodian, firms through
whom we buy and sell portfolio securities, and other service partners to monitor
the Year 2000 readiness of their systems, while addressing other remaining
systems issues.
In addition, the Funds hold securities of issuers whose business operations
leave them susceptible to Year 2000 concerns. We seek to evaluate an issuer's
Year 2000 readiness as part of our initial and ongoing research of these
issuers. This is only one of the many factors considered in determining whether
to buy, sell, or continue holding a particular security.
We anticipate that all significant components of our Year 2000 review, repair,
and testing program will be complete by mid-1999. This includes appropriate
industry-wide testing of critical systems and receipt of satisfactory assurances
from critical service providers, vendors, and issuers regarding their Year 2000
readiness. We are also making Year 2000 contingency plans to guide recovery
efforts in the event that, despite our remediation attempts, Year 2000 issues
adversely affect the Funds. Although we cannot give complete assurance at this
time that the steps we take will be sufficient to prevent any problems that
would impact the Nuveen Exchange-Traded Funds, we can assure you that we will
take all reasonable steps to prevent disruption of the services provided by your
Fund.
Fund Policies
The Board of Trustees of your Fund recently modified certain investment policies
of the Fund. The Fund was formerly not permitted to invest more than 5% of its
total assets in Municipal Leases that contain "non-appropriation" clauses. In
addition, your Fund was not permitted to invest more than 10% of its total
assets in Municipal Leases and securities that are unmarketable, illiquid or not
readily marketable. The Municipal Lease market has matured since the Fund's
inception, and non-appropriation leases have become more liquid and widely
accepted. The Nuveen Exchange-Traded Fund Board has eliminated the restrictions
noted above, replacing them with requirements that the Funds limit investments
in non-appropriation Municipal Leases to those that meet one or more of six
criteria that indicate that the issuer will be motivated to continue to
appropriate monies to make the payments under the Municipal Lease.
The Board also eliminated the Fund's policy not to invest more than 5% of its
total assets in unsecured obligations of issuers which, together with their
predecessors, have been in operation for less than three years.
Each fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the 12-month period ended May 31, 1999. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
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Serving Investors for Generations
Photo 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
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time - with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
LOGO:
NUVEEN
helping investors sustain the wealth of a lifetime(tm).
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
FAN-1-5-99
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