UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-7056
---------------------
Nuveen Select Maturities Municipal Fund
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
-------------------
Date of fiscal year end: March 31
------------------
Date of reporting period: September 30, 2005
------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
SEMIANNUAL REPORT September 30, 2005
Nuveen Investments
Municipal Exchange-Traded
Closed-End Funds
NUVEEN SELECT MATURITIES MUNICIPAL FUND
NIM
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DEPENDABLE, TAX-FREE INCOME BECAUSE IT'S NOT WHAT YOU EARN, IT'S WHAT YOU
KEEP.(R)
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Photo of: Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
Chairman's
LETTER TO SHAREHOLDERS
Once again, I am pleased to report that over the six-month period covered by
this report your Fund continued to provide you with monthly tax-free income, as
well as an attractive total return. For more details about the management
strategy and performance of your Fund, please see the Portfolio Manager's
Comments and Performance Overview sections of this report.
Given the continued strength of the economy, some market commentators are
speculating about whether longer-term interest rates will soon begin to rise
substantially, mirroring the rise that has taken place in shorter-term rates. If
longer-term rates do begin to rise significantly, some have suggested that this
would be a signal to begin adjusting your holdings of fixed-income investments.
"IN FACT, A WELL-DIVERSIFIED PORTFOLIO MAY ACTUALLY HELP TO
REDUCE YOUR OVERALL INVESTMENT RISK OVER THE LONG TERM."
Nobody knows what the market will do in the future or what investments will turn
out to be tomorrow's best performers. But from our experience, we do know that a
well-balanced portfolio, structured and carefully monitored with the help of a
trusted investment professional, can be an important component in helping you
achieve your long-term financial goals. In fact, a well-diversified portfolio
may actually help to reduce your overall investment risk over the long term.
That is one reason why we believe that a municipal bond investment like your
Fund can be an important building block in a comprehensive investment program
designed to perform well in a variety of market conditions.
As an added convenience for you, I urge you to consider receiving future Fund
reports and other Fund information by e-mail and the Internet. Not only will you
be able to receive the information faster, but this also may help lower your
Fund's expenses. Sign up is quick and easy - see the inside front cover of this
report for instructions.
Earlier in 2005, The St. Paul Travelers Companies, Inc., which owned 79% of
Nuveen Investments, Inc. (the parent of your Fund's investment adviser), sold a
substantial portion of its stake in Nuveen. More recently, St. Paul sold the
balance of its shares to Nuveen Investments or to others. Please be assured that
these transactions only affect Nuveen's corporate structure, and they do not
have any impact on the investment objectives or management of your Fund.
At Nuveen Investments, our mission continues to be to assist you and your
financial advisor by offering investment services and products that can help you
to secure your financial objectives. We are grateful that you have chosen us as
a partner as you pursue your financial goals, and we look forward to continuing
to earn your trust in the months and years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
November 15, 2005
Nuveen Select Maturities Municipal Fund
NIM
Portfolio Manager's
COMMENTS
Portfolio manager John Miller reviews key investment strategies and the
six-month performance of the Fund. With 12 years of municipal market experience,
including 9 years with Nuveen, John has managed NIM since 2001.
WHAT KEY STRATEGIES WERE USED TO MANAGE NIM DURING THE SIX MONTHS ENDED
SEPTEMBER 30, 2005?
Between April 1, 2005, and September 30, 2005, the Federal Reserve implemented
four quarter-point increases in the fed funds rate, raising this short-term
target from 2.75% to 3.75%, its highest point since August 2001. Many
shorter-term municipal market rates rose in line with the 100-basis point
increase in this rate. By comparison, the yield on the benchmark 10-year U.S.
Treasury note ended September 2005 at 4.33%, compared with 4.48% six months
earlier. The yield on the Bond Buyer 25 Revenue Bond Index, a widely followed
measure of longer-term municipal rates, was 5.04% on September 30, 2005, just
one basis point higher than it was on March 31, 2005. The dramatic rise in
shorter-term rates coupled with longer rates that declined or remained steady
over this period produced an overall flattening of the yield curve, which
generally helped the relative performance of bonds with longer effective
maturities when compared with bonds with shorter maturities or durations.
(Duration is a measure of a bond's price sensitivity as interest rates change,
with longer duration bonds being more sensitive to changes - which can be
beneficial when longer-term rates decline or remain relatively flat, as was the
case during this period.)
This environment presented some challenges for NIM, which--in keeping with its
investment parameters--seeks to provide an investment offering intermediate-term
characteristics. As a result, NIM maintained a heavier exposure to the shorter
part of the yield curve than many longer-term municipal bond funds. Given the
environment of this reporting period, we sought to reinvest the proceeds from
called bonds, sinking fund payments and other inflows in securities carrying
maturities of about 15 years, effectively the maximum maturity at which the Fund
can invest. We also sold selected holdings with shorter durations and reinvested
the proceeds in securities in the intermediate part of the yield curve. This
included selling bonds that were trading at premiums to their call prices, since
these bonds had a high likelihood of being called in the near future. This
approach enabled us to capture the premiums before they were amortized away and
pick up some additional income for the Fund. In addition, selling shorter
duration bonds and reinvesting further out on the yield curve helped to improve
NIM's overall call protection.
4
During this period, lower-rated bonds generally performed very well, and this
created considerable investor demand for these credits. As a result, we did not
find many attractively-priced opportunities among lower-rated securities that we
believed would add value. Because NIM already had substantial weightings in the
lower-rated credit categories, our purchases focused instead on bonds rated AAA,
where we believed more reasonably priced securities could be found.
NIM continued to be well diversified geographically, with Colorado, Illinois,
Washington, New York and Texas representing some of our larger positions. NIM
had no exposure to either Louisiana or Mississippi during this period.
HOW DID THE FUND PERFORM?
Results for NIM, as well as for a comparative index and fund group average, are
presented in the accompanying table.
TOTAL RETURNS ON NET ASSET VALUE*
For periods ended 9/30/05
6-MONTH 1-YEAR 5-YEAR 10-YEAR
--------------------------------------------------------------------------------
NIM 2.82% 4.32% 3.29% 4.19%
--------------------------------------------------------------------------------
Lehman Brothers
7-Year Municipal
Bond Index1 2.22% 2.03% 5.71% 5.47%
--------------------------------------------------------------------------------
Lipper General and
Insured Unleveraged
Municipal Debt Funds
Average2 3.37% 5.63% 5.60% 5.63%
--------------------------------------------------------------------------------
* Six-month returns are cumulative; returns for one year, five years, and ten
years are annualized.
Past performance is not predictive of future results. Current performance may be
higher or lower than the data shown. Returns do not reflect the deduction of
taxes that shareholders may have to pay on Fund distributions or upon the sale
of Fund shares.
For additional information, see the Performance Overview page in this report.
For the six months ended September 30, 2005, the cumulative return on net asset
value (NAV) for NIM outperformed the return for the Lehman Brothers 7-Year
Municipal Bond Index. For the same period, the Fund's intermediate-term
orientation was one reason it underperformed the average return for the Lipper
group, which consists predominately of longer-term funds.
One of the primary factors benefiting the six-month performance of NIM was the
Fund's exposure to lower-rated credits during this period, as these bonds
generally outperformed higher credit quality sectors. This was largely the
result of the interest
1 The Lehman Brothers 7-Year Municipal Bond Index is an unleveraged, unmanaged
national index comprising a broad range of investment-grade municipal bonds
with maturities ranging from six to eight years. Results for the Lehman index
do not reflect any expenses.
2 The Lipper General and Insured Unleveraged Municipal Debt Funds category
average is calculated using the returns of all closed-end exchange-traded
funds in this category for each period as follows: 6 months, 8 funds; 1 year,
8 funds; 5 years, 8 funds; and 10 years, 8 funds. Fund and Lipper returns
assume reinvestment of dividends.
5
rate environment during this time, as investor demand for the higher yields
typically associated with lower-rated bonds drove up the value of these bonds.
As of September 30, 2005, NIM had allocated 22% of its portfolio to bonds rated
BBB or lower and non-rated bonds.
Among the lower-rated credits making significant contributions to NIM's
cumulative return were bonds backed by the 1998 master tobacco settlement
agreement. As the litigation environment improved, supply/demand dynamics drove
tobacco bond prices higher. The Fund's tobacco holdings, which are generally
rated BBB, accounted for approximately 6% of NIM's portfolio as of September 30,
2005. Lower-rated charter school and hospital holdings also contributed to the
Fund's semiannual performance, with the healthcare sector ranked second by
Lehman in terms of performance among all municipal revenue sectors for the
period.
As noted earlier, the municipal market yield curve flattened over the course of
this reporting period as short-term interest rates rose dramatically while
longer-term interest rates remained essentially flat. In this environment,
longer maturity bonds generally performed better than securities with shorter
maturities. Our trading activity over the past six months, which emphasized
reducing NIM's exposure to bonds with short maturities and reinvesting in bonds
with 15-year maturities, helped the Fund's performance for the period. The Fund
also benefited from credit upgrades on several of its holdings.
During this period, NIM's holdings of older pre-refunded bonds tended to
underperform the general municipal market, primarily because the shorter
effective maturities of these bonds dampened their ability to experience price
appreciation.
HOW WAS NIM POSITIONED IN TERMS OF CREDIT QUALITY AND BOND CALLS AS OF SEPTEMBER
30, 2005?
We continued to believe that, maintaining strong credit quality was an important
requirement. As of September 30, 2005, NIM continued to offer excellent credit
quality, with 62% of its portfolio allocated to bonds rated AAA/U.S. guaranteed
and AA and another 16% in bonds rated A.
As of September 30, 2005, 9% of NIM's portfolio was subject to potential bond
calls during the period from October 2005 through the end of 2007. The number of
actual bond calls in this Fund depends largely on future market interest rates.
6
Dividend and Share Price
INFORMATION
NIM was able to maintain a stable dividend throughout this six-month reporting
period.
NIM seeks to pay stable dividends at rates that reflect the Fund's past results
and projected future performance. During certain periods, NIM may pay dividends
at a rate that may be more or less than the amount of net investment income
actually earned by the Fund during the period. If a Fund has cumulatively earned
more than it has paid in dividends, it holds the excess in reserve as
undistributed net investment income (UNII) as part of the Fund's NAV.
Conversely, if a Fund has cumulatively paid dividends in excess of its earnings,
the excess constitutes negative UNII that is likewise reflected in the Fund's
NAV. NIM will, over time, pay all of its net investment income as dividends to
shareholders. As of September 30, 2005, NIM had a positive UNII balance for tax
purposes and a negative UNII balance for financial statement purposes.
At the end of the reporting period on September 30, 2005, NIM was trading at a
premium of 0.29% to its NAV. By comparison, the Fund traded at an average
discount of -4.52% for the entire six-month reporting period.
7
Nuveen Select Maturities Municipal Fund
NIM
Performance
OVERVIEW As of September 30, 2005
ie Chart:
CREDIT QUALITY
(as a % of total investments)
AAA/U.S. Guaranteed 57%
AA 5%
A 16%
BBB 17%
BB or Lower 1%
NR 4%
Bar Chart:
2004-2005 MONTHLY TAX-FREE DIVIDENDS PER SHARE 2
Oct 0.0395
Nov 0.0395
Dec 0.0395
Jan 0.0395
Feb 0.0395
Mar 0.0395
Apr 0.0395
May 0.0395
Jun 0.0395
Jul 0.0395
Aug 0.0395
Sep 0.0395
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
10/1/04 9.61
9.6
9.57
9.57
9.64
9.71
9.81
9.82
9.78
9.62
9.72
9.7
9.7
9.73
9.69
9.73
9.74
9.63
9.64
9.56
9.57
9.63
9.63
9.61
9.62
9.53
9.37
9.41
9.45
9.47
9.42
9.47
9.35
9.38
9.44
9.47
9.46
9.49
9.43
9.43
9.45
9.42
9.45
9.46
9.58
9.52
9.5
9.48
9.54
9.5
9.42
9.42
9.41
9.31
9.35
9.33
9.31
9.29
9.31
9.35
9.35
9.31
9.33
9.34
9.39
9.51
9.5
9.51
9.68
9.9
9.8
9.57
9.55
9.55
9.59
9.54
9.54
9.53
9.65
9.64
9.62
9.7
9.71
9.78
9.79
9.72
9.82
9.87
9.73
9.75
9.79
9.79
9.62
9.68
9.65
9.68
9.74
9.69
9.9
9.76
9.76
9.81
9.8
9.79
9.8
9.76
9.66
9.74
9.77
9.6
9.58
9.56
9.47
9.52
9.57
9.58
9.52
9.48
9.42
9.43
9.4
9.338
9.25
9.27
9.3
9.3
9.3
9.3
9.33
9.31
9.36
9.43
9.62
9.53
9.55
9.55
9.63
9.59
9.65
9.55
9.5
9.63
9.49
9.5
9.59
9.52
9.52
9.56
9.55
9.64
9.63
9.52
9.67
9.68
9.7
9.64
9.58
9.68
9.59
9.62
9.64
9.82
9.75
9.8
9.81
9.81
9.89
9.89
9.88
9.75
9.78
9.77
9.86
9.83
9.8
9.72
9.77
9.67
9.68
9.7
9.68
9.65
9.7
9.68
9.66
9.72
9.83
9.81
9.78
9.83
9.84
9.91
10.03
10.08
9.95
9.84
10.05
10.05
9.87
10.04
10
10.07
9.994
9.98
10
10.09
10.08
10.09
10.14
10.2
10.2
10.2
10.05
9.99
9.87
9.81
9.93
9.82
9.83
9.84
9.87
9.88
9.87
9.9
9.9
10.07
10.05
10.05
10.18
10.2
10.06
9.94
9.949
10
10.19
10.061
10.14
10.14
10.11
10.15
10.15
10.05
10.13
9.94
9.94
10.08
10.01
10.02
10.08
10.03
10.1
10.15
10.3
10.27
9/30/05 10.3
FUND SNAPSHOT
------------------------------------
Share Price $10.30
------------------------------------
Net Asset Value $10.27
------------------------------------
Premium/(Discount) to NAV 0.29%
------------------------------------
Market Yield 4.60%
------------------------------------
Taxable-Equivalent Yield1 6.39%
------------------------------------
Net Assets ($000) $127,251
------------------------------------
Average Effective
Maturity on Securities
(Years) 11.44
------------------------------------
Modified Duration 4.17
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 9/19/92)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month
(Cumulative) 13.40% 2.82%
------------------------------------
1-Year 12.05% 4.32%
------------------------------------
5-Year 5.41% 3.29%
------------------------------------
10-Year 4.80% 4.19%
------------------------------------
STATES
(as a % of total investments)
------------------------------------
Colorado 13.0%
------------------------------------
Illinois 11.5%
------------------------------------
Washington 9.6%
------------------------------------
New York 8.9%
------------------------------------
Texas 5.9%
------------------------------------
District of Columbia 4.1%
------------------------------------
South Carolina 4.0%
------------------------------------
Wisconsin 3.8%
------------------------------------
Florida 3.8%
------------------------------------
Arkansas 3.0%
------------------------------------
Kansas 2.9%
------------------------------------
Michigan 2.5%
------------------------------------
Iowa 2.3%
------------------------------------
Alabama 2.1%
------------------------------------
Massachusetts 2.1%
------------------------------------
Tennessee 1.8%
------------------------------------
California 1.8%
------------------------------------
Utah 1.7%
------------------------------------
Connecticut 1.7%
------------------------------------
Kentucky 1.7%
------------------------------------
Other 11.8%
------------------------------------
SECTORS
(as a % of total investments)
------------------------------------
Utilities 20.0%
------------------------------------
Healthcare 16.3%
------------------------------------
U.S. Guaranteed 13.6%
------------------------------------
Tax Obligation/Limited 10.5%
------------------------------------
Consumer Staples 7.3%
------------------------------------
Long-Term Care 5.8%
------------------------------------
Transportation 5.5%
------------------------------------
Tax Obligation/General 5.1%
------------------------------------
Education and Civic
Organizations 4.6
------------------------------------
Other 11.3%
------------------------------------
1 Taxable-equivalent yield represents the yield that must be earned on a fully
taxable investment in order to equal the yield of the Fund on an after-tax
basis. It is based on a income tax rate of 28%. When comparing this Fund to
investments that generate qualified dividend income, the taxable-equivalent
yield is lower.
2 The Fund also paid shareholders a net ordinary income distribution in
December 2004 of $0.0024 per share.
8
Shareholder
MEETING REPORT
The Special Shareholder Meeting was held at The Northern Trust Bank,
50 S. La Salle St., Chicago, IL on July 26, 2005.
APPROVAL OF THE NEW INVESTMENT MANAGEMENT
AGREEMENT WAS REACHED AS FOLLOWS:
------------------------------------------------------------------------------------------------------------------------------------
For 11,598,857
Against 62,944
Abstain 97,713
------------------------------------------------------------------------------------------------------------------------------------
Total 11,759,514
====================================================================================================================================
APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS:
------------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner
For 11,688,226
Withhold 71,288
------------------------------------------------------------------------------------------------------------------------------------
Total 11,759,514
====================================================================================================================================
Lawrence H. Brown
For 11,691,806
Withhold 67,708
------------------------------------------------------------------------------------------------------------------------------------
Total 11,759,514
====================================================================================================================================
Jack B. Evans
For 11,689,426
Withhold 70,088
------------------------------------------------------------------------------------------------------------------------------------
Total 11,759,514
====================================================================================================================================
William C. Hunter
For 11,690,326
Withhold 69,188
------------------------------------------------------------------------------------------------------------------------------------
Total 11,759,514
====================================================================================================================================
David J. Kundert
For 11,690,426
Withhold 69,088
------------------------------------------------------------------------------------------------------------------------------------
Total 11,759,514
====================================================================================================================================
William J. Schneider
For 11,690,426
Withhold 69,088
------------------------------------------------------------------------------------------------------------------------------------
Total 11,759,514
====================================================================================================================================
Timothy R. Schwertfeger
For 11,693,526
Withhold 65,988
------------------------------------------------------------------------------------------------------------------------------------
Total 11,759,514
====================================================================================================================================
9
Shareholder
MEETING REPORT (continued)
APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS:
------------------------------------------------------------------------------------------------------------------------------------
Judith M. Stockdale
For 11,692,047
Withhold 67,467
------------------------------------------------------------------------------------------------------------------------------------
Total 11,759,514
====================================================================================================================================
Eugene S. Sunshine
For 11,692,926
Withhold 66,588
------------------------------------------------------------------------------------------------------------------------------------
Total 11,759,514
====================================================================================================================================
10
Nuveen Select Maturities Municipal Fund (NIM)
Portfolio of
INVESTMENTS September 30, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
ALABAMA - 2.1%
$ 2,000 Alabama 21st Century Authority, Tobacco Settlement Revenue 12/11 at 101.00 A- $ 2,156,840
Bonds, Series 2001, 5.750%, 12/01/17
500 Marshall County Healthcare Authority, Alabama, Revenue 1/12 at 101.00 A- 548,825
Bonds, Series 2002A, 6.250%, 1/01/22
------------------------------------------------------------------------------------------------------------------------------------
ARIZONA - 1.4%
965 Phoenix Industrial Development Authority, Arizona, Statewide 4/08 at 101.50 AAA 968,310
Single Family Mortgage Revenue Bonds, Series 1998C,
6.650%, 10/01/29 (Alternative Minimum Tax)
750 Winslow Industrial Development Authority, Arizona, Hospital No Opt. Call N/R 755,828
Revenue Bonds, Winslow Memorial Hospital, Series 1998,
5.750%, 6/01/08
------------------------------------------------------------------------------------------------------------------------------------
ARKANSAS - 3.0%
1,000 Fort Smith, Arkansas, Water and Sewer Revenue Refunding 10/11 at 100.00 AAA 1,086,960
and Construction Bonds, Series 2002A, 5.250%, 10/01/17 -
FSA Insured
1,000 Jonesboro, Arkansas, Industrial Development Revenue Bonds, No Opt. Call A+ 1,055,880
Anheuser Busch Inc. Project, Series 2002, 4.600%, 11/15/12
1,380 North Little Rock, Arkansas, Electric Revenue Refunding Bonds, No Opt. Call AAA 1,636,735
Series 1992A, 6.500%, 7/01/15 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA - 1.8%
2,115 Vernon, California, Electric System Revenue Bonds, 4/08 at 100.00 Aaa 2,233,377
Malburg Generating Station Project, Series 2003C,
5.250%, 4/01/17 (Pre-refunded to 4/01/08)
------------------------------------------------------------------------------------------------------------------------------------
COLORADO - 12.8%
2,895 Centennial Downs Metropolitan District, Colorado, General 12/14 at 100.00 AAA 3,091,165
Obligation Bonds, Series 1999, 5.000%, 12/01/20 -
AMBAC Insured
1,430 Colorado Educational and Cultural Facilities Authority, Charter 7/12 at 100.00 BBB 1,520,247
School Revenue Bonds, Douglas County School District RE-1 -
DCS Montessori School, Series 2002A, 6.000%, 7/15/22
1,175 Colorado Educational and Cultural Facilities Authority, 12/13 at 100.00 AAA 1,197,067
Charter School Revenue Bonds, Classical Academy,
Series 2003, 4.500%, 12/01/18 - XLCA Insured
485 Colorado Housing Finance Authority, Single Family Program 4/10 at 105.00 AA 506,699
Senior Bonds, Series 2000D-2, 6.900%, 4/01/29 (Alternative
Minimum Tax)
1,025 Denver Health and Hospitals Authority, Colorado, Healthcare 12/11 at 100.00 BBB 1,098,113
Revenue Bonds, Series 2001A, 6.000%, 12/01/23
1,465 Denver West Metropolitan District, Colorado, General 12/13 at 100.00 AA 1,470,889
Obligation Refunding and Improvement Bonds, Series 2003,
4.500%, 12/01/18 - RAAI Insured
1,340 Eagle Bend Metropolitan District 2, Colorado, General 12/14 at 101.00 AA 1,397,446
Obligation Bonds, Series 2004, 5.000%, 12/01/20 -
RAAI Insured
168 El Paso County, Colorado, FNMA Mortgage-Backed Single No Opt. Call Aaa 169,164
Family Revenue Refunding Bonds, Series 1992A-2,
8.750%, 6/01/11
70 Northwest Parkway Public Highway Authority, Colorado, 6/11 at 102.00 AAA 74,310
Revenue Bonds, Senior Series 2001A, 5.250%, 6/15/41 -
FSA Insured
5,875 Northwest Parkway Public Highway Authority, Colorado, 6/11 at 38.04 AAA 1,755,098
Senior Lien Revenue Bonds, Series 2001B, 0.000%, 6/15/27 -
AMBAC Insured
1,000 Summit County, Colorado, Sports Facilities Revenue Refunding No Opt. Call AAA 1,041,700
Bonds, Keystone Resorts Management, Inc. Project,
Series 1990, 7.750%, 9/01/06
2,845 University of Colorado Hospital Authority, Revenue Bonds, 11/11 at 100.00 Baa1 3,010,920
Series 2001A, 5.600%, 11/15/21
11
Nuveen Select Maturities Municipal Fund (NIM) (continued)
Portfolio of INVESTMENTS September 30, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONNECTICUT - 1.7%
Eastern Connecticut Resource Recovery Authority, Solid Waste
Revenue Bonds, Wheelabrator Lisbon Project, Series 1993A:
$ 500 5.500%, 1/01/14 (Alternative Minimum Tax) 1/06 at 100.00 BBB $ 505,100
1,570 5.500%, 1/01/15 (Alternative Minimum Tax) No Opt. Call BBB 1,599,987
------------------------------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA - 4.0%
District of Columbia, General Obligation Refunding Bonds,
Series 1993A:
900 6.000%, 6/01/07 - MBIA Insured No Opt. Call AAA 921,528
4,105 6.000%, 6/01/07 - MBIA Insured No Opt. Call AAA 4,201,550
------------------------------------------------------------------------------------------------------------------------------------
FLORIDA - 3.7%
2,400 Deltona, Florida, Utility Systems Water and Sewer Revenue 10/13 at 100.00 AAA 2,636,472
Bonds, Series 2003, 5.250%, 10/01/17 - MBIA Insured
2,000 Orange County, Florida, Tourist Development Tax Revenue 10/15 at 100.00 AAA 2,132,100
Bonds, Series 2005, 5.000%, 10/01/22 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
ILLINOIS - 11.4%
895 Chicago, Illinois, Tax Increment Allocation Bonds, Irving/Cicero 1/09 at 100.00 N/R 958,142
Redevelopment Project, Series 1998, 7.000%, 1/01/14
2,000 Illinois Development Finance Authority, Revenue Refunding 4/10 at 102.00 BBB- 2,112,600
Bonds, Olin Corporation, Series 1993D, 6.750%, 3/01/16
4,935 Illinois Development Finance Authority, GNMA Collateralized 4/11 at 105.00 Aaa 5,204,303
Mortgage Revenue Bonds, Greek American Nursing Home
Committee, Series 2000A, 7.600%, 4/20/40
2,000 Illinois Educational Facilities Authority, Revenue Bonds, No Opt. Call A1 2,027,780
Art Institute of Chicago, Series 2000, 4.450%, 3/01/34
(Mandatory put 3/01/15)
1,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, 2/06 at 100.00 A+ 1,009,480
Edward Hospital, Series 1993A, 6.000%, 2/15/19
1,210 Illinois Health Facilities Authority, Revenue Bonds, Silver 8/09 at 101.00 A 1,261,171
Cross Hospital and Medical Centers, Series 1999,
5.500%, 8/15/19
850 Illinois Housing Development Authority, Section 8 Elderly 11/05 at 100.00 A- 851,352
Housing Revenue Bonds, Skyline Towers Apartments,
Series 1992B, 6.625%, 11/01/07
1,000 Illinois Educational Facilities Authority, Student Housing 5/12 at 101.00 Baa2 1,115,990
Revenue Bonds, Educational Advancement Foundation Fund,
University Center Project, Series 2002, 6.625%, 5/01/17
------------------------------------------------------------------------------------------------------------------------------------
INDIANA - 0.8%
1,000 Indianapolis Local Public Improvement Bond Bank, Indiana, No Opt. Call AA 1,045,580
Series 1992D, 6.600%, 2/01/07
------------------------------------------------------------------------------------------------------------------------------------
IOWA - 2.3%
1,000 Iowa Finance Authority, Healthcare Revenue Bonds, Genesis 7/10 at 100.00 A1 1,072,500
Medical Center, Series 2000, 6.250%, 7/01/25
1,800 Iowa Tobacco Settlement Authority, Tobacco Settlement 6/11 at 101.00 BBB 1,836,828
Asset-Backed Revenue Bonds, Series 2001B, 5.300%, 6/01/25
------------------------------------------------------------------------------------------------------------------------------------
KANSAS - 2.9%
3,500 Wichita, Kansas, Hospital Facilities Revenue Refunding 11/11 at 101.00 A+ 3,710,035
and Improvement Bonds, Via Christi Health System Inc.,
Series 2001-III, 5.500%, 11/15/21
------------------------------------------------------------------------------------------------------------------------------------
KENTUCKY - 1.6%
2,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1/15 at 100.60 AAA 2,087,800
Series 2005G, 5.000%, 7/01/30 (Alternative Minimum Tax)
(WI, settling 10/11/05)
------------------------------------------------------------------------------------------------------------------------------------
MARYLAND - 0.9%
1,100 Maryland Energy Financing Administration, Revenue Bonds, 9/07 at 100.00 N/R 1,119,327
AES Warrior Run Project, Series 1995, 7.400%, 9/01/19
(Alternative Minimum Tax)
12
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS - 2.0%
$ 1,000 Massachusetts Industrial Finance Agency, Resource Recovery No Opt. Call BBB $ 1,001,860
Remarketed Revenue Refunding Bonds, Ogden Haverhill
Project, Series 1992A, 4.850%, 12/01/05
1,485 Massachusetts Housing Finance Agency, Rental Housing 7/10 at 100.00 AAA 1,605,092
Mortgage Revenue Bonds, Series 2000H, 6.650%, 7/01/41
(Alternative Minimum Tax) - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
MICHIGAN - 2.5%
1,000 Cornell Township Economic Development Corporation, 5/12 at 100.00 AAA 1,134,690
Michigan, Environmental Improvement Revenue Refunding
Bonds, MeadWestvaco Corporation-Escanaba Project,
Series 2002, 5.875%, 5/01/18 (Pre-refunded to 5/01/12)
924 Michigan State Hospital Finance Authority, Collateralized No Opt. Call Baa2 929,668
Loan, Detroit Medical Center, Series 2001, 7.360%, 3/01/07
470 Michigan State Hospital Finance Authority, Revenue No Opt. Call BB- 470,733
Refunding Bonds, Detroit Medical Center, Series 1988A,
8.125%, 8/15/12
600 Michigan State Hospital Finance Authority, Hospital Revenue 1/06 at 102.00 Ba3 605,964
Refunding Bonds, Sinai Hospital, Series 1995,
6.625%, 1/01/16
------------------------------------------------------------------------------------------------------------------------------------
MINNESOTA - 0.9%
1,000 White Earth Band of Chippewa Indians, Minnesota, Revenue No Opt. Call A 1,096,460
Bonds, Series 2000A, 7.000%, 12/01/11 - ACA Insured
------------------------------------------------------------------------------------------------------------------------------------
NEBRASKA - 0.8%
1,000 Dodge County School District 1, Nebraska, Fremont Public 12/14 at 100.00 Aaa 1,067,990
Schools, General Obligation Bonds, Series 2004,
5.000%, 12/15/19 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
NEW YORK - 8.9%
1,000 Dormitory Authority of the State of New York, Revenue Bonds, 7/13 at 100.00 AA 1,100,830
Brooklyn Law School, Series 2003A, 5.500%, 7/01/15 -
RAAI Insured
1,500 New York State Energy Research and Development Authority, 10/05 at 100.00 A1 1,500,750
Facilities Revenue Bonds, Consolidated Edison Company Inc.,
Series 2001A, 4.700%, 6/01/36 (Alternative Minimum Tax)
(Mandatory put 10/01/12)
1,225 New York State Medical Care Facilities Finance Agency, 2/06 at 102.00 AA+ 1,261,909
FHA-Insured Mortgage Hospital and Nursing Home Revenue
Bonds, Series 1995C, 6.100%, 8/15/15
2,130 Niagara Falls, Niagara County, New York, General Obligation No Opt. Call AAA 2,339,997
Water Treatment Plant Bonds, Series 1994, 8.500%, 11/01/07
(Alternative Minimum Tax) - MBIA Insured
4,300 Port Authority of New York and New Jersey, Special Project No Opt. Call AAA 5,073,957
Bonds, JFK International Air Terminal LLC, Sixth Series 1997,
7.000%, 12/01/12 (Alternative Minimum Tax) - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA - 1.6%
1,880 Union County, North Carolina, Certificates of Participation, 6/13 at 101.00 AAA 2,013,029
Series 2003, 5.000%, 6/01/18 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
OHIO - 1.6%
970 Hamilton County, Ohio, Hospital Facilities Revenue Refunding No Opt. Call A*** 977,430
Bonds, Bethesda Hospital Inc., Series 1992A, 6.250%, 1/01/06
1,000 Toledo-Lucas County Port Authority, Ohio, Port Revenue Bonds, No Opt. Call A+ 1,024,320
Cargill Inc., Series 2004B, 4.500%, 12/01/15
------------------------------------------------------------------------------------------------------------------------------------
OKLAHOMA - 0.9%
1,150 Oklahoma State Industries Authority, Health System Revenue 8/06 at 102.00 AAA 1,190,917
Refunding Bonds, Baptist Medical Center, Series 1995D,
5.000%, 8/15/14 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA - 1.2%
1,300 Pennsylvania Higher Educational Facilities Authority, College No Opt. Call Aaa 1,532,076
Revenue Bonds, Ninth Series 1976, 7.625%, 7/01/15
13
Nuveen Select Maturities Municipal Fund (NIM) (continued)
Portfolio of INVESTMENTS September 30, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA - 4.0%
Piedmont Municipal Power Agency, South Carolina, Electric
Revenue Bonds, Series 1991:
$ 1,040 6.750%, 1/01/19 - FGIC Insured No Opt. Call AAA $ 1,331,283
1,460 6.750%, 1/01/19 - FGIC Insured No Opt. Call AAA 1,827,672
1,250 South Carolina JOBS Economic Development Authority, No Opt. Call Baa2*** 1,410,238
Hospital Revenue Bonds, Palmetto Health Alliance,
Series 2000A, 7.000%, 12/15/10
500 Tobacco Settlement Revenue Management Authority, 5/11 at 101.00 BBB 536,005
South Carolina, Tobacco Settlement Asset-Backed Bonds,
Series 2001B, 6.000%, 5/15/22
------------------------------------------------------------------------------------------------------------------------------------
TENNESSEE - 1.8%
Shelby County Health, Educational and Housing Facilities
Board, Tennessee, Hospital Revenue Bonds, Methodist
Healthcare, Series 2002:
750 6.000%, 9/01/17 (Pre-refunded to 9/01/12) 9/12 at 100.00 A-*** 861,435
1,250 6.000%, 9/01/17 (Pre-refunded to 9/01/12) 9/12 at 100.00 A-*** 1,435,725
------------------------------------------------------------------------------------------------------------------------------------
TEXAS - 5.9%
1,055 Austin, Texas, General Obligation Bonds, Series 2004, 9/14 at 100.00 AAA 1,117,614
5.000%, 9/01/20 - MBIA Insured
415 Austin-Travis County Mental Health Center, Texas, Revenue 3/06 at 100.50 AAA 422,590
Bonds, Mental Health and Mental Retardation Center
Facilities Acquisition Program, Series 1995A,
6.500%, 3/01/15 - FSA Insured
2,000 Brazos River Authority, Texas, Collateralized Revenue 6/14 at 100.00 AAA 2,015,060
Refunding Bonds, CenterPoint Energy Inc., Series 2004B,
4.250%, 12/01/17 - FGIC Insured
155 Galveston Property Finance Authority Inc., Texas, 3/06 at 100.00 A3 155,477
Single Family Mortgage Revenue Bonds, Series 1991A,
8.500%, 9/01/11
2,500 Matagorda County Navigation District 1, Texas, Pollution No Opt. Call BBB 2,540,775
Control Revenue Refunding Bonds, Central Power and
Light Company, Series 2001A, 4.550%, 11/01/29
(Mandatory put 11/01/06)
460 Tom Green County Health Facilities Development Corporation, No Opt. Call Baa3 463,951
Texas, Hospital Revenue Bonds, Shannon Health System
Project, Series 2001, 5.600%, 5/15/06
300 Travis County Health Facilities Development Corporation, 11/05 at 100.00 Aaa 301,065
Texas, Hospital Revenue Bonds, Daughters of Charity
National Health System, Series 1993B, 5.900%, 11/15/07
455 Tri-County Mental Health and Retardation Center, Texas, 3/06 at 100.50 AAA 463,322
Revenue Bonds, Facilities Acquisition Program,
Series 1995E, 6.500%, 3/01/15 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
UTAH - 1.7%
2,055 Bountiful, Davis County, Utah, Hospital Revenue Refunding No Opt. Call N/R 2,134,200
Bonds, South Davis Community Hospital Project,
Series 1998, 6.000%, 12/15/10
------------------------------------------------------------------------------------------------------------------------------------
WASHINGTON - 9.5%
Washington Public Power Supply System, Revenue Refunding
Bonds, Nuclear Project 1, Series 1993A:
160 7.000%, 7/01/07 No Opt. Call Aaa 170,541
1,340 7.000%, 7/01/07 No Opt. Call Aaa 1,430,651
1,130 7.000%, 7/01/08 No Opt. Call Aaa 1,245,509
1,870 7.000%, 7/01/08 No Opt. Call Aaa 2,052,325
7,000 Washington Public Power Supply System, Revenue Refunding No Opt. Call Aaa 6,847,890
Bonds, Nuclear Project 3, Series 1990B, 0.000%, 7/01/06
295 Washington Public Power Supply System, Revenue Refunding No Opt. Call AAA 373,715
Bonds, Nuclear Project 3, Series 1989B, 7.125%, 7/01/16 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA - 1.6%
2,000 Harrison County Commission, West Virginia, Solid Waste 8/06 at 100.00 AAA 2,025,820
Disposal Revenue Bonds, West Penn Power Company,
Series 1994C, 6.750%, 8/01/24 (Alternative Minimum Tax) -
MBIA Insured
14
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
WISCONSIN - 3.8%
Badger Tobacco Asset Securitization Corporation, Wisconsin,
Tobacco Settlement Asset-Backed Bonds, Series 2002:
$ 885 6.125%, 6/01/27 6/12 at 100.00 BBB $ 946,755
1,480 6.375%, 6/01/32 6/12 at 100.00 BBB 1,609,382
1,000 Wisconsin Health and Educational Facilities Authority, 7/11 at 100.00 A- 1,068,670
Revenue Bonds, Agnesian Healthcare Inc., Series 2001,
6.000%, 7/01/21
1,150 Wisconsin Health and Educational Facilities Authority, 2/09 at 101.00 A 1,186,385
Revenue Bonds, Aurora Health Care Inc., Series 1999A,
5.500%, 2/15/20 - ACA Insured
------------------------------------------------------------------------------------------------------------------------------------
$ 123,137 Total Long-Term Investments (cost $121,950,005) - 99.1% 126,086,925
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.9% 1,164,275
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 127,251,200
====================================================================================================================
* Optional Call Provisions: Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates. Certain mortgage-backed securities may be
subject to periodic principal paydowns.
** Ratings: Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities which ensures the timely payment of
principal and interest. Such securities are normally
considered to be equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis.
See accompanying notes to financial statements.
15
Statement of
ASSETS AND LIABILITIES September 30, 2005 (Unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments, at market value (cost $121,950,005) $126,086,925
Cash 976,266
Receivables:
Interest 2,015,671
Investments sold 415,000
Other assets 3,607
--------------------------------------------------------------------------------
Total assets 129,497,469
--------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 2,162,800
Accrued expenses:
Management fees 51,357
Other 32,112
--------------------------------------------------------------------------------
Total liabilities 2,246,269
--------------------------------------------------------------------------------
Net assets $127,251,200
================================================================================
Shares outstanding 12,394,977
================================================================================
Net asset value per share outstanding
(net assets divided by shares outstanding) $ 10.27
================================================================================
NET ASSETS CONSIST OF:
--------------------------------------------------------------------------------
Shares, $.01 par value per share $ 123,950
Paid-in surplus 138,316,282
Undistributed (Over-distribution of) net investment income (32,698)
Accumulated net realized gain (loss) from investments (15,293,254)
Net unrealized appreciation of investments 4,136,920
--------------------------------------------------------------------------------
Net assets $127,251,200
================================================================================
Authorized shares Unlimited
================================================================================
See accompanying notes to financial statements.
16
Statement of
OPERATIONS Six Months Ended
September 30, 2005 (Unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME $3,365,534
--------------------------------------------------------------------------------
EXPENSES
Management fees 313,769
Shareholders' servicing agent fees and expenses 6,806
Custodian's fees and expenses 19,059
Trustees' fees and expenses 1,221
Professional fees 6,851
Shareholders' reports - printing and mailing expenses 10,917
Stock exchange listing fees 5,206
Investor relations expense 10,507
Other expenses 3,678
--------------------------------------------------------------------------------
Total expenses before custodian fee credit 378,014
Custodian fee credit (5,664)
--------------------------------------------------------------------------------
Net expenses 372,350
--------------------------------------------------------------------------------
Net investment income 2,993,184
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from investments (10,427)
Change in net unrealized appreciation (depreciation) of investments 560,854
--------------------------------------------------------------------------------
Net realized and unrealized gain 550,427
--------------------------------------------------------------------------------
Net increase in net assets from operations $3,543,611
================================================================================
See accompanying notes to financial statements.
17
Statement of
CHANGES IN NET ASSETS (Unaudited)
SIX MONTHS ENDED YEAR ENDED
9/30/05 3/31/05
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 2,993,184 $ 6,112,779
Net realized gain (loss) from investments (10,427) 22,958
Change in net unrealized appreciation (depreciation) of investments 560,854 (1,920,901)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 3,543,611 4,214,836
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (2,937,610) (5,904,969)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (2,937,610) (5,904,969)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 606,001 (1,690,133)
Net assets at the beginning of period 126,645,199 128,335,332
------------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $127,251,200 $126,645,199
====================================================================================================================================
Undistributed (Over-distribution of) net investment income at the end of period $ (32,698) $ (88,272)
====================================================================================================================================
See accompanying notes to financial statements.
18
Notes to
FINANCIAL STATEMENTS (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The fund covered in this report and its corresponding New York Stock Exchange
symbol is Nuveen Select Maturities Municipal Fund (NIM) (the "Fund"). The Fund
is registered under the Investment Company Act of 1940, as amended, as a
closed-end, diversified management investment company.
The Fund seeks to provide current income exempt from regular federal income tax,
consistent with the preservation of capital by investing in a diversified,
investment-grade quality portfolio of municipal obligations with intermediate
characteristics. In 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 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 Adviser 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 of twelve years or less.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with U.S.
generally accepted accounting principles.
Investment 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 market price
quotes are not readily available (which is usually the case for municipal
securities), the pricing service or, in the absence of a pricing service for a
particular security, the Board of Trustees of the Fund, or its designee, may
establish fair market value using a wide variety of market data including yields
or prices of municipal bonds of comparable quality, type of issue, coupon,
maturity and rating, market quotes or indications of value from securities
dealers, evaluations of anticipated cash flows or collateral, general market
conditions and other information and analysis, including the obligor's credit
characteristics considered relevant by the pricing service or the Board of
Trustees' designee. 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 transactions are determined on the specific identification method.
Securities purchased on a when-issued or delayed delivery basis may have
extended settlement periods. Any securities so purchased are subject to market
fluctuation during this period. The Fund has instructed the custodian to
segregate assets with a current value at least equal to the amount of the
when-issued and delayed delivery purchase commitments. At September 30, 2005,
the Fund had an outstanding when-issued purchase commitment of $2,162,800.
Investment Income
Interest income, which includes the amortization of premiums and accretion of
discounts for financial reporting purposes, is recorded on an accrual basis.
Investment income also includes paydown gains and losses, if any.
Federal Income Taxes
The Fund intends to distribute substantially all net investment income and net
capital gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal income tax provision is required. Furthermore,
the Fund intends to satisfy conditions which will enable interest from municipal
securities, which is exempt from regular federal income tax, to retain such
tax-exempt status when distributed to shareholders of the Fund. Net realized
capital gains and ordinary income distributions paid by the Fund are subject to
federal taxation.
19
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
Dividends and Distributions to Shareholders
Dividends from tax-exempt net investment income are declared monthly. 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, if any, 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 U.S. generally accepted
accounting principles.
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the six months ended September 30, 2005.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on the Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Indemnifications
Under the Fund's organizational documents, its Officers and Trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts that provide general indemnifications to other parties.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. 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.
2. FUND SHARES
The Fund did not engage in transactions in its own shares during the six months
ended September 30, 2005, nor during the fiscal year ended March 31, 2005.
3. INVESTMENT TRANSACTIONS
Purchases and sales (including maturities) of investments in long-term municipal
securities for the six months ended September 30, 2005, aggregated $5,751,018
and $4,914,668, respectively.
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to the treatment of paydown gains and losses, timing differences
in recognizing taxable market discount and timing differences in recognizing
certain gains and losses on investment transactions.
At September 30, 2005, the cost of investments owned was $121,841,862.
The net unrealized appreciation of investments at September 30, 2005, aggregated
$4,245,063 of which $4,667,246 related to appreciated securities and $422,183
related to depreciated securities.
20
The tax components of undistributed net investment income and net realized gains
at March 31, 2005, the Fund's last fiscal year end, were as follows:
--------------------------------------------------------------------------------
Undistributed net tax-exempt income * $293,159
Undistributed net ordinary income ** 16,787
Undistributed net long-term capital gains --
================================================================================
* Undistributed net tax-exempt income (on a tax basis) has not been reduced for
the dividend declared on March 1, 2005, paid on April 1, 2005.
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
The tax character of distributions paid during the fiscal year ended March 31,
2005, the Fund's last fiscal year end, was designated for purposes of the
dividends paid deduction as follows:
--------------------------------------------------------------------------------
Distributions from net tax-exempt income $5,875,221
Distributions from net ordinary income ** 29,748
Distributions from net long-term capital gains --
================================================================================
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
At March 31, 2005, the Fund's last fiscal year end, the Fund had unused capital
loss carryforwards of $15,281,082 available for federal income tax purposes to
be applied against future capital gains, if any. If not applied, $14,922 of the
carryforward will expire in the year 2010, $6,523,386 will expire in 2011,
$8,737,798 will expire in 2012 and $4,976 will expire in 2013.
The Fund elected to defer $1,744 of net realized losses from investments
incurred from November 1, 2004 through March 31, 2005 ("post-October losses") in
accordance with Federal income tax regulations. The post-October losses were
treated as having arisen on the first day of the current fiscal year.
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund's management fee is separated into two components - a complex-level
component, based on the aggregate amount of all fund assets managed by the
Adviser, and a specific fund-level component, based only on the amount of assets
within each individual fund. This pricing structure enables Nuveen fund
shareholders to benefit from growth in the assets within each individual fund as
well as from growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee, payable monthly, is based upon the average daily net
assets of the Fund as follows:
AVERAGE DAILY NET ASSETS FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $125 million .3000%
For the next $125 million .2875
For the next $250 million .2750
For the next $500 million .2625
For the next $1 billion .2500
For net assets over $2 billion .2375
================================================================================
21
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
The annual complex-level fee, payable monthly, which is additive to the
fund-level fee, for all Nuveen sponsored funds in the U.S., is based on the
aggregate amount of total fund assets managed as stated in the table below. As
of September 30, 2005, the complex-level fee rate was .1898%.
COMPLEX-LEVEL ASSETS(1) COMPLEX-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $55 billion .2000%
For the next $1 billion .1800
For the next $1 billion .1600
For the next $3 billion .1425
For the next $3 billion .1325
For the next $3 billion .1250
For the next $5 billion .1200
For the next $5 billion .1175
For the next $15 billion .1150
For Managed Assets over $91 billion(2) .1400
================================================================================
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
all types of leverage used by the Nuveen funds) of Nuveen-sponsored funds
in the U.S.
(2) With respect to the complex-wide Managed Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined at a later
date. In the unlikely event that complex-wide Managed Assets reach $91
billion prior to a determination of the complex-level fee rate or rates to
be applied to Managed Assets in excess of $91 billion, the complex-level
fee rate for such complex-wide Managed Assets shall be .1400% until such
time as a different rate or rates is determined.
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Fund pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Fund from the Adviser or its affiliates. The Board of Trustees has
adopted a deferred compensation plan for independent Trustees that enables
Trustees to elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from certain Nuveen advised Funds.
Under the plan, deferred amounts are treated as though equal dollar amounts had
been invested in shares of select Nuveen advised Funds.
6. ANNOUNCEMENT REGARDING PARENT COMPANY OF ADVISER
In early April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul
Travelers"), which owned 79% of Nuveen, (A) completed a public offering of a
substantial portion of its equity stake in Nuveen, (B) sold Nuveen $200 million
of its Nuveen shares, (C) entered into an agreement with Nuveen to sell an
additional $400 million of its Nuveen shares on a "forward" basis with payment
for and settlement of these shares delayed for several months, and (D) entered
into agreements with two unaffiliated investment banking firms to sell an amount
equal to most or all of its remaining Nuveen shares for current payment but for
future settlement. Transactions (C) and (D) above were settled in late July,
which effectively reduced St. Paul Travelers' controlling stake in Nuveen and
was deemed an "assignment" (as defined in the 1940 Act) of the investment
management agreements between the Funds and the Adviser, which resulted in the
automatic termination of each agreement under the 1940 Act. In anticipation of
such deemed assignment, the Board of Trustees had approved new ongoing
investment management agreements for each Fund and the submission of those
agreements for approval by each respective Fund's shareholders, which
shareholder approval was received prior to the settlement of transactions (C)
and (D). The new ongoing management agreements took effect upon such settlement.
7. SUBSEQUENT EVENT - DISTRIBUTIONS TO SHAREHOLDERS
The Fund declared a dividend distribution of $.0395 per share from its
tax-exempt net investment income which was paid on November 1, 2005, to
shareholders of record on October 15, 2005.
22
Financial
HIGHLIGHTS (Unaudited)
23
Financial
HIGHLIGHTS (Unaudited)
Selected data for a share outstanding throughout each period:
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------- ---------------------------------
NET
BEGINNING NET REALIZED/ NET ENDING ENDING
NET ASSET INVESTMENT UNREALIZED INVESTMENT CAPITAL NET ASSET MARKET
VALUE INCOME GAIN (LOSS) TOTAL INCOME GAINS TOTAL VALUE VALUE
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 3/31:
2006(b) $10.22 $.24 $ .05 $.29 $(.24) $ -- $(.24) $10.27 $10.3000
2005 10.35 .49 (.14) .35 (.48) -- (.48) 10.22 9.3000
2004 10.34 .51 -- .51 (.50) -- (.50) 10.35 9.9300
2003(a) 10.57 .43 (.22) .21 (.44) -- (.44) 10.34 9.8500
Year Ended 5/31:
2002 11.21 .57 (.57) -- (.61) (.03) (.64) 10.57 10.4500
2001 11.16 .62 .06 .68 (.63) -- (.63) 11.21 10.8700
2000 11.84 .63 (.59) .04 (.62) (.10) (.72) 11.16 10.1875
====================================================================================================================================
TOTAL RETURNS RATIOS/SUPPLEMENTAL DATA
---------------------- ---------------------------------------------------------------------------------------
BEFORE CREDIT AFTER CREDIT**
----------------------------- -----------------------------
RATIO OF NET RATIO OF NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
BASED ON BASED ON ENDING EXPENSES TO INCOME TO EXPENSES TO INCOME TO PORTFOLIO
MARKET NET ASSET NET ASSETS AVERAGE AVERAGE AVERAGE AVERAGE TURNOVER
VALUE+ VALUE+ (000) NET ASSETS NET ASSETS NET ASSETS NET ASSETS RATE
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 3/31:
2006(b) 13.40% 2.82% $127,251 .59%* 4.67%* .58%* 4.68%* 4%
2005 (1.52) 3.44 126,645 .61 4.81 .60 4.82 10
2004 6.03 5.09 128,335 .63 4.92 .62 4.93 13
2003(a) (1.48) 2.03 128,106 .65* 4.95* .65* 4.96* 6
Year Ended 5/31:
2002 1.87 (.06) 130,959 .69 5.23 .68 5.23 48
2001 13.15 6.19 138,804 .64 5.50 .61 5.53 35
2000 (5.48) .43 138,149 .61 5.48 .61 5.49 6
====================================================================================================================================
* Annualized.
** After custodian fee credit, where applicable.
+ Total Investment Return on Market Value is the combination of changes in
the market price per share and the effect of reinvested dividend income and
reinvested capital gains distributions, if any, at the average price paid
per share at the time of reinvestment. Total Return on Net Asset Value is
the combination of changes in net asset value, reinvested dividend income
at net asset value and reinvested capital gains distributions at net asset
value, if any. Total returns are not annualized.
(a) For the period June 1, 2002 through March 31, 2003.
(b) For the six months ended September 30, 2005.
See accompanying notes to financial statements.
24-25 SPREAD
ANNUAL INVESTMENT
MANAGEMENT AGREEMENT
APPROVAL PROCESS
At a meeting held on May 10-12, 2005, the Board of Trustees of the Fund,
including the independent Trustees, unanimously approved the Investment
Management Agreement between the Fund and NAM.
THE APPROVAL PROCESS
To assist the Board in its evaluation of an advisory contract with NAM, the
independent Trustees received a report in adequate time in advance of their
meeting which outlined, among other things, the services provided by NAM; the
organization of NAM, including the responsibilities of various departments and
key personnel; the Fund's past performance as well as the Fund's performance
compared to funds of similar investment objectives compiled by an independent
third party (a "Peer Group"); the profitability of NAM and certain industry
profitability analyses for advisers to unaffiliated investment companies; the
expenses of NAM in providing the various services; the management fees of NAM,
including comparisons of such fees with the management fees of comparable funds
in its Peer Group as well as comparisons of NAM's management fees with the fees
NAM assesses to other types of investment products or accounts, if any; the soft
dollar practices of NAM; and the expenses of the Fund, including comparisons of
the Fund's expense ratios (after any fee waivers) with the expense ratios of its
Peer Group. This information supplements that received by the Board throughout
the year regarding Fund performance, expense ratios, portfolio composition,
trade execution and sales activity.
In addition to the foregoing materials, independent legal counsel to the
independent Trustees provided, in advance of the meeting, a legal memorandum
outlining, among other things, the duties of the Trustees under the 1940 Act as
well as the general principles of relevant state law in reviewing and approving
advisory contracts; the requirements of the 1940 Act in such matters; an
adviser's fiduciary duty with respect to advisory agreements and compensation;
the standards used by courts in determining whether investment company boards of
directors have fulfilled their duties and factors to be considered by the board
in voting on advisory agreements.
At the Board meeting, NAM made a presentation to and responded to questions from
the Board. After the presentations and after reviewing the written materials,
the independent Trustees met privately with their legal counsel to review the
Board's duties in reviewing advisory contracts and consider the renewal of the
advisory contract. It is with this background that the Trustees considered the
Investment Management Agreement with NAM. The independent Trustees, in
consultation with independent counsel, reviewed the factors set out in judicial
decisions and SEC directives relating to the renewal of advisory contracts. As
outlined in more detail below, the Trustees considered all factors they believed
relevant with respect to the Fund, including the following: (a) the nature,
extent and quality of the services to be provided by NAM; (b) the investment
performance of the Fund and NAM; (c) the costs of the services to be provided
and profits to be realized by NAM and its affiliates from the relationship with
the Fund; (d) the extent to which economies of scale would be realized as the
Fund grows; and (e) whether fee levels reflect these economies of scale for the
benefit of Fund investors.
A. NATURE, EXTENT AND QUALITY OF SERVICES
In evaluating the nature, extent and quality of NAM's services, the Trustees
reviewed information concerning the types of services that NAM or its affiliates
provide and are expected to provide to the Nuveen Funds; narrative and
statistical information concerning the Fund's performance record and how such
performance compares to the Fund's Peer Group; information describing NAM's
organization and its various departments, the experience and responsibilities of
key personnel, and available resources. In the discussion of key personnel, the
Trustees received materials regarding the changes or additions in personnel of
NAM. The Trustees further noted the willingness of the personnel of NAM to
engage in open, candid discussions with the Board. The Trustees further
considered the quality of NAM's investment process in making portfolio
management decisions, including any refinements or improvements to the portfolio
management processes, enhancements to technology and systems that are available
to portfolio managers, and any additions of new personnel which may strengthen
or expand the research and investment capabilities of NAM. In their review of
the advisory contracts for the fixed income funds, such as the Fund, the
Trustees also noted that Nuveen won the Lipper Award for Best Fund Family: Fixed
Income-Large Asset Class, for 2004. Given the Trustees' experience with the
Fund, other Nuveen funds and NAM, the Trustees noted that they were familiar
with and continue to have a good understanding of the organization, operations
and personnel of NAM.
In addition to advisory services, the independent Trustees considered the
quality of the administrative or non-advisory services provided. In this regard,
NAM provides the Fund with such administrative and other services (exclusive of,
and in addition to, any such services provided by others for the Fund) and
officers and other personnel as are necessary for the operations of the Fund. In
addition to investment management services, NAM and its affiliates provide the
Fund with a wide range of services, including: preparing shareholder reports;
providing daily accounting; providing quarterly financial statements; overseeing
and coordinating the activities of other service providers; administering and
organizing Board meetings and preparing the Board materials for such meetings;
providing
26
legal support (such as helping to prepare registration statements, amendments
thereto and proxy statements and responding to regulatory inquiries); and
performing other Fund administrative tasks necessary for the operation of the
Fund (such as tax reporting and fulfilling regulatory filing requirements). In
addition, in evaluating the administrative services, the Trustees considered, in
particular, NAM's policies and procedures for assuring compliance with
applicable laws and regulations in light of the new SEC regulations governing
compliance. The Trustees noted NAM's focus on compliance and its compliance
systems. In their review, the Trustees considered, among other things, the
additions of experienced personnel to NAM's compliance group and modifications
and other enhancements to NAM's computer systems. In addition to the foregoing,
the Trustees also noted that NAM outsources certain services that cannot be
replicated without significant costs or at the same level of expertise. Such
outsourcing has been a beneficial and efficient use of resources by keeping
expenses low while obtaining quality services.
In addition to the above, in reviewing the variety of additional services that
NAM or its affiliates must provide to closed-end funds, such as the Fund, the
independent Trustees determined that Nuveen's commitment to supporting the
secondary market for the common shares of its closed-end funds is particularly
noteworthy. In this regard, the Trustees noted Nuveen's efforts to sponsor
numerous forums for analysts and specialists regarding the various Nuveen
closed-end funds, its creation of a new senior position dedicated to providing
secondary market support services and enhancing communications with investors
and analysts, and its advertising and media relations efforts designed to raise
investor and analyst awareness of the closed-end funds.
With respect to services provided to municipal funds, including the Fund, the
Trustees also noted, among other things, the enhancements NAM implemented to its
municipal portfolio management processes (e.g., the increased use of benchmarks
to guide and assess the performance of its portfolio managers); the
implementation of a risk management program; and the various initiatives being
undertaken to enhance or modify NAM's computer systems as necessary to support
the innovations of the municipal investment team (such as, the ability to assess
certain historical data in order to create customized benchmarks, perform
attribution analysis and facilitate the use of derivatives as hedging
instruments). With respect to certain of the Nuveen funds with a less seasoned
portfolio, the Trustees also noted the hedging program implemented for such
funds and the team responsible for developing, implementing and monitoring the
hedging procedures. The hedging program was designed to help maintain the
applicable fund's duration with certain benchmarks.
Based on their review, the Trustees concluded that, overall, they were satisfied
with the nature, extent and quality of services provided (and expected to be
provided) to the Fund under the Investment Management Agreement.
B. THE INVESTMENT PERFORMANCE OF THE FUND AND ADVISER
As previously noted, the Board received a myriad of performance information
regarding the Fund and its Peer Group. Among other things, the Board received
materials reflecting the Fund's historic performance and the Fund's performance
compared to its Peer Group. In evaluating the performance information, in
certain limited instances, the Trustees noted that the closest Peer Group for a
fund still would not adequately reflect such fund's investment objectives and
strategies, thereby limiting the usefulness of the comparisons of such fund's
performance with that of the Peer Group.
As noted above, the performance data included, among other things, the Fund's
performance relative to its peers. More specifically, the Fund's one-, three-
and five-year total returns (as applicable) for the periods ending December 31,
2004 were evaluated relative to the unaffiliated funds in its respective Peer
Group (including the returns of individual peers as well as the Peer Group
average) as well as additional performance information with respect to all funds
in the Peer Group. Based on their review, the Trustees determined that the
respective Fund's absolute and relative investment performance over time had
been satisfactory.
C. FEES, EXPENSES AND PROFITABILITY
1. FEES AND EXPENSES
In evaluating the management fees and expenses that the Fund is expected to
bear, the Trustees considered the Fund's current management fee structure and
the Fund's expected expense ratios in absolute terms as well as compared with
the fees and expense ratios of the unaffiliated funds in its Peer Group. The
Trustees reviewed the financial information of NAM, including its respective
revenues, expenses and profitability. In reviewing fees, the Trustees, among
other things, reviewed comparisons of the Fund's gross management fees (fees
after fund-level and complex-wide level breakpoints but before reimbursement
and fee waivers), net management fees (after breakpoints and reimbursements
and fee waivers) and total expense ratios (before and after waivers) with
those of the unaffiliated funds in the Peer Group and peer averages. In this
regard, the Trustees noted that the relative ranking of the Nuveen funds on
fees and expenses was aided by the significant level of fee reductions
provided by the fund-level and complex-wide breakpoint schedules, and the fee
waivers and reimbursements provided by Nuveen for certain funds launched
since 1999. The complex-wide breakpoint schedule was instituted in 2004 and
is described in further detail below in Section D entitled "Economies of
Scale and Whether Fee Levels Reflect these Economies of Scale." In their
review of the fee and expense information provided, including, in particular,
the expense ratios of the unaffiliated funds in its respective Peer Group,
the Trustees determined that the Fund's net total expense ratio was within an
acceptable range compared to such peers.
2. COMPARISONS WITH THE FEES OF OTHER CLIENTS
The Trustees further compared the fees of NAM to the fees NAM assessed for
other types of clients investing in municipal funds (such as municipal
managed accounts). With respect to such separately managed accounts, the
advisory fees for such accounts are generally lower than those charged to the
Fund. The Trustees noted, however, the additional services that are provided
and the costs incurred by Nuveen in managing and operating registered
investment companies, such as the Fund, compared to individually managed
separate accounts. For instance, as described above, NAM and its affiliates
provide numerous services to the Fund including, but not limited to,
preparing shareholder reports; providing daily accounting; preparing
quarterly financial statements;
27
ANNUAL INVESTMENT MANAGEMENT
AGREEMENT APPROVAL PROCESS (continued)
overseeing and coordinating the activities of other service providers;
administering and organizing Board meetings and preparing the Board materials
for such meetings; providing legal support; and administering all other
aspects of the Fund's operations. Further, the Trustees noted the increased
compliance requirements for funds in light of new SEC regulations and other
legislation. These services are generally not required to the same extent, if
at all, for separate accounts. In addition to the differences in services,
the Trustees also considered, among other things, the differences in product
distribution, investment policies, investor profiles and account sizes.
Accordingly, the Trustees believe that the nature and number of services
provided to operate the Fund merit the higher fees than those to separate
managed accounts.
3. PROFITABILITY OF NAM
In conjunction with its review of fees, the Trustees also considered NAM's
profitability. The Trustees reviewed NAM's revenues, expenses and
profitability margins (on both a pre-tax and after-tax basis). In reviewing
profitability, the Trustees recognized that one of the most difficult issues
in determining profitability is establishing a method of allocating expenses.
Accordingly, the Trustees reviewed NAM's assumptions and methodology of
allocating expenses. In this regard, the methods of allocation used appeared
reasonable but the Board noted the inherent limitations in allocating costs
among various advisory products. The Trustees also recognized that individual
fund or product line profitability of other advisers is generally not
publicly available. Further, profitability may be affected by numerous
factors including the types of funds managed, expense allocations, business
mix, etc. and therefore comparability of profitability is somewhat limited.
Nevertheless, to the extent available, the Trustees considered NAM's profit
margin compared to the profitability of various publicly-traded investment
management companies and/or investment management companies that publicly
disclose some or all of their financial results compiled by three independent
third-party service providers. The Trustees also reviewed the revenues,
expenses and profit margins of various unaffiliated advisory firms with
similar amounts of assets under management for the last year prepared by NAM.
Based on their review, the Trustees were satisfied that NAM's level of
profitability from its relationship with the Fund was reasonable in light of
the services provided.
In evaluating the reasonableness of the compensation, the Trustees also
considered any other revenues paid to NAM as well as any indirect benefits
(such as soft dollar arrangements, if any) NAM and its affiliates are
expected to receive that are directly attributable to their management of the
Fund, if any. See Section E below for additional information. Based on their
review of the overall fee arrangements of the Fund, the Trustees determined
that the advisory fees and expenses of the Fund were reasonable.
D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE
In reviewing the compensation, the Trustees have long understood the benefits of
economies of scale as the assets of a fund grow and have sought to ensure that
shareholders share in these benefits. One method for shareholders to share in
economies of scale is to include breakpoints in the advisory fee schedules that
reduce fees as fund assets grow. Accordingly, the Trustees received and reviewed
the schedules of advisory fees for the Fund, including fund-level breakpoints
thereto. In addition, after lengthy negotiations with management, the Board in
May, 2004 approved a complex-wide fee arrangement pursuant to which fees of the
funds in the Nuveen complex, including the Fund, are reduced as the assets in
the fund complex reach certain levels. The complex-wide fee arrangement was
introduced on August 1, 2004 and the Trustees reviewed data regarding the
reductions of fees for the Nuveen funds for the period of August 1, 2004 to
December 31, 2004. In evaluating the complex-wide fee arrangement, the Trustees
considered, among other things, the historic and expected fee savings to
shareholders as assets grow, the amount of fee reductions at various asset
levels, and that the arrangement would extend to all funds in the Nuveen
complex. The Trustees also considered the impact, if any, the complex-wide fee
arrangement may have on the level of services provided. Based on their review,
the Trustees concluded that the breakpoint schedule and complex-wide fee
arrangement currently were acceptable and desirable in providing benefits from
economies of scale to shareholders.
E. INDIRECT BENEFITS
In evaluating fees, the Trustees also considered any indirect benefits or
profits NAM or its affiliates may receive as a result of its relationship with
the Fund. In this regard, the Trustees considered any benefits from soft dollar
arrangements. The Trustees noted that although NAM manages a large amount of
assets, it has very little, if any, brokerage to allocate. This is due to the
fact that NAM typically manages the portfolios of the municipal funds in the
Nuveen complex and municipal bonds generally trade on a principal basis.
Accordingly, NAM does not currently have any soft dollar arrangements and does
not pay excess brokerage commissions (or spreads on principal transactions) in
order to receive research services. In addition to soft dollar arrangements, the
Trustees also considered any other revenues, if any, received by NAM or its
affiliates. In this regard, the Trustees considered revenues received by
28
Nuveen for serving as agent for broker-dealers at its preferred trading desk and
for acting as co-manager in the initial public offering of new closed-end
exchange-traded funds.
F. OTHER CONSIDERATIONS
Nuveen, until recently, was a majority-owned subsidiary of St. Paul Travelers
Companies, Inc. ("St. Paul"). As noted, St. Paul earlier this year announced its
intention to divest its equity stake in Nuveen. Nuveen is the parent of NAM.
Pursuant to a series of transactions, St. Paul had begun to reduce its interest
in Nuveen which will ultimately result in a change of control of Nuveen and
therefore NAM. As mandated by the 1940 Act, such a change in control would
result in an assignment of the Investment Management Agreement with NAM and the
automatic termination of such agreement. Accordingly, the Board also considered
the approval of a New Investment Management Agreement with the Fund in light of,
and which would take effect upon, the anticipated change of control. More
specifically, the Board considered for the Fund a New Investment Management
Agreement on substantially identical terms to the existing Investment Management
Agreement, to take effect after the change of control has occurred and the
contract has been approved by Fund shareholders. In its review, the Board
considered whether the various transactions necessary to divest St. Paul's
interest will have an impact on the various factors they considered in approving
NAM, such as the scope and quality of services to be provided following the
change of control. In reviewing the St. Paul transactions, the Board considered,
among other things, the impact, if any, on the operations and organizational
structure of NAM; the possible benefits and costs of the transactions to the
respective Fund; the potential implications of any arrangements used by Nuveen
to finance certain of the transactions; the ability of NAM to perform its duties
after the transactions; whether a fee structure or expense ratio would change;
any changes to the current practices of the Fund; any changes to the terms of
the advisory agreement; and any anticipated changes to the operations of NAM.
Based on its review, the Board determined that St. Paul's divestiture would not
affect the nature and quality of services provided by NAM, the terms of the
Investment Management Agreement, including the fees thereunder, and would not
materially affect the organization or operations of NAM. Accordingly, the Board
determined that their analysis of the various factors regarding their approval
of NAM would continue to apply after the change of control.
G. APPROVAL
The Trustees did not identify any single factor discussed previously as
all-important or controlling. The Trustees, including a majority of independent
Trustees, concluded that the terms of the Investment Management Agreement were
fair and reasonable, that NAM's fees are reasonable in light of the services
provided to the Fund, that the renewal of the NAM Investment Management
Agreement should be approved and that the new, post-change of control NAM
Investment Management Agreement be approved and recommended to shareholders.
29
Reinvest Automatically
EASILY AND CONVENIENTLY
Sidebar text: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET
UP YOUR REINVESTMENT ACCOUNT.
NUVEEN EXCHANGE-TRADED CLOSED-END FUNDS
DIVIDEND REINVESTMENT PLAN
Your Nuveen Exchange-Traded Closed-End Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of tax-free
compounding. Just like dividends or distributions in cash, there may be times
when income or capital gains taxes may be payable on dividends or distributions
that are reinvested.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
then-current market price. If the shares are trading at less than net asset
value, shares for your account will be purchased on the open market. Dividends
and distributions received to purchase shares in the open market will normally
be invested shortly after the dividend payment date. No interest will be paid on
dividends and distributions awaiting reinvestment. Because the market price of
the 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.
FLEXIBLE
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
CALL TODAY TO START REINVESTING DIVIDENDS AND/OR DISTRIBUTIONS
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
30
Other Useful
INFORMATION
In April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul Travelers")
sold the majority of its controlling equity interest in Nuveen Investments, Inc.
("Nuveen") to the general public. Nuveen is the parent of Nuveen Asset
Management ("NAM"), which is each Fund's investment manager. This sale was
deemed to be an "assignment" of the investment management agreement between each
Fund and NAM and, if applicable, of the sub-advisory agreement between NAM and
the Fund's sub-adviser. As required by law, the shareholders of each Fund were
asked to approve a new investment management agreement and, if applicable, a new
subadvisory agreement that reflected this change in ownership. The shareholders
of each Fund voted this approval at a Shareholders' Meeting on July 26, 2005.
There were no changes to the investment objectives or management of any Fund as
a result of these actions.
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
Each Fund's (i) quarterly portfolio of investments, (ii) information regarding
how the Funds voted proxies relating to portfolio securities held during the
12-month period ended June 30, 2005, and (iii) a description of the policies and
procedures that the Funds used to determine how to vote proxies relating to
portfolio securities are available without charge, upon request, by calling
Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at
www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
References Section at 450 Fifth Street NW, Washington, D.C. 20549.
CEO CERTIFICATION DISCLOSURE
Each Fund's Chief Executive Officer has submitted to the New York Stock Exchange
the annual CEO certification as required by Section 303A.12(a) of the NYSE
Listed Company Manual.
Each Fund has filed with the Securities and Exchange Commission the
certification of its Chief Executive Officer and Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act.
GLOSSARY OF TERMS USED IN THIS REPORT
AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return that would have been necessary each year to equal the
investment's actual cumulative performance (including change in NAV or market
price and reinvested dividends and capital gains distributions, if any) over the
time period being considered.
AVERAGE EFFECTIVE MATURITY: The average of all the maturities of the bonds in a
Fund's portfolio, computed by weighting each maturity date (the date the
security comes due) by the market value of the security. This figure does not
account for the likelihood of prepayments or the exercise of call provisions.
MODIFIED DURATION: Duration is a measure of the expected period over which a
bond's principal and interest will be paid and consequently is a measure of the
sensitivity of a bond's or bond Fund's value to changes when market interest
rates change. Generally, the longer a bond's or Fund's duration, the more the
price of the bond or Fund will change as interest rates change.
MARKET YIELD (ALSO KNOWN AS DIVIDEND YIELD OR CURRENT YIELD): An investment's
current annualized dividend divided by its current market price.
NET ASSET VALUE (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any MuniPreferred shares
issued in order to leverage the Fund) from its total assets and then dividing
the remainder by the number of shares outstanding. Fund NAVs are calculated at
the end of each business day.
TAXABLE-EQUIVALENT YIELD: The yield necessary from a fully taxable investment to
equal, on an after-tax basis, the yield of a municipal bond investment.
BOARD OF TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Eugene S. Sunshine
FUND MANAGER
Nuveen Asset Management
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
The Fund intends to repurchase shares of its own common stock in the future at
such times and in such amounts as is deemed advisable. No shares were
repurchased during the period covered by this report. Any future repurchases
will be reported to shareholders in the next annual or semiannual report.
31
Nuveen Investments:
SERVING Investors
For GENERATIONS
Photo of: 2 women looking at a photo album.
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
WE OFFER MANY DIFFERENT INVESTING SOLUTIONS FOR OUR CLIENTS' DIFFERENT NEEDS.
Managing more than $125 billion in assets, Nuveen Investments offers access to a
number of different asset classes and investing solutions through a variety of
products. Nuveen Investments markets its capabilities under four distinct
brands: Nuveen, a leader in fixed-income investments; NWQ, a leader in
value-style equities; Rittenhouse, a leader in growth-style equities; and
Symphony, a leading institutional manager of market-neutral alternative
investment portfolios.
FIND OUT HOW WE CAN HELP YOU REACH YOUR FINANCIAL GOALS.
To learn more about the products and services Nuveen Investments offers, talk to
your financial advisor, or call us at (800) 257-8787. Please read the
information provided carefully before you invest.
Be sure to obtain a prospectus, where applicable. Investors should consider the
investment objective and policies, risk considerations, charges and expenses of
the Fund carefully before investing. The prospectus contains this and other
information relevant to an investment in the Fund. For a prospectus, please
contact your securities representative or Nuveen Investments, 333 W. Wacker Dr.,
Chicago, IL 60606. Please read the prospectus carefully before you invest or
send money.
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ESA-A-0905D
ITEM 2. CODE OF ETHICS.
Not applicable to this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Portfolio of Investments in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable at this time.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board implemented after the registrant
last provided disclosure in response to this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")(17 CFR
240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable to
this filing.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons: Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Select Maturities Municipal Fund
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: December 8, 2005
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
----------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(principal executive officer)
Date: December 8, 2005
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: December 8, 2005
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* Print the name and title of each signing officer under his or her signature.